Story Case

J. F. Kimball owned a race horse which he was unable to enter in the Derby because of lack of funds. He therefore mortgaged the animal to L. B. Powers, who advanced him $2,000 The latter immediately insured the horse with the Phoenix Insurance Company. During the first day of the races, the horse stumbled and broke its neck. In the suit brought by Powers, the insurance company insists that he cannot recover on the policy because he did not own the horse when the insurance was taken out. Can this view of the insurance company prevail?

Ruling Court Case. Williams Vs. Roger Williams Insurance Company, Volume 107 Massachusetts Reports, Page 377

One Whitaker, owner of certain property, mortgaged it to Little and Stanton to secure an indebtedness in favor of Little and Stanton, evidenced by promissory notes held against Whitaker by Little and Stanton. Little and Stanton assigned the mortgage and indorsed the notes to Williams. Later, Little and Stanton, before the notes were paid by Whitaker, insured the property in the Roger Williams Insurance Company, the loss payable to Williams. The property was damaged by fire, and this action was brought by Williams.

It was contended by the insurance company that Williams had no insurable interest in the property, and, therefore, the policy was void from the beginning.

Mr. Justice Gray said: "In the present state of the law, there can be no doubt that, at the time of procuring this policy, Little and Stanton, although they had no legal title in the property, had an equitable right and an insurable interest therein. The mortgage stood as security for the payment of the mortgage notes, and the assured, having themselves indorsed those notes at the time of assigning the mortgage, Would be entitled in equity, upon being charged on those rates and paying the amount thereof, to have the mortgage reassigned to them, to secure reimbursement from the original makers of the notes and mortgage/J Judgment was given for Williams.

Ruling Law. Story Case Answer

An insurable interest is indicated when he who desires the insurance stands in such a legal or equitable relation to property that he will be benefited by its preservation or prejudiced by its destruction. Accordingly, a mortgagee of property has an insurable interest. The property stands as a security for the debt or obligation which he holds against the mortgagor. Naturally, he will be benefited by the preservation of the property and will be prejudiced by its destruction.

Mr. Powers, the mortgagee in the Story Case, was certainly interested in the animal upon the security of which he had staked $2,000. Such an interest as he possessed could be insured.