Brief Fact Summary. Design Data Corp., (Plaintiff), brought this suit against Maryland Causalty Co., (Defendant), after Defendant denied Plaintiff’s claim made on a commercial insurance policy. Plaintiff seeks to recover for damages caused to its product while in transit from Plaintiff’s place of business to a buyer’s place of business. Defendant denies coverage of the product claiming Plaintiff had no insurable interest in a product that had been sold to and accepted by a purchaser.
Synopsis of Rule of Law. Where the revocation of acceptance is timely, the risk of loss remains on the seller.
The parties to an insurance contract may contract for any lawful coverage, and the insurer may limit its liability and impose restrictions and conditions upon its obligation under the contract not inconsistent with public policy or statute.View Full Point of Law
Issue. Whether Plaintiff had an insurable interest in its product, damaged in transit to HHB, at the time the damage was discovered at the HHB’s place of business.
Held. Yes. Since HHB’s revocation of its acceptance was timely, the risk of loss remained on the seller, Plaintiff, and Defendant was obligated to provide coverage.
Discussion. Although HHB had reason to suspect that the product was damaged, the nature of the damage was not known until the package was opened and an inspection was made. It was reasonable under the circumstances for HHB to allow Plaintiff’s representative who was present to install the product and ascertain the extent of the damage. The revocation of acceptance was timely and therefore the risk of loss remained with Plaintiff. Under the terms of its policy, Defendant was to provide coverage for equipment for which Plaintiff was legally responsible. Therefore, Plaintiff had an insurable interest in the product at the time the damage was discovered.