Court Opinion

ID: 9773754
Source: CourtListenerOpinion
Date Created: 2023-08-29 17:57:43.538974+00
Date Added: 2024-06-11T07:31:56.958173
License: Public Domain

LIMBAUGH, Judge,
dissenting.
Although I agree with the majority’s general statement of the law in this case, I cannot agree with the conclusion that the majority reaches when applying the law to the facts. For that reason, I respectfully dissent.
As the majority recognizes, it has long been the rule in Missouri that one must have an insurable interest in a person’s life in order to take out a valid policy of insurance on that person’s life. Lakin v. Postal Life & Cas. Ins. Co., 316 S.W.2d 542, 549 (Mo.1958). If a beneficiary takes out a policy of insurance on the life of a person when the beneficiary has no insurable interest in the life of that person, that policy is referred to as a wager life insurance policy and is against public policy. Butterworth v. Mississippi Valley Trust Co., 362 Mo. 133, 240 S.W.2d 676, 681-82 (1951). For this reason, a creditor’s ability to insure the life of his debtor is generally limited to the amount of the outstanding debt. Strode v. Meyer Bros. Drug Co., 101 Mo.App. 627, 74 S.W. 379, 381 (1903). However, a person has an insurable interest in his own life and may procure a policy of insurance on his life and name as beneficiary a person who has no insurable interest in his life “provided [that] it not be done by way of cover for a wagering policy.” Lakin, 316 S.W.2d at 552.
In this case, it is uncontested that the life insurance policy was procured by the insured (“Bean”) and not by the beneficiary (“Hazel”). Because Bean had an insurable interest in his own life, the rule against wager life insurance policies normally would not apply, and he was free to name Hazel as a beneficiary regardless of whether Hazel had an insurable interest in Bean’s life. Furthermore, the fact that Bean and Hazel were involved in a debtor/creditor relationship generally would not change this result, because the rule against wager life insurance policies only “applies where a policy has been taken out by, and the premiums paid by, a person who has no insurable interest in the life of the insured, or when it has been assigned for speculative purposes.” Butter-worth, 240 S.W.2d at 682.
Apparently, the majority bases its opinion on the assumption that Bean named Hazel as a beneficiary for speculative purposes — as a part of some unstated wager. However, the record simply does not support that conclusion. Bean named Hazel as a beneficiary of $120,000 of the proceeds of a life insurance policy to secure a $120,000 debt that he owed to Hazel. Although Bean chose to name Hazel as the beneficiary of a set amount, Bean was free to have obtained a declining balance policy that would have decreased Hazel’s interest as the outstanding debt decreased. In the alternative, Bean could have made subsequent reductions in Hazel’s inter*294est as . the amount of the outstanding debt decreased. Moreover, nothing in the record indicates that Hazel induced or required Bean to structure the transaction in the manner that he did. In short, while Hazel certainly benefited from Bean’s choices regarding the life insurance policy, there is no evidence that Hazel was named as a beneficiary for speculative purposes.
The majority relies heavily on Strode, but the facts in Strode were significantly different from those in this ease. In Strode, the debtor owed the creditor $111, and the debt- or took out a life insurance policy in which he named the creditor as a beneficiary of proceeds in the amount of $4,950 as security for the debt. Strode, 74 S.W. at 379. The premiums were paid by the creditor, rather than the debtor, and a total of $299.40 had been paid at the time of the debtor’s death. Id. at 879-80. Thus, the creditor invested $299.40 in an insurance policy that supposedly secured a debt of $111, wagering that the payoff of $4,950 would substantially exceed the amount of the investment. Given these facts, it is not surprising that the Strode court, found evidence of improper speculation in the life of the debtor.
In contrast, the facts in this case indicate that there was no disparity between the amount of the insurance and the amount of the debt at the time Bean named Hazel as a beneficiary under the policy. Furthermore, Bean, the debtor, paid all of the premiums on the policy. Thus, the facts that served as evidence of improper speculation in Strode are simply not present in this case.
The only notable similarity between this case and Strode is the existence of a disparity between the amount of the outstanding debt at the time of the debtor’s death and the amount actually paid under the insurance policy. Nonetheless, this similarity does not warrant a finding of improper speculation in this case. In Strode, the gross disproportion between the amount of insurance and the amount of the debt existed from the very beginning and provided convincing evidence that the transaction served as a means for improper speculation. In this case, the difference between the amount of insurance and the amount of the debt was not present when Hazel was named as a beneficiary, but arose solely as a result of the manner in which Bean managed the transaction. Considering that Bean, himself, was responsible for the disparity in this ease, it is difficult to see how the disparity could have been the product of improper speculation on the part of Hazel.
In fashioning a remedy, the majority recognizes that “a constructive trust will be imposed where a person wrongfully obtains the proceeds of a life insurance policy as beneficiary of the policy.” William F. Fratcher, Soott on Trusts sec. 490 (4 th ed.1989); Strode, 74 S.W. at 381. However, as indicated by the preceding discussion, Hazel did not “wrongfully” obtain proceeds under Bean’s insurance policy. The fact that Hazel received insurance proceeds in excess of the amount of Bean’s outstanding debt does not, in itself, prove that Hazel engaged in any wrongful conduct.
The majority makes much of the fact that Bean had to provide insurance in a “form acceptable” to Hazel. Presumably, the majority means to imply that Hazel had some undue influence over Bean’s actions, though there is no evidence to support this implication. The facts merely indicate that Bean named Hazel as a beneficiary of a set amount of $120,000 and that Hazel apparently found this arrangement acceptable. Had there been any evidence that Bean attempted to limit or decrease Hazel’s interest under the policy, but was unable to do so because of Hazel’s control over the form of the policy, then Hazel’s control would be relevant. But there is absolutely no indication that Hazel took any such action; thus, the majority’s focus on Hazel’s possible control over the form of the policy is misplaced. In effect, the majority attempts to build a scenario that never happened.
The law of Missouri is clearly designed to prevent speculation in human life. To this end, a beneficiary is prohibited from insuring the life of another person when the beneficiary has no insurable interest in the life of that person. It follows that a beneficiary may be prohibited from obtaining proceeds under a policy taken out by the insured, when that policy is taken out for improper speculative purposes. In this case, there is no evidence *295of any conduct that violates the basic policy against speculation in human life. Although Bean was initially required to secure his debt to Hazel by procuring a life insurance policy, he could have reduced Hazel’s interest under the policy as the amount of the outstanding debt decreased, and it does not appear that Hazel prevented him from doing so. Indeed, it appears that Hazel received funds in excess of the outstanding debt solely as a result of Bean’s voluntary actions. It may very well be that this result was unintentional, that Bean was merely careless in naming Hazel as beneficiary of a set amount and then failing to decrease that amount as the outstanding debt decreased. But the law regarding wager policies is not designed to avoid the unintentional results of an insured’s actions; it is designed to avoid speculation in human life. Because I see no evidence of speculation in the facts of this case, I would hold that Hazel is entitled to the full $120,000 he received as beneficiary under the policy taken out by Bean.