New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on December 7, 2005, representing the position of the New York State Insurance Department. 

RE: Adding Cooperative Corporation As Insured To Homeowners Insurance Policy

Question Presented:

May a cooperative corporation be named as an insured on a cooperative unit owner’s homeowners insurance policy?

Conclusion:

Yes, a cooperative corporation may be named as an insured on a cooperative unit owner’s homeowners insurance policy. However, the property coverage component would be unenforceable by the cooperative corporation except to the extent that it has an insurable interest in the property coverage, and the liability coverage component would be valid and enforceable to the extent that the cooperative corporation has a risk exposure. N.Y. Ins. Law § 3401 (McKinney 2000).

Facts:

The owner of a cooperative apartment located in New York states that the cooperative corporation that owns the building requires shareholders to name the corporation as an insured on each unit owners’ homeowners insurance policy. She questions the propriety of complying with this requirement.

Analysis:

A standard homeowners insurance policy provides coverage for both property and liability insurance. The property component compensates the insured for loss or damage to the insured’s own property. The liability component pays the costs that the insured would be liable to pay another person for injury to that person, or damage to that person’s property, typically where the injury or damage occurs on the insured’s premises or are caused by activity arising from the insured’s covered property.

The New York Insurance Law requires that the person named as an insured on a property insurance policy have an "insurable interest" in the property insured. N.Y. Ins. Law § 3401 (McKinney 2000) states:

No contract or policy of insurance on property made or issued in this state, or made or issued upon any property in this state, shall be enforceable except for the benefit of some person having an insurable interest in the property insured. In this article, "insurable interest" shall include any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage.

A person with an insurable interest would benefit from the property’s continued existence and would suffer economic loss if it was damaged or destroyed. This statute, however, applies to property insurance and does not apply to liability insurance. There is no other Insurance Law that imposes an insurable interest requirement on the part of the insured with respect to liability insurance.

So long as a party (in this instance, the cooperative corporation) has a risk exposure (i.e., the potential for being named as a defendant in an action against the cooperative unit owner), it may be named as an insured on the homeowners insurance policy.

Hence, a cooperative corporation may be named as an insured on a cooperative unit owner’s homeowners insurance policy. However, the property coverage component would be unenforceable by the cooperative corporation except to the extent that it has an insurable interest in the property, and the liability coverage component would be valid and enforceable to the extent that the cooperative corporation has a risk exposure.

For further information you may contact Associate Attorney Sally Geisel at the New York City Office.