Insurable Interest Case Study

Adia owns a house and has an elderly third cousin living with her. Adia decides she needs fire insurance on the house and a life insurance policy on her third cousin to cover funeral and other expenses that will result from her cousin's death. Adia takes out a fire insurance policy from Ajax Insurance Co. and a $10,000.00 life insurance policy from Beta Insurance Co. on her third cousin. Six months later, Adia sells the house to John and transfers the title to him. Adia and her cousin move into an apartment. With two months remaining on the Ajax policy, a fire totally destroys the house, at the same time, Adia's third cousin dies. Both insurance companies tender back premiums but claim they have no liability under the insurance contracts, as Adia did not have an insurable interest.…