Court Opinion

ID: 9659010
Source: CourtListenerOpinion
Date Created: 2023-08-23 21:26:33.552586+00
Date Added: 2024-06-11T18:14:02.977582
License: Public Domain

HEFLIN, Chief Justice.
This is a declaratory judgment action in equity in which the appellee-complainant, Donald R. Noah, alleges in his bill of complaint that he is the named beneficiary in three policies of insurance issued by the appellant-respondent, Mutual Savings Life Insurance Company; that the life of William L. Noah, the brother of the appelleecomplainant, was insured under each of these policies; that the insured died by drowning in the City of Galveston, Texas, while the policies were in force; and that the appellant-respondent insurance company refused to pay the amounts due under any of said policies (except that a partial payment was made on one of them). The bill seeks a decree construing the policies and declaring the rights of the appelleecomplainant and the obligations of the appellant-respondent insurer thereunder, and ultimately that the court declare that the insurer is obligated to pay the death benefits and the balance of the burial benefits prescribed under one of the policies, plus the accidental death benefits provided in all three.
Copies of the three policies were attached as Exhibits A, B and C, respectively, to the bill. Since the evidence showed that such policies were issued and were in accordance with and contained the terms set forth in said exhibits, these exhibits will be referred to as showing the terms and conditions of the policies and as describing the policies in question.
Exhibit A provides for a death benefit of $1,500 and double that sum in case of accidental death, amounting to $3,000. It is provided therein that William L. Noah, who the evidence shows met death by drowning in or near Galveston, Texas, on September 13, 1971, is named therein as the insured and the appellee-complainant is named as the primary beneficiary. The policy bears date of February 15, 1971, which under the evidence is to be taken as the date of issuance.
Exhibit B shows a policy with the same date of issuance and the same terms and beneficiary as that contained in Exhibit A, except that the ordinary death benefit is $1,000 and the accidental death benefit is in double that amount, $2,000. Each of the two policies is characterized as a “Twenty Pay Life Insurance Policy.”
Exhibit C is entitled a “Burial Insurance Policy,” and provides that the insurer will furnish described funeral services, including, among other things, a casket, if the death of the insured, William L. Noah, should occur within the State of Alabama and within 35 miles of an authorized fu*448neral director. There is the further provision that if the insured’s death occurs outside the State of Alabama or more than 35 miles from an authorized funeral director, the company agreed to pay to the beneficiary (Donald) one-half of the retail value of the policy as a cash payment. Since the retail value of the policy is $600, the cash payment to the beneficiary for a death outside the State would be $300. However, there is a further provision that in a case of accidental death the company would pay an additional amount equal to one-third of the retail value, which in this case would be an additional sum of $200, meaning a total cash payment of $500. The date of issuance was February 15, 1971, the same date as the other two policies.
The evidence shows that the beneficiary, Donald R. Noah, by written instrument dated September 16, 1971, declared that he became indebted to Kilgore Funeral Home, Pell City, Alabama, for funeral services and supplies for the burial of William I. Noah in the amount of $434.66, and he thereby assigned unto said funeral firm that amount out of the proceeds of the said burial policy, authorizing Mutual Savings Life Insurance Company to make its check payable to said firm for the assigned amount and directing it to pay the remainder of the proceeds of the policy to the beneficiary, Donald R. Noah. If this burial policy is held to be effective, unquestionably the obligation of the insurer has been partially discharged up to the amount of $434.66, and the insurer owes the beneficiary the unpaid balance of the maximum benefit of $500 due thereunder, viz., $65.34 with interest thereon.
The respondent in its answer and the amendment thereto denies liability under the policies on the ground that the complainant and beneficiary obtained the policies of insurance on his brother’s life and that he had no insurable interest which would entitle him to recover, and also on the ground that the policies had lapsed for non-payment of premium.
The trial court rendered a judgment in favor of the appellee-complainant and against the appellant-respondent on all three policies in the total amount of $5,065.34, consisting of $5,000 under the life policies (Exhibits A & B), and $65.34 under the burial policy (Exhibit C), with interest from October 6, 1971, specified as the date the appellant-respondent denies liability.
The most divisive issue with which this court is faced is presented by appellant-respondent’s contention that Donald R. Noah has no insurable interest in the life of the insured, and that each of the three policies was invalid by reason thereof. It may be well to note at the outset that this court holds the burial policy not to be subject to the insurable interest requirement. The public policy grounds for requiring an insurable interest, which are discussed below, are not applicable to a burial policy wherein the benefits are substantially restricted to providing burial services. For this reason, it is the named insured in such a policy who is in reality the recipient of the insurance benefits, not the named beneficiary. Jordan’s Mutual Aid Association v. Edwards, 232 Ala. 80, 166 So. 780. But, even if it could be said that the burial policy is subject to the insurable interest requirement, this court holds, for the reasons stated below, that Donald R. Noah did have an insurable interest in William’s life.
Under the evidence the two life policies were procured or “taken out” (an expression used in our cases) by the beneficiary, and thus the long-established rule that the insurance is invalid unless the beneficiary has an “insurable interest” in the life of the insured applies. This rule is to the effect that a person has an unlimited insurable interest in his own life and may designate any person as his beneficiary so long as the insurance was procured or taken out by the insured and the premiums paid by him, but one taking out a policy of insurance for his own benefit, on the life *449of another person, must have an insurable interest in the continuance of the life of such insured. National Life & Accident Ins. Co. v. Alexander, 226 Ala. 325, 147 So. 173; Tit. 28A, § 316, Code of Alabama, 1940 (Recomp. 1958).1
Several reasons have been assigned as the basis for the insurable interest requirement, both of which are grounded upon public policy considerations: a policy taken out by one for his own benefit on the life of another, in whom he has no insurable interest is, in substance, a wagering contract; and such a policy may hold out a temptation to the beneficiary to hasten by improper means the death of the insured. Commonwealth Life Insurance Co. v. George, 248 Ala. 649, 28 So.2d 910; Helmetag’s Adm’x v. Miller, 76 Ala. 183.
Certain blood relationships have been held sufficient, in and of themselves to negate the supposition that the beneficiary would take out such a policy for the purpose of wagering on the insured’s death, or that such a policy would entice the beneficiary to take the insured’s life, and in such cases the relationship alone is said to create an insurable interest. This is true notwithstanding the fact that the beneficiary may have no reasonable expectation of pecuniary advantage through the continued life of the insured or consequent loss by reason of his death, which would otherwise be required in order to find an insurable interest.
 The relationship of husband and wife has been held to be sufficiently close to give either an insurable interest in the life of the other. Jennings v. Jennings, 250 Ala. 130, 33 So.2d 251. The parent-child relationship has been accorded the same status as that given to husband and wife in Jennings. Warnock v. Davis, 104 U.S. 775, 26 L.Ed. 924; 44 C.J.S. Insurance § 204.
On the other hand, the following relationships have been held not to create an insurable interest on the basis of such relationship alone. Cousin and cousin, National Life & Accident Ins. Co. v. Alexander, 226 Ala. 325, 147 So. 173; beneficiary has no interest in the life of the wife of his wife’s brother, National Life & Accident Ins. Co. v. Middlebrooks, 27 Ala.App. 247, 170 So. 84; aunt and niece, Commonwealth Life Ins. Co. v. George, 248 Ala. 649, 28 So.2d 910; aunt-in-law and niece, Liberty National Life Ins. Co. v. Weldon, 267 Ala. 171, 100 So.2d 696; niece and uncle, Bell v. National Life & Accident Ins. Co., 41 Ala.App. 94, 123 So.2d 598.
The specific issue presented in the case under review is whether one has an insurable interest in the life of his brother by virtue of the relationship alone. While realizing that this issue is one of first impression in Alabama, and that other jurisdictions are in conflict on this matter, a review of the holdings of other states has convinced this court that the vast majority 2 and best reasoned holdings support the proposition that the brother-brother relationship will, in and of itself, support an insurable interest.
Before reviewing the holdings and rationale of other jurisdictions it may be well *450to comment upon the United States Supreme Court’s holding in Aetna Life Ins. Co. v. France, 94 U.S. 561, 24 L.Ed. 287 (1876), wherein the beneficiary-sister, Lucetta P. France, although not dependent upon her brother, Andrew J. Chew, the insured, for her support, had loaned him some $6,000. The policy stated that the insured had paid the first premium, and several subsequent annual premiums were paid by him, with the beneficiary contributing to the payment of the last three premiums.
It has been suggested that although the United States Supreme Court upheld the policy, its decision would have been otherwise had the beneficiary herself procured the policy on the life of her brother, as she would have no insurable interest in his life in the absence of some showing of dependency or pecuniary interest. France, supra, can not be so interpreted for two reasons. First, the court in France, expressly waived the issue whether the beneficiary could have taken out the policy in her own name on the life of her brother merely as his sister. Second, if any inference is to be drawn as to what the court might have held had the beneficiary taken out the policy in her own name, it must be that such policy would be upheld, for the court stated:
“[W]here the relationship between the parties, as in this case, is such as to constitute a good and valid consideration in law for any gift or grant, the transaction is entirely free from such [wagering contract] imputation.”
Also, the France holding has been cited by many state courts which will be referred to later, as authority for the proposition that one has an insurable interest in the life of his brother solely by virtue of the relationship alone. It is also cited at 43 Am.Jur.2d p. 540 for this same proposition.
As to what blood relationships are sufficiently close to support an insurable interest, that of brothers is admittedly a borderline case. Equitable Life Assur. Soc. v. Hazlewood, 75 Tex. 338, 12 S.W. 621 (1889). The Court in Hazlewood, although stating that brothers and sisters were “on the dividing line”, refused to hold there was no insurable interest by virtue of the relationship alone. Although the insured was indebted to the beneficiary, the amount of the debt represented less than one-tenth of the proceeds of the policy. Any doubt as to the position Texas had taken in the wake of Hazlewood was later resolved in Williams v. Fletcher, 26 Tex.Civ.App. 85, 62 S.W. 1082 (1901), wherein the Texas court held that a brother does have an insurable interest in the life of his brother by virtue of the relationship alone.
The reason most often assigned as the basis of a holding that such relationship will, in and of itself, support an insurable interest is that the natural love and affection prevailing between the two and the expectation that one will render the other aid in time of need is sufficient to overcome any wagering contract argument, as well as any impulse to hasten the death of the insured. This rationale was well stated in Century Life Ins. Co. v. Custer, 178 Ark. 304, 10 S.W.2d 882 (1928), as follows:
“Brothers are so closely related that they are naturally interested in the preservation of the life of each other. Generally, they will lay down their life for each other. As a rule they care for each other in illness to the extent, if necessary, of furnishing all needed comforts and medicinal aid. It would be contrary to human nature for them to speculate on the death of each other, so it may well be that their contracts for insurance on the life of each other should not be classed as wagering contracts.”
This view was adopted by Kentucky in Hahn v. Supreme Lodge of the Pathfinder, 136 Ky. 823, 125 S.W. 259 (1910), wherein the court stated that an insurable interest may arise from blood relationship alone without regard to whether the beneficiary has any pecuniary interest in the life of *451the insured or is dependent upon him. If blood relationship alone constitutes an insurable interest, certainly, the court reasoned, the relationship of one brother to another, is sufficiently close for that purpose. The court concluded as follows:
“[W]here the relationship is so close as to preclude the probability that mercenary motives would induce the sacrifice of life to gain the insurance, the element of pecuniary consideration is not deemed essential to sustain the validity of the policy.”
Pennsylvania’s position on this issue was left in doubt by Bonistalli v. Bonistalli, 269 Pa. 8, 112 A. 7 (1920), wherein a joint policy was taken out by two brothers, who were partners in business, payable to the survivor. The court upheld the policy stating that “[t]he policy was properly issued to protect the firm, and, considering their blood relation and joint business affairs, Joseph [the beneficiary] had an insurable interest in the life of his brother.” Thus, there was no clear holding as to whether, absent such business relationship, The court would have found an insurable interest. The case of Phillips’ Estate, 238 Pa. 423, 86 A. 289 (1913), which was cited for the above proposition may indicate that Bonistalli is authority for the proposition that one has an insurable interest in the life of his brother by virtue of the relationship alone, for Phillips’ Estate, held the relationship of brother-sister alone sufficient to support an insurable interest, reasoning that the natural affection prevailing between brother and sister and the expectation that in case of need they will render each other aid was sufficient.
Any doubt as to Pennsylvania’s position was resolved in Montgomery’s Estate, 299 Pa. 452, 149 A. 705 (1930), wherein it was held that the blood relationship of brother-sister, standing alone, will support an insurable interest.
In addition to the cases cited above a number of other jurisdictions have held the blood relationship alone sufficient. Hosmer v. Welch, 107 Mich. 470, 65 N.W. 280 (1895); Hess’ Adm’r v. Segenfelter, 127 Ky. 348, 105 S.W. 476 (1907) (dicta); Goodwin v. Massachusetts Mut. Life Ins. Co., 73 N.Y. 480 (1878); Lawler v. Home Life Ins. Co. of America, 59 Pa.Super. 409 (1915); Rettenmaier v. Rettenmaier, 255 Iowa 952, 124 N.W.2d 453 (1963); Webb v. Imperial Life Ins. Co., 216 N.C. 10, 3 S. E.2d 428 (1939); Rogers v. Atlantic Life Ins. Co., 135 S.C. 89, 133 S.E. 215 (1926); Woods v. Woods’ Adm’r, 130 Ky. 162, 113 S.W. 79 (1908) (dicta); Hodge v. Globe Mut. Life Ins. Co., 274 Ill.App. 31 (1934) ; Inter-Southern Life Ins. Co. v. Stephenson, 246 Ky. 694, 56 S.W.2d 332 (1933); Lane v. Lane, 99 Tenn. 639, 42 S.W. 1058 (1879); Rombach v. Piedmont & Arlington Life Ins. Co., 35 La.Ann. 233, 48 Am. Rep. 239 (1883) (dicta) ; Newmore v. Western & Southern Life Ins. Co., 8 Ohio Civ.Ct.R., N.S., 308 (1906) (dicta) ; Trenton Mut. Life and Fire Ins. Co. v. Johnson, 24 N.J.L. 576 (1854) (dicta) ; Crosswell v. Connecticut Indemnity Ass’n., 51 S.C. 103, 28 S.E. 200 (1879) (dicta).
Perhaps the facts of the instant case tend to contradict the closeness and mutual love and affection which the above holdings attribute to the brother-brother* relationship, but this court does not write' for this case alone. The holding of this court today will govern all future cases, not just the exceptional one where the natural love and affection common to the brother-brother relationship may be missing.
In view of the foregoing it is the conclusion of this court that the brother-brother relationship will, standing alone, support an insurable interest.
This court has reviewed the holdings of various other jurisdictions 3 which are con*452tra. to the decision announced by this court today, and finds that the rationale underlying these cases is that one would take out an insurance policy on the life of his brother for the purpose of gambling on the time of his death, or would, by virtue of such policy, be induced to take the life of his brother for a price, which is not, in the opinion of this court, substantiated by the common experience of mankind.
Having determined the insurable interest issue adversely to the appellant-respondent, this court now directs its attention to the question of “lapsation” presented by the insurer. The evidence disclosed that the last premium payment on the three policies in question prior to William’s death was received by appellant on July 26, 1971. Clearly, by the strict language of the policy, they had lapsed and were out of benefit at the time of William’s death on September 13, 1971, such date being well past the 28-day grace period. The question then is did the appellant-respondent in some way extend the period of coverage so as to render itself liable on these policies ?
The Noahs had a total of eleven policies of insurance with the appellant (three on William and eight on members of the immediate family). Mrs. Noah normally wrote one check per month to pay the premiums on all eleven policies in a lump sum. On September 20, 1971, the appellant-respondent accepted a check from the Noahs for $67.26, which amount represented the August and September premiums on all eleven policies. It will be noted that on September 20, 1971, William had been dead for one week and such fact was known to the insurer. Appellant-respondent contends that even though it accepted the full $67.26 covering all eleven policies, no part of said sum was applied to the three policies in question, the necessary amount to reinstate the other eight policies being applied to them and the remainder being credited to the October payment for those eight policies. The insurer took the above actions without consulting the Noahs and made no offer to return the premium payment on William’s policies to the Noah family.
In view of the circumstances presented, this court must conclude that the appellant-respondent, by retaining the September 20, 1971, payment on the three policies in question after having notice of his death, extended the period of coverage thereunder and caused itself to be liable thereon. In the case of Alabama Farm Bureau Mutual Casualty Insurance Company v. Hicks, 272 Ala. 574, 133 So.2d 221, this court held that retention by an insurer of a past due premium payment, with knowledge that a loss was sustained during the defaulting period, constituted a waiver of the condition that premiums paid late did not cover losses sustained during the period of default and rendered insurer liable for such loss. Though Hicks involved an automobile liability policy, the basic principles found therein are applicable to the instant case. This court stated in the Hicks decision that:
“When the insurance company ascertained that Hicks suffered an accident during the defaulting period for which he claimed coverage, it could have offered (1) to return the premium for the defaulting period, or (2) it could have applied the premium for the period from November 27, 1956 to May 27, 1957, or (3) it could retain the premium and cover the collision loss.”
Obviously, choice number 2 above has no application - to the present case since the loss suffered was death and there could be no reinstatement. However, this court is of the opinion that options 1 and 3 above *453do apply and were available to the appellant-respondent. For reasons of its own the insurer selected option 3 and is bound thereby to pay to appellee-complainant, the amount due under the two life policies as well as the full amount provided under the burial policy ($500). Counsel for the insurer might argue that the September 20 premium on the three policies in question was not “retained” but in fact credited to the Noah family account. This may be true but it was not authorized to make such a determination on its own. Consequently, since the insurer failed to tender back to the Noahs that part of the $67.26 representing the payment on William’s policies, appellant-respondent by its actions elected option 3 and rendered itself liable on all three policies. Accordingly, this court holds that the insurance company is obligated to pay Donald Noah, in addition to the amount due under the life insurance policies, the balance due on the burial policy being the sum of $65.34, with interest from September 16, 1971.
Affirmed.
MERRILL, MADDOX and FAULKNER, JJ., concur in the entire opinion.
HARWOOD and McCALL, JJ., concur in the opinion except the “lapsation” feature with which they dissent.

. Although the Insurance Code, i. e., Title 28A, became effective after all relevant times for purposes of the instant case, this court is of the opinion that the result obtained in the instant case would not be altered by the application of section 316, which provides as follows:
“§ 316. Insurable interest; personal insurance. — -(1) Insurable interest with reference to personal insurance is an interest based upon a reasonable expectation of pecuniary advantage through the continued life, health or bodily safety of another person and consequent loss by reason of his death or disability, or a substantial interest engendered by love and affection in the case of individuals closely related by blood or by law.”

. This court’s research has disclosed that of the nineteen jurisdictions which have written to this issue, fourteen have stated that one has an insurable interest in the life of his brother by virtue of the relationship alone.

. For eases holding that the relationship of brother-brother does not constitute an insurable interest, see Lord v. Dall, 12 Mass. 115, 7 Am.Dec. 38 (1815) ; Lewis v. Phoenix Mut. Life Ins. Co., 39 Conn. 100 (1872) ; Miller v. Travelers’ Ins. Co., 81 Ind.App. 618, *452144 N.E. 554 (1924) ; Abernathy v. Springfield Mut. Ass’n, 284 S.W. 198 (Mo.App. 1926) ; Gulf Life Ins. Co. v. Davis, 52 Ga. App. 464, 183 S.E. 640 (1936) ; Dieterle v. Standard Life Ins. Co., 119 S.W.2d 440 (Mo.App.1938) ; Williams v. Northeast Mut. Ins. Ass’n., 72 S.W.2d 166 (Mo.App.1934) ; Masonic Ben. Ass’n of Central Illinois v. Bunch, 109 Mo. 560, 19 S.W. 25 (1892).