Insurable Interest 360°
Many discussions have been held around the insurable interest. Some of these fail to consider that any person could be eligible to demand an indemnity against an insurance agreement.
CONTEXT
Article 87 of the Mexican Insurance Agreement Law (“Law”) provides there will be an insurable interest whenever there is a concern that “…a certain thing is not destroyed or deteriorated …”.
Many insurers conclude that the agreement should ONLY benefit the insureds/beneficiaries appointed under the schedule; and thus, if these do not suffer a loss, no payment obligation rises.
As a starting point, we agree that it is the insured who holds the contractual right to demand fulfilment of the agreement; however, the Law foresees the possibility for an insurance to be purchased on behalf and/or to benefit a third party, even if it is not appointed as an insured within the policy schedule.
This clearly disrupts one of the industries paradigms. We tend to request documents and evidence showing the causal link between the policy, the insured and the loss; however, the Law suggests the occurrence of a certain risk, if covered under an insurance agreement, might have effects regardless of the parties executing the agreement.
As an example: in a construction project, the parties holding an insurable interest would go from the property owner to the notary public supposed to issue the public deeds. Clearly each of these parties holds a different insurable interest, and may hold a diverse indemnifiable loss, subject to the terms and conditions of the agreement.
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INSIGHT
We must be cautions when accepting or declining coverage, alleging the existence, or lack, of an “insurable interest”. The existence of an interest related to the insured property, suffices to hold a legal standing to request the payment of an indemnity, despite this right is to be resolved subject to the terms, conditions and exclusions of the agreement.
The burden of evidence to undermine an allegation around the existence of an insurable interest falls on insurers, and thus, it is important to perform a thorough review. At the end, a chain is only as strong as its weakest link.
Rodrigo Fernández Guerra
Business Development Management Specialist at Peacock