When the owner of a logging machine sold the equipment to another party, arrangements were made for the buyer to make monthly payments to the seller. Thereupon, the seller continued to make the monthly payments he had previously made to a finance company that had financed his original purchase. No changes were made in the inland marine policy that he carried on the equipment. It continued in force without notice to the insurer of the sale of the machine. The seller was the named insured. The buyer agreed to this.

Fire destroyed the machine. The buyer ceased payments to the seller, who promptly paid off the amount of the loan. He then filed suit to recover the value of the machine from the insurer. The insurer appealed a trial court judgment awarding the stipulated value of the insured property to its insured.

The insurer argued that the seller lost his insurable interest in the property when he sold it and did not arrange assignment of the policy to the buyer. The appeal court referred too the following definition in Louisiana statutes relative to enforcement of insurance contracts: "B. 'Insurable interest' as used in this Section means any lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage." (LSA-R.S. 22:614.) The court cited various authorities and cases in point in concluding that the key determination of insurable interest is "whether a substantial economic interest exists."

Finding that to be the case here, the judgment of the trial court was affirmed in favor of the insured and against the insurer.

(JOHNSON, Plaintiff, Appellee v. MIDLAND INS. CO., Defendant, Appellant. Louisiana Court of Appeal, Third Circuit. No. 88-19. April 19, 1989. 541 So. 2d 1010. CCH 1989-90 Fire and Casualty Cases, Paragraph 1974.)