An Insurer Cannot Rely on the Concept of Insurable Interest to Deny Coverage for Statutory Insurance

An insurer cannot rely on the common law concept of an insurable interest to deny coverage for statutory insurance.

Insurance law – Automobile insurance – Actions – Ownership of vehicle – Statutory provisions – Insurable interest

Young v. Saskatchewan Government Insurance, [2015] S.J. No. 207, April 30, 2015, Saskatchewan Provincial Court, D.J. Kovatch Prov. Ct. J.

The plaintiff insured was involved in a motor vehicle accident. He made a claim for the value of the vehicle. The insurer denied coverage on the basis that the insured did not have an insurable interest in the vehicle. The insured commenced an action against the insurer.

The vehicle was purchased by a non-party to the action. It was registered in the name of the non-party and he was responsible for the monthly payments to finance that purchase. The non-party’s license was suspended and he allowed the plates to expire. The insurer’s policy was that where a licensed driver is suspended from driving, the insurer does not allow that driver to license a vehicle in his/her name. Without knowing that he was not allowed to have a vehicle licensed with the insurer, the non-party transferred the ownership of the vehicle to his roommate for a nominal price. A month later, the roommate transferred the ownership of the vehicle to the insured for another nominal amount and the certificate of registration for the vehicle was issued to the insured. A few months later, the insured was involved in the accident. He had committed no breach of the terms of the insurance that would have allowed the insurer to deny coverage.

The insurer investigated the accident and denied coverage on the basis that the insured had no financial interest in the vehicle. The court held the insurer could not rely upon the common law concept of insurable interest to deny coverage. It found this concept did not apply to statutory coverage. The court found the insured did have a relation or concern with the vehicle as he benefited from its existence and was prejudiced by its destruction. He was also required to have the vehicle registered in order to operate it. Accordingly, the insured had an insurable interest in the vehicle. The insurer was wrong to deny coverage on the basis the insured did not have an insurable interest.

This case was digested by Djuna M. Field and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at dfield@harpergrey.com or dpilley@harpergrey.com or review their biographies at http://www.harpergrey.com.

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