Legal Issues

Insurable Interest

There are only two statutes in Georgia which specifically pertain to the principle of insurable insurance. O.C.G.A. § 33-24-3 deals with "personal insurance". Personal insurance is that which pertains to life, health, or bodily safety. Under that code section, an insurable interest in personal insurance is an interest based upon a reasonable expectation of pecuniary advantage through the continued life, health or bodily safety of an another person. Thus, this code section is inapplicable to our situation.

The second statute, O.C.G.A. § 33-24-4 deals with "property insurance". An insurable interest in property insurance is defined as "any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage". The code section further provides that no insurance contract on property or of any interest in property is enforceable except for the benefit of persons having an insurable interest in the thing insured at the time of the loss. To the extent that a property damage claim has been presented to Nationwide, this code section would seem to be applicable.

The test of an insurable interest under O.C.G.A. § 33-24-4 pertaining to property insurance is whether the insured has such a right, title or interest in the property, or a relation to the property, that she will be benefitted by its preservation and existence or suffer a direct pecuniary loss from its destruction or injury. Farmers Mutual Fire Insurance Co. v. Pollock, 52 Ga. App. 603, 184 S.E.2d 383 (1936); New Jersey Insurance Co. v. Rowell, 157 Ga. 360, 121 S.E.2d 414 (1924).

However, in Auto-Owners Insurance Co. v. Smith, 178 Ga. App. 420, 343 S.E.2d 129 (1986), the Georgia Court of Appeals held that no legal or equitable interest in the insured vehicle as property is necessary to support an insurable interest regarding liability insurance. In Auto-Owners, a father assisted his son in purchasing an automobile for use as a family-purpose vehicle. Subsequently, the son moved out of his father's household, and soon thereafter attempted to sell his car to a third-party. Although the sale was never consummated, the son prematurely transferred title to the prospective buyer. The son was thereafter involved in a collision while driving the insured automobile.

The automobile was insured originally under a policy issued to the father, who maintained the policy on the vehicle at the time of the collision. The court found that under the circumstances, the father may have faced liability vicariously under the family-purpose doctrine, and therefore had an interest in maintaining liability insurance on the automobile. Therefore, although the car was never titled in his name, and he never had a pecuniary interest in the automobile, he had an interest in maintaining liability insurance on the automobile.See Also: James v. Pennsylvania General Insurance Company, 167 Ga. App. 427, 306 S.E.2d 422 (1983). Thus, a person who does not have sufficient insurable interest in an automobile to maintain insurance for physical damage to the automobile, may have sufficient insurable interest to maintain other forms of coverage.