P&CIllinoishard
An Illinois homeowner sells her house on March 1 but the policy is not formally cancelled. A fire destroys the dwelling on March 15. Under 215 ILCS 5/229.2, which statement most accurately describes the former owner's right to recover?
She may not recover under the policy because she lacked an insurable interest in the property at the time of the loss
BShe may recover the full policy limit because the policy remained in force at the time of loss
CShe may recover only the premium refund she would have received had the policy been cancelled on March 1
DShe may recover but must remit the proceeds to the new owner as a constructive trust beneficiary
Why this is the answer
Under 215 ILCS 5/229.2, property insurance is enforceable only for the benefit of persons with an insurable interest at the time of loss. After the March 1 sale, the seller no longer had legal or equitable ownership, possession, or other recognized property interest in the dwelling. When the fire occurred on March 15, she lacked insurable interest. Therefore, even though the policy was nominally in force, she cannot recover for the loss. The new owner, who held insurable interest, would have to look to his own coverage, if any.
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