Gossett v. Farmers Insurance Co. of Washington

In 1990, Richard and Margaret Gossett (plaintiffs) made an offer, which was accepted, for an unfinished house. The Gossetts intended to complete the house and then sell it at a profit. In August 1990, the Gossetts spoke to an agent from Farmers Insurance Company of Washington (Farmers) (defendant). Richard represented to the agent that the Gossetts would be the legal owners of the house. On the policy, the Gossetts were the named insured, and Trusty Deed was the mortgagee. The policy covered only “an insurable interest” in the house. Insurable interest is defined by statute as interest in the “preservation of the subject of the insurance free from loss, destruction, or pecuniary damage.” Shortly afterward, the Gossetts assigned their interest in the purchase-and-sale agreement for the house to Trusty Deed. The Gossetts also signed an addendum to the purchase-and-sale agreement, stating that title to the house was to be taken in the name of Trusty Deed. The sale of the house closed on September 5, 1990, and title was placed in Trusty Deed. Trusty Deed was named as the buyer in the closing documents. There is no evidence that Trusty Deed and the Gossetts had an agreement that would permit the Gossetts to purchase the house from Trusty Deed. Although the Gossetts worked on finishing the house, they never resided there. The Gossetts kept some of their possessions in the house, and their sons infrequently stayed there. On November 18, 1990, the house was destroyed in a fire. At that time, the Gossetts had not purchased the house. In the action that followed, the parties disputed whether the Gossetts had an insurable interest in the house.