Fire Loss Claimed Dismissed, As No Insurable Interest Found

In Kittner v. Eastern Mutual Ins. Co., the defendant insured Design Science Toys, Ltd. (DST) and QK Properties against the risk of fire. DST operated a toy business from a building owned by QK. Ultimately, QK sold the building and DST went bankrupt.  After the bankruptcy, DST transferred its remaining assets, which consisted of inventory and equipment, to QK. The equipment/inventorty remained located in QK's former building. These materials were destroyed in a fire and both DST and QK made claim under the Eastern policy. DST then assigned its interest in the fire-loss to Kittner.

The Third Department held that Kittner lacked standing to sue Eastern because she lacked an insurable interest in the subject property. More specifically, since DST had already transferred its assets to QK, DST had nothing to assign to Kittner. The Court found that "[n]o contract or policy of insurance on property made or issued in this state. . . shall be enforceable except for the benefit of some person having an insurable interest in the property. . ." and a person has an "insurable interest" only when she has a "substantial economic interest" to protect the property which is the subject of the loss. Therefore, Kittner's claim was dismissed.

The decision is also notable for the finding that judicial estoppel applied to preclude QK from claiming that the value of the lost property was 40 times more than that previously asserted by DST in its bankruptcy proceedings.