Summary
recognizing legality of assigning insurance policies to parties without an insurable interest as long as the contract was not "a wager in its inception"
Summary of this case from Lincoln National Life Insurance Company v. SchwarzOpinion
Argued October 19th, 1933.
Decided January 5th, 1934.
1. A clause in the insurance policy that an assignee from the assured make proof of his interest and the extent thereof before recovering from the company on the policy, is intended for the benefit and protection of the company, which may waive it, and is not available to a conflicting claimant.
2. The assignment of the policy from the assured in this case was absolute in character and there is no evidence in the case to support the claim of the assured's administratrix that the assignment was only by way of security, or that the parties to the assignment subsequently agreed or intended that there be a reassignment to the assured.
3. A life insurance contract is not a wager, bet or hazard of stakes under the statute against wagers ( 2 Comp. Stat. p. 2693 § 1), even though the payment promised by the insurance company is in certain respects dependent upon a contingent event. On the contrary, the business of life insurance is sanctioned, supervised and even fostered by the laws and government of this state.
4. Though a wager might be effectuated in the form of a life insurance contract, that is not the case in the present instance where the assignee, who had invested a large sum in the assured's company, sought to protect himself financially by lessening the risk of loss to himself by the deprivation of the company of the services and good will of the assured by his death.
5. The assignee paid all premiums on the policy in question, even after the assured severed his relations with the company. The arrangement not being a wager in its inception, it did not become so thereafter, even though the assured severed his relations with the company.
6. An insurable interest in the life of the assured is not required of the beneficiary in this state. Meyers v. Schumann, 54 N.J. Eq. 414. The defense of insurable interest can only be raised by the insurance company itself.
7. The administratrix has made no tender of the amount of premiums paid by the assignee on the life of her husband; she does not admit that he is entitled to any part of the fund paid into court by the insurance company; her husband, the assured, never paid a cent of the premiums and had no interest whatsoever in the policy. She is entitled to none of the fund.
8. It was by no means unreasonable for the administratrix to test the claim of the assignee to the fund. The award of a counsel fee of $1,000 against her was improper. Counsel fee of $250 directed.
On appeal from a decree in an interpleader suit advised by Vice-Chancellor Buchanan, who filed the following conclusions:
"Conflicting claims on an insurance policy being made to the complainant insurance company, it paid into court the amount due on the policy and obtained decree that the two claimants interplead.
"There is no dispute between the claimants as to the facts, some of which were admitted by the pleadings, others by admissions in court, and others by proof in court, uncontradicted.
"The policy in question, for $25,000, on the life of Joseph C. Richardson, Jr., was applied for by Mr. Richardson on June 21st, 1926, was issued June 30th, 1926, and six days later was assigned by him to James H. Morris, by written assignment absolute in form, and (as clearly shown by the proofs) intended by the parties as an absolute assignment. All premiums on the policy were paid by Morris. Richardson died November 1st, 1932. His administratrix is the other claimant.
"The administratrix pleads as defenses against the statement of claim filed by Morris herein:
"1. That Morris had no insurable interest in the life of Richardson and that hence the assignment to Morris was ineffective.
"2. That the assignment was contrary to the statutes of New Jersey respecting unlawful wagers, and that hence the assignment is void.
"3. a. That the assignment was intended as security for indebtedness of Richardson to Morris.
b. That the assignment was intended to protect the investment of Morris in a business in which both were associated, only while such association continued; that prior to Richardson's death such association ceased, and by the agreement and intent of the two, the policy reverted to Richardson with no further interest of Morris therein.
"4. That Morris fails to set forth in his claim `proof of interest and the extent thereof.'
"Taking these up in inverse order — the quoted words in `4' are obviously taken from a clause in the policy, and refer to a claim made to the company, on the policy, by an assignee from the assured named in the policy. That clause with equal obviousness is intended only for the benefit and protection of the insurance company, is waivable by the company, and is not available to a conflicting claimant. Moreover the proofs show that Morris did in fact adequately prove to the insurance company the nature and extent of his interest under the assignment, and that the company was entirely satisfied with such proof.
"As to defense 3, (a) and (b) — the evidence absolutely disproves everything that is therein alleged as to intent and agreement. The absolute character of the assignment was reiterated in a letter from Richardson to the company in 1929. No attempt was made to offer any evidence in support of the allegation that the assignment was only by way of security; no attempt was made to offer any evidence in support of the allegation that the parties subsequently agreed or intended a reassignment to Richardson.
"As to defense 2 — it is established that Morris and Richardson were associated in business in a corporation; that Richardson had the experience and the actual management of the company, while Morris had neither; that Morris had invested $50,000 in the company and desired the $25,000 insurance on Richardson's life as a protection to his investment and interest in the company; that it was mutually agreed between them that Morris should have this insurance — he to pay the premiums; that in accordance with such agreement the insurance was taken out and assigned to Morris.
"The statute against wagers ( 2 Comp. Stat. p. 2693 § 1), is `that all wagers, bets or stakes made to depend upon any race or game, or upon any gaming by lot or chance, or upon any lot, chance, casualty or unknown or contingent event, shall be unlawful.' It seems scarcely necessary to say at this day, that a life insurance contract is not a wager, bet or hazard of stakes even though the payment promised by the insurance company is in certain respects dependent upon a contingent event. Such a contract is in nowise unlawful; on the contrary the business of life insurance is sanctioned, supervised and even fostered by the laws and governments of the several states. The intent of the parties to a life insurance contract and the intent of the parties to a wager or bet are utterly different. Doubtless a wager might be effectuated in the form of a life insurance contract — but that assuredly is not the case in the present instance. As between Morris and Richardson, or Richardson's administratrix, the issuance of the policy and its later assignment may be regarded in the aspect of a single transaction just as if the policy had been originally written with Morris as the beneficiary therein, but even so, it is clearly established that Morris had no intent of making a wager. His intent was to protect himself financially in respect of his investment in the company — to lessen the risk of loss to himself by the deprivation of the company of the services and good will of Richardson (by his death), which was a valuable asset to the company. Not being a wager in its inception, it did not become so thereafter, even though Richardson's relations with the company were severed in May, 1931.
"In Trenton Mutual Life, c. Co. v. Johnson, 24 N.J. Law 576, the supreme court held that a life insurance contract in circumstances entirely similar to those in the instant case, was not a wagering contract and was not void or unlawful under the laws of New Jersey. In Meyers v. Schumann, 54 N.J. Eq. 414; 34 Atl. Rep. 1066, this court held similarly as to a contract where the beneficiary had no insurable interest whatever in the life of the insured. In Howard v. Commonwealth Beneficial Association, 98 N.J. Law 267; 118 Atl. Rep. 449, the court of errors and appeals affirms it as the law of this state that an insurable interest in the life of the insured is not required — and obviously the only basis for considering the contract a gaming contract is that the beneficiary had no insurable interest.
"This last mentioned determination obviously also disposes of defense 1 — that Morris is not entitled to the proceeds of the policy because he had no insurable interest. This defense, so far as the instant case is concerned, was also disposed of by the determination of the court of errors and appeals in Meyers v. Schumann, supra. The Howard Case was one where the defense of lack of insurable interest was raised by the insurance company itself. In Meyers v. Schumann it was held that that defense could only be raised by the insurance company — that it could not be raised by a conflicting claimant where the company had not raised it but had paid the money into court — which is the precise situation in this case.
"It may be added that it is impossible to see upon what equitable theory Richardson's administratrix lays claim to the proceeds of the policy. All the premiums were paid by Morris; Richardson never paid a cent toward premiums — not even for the two years after the severance of the business relations between Richardson and the company (and Morris), when she claims the policy `reverted' to Richardson. Her husband never had at any time any interest in the policy, and never claimed to have; and she can have no better claim than he. She does not even tender to Morris the amount of such premiums, or any amount, nor admit that Morris is entitled to any part of the fund in court by way of reimbursement for any of such premium payments. She claims it all. She is entitled to none. There appears to be no justification whatever for this litigation by the administratrix — whereby Morris has been delayed and deprived of the interest on, or use of, these moneys.
"Decree will be entered for the payment of the fund to Morris."
Mr. Louis A. Fast, for the appellant.
Mr. Ewald J.J. Smith, for the respondent Morris.
So far as relates to the right to the fund, the decree under review will be affirmed, for the reasons stated in the conclusions filed by Vice-Chancellor Buchanan.
We do not concur, however, in the award of a counsel fee of $1,000 to Morris against the administratrix appellant. It was by no means unreasonable for her as an administratrix to test the claim of Morris to the fund. We see no good reason for a counsel fee of over $250. The hearing was very brief.
Counsel for respondent asks that the counsel fee be charged against Mrs. Richardson personally. As there is no cross-appeal on this or any other point, we do not consider it.
With this modification the decree will be affirmed.
For affirmance — THE CHIEF-JUSTICE, TRENCHARD, PARKER, LLOYD, CASE, BODINE, DONGES, HEHER, PERSKIE, VAN BUSKIRK, KAYS, HETFIELD, DEAR, WELLS, DILL, JJ. 15.
For reversal — None.