Third DCA affirms that having an insurable interest in property, which is defined as a substantial economic interest not necessarily related to direct ownership of the property, provides standing to enforce an insurance policy.
In Cole, two months after executing the subject policy, co-plaintiff Aundrea Cole changed the ownership structure of the subject property by transferring ownership into an LLC in which Ms. Cole was a 25% member. Later that same year, the subject property suffered two instances of a direct physical loss.
Ms. Cole and the LLC subsequently filed suit alleging the carrier was in breach of the insurance policy by failing to fully indemnify Ms. Cole and the LLC for the allegedly covered losses under the policy. The carrier moved to dismiss on the ground that Ms. Cole’s transfer of the property to the LLC without the carrier’s consent negated Ms. Cole’s insurable interest in the subject property and that, consequently, she lacked standing to enforce the subject policy of insurance.
The trial court agreed and entered a final order determining as a matter of law that Ms. Cole no longer had an insurable interest in the subject property after transferring her interest to the LLC, and that she lacked standing to sue the carrier. The trial court also ruled that the LLC lacked standing to sue the carrier without explaining why.
The Court reversed the trial court’s judgment because “[i]n Florida an ‘insurable interest’ is not determined by the concept of title, but rather whether the insured has a substantial economic interest in the property,” See Aetna Ins. v. King, 265 So.2d 716, 718 (Fla. 1st DCA 1972), per § 627.428, Fla. Stat. (2013).
The Court explained that the trial court was required to accept as true the Appellant’s well pled allegation that she maintained an insurable interest in the property, and whether Ms. Cole had an insurable interest in the property presented a fact issue that could not be resolved as a matter of law at that stage of the litigation. See Rivera v. Praetorian Ins. Co., No. 8:18-cv-1059-T-23SPF, 2020WL 3250131, at *3 (M.D. Fla. Mar. 31, 2020) (denying summary judgment for insurer because extent to which prior owner, who conveyed title to another, retained a “substantial economic interest” in insured home presented dispute of material fact). The Court reversed the trial court’s judgment regarding the LLC’s standing to file suit on the same ground.
Because the LLC alleged having an insurable interest in the subject property that was not expressly negated by the subject policy attached to the Complaint, the Court held that the LLC maintained a well pled cause of action that survived the dismissal stage of the litigation and denied the carrier’s motion.
Takeaway: Often Insureds will create a family trust which will technically own the subject property. Since the Insureds themselves may have an insurable interest in the subject property as beneficiaries, it is important to join all parties to the suit, including the insureds in their individual capacity or as trustees to prevent any exposure to additional litigation on behalf of a non-party.