Life Ins. Clearing Co. v. O'Neill

• Citation: 106 F. 800
• Decision Date: 12 March 1901
• Docket Number: 7.
• Parties: LIFE INS. CLEARING CO. v. O'NEILL.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

106 F. 800

LIFE INS. CLEARING CO. v. O'NEILL.

No. 7.

United States Court of Appeals, Third Circuit.

March 12, 1901

J. P Kyle, for plaintiff in error.

James Scarlett, for defendant in error.

Before DALLAS and GRAY, Circuit Judges, and McPHERSON, District Judge.

J. B McPHERSON, District Judge.

This is an action on a policy of insurance taken out and maintained by an adult son for his own benefit upon the life of his father, and the question for decision is whether, under the facts in evidence, the son had an insurable interest sufficient to support the policy. The learned trial judge held that such interest existed, relying mainly upon insurance Co. v. Kane, 81 Pa. 154, but evidently deciding the point with some reluctance. His opinion upon this subject is as follows:

'The second question is, had the plaintiff an insurable interest in the life of father? We have examined with much care the authorities and text books on this subject. We find them conflicting to such an extent as to support a judgment on this reserved point for either the plaintiff or defendant. The supreme court of Pennsylvania in Insurance Co. v Kane, 81 Pa. 154, held an adult son had an insurable interest in the life of his father. While the federal courts are not bound by the state courts' construction of a contract of insurance (Carpenter v. Insurance Co. 16 Pet. 495, 10 L.Ed. 1044; Liverpool & G.W. Steam Co. v. Phoenix Ins. Co., 129 U.S. 443, 9 Sup.Ct. 469, 32 L.Ed. 788), yet, in view of the general conflict of decisions on this question, the fact that a state statute was an element in the conclusion reached by the supreme court of Pennsylvania and that a decision holding the son had not an insurable interest might unsettle the status of policies in this state, we are moved, sitting at circuit, to hold, for the purposes of this case, the plaintiff had an insurable interest in the life of his father, leaving it to the circuit court of appeals to settle the question.'

The uncontradicted evidence established the facts that the son was an adult, married, and having a home and family of his own apart from his father; that he was not supported by, and did not support, his father, but that each maintained himself by his own exertions. There is nothing to show that the relation of debtor and creditor existed between them. It will be observed, therefore, that the precise question is-- laying aside, for the present, the effect of the poor law of Pennsylvania-- whether the bare fact of relationship is sufficient to give an adult son an insurable interest in his father's life. Upon this point, all the decisions, so far as we have been able to discover, declare that no such interest exists, although dicta to the opposite effect are no doubt to be found, and, in our opinion, this declaration is not only supported by the weight of authority, but is also in harmony with the principles upon which the doctrine of insurable interest rests.

The sum of the decisions and of text-book discussion upon the subject of insurable interest may, we think, be fairly stated thus: No person has an insurable interest in the life of another unless he would in reasonable probability suffer a pecuniary loss, or fail to make a pecuniary gain, by the other's death; or (in some jurisdictions) unless, in the discharge of some undertaking, he has spent money, or is about to spend money, for the other's support or advantage. The extent of the insurable interest-- the amount for which a policy may be taken out, or for which recovery may be had-- is not now under consideration. What is often called 'relationship insurance' must be governed by this rule. It must rest upon the foundation of a pecuniary interest, although the interest may be contingent, and need not be capable of exact estimation in dollars and cents. Sentiment or affection is not sufficient of itself, although it may often be influential in persuading a court or jury to reach the conclusion that a beneficiary had a reasonable expectation of pecuniary advantage from the continued life of the insured. In one relation only-- the relation of husband and wife-- is the actual existence of such a pecuniary interest unimportant; the reason being that a real pecuniary interest is found in so great a majority of cases that the courts conclusively presume it to exist in every case, whatever the fact may be, and therefore will not inquire into the true state of a few exceptional instances. This we think, is essentially what is meant by the declaration of courts and text-book writers that the mere relationship of husband and wife is sufficient to give an insurable interest. The supreme court of Vermont-- alone, we think, among judicial tribunals-- seems disposed to hold the presumption to be rebuttable. In Currier v. Insurance Co., 57 Vt. 496, it is said:

'Admitting that the rule as to the interest necessary to support a contract of life insurance is that the interest must be a pecuniary one, we think that, where no facts are shown in relation to the wife, the presumption is that the husband has an insurable pecuniary interest in her life. He is entitled to her services. There are many cases where she is the real support of her husband and family, or, as is sometimes said, she is the 'man of the house.' In all ordinary cases, the husband has a deep interest in the life of the wife. Cases may exist where the husband has no interest whatever in his wife's life. She may be a burden,-- a hopeless maniac, or invalid,-- and such facts may require the application of a different rule. There are none such in this case, and we only hold that the presumption is that the wife is a helpmate, and the husband has an interest of a pecuniary nature in her living.'

In all other relationships there is no presumption of interest, and no insurable interest exists, unless the reasonable likelihood of pecuniary loss or gain is present in actual fact. No doubt, judicial language is to be found supporting the view that the mere relationship of parent and child is sufficient to give an insurable interest. The dictum in Warnock v. Davis, 104 U.S. 775, 26 L.Ed. 924, is perhaps more often referred to than any other similar declaration, and it may therefore be quoted as an example:

'It is not easy to define with precision what will in all cases constitute an insurable interest, so as to take the contract out of the class of wager policies. It may be stated generally, however, to be such an interest, arising from the relations of the party obtaining the insurance, either as creditor of or surety for the assured, or from the ties of blood or marriage to him, as will justify a reasonable expectation of advantage or benefit from the continuance of his life. It is not necessary that the expectation of advantage or benefit should be always capable of pecuniary estimation; for a parent has an insurable interest in the life of his child, and a child in the life of his parent, a husband in the life of his wife, and a wife in the life of her husband. The natural affection in cases of this kind is considered as more powerful-- as operating more efficaciously-- to protect the life of the insured than any other consideration. But in all cases there must be a reasonable ground, founded upon the relations of the parties to each other, either pecuniary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured. Otherwise, the contract is a mere wager, by which the party taking the policy is directly interested in the early death of the assured. Such policies have a tendency to create a desire for the event. They are, therefore, independently of any statute on the subject, condemned, as being against public policy.'

The comment upon this passage in the note of Morrell v. Insurance Co., 57 Am.Dec.,on page 96, seems to us to be sound, and we quote it with approval:

'If we correctly understand the doctrine here laid down, it amounts simply to this: that an insurable interest in another's life need not be pecuniary, in the sense of being susceptible of definite 'pecuniary estimation,' nor in the sense of being founded upon any mere pecuniary relation, but that it may rest solely upon ties of blood or affinity, and yet that the mere existence of such a tie is not of itself sufficient to constitute an insurable interest, but that the tie must be such as to give reasonable ground for an expectation of benefit or advantage from the continuance of the life. By 'benefit or advantage,' in this connection, we understand that it must be a material or physical 'benefit or advantage'; that is to say, a mere sentimental benefit arising from a gratification of the affections by the prolongation of the life assured will not suffice. The expected benefit must consist in service, maintenance, or the like. This is equivalent to saying that it must be a pecuniary benefit, as distinguished from a mere sentimental or moral gratification. Thus understood, the doctrine of those cases, which professedly reject the test of pecuniary interest, is not substantially different from that held in other cases. If it were true that the reasonable expectation of advantage from the continuance of another's life, required to constitute an insurable interest in that life, had reference in any case solely to the satisfaction of an affectionate desire for the prolongation of the life, ought not the insurers to be permitted to show in defense that there was in fact no affection between the parties? And, on the other hand, ought not an insurable interest to be held to exist wherever there is affection, though there was no other relation? Yet we venture to say, on the one hand, that the right of a husband to insure his wife's life would not be denied even

...