Hyman v. Sun Ins. Co.

• Decision Date: 27 October 1961
• Docket Number: No. A--389,A--389
• Citation: 175 A.2d 247,70 N.J.Super. 96
• Parties: C. Herbert HYMAN, Plaintiff-Respondent, v. SUN INSURANCE COMPANY, a corporation of the State of New York, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 96

70 N.J.Super. 96

175 A.2d 247

C. Herbert HYMAN, Plaintiff-Respondent, v. SUN INSURANCE COMPANY, a corporation of the State of New York, Defendant-Appellant.

No. A--389.

Superior Court of New Jersey Appellate Division.

Argued Oct. 16, 1961.

Decided Oct. 27, 1961.

Vincent A. Vitiello, Newark, for appellant (Dreskin & Vitiello, Newark, attorneys).

Herbert Horn, Atlantic City, for respondent (Lloyd, Horn, Megargee & Steedle, Atlantic City, attorneys).

Before Judges KILKENNY, HERBERT and COLLESTER.

The opinion of the court was delivered by

KILKENNY, J.A.D.

Plaintiff sued in the Superior Court, Law Division, to recover on a standard form fire insurance policy, with extended coverage, in the amount of $10,000, issued by the defendant insurance company in favor of the plaintiff on December 17, 1959, for a period of one year, covering the Wiltshire Hotel at 170 South Virginia Avenue, Atlantic City, New Jersey. Plaintiff had paid the premium of $414.85. The insured building, worth far in excess of the policy, was totally destroyed by fire on March 23, 1960. The defendant refused to pay the fire loss, contending that the plaintiff did not have an insurable interest in the property at the time of the loss.

There were a motion and a cross motion for summary judgment supported by affidavits on behalf of the respective parties. On the hearing of these motions, counsel for the parties agreed that there were no issues of fact. Plaintiff's motion was granted and defendant's motion was denied, the trial court holding that the plaintiff did have an insurable interest at the time of the loss. The defendant appeals from this judgment. The sole issue before us is whether the plaintiff had an insurable interest.

The following are the undisputed facts. Prior to the purchase of the insurance policy, the plaintiff had performed services as a broker in the sale of the subject premises from Frank Moss and Eva Moss to Wiltshire, Inc. On September 8, 1959 title closing involving the premises took place at the Chelsea Title and Guaranty Company in Atlantic City. Daniel Bell, Jr. was the attorney for the sellers and also for the Boardwalk National Bank of Atlantic City. The Mosses took back a real and chattel purchase money mortgage in the amount of $357,200 from Wiltshire, Inc. At the same closing, the Mosses obtained a loan from the Boardwalk National Bank in the amount of $180,000 and assigned the purchase money mortgage to the Bank as security for that bank loan.

Also at the closing of September 8, 1959, Frank and Eva Moss, being indebted to the plaintiff, assigned to him a certain payment of $10,000 to be made on July 15, 1960 under the aforesaid purchase money mortgage. This assignment expressly recited that it was made 'without recourse.' There were three payments of $10,000 each scheduled by the mortgage to be made in July of 1960, namely, on July 10, 1960, July 15, 1960 and July 25, 1960. The Boardwalk National Bank, under the terms of the Moss loan, was not to be paid the $10,000 payment due on July 15, 1960, but it was understood among the interested parties that plaintiff would receive that payment under the assignment to him.

Plaintiff's assignment was not recorded by him until April 1, 1960, about nine days after the fire mentioned above. The loan in the sum of $180,000 made by the Boardwalk National Bank to the Mosses was paid in full on June 14, 1960.

Defendant's brief states the question involved in these words:

'Does a person who received an assignment of a payment to become due out of a certain mortgage, not having received any legal assignment of the mortgage or any part thereof, have an insurable interest under a fire insurance policy?'

Before answering that specific question, we state some general legal principles.

The law is clear that, in order to recover on a fire insurance policy, the insured must have had an insurable interest in the property insured at the time of the fire loss. Conversely, when no such insurable interest existed, there is no right of recovery. Flint Frozen Foods v. Firemen's Insurance Co. of N.J., 8 N.J. 606, 86 A.2d 673 (1952); Royal Insurance Co. Ltds. v. Smith, 77 F.2d 157 (9 Cir.1935). As stated in Motion Picture Co. of America v. Scottish Union & National Insurance Co. of Edinburgh, 244 Pa. 358, 90 A. 642, 645 (Pa.Sup.Ct.1914), without an insurable interest, "insurance would soon become a mere system of gambling.' Sweeney v. Franklin Fire Insurance Co., 20 Pa. 337.'

It is also fundamental that one may have an insurable interest in property without any necessity of being the absolute owner thereof. Thus, in the following cases it was held that the insured had an insurable interest: Sussex County Mutual Insurance Co. v. Woodruff, 26 N.J.L. 541 (E. & A. 1857)--a mortgagee or an assignee of a mortgagee or any legal or equitable lien holder; The Franklin Fire Insurance Company v. Martin, 40 N.J.L. 568 (Sup.Ct. 1878)--a party in possession under a contract; Trade Insurance Co. v. Barracliff, 45 N.J.L. 543 (E. & A.1883)--a husband with an inchoate right of curtesy; Wiley v. Morris, 39 N.J.Eq. 97 (Ch.1884)--a trustee's interest in property; Lawrence v. Union Insurance Co., 80 N.J.L. 133, 76 A. 1053 (Sup.Ct.1910)--the interest of both a mortgagor and a mortgagee; Kozlowski v. The Pavonia Fire Insurance Co., 116 N.J.L. 194, 183 A. 154 (E. & A.1936)--an equitable title or interest; Flint Frozen Foods, Inc. v. Firemen's Insurance Co. of N.J., supra--a creditor holding warehouse receipts as collateral security.

The Flint Frozen Foods, Inc. case, supra, states the general rule as follows (8 N.J., at p. 612, 86 A.2d at p. 675.

'A mortgagee, pledgee, or other person having merely a security interest or having less than complete ownership in the property may now safely take out a fire insurance policy in his own name covering the property in which he has an interest, without his claim on the policy being defeated by the existence of other interests in the insured property.'

In Farmers Mutual Fire Insurance Co. v. Pollock, 52 Ga.App. 603, 184 S.E. 383, 386 (Ct.App.1936), the rule is phrased in these words:

'It is sufficient if the insured holds such a relation to the property that its destruction by fire would result in pecuniary loss to him. 'The test of insurable interest in property is whether insured has such a right, title or interest therein, Or relation thereto, that he will be benefited by its preservation and continued existence or suffer a direct pecuniary loss from its destruction or injury by the peril insured against. " (Emphasis supplied.)

Comparable language has been used in Getchell v. Mercantile & Mfgrs. Mutual Fire Insurance Co., 83 A. 801 (Maine Sup.Jud.Ct.1912); Aktiebolaget etc....