No Right to Insurance Proceeds After Sale of Property

Barry Zalma
Aug 9, 2023

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Thomas Spoon and Maria Spoon appealed from the Pulaski County Circuit Court order granting summary judgment in favor of Chester Lee Bolds and Linda Bolds in the Boldses’ civil suit for damages related to insurance proceeds because the Spoons did not own the damaged house at the time of the alleged loss.

In Thomas Spoon And Maria Spoon v. Chester Lee Bolds And Linda Bolds, 2023 Ark.App. 244, No. CV-22-277, Court of Appeals of Arkansas, Division II (April 26, 2023) the Spoons’ claimed entitlement to insurance proceeds paid on an insurance claim on a house after the Spoons sold the house to the Boldses.

The Boldses purchased the Spoons’ house by warranty deed on July 2, 2020. In November 2020, the Boldses filed an insurance claim because they discovered the roof was leaking. The Boldses’ insurance coverage would not pay because there was preexisting damage to the roof. The Boldses then filed a claim against the Spoons’ homeowner’s insurance. That insurer accepted the claim but paid the money in dispute ($5,219.48) to the Spoons. When the Spoons failed to turn the money paid on the insurance claim over to the Boldses they sued raising claims of breach of contract, declaratory judgment, and unjust enrichment.

The Spoons also contended they were entitled to the money because they were the owners of the property at the time of loss. They claim that unjust enrichment cannot equitably apply because the Boldses did not pay for the insurance policy.

The court’s order found that any and all interest the Spoons may have had in the house was terminated and extinguished upon the sale of the house to the Boldses, and it ordered the Spoons to reimburse the Boldses for the roof repairs.

ANALYSIS

Arkansas law is well settled that summary judgment is to be granted by a circuit court only when there are no genuine issues of material fact to be litigated, and the party is entitled to judgment as a matter of law.

If one has money belonging to another, which, in equity and good conscience, he ought not to retain, it can be recovered although there is no privity between the parties.

It was undisputed that the Spoons received the insurance money that was distributed for repair of the roof of a house they no longer have an interest. Unjust enrichment amounted to an alternative, independent basis for the circuit court’s ruling, which has gone unchallenged by the Spoons. Accordingly the Boldses were entitled to the reimbursement.

ZALMA OPINION

It is axiomatic that to obtain benefits from an insurer the person insured must have an insurable interest in the property at the time of the loss. Since the loss occurred after the Spoons sold the property to the Boldses their insurable interest was eliminated. They should have recovered nothing, but they were paid by their insurer who decided it was better to pay than fight over a small claim. The Spoons had no right to the money and since the Boldses suffered the loss they were allowed to recover the money paid by the insurer to the Spoons since it would be wrong to profit from the error of the insurer because the Spoons incurred no loss.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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