Hawley v. Ætna Life Insurance

Mr. Justice Carter delivered the opinion of the court: The prayer of a bill filed in the circuit court of Cook county to set aside an assignment of a life insurance policy was allowed by said court and a decree entered in accordance therewith. On appeal to the Appellate Court the decree of the circuit court was reversed, with directions to dismiss the bill for want of equity. The Appellate Court granted a.certificate of importance, stating that the questions of law involved justified the same. This appeal followed. On June 30, 1893, George F. Hawley, a physician residing in Chicago, took out a policy of insurance on his own life in the /Etna Life Insurance Company for $10,000, in which his first wife was named as the beneficiary. On January 4, 1900, the wife having previously died, his daughter was named as beneficiary, and on June 14, 1912, the insured again changed the beneficiary from his daughter, who was then married, to his executors, administrators or assigns. On June 22, 1912, the policy was duly assigned by the insured to Frank .C. Crittenden, who had no insurable interest in the policyholder’s life, for $2500, and said assignee assumed the payments of the future premiums. At the time the policy was first made out Dr. Hawley was a practicing physician residing in Chicago, forty-nine years of age. The premium on the policy "was then $315.90, subject to change every ten years, depending upon the surplus earnings of the company. During the nineteen years before the assignment of the policy to Crittenden Dr. Hawley paid the premiums. At the time of the assignment he was sixty-eight years of age, and his life expectancy, based on actuaries’ tables, was 9.47 years. At that time he was not . in very good health, having heart trouble. He was also in June, 1912, pressed for ready money with which to pay real estate assessments on certain property that he owned, and his annual premium on this life insurance policy was falling due the last part of that month. He therefore decided to sell the policy, if possible, to the best advantage, and inquired of the /Etna Life Insurance Company the cash surrender value. He learned in some way that he could get $2000 from some person in the company’s office but could not get a cash surrender value from the company. He then advised with one of his office associates, Dr. Pratt, with reference to investigating the value, explaining that his daughter was married to a young man of decidedly good prospects and that there was no reason why he should carry the policy any longer; that the premiums were hard to meet and would probably be increased shortly, and he did not feel called upon to sacrifice himself to any great extent. He finally told Dr. Pratt that he would sell the policy for $2500. The evidence shows that fhe cash surrender value of the policy amounted to $2040.40, although the evidence tends strongly to show that Dr. Hawley did not know that the company itself would pay the cash surrender value, and the understanding between him and Dr. Pratt was that Dr. Pratt was to inquire of a friend in the life insurance business as to the salable value of the policy. After some investigation Crittenden told Dr. Pratt that he would pay $2500 cash for an assignment of the policy and assume the payment of the premiums’ thereafter. The $2500 cash was paid, an assignment made, and the premiums thereafter during Dr. Hawley’s life were paid by Crittenden. Dr. Hawley’s death took place in Chicago on April 16, 1917. Notice of the assignment was given, shortly after it was made, to the ¿Etna Life Insurance Company. Dr. Hawley was married to appellant in 1911, a year prior to the assignment of the policy. He practiced his profession for some time thereafter, giving it up on account of ill-health shortly before his death. After his death Crittenden filed proofs with the insurance company, and thereafter, before the payment of the policy to' Crittenden, appellant, as executrix of Dr. Hawley’s will, filed the bill in this proceeding. The principal question involved herein is whether the holder of a policy of life insurance has the right to assign the same by an absolute sale to a stranger having no insurable interest in the life of the insured. The record shows that the policy in question was procured by Dr. Hawley in good faith and that the assignment was also made in good faith, free from any fraud or deceit. The courts have uniformly held that one having no insurable interest in the life of another cannot procure a policy of insurance on such life, and the policy so procured is void at its inception. (Guardian Mutual Life Ins. Co. v. Hogan, 80 Ill. 35; Golden Rule v. People, 118 id. 492; Connecticut Mutual Life Ins. Co. v. Schafer, 94 U. S. 457; Warnock v. Davis, 104 id. 775; 3 Am. & Eng. Ency. of Law, — 2d ed. — 929.) This court has also held that one may insure his own life for the benefit of another having no insurable interest therein. (Bloomington Benefit Ass’n v. Blue, 120 Ill. 121.) The doctrine on this point in the last case has been quoted with approval by this court at various times and has never been in any way modified or overruled. It has also been held by this court that while it is the general rule that no person can procure a valid- insurance on the life of another unless he has an insurable interest in such life, “yet the rule seems to be that a person having insured his own life, may by an assignment of the policy provide for the payment of the insurance money to an assignee who has no insurable interest in his life.” (Martin v. Stubbings, 126 Ill. 387.) The doctrine in both these cases has been quoted with approval by this court as late as the case of Stake v. Stake, 228 Ill. 630. “The tendency in business life has been to liberalize the rules governing life insurance and thus to broaden its scope. It was found desirable that life insurance policies should pass freely by transfer and assignment, and so long as this was with the consent of the parties it was felt that the objections on the ground of public policy were largely illusory. Thus a more liberal rule has been adopted in many States, where it is held that a policy supported by an interest at its inception is a mere chose in action, which may be assigned to a person who had no insurance interest in the life.” (Elliott on Insurance, — 1907,—sec. 63.) This author includes Illinois as one of the States that- has adopted a more liberal rule and quotes the Illinois decisions cited above as laying down such rule. The same doctrine is laid down by the United States Supreme Court in Grigsby v. Russell, 222 U. S. 149, where the court discussed its former decisions on this question and said (p. 154) : “The ground suggested for denying the validity of an assignment to a person having no interest in the life insured is the public policy that refuses to allow insurance to be taken out by such persons in the first place. A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter-interest in having the life come to an end, and although that counter-interest always exists, * * * the chance that in some cases it may prove a sufficient motive for crime is greatly enhanced if the whole world of the unscrupulous are free to bet on what life they choose. The very meaning of an insurance interest is an interest in having the life continue, and so one that is opposed to crime; and, what perhaps is more important, the existence of such an interest makes a roughly-selected class of persons who by their general relations with the person whose life is insured are less likely than criminals at large to attempt to compass his death.” ' The opinion then goes on to state that in case of the assignment of a policy taken out in good faith there is no question as to the character of the original contract, and that, this being so, “not only does the objection to wagers disappear, but also the principle of public policy referred to, — at least in its most convincing form. * * * Obviously it is a very different thing from granting such a general license, to allow the holder of a valid insurance upon his own life to transfer it to one whom he, the party most concerned, is not afraid to trust. The law has no- universal cynic fear of the temptation opened by a pecuniary benefit accruing upon a death. * * * Life insurance has become in our days one of the best recognized forms of investment and self-compelled saving. So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property.” ' It was there held that a policy taken out in good faith could thereafter be assigned to one who had no insurable interest. In discussing the difference between the cases in which the policy was procured by a person who had no insurable interest in the life of the person insured, thus making a wager contract, and the cases where a policy was procured in good faith by the person himself to be assigned thereafter, one author has said: “The true line of distinction is the activity and responsibility of the assured and not the interest of the person entitled to the funds. It is well established that a man may take out a policy on his own life, payable to any person he pleases, and it is drawing a dis- . tinction without a difference to hold that he cannot take out a policy'and afterward transfer its benefits.” (2 May on Insurance, — 4th ed. — sec. 398a.) Another author in discussing this question, aftér stating that there is not entire unanimity in the decisions with reference to this subject, states: “The weight of authority sustains the proposition that if a person effects a valid insurance upon his own life and the transaction is bona fide and not intended to circumvent the law, the assignment to another will be upheld even though the assignee has no insurable interest in the life insured.” (2 Joyce on Insurance, — 2d ed. — sec. 918, and cases there cited.) Counsel for appellant argue earnestly that public policy should require that the policy could not be legally assigned under the circumstances shown on this record. We cannot so hold. There can be no question on this record that Dr. Hawley could have received for his policy on a cash surrender, from the company, $2040.40. We can see no reasonable basis for public policy forbidding the owner of the insurance policy to sell it and assign it to anyone who would pay more than the cash surrender value which the company was willing to pay. To sustain the doctrine of counsel for appellant on this point would be, in effect, to hold that a valid policy cannot be sold in the best market but must be either surrendered to the company or sold to a person having an insurable interest, and this would in most cases result in compelling the- policyholder to surrender his policy to the insuring company at its own figure. This, it seems to us, is contrary to sound public policy, and is not only contrary to the former decisions of this court but is not in accord with the weight of authority in other jurisdictions, including the latest decision of the Federal Supreme Court. The judgment of the Appellate Court will therefore be affirmed. Judgment affirmed.