Crotty v. Union Mutual Life Ins Co of Maine

• Decision Date: 18 April 1892
• Citation: 12 S.Ct. 749,36 L.Ed. 566,144 U.S. 621
• Parties: CROTTY v. UNION MUTUAL LIFE INS. CO. OF MAINE
• Court: U.S. Supreme Court

144 U.S. 621

12 S.Ct. 749

36 L.Ed. 566

CROTTY v. UNION MUTUAL LIFE INS. CO. OF MAINE.

April 18, 1892.

STATEMENT BY MR. JUSTICE BREWER.

On January 31, 1883, defendant in error, defendant below, insured the life of Michael O'Brien. The language of the policy was this: 'Does promise Michael O'Brien, of Lockford, in the state of California, to pay to said Michael O'Brien the sum of ten thousand dollars (any indebtedness to the company on account of this contract to be first deducted therefrom) at the office of the company in Portland, Maine, on the fifteenth day of January, in the year nineteen hundred and forty-one, or, if said Michael O'Brien shall die before that time, to pay said sum within ninety days after notice and satisfactory proofs of death shall have been furnished to the company at its said office, to Michael Crotty, his creditor, if living; if not, then to the said Michael O'Brien's executors, administrators, or assigns, upon the following conditions.' On January 2, 1885, plaintiff in error, plaintiff below, commenced his action in the circuit court of the United States for the northern district of California to recover on the policy. The complaint contained these allegations:

Third. That plaintiff was at the time of effecting said policy of insurance, and at the time of the death of said Michael O'Brien, a creditor of said Michael O'Brien for various sums of money, which this plaintiff had at various times advanced to the said Michael O'Brien, amounting to several thousand dollars, and as such creditor had a valuable interest in the life of said Michael O'Brien.

'Fourth. That on the 15th day of September, 1883, at the city of Boston, state of Massachusetts, the said Michael O'Brien died.

'Fifth. That on the 14th day of January, 1884, plaintiff furnished the defendant with proof of the death of said Michael O'Brien in this case, and otherwise performed all the conditions of the said policy of insurance on his part.'

The answer denied specifically that O'Brien was ever indebted to plaintiff, and denied that plaintiff ever performed the conditions of the policy, except by furnishing proofs of the death of O'Brien. In the proofs of death, which were on a blank furnished by the insurance company, were these questions and answers: '(3) In what capacity or in what title do you make the claim? As creditor and beneficiary named in the policy.' '(17) If the claim is made under an assignment, give the date, name of assignor, and the consideration. The claim by me as creditor of deceased and beneficiary named in the policy.' On the trial the only evidence furnished by the plaintiff of his interest in the policy was that contained in the policy itself and in these two statements in the proofs of death. The court instructed the jury to find a verdict for the defendant, to reverse which judgment plaintiff sued out this writ of error.

S. F. Phillips and Frederic D. McKenncy, for plaintiff in error.

Josiah H. Drummond and Josiah H. Drummond, Jr., for defendant in error.

Mr. Justice BREWER, after stating the facts in the foregoing language, delivered the opinion of the court.

Without noticing other questions discussed by counsel, it is sufficient to consider that of plaintiff's interest in the policy. It is the settled law of this court that a claimant under a life insurance policy must have an insurable interest in the life of the insured. Wagering contracts tracts in insurance have been repeatedly denounced. Cammack v. Lewis, 15 Wall. 643, in which a policy of $3,000, taken out to secure a debt of $70, was declared 'a sheer wagering policy.' Insurance Co. v. Schaefer, 94 U. S. 457, 461, in which it was said: 'In cases where the insurance is effected merely by way of indemnity, as where a creditor insures the life of his debtor for the purpose of securing his debt, the amount of insurable interest is the amount of the debt' Warnock v. Davis, 104 U. S. 775.

Confessedly, plaintiff sues as a creditor of O'Brien. Within the language quoted, the amount of his insurable interest was the amount of his debt; and the question is whether the policy and the proofs of death contained sufficient evidence of such insurable interest. It is unnecessary to enter into the disputed question, as to how far a policy of insurance taken out by a creditor on the life of his debtor is affected by a change in the relations between debtor and creditor prior to the maturity of the policy; for here the contract was between the insured, O'Brien, and the company; the promise of the company was to him, and to pay to him at the maturity of the policy, with a proviso that if the insured died before the end of the term payment should be made 'to Michael Crotty, his creditor, if living; if not, then to the said Michael O'Brien's executors,' etc. The words 'if not' grammatically stand in antithesis to the words immediately prior, 'if living;' and yet, considering the purpose of the contract, and the words which follow directly thereafter, if would seem not unreasonable that they refer to a determination of the relation of creditor, and as though the language was, 'if not a creditor, then to the said Michael O'Brien's executors,' etc. If a policy of insurance be taken out by a debtor on his own life, naming a creditor as beneficiary, or with a subsequent assignment to a creditor, the general doctrine is that, on payment of the debt, the creditor loses all interest therein, and the policy becomes one for the benefit of the insured, and collectible by his executors or...