Hepler Broom, LLC

To Taylor, Love Michael: And Other Remarks on Insurable Interests for Property Insurance

February 5, 2016

“He’s a jacka**,” President Obama explained, responding to a question as to why Kanye West interrupted Taylor Swift’s acceptance speech for Best Female Video at MTV’s 2009 Video Music Awards. “The young lady seems like a perfectly nice person. She’s getting her award. What’s he doing up there?” The President asked. According to Mr. West, the answer was simple: “I’m sorry, but Beyoncé had one of the best videos of all time,” he said on stage. Many other artists at the Awards ceremony disagreed, such as Kelly Clarkson, Katy Perry and Pink, the latter of whom reportedly had to be restrained by security from approaching West after his rant. Six years later, Mr. West sent Ms. Taylor a “stunning bouquet of flowers” to apologize. It was a grand gesture, indeed, but not exactly how you get the girl.

Besides flower bouquets, a lot of things have changed in Taylor Swift’s life for the better since her VMA moment with Kanye West. Originally a country music star, Ms. Swift—whose nicknames include T-Swizzle, Swifty, T-Swift, Tater Tot and (this author’s favorite) Tay-Tay—successfully  (and wisely) transitioned into the pop music genre. Her debut pop album 1989 (named after the year of her birth) became the best-selling album of 2014 in the U.S. market with over 5.5 million copies sold. 8.6 million have been sold worldwide. (And yes, she wrote her own songs on 1989.) A wildly successful international tour of her album soon followed, the highest grossing tour in the world in 2015.

During that same year, Ms. Swift became the youngest woman (25) ever to be included on the Forbes list of The World’s 100 Most Powerful Women. This love from the public over her pop music surprised even Ms. Swift, who initially wondered if all she had to do was stay in country music to be successful. Indeed, Forbes bestowed its most-powerful status upon her even before she published her infamous open letter on Tumblr to Apple (“To Apple, Love Taylor”) that caused the iconic Silicon Valley company to change the way it compensated artists on its new Apple Music streaming service. As Tay-Tay (and effective legal advocates) might say, persuasive writing never goes out of style.

Of course, the price of such popularity is the dreaded rumor and innuendo. One recent rumor regarding Ms. Swift had insurance coverage lawyers everywhere buzzing: that she reportedly insured her legs for $40 million. While Tay-Tay later denied and became finally clean of this rumor, the story did highlight a certain segment of the population that actually does insure parts of their body. For example, a singer may seek insurance to protect against the loss of their voice. Chefs and sommeliers may insure their noses and tongues. Piano players, yep, their fingers. All of these individuals have a financial interest in their particular body parts that, if injured, would cause them significant financial loss. In insurance parlance, this is known as an “insurable interest”.

While most individuals or companies would not in their wildest dreams seek insurance for body parts, insurance for loss of one’s life (which goes by the technical term, “life insurance”) or of property is quite common. Just as with body parts, one must have an insurable interest in the life or property at issue before he or she can obtain insurance to protect against the loss of same. With respect to property, Missouri and Illinois courts do not require that an insured have an ownership interest in certain property in order to obtain insurance for the loss of it. One Missouri appellate court explained that an insurable interest may be derived from an insured’s “possession, enjoyment, or profits of the property, security or lien resting upon it, or…other certain benefits growing out of or dependent upon it”. An Illinois appellate court similarly held that a person has an insurable interest in property whenever he or she “would profit by or gain some advantage by its continued existence or suffer loss or disadvantage by its destruction.”

Nevertheless, any person or company seeking insurance on property that technically may be owned by another person or company, particularly small businesses, may want to do more than just write your name in the blank space under “INSURED” on the policy application form. The prospective insured may be well-served to ensure that the insurance company is well aware of the relationship between the soon-to-be policyholder and the property at issue during the application process. Many times an insurance underwriter will tell an insured that “I wish you would” explain these relationships before a claim arises, as technical issues regarding the proper insured for a policy often can be clarified by effective communication. Nothing creates more bad blood between insurer and insured than the carrier’s declination of a loss on insurable interest grounds.

Furthermore, even if an insurable interest exists at the time the policy issued, the insured is not necessarily out of the woods. While an argument that an insured need not prove that it has an insurable interest at the time of a loss may be welcome to New York courts, it is not in Missouri and Illinois. Both states here require the insured to have an insurable interest at the time the policy is issued and at the time the insured sustains a loss. While a Missouri or Illinois court may make every effort to find an insurable interest, the court likely will find it difficult to shake it off if such an interest does not exist at both of these key points in time.

If you are individual, business or insurance company struggling with an insurable interest question or problem for an insurance policy or claim, please contact one of lawyers on the HeplerBroom Insurance Law team. I know places in St. Louis, Chicago, Edwardsville and Springfield that can help.