Opinion ID: 1356228
Heading Depth: 2
Heading Rank: 2

Heading: Insurable Interest in Groundwater

Text: The first issue we address goes to the formation of the DIC insurance contracts. The trial court held, without dispute on appeal, The Court determines that the 1977-80 and 1980-83 Difference in Conditions (`DIC') policies insure only property in which plaintiffs [Alcoa] had an insurable interest as of the date of loss or damage. Clerk's Papers at 041154 (footnote omitted). The DIC policies contained the following definition of property insured: PROPERTY INSURED: The interest of the Insured in all Real and Personal Property of every description, including Business Interruption, owned by the Insured [or] held by them in trust, or for which they may be legally liable or may agree to insure. Trial Ex. 584, at 3. The DIC insurers moved for summary judgment eliminating Alcoa's claims for recovery of damage to the groundwater at the Vancouver and Massena sites. [7] The basis of the insurers' motion is that in Washington and New York, the people of those states own the groundwater, and, therefore, Alcoa could not have an insurable interest in groundwater it did not own. The trial court denied the motion, holding, Pennsylvania law permits the purchase of insurance to protect any property whose continued existence produces an economic benefit or whose destruction would result in a pecuniary loss, regardless of actual ownership. Clerk's Papers at 041156. Under Pennsylvania law, In order to have an insurable interest in property, a person must derive pecuniary advantage from the continued existence of the property or suffer pecuniary loss from its destruction. Sotelo v. Washington Mut. Ins. Co., 734 A.2d 421, 423 (Pa.Super.1999). All definitions of an insurable interest import an interest ... which can be enforced at law or in equity. Kanefsky v. National Commercial Mut. Fire Ins. Co., 154 Pa.Super. 171, 35 A.2d 766, 768 (1944) (quoting Prospect Dye Works v. Federal Ins. Co., 33 Pa.Super. 223, 227 (1907)). Thus, while it is true Alcoa cannot not have title to the groundwater in either Washington or New York, it clearly has an interest in groundwater that can be enforced at law, i.e., its license to withdraw the groundwater for its own use, because that license conferred a pecuniary benefit on Alcoa. The DIC insurers' reliance on Alcoa's lack of title to the groundwater is hypertechnical. We note Alcoa had permits to withdraw the groundwater for plant operations in New York and Washington. Plainly, if someone else contaminated that groundwater making it unusable by Alcoa there would be coverage for the damage to Alcoa's pecuniary interest in that groundwater. The trial court's holding was correct because in Pennsylvania, the definition of insurable interest in property includes more than mere title to property. Alcoa derived both pecuniary benefit and potential pecuniary loss from its interest in the groundwater. It therefore had an insurable interest in the groundwater.