Northwestern Mutual Life Insurance v. Coshocton Glass Co.

There is practically no conflict in the testimony as to the facts in this ease, and the main contention of the plaintiffs in error is that the plaintiff below, the glass company, had no insurable interest in the life of Mr. Gainor at the time the policy was issued, and therefore the contract of insurance was a wagering one and was void in its inception; or if the company had an insurable interest in Mr. Gainor’s life when the policy was issued, the interest lapsed and was lost when he, Gainor, ceased to belong to the company or to be an employe thereof. These contentions raise the important legal questions involved in the case, and they may be summarized as follows: 1. Is an insurable interest necessary where one causes his own life to be insured for the benefit of a stranger? 2. Did the glass company have an insurable interest in the life of Mr. Gainor at the time the policy was issued? 3. If the glass company had an insurable interest in Gainor’s life at the time the policy was issued, did its interest lapse when that interest ceased? 4. Can the executors of Gainer’s estate raise the question of lack of insurable interest, if the insurance company does not ? Considering the questions in the order named: It may be stated at the threshold of the inquiry that the undisputed facts are that Gainor personally conducted the negotiations with the insurance company for the policy, signed the application and designated and had named therein the glass company as the bene7 fieiary, causing his own life to be insured for the benefit of the company. In such case it is immaterial whether the company had an insurable interest in his life or not. When one. causes his own life to be insured for the benefit of a stranger, the want of an insurable interest in the stranger will not invalidate the policy. Ryan v. Rothweiler, 50 O. S., 595, 601; May on Insurance, Section 75b. When a person effects insurance on his own life, and designates another as payee in the policy, without any fraud being practiced upon the insurer, the person named may maintain an ac — 236 — tion upon the policy without showing an insurable interest in the life of the insured.' No one except the insurer can take advantage of the fact that the payee named in the policy is not within the class which by the constitution of insurer is entitled to take the benefit. Kerr on Imurance (1902 Ed.), pp. 679, 680; Milner v. Bowman, 119 Ind., 448. The weight of authority is; or seems to be that in the absence of bad faith or fraud, the insured may have the policy made payable to any one. When a persqn takes out a policy of insurance upon his own life, and the amount is made payable to another having no interest in the life, or where the insured assigns his policy to one having no such interest, the beneficiary, or the assignee may hold and enforce the policy, if it was valid in its inception, and was procured or the assignment made in good faith. Olmstead v. Keyes, 85 N. Y., 593. Had the glass company an insurable interest'in the life of Thos. J. Gainor at the time the policy was issued? This involves a question of fact as well as of law. The right of a corporation to insure the life of an officer of the corporation, or an employe in its service, depends upon conditions and the good faith of the transaction on which the insurance was obtained. The record in this case shows that the glass company was engaged in a business of established lines of skilled workmanship; a large amount of capital was invested in the plant and its stock, and liabilities were outstanding for loans. Only one of its officers, namely, Thos. J. Gainor, had experience and specialized knowledge and skill in the business in which he was engaged. He was its vice-president and general manager, and was devoting his time and energies to the building up, establishing and superintending the enterprise. To him, creditors and stockholders alike looked and largely depended for the success of the company’s business. Mr. Gainor’s life by reason of his skill and ability in the business was a valuable asset of the company, and his death would be correspondingly a loss to the company financially. For these reasons, at least, if no other the company was financially interested in the life and the continuance of the life of Mr. Gainor. — 237 — We are conscious of the difficulty of defining with absolute precision what will in all cases constitute an insurable interest in the life of a person, so as to take a contract of insurance out of the class of wager policies. But we believe the test to be that where there is a reasonable ground, founded upon the relations of the parties to each other contractual, or by blood or affinity, whereby any pecuniary interest arises in the continuance of the life or expected benefit, or advantage from the continuance of the life of such person, there is an insurable interest in his or her life. Elliott on Insurance, Section 57, and Warnock v. Davis, 104 U. S., 775, seem to favor and support this principle. Bliss on Life Insurance, Section 21, says: ‘‘ The tendency of the American decisions, especially the more recent ones, is to'hold that wherever there is any well founded expectation of or claim to any advantage to be derived from the continuance of a life, there is an insurable- interest in that life, though there may be no claim that can be recognized in law or equity.” The interest required need not be such as to constitute the basis of any direct claim in favor of the plaintiff, the glass company, upon the life of the insured, Gainor; it is sufficient if an indirect advantage may result to the plaintiff from the continuance of his life. This principle is recognized and sustained by authority: Trenton Ins. Co. v. Johnson, 24 N. J. L., 586; State v. Willett, 86 N. E., 68; App. of Corson’s Exr., 113 Pa. St., 446. Did the' glass company’s interest terminate or lapse when Gainor ceased to be an officer or employe of the company? It is contended by plaintiff in error that Gainor, having left the services of the glass company on September 1, 1906, the company could not suffer any loss by his death in April, 1908, and therefore it could claim nothing under the policy. We do not agree with this contention,.but on the contrary believe the rule to be that if a policy is valid at its inception because based on either an adequate insurable interest, or the policy was taken out by Gainor on his own life, the existence of such an interest at the maturity of the policy is immaterial. This doctrine is recog — 238 — nized and held to be law by the great weight of authority in the United States, as will appear by 1 Cooley’s Briefs, p. 311, wherein the author cites many authorities, among them Conn. Mut. Life Ins. Co. v. Scheafer, 94 U. S., 457. The fact that such interest ceased before the death of the assured is immaterial on the question of plaintiff’s right to recover, unless such be the necessary effect of the provisions of the policy itself. Joyce on Insurance, Section 902; Elliott on Insurance, Section 60. If the insurance company does not raise the question as to want of insurable interest of the glass company in the life of Gainor at the time the policy was issued, can the executors of his estate do so? The insurance company recognized its liability on the policy, and paid the full amount into court to be distributed under its order. The insurance company does not question the right of the glass company to recover for want of an insurable interest in the life of Gainor, but recognized the contract as a valid one and enforceable. Under these conditions, can the executors of Gainor’s estate defend against the claim of the glass company, when the insurance company waived it ? No one but the insurer is entitled to interpose a defense of lack of insurable interest in the beneficiary named in the policy. We' think the weight of authority in this country is to this effect, as shown by the following cases: Chicago Title & Trust Co. v. Haxton, 129 Ill. App., 626; Standard Life & Ac. Ins. Co. v. Catlin, 106 Mich., 138; Johnson v. Van Epps, 110 Ill., 552; Hosmer v. Welch, 107 Mich., 470; Graff v. Mutual Life Ins. Co., 92 Ill. App., 207; Langford v. Freeman, 60 Ind., 55; Diffenback et al v. N. Y. Life Ins. Co., 61 Md., 370; and Mechanics Nat’l Bank v. Comins, 101 Am. St. Rep., 650. It is not contended that the policy was void in its inception, or when taken out by Mr. Gainor on his own life, and the record does not show or tend to establish any bad faith on the part of the glass company in accepting this policy, or in consenting to be named as the beneficiary therein. In short, the policy was applied for- by Mr. Gainor on his own life in good faith and not for — 239 — the purpose of speculating upon his life. The insurance company in issuing the policy also acted in good faith and raised mo question as to the bona fides of the transaction, when the policy became payable upon the death of Mr. Gainor. These facts all appearing in the record show that no gambling element entered into the contract of insurance. “Public policy is that principle of law which holds that no subject can lawfully do that which has a tendency to be injurious to the public or against the public good.” It may be true as an abstract proposition of law that á corporation has no insurable interest in the lives of members of its board of directors who are not indebted to it, but very different is the situation in this case. Mr. Gainor, it appears from the record, possessed practical skill and knowledge of the business in which the corporation was engaged; he was its general manager, on whose life and the continuance of his life at the time the policy was taken out by him depended the success of the enterprise, a situation very different from that of an ordinary director who usually serves without compensation. Suppose we are wrong 'as to our third proposition of law, namely, that the glass company’s interest in the policy did not lapse when Gainor’s interest in and employment with the company ceased; yet, if the policy taken out by Gainor on his own life was in good faith, and there is nothing shown to the contrary, he could dispose of the policy by sale or transfer in the absence of prohibitory legislation or contract stipulation. Eckel v. Renner, 41 O. S., 232. The sale and transfer made by Gainor and his wife of the policy in this case, as evidenced by plaintiff’s Exhibit No. 2 attached to the bill of exceptions, divest both he and his wife of all interest in the policy. Under these conditions neither Gainor, at the time of his death, nor his executors or his wife have any interest in the policy or the fund which the insurance company has paid into court. Without pursuing the discussion further, we are unanimously of the opinion that there is no error in the record of this case and the judgment is affirmed with costs, without penalty, costs to be — 240 — paid out of the fund arising on the policy-; exceptions are noted; and the cause is remanded to the common pleas court for execution.