Court Opinion

ID: 9773380
Source: CourtListenerOpinion
Date Created: 2023-08-29 17:43:51.43804+00
Date Added: 2024-06-11T17:32:46.844911
License: Public Domain

WELLIVER, Judge,
dissenting.
I respectfully dissent. The principal opinion abandons the most fundamental concept of fire and hazard insurance law which is that
[a]s a prerequisite to the enforcement of an insurance contract, public policy demands that the insured have an insurable interest in the property both at the time of making the contract and at the time of loss. Prewitt v. Continental Insurance Co., 538 S.W.2d 902, 905 (Mo.App.1976); Galati v. New Amsterdam Casualty Co., 381 S.W.2d 5, 9 (Mo.App.1964); Estes v. Great American Insurance Co.,d 112 S.W.2d 153, 156 (Mo.App.1938). The requirement of insurable interest is necessary to prevent wagering under the guise of insurance and temptation to destroy the insured property. See B. Harnett & J. Thornton, Insurable Interest In Property: A Socio-Economic Reevaluation of a Legal Concept, 48 Co-lum.L.Rev. 1162, 1178-83 (1942).
DeWitt v. American Fam. Mut. Ins. Co., 667 S.W.2d 700, 704 (Mo.banc 1984).
Today, this Court permits a lessee with an unexercised option to purchase property to insure the property for $125,000, and to collect the face amount of the policy, even though “GMB Pessor-owner of the property] collected $75,000 on a policy which it had obtained on the building from an insurer other than St. Paul.” G.M. Battery & Boat Co., v. L.K.N. Corporation, 747 S.W. 2d 624, 625 (Mo.banc 1988). This is judicial approval of gambling in the rankest form. In addition, it is a judicial invitation to arson.
The principal opinion apparently finds the insurable interest to be the loss L.K.N. could suffer by the fire, the damages suffered by reason of its breach of its covenant “to furnish insurance payable to GMB Pessor]” and its loss of “the remaining six months of the term of its lease.” G.M. Battery, 747 S.W.2d at 627.
The principal opinion apparently ignores the exclusion of liability contractually incurred, Exhibit B, and the fact the lessee L.K.N. purchased business interruption insurance which is not contested and will be paid by St. Paul. The principal opinion seems to ignore the provision of the Standard Fire Policy Supplement, relating to “Pro rate liability”, Exhibit B, Legal File page 178, line 86-89, which provides:
The company shall not be liable for a greater proportion of any loss than the amount hereby insured shall bear to the whole insurance covering the property against the peril involved, whether collectible or not.
*629By permitting recovery of the face amount of this policy and $75,000 on the other policy, or a total of $200,000 on a $145,000 property, the principal opinion would convert the valued policy statute, § 379.140, RSMo 1986, into an instrumentality for approving gambling, rather than an instrumentality for equitable justice.
In order to enforce an insurance contract in Missouri, it has always been the law that the insured must have an insurable interest in the property as was so clearly stated in DeWitt and Puritan Insurance Co. v. Yarber, 723 S.W.2d 98, 100 (Mo.App.1987), quoting Lumberman’s Mutual Insurance Company v. Edmister, 412 F.2d 351, 353 (8th Cir.1969).
In this case the subject matter of the insurance contract is the building leased by respondent. The insurance policy provided coverage for the named insured’s “financial interest in the insured building or structure ...” Respondent claims that as a lessee with an exclusive option to purchase, it has a financial interest in the building.
Respondent relies on Graves v. Stanton, 621 S.W.2d 524 (Mo.App.1981) and Kelly v. Iowa Valley Mutual Assurance Company, Inc., 332 N.W.2d 330 (Iowa 1983). These cases both find that a lessee with an exercised option to purchase may collect the insurance proceeds.
Here, respondent did not give the required written notice necessary to exercise the option. In order to exercise the option, the lease said: “Tenant may exercise his option by giving written notice of such election to Landlord at least thirty (30) days prior to date upon which tenant desires to close transaction.” Respondent did not comply with this provision.
The cases relied on by respondent do not reach the issue of whether an unexercised option to purchase is an insurable interest.
An option itself is at most a contract but does not itself transfer an interest or title in land. Farmer v. Littlefield, 355 Mo. 243, 195 S.W.2d 657 (1946). Respondent had a contract only. Respondent had neither an interest nor title in the building.
I recognize that DeWitt, 667 S.W.2d 700, 705 (Mo.banc 1984) states that the issue is not what the insured’s title is to the property, but rather, if the insured will suffer pecuniary damage by its loss. In DeWitt, plaintiff recovered the total insurance proceeds based on her personal liability on the house mortgage. I believe that the result reached in DeWitt is correct. I would decline to broaden DeWitt.
“An option is only a continuing offer, or at most an unilateral contract, whereby the owner of land agrees with another person that the latter shall have the privilege of buying the property, upon certain terms, within a specified time. It imposes no obligation to purchase upon the optionee.” Fisher v. Lavelock, 282 S.W.2d 557 (Mo. 1955).
Allowing respondent as optionee with no obligation to exercise the option and purchase the building to recover the value of the building when it was destroyed, would be to allow wagering under the guise of insurance. DeWitt, 667 S.W.2d at 704. Respondent’s only interest is limited to that of a lessee. A lessee’s rights do not rise to the same interest as an owner. Puritan Insurance Co. v. Yarber, 723 S.W.2d 98, 101 (Mo.App.1987).
The landlord elected to cancel the lease after the fire. Respondent had no financial interest in the building or structure, as its total destruction operated to terminate the lessee’s rights and obligations under the lease.1
Respondent does not stand to gain a pecuniary benefit or suffer a pecuniary loss by reason of the fire. Respondent as a lessee with an unexercised option to purchase the building, has no insurable interest in the building itself. Courts in other jurisdictions have reached a similar conclusion when confronted with the question of the insurable interest of a lessee with an unexercised option to purchase. See, e.g., *630The Travelers Indemnity Co. v. Duffy’s Little Tavern, Inc., 478 So.2d 1095 (Fla.App.1985), app. denied, 488 So.2d 68 (Fla.1986); Vendriesco v. Aetna Casualty & Surety Co., 68 A.D.2d 946, 414 N.Y.S.2d 64 (1979); Gamble v. Garlock, 116 Minn. 59, 133 N.W. 175 (1911).
The judgment of the trial court should be reversed.

. Appellant does not dispute that lessee does have an insurable interest in business interruption and the contents of the building.