Insurance companies have developed a reputation among some observers for frequently avoiding paying out bona fide claims. Recently, Allstate inadvertently reinforced this conception by arguing that a woman did not have an “insurable interest” in her home when it burnt down, because the bank was seeking to evict her.

In Hope Federal Credit Union v. Griffin, the Tennessee Court of Appeals clarified what counts as an “insurable interest” in real property. Here, the question arose whether Allstate was required, pursuant to its insurance policy with Ms. Griffin, to reimburse her for additional living expenses after Ms. Griffin’s home caught fire during the pendency of an eviction filed by Hope Federal Credit Union against Ms. Griffin.

Allstate argued that Ms. Griffin did not have an insurable interest in the home because the bankruptcy court had ordered Griffin to vacate the premises and the bank had filed a wrongful detainer action against Ms. Griffin before the home caught fire. The Court of Appeals, citing numerous Tennessee cases, held that one has an insurable interest in property if by its continued existence one will gain an advantage, or by its damage or destruction one will suffer a loss – regardless of whether one had any title in, lien upon, or possession of the property. The Court held that although the bank was attempting to evict her, Ms. Griffin held an insurable interest in the home because she would suffer a loss by having to immediately move out of the home after a fire.

This decision from the Court of Appeals provides guidance to determine when one has an insurable interest in property. Important to note is that “any interest, legal or equitable, qualified, conditional, contingent, or absolute, or merely the right to use the property, with or without the payment of rent, is sufficient” to create an insurable interest in property that requires insurance companies to live by their promises in insurance contracts.