New England Mut. Life Ins. Co. v. Null

• Decision Date: 14 September 1979
• Docket Number: No. 78-1897,78-1897
• Parties: NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY, a corporation, Appellee, v. Shirley Ann NULL, Individually and as Administratrix of the Estate of Victor G. Null, Deceased, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 421

605 F.2d 421

NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY, a corporation, Appellee, v. Shirley Ann NULL, Individually and as Administratrix of the

Estate of Victor G. Null, Deceased, Appellant.

No. 78-1897.

United States Court of Appeals,

Eighth Circuit.

Submitted May 16, 1979.

Decided Sept. 14, 1979.

Don B. Sommers, Sommers & Holloran, St. Louis, Mo. (argued), Andrew P. Deschu, and Joseph W. Toeniskoetter, St. Louis, Mo., on brief, for appellant.

P. Terrence Crebs, Gallop, Johnson, Godiner, Morganstern & Crebs, St. Louis, Mo., argued and on brief, for appellee.

Before LAY and HEANEY, Circuit Judges, and DEVITT, ^* Chief Judge, United States District Court.

HEANEY, Circuit Judge.

Shirley Ann Null appeals from an order of the District Court which declared void a personal insurance policy issued by New England Mutual Life Insurance Company (New England) on the life of Victor Null. Shirley Ann Null contends that the District Court erred in finding that Victor Null contracted for the insurance solely because Ronald and James Calvert required it as security for their investment in the development of Victor Null's invention. The Calverts, however, actually desired the insurance as part of a plan to obtain the proceeds thereof through Victor Null's murder. This finding follows our reversal of a grant of summary judgment in favor of New England, New England Mut. Life Ins. Co. v. Null, 554 F.2d 896 (8th Cir. 1977). We remanded the case for a plenary trial on the issue

whether Null executed the application and procured the insurance for his own purposes and thus became the contracting party with the insurer, or instead merely served as an innocent instrumentality in the evil scheming of Ronald Calvert(.)

Id. at 902.

We affirm the District Court's judgment.

The facts giving rise to this action are set out in this Court's prior opinion, Id. at 898-899, and we briefly summarize them here. Ronald Calvert planned to obtain several insurance policies on the life of Victor Null, an inventor who sought Calvert's financial backing, and then arrange Null's murder and obtain the insurance proceeds. After an unsuccessful attempt at procuring a $500,000 policy from Prudential Insurance Company, Calvert discussed with New England agents the possibility of obtaining a $500,000 policy on Null's life. New England's underwriter, however, refused to issue more than $150,000 in "business insurance," or insurance for the benefit of Calvert. After consultation with Calvert and Victor Null, the insurance agent requested a $100,000 personal life insurance policy which the company agreed to issue. On Friday, July 21, 1972, Mr. Null executed an application designating as beneficiary the "Estate of Insured." The following Monday, Null and Calvert arrived at New England's St. Louis office and Null executed an "Absolute Assignment and Change of Beneficiary Request" in favor of James Calvert, Ronald Calvert's father and his straw man and agent in the scheme.

Also on Monday, July 24, Calvert paid the premiums for both the $150,000 business policy and the $100,000 personal insurance policy by a check of his father in the amount of $5,616. New England issued the policies and the agent delivered them to Ronald Calvert.

The parties have stipulated that

"The Calverts" at all times pertinent and prior to the issuance of the policy in question, had a preconceived intent to engage in criminal conduct which would and did result in the murder of Victor Null on November 8, 1972, which intent was unknown to Null and the company (plaintiff).

Null contends that the District Court erred in three respects: (1) New England did not meet its burden of proving fraud because it solicited the policy with knowledge of the underlying business transaction and Null's intent to assign the policy to Calvert; (2) the court failed to examine the question whether Null had an independent business purpose in obtaining the insurance but asked only whether Null intended to benefit his estate by obtaining the insurance, thereby incorrectly interpreting our holding in the earlier appeal of this case; and (3) the court misapplied the law because the evidence showed that Null and New England were the real parties to the insurance contract.

The appellant contends that New England could not prove it was defrauded because it had knowledge of the underlying business transaction between Mr. Null and Calvert and specifically solicited the insurance to effectuate that transaction. The evidence shows that New England's agent originally contacted Calvert regarding life insurance for Null after learning of Calvert's unsuccessful application with Prudential. The agent first attempted to obtain a $500,000 policy on Victor Null's life from New England for Calvert's benefit. The company refused to issue more than $150,000 of such insurance. Calvert then told the agent that his business transaction with Null could not go forward with such a small amount of insurance. The agent discussed the situation with several other agents and suggested to Calvert and Victor Null the possibility of obtaining a personal insurance policy which Victor Null would be able to assign to Calvert. The agent, therefore, sought to contravene the company's directive by offering an alternative means of obtaining insurance which would be payable to the Calverts on Victor Null's death. The appellant argues that under these circumstances, New England cannot prove that it was in any way defrauded by the policy application. New England was aware of the business transaction between Calvert and Victor Null. New England, through its agents, supplied Calvert with the incentive to kill Victor Null by issuing insurance in an amount that exceeded Victor Null's worth to Calvert. New England allowed this in spite of its awareness of this risk, which it demonstrated by its refusal to issue more than $150,000 in business insurance. The appellant contends that New England may not show it was defrauded when its eagerness to sell the policy created the risk that resulted in Victor Null's death.

This argument is not unappealing. Historically, the law has looked with disfavor on insurance contracts which create a risk of death to the insured.

(I)t is contrary to a sound public policy to permit one, having no interest in the continuance of the life of another, to speculate upon that other's life and it should be added that to permit the same might tend to incite the crime of murder * * * and that the rule is enforced, and the defense permitted, not in the interest of the defendant insurer, but solely for the sake of the law, and in the interest of a sound public policy(.)

Henderson v. Life Ins. Co. of Virginia, 176 S.C. 100, 179 S.E. 680, 692 (1935).

It is well settled that "to allow the creditor to procure insurance greatly exceeding the amount of the debt might be to tempt him to bring the debtor's life to an unnatural end, and thus contravene the principle of public policy which has been seen to lie at the very basis of the doctrine of insurable interest(.)" (Citation omitted.)

Lakin v. Postal Life and Casualty Insurance Co., 316 S.W.2d 542, 551 (Mo.1958).

The courts have, therefore, voided life insurance policies which have encouraged the murder of the insured. E. g., Henderson v. Life Ins. Co. of Virginia, supra; Lakin v. Postal Life and Casualty Insurance Co., supra. These decisions have served the purpose of discouraging beneficiaries who plan a murder, but they do not have the effect of discouraging insurance companies from negligently issuing policies in contravention of the public interest. To reach this problem, the Supreme Courts of Alabama and South Carolina have allowed negligence actions against an insurer who negligently issues a life insurance policy which creates the risk of...