Myrna and James Brown ordered a $35,000 motor home from R.V. Kingdom, Inc. The manufacturer delivered the vehicle to R.V. Kingdom, with title in the dealer’s name. The Browns agreed to accept the motor home, but they soon regretted spending the money and asked R.V. Kingdom to resell it. The motor home stayed on R.V. Kingdom’s lot for quite a few months, but when the Browns decided to come get it, they learned that R.V. Kingdom had illegally used the vehicle as collateral for a loan and that a bank had repossessed it. The Browns filed a claim with their insurance company, State Farm. The insurer agreed that the vehicle had been stolen and agreed that the Browns’ policy covered newly acquired vehicles. But the company refused to pay, claiming that the Browns had not taken title or possession to the goods and therefore had no insurable interest. The Browns sued. Please rule on their case.
Let us also look at the ethics of the case by creating a contrasting hypothetical. Suppose that among the insurance company’s thousands of customers was Arvee, a recreational vehicle dealership similar to the one in the real case. Imagine that Arvee had taken in an automobile for resale from a customer named Parker and kept the vehicle on its lot. If Parker’s auto were stolen, what argument would the insurance company be making? How would the company define insurable interest in that case?