Murphy v. Red

AeNOLD, J., delivered the opinion of the court. It is shown that the husband of appellee before his death assigned the policy on his life for a valuable consideration to appellant’s intestate. It is not suggested that there was any purpose in procuring the policy to evade or circumvent the laws against wagering policies, but it is affirmed on one side and denied on the other that the fact that the assignee had no insurable interest in the life insured vitiated the assignment, and the case will be considered in that aspect. It is generally agreed that mere wager policies — that is to say, policies in which the insured party lias no interest whatever in the matter insured, but only an interest in its loss or destruction — are void as against public policy. Conn. Mut. Ins. Co. v. Schaefer, 94 U. S. 457. And it must be admitted that there are decisions and dicta to the effect that it is unlawful for the holder of a life insurance policy on his own life to sell or assign the same under any circumstances to one who has no insurable interest in the life insured. Courts, which deny the validity of such sale or assignment, manifest great sensibility in regard to the danger which such transaction if sanctioned would cause to human life. They say that all the objections against issuing a policy directly to one on the life of another, in whose life the former has no insurable interest, exist against his holding such policy by mere purchase and assignment from another, that in either case the holder of such policy is interested in the death rather than in the life of the insured, and that the speculative or gambling element is the same, and the temptation to shorten the life of the insured is the same in the one case as in the other. [618] The weight of reason and authority, we think, is against this view. There is an obvious difference between the two transactions. It is contrary to public policy for a person to insure a life in which he has no insurable interest and to derive benefit or advantage therefrom. This is condemned as gaming or wagering on the chances of human life, and as such is prohibited by law. But it is, lawful for one to insure his own life, and after he has done so the policy becomes his own if payable as in this case, and there is no good reason why he may not sell or dispose of it as he may of any other chose in action if the policy was valid in its inception. Clark v. Allen, 11 R. I, 439 ; St. John v. Am. Mut. Life Ins. Co., 13 N. Y. 31 ; Mut. Life Ins. Co. v. Allen, 138 Mass. 24; Valton v. Assuranee Co., 20 N. Y. 32 ; Olmsted v. Keyes, 85 N. Y. 593 ; Ashley v. Ashley, 3 Sim. 194 ; Currier v. Continental Life Ins. Co., 52 Am. Rep. 134, note; Bussinger v. Bank, etc., Northwestern Reporter, vol. 30, No. 3, p. 290. A man may have the best of reasons for wishing to dispose of the policy on his life. The exigencies of business or absolute necessity may require him to do so. He may have paid large sums in premiums and afterward became unable to pay more, and if he is not allowed to sell or assign on the best terms he can make, the policy may be lapsed and lost. To impair the value and utility of his policy or require him to'lose it on the ground that if he were to sell or assign it the assignee or purchaser would have a motive to kill him, or that any sale or assignment he might be able to effect Math one who had no insurable interest in his life would be tainted with the vice of gambling, is, as matter of law, extremely fanciful and unsatisfactory./ Other interests and conditions generally prevalent, and involving tendencies quite as fatal to human life, may be created and are maintained without any such restriction. . It seems that a life tenant would be in about as much danger from the remainderman, and a testator from a person having no interest in his life, for whom he had made provision by will, as the insured would be from the assignee or purchaser without interest of a life insurance policy. An insurable interest in the-assured at the time the policy is issued [619] is essential to the validity of the policy, but it has been often de-1 cided, as when a creditor takes out a policy on the life of his debtor, j that it is not necessary to the continuance of the insurance that the interest in the life insured should continue. Cessation of interest, payment of the debt in the case supposed, would not terminate the policy. Dalby v. India Assurance Co., 15 C. B. 365 ; Law v. London Policy Co., 1 Kay & Johns. 223; Conn. Ins. Co. v. Schaefer, 94 U. S. 457; Rawle v. Am. Ins. Co., 27 N. Y. 282; Provident Ins. Co. v. Baum, 29 Ind. 236; Currier v. Continental Ins. Co., 52 Am. Rep. 134, note. If the danger to life is not adequate to avoid the policy in such ease, when the interest in the life insured ceases, it is not perceived why it should be deemed sufficient to invalidate a contract by which a policy is sold and assigned to one without interest. Besides, the protection should not be overlooked which is afforded to the life insured by the doctrine that one cannot recover insurance money payable on the death of a party whose life he has taken by felonious means. It would be a reproach to the law of the land if he were allowed to do so. He could not, in fact, do so, any more than he could recover insurance money on a building which he had willfully set fire to and burned. Mutual Life Ins. Co. v. Armstrong, 117 U. S. 591. In Mutual Life Ins. Co. v. Allen, supra, the Supreme Court of Massachusetts, after removing all doubt as to the meaning of the decisions in that State on the subject, and referring to the dicta in Cammack v. Lewis, 15 Wall. 643 ; Warnock v. Davis, 104 U. S. 775, and Franklin Ins. Co. v. Hazzard, 41 Ind. 116, and showing that it was not decided in either of these cases, that all assignments of life insurance policies without interest are illegal, said : “ That the right to receive money on the death of another is assignable at law or in equity will not be questioned. It is true that every person who is in expectation of property at the death of another has an interest in his death, but it does not follow, and it is not true, that the law does not allow the possession and assignment of such expectations. The objection applies with equal force to the assignment of a provision made for one upon the death of another by [620] deed or will as to the assignment of a like provision in the form of a life insurance. We see nothing in the contract of life insurance which will prevent the assured from selling his right under the contract for his own advantage, and the fact that the assignee has no insurable interest in the life insured is neither conclusive nor prima facie evidence that the transaction is illegal.” In the well-considered case of Clark v. Allen, supra, the Supreme Court of Rhode Island used this language : “ It is said that such an assignment, if permitted, may be used to circumvent the law. But it does not follow that such an assignment is not to be permitted at all because if permitted it may be abused. Let the abuse and not the bona fide use be condemned and defeated. The truth is, it is one thing to say that a man may take insurance upon the life of another for no purpose except as a speculation or bet on his chances of life, and may repeat the act ad libitum, and quite another thing to say that he may purchase the policy as a matter of business, after it has once been duly issued under the sanction of law and is therefore an existing chose in action or right of property. There is in such purchase, in our opinion, no immorality and no imminent peril to human life. We should have strong reasons before we hold that a man shall not dispose of his own. Courts of justice, while they should uphold the great and universally recognized interests of society, ought nevertheless to be cautious about making their own notions of public policy the criterion of legality, lest, under the semblance of declaring the law, they in fact usurp the functions of legislation.” We are unable to subscribe to the doctrine that the assignee or purchaser of a life insurance policy, valid in its inception and transferred according to its terms, is not entitled to its proceeds by reason of his want of interest in the life insured. The judgment is reversed, and judgment here for appellant.