The shareholders of a company have an insurable interest in the assets of their company.  The high court has reaffirmed that insurable interest in a short-term insurance policy is a wide concept.  It is there to prevent speculation and gambling as a matter of public policy and not to protect insurance companies who know what they are insuring.

In Lorcom Thirteen v Zurich Insurance Company the shareholders of the plaintiff company had insured the company’s fishing vessel which was lost at sea.  After an extensive examination of South African and international case law, the court found that shareholding confers an insurable interest in the assets of a company which entitles the shareholders to recover the value of the lost asset and not only the adverse financial effect that losing the asset had on their shares.

A shareholder has sufficient interest to insure the company’s assets under a property insurance policy and is entitled to claim what the policy promises, namely the loss or diminution in value of the insured asset.

shareholders of a company have an insurable interest in the assets of their company

If the insurer takes on the risk of paying out the market value of the property insured by a non-owner with a commercial interest on the basis of an actuarially assessed premium relating to the likelihood of that risk eventuating, it must fulfil the promise it made to the insured in exchange for being paid the premium.

In the absence of misrepresentation or non-disclosure of the nature of the insured’s commercial interest in the asset, there is no reason why the insurer should not pay the claim if it is not a speculative or gambling transaction but a genuine commercial arrangement.