Seaman v. Enterprise Fire & Marine Ins.

U.S. Circuit Court for the District of Eastern Missouri
1883 U.S. App. LEXIS 2398, 5 McCrary's Cir. Ct. Rpts 558, 18 F. 250 (1883)

ELI5:

Sections

Rule of Law:

A stockholder in a private corporation possesses an insurable interest in corporate property because the destruction of such property would result in a direct pecuniary loss to the stockholder.

Facts:

A private corporation owned a specific piece of property, identified as a steamboat.
The plaintiff held shares of stock in this corporation, representing a three-sixteenths interest in the corporate assets.
Seeking to protect his financial investment, the plaintiff purchased an insurance policy valued at $54,000 specifically covering his interest in the corporate property.
The steamboat was subsequently lost or destroyed, triggering a claim on the insurance policy.
The insurance company refused to pay the claim, arguing that the plaintiff did not own the boat and therefore could not insure it.

Procedural Posture:

The plaintiff filed a petition in the Circuit Court against the defendant insurance company to recover damages under the insurance policy.
The defendant filed a demurrer to the petition, asking the court to dismiss the case on the grounds that a stockholder legally cannot have an insurable interest in corporate property.

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does a stockholder in a private corporation hold a sufficient legal interest in the specific property owned by the corporation to validly insure it against loss or destruction?

Opinions:

Majority - Judge McCrary

Yes, a stockholder holds an insurable interest in corporate property because the value of their stock is inextricably linked to the preservation of that property. The court reasoned that an insurable interest does not require the insured party to hold legal title to the property. Instead, the controlling factor is whether the individual stands to suffer 'pecuniary damage or loss' if the property is destroyed. Since stock is merely evidence of a right to profits and corporate assets, the destruction of the underlying property (the steamboat) inevitably reduces the value of the stock and potential dividends. Therefore, the stockholder has a valid economic interest to protect.

Analysis:

This decision represents a significant shift from formalistic views of property ownership toward a more economic/functional approach in insurance law. By establishing that 'pecuniary loss' rather than 'legal title' is the litmus test for insurable interest, the court ensured that individuals with legitimate financial stakes—such as shareholders—can protect their investments. This prevents insurance companies from collecting premiums on risks they later refuse to cover based on technicalities regarding corporate structure. It acknowledges the reality that while a corporation is a separate legal entity, its financial health (and that of its shareholders) relies entirely on its physical assets.

Gunnerbot

AI-powered case assistant

Loaded: Seaman v. Enterprise Fire & Marine Ins. (1883)

Try: "What was the holding?" or "Explain the dissent"