While Dorothy and James Morgan were still married, Dorothy purchased insurance on their home from American Security Insurance Co. The policy was issued on November 3, 1981, listing the “insured” as Dorothy L. Morgan. Shortly thereafter the Morgans  entered into a separation agreement under which Dorothy deeded her interest in the house to James. The Morgans were divorced on August26, 1982. On November 28, 1982, the house was destroyed by fire. American Security refused to pay on the policy, claiming that Dorothy had no insurable interest in the property at the time of the loss. The Morgans sued the insurer, contending that they were entitled to payment under the policy issued to Dorothy.

ISSUE: Does the transfer of property end the insurable interest? Why or why not?

Answer rating: 100% (QA)

The resolution of this issue depends on the applicable laws and regulations governing insurance cont... View the full answer