Case ID: ohio-law-abs_2/html/0242-01.html
Source: Caselaw Access Project
Author: {"author": "DENISON, C..J-", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

No. 260
    FEHR v. CAWTHON
    U. S. Court of Appeals, 6th Circuit
    No. 3844.
    Decided Oct. 5, 1923
    723. LIFE INSURANCE — Life policy issued to creditor is not invalidated by simul-tf neous discharge of- debt — Question of insurable interest material only to insurer — Creditor held to have accepted life policy in payment of, and not as security for, his debt.
    Attorneys — Sidney G. Strieker, for Fehr; Murray Seasongood, for Cawthon, both of Cincinnati.'
   DENISON, C..J-

Epitomized Opinion

Published Only in Ohio Law Abstract

This was a suit in equity by Cawthon, ad-ministratrix, against Fehr. The Friedman Company, a creditor of Cawthon, was the beneficiary of a $10,000 policy on his life. Upon the winding up of the Friedman Company the defendant, Fehr, became owner of all its assets, including this policy and any indebtedness against Cawthon. The beneficiary paid the initial premium in 1918 and the first annual premium. During the next year Caw-thon died and the amount of the policy was paid to Fehr. Some months later, the platin-tiff, who was Cawthon’s administratrix, brought this suit in the United States District Court upon the theory that Fehr held as trustee for her the amount of insurance he had received in excess of Cawthon’s indebtedness. The trial court held in favor of plaintiff whereupon defendant appealed. In reversing the judgment, the United States Circuit Court held:

1. T-he fact that a creditor, having an insurable interest in the life of his debtor, in consideration of the issuance to him as payee of a policy on the life of the debtor, discharges the debt, held not to invalidate the policy.

2. Where a life policy has been paid in full to the payee by the insurer, the question of his insurable interest cannot be raised in a controversy over the ownership of the proceeds.

3. The intention of the parties, and the effect of an arrangement by which a debtor applied for and obtained a policy of insurance on his life, payable to a creditor, who paid the premium and all charges, held to haye been that the policy should be accepted in cancellation of the debt and not as security therefor, and to entitle the creditor to the full proceeds of the policy on the death of insured.