In Lucena v. Craufurd, (1806) 2 Bos and Pul MR 269. In this case Justice Lawrence J.

held
that an insured could recover if he suffered "factual expectation of loss." Unfortunately, on
the Bench there was another Judge Eldon L.C. who sought to improve Lawrence J.'s
definition of insurable interest by requiring that, in addition to a loss, the plaintiff (insured)
must have a "legal or equitable interest" in the property.

This test was further approved by the UK House of Lords in the case Macaura v Northern
Assurance Co Ltd., [1925] AC 619.

Slowly, however, courts in UK, Australia, Canada and USA, were “inching” towards a wider
test, principally on the basis that a strict version had the potential to defeat the reasonable
commercial expectations of the parties. This view was clearly expressed as early as 1884 in
the case Stock v. Inglis [1884] 12 QBD 564, where the court said: “In my opinion it is the
duty of a Court always to lean in favour of an insurable interest, if possible, for it seems to
me that after underwriters have received the premium, the objection that there was no
insurable interest is often, as nearly as possible, a technical objection, and one which has no
real merit, certainly not as between the assured and the insurer. Of course, we must not
assume facts which do not exist, nor stretch the law beyond its proper limits, but we ought,
I think, to consider the question with a mind, if the facts and the law will allow it, to find in
favour of an insurable interest.’’

Hence as time went the application of insurable interest began to be widened to apply to
many categories of interested parties who stood to lose by an unforeseen loss. Categories of
Insurable Interestare as below;

1. Bailees. One of the earliest extensions was for bailees, that is, for those who hold other
people’s goods in their possession, with a duty to take care of them. Courts recognise that
bailees can insure the goods in their possession against all perils. In the case Waters v
Monarch Fire and Life Assurance Co (1856) 5 EL & BL 870. A Carrier of goods is entitled to
insure for more than their own liability to the owners.

2. Shareholders. It may be seen that courts will look for ways to find an insurable interest.
Unlike Macaura v Northern Assurance Company Ltd [1925] AC 619, in the case Wilson v
Jones (1865 - 66) LR 2 EX 139, a shareholder took a policy on property owned by the
company – a telegraph cable. In this case, however, the court allowed his claim.

3. Sale and Purchase. It is held that an insurance contract is essentially personal and does
not pass with the property to a buyer (transferee). In the case Rayner v. Preston 18 Ch. D. 1
(1881), The court ruled that since the contract of insurance was a personal one between the
insurer and the seller, it did not run with the property, and, hence the buyer had no claim
from the policy. However, it may be noted that later the insurer proceeded against the
seller and he was compelled to return the claim money to the insurer because he had
suffered no loss.

In conclusion, courts will be reluctant to find that the requirement has not been met. It is
also felt that the categories of insurable interest may not be closed, as insurers will develop
new products which may require new forms or categories of insurable interest.