General Insurance PrinciplesQuestion 171 of 215
A homeowner sells her house on April 1 but forgets to cancel her fire policy. The house burns on May 15. Under California property insurance law, the seller can recover:
a.The full policy limit because she still held the policy
b.Nothing, because she had no insurable interest at the time of the loss
c.Only the unearned premium that would have been refunded
d.Half of the loss, with the other half paid to the buyer
Explanation
California Insurance Code §286 requires that an insurable interest in property exist at the time of the loss. Because the seller transferred ownership before the fire, she had no insurable interest when the loss occurred and may not recover anything under the policy. This is a key contrast with life insurance, where insurable interest need only exist at policy inception.
Law Reference: Cal. Ins. Code §286Practice all 215 questions free — no signup required.
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