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Teague-Strebeck Motors Inc. v. Chrysler Insurance Co.3/8/1999
in the dealership property at the time of the fire because the Purchase Agreement and the Management Agreement had not received the necessary approval from the bankruptcy court. As a back-up argument, Chrysler contends that even if Mills-Strebeck had an insurable interest, its recovery must be reduced by the $50,000 purchase price under the Purchase Agreement and by the amount of a secured creditor's lien on the dealership assets.
{18} We agree in part with Chrysler's position. We agree that Mills- Strebeck did not hold title to the property at the time of the fire. Nevertheless, Mills-Strebeck may have had an insurable interest. We must remand to the district court for further findings on this issue. We also agree that even if there was an insurable interest, the insurable interest did not extend to the full value of the property. We first discuss whether an insurable interest existed; we then discuss the extent of the possible insurable interest.
A. Existence of Insurable Interest
{19} Even if one pays the premium for an insurance policy with respect to certain property, one must have an insurable interest in the property in order to collect under the policy. Section 59A-18-6 states:
"A. No contract of insurance of property or of any interest in property or arising from property shall be enforceable as to the insurance except for the benefit of persons having an insurable interest in the things insured as at the time of the loss.
B. "Insurable interest" as used in this section means any actual, lawful and substantial economic interest in the safety and preservation of the subject of the insurance free from loss, destruction, pecuniary damage or impairment."
{20} Chrysler contends that Mills-Strebeck had no insurable interest in the dealership property because the bankruptcy court had not approved the Purchase and Management Agreements. According to Chrysler, the sale of Tucumcari Chevrolet-Geo constituted a sale of property of the bankruptcy estate outside the ordinary course of business and therefore 11 U.S.C. § 363(b) (1994) required bankruptcy court approval of the sale. Likewise, it argues, the Management Agreement had to be approved by the bankruptcy court either because it constituted an agreement to employ a professional, see 11 U.S.C. § 327 (1994), or because it constituted an effective Disposition of the property, see 11 U.S.C. § 363(b).
{21} Nevertheless, the district court held that Mills-Strebeck had an insurable interest in the assets of the dealership. In support of this ruling, Mills-Strebeck contends that the Purchase Agreement and the Management Agreement were fully enforceable, valid contracts. It asserts that any problem caused by the failure to obtain bankruptcy approval of the contracts "was cured by the subsequent abandonment and closure of the Chapter 7 bankruptcy case." It relies on the district court's Conclusion of Law 31, which states:
"The abandonment by the Trustee in the [Tucumcari Chevrolet-Geo] bankruptcy and the subsequent dismissal of the case caused a reversion ab initio of title to [Tucumcari Chevrolet-Geo] as though the bankruptcy filing had never occurred. Property abandoned under [11 U.S.C.] Section 554 ceases to be property of the estate and the party which holds a possessory right to the property at the time of the filing of the bankruptcy petition reacquires that right upon abandonment."
The district court apparently believed that the contracts could be treated as if there had never been a bankruptcy proceeding.
{22} Chrysler responds that the trustee's abandonment of assets and dismissal of the case both occurred after the property in que
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