Named Insured Can Have An Insurable Interest In Property It Does Not Own

In A B Petro Mart, Inc v Prime One Ins, 317 Mich App 290 (2016) Docket 327481, an insurance coverage action, the Michigan Court of Appeals held that a corporate Plaintiff had an insurable interest in the property at issue, despite the fact that it did not own the property. In Petro Mart, the Plaintiffs sought coverage for damage to a gas pump at their gas station. The facts revealed that the corporate Plaintiff owned the gas station, but that the actual gas pumps were owned individually by the co-Plaintiff, Aref Bazzi, who was the sole owner of the corporation. The pumps were insured under a policy issued by the Defendant insurance company to the corporate Plaintiff only. Mr. Bazzi was not a named insured. As a result, the insurance company argued that the corporate Plaintiff had no insurable interest in the damaged gas pump and could not make a claim under the policy. The Trial Court agreed and granted summary disposition in favor of the insurance company.

The Court of Appeals reversed the Trial Court and held that the corporate Plaintiff had a sufficient legal interest in the gas pump such that it could insure it and receive an indemnity payment for the damage. In so doing, the Court of Appeals clarified the law with respect to the type of interest sufficient to allow a person or entity to insure a given property. The Court held that “an insured’s pecuniary interest in the insured property is sufficient to constitute an insurable interest.” Thus, regardless of the fact that the corporate Plaintiff was not the legal owner of the gas pump, its operation of the gas station was dependent upon the gas pump, which gave rise to a sufficient legal interest such that the corporate Plaintiff could insured the pump. The Court held that an “insurable interest” is not synonymous with “ownership,” but rather, that a showing that the insured would “suffer a direct, pecuniary loss from the property’s destruction” is sufficient.