Opinion ID: 2623341
Heading Depth: 1
Heading Rank: 5

Heading: a cotenant in possession, being legally liable to the other joint owners for damage to or destruction of the common property, has an insurable interest to the extent of his (or her) potential legal liability

Text: ¶ 22 Plaintiff also urges us to instruct the certifying court that she has an insurable interest in the whole dwelling by virtue of her use and occupancy of it as her residence. We need not decide whether bare possession would suffice to permit a cotenant in possession of a dwelling to insure it for its full value. This is so because we recognize the traditional common-law rule that whenever one person is by circumstances placed in such a position with regard to another, that, if he (or she) did not use ordinary care and skill in his (or her) own conduct, he (or she) would cause danger of injury to the person or property of the other, a duty arises to use ordinary care and skill to avoid such danger. [52] A cotenant who occupies and uses the common property falls within this rule. He (or she) is obligated to use ordinary care in the use of the common property and stands liable to the other joint tenants for damage to or destruction of the property. A cotenant in possession may hence become subject to pecuniary loss in tort if the dwelling is damaged or destroyed. This legal liability provides an insurable interest for purposes of property insurance. [53] ¶ 23 The separate writing of the justice who partially concurs in today's pronouncement suggests that our answer to the certified question establishes as a matter of law that a cotenant in possession has an insurable interest in the common property by virtue of the cotenancy relationship. This is a misstatement of our holding, which rests on the potential liability of a cotenant in possession to the other cotenants for damage to or destruction of the common property and not on a status-based duty to insure the common property for the benefit of the other joint owners. [54] ¶ 24 The objection could be raised that a cotenant who could recover all the insurance proceeds upon a total loss of the common property might be tempted to destroy the property and then either keep the proceeds or use them to rebuild, excluding the former cotenants from ownership of the new premises. Cotenancy principles preclude this result. Just as the acquisition of an adverse title inures to the benefit of other joint owners, [55] so, too, must the recovery of insurance proceeds. The insuring cotenant in possession must account to the other joint owners for their share of the insurance proceeds and a suit to impress a constructive trust on the proceeds would be available to the other cotenants if the insuring cotenant fails to make the required accounting. ¶ 25 CERTIFIED QUESTION ANSWERED ¶ 26 WATT, C.J., and HODGES, LAVENDER, SUMMERS and WINCHESTER, JJ., concur. ¶ 27 HARGRAVE and KAUGER, JJ., concur in result. ¶ 28 BOUDREAU, J., concurs in part and dissents in part. BOUDREAU, J., concurring in part and dissenting in part. ¶ 1 I agree with the majority that a tenant in common, in possession of the common property, has an insurable interest to the extent of his or her potential legal liability for the loss or destruction of the property. However, I would base this holding on the status based duty of the cotenant in possession to preserve the common property for the benefit of the other cotenants, and not on a duty derived from general negligence principles. [1] ¶ 2 The majority opinion recognizes that each tenant in common has a mutual and reciprocal interest in the safety and preservation of the common property. Beyond that, a cotenant in sole possession has a duty to preserve the common property for the benefit of the other cotenants. See, e.g., Gearhart v. Gearhart, 213 S.W. 31, 33 (Mo. 1919) (a cotenant in sole possession and enjoyment of the common property is deemed to have undertaken the discharge of certain duties to his cotenants, such as preserving the property); Caffey v. Caffey, 274 Ark. 335, 625 S.W.2d 444, 445 (1981); Bailey v. Parker, 492 So.2d 1175, 1177 (Fla.App.1986); In re Estate of Ray, 7 Ill.App.3d 433, 287 N.E.2d 144, 149 (1972); Ellis v. Snyder, 83 Kan. 638, 112 P. 594, 595 (1911); Smither v. Betts, 264 S.W.2d 255, 257 (Ky.App.1954); Baird v. Moore, 50 N.J.Super. 156, 141 A.2d 324, 327 (1958); Mastbaum v. Mastbaum, 126 N.J. Eq. 366, 9 A.2d 51, 55 (Ch.1939); Clute v. Clute, 197 N.Y. 439, 90 N.E. 988, 990 (1910). [2] ¶ 3 Insurable interest is defined as any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction or pecuniary damage or impairment. 36 O.S.2001, § 3605(B). Because a cotenant in sole possession of the common property has a legal duty to preserve the common property for the benefit of the other cotenants, she is potentially liable to her cotenants for loss, destruction or impairment of the property. Accordingly, she has an actual, lawful, and substantial economic interest in the safety or preservation of the common property that is the subject of the insurance. This economic interest allows a cotenant in possession of the entire common property to claim an insurable interest in the value of the entire common property. ¶ 4 Allowing a cotenant in possession to recover the full value of the property under an insurance contract does not undermine the public policy concerns underlying the insurable interest requirement. In the event of a loss, the cotenant in possession will not be able to retain the entire proceeds of the policy. Tenants in common each stand in a relation of mutual trust and confidence to each other. Rex Oil Refining, Inc. v. Shirvan, 1967 OK 127, 443 P.2d 82, 87. Where one cotenant comes into possession of funds belonging to other cotenants, she becomes a trustee of such funds and stands in a fiduciary relationship to the other cotenants. Ludey v. Pure Oil Co., 1931 OK 527, 157 Okla. 1, 11 P.2d 102, 104. A constructive trust would arise where there is a breach of this fiduciary relationship. Renegar v. Bruning, 1942 OK 99, 190 Okla. 340, 123 P.2d 686, 687. ¶ 5 I do not think it is necessary for us to decide whether a cotenant in possession who has insured the common property for its full value may recover more than the value of her fractional interest in the property when she acts as the managing agent for the joint owners. [3] In Jones v. University of Central Oklahoma, 1995 OK 138, 910 P.2d 987, 989, we cautioned that we would not presume any facts outside those offered by the certification order. The certification order contained no facts indicating plaintiff was acting as an agent of the other fractional owners, nor did the plaintiff allege or tender evidentiary materials establishing such an agreement between herself and the remaining cotenants.