THE AMERICAN

Law Register and Review.

VOL. 44~0 : }S FEBRUARY, 1896. No. 2,

INSURABLE INTEREST IN LIFE.

I.
THE NATURE OF THE CONTRACT.

To understand properly the questions that will confront us,

we must have a clear conception of the contract of Life Insur-
ance and of its treatment at the Common Law. Was the
contract one of indemnity and, if not, what was requisite to
give it validity? What objections were made to a contract
without interest and how, in a general way, are these objec-
tions regarded to-day ? These matters will be examined briefly
before entering upon the subject of an insurable interest.
The contract of life insurance is said by Mr. Biddle,
the latest of the text writers on the subject, to be "substan-
tially the purchase by the insured from the insurer of a rever-.
sionaly interest for a present sum of money," and his defini-
tion of it is "An agreement by the insurer to pay to the
insured or his nominee a specified sum of money, either on
the death of a designated life, or it the end of a certain
period, provided the death does not occur before, in consider-
ation of the present payment of a fixed amount, or of an
annuity till the death occurs or the period of insurance is
ended:" Biddle on Ins., § 2. Parke's definition is much to the
same effect, but it emphasizes the element of the considera-
tion : " It is a contract by which the underwriter, for a certain
sum proportioned to the age, health, profession and other cir-
cumstances of the person whose life is the object of insurance,
engages that the person shall not die within the time limited
in the policy; or, if he do, that he will pay a sum of money
65
 INSURABLE INTEREST IN LIFE.

to him in whose favor the policy was granted:" Park on

Ins., ch. xxii. And Bunyon's definition is substantially the
same: Bunyon on Ins., I.
Turning now to the cases, we find Parke, B., speak-
ing of it as " a mere contract to pay a certain sum of money
on the death of a person, in consideration of the due payment
of a certain annuity for his life, the amount of the annuity
being calculated, in the first instance, according to the prob-
able duration of the life; and when once fixed, it is con-tant
and invariable:" Daby v. I & L. L. Ass. Co., 15 C. B. 365
(1854). This was quoted with approval in Elliott's Appeal:
50 Pa. 75 (1865).
Clearly, then, these contracts of life insurance shoul-i be
classed as wagers, which are "promises to pay money or
transfer property upon the determination or ascertainment of
an uncertain event; the consideration for such a promise is
either a present payment or transfer by the other party or a
promise to pay or transfer upon the event of determining in
a particular way:" Anson on Contracts, 173. It is none the
less a wager because sanctioned by law under proper condi-
tions : Ogilvie v. Knox L. I. Co., 22 How., at 388; yet we find
the courts using the term "wagering policy" wholly in an
invidious sense. Thus Bradley, J., speaks of "a mere wager
policy" as one " in which the insured party has no interest
whatever in the matter insured, but only an interest in its loss
or destruction :" Conn. M. L. I. Co. v. Schacifer, 94 U. S.
460 (1876). The same idea recurs constantly throughout the
reports. Strictly then, this is an inaccurate use of the terms,
yet it prevails so generally that it would but lead to confusion
were we to attempt to do differently.
The contract, as defined above, is in its nature not one of
indemnity. A different view was expressed by Lord Ellen-
borough, C. J., in the leading case of Godsall v. Bohdero,
9 East 72 (1807). Certain creditors of Mr. Pitt's had insured
his life, and their debt being paid aliunde, they brought suit
against the company to recover the amount of their policy.
Lord Ellenborough said: " This assurance, as every other
to which the law gives effect, is in its nature a contract of
 INSURABLE INTEREST IN LIFE.

indemnit, as distinguished from a contract by way of gaming

or wagering." Judgment was, therefore, given against the
plaintiff. The error here came from the failure to distinguish
between the case of marine and fire insurance on the one hand,
and life insurance on the other. The only authority relied on
was the case of Hamilton v. 2fendes, 2 Burr. 1198, (1761), and
Lord Mansfield, C. J., was quoted as saying: "The plain-
tiff's demand is for an izdemnity; his action then must be
founded upon the nature of the damniflcation, as it really was at
the time the action is brought. It is repugnant, upon a contract
for indemnity to recover as for a total loss, when the event has
decided that the damnification is in truth an average, or per-
haps no loss at all." But here Lord Mansfield was discus-
sing a question of marine insurance-an altogether different
matter.
The error went uncorrected for many years, until God-
sall v. Boldero was overruled in the Exchequer Chamber by
Dalbj, v. . & L. L. A. Co., 15 C. B. 365 (I854). Parke, B.,
called attention to the fact that the premiums to be paid for a
policy were computed solely on the chances of life, and that
it was a matter of indifference to the insurer what was the
nature of the interest the insurance was effected to protect;
this being so, it was not open to the insurers to object that
the debt had been satisfied and their liability released. They
had received their quid pro quo, and provided only that the
contract did not offend against the public policy or a statute, it
must be fulfilled according to its terms.
Such being the nature of the contract, if one may, without
restriction, insure the life of a perfect stranger, an excellent
opportunity is afforded for .gambling of the most pernicious
kind.
Was, then, a wagering policy good at the common law ?
This is evidently a question of the first importance to us
and yet one not easy to answer. Three views seem to have
have met with favor in the minds of the courts :
(i). Originally an interest was requisite and subsequently,
through a mistaken analogy to marine insurance, wagering
policies were permitted. Then, and before the matter had
 INSURABLE INTEREST IN LIFE.

come before the courts, the Statute 14 G. III. c. 48 sub-

stantially re-enacted the old rule.
(ii). Wagering policies on lives were valid, as were all other
wagers. save perhaps a few that tended to immorality or were
clearly against public policy.
(iii). However may have been the law in England, all
wagers, whether on lives or not, are opposed to the genius of
our American institutions, and will therefore be declared void
by the American Common Law, regardless of any statute.
The first view is plausible, yet it is hardly borne out
by the facts and it is disapproved by the latest text-writers:
Biddle on Ins., § 184. The fullest discussion of it is to be
found in Ruse v. Mut. B. L. I. Co., 23 N. Y. 516 (I861).
Under the circumstances of the case it became necessary for
the court to investigate the Common Law of New Jersey,
which apparently is assumed to be the same as that of Eng-
land. Innocent wagers were pronounced valid, though wager-
ing contracts of fire insurance were to be condemned as leading
to gambling, and the decisions of Lords Chancellors King and
Hardwicke were cited in regard to the latter: Lynchi v. Dalzel,
4 Bro. P. C. 431 (1729) ; Sadlers' Co. v. Badcock, 2 Atk. 554
(1743). A different rule, however, obtained in regard to marine
insurance, but Selden, J., speakingfor the court, calls the distinc-
tion "a mere accident." " To me," he says, "it seems clear that
the decision in DePaba v. Ludlow, I Comyns, 361 (1721), was
made because the court failed to distinguish between a waiver
of proof of interest at the trial, which the defendant was, of
course, at liberty to make, and a waiver of proof in the policy
itself, by which it was converted into a mere wager." The court,
in that case, decided that the import of the words " interest or
on interest" in the policy was that the plaintiff had no occasion
to prove his interest. The Statute 19 Geo. II. c. 37 was passed in
consequence of this and subsequent cases, and it contains in
its recitals a statement of the dangers of these marine policies
made "interest or no interest." Judge Selden continues:
" In this indirect way, the doctrine in question, as to marine
policies, first crept into the law..... .It must have been,
I think, in consequence of the doctrine initiated in that case that
 INSURABLE INTEREST IN LIFE.

it came to be understood in England that in insurance on life

it was not necessary at the common law that there should be
any interest in the life. There may not have been any direct
decision to this effect, yet that such was the prevalent impres-
sion is to be inferred from the i 4 th of Geo. III., prohibiting
insurance on life without an interest..... .The probability
is that as soon as such insurance became frequent, and before
any decision, Parliament interposed to avoid the same evils,
upon the assumption that the same rule applied to this as to
ships. I cannot regard that act as affording any very strong
evidence that at the Common Law wagering policies on lives
were valid....... My conclusion, therefore, is that the
Statute 14 Geo. III., avoiding wager policies on lives, was
simply declaratory of the Common Law and that all such
policies would have been void independently of that act."
It cannot well be objected that this a mere dictum,
and Judge Selden was certainly a very learned judge. The
decision, too, is cited with approval in Whitmore v. Supr. L.,
100 Mo. 36 (1889), and elsewhere, and Bradley, J., takes
substantially the same position in the leading case of Conn. H.
L. .Co. v. Schaeffer, 94 U. S. 457 (1876). In the light of the
other authorities, however, the second view appears the prefer-
able one.
That wager policies were valid in England at the time
of the Statute there can be no doubt, and it seems equally
clear that they were so originally. Perhaps the earliest case is
that of Andrews v. Herne, I Lev.-33, I Keb. 65 (1662),
where a wager was made that Charles Stuart, then in exile,
should be king of England within twelve months then next
ensuing. Of course this might have been prevented by his
death, yet no suggestion is made either of public policy, or of
the interest one is given in the death of another. "The
consideration was sufficient:" I Keb. 65, and the plaintiff
recovered.
This position was subsequently completely abandoned,
and early in the present century we find Andrews v. Herne,
disapproved in the important case of Gilbert v. Sykes, 16 East
150 (1812). A., in consideration of ;CIoo, had agreed to
 INSURABLE INTEREST IN LIFE.

pay B. .i per day so long as Napoleon should live. This,

of course, was a wager on Napoleon's chances of assassi-
nation, concealed in the guise of an annuity.
It was admitted by the court, though not without doubt,
that a wager may be sustained where the parties have no
special interest in the subject-matter; there is the qualifica-
tion, however, that it must not offend against public policy.
"Wherever the tolerating of any species of contract has a
tendency to produce a public mischief or inconvenience, such a
contract has been held to be void:" per Lord Ellenborou'gh,
C. J. That this contract has an evil tendency is then argued
at length, its general impolicy and immorality, the disaffection
produced in the mind of an English subject by an opposing
private and pecuniary interest, the possibility, though remote,
of encouraging assassination and retaliation in kind by the
enemy, and the disgust created abroad among foreign poten-
tates by having such matters discussed in the courts of law,
are all given as reasons why such a wager should be con-
demned. The suggestion is made, too, that the hearing of
such idle wagers as this should be postponed until the courts
have nothing better to do, that the time of worthy suitors need
not thus be wasted.
This case has been dwelt upon at some length to illus-
trate what have been called the "ludicrous attempts" of the
the courts to discountenance such forms of gambling by rely-
ing solely on the principles of public policy involved in each
particular case. An advance has been made and a distinct one
since Andrews v. Herne-LeBlanc, J., has "no hestitation in
saying that that bet would never have been sustained in these
days "-yet the modern doctrine that no one may enter into a
contract, involving the life of another, without an interest in
that life, is still unrecognized. Mr. Justice Buller had sug-
gested such a ruling in Atherfold v. Beard, 2 D. & E. 61 I
(1786) ; and again in Good v. Elliott, 3 D. & E. 695 (1788) ;
and Lord Ellenborough seems inclined to agree with him,
but evidently that was not then the law. Gilbert v. Sykes,
therefore, occupies an intermediate position, and is of import-
ance to us as illustrating the rule as then understood, with
 INSURABLE INTEREST IN LIFE.

its exceptions, and marking the transition from the law of

Andrews v. Herne, to that of the present day.
Such we believe to have been the law in England at the
time of the passage of the Statute, 14 Geo. III. C.48: (See
the Statute cited at length in z [Link] Ins., § 186) This
view is sustained, too, by the recitals of the Statute : "Whereas
it hath been found by experience that the making insurances
on lives or other events wherein the assured shall have no
interest, hath introduced a mischievous kind of gaming, for
remedy whereof be it enacted, etc." Nothing could show
more clearly the intention of Parliament to change an existing
law and not simply to pass a declaratory statute.
That this is the proper interpretation to be put upon the
Act appears from three important Irish cases. The Statute
did not, in terms, extend to Ireland, and questions arising
there came under the Common Law until the Act of 29 and
31 Vict. c. 42.
The first case, Shannon v. Xugent, I Hayes, 536 (1832),
did not require a consideration of the matter by the court,
but Joy, C. B., said: "Our' leaning is that interest is not
necessary to give validity to the contract "-i. e., a wagering
policy would be good at the Common Law.
The next case, Biritish Ins. Co. v. Mlfagee, I Cooke & Alcock,
182 (1834), presented the question squarely for decision. A
policy was declared on without any allegation of interest,
"Na interest" was pleaded in bar and the record was opened
by a demurrer. We quote from the opinion of Bushe, C. J.:
"The argument that insurance without interest was illegal at
the common law, independently of statute, and that the 14
Geo. III. was declaratory of the Common Law, has not been
sustained. No authority has been cited to show that such an
insurance has been held illegal, as being against policy or
morals, in any case in England decided before the Statute;
and it is only necessary to look into the Statute itself to be
satisfied that it is not declaratory, for it does not recite any
existing doubt or prevailing mistake as to the law, but recites
that the making of such insurance without interest ' has been
found by experience to have introduced a dangerous kind of
 INSURABLE INTEREST IN LIFE.

gambling,' and then enacts ' that from and after the passage
of this Act' ' such insurance shall not be made,' thus recog-
nizing the frequency of the practice and the necessity of pre-
venting it in the future. The court is, thercfore, unanimously
of the opinion that the judgment of the Court of Exchequer
must be affirmed."
This case was followed a few years later by Scott v..Roose,
3 Tr. Eq. R. 170 (841), Brady, C. B., basing his decision
wholly on the fact that there was no Statute in Ireland.
It is interesting to contrast these cases with Ruse v. 3fut. B.
L. I. Co., 23 N. Y. 516 (1861), and see how widely the courts
have differed in regard to what is really a matter of history.
On the whole there appears to be no reason to doubt the
decision of the Irish courts, sustained, as it is, by many other
authorities.
We will examine now the subject of wagering policies as
they have been treated in America. A more remarkable in-
stance of judicial legislation it would be hard to imagine.
Often we shall find the courts saying frankly that such con-
tracts were valid by the Common Law of England, on which
our Common Law is founded, yet because such a doctrine is
to their minds inadvisable, these contracts will not be enforced.
This is simply to do what Parliament did by 14 Geo. III. c.
48. That such a rule is universally considered a wise one
may be conceded-gambling of any sort is held to be per-
nicious; as was said by Marshall: "There never can be a
loss without an interest. A policy therefore made without
interest is a wager and has nothing in common with insurance
but name and form :" r AarshallonIs. 97. All this may be
true without effecting the question of the proper source of the
change.
It is probable, however, that the change may be traced one
step further back; to the declaration that all wagers, of which
these are but species,are invalid by our American Common Law.
The development of this doctrine in Pennsylvania, the
state perhaps where the common law is held in the highest
esteem, is well worthy of notice. Its course is traced by
Sergeant, J., in Edgell v. .1f'Laughlin,6 Whar. 176 (1840).
 INSURABLE INTEREST IN LIFE.

The first case considered is Pritchetv. Ins. Co. of N. A., 3 Y.

458 (1803), where Shippen, C. J., discussing a contract of
marine insurance, had said of the Statute 19 Geo. II. c. 376:
"Certainly it does not bind us proprio vigore; but the
system of national policy which dictated. the law has been
adopted by our courts." (It will be remembered that DePaba
v. Ludlow had sustained wagering policies made "interest or
no interest.") This is really not an unreasonable position, in
its result, for the court to take, as the contract of marine insur-
ance is essentially a contract of indemnity. The language of
Yeates, J., is broader: "-Everi, species of gaming contract
wherein the insured have no interest, under the cloak of insur-
ance, is reprobated by our law and usage."
Following this case is Plillips v. Ives, I R. 36, (1828),
which bears a certain analogy to Andrt-ws v. Herne and Gilbert
v. Sykes. A bet was made that Napoleon, then imprisoned in
St. Helena, would escape or be removed thence, by death or
otherwise, within two years. Huston, J., delivered the opin-
ion of the majority of the court. He expressed himself as
regretting that wagers ever had been recognized, but in this he
"does not give the opinion of the court, who think the legis-
lature only can prohibit a recovery in all cases of wagers."
He is determined, however, that this bet shall not be sustained,
and finally he "holds that no bet of any kind, about any
human being, is recoverable in a court of justice."
Gibson, C. J., dissented vigorously from this decision and
Smith, J., concurred in the dissent.
" It seems to me," says the Chief Justice, "that the policy
of the law, as already settled, is not a subject for our consid-
eration. Nothing like argument or reason has been adduced
at the Bar to show that the adjudications of the English courts
prior to the American Revolution, are not, as regards the
point in controversy, binding authority and conclusive upon
the judgment of this court. If they be disregarded in this
instance, I see nothing to prevent us from uprooting the very
foundations of the common law. It has not been pretended
that this wager would be invalid on any principle of those
decisions ...... .In the case at bar, the mischievous con-
 INSURABLE INTEREST IN LIFE.

sequences supposed to have been producible were, an enter-

prise against the Island of St. Helena; the rescue of Napo-
leon ; the selection by him of the United States as a place of
refuge; the demand of his person by the European powers;
the refusal of the American Government; and, as a conse-
quence of the whole-war. Surely we ought to look at these
matters with a practical eye to their probable. results, instead
of encouraging a train of idle fancies by the aid of which there
is no circumstances or contingency that may not be made
pregnant with danger and unlawful as the subject of a wager.
...... It is undoubtedly true that a wager which preju-
dices the interest or outrages the feelings of a third person is
illegal; and were there color to suppose that the wager in the
case at bar would have thus operated on the interest or feel-
ings of Napoleon, I would agree that it ought not to be sus-
tained ...... .It seems to me this wager tende. neither to
indecent evidence, nor to disturb the peace of the public or
of an individual; and that it was not, in its design or conse-
quence, contrary to good manners or sound policy. I am,
therefore, of opinion that the action be sustained."
We will consider now the principal case: Edgell v.
il'Lauglzlin, 6 Whar. 176 (1840), supra. A cheque was
declared on, which appeared at the trial to have been given in
payment of a wager that B. had not done a certain thing per-
fectly innocent in its nature and leading to no evil results.
Mr. Justice Sergeant speaks first of the continuous efforts
made by the English courts to extend the exceptions to the
general rule that wagers were valid, and he then turns to an
examination of the Pennsylvania authorities cited above.
No'.vhere doeslhe find it expressly decided by the Supreme
Court that wagers are recoverable, and he is as strenuously
opposed to them as was Huston, J., in Phillips v. Ives, supra.
Mr. Justice Huston," says he, " expressed his opinion
very plainly that, though bets were recoverable by the Com-
mon Law of England, it was not a part of the Common Law
introduced into Pennsylvania by William Penn or his succes-
sors, nor recognized in the Act of Assembly passed in 1777,
which is our guide on that subject. And I fully concur with
 INSURABLE INTEREST IN LIFE.

him, that it is not. When I look back to the character and

principles which actuated our founders and predecessors, I am
satisfied they never countenanced such a principle, but left
parties who chose to embark into contracts of this kind, to
recover as they could, according to the code of honor under
which they originated; and that -it is derogatory to the char-
acter and injurious to the interests of the community, to sanc-
tion them, and to employ their legal tribunals in investiga-
tions, often indecent, often inflammatory, often inpertinent and
frivolous, and always useless, if not noxious in their effects on
society:" (Cf. the language of Parker, C. J., in Lord v. Dall,
12 Mass. 115 (1815): " . . . . a mere wager policy, which,
we think, would be contrary to the policy of our laws, and,
therefore, void.")
Contrast with this the descent of an intestate's land in
Pennsylvania. It was felt by "our founders and prede-
cessors " that the English system of primogeniture was ill-
adapted to the conditions prevailing here, yet that system con-
tinued in force until changed by an Act of the Provincial Leg-
islature: Jlitchell on Real Property, p. 284. The cases are
[Link] in that each was believed to be repugnant
to a true sense of public policy; what right then had the
court, especially in the face of Chief Justice Gibson's most
vigorous dissent, to declare that from their knowledge of the
characters of the founders of this commonwealth, this integral
part of the Common Law of England had been left there and
had never formed a part of the Common Law of this country?
The rule that there must be an interest in the sub-
ject-matter of insurance has been recognized very generally
both by the legislatures: (See Statutes cited in i Biddle on
Ins); and the courts, and it is believed that in the United States
the contrary is true only in New Jersey and possibly Rhode
Island. Tile leading case in New Jersey is Trenton 2i..L. 1.
Co. v. Johnson, 4 Zabr. 576 (1854), decided in the same year
as Dalby v. I. & L. L. A. Co., 15 C. B. 365 (854), supra,and
before the latter was reported in this country. The opinion of
Elmer, J., is so interesting and able that we quote from it at
length :
 INSURABLE INTEREST IN LIFE.

"The case of Godsall v. Boldero is the leading case relied

on to show that a contract of life insurance is simply a con-
tract of indemnity, not only requiring an interest in the assured
in order to give validity to it at its inception, but continuing
good only so far as it is rendered so by the persistance of such
interest. This case has been since adhered to and has often
been considered as founded on the Common Law, an impres-
sion to which some countenance is given by some of the lan-
guage used by Lord Ellenborough in giving the opinion of
the court. It is evident, however, that the decision was not
warranted by the Common Law, but by the Statute of 14 Geo.
III., c. 48, which does not purport to be a declaratory act, but
enacts in expression that no insurance shall be made on the
life of any person, wherein the person for whose use the policy
shall have been made shall have no interest, and that in all
cases where the insured hath interest in the life, no greater
sum shall be recovered or received from the insurers than the
amount or value of the interest of the insured in such life.
This Statute not extending to Ireland, the courts in that
country held, in several recent cases, that at Common Law
policies of insurance are valid without any interest. No such
statute exists in this state. Whether an action can be sus-
tained on a policy without interest, which is, therefore, in some
respects like a mere wager on the life of a third person, or on
any other wager relating to a transaction in itself legal, does
not appear to have been decided by our courts. . . . Wagers
on indifferent questions are held good grounds of action in
England, and it was there held that at Common Law wager-
ing policies 9f insurance were valid: 0-azford v. Hunter, 8
D. & E. 13 (1798)....... The American text-writers strongly
favor the doctrine that wager policies should, in all cases, be
held bad, upon general principles of policy and morality. I
confess, however, that whatever might be my opinion as to the
expediency of a statute like that in England, before quoted, I
must agree with the Irish courts in holding that such is not
the law. Our act to prevent gaming: Rev. Stat. 572, does
not in terms or by implication, prohibit all wagers, but only
particular forms of gaming. Until the legislature shall think
 INSURABLE INTEREST IN LIFE.

proper to interfere, the courts can only adhere to the Com-

mon Law as they find it established. To do otherwise would
be an act of legislation, and not of judicial construction. It
was insisted by counsel, and with much apparent force, that
wagers on the life of a third person are in their very nature
dangerous, and contrary to the policy and to sound morality.
But the danger, if any exists, would apply with great, although
not with equal force, to policies where there is an interest as
well as to those where there is none .....
Modern experience has proved the value of insurance upon
the insured's life, or upon the life of another upon whom the
insured may be dependent; or in whose life he has a real or
supposed interest. And it is worthy of notice that even in
England since that Statute, so great is considered the injustice
of requiring the continued subsistence of an insurable interest,
that in practice it is disregarded, and the offices find it to their
interest, and are in the common practice of paying, without
any inquiry as to the interest ...... .Upon a view of the
whole matter, I think it admits of great doubt whether the
English Statute, by throwing impediments in the way of life
insurances, and by raising questions often of difficult solution
as to the nature and amount of the required interest, can be
regarded as wise and "salutary; at all events, in the absence of
any such legislation here, I see no solid ground upon which
we can safely depart from the doctrine of the Common Law,
and upon reason of doubtful expediency hold a policy of life
insurance to be something different from what it purports to
be, that is to say, a contract to indemnify against loss, and not
a contract to pay a given sum upon the happening of a par-
ticular event."
The position of the Rhode Island courts is similar, Potter,
J., referring with approval to this case and saying "The
reasons generally given for requiring an interest as matter of
public poticy do not seem very forcible:" Mowzuy v. Home
_. Co., 9 R. I. 354 (1869).
The objections to policies without interest appear then
to be that they give one a dangerous interest in the death
of another, and that they are wagers. Both have their
 INSURABLE INTEREST IN LIFE.

source in considerations of public policy, and for this reason

we may expect to see the courts scrutinize doubtful cases
more and more closely. At times, of course, they ques-
tion the necessity for such strict rules, but such instances are
exceptional: (Cf. _-owrj, v. Home _. Co., supra.) In this con-
nection the remarks of Shaw, C. J., in King v. State i F. .
Co., 7 Cush. IO (185 1), will be found interesting: "We sup-
pose a wager policy is not held void because it is with-
out consideration or is unequal between the parties, but
because it is contrary to public policy and prohibited by
positive law. But, independently of considerations of public
policy, if an insurance were made on a subject in which the
assured has no "pecuniary interest-although in another
respect he may be deeply concerned in it, and on that
ground be willing to pay a fair premium-made with a
full knowledge of all the circumstances, by both parties,
without coercion or fraud, we cannot perceive why it would
not be valid, as between the parties. But upon the strong
objections on grounds of public policy to all gaming contracts
and especially to contracts which would create a temptation
to destroy life or property, such contracts without interest are
justly held to be void."
We should do well though, to bear in mind what Bur-
roughs, J., said of public policy: Richardsoz v. .fcllish, 2
Bing. 252 (1824). " Public policy is a very unruly horse, and
when once you get astride it, you never know where it will
carry you. It may lead you far from the sound law."
It is hardly too much to say that sometimes this warning
has been far rom the minds of the courts.
From this 2xamination into the nature of the contract
of life insurance, it appears that an interest is required, not
because the contract is one of indemnity but to prevent its use
for gambling purposes. The question of the nature of an
interest that the courts will -regard as sufficient to sustain
a policy will not be entered into any length until we take up
the question of insurable interest in the life of another. We
must defer until then, too, any attempt at definition. For
the present, the ordinary conception of insurable interest will
 INSURABLE INTEREST IN LIFE.

suffice-that the continued existence of the subject-matter of

insurance is a matter of concern to the person effecting the
insurance, at the time the contract is entered into. Whether
it must continue so to be, will appear later.
In concluding this brief preliminary- view of the subject,
it may tend to clearness if we bear in mind-a deduction from
the definitions cited above-that while in fire and marine insur-
ance it is the interest and not the thing that is insured, in life
insurance it is the thing and not the interest,

II.
INSURANCE EFFECTED ON ONE'S OWN LIFE,
Vc have seen that an insurable interest is considered requi-
si'c to :support a policy. Such an interest every one has in
his own life: Loomis v. .Eagle L. & H. I. Co., 6 Gray, 396
(1856) ; Catvpbell v. 2\Y E. "l L. . Co., 98 Mass. 381 (i867) ;
.'Etna Co. v. France.,94 U, S. 561 (1876) ; Scott v. Dickson,
ioS Pa. 6 (1884); Benefit Ass'n v. Blue, 12o Ill. 121 (887);
Lamont v. Gr. L. I'a L. of H., 31 Fed. R. 177 (1887), and
in every part thereof; ainewight v. Bland, I Moo. & Rob.
481 (1835), per Lord Abinger, C. B,, and it is of a pecuniary
nature, for it represents his earning power.
Whether the beneficiary also must have an interest is a
question that has caused the courts much difficulty and their
answers to it have depended upon their conceptions of public
policy. Where one insures his life for his own benefit or for
the benefit of his estate, it is clear that the question cannot
arise-the same person is at once the insured and the assured,
and he has an interest in either capacity. But where A. insures
his life for the benefit of B. and pays the premiums himself, is
the interest that supports the policy the interest of A. or that
of B. or is it the combination of the two? The qualification
that A. pay the premiums is important, else the policy will
usually be assimilated to one taken out by B. on the life of
A., and then undoubtedly A. must be interested.
That A.'s interest in his own life is the fundamental one
is the prevailing opinion; this appears both from the direct
 INSURABLE INTEREST IN LIFE.

statements to this effect and from the treatment of a bene-

ficiary without interest, in certain jurisdictions, as a trustee of
the fund for the insured's estate. The second view-that the
policy depends on B.'s interest in A.'s life-was advanced
in the recent cases of Etna Bank v. U. S. L. I. Co., 24 Fed.
R. 770 (1885), and l1'as/zington v. Hmc, 128 U. S. 195
(1885), but it has been severely criticized: (See 25 Am. L.
Rev. 195 (1891),) and on the whole appears unsound. This
case of TVas&inzgtoii Bank v. fHume will be considered at
length in the discussion of policies for the benefit of married
women. The third view will explain the position of many of
the courts--k.'s interest may be the fundamental one, but to
enable B. to derive any benefit from the policy, he must have
a subsidiary interest, as well, in A.'s life.
Considering the matter from the point of view of strict
public policy, it is difficult to see why one may not in-
sure his own life, pay the premiums himself and designate
whom he will as beneficiary to receive the fund at his death.
There is no suggestion of gambling on the part of any one.
In an average case, the sums laid out by the insured in pre-
miums will by judicious investment equal, or rather exceed,
the face of the policy. His right to make annual gifts equi-
valent to the premiums cannot be questioned when the rights
of creditors have not intervened, not yet his right to invest
such sums and by his will leave them with their accumulated
interest to the one who might otherwise be made the bene-
ficiary of a policy of insurance. There is no more " gam-
bling on the chances of human life " in the one case than in
the other-no more offence against public policy. In each
case, the owner alone is dealing with his own property, and
"it would seem, when the person whose life is insured is him-
self an actor in the matter, that the amount of temptation held
out to others to take his life, may, as a general rule at least,
be left to his discretion :" Eq. L. A. Soc. v. Patei-son, 41 Ga.
at 365 (1870). We will examine a few of the cases in which
these views are expressed.
One of the first of these is: Amer. L. & H. L Co. v.
Robcrtshaw, 26 Pa. 189 (1856). There A. insured his life in
 INSURABLE INTEREST IN LIFE.

favor of B. a credit or for more than the amount of the debt,

the surplus to go to the debtor's wife. The case is of value
for the dictum of Sharswood, J., contained in his opinion
on a motion for a new trial:
" 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 transac-
tion being bonafide-no fraud on the company intended ?"
Another Pennsylvania case is Scott v. Dickson, Io8 Pa. 6
(1885). The beneficiary here was in fact interested in the
insured, yet the language of Paxson, J., would seem broad
enough to cover all cases free from fraud: " Policies of this
nature are in no sense wagering. It would be denying a
man's right to do what he will with his own to say he could
not in any form insure his life for the benefit of an indigent
relation or a friend to whom he felt himself under obligations."
It is noticeable, however, that the nature of the relationship
or obligation is not defined, to make it clear that mere love or
sentiment would suffice.
Turning now from these dicta, we find it held positively
in Massachusetts, Campbell v. N. E. M. L. . Co., 98
Mass. 381 (1867), that the beneficiary need have no interest,
for the insured's own interest supports the policy. The
same conclusion was reached in the recent case of Benefit
Ass'n v. Blue, 120 Ill. 12 (887), after a careful review of the
authorities: (Cf. Con. H3.L. L Co. v. Schaeffcr, 94 U. S. 457
(1876), and C'ampbcll v.,V.E. L. Z Co., 98 Miss. 38 (1867);
Amick v. Butler, I II Ind. 578 (885). "The better rule is,"
-
says CRAIG, J., that where a person obtains a policy on his
life of his own accord, and pays the premiums himself, he
may, if he desires, make the policy payable to one who has no
insurable interest in his life, hnd by so doing, no rule of law
or principle of public policy will be violated.")
This is stated also in Bidl/e on Insurance, (Benefit Ass'n v.
Blue, supra,) § 194, to be the general rule and it is certainly
difficult to understand the objections to it.
 INSURABLE INTEREST IN LIFE.

Opposed to it is the broad rule laid down in Pennsyl-

vania in Gilbert v. Jfoose, 104 Pa. 74 (1883); and approved
in U. B.R. Aid Soc. v. AcDonald, 122 Pa. 324 (1888), and
elsewhere. It is true that most, if not all, of these cases
involved wagering policies, but nothing could be more em-
phatic than the language of Mr. Justice Gordon: "As a
beneficiary merely, having no interest in the life, it seems to us
very clear that he could lawfully have no interest in the
policy. For if we admit the contrary; if we admit that one
man 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. But in the case sup-
posed the presumption is inverted; the beneficiary is directly
interested in the death of the assured. Moreover, if such a
transaction were permitted, the wager could always be con-
cealed under the mere form of the policy."
This, it will be seen, is broad enough to cover even the case
under consideration, where the insured alone is an actor and
the assured is a passive beneficiary. The rule was aimed
chiefly at the so-called " grave-yard " insurance which pre-
vailed at the time, and it proved itself effectual in ending a
dangerous practice. The absence of interest raised a pre-
sumption of fraud in all cases and the beneficiary was not
allowed to derive a benefit from the policy.
Gilbert v. 3Moose is constantly cited as the leading case, yet
its effect may now be said to be restricted to wager policies.
The dictum of Paxson, C. J., in Scott v. Dickson, has been
quoted in several recent cases: Hill v. United Lfc Ins. Ass'n.,
154 Pa. 89 (1893) ; N'orthwestern M1asonic Aid Ass'n v. Jones,
154 Id. 99 (1893); Ovcrbcck v. Id., 155 Id. 5 (1893); Chid-
ester v. Yard, 155 Id. 483 (i893); where the facts were such
as to preclude any suspicion of fraud, and it seems clear that
the rule is now relaxed as to policies carried by the insured.
In some of these cases the point was not, perhaps, neces-
sary to the decision of the court and what was said may
 INSURABLE INTEREST IN LIFE.

fairly be considered obiter dictum, yet it is said very posi-

tively. Thus, 'Thompson, J., in ilfasonic Aid Ass'n v. Jones,
treats rights under certificates of beneficial associations as analo-
gous to rights under contracts of insurance and speaks of the
right so to insure for the benefit of a, stranger as one that
"cannot be questioned. . .These contracts [with the beneficial
association] were made in good faith, without any misrepre-
sentation and in the form prescribed by the laws of the state
in which they were made, and they were not wagering con-
tracts in any sense."
The subsequent cases of Overbeck v. Id. and Chidester v.
Yard appear to raise the question directly and in each the
recovery by the assured was sustained by the Supreme Court
in a per curiam opinion.
That the beneficiary must in all cases have, an interest
is law in several other jurisdictions. Thus in Watson v.
Ccnt'l Jf. L. Ass'", 14 Ins. L. J. 73 (1884), Brewer, J., in
the Circuit Court of Missouri, permitted a recovery on the
express ground that such an interest existed : (Cf. Gambs v.
Cov. J1 L. .Co., 5o M o. 44 (1872).) The same appears to
be true in New York: Baker v. Union X L. I. CO., 43 N. Y.
283 (I871), but see Objsted v. Keyes, 85 N. Y. 593 (i88i),
contra; and at one time in Massachusetts : Lord v. Dall, 12
Mass. 115 (I815); though in the latter state this is now
changed: Cantpbcll v. Ar E. JV, L. I. Co., 98 Mass. 387
(1867), supra.
That the beneficiary should be. permitted to maintain
his action against the company is but reasonable. As was
said in Ins. Co. %-.Baum, 29 Ind. 240, (1867), " It is not for the
insurance company, after executing such a contract and agree-
ing to the appointment so made, to question the right of such
appointee to maintain the action. If there should be a con-
troversv as to the distribution among the heirs of the deceased
of the sum so contracted to be paid, it does not concern the
insurers. The defendant company contracted with the insured
to pay the money to the plaintiff (the beneficiary), and upon
such payment being made it will be discharged from all
responsibility. So far as the insurance company is interested,
 INSURABLE INTEREST IN LIFE.

the contract is effective as an appointment of the plaintiff to

receive the sum insured." Stayton, C. J., quotes this passage
in Ins. Co. v. Williams, 79 Tex. 633 (I89 1); and adds " The
fact that (the beneficiary) may recover against the insurance
company, and is entitled to do so, does not cut off an inquiry
between (him) and the legal representatives or heirs of the
insured as to whether (he, the beneficiary) had an insurabie
interest "-i. e., the beneficiary may be made a trustee of the
fund: (Cf. Gilbert v. Moose, io4 Pa. 94 (1883): Jcill' v.
Herschberger, 16 W. N. C. 183 (i885).) The only other
alternative is to allow the heirs or representatives of the
insured to sue, on the ground that the policy is a valid con-
tract, the consideration for which was paid by the insured.
The appointment to the beneficiary, being unlawful and invalid
if an interest is required, will be disregarded, and then the
heirs or representatives, may sue in their own right. The
contract is not with the beneficiary, so that not even in Michi-
gan, it is submitted, could recovery from the company be
impossible : M/. B. Ass'n v. Hoyt, 46 Mich. 473 (i88I).
When A. applies for a policy for the benefit of B.,
and by mutual agreement B. pays the premiums, the courts
have held very generally that the transaction is equivalent to
B.'s taking out the policy at once in his own name and an
interest in B. is accordingly required. In the latter case, it
must often happen that A. is obliged to submit to a medical
examination, so that the policy is not issued without his
knowledge and consent, yet the two cases differ widely in their
nature. A. is the actor in the first instance-he lends to the
policy the support of his interest in his own life-and, save in
cases of fraud, no harm would seem to be done by permitting
such insurance. The circumstances are exactly the same as
when a policy, taken out for example to protect a debt, has
survived the interest on which it was founded. No objection
is then made on the score of public policy: Dabli v. . & L.
L. A. Co., 15 C. B. 365 (1854); Colln. J1 L. . Co. v.
Schaeffer, 94 U. S. 457 (1876), supra; although the whole
advantage of the assured comes equally from an early termin-
ation of the life. The difficulty would seem to be that an
 INSURABLE INTEREST IN LIFE. 85

opportunity is afforded sometimes for wagering on life, though,

as said before, the party running the risk goes into the trans-
action with his eyes open. His care for his own safety will
subserve the ends of public policy as well as could an interest
in the ordinary case.
Numerous cases might be cited in regard to these
policies, for they -have been often before the courts, but we
need examine only a few of them. The earliest of importance
is: Wainewri,,lt v. Bland, I Moo. & Rob. 481 (1835), supra.
The evidence showed the policy was taken out in the name of
the insured but really for the benefit of the plaintiff and with
the plaintiff's money. The plaintiff had no interest. Lord
Abinger, C. B., charged the jury that should they find the policy
had been fraudulently taken out at the instigation of the plain-
tiff, their verdict must be for the defendant. The fraud involved
seems to have been the controlling feature of this case : See
per Crompton, J., in Hebdon v. West, 3 B. & S. 578, (1863)
for the court treated the policy as made out directly to the
plaintiff
Even where an interest exists, the courts will sometimes
refuse to permit a recovery, if they believe the parties have
not acted in good faith. Thus, in Shilling v. Accidental
D. I. Co., 27 L. J. Exch. 16 (1857), a verdict was set
aside on evidence showing that a policy taken out by an
aged father in favor of his son had really been negotiated by
the son without the father's knowledge. They went rowing
together soon after the policy issued, and the father was
drowned when the boat upset. A similar case is N. I' M.
L. I. Co. v. Armstrong, 117 U. S. 591 (1886), to be referred
to again when we treat of assignments.
The rule in Pennsylvania is, of course, most stringent,
and it is sufficent to refer to the language of Mr. Justice
Gordon in Gilbert v. 17'oose, 104 Pa. 74 (883). See, also,
the very recent case of Riney- v. ld., I66 Pa. 617 (1895).
Other authorities often cited are Guardian 3f. L. I. Co.
v. Hogan, 8o Ill. 32 (1875), and Amick v. Biutler, III
Ind. 578 (1887). -- If the beneficiary is really the con-
tracting party," says the court in the latter case, " and
 INSURABLE INTEREST IN LIFE.

has paid the premiums, then to avoid a wager he must

have an insurable interest." In Goldbaum v. B/urm, 79 Tex.
638 (I89I), already referred to, we have an illustration of a
procedure quite common in insurance by creditors-both
parties, the creditor and his debtor, joined in the application
for the policy. This, the court held, gave the debtor such an
interest in it that his heirs and representatives were entitled to
demand from the creditor the surplus over and above the debt
and expenses, although the creditor had paid the premiums.
The case, however, is partly to be explained by the fact that
in Texas a creditor's policy is substantially a contract of in-
demnity.
The leading case in the Federal Courts is: Bltna L.
I. Co. v. France, 94 U. S. 561 (1876). A. and B. joined in
the application for a policy designating B. as beneficiary, and
A. paid the premium. The court, per Bradley, J., held this
constituted "a contract between the company and (A.) for an
assurance of his life, with a stipulation and agreement that the
money should be paid to (B.); and such a policy is sustain-
able at law on account of the nearness of the relationship of
the parties "-i. e., on account of the interest of B. "As held
by us in the case of Conn. if L. . Co. v. Schaeffer, 94 U. S.
457 (1876), any person has a right to procure an insurance on
his own life and to assign it to another, provided it be not
done by way of cover for a wager policy . . . . and the
direction of payment in the policy itself is equivalent to such
an assignment."
A further question was raised by the fact that some
of the premiums had, in fact, been paid by B., but this
was held immaterial. "Waiving the question, whether
merely as sister of A., B. could have effected in her own
name an insurance on his life, without its being obnoxious to
the charge of a wager policy, the evidence was incompetent
to prove the fact sought to be proved by it. The company,
when taking the notes in question, acknowledged the pre-
miums to have been received from A., and was estopped from
going behind its own admission, under the circumstances of
the case. The contract of insurance, as correctly construed
 INSURABLE INTEREST IN LIFE.

by the court, was made with A., and the relationship of the
parties was such as to divest the assignment of the policy or
the direction of its payment to his sister of all semblance of a
wagering transation. Under the circumstances, it matters not
if the money or notes required for paying the premium did
come from B.; at most, it was by -way of advance on her
brother's account, and on his contract. He had a right to
take out a policy on his own life for his sister's benefit; and
she had a right to advance him the necessary means to do so.
As between strangers, or persons not thus nearly connected,
such a transaction would be evidence to go to jury, from
which, according to the circumstances of the case, they might
or might not infer that it was mere gambling. But as between
brother and sister, or other near relations, desirous of thus
providing for each other .... the case is divested of that
gambling aspect which is presented where there is nothing but
a speculative interest in the death of another, without any
interest in his life to counterbalance it. On this ground, we
hold that where, as in this case a brother takes out a policy
on his own life for the benefit of his sister, it is totally immat-
erial what arrangement they choose to make between them
about the payment of the premiums. The policy is not a
wager policy. It is divested of those dangerous tendencies
which render such policies contrary to good morals. And as
the company gets a perfect quid pro quo in the stipulated
premiums, it cannot justly refuse to pay the insurance when
incurred by the terms of the contract,"
SEC. 42. To sum up our results: The general rule, and the
correct one, is that a person may insure his life for his own
benefit or for that of another, if he pay the premiums himself;
if such other, as designated beneficiary, pay the premiums, he
must, in most jurisdictions, have an interest in the life, for he
is then regarded, rightly or wrongly, as the real contracting
party.
ERSKINE HAZARD DICKSON.