{"id":51524,"date":"2025-08-28T08:07:56","date_gmt":"2025-08-28T08:07:56","guid":{"rendered":"https:\/\/my.legal500.com\/developments\/?post_type=legal_developments&#038;p=51524"},"modified":"2025-08-28T08:07:56","modified_gmt":"2025-08-28T08:07:56","slug":"without-insurable-interest-there-is-no-insurance","status":"publish","type":"legal_developments","link":"https:\/\/my.legal500.com\/developments\/thought-leadership\/without-insurable-interest-there-is-no-insurance\/","title":{"rendered":"\u201cWITHOUT INSURABLE INTEREST, THERE IS NO INSURANCE.\u201d"},"content":{"rendered":"<p><strong>Introduction<\/strong><\/p>\n<p><strong>On the insurance market, few expressions are as categorical\u2014and yet as underestimated\u2014as the following: \u201c<em>Without insurable interest, there is no insurance<\/em>.\u201d Although it is not a simple legal concept, understanding its scope allows us to distinguish a legitimate contract from what is, at its core, nothing more than a wager.<\/strong><\/p>\n<p><!--more--><\/p>\n<p>Consider a transport company with a fleet of trucks, warehouses, and other assets. These goods are part of the company\u2019s assets, and the company has a legitimate interest in protecting them against risks such as loss, theft, or impairment, as well as other events that could harm its assets. In legal terms, this economic link translates into an insurable interest in protecting assets, and it is this interest that legitimizes entering into an insurance contract. Now, let us change the scenario: what happens if the good to be insured does not belong to the insured and its loss does not affect the insured? In this case, there is no insurable interest. In other words, when an insured person protects one of his\/her assets, they are effectively saying, \u201c<em>this asset matters to me, because its loss affects me<\/em>,\u201d and it is precisely that tie which empowers the insurer to assume the risk through a policy.<\/p>\n<p><strong>Relevance of the insurable interest and its definition<\/strong><strong style=\"font-size: 1rem\">\u00a0<\/strong><\/p>\n<p>Determining whether an insurable interest exists is crucial in the analysis of coverage issuance. Currently, insurers face numerous claims arising from policies contracted without this essential element. In cases involving multi-risk policies, for instance, scenarios may arise where the insured asset no longer belongs to the policyholder at the time of the claim, or that it was destroyed before the insurance became effective. More delicate still is the situation in which a life insurance policy is taken out, and the insured is, regrettably, aware that he\/she is in a terminal phase with only a few months to live. Here, the policy is not based on the presence of a risk \u2013 which entails uncertainty \u2013 but on the certainty of an impending event, making the insurance contract resemble a gamble, which is clearly incompatible with the core principles of insurance.<\/p>\n<p>Under Insurance Law, the insurable interest is a core requirement of the insurance contract. In its absence, the policy\u2014which outlines the scope of coverage, exclusions, and the respective obligations of the parties\u2014has no legal basis and is rendered void, unable to impose any duty on the insurer. Therefore, it is crucial to establish the meaning of insurable interest.<\/p>\n<p>Insurable interest is defined as the \u201c<em>economic, legal, and substantial interest of the person seeking to enter into an insurance policy for the purpose of covering a risk, which constitutes the object of the contract<\/em>\u201d (RAE, 2025), or as a \u201c<em>requirement that must be present in the person seeking coverage for a given risk, reflected in his\/her genuine desire for the claim not to occur, since its occurrence would result in harm to his\/her assets<\/em>\u201d (Fundaci\u00f3n Mapfre, n.d.). Similarly, Colombian jurisprudence defines insurable interest as \u201c<em>the economic relationship between a person and the asset being insured<\/em>\u201d (D\u00edaz, 2023, pp. 3\u20134).<\/p>\n<p>Under Peruvian law, insurable interest is acknowledged by the legislator as a foundational principle in Article II, paragraph (d), of Law Number 29946, the Peruvian Insurance Contract Law (LCS). Article 2 further defines the insurance contract as one that \u201c<em>covers any risk, as long as there is a current or potential insurable interest at the time<\/em> <em>the contract is entered into<\/em>\u201d, and, in connection with Property Damage Insurance, Article 82 emphasizes that \u201c<em>any risk may be the subject of property damage insurance, provided there is an insurable interest<\/em>.\u201d However, it may be noted that the Peruvian Insurance Contract Law (LCS) does not expressly define insurable interest, unlike the proposal made by the Congressional Committee on Economic Affairs in the Substitute Text of the Peruvian LCS (Opinion issued on Law Number 28\/2011-CR), where it was understood as \u201c<em>the lawful economic relationship existing between the insured object and the policyholder<\/em>.\u201d<\/p>\n<ul>\n<li><strong>How is insurable interest to be understood?<\/strong><\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong>We argue that the definitions cited earlier\u2014and those with a similar perspective\u2014do not entirely reflect what the concept entails, mainly for two reasons. First, most of them are based on property insurance, since historically \u2013 and still in some schools of thought \u2013 the concept is considered not to apply to personal insurance. Hence, it has traditionally been associated only with property, overlooking the fact that, today, insurable interest also applies to personal insurance. In this context, certain authors conceptualize it as \u201c<em>the legitimate attribution to the insured of some benefit derived from the insured personal or patrimonial asset, such that its frustration or impairment must be regarded as a personal loss<\/em>\u201d (Zegarra, 2017, p. 85). In our view, defending a broader concept of insurable interest today is more than a theoretical exercise as it entails the need to recognize changes in the insurance market and that legal frameworks must adapt to those changes. Second, certain (traditional) definitions do not sufficiently clarify that insurable interest goes beyond mere ownership or a simple link to a given asset. In contrast, we argue that the concept comprises three components emerging from our conceptual proposal: insurable interest refers to the lawful and economically grounded connection between the insured party and the risk covered by the insurance contract, characterized by the expectation that the risk will not occur. Thus, we emphasize that its definition incorporates: (i) the economic nature of the interest; (ii) the legitimacy of the relationship with the insured object; and, (iii) protection against a specific \u201crisk\u201d (which implies probability rather than certainty).<\/p>\n<p><strong>Consequences Arising from Insurable Interest<\/strong><\/p>\n<p>Peruvian Insurance Contract Law (LCS) establishes three distinct legal consequences for different scenarios: nullity, termination, and conclusion.<\/p>\n<p><strong>Nullity<\/strong><\/p>\n<p><strong>\u00a0<\/strong>The absence of insurable interest at the time the contract is perfected or at the start of its effects renders it null and void, entitling the insurer only to reimbursement of expenses. In this regard, it is important to consider Article 4 of the Peruvian Insurance Contract Law (LCS), which provides that the insurance contract is perfected by the parties\u2019 mutual consent, even if the policy has not been issued and the premium has not been paid. The fact that coverage begins on a later date does not affect the contract\u2019s perfection, which allows for clearly determining the moment at which the conditions required for the contract\u2019s validity\u2014among them the existence of insurable interest\u2014must be verified. It may also occur that the effective date of coverage of the insurance contract\u2019s effects does not coincide with its perfection, but rather takes place at a later date. If that is the case, Article 101 of the Peruvian Insurance Contract Law (LCS) stipulates that the insurable interest must exist at the time the contract\u2019s effects start; otherwise, the legal consequence remains the same: nullity. For example, an insured party takes out a vehicle insurance policy for his\/her car on March 1, but agrees with the insurer that coverage will begin on March 15. On March 12, the vehicle is damaged and destroyed. By the time March 15 arrives\u2014the date on which the contract\u2019s effects begin\u2014the insured asset no longer exists, and therefore, there is no insurable interest.<\/p>\n<p><strong>Termination<\/strong><\/p>\n<p>If the insurable interest ceases to exist due to an uncovered cause, the contract is terminated, and the insurer is entitled only to the portion of the premium corresponding to the time at risk. This can be illustrated by the following example. A company takes out fire insurance for its warehouse. During the term of the insurance, the State, through its competent authorities, orders the demolition of the property (an uncovered cause) due to a structural risk\u2014an event not covered by the policy. As a result, the insured asset ceases to exist, and the insurance contract is thereby terminated.<\/p>\n<p><strong>Contract Termination<\/strong><\/p>\n<p>In the event that the insured asset (or the insurable interest) is transferred, the insurance coverage terminates after ten (10) days, unless the policy has been transferred with the insurer\u2019s approval (except in the case of bearer or order policies). This termination applies even if the insured retains part of the interest. The same rule applies to forced sale and expropriation, but not to hereditary transmission. Thus, if a person ensures their vehicle and, during the term of the insurance contract, sells the vehicle to a third party, the contract terminates ten (10) days after transfer. It is worth noting, by way of example, that termination also applies in cases of judicial auction or expropriation.<\/p>\n<p><strong>Conclusions<\/strong><\/p>\n<ul>\n<li>The insurable interest is an essential element of the insurance contract; its absence renders the policy null and void. This applies to both property damage insurance and personal insurance.<\/li>\n<li>A modern conception of insurable interest encompasses the economic nature of the interest, the legitimacy of the relationship with the insured asset, and its relevance to coverage against a defined risk.<\/li>\n<li>The lack of insurable interest may lead to distinct legal outcomes\u2014nullity, extinction, or termination of the insurance contract\u2014depending on when it arises. Determining the applicable circumstance allows both parties to foresee its implications.<\/li>\n<\/ul>\n<p><strong>LUCERO CELESTE RAM\u00cdREZ IZAGUIRRE<\/strong><\/p>\n<p><strong>Co-lead, Insurance Litigation Department<\/strong><\/p>\n<p><strong>Bibliography <\/strong><\/p>\n<p>Congreso de la Rep\u00fablica del Per\u00fa [Congress of the Republic of Peru]. (2011). Dictamen reca\u00eddo en el Proyecto de Ley N.\u00b0 28\/2011-CR: Ley del Contrato de Seguro [Opinion issued on Law Number 28\/2011-CR: Peruvian Insurance Contract Law (LCS]. Comisi\u00f3n de Econom\u00eda [Economics Committee].<\/p>\n<p>D\u00edaz Moreno, A. (2023). <em>El inter\u00e9s asegurado como elemento esencial del contrato de seguro (STS [Pleno] 338\/2023, de 1 de marzo)<\/em>. G\u00f3mez\u2011Acebo &amp; Pombo.<\/p>\n<p>https:\/\/ga-p.com\/wp- content\/uploads\/2023\/03\/Interes_asegurado.pdf<\/p>\n<p>Fundaci\u00f3n Mapfre. (s.f.). Diccionario Mapfre de Seguros. Fundaci\u00f3n Mapfre. https:\/\/www.fundacionmapfre.org<\/p>\n<p>Real Academia Espa\u00f1ola. (2025). Diccionario del espa\u00f1ol jur\u00eddico. RAE &amp; Consejo General del Poder Judicial.<\/p>\n<p>Zegarra Mul\u00e1novich, A. (2017). Marco y principios de la regulaci\u00f3n y contrataci\u00f3n de seguros privados (art\u00edculos I al IV LCS) (pp. 27\u2013111). En Estudios sobre el contrato de seguro. Instituto Pac\u00edfico.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-51524","legal_developments","type-legal_developments","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/legal_developments\/51524","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/legal_developments"}],"about":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/types\/legal_developments"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/media?parent=51524"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}