Equitable Life Assurance Society v. O'Connor's Administrator

OpinioN op the Court by Judge Hannah Reversing. In 1904 Mary O’Connor, at the solicitation of ber uncle, John O’Connor, procured a policy of insurance on the life of John O’Connor to be issued by the Equitable Life Assurance Society. Her parents were dead; but she was not only self-supporting, but was also earning sufficient to make some provision for her future; and an investment in the form of a policy of life insurance upon her uncle’s life was recommended to and urged upon her by him, as a safe way of accumulating her surplus earnings. It was arranged between them that she was to pay the first and all succeeding premiums on the policy and was to have the entire proceeds thereof at O’Connor’s death. The policy was issued payable to the estate of the insured, and a few days thereafter he assigned it to Mary O’Connor. She continued to pay the premiums thereon until 1912, when O’Connor died. Upon his death she made proof of claim and applied to the assurance society for payment of the policy. The society paid to her $497.15, the total of the premiums she had paid, but declined to pay the face of the policy upon the ground that she had no insurable interest in the life of her uncle, and that the policy was, therefore, void. John O’Connor’s administrator brought this action in the Jefferson Circuit Court against the assurance society to recover the amount of the policy, upon the theory that the policy itself was valid, but that the assignment [264] thereof to Mary O’Connor was invalid. There was a verdict and judgment in favor of plaintiff in the snm of $502.85, being the amount of the policy, one thousand dollars, less $497.15, the total of the premiums' paid by Mary O’Connor and restored to her by the insurer. The defendant appeals. 1.' The relationship of uncle and nephew or uncle and niece is not in itself sufficient to constitute an -insurable interest upon the part of either in the life of the other, where there is no reasonable ground of expectation of support to be furnished by the assured to the other. Hess’ Admr. v. Segenfelter, 127 Ky., 348, 105 S. W., 476, 32 R., 225, 128 A. S. R., 343, 14 L. R. A. (n. s.), 1172; Woods v. Woods, 130 Ky., 162, 113 S. W., 79, 19 L. R. A. (n. s.), 233; Metropolitan Ins. Co. v. Elison, 72 Kan., 199, 115 A. S. R., 189, 7 Ann Cas. 909, 3 L. R. A. (n. s.), 934. Mary O’Connor, therefore, had. no .insurable interest in the life of her uncle, John O’Connor. 2. It is also well settled that where the assignment of the policy was contemplated at the time it was pro-' cured to be issued, the first and all subsequent premiums' to be paid by the assignee, and he to receive the entire proceeds of the policy, the assignment is void as' between the insurer and the assignee, where the latter lacks insurable interest in the life of the insured. Steinback v. Diepenbrock, 158 N. Y., 24, 44 L. R. A., 417; 70 A. S. R., 424, 52 N. E., 662; Powell v. Dewey, 123 N. C., 103, 68 A. S. R., 818; Keystone v. Morris, 115 Pa., 46, 2 A. S. R., 572; Brockway v. Mutual Life, 9 Fed., 249; Hinton v. Mutual Reserve, 135 N. C., 314, 65 L. R. A., 161, 102 A. S. R., 545; Metropolitan Ins. Co. v. Elison, supra. 3. . But this contest is between the personal representative of the insured and the insurer, and not'.between the assignee arid the insurer. • ■ • The authorities are in conflict as to whether the policy itself is invalid, so' as to prevent a recovery thereon-by the, personal representative of the insured, where the assignment of the insurance- contract was contemplated at the timé it was procured to be issued, and where the' assignee, having no insurable interest, is to pay the 'first • and all subsequent premiums and to receive the proceeds' of the policy. ~ But this court has adopted the rule that in such case' the policy, although in form originally issued to.the in-. [265] sured, baying been in fact procured for the benefit of one haying no insurable interest, is therefore invalid frbin'its inception; such assignment of the policy being a mere colorable evasion of the prohibition against wagering contracts. ‘ • • The rule that in such case the policy itself is invalid was announced by this court in Bromley’s Admr. v. Washington Life Insurance Company, 122 Ky., 402, 92 S. W., 17, 121 A. S. R., 467, 12 Ann Cas. 685, 5 L. R. A. (n. s.), 747. y In" that case, Bromley made an arrangement with one; .B'ates whereby the latter was to pay the former $75.00 and they were to obtain insurance policies on Bromley’s life, payable to his estate,' which policies Bromley was to assign to Bates, he to pay the first ánd all subsequent premiums, and to have' the proceeds of the policies; Bates having no insurable interest in Brom-ley’s life. ' ■ ■ The court in that case quoted from Steinback y. Die-penfirock, supra, the following language: “The intention of the parties procuring.the policy would determine its character, which the courts would unhesitatingly declare in accordance with the facts, redding the policy and the assignment together as forming part 'of one transaction.” . ■The court then said that if the policies in question had been made payable directly to Bates they would have {been void, because he had .no insurable interest in Bromley’s life; and the issual of the policies payable to Bromley and assignment by him to Bates being .a mere evasion of the prohibition against wagering contracts, could not operate to validate that which was invalid. In the Bromley case the court said: “It is conceded that if the policies under this arrangement had been made payable- to Bates, they would have been void, as he had no insurable interest in the life of Bromley. But it is insisted that as they were made payable to Bromley’s estate and were assigned by him to Bates, only the assignment is void and that his administrator should recover from the insurance company. There would be force in this if the. policies had been delivered to Bromley and the assignment to Bates had been a subsequent and independent transaction. But the proof leaves no doubt that Bromley did not contemplate insuring his life for the benefit of his [266] estate at any time. He contemplated simply getting $75.00 out of the arrangement.' There is some proof in this record that O’Connor had the policy in his own possession for a short time before it was assigned to Mary, his niece; and appellee administrator lays great stress npon this, contending that this case is thereby taken out of the rule announced in the Bromley case. The evidence of Mary O’Connor and the agent who delivered the policy is that the policy was delivered to Mary by the agent when she paid the first -premium, and this evidence is uncontradicted. But the matter of delivery of the policy is immaterial. The material thing was that O’Connor, like Bromley, never had any purpose to insure his life for the benefit of his estate; and the assignment of the policy by him to his niece was not an independent transaction originating and executed after the insured had taken out a policy on his life, payable to his estate, in good faith, for the benefit of his estate. That assignment was made by him pursuant to the arrangement contemplated at the time the policy was procured to be issued, and constituted an evasion of the prohibition against the taking of insurance by persons having no insurable interest in the life of the insured. Such transactions are obnoxious to the law, and vio-lative of a sound public policy; invalid in their inception, and unenforceable in the courts. Metropolitan Ins. Co. v. Elison, supra. O’Connor’s administrator, therefore, was not entitled to recover any amount upon the policy in question. Judgment reversed.