New York Law Review

Tag: Szemko v. General Cas. Co.

  • Szemko v. General Cas. Co. of America, 36 N.Y.2d 43 (1974): Insurable Interest of a Good Faith Purchaser of Stolen Property

    Szemko v. General Cas. Co. of America, 36 N.Y.2d 43 (1974)

    A purchaser of stolen property, who buys it in good faith and for value, has an insurable interest in the property up to its value, based on their right to possess the property against all but the true owner.

    Summary

    Szemko purchased a car later discovered to be stolen and insured it with General Casualty Co. After the car was stolen from Szemko, General Casualty refused to pay, arguing Szemko lacked an insurable interest. The New York Court of Appeals held that a good faith purchaser for value has an insurable interest in the stolen property because they have a right to possession against all but the true owner, and would suffer direct pecuniary loss if the property were damaged or destroyed. This decision upholds the principle that insurance should cover genuine economic interests and not be used for wagering.

    Facts

    • Plaintiff Szemko purchased an automobile.
    • Szemko insured the automobile with General Casualty Company of America.
    • The automobile was later stolen from Szemko.
    • It was subsequently determined that the automobile had been stolen prior to Szemko’s purchase.
    • General Casualty refused to pay out on the insurance policy, asserting Szemko lacked an insurable interest in the vehicle.
    • The lower courts affirmed that Szemko was a purchaser for value without knowledge that the car was stolen.

    Procedural History

    • The trial court found in favor of Szemko.
    • The Appellate Term affirmed the trial court’s decision.
    • The Appellate Division also affirmed.
    • The case was appealed to the New York Court of Appeals.

    Issue(s)

    Whether a purchaser of a stolen automobile, who buys it in good faith and for value, has an insurable interest in that automobile.

    Holding

    Yes, because the purchaser has a right to possession of the car against any contrary assertion except that of the true owner, and would sustain a direct pecuniary loss if the car were destroyed.

    Court’s Reasoning

    • The court relied on the precedent set in National Filtering Oil Co. v. Citizens’ Ins. Co. of Mo., 106 N.Y. 535, which stated that a legal or equitable interest in the property is not necessary to support insurance, only that the assured is “so situated as to be liable to loss if it be destroyed by the peril insured against”.
    • The court stated that an insurable interest exists when “there be a right in or against the property which some court will enforce upon the property, a right so closely connected with it and so much dependent for value upon the continued existence of it alone, as that a loss of the property will cause pecuniary damage to the holder of the right against it, he has an insurable interest”.
    • The court addressed the concern that insurance contracts should not be wagering contracts, emphasizing that Szemko had a genuine economic interest in the car.
    • The court cited decisions in other states (New Jersey and Washington) that held a good faith purchaser of a car has an insurable interest.
    • The court distinguished Nieschlag & Co. v. Atlantic Mut. Ins. Co., 43 F. Supp. 797, where the insured had no possession or right to possession of the goods represented by a fraudulent receipt, giving them nothing to assert against anyone.
    • The court concluded that Szemko’s right to possession, though limited, was insurable, solidifying the idea that insurance should cover genuine economic interests.