Counihan v. Allstate Ins. Co., 25 F. 3d 109 - Court of Appeals, 2nd Circuit 1994

Plaintiff-appellant Josephine A. Counihan appeals from a summary judgment entered in the United States District Court for the Eastern District of New York (Wexler, J.) in favor of defendant-appellee Allstate Insurance Company ( Allstate ) in an action to recover on a fire insurance policy. The structure covered by the policy was totally destroyed by fire. Subsequent to the fire loss, a final judgment of forfeiture was entered on the basis of an earlier use of the property for illegal drug activities. Because the statute authorizing forfeiture under these circumstances provides that title vests in the United States as of the date of the act giving rise to the forfeiture, the district court determined that the plaintiff had no insurable interest in the property at the time of the fire. We are called upon to decide for the first time whether the relation-back provision of the forfeiture statute serves to divest a property owner of an insurable interest so as to bar recovery on a fire insurance policy where a fire loss occurs before the government acquires title to the property pursuant to a final decree of forfeiture. Disagreeing with the district court, we reject the notion of retroactive divestiture of an insurable interest and therefore reverse and remand in accordance with the analysis that follows