§ 7.09 Casualty Insurance

• Jurisdiction: United States
• Publication year: 2021

§ 7.09 Casualty Insurance

Life insurance policies are generally characterized based upon the property used to pay the premiums.³⁴⁶ In contrast, most states that have considered this issue characterize casualty insurance proceeds based upon the character of the property insured.³⁴⁷ This different approach makes sense, since the premium payment amount frequently is negligible when compared to the value of the property insured. One estate is entitled to reimbursement if it contributed funds for premiums to insure property of another estate.³⁴⁸

If the recovery is characterized based upon the character of the property lost, the proceeds can be partly marital and partly separate.³⁴⁹ An Idaho case presented the interesting issue of what should occur when the amount of the coverage was not sufficient to cover all of the separate and marital property lost. In this case, the court divided the proceeds based upon the relative values of the property lost.³⁵⁰ So, because the sum of the wife's separate property lost, plus 50% of the marital property lost, amounted to about 33% of the total loss, she was awarded 33% of the proceeds.

Some courts have not accepted this approach and have focused on the source of the premiums to characterize the proceeds.³⁵¹

In a North Carolina case, the wife continued to live in the marital home after the spouses separated. She continued to pay premiums for homeowner's insurance with her separate funds. When the house was damaged by a tornado, the proceeds were considered the wife's separate property.³⁵²

A wife in an Ohio divorce had lost her engagement ring...