## Facts

- A landlord leased a commercial building to a tenant for a two-year term beginning March 1, 1982, at $1,500 per month, with an option to purchase for $145,000 and a credit of half the second-year rent toward the price.
- The lease required the tenant to maintain, at its expense, an “all hazard” policy for $75,000 “payable to” the landlord and to provide a certificate showing the coverage was in force.
- The tenant instead obtained an insurance policy effective June 1, 1983, providing $125,000 building coverage naming the tenant as the insured; the landlord was not named as loss payee on the building coverage.
- On August 23, 1983, a fire totally destroyed the building and contents.
- The landlord collected $75,000 under a separate policy the landlord had independently purchased on the building.
- The tenant sought payment under its policy’s building coverage; the insurer denied building-loss liability, asserting the tenant lacked an insurable interest because it did not hold title.
- Litigation followed: the landlord obtained summary judgment against the tenant for breach of the lease’s insurance clause, and the tenant pursued a cross-claim against the insurer for the building loss.

## Issues

1. Whether a tenant who lacks title but holds a purchase option and bears contractual obligations connected to the property has an insurable interest sufficient to recover under a policy insuring the building in the tenant’s name.
2. Whether potential “double recovery” concerns arising from the landlord’s separate insurance payment negate the tenant’s ability to recover from the tenant’s insurer, or instead should be addressed through allocation doctrines.

## Decision

- The Missouri Supreme Court held the tenant had an insurable interest in the building despite lacking title.
- The court ruled the insurer was liable on the building coverage, subject to proper proceedings to address allocation and prevent an improper duplicate recovery.
- The court reversed the intermediate appellate court’s contrary decision and reinstated the trial court’s determination of coverage, with modification to account for allocation concerns.

## Legal Principles

- An insurable interest in property does not require legal title; it exists where the insured has a substantial economic interest in the property’s preservation and would suffer pecuniary loss from its destruction.
- A lessee may have an insurable interest based on combined economic stakes such as ongoing lease obligations, exposure to contractual liability tied to the premises, and benefits associated with a purchase option.
- Issues of multiple insurance, allocation of proceeds, and prevention of duplicate recovery are addressed through subrogation and related equitable doctrines, not by denying the existence of an insurable interest or voiding an otherwise valid coverage grant.

## Conclusion

The court enforced building coverage written in the tenant’s name because the tenant faced real economic loss from destruction of the leased premises and therefore had an insurable interest; any overlap with the landlord’s separate insurance recovery was a matter for allocation and subrogation rather than a basis to defeat coverage.


G.M. Battery & Boat Co. v. L.K.N. Corp., 747 S.W.2d 624 (Mo. 1988)