insurance

Vendor Loses Insurable Interest on Closing

Ontario Real Estate Source

By Brian Madigan LL.B.

When the closing takes place, the vendor loses his “insurable interest” in the property.

And, from an insurance perspective, that’s what’s required in order to have the right to insure property.

In other words, for an insurance contract to be “legal”, the person placing the insurance must have a clear interest in the property. So, if the property is “lost” due to fire or some other peril, then that person would actually lose something. It needs to be a measurable loss. If, that’s the case, then that person would have an “insurable interest” in the property. Otherwise, they are just strangers. If strangers could place insurance on other people’s property, then there would certainly be a lot of fires. So, the law requires the “insurable interest” in order to make it legal.

Both the owner and the mortgagee would have an insurable interest in the same property.

On closing, the vendor parts with ownership and possession of the property, and therefore loses his “insurable interest”.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

 

 
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2 Comments on Vendor Loses Insurable Interest on Closing

NOV
19
2011

In Oakville I believe it was,  on the day of closing, before it closed the seller deliberately blew up the house with himself in it.  He survived.  Who was insured?  I am sure it was a nightmare to sort out.
3:20pm • #1
868,771 Points 5 Featured Posts

Gail,

I remember that case. Of course, it went out of the news, so I never heard what actually took place with respect to the insurance.

Brian
3:32pm • #2


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Brian Madigan LL.B.

Toronto, ON

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RE/MAX West Realty Inc., Brokerage (Toronto)

Address: Toronto, Mississauga, Oakville, Brampton, Caledon, Thornhill, Greater Toronto Area, http://www.iSourceRealEstate.com

Office Phone: (416) 745-2300

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