What is secured interest?
The insured interest is understood as the relationship that exists between the insured and the property exposed to the risk. If a loss occurs, this relationship may generate an economic loss or damage for the insured.
This loss can occur directly, when the consequences of the loss affect the insured's own assets (for example, if he is the owner of the property). Or it can occur indirectly, if the insured has an interest in or responsibility for what is damaged or destroyed, such as when he is responsible for its conservation.
Conditions for the interest to be insurable
Although, in principle, any interest could be insurable, in order to be legally insurable it must fulfil two conditions: it must be a legitimate interest and not contrary to law, and it must be economically quantifiable.
What the Insurance Contract Law says
The Article 25 of the Insurance Contract Act establishes that insurance against damage is null and void if, at the time of its contracting, there is no interest of the insured in the compensation of the damage. Textually it states: "Without prejudice to the provisions of the fourth article, a contract of insurance against damage is null and void if at the time of its conclusion there is no interest of the insured in the compensation of the damage"..
We can affirm that, if there is no insured interest, there would also be no possible effective damage to compensate. Therefore, the insurer would have no obligation to repair or compensate any damage.
Reference to the Civil Code
This principle leads us to the Article 1261 of the Civil Codewhich establishes the essential requirements for the validity of a contract. One of these requirements is precisely the object or interest insured. The article states: "A contract does not exist unless the following requirements are met: 1st Consent of the contracting parties. 2.º Certain object that is the subject of the contract. 3.º Cause of the obligation that is established"..