No Right to Insurance Proceeds After Sale of Property
NO INSURABLE INTEREST
Thomas Spoon and Maria Spoon appealed from the Pulaski County Circuit
Court order granting summary judgment in favor of Chester Lee Bolds and
Linda Bolds in the Boldses' civil suit for damages related to insurance
proceeds because the Spoons did not own the damaged house at the time of
the alleged loss.
In Thomas Spoon And Maria Spoon v. Chester Lee Bolds And Linda Bolds,
2023 Ark.App. 244, No. CV-22-277, Court of Appeals of Arkansas, Division
II (April 26, 2023) the Spoons' claimed entitlement to insurance
proceeds paid on an insurance claim on a house after the Spoons sold the
house to the Boldses.
The Boldses purchased the Spoons' house by warranty deed on July 2,
2020. In November 2020, the Boldses filed an insurance claim because
they discovered the roof was leaking. The Boldses' insurance coverage
would not pay because there was preexisting damage to the roof. The
Boldses then filed a claim against the Spoons' homeowner's insurance.
That insurer accepted the claim but paid the money in dispute
($5,219.48) to the Spoons. When the Spoons failed to turn the money paid
on the insurance claim over to the Boldses they sued raising claims of
breach of contract, declaratory judgment, and unjust enrichment.
The Spoons also contended they were entitled to the money because they
were the owners of the property at the time of loss. They claim that
unjust enrichment cannot equitably apply because the Boldses did not pay
for the insurance policy.
The court's order found that any and all interest the Spoons may have
had in the house was terminated and extinguished upon the sale of the
house to the Boldses, and it ordered the Spoons to reimburse the Boldses
for the roof repairs.
ANALYSIS
Arkansas law is well settled that summary judgment is to be granted by a
circuit court only when there are no genuine issues of material fact to
be litigated, and the party is entitled to judgment as a matter of law.
If one has money belonging to another, which, in equity and good
conscience, he ought not to retain, it can be recovered although there
is no privity between the parties.
It was undisputed that the Spoons received the insurance money that was
distributed for repair of the roof of a house they no longer have an
interest. Unjust enrichment amounted to an alternative, independent
basis for the circuit court's ruling, which has gone unchallenged by the
Spoons. Accordingly the Boldses were entitled to the reimbursement.
ZALMA OPINION
It is axiomatic that to obtain benefits from an insurer the person
insured must have an insurable interest in the property at the time of
the loss. Since the loss occurred after the Spoons sold the property to
the Boldses their insurable interest was eliminated. They should have
recovered nothing, but they were paid by their insurer who decided it
was better to pay than fight over a small claim. The Spoons had no
right to the money and since the Boldses suffered the loss it was
allowed to recover the money paid by the insurer to the Spoons since it
would be wrong to profit from the error of the insurer because the
Spoons incurred no loss.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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