Foster v. Preferred Acc Ins Co.

• Decision Date: 06 November 1903
• Docket Number: 10.
• Citation: Foster v. Preferred Acc Ins Co., 125 F. 536 (E.D. Pa. 1903)
• Parties: FOSTER v. PREFERRED ACCIDENT INS. CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

125 F. 536

FOSTER v. PREFERRED ACCIDENT INS. CO.

No. 10.

United States Circuit Court, E.D. Pennsylvania.

November 6, 1903

Melick Potter & Dechert, for plaintiff.

Richard C. Dale, for defendant.

J. B McPHERSON, District Judge.

This is a suit upon a policy of accident insurance taken out in August, 1900, by Charles S. Partridge, whereby the defendant promised, inter alia, to pay $2,500 to 'Mrs. Mary G Foster, friend,' if the insured should die as the result of an accident. Upon this policy the insured paid nine quarterly premiums, and died from accident on September 8 1902. The defense is the beneficiary's want of insurable interest, and upon that point the undisputed facts are as follows:

The insured was an attorney at law, and resided in Florida, where Mrs. Foster also had her residence until she removed to Philadelphia not long ago. He came to live with her family when he was 18 years old, received his legal education in the office of her husband, and was considered a member of the family until the day of his death, although there was no relationship, and although he had not been living in the same household with Mrs. Foster for several years before he died. He paid nothing for his boarding during the 10 or 12 years of his actual residence in her house, and was in all respects on the footing of a near and affectionately regarded relative by blood. When he died he owed Mrs. Foster $250, which he had borrowed two or three years before. At the time the policy was taken out, he wrote a letter to Mrs. Foster, of which the following portion refers to the insurance:

'Sanford, Florida, August 13, 1900. My dear Mrs. Foster: I have taken out an accident policy in the sum of $5000.00 in the Preferred Accident Assurance Company of New York City, Capt. Manley of this place Agent, who can give all particulars. I have had the policy made payable to you, so that in case of any accident resulting in death you can collect the money. I do this as my mother is getting old and it would be a burden for her to have it on her mind. It wish you would dispose of the money in case anything should happen as follows: Send my mother $2000, take $2000 for yourself and the other thousand use to pay any debts etc. that may come up. Whatever of the balance there might remain from the $1000 you are also to keep. I think that makes the insurance matter plain.'

Mrs. Foster had nothing to do with taking out the policy, and paid none of the premiums.

Whether these facts would have supported a policy taken out and maintained by Mrs. Foster on the life of the insured may admit of question. I express no opinion upon this subject, nor upon another possible question, namely, whether the testimony should have been submitted to the jury to determine the good faith of the transaction, its freedom from the element of speculation. The defendant did not ask that the case should be passed upon by the jury. On the contrary, the good faith of the parties was not disputed, the sole defense being that the beneficiary had shown no insurable interest whatever, and that the court should so declare as matter of law. The defendant's argument is that it makes no difference what the form of the transaction may be-- whether the policy be taken out by the insured himself or by the beneficiary; in either case the result is that the beneficiary has acquired an interest in the contract and in the life of the insured, and therefore that public policy denies to the plaintiff the right to recover, unless her interest is shown to be such as is recognized by the law as insurable. It is undoubtedly true that during the discussion and development of the doctrine of insurable interest the courts have used language which supports this argument. For example, in Gilbert v. Moose's Adm'rs, 104 Pa. 74, 49 Am.Rep. 570, the Supreme Court of Pennsylvania declared:

'As a beneficiary merely, having no interest in the life, it seems to us very clear that he (referring to a stranger in blood, in whose favor the policy was issued) could lawfully have no interest in the policy; for if we admit the contrary, if we admit that one may insure his life for the benefit of another, who is neither a relative nor a creditor, our whole doctrine concerning wagering policies goes by the board. The very foundation of that doctrine is that no one shall have a beneficial interest of any kind in a life policy who is not presumed to be interested in the preservation of the life insured.'

The Supreme Court of the United States has also used similar language in several cases, of which Crotty v. Ins. Co., 144 U.S. 621, 12 Sup.Ct. 749, 36 L.Ed. 566, is an example. It is there said:

'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 in insurance have been repeatedly denounced. Cammack v. Lewis, 15 Wall. 643 (21 L.Ed. 244), in which a policy of $3,000 taken out to secure a debt of $70, was declared 'a sheer wagering policy.' Connecticut Mutual Life Insurance Co. v. Schaefer, 94 U.S. 457, 461 (24 L.Ed. 251), 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 (26 L.Ed. 924).'

Upon the other hand, both these courts have distinctly declared otherwise in words that are quite as clear. Thus, in Connecticut Ins. Co. v. Schaefer, 94 U.S. 457, 24 L.Ed. 251, it is said:

'There is no doubt that a man may effect an insurance on his own life for the benefit of a relative or friend. * * * The essential thing is that the policy shall be obtained in good faith, and not for the purpose of speculating upon the hazard of a life in which the insured has no interest.'

So, in Ins. Co. v. Robertshaw, 26 Pa. 189, Mr. Justice Sharswood used the following language:

'For myself, I can see no good reason why a man having an insurable interest may not insure it, and present the policy as a gift to a friend; and, if such an agreement to give be made at the very time of the contract, why may not the policy be made at once in the name of the donee, the whole transaction being bona fide, no fraud on the company intended?'

In Scott v. Dickson, 108 Pa. 6, 56 Am.Rep. 192, the court said:

'Can there be a doubt that he intended the policy for his friend when he made the application? Had it been made so in form, had he instructed the company to make the loss payable to John F. Scott in case of his death, the transaction would have been perfectly legal, and open to no objection as a wagering policy. The validity of such policies has never been doubted.'

In Carpenter v. Ins. Co., 161 Pa. 15, 28 Atl.944, 23 L.R.A. 571, 41 Am.St.Rep. 880, the point decided in Gilbert v. Moose's Adm'rs, supra, is declared to be this:

'Can one having no interest in the life of the insured, for the purpose of speculation only, acquire, by assignment or otherwise, such title to the policy as the law will enforce?' In none of these cases was the point decided that is now presented, and the dicta on the one side may be fairly held to balance the dicta on the other. But there is a line of decisions which deal with the precise question now before the court. That question is whether, in a suit on a policy that was taken out and maintained by the insured on his own life, but in favor of a third person as beneficiary, the company may set up the beneficiary's want of insurable interest? Or, to state it in another form, the question is not to whom does the money properly belong-- to the estate of the insured or to the beneficiary? but, should the company be allowed to raise that point? The courts of numerous states have upheld either the complete validity of such a policy, or, at all events, its validity against the company, who will not be permitted to set up the beneficiary's want of insurable interest. In Campbell v. Ins. Co., 98 Mass. 381, where the policy was in favor of a sister-in-law, the court said:

'The policy in this case is upon the life of Andrew Campbell. It was made upon his application. It issued to him as 'the assured.' The premium was paid by him, and he thereby became a member of the defendant corporation. It is the interest of Andrew Campbell in his own life that supports the policy. The plaintiff did not, by virtue of the clause declaring the policy to be for her benefit, become the assured. She is merely the person designated by agreement of the parties to receive the proceeds of the policy upon the death of the assured. The contract (so long as it remains executory), the interest by which it is supported, and the relation of membership, all continue the same as if no such clause were inserted. It was not necessary, therefore, that the plaintiff should show that she had an interest in the life of Andrew Campbell, by which the policy could be supported as a policy to herself as the assured. The defendants raise no question as to her right to bring this action if the policy can be supported for her benefit.'

In Provident Life Co. v. Baum, 29 Ind. 236, where the policy was in favor of a brother, the trial court ruled that it was wholly immaterial whether the beneficiary had any interest of a pecuniary nature in the life of the insured. This instruction was held to be correct, the Supreme Court saying:

'It cannot be questioned that a person has an insurable interest in his own life, and that he may effect such insurance and appoint any one to receive the money in case of his death during the existence of such a policy. It is not for the insurance company, after executing such a policy, and agreeing to the

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