Section 17 of the Insurance Code provides: "The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof."
In Sps. Cha vs. Court of Appeals (G.R. No. 124520 August 18, 1997), the Supreme Court held that automatic assignment of the policy to another entity under the provision of the lease contract is void for being contrary to law and public policy.
This is because the insurable interest over the merchandise remains with the insured not the assigneed entity. Thus, the insurer cannot be compelled to pay the proceeds of the fire insurance policy to a person who has no insurable interest in the property insured.
In Gercio vs. Sun Life Assurance of Canada (G.R. No. 23703, September 28, 1925, it states that it is well settled that a man has an insurable interest in his own life and in that of his wife and children; a woman in the life of her husband; and the creditor in the life of his debtor.
"Indeed it may be said generally that any reasonable expectation of pecuniary benefit or advantage from the continued life of another creates an insurable interest in such life. And there is no doubt that a man may effect an insurance on his own life for the benefit of a relative or fried; or two or more persons, on their joint lives, for the benefit of the survivor or survivors. The old tontines were based substantially on this principle, and their validity has never been called in question."
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