Insurable interest of irregular structures

Insurable interest of irregular structures

Even buildings that were erected or maintained in violation of the urban development regulations can qualify for insurance coverage.

In a recent decision dated 17 November 2017, the Court of Cassation ruled that an insured can also be entitled to a compensation from the fire insurer for fire damage to a chalet that was irregularly erected (link to the decision: link).

The fact that the chalet was “irregular” in terms of meeting urban development requirements does not prevent the policyholder / insured from being able to have an insurable interest entitling him to compensation by the insurer. The Court of Cassation recalls that the insured must be able to demonstrate that he has an interest that can be valued in money in the retention of the thing or in the intactness of his assets (old art. 37 of the WLVO [Wet op de landverzekeringsovereenkomst = Act on Non-Marine Insurance Contracts], current art. 91 of the Insurance Act of 4 April 2014). According to the Court, the insurable interest is the interest that the insured or beneficiary has that an uncertain event which might harm the insured good or asset (liability) does not in fact occur. The trier of fact must assess whether such an interest exists at the moment of the loss event.

In this case, the trier of fact had ruled that, although the chalet was irregularly built and as such would ultimately have to be demolished, at the time of the loss event it did represent a certain asset value and economic value for the insured. The insurance compensation may be used for rebuilding the structure at a different location (one where of course a building permit can be obtained for it). This compensation is owed by the insurance company even if the insured should decide not to proceed with reconstruction. According to the judge on the merits at the appeal level, paying out this insurance compensation is not a violation of the indemnity principle, and the Court of Cassation followed this position of the Court of Appeal. The insurance policy is not invalid or voided for this reason.   

The Court found that the insurance policy in question provided new-for-old coverage, as a result of which, in the absence of reconstruction or replacement, the compensation can remain limited to 80%.

For more information on this topic you can consult Siegfried Busscher (author and head of the Private Construction Law unit) and Bob Goedemé (head of the Insurance Law unit).