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Teague-Strebeck Motors Inc. v. Chrysler Insurance Co.3/8/1999
the secured creditors, leaving nothing for unsecured creditors. We also observe that even though the agreement required court approval, Mills-Strebeck apparently did not have the option of withdrawing its offer. On the other hand, one unsecured creditor and the United States Trustee had each filed objections to the sale. In any event, we need not resolve the matter ourselves. We remand to the district court for a finding regarding whether the sale would have been approved by the bankruptcy court.
{41} We recognize that our holding probably extends the notion of an insurable interest as far as it has been extended in any jurisdiction. Nevertheless, we believe that our holding comports with the language and purposes of our insurable-interest statute. Moreover, our holding should cause no undue problem for insurance companies. Nothing requires insurance companies to write policies for contingent interests such as the one here. We note that Chrysler has not argued on appeal that the claimed loss was not covered by the policy.
{42} Although several of the remaining issues on appeal would be mooted if on remand the district court finds no insurable interest, we believe the more efficient course is to address them and avoid a future appeal on the same issues should the district court determine that an insurable interest exists.
B. Extent of Insurable Interest
{43} The Conclusion that the insured has an insurable interest in the destroyed property does not end the inquiry. It is also necessary to measure that insurable interest, to determine its extent. Both the insurable-interest doctrine and the indemnity principle can require limitations on recovery by those with insurable interests. See Jerry, supra, § 93 , at 571 (that an insured cannot recover more than the insured's interest in the property is "a particular application of the insurable interest doctrine"); Harnett & Thornton, supra, at 1175-76 (noting relationship between existence of insurable interest and the extent of the interest); Keeton & Widiss, supra, §§ 3.1(a) (the principle of indemnity), 3.6(a) (rules for preventing net gain). The insurable interest ordinarily should not exceed the potential loss to the insured.
{44} A particular problem may arise when more than one person has an insurable interest in the same property. Allowing recovery for the full value of the destroyed property by everyone with an insurable interest in the property poses a moral hazard. The insureds as a group should not be better off with the property destroyed. Assume that three different persons each have insurable interests in property that is worth $100,000. The incentive for mischief (or neglect) would be great if each could collect $100,000 (a total of $300,000) upon the loss of the $100,000 worth of property. Cf. Keeton & Widiss, supra, § 4.3(e) (noting that when purchaser and seller of property both carry property insurance, paying both can be inconsistent with the principle of indemnity and the objectives of the insurable interest doctrine if the sum of the payments exceeds the property's value). See generally id. § 4.6.
{45} Our analysis of the extent of Mills-Strebeck's insurable interest in the dealership property requires consideration of both the potential loss to Mills-Strebeck and the potential recovery of all those with insurable interests in the dealership property. Before we address the unique facts of this case, however, it may be instructive to review some court-fashioned rules that prevent overcompensation in similar circumstances.
{46} One rule recognized in New Mexico is that an insured with a limited interest in property can recover only to the extent of that
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