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United States Court of Appeals,
Fifth Circuit.
No. 93-3108.
UNITED FIRE & CASUALTY COMPANY, Plaintiff-Appellant Cross-Appellee,
v.
Owen William REEDER, Jr. and Independent Fire Insurance Company, Defendants-Appellees
Cross-Appellants.
Dec. 10, 1993.
Appeals from the United States District Court for the Eastern District of Louisiana.
Before POLITZ, Chief Judge, REAVLEY and EMILIO M. GARZA, Circuit Judges.
POLITZ, Chief Judge:
United Fire & Casualty Company appeals an adverse summary judgment in its dispute with
Independent Fire & Casualty Company over which insurer is responsible for the liability of Owen
William Reeder, Jr. based on an altercation with his former wife.
Background
Independent Fire furnished homeowners insurance to Reeder and his wife, Janet Rita Capaci,
for their Metairie, Louisiana home. The policy included liability insurance. The couple agreed to get
a divorce, Capaci moved out, and the two reached a property settlement in which Capaci relinquished
all right, title, and interest in the Metairie house. About four months later Capaci was injured by
Reeder during a fight on the insured premises. Capaci sued Reeder in state court. Independent Fire
refused to defend Reeder or to pay his claim, citing the policy exclusion for injuries to insureds.
United Fire, Reeder's personal umbrella liability carrier, agreed to provide a defense but reserved its
rights to deny coverage. It then brought a declaratory judgment action against Reeder and
Independent Fire to determine the rights and obligations of the parties under the two insurance
policies. The district court granted summary judgment ruling in favor of Independent Fire. United
Fire and Reeder timely appealed.
Analysis
We review entry of summary judgment under the same standard employed by the district

court, affirming if there is no genuine issue of material fact and the movant is entitled to judgment as
a matter of law.1 Such is the situation herein.
Independent Fire, Reeder's primary liability carrier, denied coverage on the basis of an
exclusion for "bodily injury to you or an insured." The policy defined "you" as, inter alia, the named
insured. The policy lists two named insureds: Reeder and Capaci. The policy, therefore, does not
cover any liability for Capaci's injuries.
United Fire attempts to create an issue of fact with a premium notice which has Capaci's
name stricken. That notice, however, was for a policy which took effect one month after the injury
occurred. The policy at the time of the incident listed both Reeder and Capaci as named insureds.
We agree with the district court that the affidavit submitted by Reeder does not create a jury question;
Reeder did not attest that he instructed his insurance agent to delete Capaci's name from the
homeowners policy before the subject fight occurred.
United Fire nonetheless contends that, as a matter of law, Capaci coul d not have been an
insured at the time of the loss because she lost her insurable interest when she relinquished her rights
to the property in her settlement with Reeder. We are not persuaded.
Property insurance policies are deemed void when the insured has no insurable interest in the
property.2 The coverage at issue herein relates to liability. In DiGerolamo, the Louisiana Supreme
Court held that there is no statutory requirement of an insurable interest in connection with liability
insurance and indicated that it would not impose such a requirement should the question squarely
present itself. It so indicated again in Cousin v. Page.3 United Fire emphasizes that in both cases the
court declined to hold that an insurable interest was not necessary t o support liability insurance,
recognizing "the prevalence of [the] contrary rule ... in the national jurisprudence."4 As an Erie court,
however, we are bound to "determine issues of state law as [we] believe the highest court of the state
1Fed.R.Civ.P. 56(c); Blankenship v. Kerr County, Tex., 878 F.2d 893 (5th Cir.1989).
2La.R.S. 22:614; DiGerolamo v. Liberty Mutual Ins. Co., 364 So.2d 939 (La.1978).
3372 So.2d 1231 (La.1979).
4DiGerolamo, 364 So.2d at 942.

would decide them."5 DiGerolamo and Cousin reflect the Louisiana Supreme Court's reluctance to
require an insurable interest for liability insurance.
The basis for the public policy against issuance of property insurance to one who has no
interest in the property is obvious. Such an insured would have nothing to lose and everything to gain
from the loss of the property. The resultant moral hazard is not to be invited or supported. There
is no such perverse incentive in insuring against liability for injury to another on any location, whether
one has an ownership interest or not; such insurance merely indemnifies the insured if and to the
extent the insured is held liable for the injury.6 As a result it is generally recognized that public policy
does not require that such an insured have an interest in the property itself. Typically, only legal
accountability for accidents or losses thereon is required.7 It is apparent that liability insurance may
issue in any instance in which the insured might be held liable.
We also can perceive a situation where exposure to liability is tenuous but a party nonetheless
desires insurance both for peace of mind and for that second tangible benefit: the carrier's obligation
to provide a defense.8 We perceive no valid reason to interpose a rule of law barring purchase of
liability insurance under such circumstances.
In the case at bar Capaci was exposed to the risk of liability at the time of her injury. She had
moved out of the Metairie house only a few months earlier. A third party incurring injury on the
premises might have blamed a condition that Capaci created before she left.9 Capaci possessed the
5Blankenship, 878 F.2d at 898 (internal quotation omitted).
6DiGerolamo; Omaha Property and Casualty Co. v. Crosby, 756 F.Supp. 1380
(D.Mont.1990), aff'd 951 F.2d 361 (9th Cir.1991); United Services Automobile Assn v. Howe,
208 F.Supp. 683 (D.Minn.1962), appeal dismissed, 322 F.2d 476 (8th Cir.1963).
7E.g., Scottsdale Ins. Co. v. Glick, 240 Va. 283, 397 S.E.2d 105 (1990); see 6B Appleman,
Insurance Law and Practice, � 4253 at 19 (1979 and 1992 Supp.); R.A. Vinluan, Annotation,
Liability Insurance: Insurable Interest, 1 ALR3d 1193 (1965 and 1993 Supp.) (citing cases).
8See American Home Assurance Co. v. Czarniecki, 255 La. 251, 230 So.2d 253 (1969) (the
insurer's obligation to defend suits against its insured is broader than its liability for damage
claims).
9Cf. Cee Jay Realty Corp. v. Aetna Casualty and Surety Co., 37 A.D.2d 535, 321 N.Y.S.2d
944 (1971), modified 30 N.Y.2d 754, 333 N.Y.S.2d 419, 284 N.E.2d 575 (1972) (insurer has
duty to defend where its insured is sued for fire that occurred after he sold the premises; injured

requisite interest--potential legal liability. United Fire's challenge to her status as a named insured
fails. As a named insured the policy did not cover her injury.
As a last resort United Fire seeks relief through the severability clause in the Independent
policy which states:
This insurance applies separately to each insured. This condition will not increase our limit
for any one occurrence.
United Fire construes this language to create two separate policies with Reeder the sole insured on
one policy and Capaci the sole insured on the other. Under this construction, Capaci would not be
an insured on Reeder's policy and the exclusion for injuries to an insured would not apply. We are
not persuaded that this is the meaning of the severability clause.
A severability clause operates to provide coverage to one insured even though another insured
might be excluded. This clause apparently originated to offset provisions in commercial automobile
insurance policies which denied coverage of a claim by an employer for the injuries of an employee
on the grounds that worker's compensation insurance provided reimbursement. No such rationale
exists for denying coverage to additional insureds.10
Severability clauses also have been applied in connection with the family11 or household
exclusion for "bodily injury to you or an insured." For example, in American National Fire Ins. Co.
v. Estate of Fournelle,12 a father killed his children who were then living with his estranged wife, their
mother, and then committed suicide. The childrens' estate sued the father's estate. In an expansive
reading of the severability clause the Minnesota Supreme Court found coverage despite a household
exclusion. The policy defined "insured" to include resident relatives. The children were not deemed
parties allege that his failure to maintain the premises prior to the sale was a contributing cause of
the fire).
10Zenti v. Home Ins. Co., 262 N.W.2d 588 (Iowa 1978); Commercial Standard Ins. Co. v.
American General Ins. Co., 455 S.W.2d 714 (Tex.1970).
11See McKenzie and Johnson, Insurance Law and Practice, 15 Louisiana Civil Law Treatise, �
168 at 306 (1986 and 1993 Supp.) (the exclusion was added to policies to avoid intra-family
claims).
12472 N.W.2d 292 (Minn.1991).

insureds with respect to the father and the severability clause preserved his coverage.13
The case at bar presents a materially different situation. Reeder and United Fire seek
insurance coverage for a claim by Capaci that is excluded by unambiguous policy language. The
severability clause provides no succor to appellants.14
For the foregoing reasons, the judgment of the district court is AFFIRMED.

13Similarly, in Pizzo v. Graves, 453 So.2d 592 (La.App.), writ denied, 457 So.2d 1181
(La.1984), a Louisiana intermediate appellate court held that a severability clause preserved
coverage for the mother where the child lived with the father. A claim by the father would have
fallen within an exclusion for bodily injury arising from the operation of a motor vehicle by an
insured because the child was an insured with respect to him. The claim by the mother was not
subject to the exclusion.
14See Sciaudone v. Steuk, 128 N.H. 261, 512 A.2d 1108 (1986) (Souter, J.).