Chapter 48
• Capable of being acquired, owned, used
• A legally protected right or interest over
which the owner has the ability to exercise
• A bundle of rights - that are recognized and
enforced by law, and protected under the
– Property has a unique status, second in
importance only to liberty.
– No person shall be deprived of life, liberty or
property, without due process of law ...and just
• The earth’s crust and
all things firmly
• Immovable
• Includes subsurface
rights, i.e., minerals
• Includes rights above
land, i.e., radio towers
• Trees, shrubs,
perennial vegetation
• Fixtures - Can it be
removed w/o material
damage? What is the
party’s intent; the
purpose of the item?
Real Property
Personal Property (chattels)
• Acquired and transferred easily.
• Intangible - Intellectual property (patents,
copyrights);stock; commercial paper (notes)
• Tangible - Anything that has a physical
existence, generally moveable, cars,
computers, books, animals, severed trees,
crops that must be planted each year, i.e.,
corn, oats, potatoes
Ten ways to acquire personal property
Buy it (Sale of Goods)
Create it (knit a sweater)
Take it (capture a deer)
Trade it
Inherit it
Receive it as a gift
Find it (abandoned or lost property)
By accession
By divorce
By Confusion
• Voluntary transfer
without consideration
• 3 elements needed:
– Donor’s present intent
to give a gift
– Donor must make
delivery of the gift
• constructive delivery
– Acceptance
• Inter vivos
– Irrevocable
• Causa mortis
– Contingent upon death
– Must die as anticipated
– Revocable
By Gift
Lost, Mislaid or Abandoned Property
• Lost - unintentionally left. Finder is entitled to the
property against everyone except the true owner.
– Exception for lost property found in the ground.
– Estray statutes
• Mislaid - Intentionally placed somewhere and
accidentally left with no intent to relinquish
ownership. Finder acquires no rights. Owner of
premises, not finder, has first claim.
• Abandoned - Intentionally left. Intent to
relinquish ownership. First finder entitled to the
– Unclaimed Property escheats to the state
By Accession
• The right of the owner to any
increase/improvement of the property,
whether natural or human made
– Owner of cow acquires title by accession to any
calves born to the cow
• Improvements
– by thief
– by someone in good faith who believed he was
an owner
By Confusion
• The mixing or putting together of property
so that it becomes difficult to distinguish
who is the owner of their own individual
– Co-mingling of fungible goods (oil, grain)
– Accident, Mistake, Agreement, each owner
will bear the loss in proportion to his share
– By willful or wrongful act, he may lose his
Property Insurance: Insurable
• Insurable interest - A person has an
insurable interest if the insured will derive
an economic benefit or advantage from its
preservation, or will suffer economic loss or
damage from destruction.
– Must exist when the loss occurs but not
necessarily at the time the policy is issued
– Acquired when goods are identified.
• Persons other than owners can have an
insurable interest, i.e, lessees, secured
creditors, grantors liable for a mortgage
• Entitles the insurer, to the extent it has paid
for a loss, to any rights of its policy holder
to recover from any third party.
• If a loss is covered by the insured’s own
negligence, subrogation does not apply.
• Not applicable to life insurance and rarely
to health insurance
• Subrogation precludes double recovery for
the same loss
• Exercising the right to rescind, abandon,
abrogate or otherwise terminate a contract
of insurance.
• The form and the notice of proper
cancellation are determined by provisions in
the policy.
• Both the insurer and insured can cancel.
• Restrictions on cancellation may apply
(statutes, administrative regulations) may
require that insurers give proper reasons for
cancellation or nonrenewal.
Fire and Casualty Insurance
• Covers direct fire damage, and damage
from smoke chemicals, water
• Also, policies usually cover wind, hail, and
other forces of nature (not hurricanes)
• Pays insured a specified amount for
property loss. Does not indemnify for lost
profits, business interruption or other
special matters unless there is a rider
• Friendly Fire/Hostile Fire
• Insured can be fully protected up to a
percentage (usually 80%) of the value of the
• Encourages policy holders to insure
property for an amount that is near to its full
replacement cost.
• The coinsurance requirement applies only to
partial losses. Total losses result in
recovery of the face amount of the policy.
• Recovery = Face Value of Policy
X Loss
FMV of Property X Co-insurance %
Book Example, p. 1045
• $60,000 (Policy)
• $100,000 X 80%
X $50,000 = 37,500
• Insurer pays $37,500
Book, Problem #13
• Graham is entitled to collect $36,600.
Graham should have carried $96,000 fire
insurance if the building was valued at
$120,000 and the policy contained an 80%
co-insurance clause. Since the property is
under insured, the amount recoverable is
computed by multiplying the amount of loss
($48,000) by a fraction, the numerator of
which is the amount of the policy and the
denominator of which is the amount the
policy should have been
Insurance Defenses
• Misrepresentation
– Must be material
• Breach of Warranty - a statement,
undertaking that appears in policy
– Affirmative warranty
– Promissory Warranty
• Nondisclosure
Types of Policies
• Valued - Policy where the parties
specifically agree upon the full value of the
property at the time it is issued
• Open - No agreement as to specific value.
Insurer pays FMV.
• Agents have authority to make the
insurance effective immediately
• Answer to Problem # 12 - Offer and
Acceptance. Yes. Adler is protected by
public liability insurance in these
circumstances because agents of casualty
insurance companies are normally
authorized to issue a temporary binder and
to cover an insured immediately upon
request, without notice to or acceptance by
the insurance company of the risk.