31 N.Y.2d 411 (1972)
A purchaser of stolen property who buys it in good faith and for value has an insurable interest in the property, based on their right to possession against all but the true owner.
Summary
Scarola purchased a car later discovered to be stolen and insured it. After the car was stolen from Scarola, the insurance company denied the claim, arguing Scarola lacked an insurable interest. The court held that an innocent purchaser for value has an insurable interest because they have a right to possession against all but the true owner, which constitutes a substantial economic interest. This decision highlights the balance between preventing wagering contracts and protecting innocent parties in commercial transactions.
Facts
Scarola purchased a used Cadillac from an unknown salesman. He registered the car in New York and obtained an insurance policy from the Insurance Company of North America. Three days later, the car was stolen from Scarola. The insurance company discovered the car had a false serial number, suggesting it was stolen, and denied Scarola’s claim based on lack of insurable interest. Scarola claimed he was an innocent purchaser.
Procedural History
The trial court found that Scarola was an innocent purchaser of a stolen vehicle and awarded him judgment. The Appellate Term affirmed, and the Appellate Division also affirmed. The Insurance Company of North America appealed to the New York Court of Appeals.
Issue(s)
Whether an innocent purchaser for value of a stolen automobile has an insurable interest in that vehicle under New York Insurance Law § 148, such that they can recover under an insurance policy when the vehicle is stolen from them?
Holding
Yes, because the innocent purchaser has a right to possession against all but the true owner, which constitutes a lawful and substantial economic interest in the safety or preservation of the property from loss.
Court’s Reasoning
The court reasoned that Scarola, as a good faith purchaser, had a right to possession of the car against anyone except the true owner. This right, even if limited, constitutes an insurable interest. The court cited National Filtering Oil Co. v. Citizens’ Ins. Co. of Mo., noting that an insurable interest exists if the insured is situated such that they would suffer a direct loss from the property’s destruction. The court emphasized that the underlying policy problem is preventing wagering contracts, and since Scarola had a real economic interest, the insurance policy was not a wagering contract. The court also noted that other states (New Jersey and Washington) have similarly held that good faith purchasers have an insurable interest. The dissenting judge argued that the purchaser’s interest was not “substantial” enough to qualify as an insurable interest under the statute, as the true owner could reclaim the car at any moment.