Watts v. St. Katherine Ins. Co.

• Decision Date: 19 December 1991
• Docket Number: No. 09-91-123,09-91-123
• Citation: 820 S.W.2d 259
• Parties: Ross C. WATTS and Great Northwest Pacific Corporation, Appellants, v. ST. KATHERINE INSURANCE COMPANY and General Agents Insurance Company of America, Inc., Appellees. CV.
• Court: Texas Court of Appeals

Page 259

820 S.W.2d 259

Ross C. WATTS and Great Northwest Pacific Corporation, Appellants, v. ST. KATHERINE INSURANCE COMPANY and General Agents Insurance Company of America, Inc., Appellees.

No. 09-91-123 CV.

Court of Appeals of Texas Beaumont.

Dec. 19, 1991.

Rehearing Denied Jan. 9, 1992.

Jack Fisher, Bal V. Kale, Fisher & Kale, Beaumont, for appellants.

David B. Gaultney, Elizabeth B. Pratt, Mehaffy & Weber, Beaumont, Marshall Campbell, Richard A. Schwartz & Assoc., Houston, for appellees.

Before WALKER, C.J., and BROOKSHIRE and BURGESS, JJ.

OPINION

BURGESS, Justice.

This is a summary judgment appeal. Great Northwest Pacific Corporation ("Great Northwest") owned an apartment building in Beaumont, Texas. Jefferson County and Beaumont Independent School District obtained a judgment in a tax suit. Ross C. Watts purchased the property and obtained separate insurance policies on the building through St. Katherine Insurance Company ("St. Katherine") and General Agents Insurance Company of America, Inc. ("General Agents"). Great Northwest retained a vendor's lien on the property. Jefferson County and Beaumont Independent School District bought in the property at a sheriff's sale on February 6, 1990. The property was damaged in a fire three days later. There is no evidence that the county or the school district initiated any action to obtain actual possession of the property before the fire occurred. The insurance companies denied liability and filed separate suits for declaratory judgment which were consolidated into the action before us.

St. Katherine and General Agents filed motions for summary judgment against Watts and Great Northwest, claiming that they did not have an insurable interest in the property because (1) after the Sheriff's sale appellants had nothing more than a right of redemption in the property, and (2) there was a change in ownership and an increased hazard to the property, which are conditions which suspend or restrict coverage under the policy. The trial court granted summary judgment. Appellants complain of the summary judgment in seven points of error.

Point of error three avers the trial court erred in holding that as a matter of law appellants had no insurable interest in the insured property at the time of the loss. At the time of the loss, Watts had a right of redemption in the property. TEX.TAX CODE ANN. § 34.21 (Vernon 1982 and Supp.1991). The issue is whether that right is sufficient to constitute an insurable interest in the property. The 1989 amendment to section 34.21 provides: "The right of redemption does not grant or reserve in the former owner of the real property the right to the use or possession of the property, or to receive rents, income, or other benefits from the property while the right of redemption exists." Appellees argue that without a right to receive any benefit from the property, appellants could not suffer a loss. We disagree. The general rule, as stated by the supreme court, is " 'that an insurable interest exists when the assured derives pecuniary benefit or advantage by the preservation and continued existence of the property or would sustain pecuniary loss from its destruction' ", Smith v. Eagle Star Insurance Co., 370 S.W.2d 448, 450 (Tex.1963). The Smith court cited with approval language in 29 AM.JUR. Insurance § 438, which states that an insurable interest does not necessarily imply title or a beneficial interest, nor a property interest, nor lien upon, nor possession of the subject matter. Although the right of redemption is not a possessory right, it is an interest in the property the value of which is affected by destruction of the property.

Appellees rely upon St. Paul Fire & Marine Ins. Co. v. Daughtry, 699 S.W.2d 321 (Tex.App.--San Antonio 1985, writ ref'd n.r.e.). In that case, the San Antonio court ruled that the insured, whose right to the property was subject to a superior option held by another, would derive no benefit from the property until the option period expired. Since the insured produced no evidence of time or money expended upon the property, no pecuniary loss was shown. We find that in jurisdictions where the debtor enjoys a post-foreclosure right to redemption, the cases applying the Smith standard for determining whether there is an insurable interest generally hold that an insurable interest exists during the redemption period. See generally, Crowell v. Delafield Farmers Mut. Fire Ins. Co., 463 N.W.2d 737 (Minn.1990); Carr v. Union Mut. Ins. Co., 598 P.2d 269 (Okla.Ct.App.1979); City of Chicago v. Maynur, 28 Ill.App.3d 751, 329 N.E.2d 312 (1975); Chrysler Credit Corp. v. State Farm Mut. Auto Ins. Co., 263 S.C. 70, 207 S.E.2d 806 (1974); Pattison v. State Farm Fire & Cas. Co., 209 Kan. 167, 495 P.2d 975 (1972); Fenter v. General Acc. Fire & Life Assur. Corp., 258 Or. 545, 484 P.2d 310 (1971); Scheidle v. Joergensen, 10 Cal.App.3d 139, 88 Cal.Rptr. 723 (1970); First Westchester Nat. Bank v. New England Ins. Co., 11 A.D.2d 192, 204 N.Y.S.2d 754 (1960); Fulwiler v. Traders & General Insurance Co., 59 N.M. 366, 285 P.2d...