Daily Development for
Tuesday, April 16, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

The Editor has no particular comment on the following three cases. Each has a little tidbit of information that might be useful to practitioners.

INSURANCE; COVERAGE; "FROST HEAVE:" Damage to property caused by "frost heave" is not covered by property insurance policy that excludes coverage for "movement of the earth." Loretto-Utica Properties Corp. v. Douglas Company, 630 N.Y.S.2d 917 (Sup. Ct. 1995).

The policy excluded all damage caused by the movement of earth. The Court determined in a case of first impression that frost heave is the result of moist soil freezing and resulting in the upthrust of ground or pavement. This resulted in the structural damage to the walls of the improvements on the property. Frost heave is a common event in the Northeast.

INSURANCE; HUSBAND AND WIFE; SEPARATE INSURABLE INTEREST: A wife who purchases property jointly with her husband has insurable interest in entire property, not just interest proportionate to her contribution to purchase price.

Alberici v. Safeguard Mutual Insurance Co., 664 A.2d 110 (Pa. Super. 1995). Husband entered into contract to purchase improved land using funds from the couple's joint bank account for a down payment. The contract named the husband or his nominee as the buyer. The husband obtained six insurance policies on the property, two naming him alone as insured, four naming him and his wife as insureds. The improvements were destroyed by fire before closing, but the buyers mortgaged other jointly owned properties for funds to complete purchase. Later the husband was convicted of mail fraud in connection with submitting fire loss claims.

Whether a named insured has insurable interest in property destroyed by casualty is usually a question of fact. The trial court had found as fact that husband and wife were husband's intended nominees under the contract. Facts showed: that the husband and wife always bought property together; that wife had accompanied husband to inspect the property before purchase; and that funds to acquire the property came from their marital assets. Thus, as a purchaser, the wife had an insurable interest in the entire value of the property both when the policies were issued and at the time of loss. The court prorated the loss among the four policies naming husband and wife as insureds and upheld a dismissal for the two policies naming only the husband.

INSURANCE; KNOWN LOSS DOCTRINE: Where, after removing 95% of lead paint from apartment, defendant property owner obtained insurance policies from plaintiff, insurer must indemnify owner with respect to a minor tenant's lead poisoning that occurred while the policies were in effect.

U.S. Liability Ins. Co. v. Selman, 70 F.3d 684 (1st Cir. 1995). The Court found that the "known-loss" doctrine did not bar coverage under Massachusetts law as the insurer did not overcome its burden to prove that the insured had actual knowledge that a loss occurred prior to the effective date of the policy. The lower court concluded that a significant portion of the injuries asserted arose after the policy date.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. This item, however, has not been. It is an April Fool story. But no one ever reads this fine print anyway. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. Contact Laprica Mims at the ABA. (312) 988 5260.

Items reported here and in the ABA publications are for general information (and, in this case disinformation) purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.