United States District Court, E.D. Pennsylvania
April 26, 2004.
JAMES M. HOGGARD, JR.
ALLSTATE INSURANCE COMPANY.
The opinion of the court was delivered by: JACOB HART, Magistrate Judge
MEMORANDUM AND ORDER
This case presents an insurance coverage question. Does the
resident of a home, on which he has paid homeowners' insurance
premiums, have an insurable interest in the home once a writ of
execution is issued on the property? Allstate contends that the
writ of execution divested the resident of his insurable
interest. Additionally, since the Plaintiff renewed the insurance
policy after the writ was executed, Allstate contends that there
is no coverage because Plaintiff failed to inform Allstate of the
transfer of ownership of the property. The Plaintiff argues that
the foreclosure action did not divest him of an insurable
interest in the property. Hoggard also claims that he was unaware
of the change in title. Therefore, no material misrepresentation
was made in the policy renewal.
On March 9, 2003, the house located at 15 Somerset Drive in
Coatesville caught fire. Both the dwelling and its contents
suffered significant damage. On March 13, 2003, Plaintiff, who,
at that time, lived in the house, contacted his homeowners
insurance company to report the fire loss. The Defendant denied
Prior to the fire, on June 24, 2002, a writ of execution was
issued to the sheriff, based on a foreclosure action filed by the
Plaintiff's mortgagee, Eastern Savings Bank, FSB. On November 8, 2002, the property was conveyed from the Office of
the Sheriff to Tiger Real Estate, Inc., a subsidiary of Eastern
Savings Bank. Plaintiff, who had been insured with Allstate for
approximately eighteen years, renewed his homeowners policy on
February 25, 2003. Citing the change of ownership and Plaintiff's
failure to notify Allstate of the change of ownership, the
Defendant denied Plaintiff's claim in an undated letter which is
attached to Plaintiff's complaint. Plaintiff filed suit in the
Court of Common Pleas and the Defendant removed the case to
federal court. Presently before the court is the Defendant's
Motion for Judgment on the Pleadings.
Standard of Review
Federal Rule of Civil Procedure 12(c) permits a party to move
for judgment "after the pleadings are closed but within such time
as not to delay the trial." Fed.R.Civ.P. 12(c). A party moving
for judgment on the pleadings pursuant to Rule 12(c) must
demonstrate that there are no issues of material fact and that
judgment should be entered in its favor as a matter of law. See
Jablonski v. Pan Amer. World Airways, Inc., 863 F.2d 289, 290
(3d Cir. 1988). In evaluating a Rule 12(c) motion, a court must
view the pleadings in the light most favorable to, and draw all
inferences in favor of, the nonmoving party. See Soc'y Hill
Civic Ass'n v. Harris, 632 F.2d 1045, 1054 (3d Cir. 1980).
A. Insurable Interest
We must first determine if Mr. Hoggard had an insurable
interest in the property at the time of the fire. In making this
determination, Allstate has focused on the fact that Mr. Hoggard
was not the titled owner of the property. His name did not appear
on the deed at the time of the fire. Hence, according to
Allstate, he had no insurable interest in the property. Hoggard
argues that the policy does not require that the property be titled to
him. Rather, since it was his resident premises, he had an
insurable interest in the property.
We reject Allstate's theory that merely because Mr. Hoggard's
name did not appear on the deed he does not have an insurable
interest in the property. The courts of Pennsylvania do not limit
the classification of those with an insurable interest to those
who have legal title to a piece of property. Rather, the courts
follow the generally accepted rule that "anyone has an insurable
interest who derives pecuniary benefit or advantage from the
preservation or continued existence of the property or who will
suffer pecuniary loss from its destruction. . . . [A] fee title
is clearly not required of the insured, nor even a direct
property interest, the test of exposure to financial loss being
all important." Luchansky v. Farmers Fire Insurance Co.,
357 Pa.Super. 136, 138 (1986) (citing 43 Am.Jur.2d Insurance § 943;
4 Appleman, Insurance Law and Practice § 21).
In Luchansky, the Superior Court considered and rejected a
theory substantially similar to that made by Allstate today. In
Luchansky, parents transferred legal title of their property to
their son under an agreement providing for the reconveyance of
the property and the parents paid for the insurance on the
property and its maintenance. When a fire destroyed the property,
the insurance carrier denied the claim. The Superior Court held
that the parents had an insurable interest in the property
despite the fact that their names did not appear on the deed.
"[A] fee title is clearly not required of the insured. . . ."
Luchansky, at 139.
Similarly, in Shockley v. Harleysville Mutual Ins. Co.,
381 Pa.Super.287 (1989), the Superior Court found that the bona fide
purchaser of a stolen vehicle had an insurable interest in the
vehicle. "Having perfect legal title is not necessary [to
establish an insurable interest]." Id, at 291.
Thus, we are persuaded that the mere fact that Mr. Hoggard's
name did not appear on the deed is not dispositive of the
insurable interest issue. Therefore, we must determine if Mr.
Hoggard had any insurable interest in the property at the time of
As evidence of his insurable interest, the Plaintiff argues
that he lived in the residence,*fn1 he claims to have been
unaware of the transfer of title, was attempting to renegotiate
his mortgage with Eastern Savings Bank at the time of the fire,
see Response, at 7, and continued to carry homeowners insurance
on the property.
Allstate contends that Mr. Hoggard's attempts to renegotiate
his mortgage are insufficient to establish an insurable interest.
Citing Christ Gospel Temple v. Liberty Mutual Insurance
Company, 273 Pa.Super.302 (1979) and Van Cure v. Hartford Fire
Insurance Company, 435 Pa. 163 (1969), Allstate argues that "the
mere expectancy interest or option to re-purchase property
conveyed to another, upon the occurrence of a certain
contingency, does not create an insurable interest in real
property." Defendant's Memorandum, at 4-5. We agree with Allstate
that if the renegotiation of the mortgage were the only basis
upon which Mr. Hoggard claimed an insurable interest in the
property, Allstate could properly deny coverage.
However, Allstate's blanket assertion that Mr. Hoggard "had
absolutely no interest in the property," Defendant's
Memorandum, at 5, is inaccurate. Mr. Hoggard continued to live in
the residence after the foreclosure. Although Allstate failed to
directly address this claimed interest, one of the cases cited by
Allstate does. In Van Cure, a divided Superior Court wrestled
with the two battling theories to determine an insurable interest: the
legally enforceable interest theory and the factual expectation
theory. The factual expectation theory is the theory that has
been adopted by the courts, see Seals v. Tioga County Grange
Mutual Insurance Co., 359 Pa.Super.606, 619-20 (1987), and was
discussed earlier in this opinion. See supra, at 3.
The facts of Van Cure involve a condemnation proceeding.
Between the time that Mrs. Van Cure obtained insurance on her
residence and the time it was destroyed by fire, the Urban
Redevelopment Authority had the property condemned and posted a
bond for the property. The Authority allowed Mrs. Van Cure to
remain on the property after its condemnation. When Mrs. Van Cure
submitted her claim to her insurance company, they refused
coverage, claiming she had no insurable interest in the property.
The Honorable Herbert B. Cohen, speaking for the plurality,
concluded that under either theory, the plaintiff did not have an
insurable interest in the property. Because any loss could be
recovered from the posted bond, Mrs. Van Cure could not establish
any pecuniary loss necessary under the factual expectation
theory. Moreover, Justice Cohen concluded that, in the event the
condemnor chose to return the property to Mrs. Van Cure, the
condemnor was obligated to repair any damage that had been
suffered by the property in the interim. Thus, Mrs. Van Cure
could not establish any pecuniary loss.
As previously mentioned, the Van Cure opinion was a plurality
opinion and, therefore, is not binding precedent. Seals v. Tioga
County Grange Mutual Insurance Co., 359 Pa.Super.606, 619
(1987). Since Justice Cohen's opinion, the factual expectation
theory of insurable interest has been discussed in both caselaw
and learned treatises. As previously discussed the general rule
is that anyone who derives a benefit or advantage from the
preservation of property has an insurable interest in the
property. Luchansky, supra, at 3. In discussing the scope of
the concept, the Honorable Donald E. Wieand, speaking for the Luchansky
A reasonable expectation of benefit from preservation
of the property is thus sufficient [to establish an
insurable interest]. It is not necessary to
constitute an insurable interest that the interest be
such that the event insured against would necessarily
subject the insured to loss; it is sufficient that it
might do so, and that pecuniary injury would be the
Since the requirement of an insurable interest arose
merely to prevent the use of insurance for
illegitimate (gambling) purposes, it should not be
extended beyond the reasons for it by an excessively
technical construction. And a right of property is
not an essential ingredient of an insurable interest;
any limited or qualified interest, whether legal or
equitable, or any expectancy of advantage, is
sufficient. It does not matter in what way such
benefit arises or the reason loss would occur
thereby, limited presumably by dictates of public
policy if such benefit would be lost by destruction
of the subject matter, that interest is insurable.
Luchansky, at 139.
Although we have been unable to locate any binding authority
dealing with foreclosure proceedings, the courts of Pennsylvania
have taken an expansive approach in defining insurable interest
since Justice Cohen's opinion. See Luchansky, supra, at 3;
Seals v. Tioga County Grange Mutual Insurance Co.,
359 Pa.Super.606 (1987) (concluding that a franchisor had an
insurable interest in the inventory of his franchisee by virtue
of the fact that the franchise fee was paid from the proceeds of
the sale of the inventory). It appears, from our reading of the
Luchansky opinion that any benefit derived from the continued
existence of the property is sufficient to establish an insurable
interest. Moreover, in a case factually similar to ours, the New
Jersey Supreme Court determined that an insured's continued
possession of a property was sufficient to establish an insurable
interest, despite a tax foreclosure proceeding, the entry of
judgment, and the loss of title. Miller v. New Jersey Insurance
Underwriting Association, 82 N.J. 594 (1980). Although we
recognize that a decision of the New Jersey court is not binding on a case arising in Pennsylvania, considering the expanding
definition of an insurable interest in Pennsylvania since Justice
Cohen's decision, and the fact that New Jersey, like
Pennsylvania, is guided by the factual expectation theory of
insurable interest, we believe Mr. Hoggard's continued possession
of the property is sufficient to establish an insurable interest.
Obviously Mr. Hoggard had a pecuniary interest in his residence.
Not only were all of his belongings in the house, but once the
fire occurred, Mr. Hoggard had to pay for an alternative
B. Material Misrepresentation
Allstate also argues that the policy is void because Mr.
Hoggard made material misrepresentations to Allstate concerning
the ownership of the property at the time the policy was renewed
and/or at the time he submitted his claim to Allstate. It is
impossible for the court to consider this issue in a summary
proceeding because material issues of fact exist. The Plaintiff
contends that he could not have misrepresented the facts
concerning ownership because he was unaware of the transfer of
title until after the fire. "He knew of the mortgage foreclosure
action, but he did not know of the actual transfer of title."
Plaintiff's Response, at 7. As such, judgment on the pleadings is
improper at this time.
An appropriate Order follows.