Court of Appeals issues insurable interest opinion relating to UM coverage

In Nationwide v. Smith, a 1999 Montero vehicle was involved in an accident with an uninsured vehicle. The Montero was insured by Nationwide Policy Number: 61 39 K 931345. While the Montero was owned by and registered to Son, and the Nationwide policy covering the Montero was taken out and owned by Father. Nationwide denied coverage and filed a declaratory judgment action for a determination that the policy covering the Montero was void for lack of an insurable interest. Nationwide argued Father lacked an insurable interest in the vehicle because he did not own the Montero, did not control the Montero, or was not responsible for or could be held liable for its operation or use. Son argued because he used the Montero to transport Father, Father benefited from its use and therefore had an insurable interest in the Montero. Regardless, Son averred the insurable interest requirement for liability coverage was irrelevant when dealing with UM coverage inasmuch as the uninsured motorist statute mandates insurers to provide UM coverage to the named insured and resident relatives of the named insured’s household at all times. The trial court held the insurable interest requirement was irrelevant to UM coverage and Nationwide appealed.

Although recognizing the purpose of the uninsured motorist statute is to provide benefits and protection against the peril of injury or death by an uninsured motorist to an insured motorist and his family, the Court found that the lower court erred in ignoring "the well settled rule of law in this country that an insured must possess an interest in the subject matter of the policy." The case was remanded to determine whether Father had an insurable interest in the vehicle.