2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 2A - Leases › Part 2 - FORMATION AND CONSTRUCTION OF LEASE CONTRACT › Section 55-2A-218 - Insurance and proceeds.

(1) A lessee obtains an insurable interest when existing goods are identified to the lease contract even though the goods identified are nonconforming and the lessee has an option to reject them.
(2) If a lessee has an insurable interest only by reason of the lessor's identification of the goods, the lessor, until default or insolvency or notification to the lessee that identification is final, may substitute other goods for those identified.
(3) Notwithstanding a lessee's insurable interest under Subsections (1) and (2), the lessor retains an insurable interest until an option to buy has been exercised by the lessee and risk of loss has passed to the lessee.
(4) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.
(5) The parties by agreement may determine that one or more parties have an obligation to obtain and pay for insurance covering the goods and by agreement may determine the beneficiary of the proceeds of the insurance.
History:
1978 Comp., § 55-2A-218, enacted by Laws 1992, ch. 114, § 34.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
Uniform Statutory Source.
— Section 2-501 [55-2-501 NMSA 1978].
Changes.
— This section, together with Section 2A-217 [55-2A-217 NMSA 1978], is derived from the provisions of Section 2-501 [55-2-501 NMSA 1978], with changes and additions to reflect leasing practices and terminology.
Purposes.
— Subsection (2) states a rule allowing substitution of goods by the lessor under certain circumstances, until default or insolvency of the lessor, or until notification to the lessee that identification is final. Subsection (3) states a rule regarding the lessor's insurable interest that, by virtue of the difference between a sale and a lease, necessarily is different from the rule stated in Section 2-501(2) [55-2-501 NMSA 1978] regarding the seller's insurable interest. For this purpose the option to buy shall be deemed to have been exercised by the lessee when the resulting sale is closed, not when the lessee gives notice to the lessor. Further, Subsection (5) is new and reflects the common practice of shifting the responsibility and cost of insuring the goods between the parties to the lease transaction.
Cross References.
— Sections 2-501, 2-501(2) and 2A-217 [55-2-501 and 55-2A-217 NMSA 1978, respectively].
"Agreement". Section 1-102(3) [55-1-102 NMSA 1978].
"Buying". Section 2A-103(1)(a) [55-2A-103 NMSA 1978].
"Conforming". Section 2A-103(1)(d) [55-2A-103 NMSA 1978].
"Goods". Section 2A-103(1)(h) [55-2A-103 NMSA 1978].
"Insolvent". Section 1-201(23) [55-1-201 NMSA 1978].
"Lease contract". Section 2A-103(1)(l) [55-2A-103 NMSA 1978].
"Lessee". Section 2A-103(1)(n) [55-2A-103 NMSA 1978].
"Lessor". Section 2A-103(1)(p) [55-2A-103 NMSA 1978].
"Notification". Section 1-201(26) [55-1-201 NMSA 1978].
"Party". Section 1-201(29) [55-1-201 NMSA 1978].
ANNOTATIONS
Effective dates.
— Laws 1992, ch. 114, § 238 made Laws 1992, ch. 114, § 34 effective July 1, 1992.