(a) A lessee obtains an insurable interest when existing goods are identified to the lease contract even though the goods identified are nonconforming and the lessee has an option to reject them.
(b) If a lessee has an insurable interest only by reason of the lessor‘s identification of the goods, the lessor, until default or insolvency or notification to the lessee that identification is final, may substitute other goods for those identified.
Terms Used In Texas Business and Commerce Code 2A.218
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Contract: A legal written agreement that becomes binding when signed.
- Goods: means all things that are moveable at the time of identification to the lease contract, or are fixtures (Section Texas Business and Commerce Code 2A.103
- Lease: means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease. See Texas Business and Commerce Code 2A.103
- Lease contract: means the total legal obligation that results from the lease agreement as affected by this chapter and any other applicable rules of law. See Texas Business and Commerce Code 2A.103
- Lessee: means a person who acquires the right to possession and use of goods under a lease. See Texas Business and Commerce Code 2A.103
- Lessor: means a person who transfers the right to possession and use of goods under a lease. See Texas Business and Commerce Code 2A.103
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Rule: includes regulation. See Texas Government Code 311.005
- Statute: A law passed by a legislature.
(c) Notwithstanding a lessee’s insurable interest under Subsections (a) and (b), the lessor retains an insurable interest during the existence of the lease contract.
(d) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.
(e) The parties by agreement may determine that one or more parties have an obligation to obtain and pay for insurance covering the goods and by agreement may determine the beneficiary of the proceeds of the insurance.