## Facts

- Purchasers entered an executory contract to buy land and improvements from sellers (heirs), with the right to occupy and improve the premises before closing.
- Sellers obtained a $15,000 fire policy from Paramount covering only the sellers’ interest; a proposed clause extending coverage to purchasers was rejected.
- Purchasers later obtained an $18,000 fire policy from Aetna covering the same improvements.
- A fire destroyed the improvements shortly before the scheduled closing date.
- The transaction nonetheless closed after the fire: purchasers paid the full contract price and received a warranty deed.
- At closing, sellers assigned to purchasers all rights under the Paramount policy.
- Purchasers asserted a claim for the fire loss against both insurers; Paramount and Aetna paid the claim on a pro rata basis by policy limits.
- The insurers then litigated between themselves to determine which carrier ultimately owed the loss.

## Issues

1. Whether the sellers sustained a recoverable loss under their fire policy when they later received the full contract price despite the pre-closing fire.
2. Whether the post-loss assignment of the sellers’ policy rights to the purchasers transferred any enforceable claim against the sellers’ insurer.
3. Whether the vendor’s policy proceeds should be treated in equity for the purchaser’s benefit when the purchaser separately obtained sufficient insurance covering its own loss.

## Decision

- The Texas Supreme Court reversed the intermediate court’s pro rata allocation and rendered judgment effectively placing ultimate liability on Aetna.
- The court held the sellers suffered no pecuniary loss because they received the full contract price after the fire; therefore, no amount was recoverable under the sellers’ indemnity policy.
- Because the sellers had no enforceable claim under the Paramount policy, their post-loss assignment conveyed no recoverable right to the purchasers.
- The purchasers were the parties who sustained the economic loss and were insured for that loss by Aetna; Aetna was responsible as between the insurers.

## Legal Principles

- Fire insurance is a contract of indemnity: recovery is limited to the insured’s actual pecuniary loss; without loss, there is no recovery.
- In vendor–purchaser disputes, equitable treatment of the vendor’s insurance proceeds for the purchaser’s benefit is not automatic and depends on the circumstances.
- Where the purchaser fully insures its own interest against the casualty loss, equity does not require treating the vendor’s policy as a substitute source of recovery.
- Policy language limiting coverage to “the interest of the insured,” coupled with rejection of purchaser-protective clauses, supports limiting benefits to the named insured’s loss.
- A post-loss assignment cannot create coverage or a claim where the assignor had no compensable loss under an indemnity policy.

## Conclusion

The court allocated the entire fire loss to the purchaser’s insurer because the vendor, having later received the full sale price, sustained no compensable loss under its own policy, leaving nothing to assign and no basis to shift the purchaser’s insured loss onto the vendor’s carrier.


Paramount Fire Ins. Co. v. Aetna Cas. & Sur. Co., 353 S.W.2d 841 (Tex. 1962)