In this case, a hog buyer could not obtain financing to complete the construction of a hog-buying station, so he transferred the property by warranty deed to another livestock trader in return for the trader’s agreement to borrow the necessary funds. Two weeks later, the unfinished building collapsed under the weight of ice and snow. The Iowa Court of Appeals was faced with the question of whether the hog buyer’s insurer was responsible for the claimed loss of more than $500,000 under the buyer’s builder’s-risk policy. The trial court found that the coverage did not cease when the property was transferred to the livestock trader. The appellate court agreed that the insurance company’s interest in the property had not ceased.
The “builder’s risk policy” at issue provided that coverage would end when the “property is accepted by the purchaser” or when the “interest in the property ceases.” The ultimate question was whether the livestock trader accepted the unfinished hog building. The court found that there was insufficient evidence that the livestock trader “accepted” the hog buying station with the intention of terminating the hog buyer’s need for builder’s risk coverage.
Further, the transfer of the hog buyer’s interest in the hog buying station through a warranty deed did not mean he transferred his insurable interest in the property. Other Iowa cases have stated that an insurable interest does not depend upon title or ownership of the property. It may be disconnected from title or possession. In essence, if the holder of an interest in property will suffer loss by its destruction he may indemnify himself through insurance. The insurance company argued that the hog buyer’s interest in the property after the transfer was minimal. However, the court disagreed, following well-established law stating that “the term interest, as used in application to the right to insure, does not necessarily imply property.” The hog buyer retained a connection to the insured property from which he suffered a loss following the building collapse. He was entitled to the proceeds of the policy for the loss. Farm Bureau Mutual Ins. Co. v. McAndrews Livestock Company, Inc., No. 0-563/09-1915 (Iowa Ct. App. Oct. 6, 2010).