Jeff is a book dealer who purchased a building from Richard. Jeff obtained a loa

Question

Jeff is a book dealer who purchased a building from Richard. Jeff obtained a loan from the Gateway Bank to purchase the building, which held a mortgage on the building. Jeff planned to store his inventory of books in the building. He also planned to use part of the building for a fast-food restaurant. When Jeff applied for property insurance on the building, he did not tell the agent about the fast-food res- taurant because premiums would be substantially higher. Eight months after the policy was issued, a fire occurred in the restaurant that caused substantial damage to the building.

a. Do any of the following parties have an insurable interest in the building at the time of loss? Explain your answer.

1. Jeff

2. Richard

3. Gateway Bank

b. Richard told Jeff he could save money by taking over Richard

Explanation / Answer

a) Insurable interest means   the beneficiary/policy holder would suffer a direct financial loss if the event occurs against which the insurance was bought .

1. Jeff - Yes Jeff would have an insurable interest in the building at the time of loss because he would lose financially if a loss occurs

2. Richard - Richard Sold the Building and has no Right or any insurable interest on it

3. Gateway Bank - yes Bank has the insurable interest of amount of ramaining principal as A lender has insurable interest in property used as collateral for a loan.

b. No this is invalid and Richard cannot assign his existing property insurance policy to Jeff without notifying the insurer. As for the Bank Richard is the owner and beneficier of the Propoerty & insurance and the contract is between Bank & Richard and contract cannot be created between Bank and a Third Person without the consent of the Bank

c. Yes Jeff

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