Summary
finding that anyone who derives a benefit or advantage from the preservation of property has an insurable interest in the property and plaintiff did not lose his insurance coverage, which he renewed and paid for, on the property where he still resided after foreclosure
Summary of this case from Lapensohn v. Hudson City Sav. BankOpinion
Civil Action No. 03-6027.
April 26, 2004
MEMORANDUM AND ORDER
This case presents an insurance coverage question. Does the resident of a home, on which he has paid homeowners' insurance premiums, have an insurable interest in the home once a writ of execution is issued on the property? Allstate contends that the writ of execution divested the resident of his insurable interest. Additionally, since the Plaintiff renewed the insurance policy after the writ was executed, Allstate contends that there is no coverage because Plaintiff failed to inform Allstate of the transfer of ownership of the property. The Plaintiff argues that the foreclosure action did not divest him of an insurable interest in the property. Hoggard also claims that he was unaware of the change in title. Therefore, no material misrepresentation was made in the policy renewal.
Factual Background
On March 9, 2003, the house located at 15 Somerset Drive in Coatesville caught fire. Both the dwelling and its contents suffered significant damage. On March 13, 2003, Plaintiff, who, at that time, lived in the house, contacted his homeowners insurance company to report the fire loss. The Defendant denied the claim.
Prior to the fire, on June 24, 2002, a writ of execution was issued to the sheriff, based on a foreclosure action filed by the Plaintiff's mortgagee, Eastern Savings Bank, FSB. On November 8, 2002, the property was conveyed from the Office of the Sheriff to Tiger Real Estate, Inc., a subsidiary of Eastern Savings Bank. Plaintiff, who had been insured with Allstate for approximately eighteen years, renewed his homeowners policy on February 25, 2003. Citing the change of ownership and Plaintiff's failure to notify Allstate of the change of ownership, the Defendant denied Plaintiff's claim in an undated letter which is attached to Plaintiff's complaint. Plaintiff filed suit in the Court of Common Pleas and the Defendant removed the case to federal court. Presently before the court is the Defendant's Motion for Judgment on the Pleadings.
Standard of Review
Federal Rule of Civil Procedure 12(c) permits a party to move for judgment "after the pleadings are closed but within such time as not to delay the trial." Fed.R.Civ.P. 12(c). A party moving for judgment on the pleadings pursuant to Rule 12(c) must demonstrate that there are no issues of material fact and that judgment should be entered in its favor as a matter of law. See Jablonski v. Pan Amer. World Airways, Inc., 863 F.2d 289, 290 (3d Cir. 1988). In evaluating a Rule 12(c) motion, a court must view the pleadings in the light most favorable to, and draw all inferences in favor of, the nonmoving party. See Soc'y Hill Civic Ass'n v. Harris, 632 F.2d 1045, 1054 (3d Cir. 1980).
Discussion A. Insurable Interest
We must first determine if Mr. Hoggard had an insurable interest in the property at the time of the fire. In making this determination, Allstate has focused on the fact that Mr. Hoggard was not the titled owner of the property. His name did not appear on the deed at the time of the fire. Hence, according to Allstate, he had no insurable interest in the property. Hoggard argues that the policy does not require that the property be titled to him. Rather, since it was his resident premises, he had an insurable interest in the property.
We reject Allstate's theory that merely because Mr. Hoggard's name did not appear on the deed he does not have an insurable interest in the property. The courts of Pennsylvania do not limit the classification of those with an insurable interest to those who have legal title to a piece of property. Rather, the courts follow the generally accepted rule that "anyone has an insurable interest who derives pecuniary benefit or advantage from the preservation or continued existence of the property or who will suffer pecuniary loss from its destruction. . . . [A] fee title is clearly not required of the insured, nor even a direct property interest, the test of exposure to financial loss being all important." Luchansky v. Farmers Fire Insurance Co., 357 Pa.Super. 136, 138 (1986) (citing 43 Am.Jur.2d Insurance § 943; 4 Appleman, Insurance Law and Practice § 21).
In Luchansky, the Superior Court considered and rejected a theory substantially similar to that made by Allstate today. InLuchansky, parents transferred legal title of their property to their son under an agreement providing for the reconveyance of the property and the parents paid for the insurance on the property and its maintenance. When a fire destroyed the property, the insurance carrier denied the claim. The Superior Court held that the parents had an insurable interest in the property despite the fact that their names did not appear on the deed. "[A] fee title is clearly not required of the insured. . . ."Luchansky, at 139.
Similarly, in Shockley v. Harleysville Mutual Ins. Co., 381 Pa.Super.287 (1989), the Superior Court found that the bona fide purchaser of a stolen vehicle had an insurable interest in the vehicle. "Having perfect legal title is not necessary [to establish an insurable interest]." Id, at 291.
Thus, we are persuaded that the mere fact that Mr. Hoggard's name did not appear on the deed is not dispositive of the insurable interest issue. Therefore, we must determine if Mr. Hoggard had any insurable interest in the property at the time of the loss.
As evidence of his insurable interest, the Plaintiff argues that he lived in the residence, he claims to have been unaware of the transfer of title, was attempting to renegotiate his mortgage with Eastern Savings Bank at the time of the fire,see Response, at 7, and continued to carry homeowners insurance on the property.
Although the Plaintiff was vacationing in Florida at the time of the fire, see Complaint, at ¶ 4, there is no dispute that the property was his residence at the time of the fire.
Allstate contends that Mr. Hoggard's attempts to renegotiate his mortgage are insufficient to establish an insurable interest. Citing Christ Gospel Temple v. Liberty Mutual Insurance Company, 273 Pa.Super.302 (1979) and Van Cure v. Hartford Fire Insurance Company, 435 Pa. 163 (1969), Allstate argues that "the mere expectancy interest or option to re-purchase property conveyed to another, upon the occurrence of a certain contingency, does not create an insurable interest in real property." Defendant's Memorandum, at 4-5. We agree with Allstate that if the renegotiation of the mortgage were the only basis upon which Mr. Hoggard claimed an insurable interest in the property, Allstate could properly deny coverage.
However, Allstate's blanket assertion that Mr. Hoggard "had absolutely no interest in the property," Defendant's Memorandum, at 5, is inaccurate. Mr. Hoggard continued to live in the residence after the foreclosure. Although Allstate failed to directly address this claimed interest, one of the cases cited by Allstate does. In Van Cure, a divided Superior Court wrestled with the two battling theories to determine an insurable interest: the legally enforceable interest theory and the factual expectation theory. The factual expectation theory is the theory that has been adopted by the courts, see Seals v. Tioga County Grange Mutual Insurance Co., 359 Pa.Super.606, 619-20 (1987), and was discussed earlier in this opinion. See supra, at 3.
The facts of Van Cure involve a condemnation proceeding. Between the time that Mrs. Van Cure obtained insurance on her residence and the time it was destroyed by fire, the Urban Redevelopment Authority had the property condemned and posted a bond for the property. The Authority allowed Mrs. Van Cure to remain on the property after its condemnation. When Mrs. Van Cure submitted her claim to her insurance company, they refused coverage, claiming she had no insurable interest in the property. The Honorable Herbert B. Cohen, speaking for the plurality, concluded that under either theory, the plaintiff did not have an insurable interest in the property. Because any loss could be recovered from the posted bond, Mrs. Van Cure could not establish any pecuniary loss necessary under the factual expectation theory. Moreover, Justice Cohen concluded that, in the event the condemnor chose to return the property to Mrs. Van Cure, the condemnor was obligated to repair any damage that had been suffered by the property in the interim. Thus, Mrs. Van Cure could not establish any pecuniary loss.
As previously mentioned, the Van Cure opinion was a plurality opinion and, therefore, is not binding precedent. Seals v. Tioga County Grange Mutual Insurance Co., 359 Pa.Super.606, 619 (1987). Since Justice Cohen's opinion, the factual expectation theory of insurable interest has been discussed in both caselaw and learned treatises. As previously discussed the general rule is that anyone who derives a benefit or advantage from the preservation of property has an insurable interest in the property. Luchansky, supra, at 3. In discussing the scope of the concept, the Honorable Donald E. Wieand, speaking for the Luchansky court, explained:
A reasonable expectation of benefit from preservation of the property is thus sufficient [to establish an insurable interest]. It is not necessary to constitute an insurable interest that the interest be such that the event insured against would necessarily subject the insured to loss; it is sufficient that it might do so, and that pecuniary injury would be the natural consequence.
Since the requirement of an insurable interest arose merely to prevent the use of insurance for illegitimate (gambling) purposes, it should not be extended beyond the reasons for it by an excessively technical construction. And a right of property is not an essential ingredient of an insurable interest; any limited or qualified interest, whether legal or equitable, or any expectancy of advantage, is sufficient. It does not matter in what way such benefit arises or the reason loss would occur thereby, limited presumably by dictates of public policy — if such benefit would be lost by destruction of the subject matter, that interest is insurable.Luchansky, at 139.
Although we have been unable to locate any binding authority dealing with foreclosure proceedings, the courts of Pennsylvania have taken an expansive approach in defining insurable interest since Justice Cohen's opinion. See Luchansky, supra, at 3;Seals v. Tioga County Grange Mutual Insurance Co., 359 Pa.Super.606 (1987) (concluding that a franchisor had an insurable interest in the inventory of his franchisee by virtue of the fact that the franchise fee was paid from the proceeds of the sale of the inventory). It appears, from our reading of theLuchansky opinion that any benefit derived from the continued existence of the property is sufficient to establish an insurable interest. Moreover, in a case factually similar to ours, the New Jersey Supreme Court determined that an insured's continued possession of a property was sufficient to establish an insurable interest, despite a tax foreclosure proceeding, the entry of judgment, and the loss of title. Miller v. New Jersey Insurance Underwriting Association, 82 N.J. 594 (1980). Although we recognize that a decision of the New Jersey court is not binding on a case arising in Pennsylvania, considering the expanding definition of an insurable interest in Pennsylvania since Justice Cohen's decision, and the fact that New Jersey, like Pennsylvania, is guided by the factual expectation theory of insurable interest, we believe Mr. Hoggard's continued possession of the property is sufficient to establish an insurable interest. Obviously Mr. Hoggard had a pecuniary interest in his residence. Not only were all of his belongings in the house, but once the fire occurred, Mr. Hoggard had to pay for an alternative dwelling.
B. Material Misrepresentation
Allstate also argues that the policy is void because Mr. Hoggard made material misrepresentations to Allstate concerning the ownership of the property at the time the policy was renewed and/or at the time he submitted his claim to Allstate. It is impossible for the court to consider this issue in a summary proceeding because material issues of fact exist. The Plaintiff contends that he could not have misrepresented the facts concerning ownership because he was unaware of the transfer of title until after the fire. "He knew of the mortgage foreclosure action, but he did not know of the actual transfer of title." Plaintiff's Response, at 7. As such, judgment on the pleadings is improper at this time.
An appropriate Order follows.