Court Opinion

ID: 5568346
Source: CourtListenerOpinion
Date Created: 2022-01-11 01:06:45.564439+00
Date Added: 2024-06-11T08:35:15.718865
License: Public Domain

Little, J.,
concurring specially. I agree to the judgment of the court as being sound and properly interpreting the rights of the parties; but I arrive at this conclusion for reasons different from those stated in the very able opinion rendered by Presiding Justice Lumpkin. It is not my purpose to enter into' a discussion of the case. It has, from time to time, been considered by each of us with a great deal of care, and the authorities, which are numerous and conflicting, have been carefully examined. It will be seen, by reference to the opinion of the-majority of the court, that there are two propositions of law which form the basis for the conclusions reached. The first is,, that a contract effecting assurance upon the life of a debtor for the benefit of a creditor is a contract of indemnity. The second is, that the creditor’s insurable interest in the debtor’s life is confined to the amount of the indebtedness to be secured. I think that neither of these is a correct conclusion of law. *469Neither of these questions, in my judgment, properly arises under the circumstances of the case; but meeting the proposition so broadly laid down, that insurance (life) for the purpose of securing an indebtedness is a contract of indemnity and nothing else, I have this to say: By our Civil Code, § 2089, a contract of fire-insurance is clearly made a contract of indemnity. And by section 2120 of our Civil Code a contract of marine insurance is in terms classed as a contract of indemnity. The definition of the contract of life-insurance which is made by the Civil Code, § 2114, is that it is a contract by which the insurer for a stipulated sum engages to pay a certain amount of money if another dies within the time limited by the policy. If such contracts derive any of the incidents which attach to contracts of indemnity, they must arise under principles of law which are not enunciated in our code. It is true that section 2117 of the Civil Code declares that the principles stated in the code in relation to fire-insurance apply equally to the law of life-insurance. Manifestly, however, reference is had to those legal principles which pertain generally to fire-insurance, which can he made applicable to a contract of life-insurance; and this provision in no way affects the definition or meaning of these two contracts. It is provided in the Civil Code, § 2114, in reference to contracts of life-insurance, that the assured must have an interest in the continuation of the life insured, and, both by text-writers and adjudicated cases, creditors have an insurable interest in the life of a debtor.
Mr. Joyce in his work on Insurance, vol. 1, 26, says that “ although the question of indemnity as related to life-insurance has been prolific of much discussion by both text-writers and the courts, yet the weight of authority is that life-insurance is not a contract of indemnity.” And this author then proceeds to discuss the question, referring to a large number of adjudicated cases to support the text. As a matter of law numerous courts have held them to be contracts of this character, while a great many other courts of final resort have held the contrary of the proposition; and it seems to me that the latter are more in accordance with principle. A life is not, and can not of itself be, a subject of valuation. Mr. Bunyon in his work on *470Life Insurance, page 7, says that such insurances are independent of the value of the subject-matter; and in the case of the Conn. Mut. Life Ins. Co. v. Schaefer, 94 U. S. 457, it is declared that “in life-insurance the loss can seldom be measured by pecuniary valuations.” The doctrine of indemnity contemplates that the insured shall be indemnified but shall never be more than fully indemnified for a loss. For instance, the contract of fire-insurance only indemnifies the assured against any loss which he may sustain within an amount named by the policy. This affects property. The value of the property destroyed can be ascertained, and the contract is a pure and simple indemnification for the value of the property destroyed. The same applies to a- contract of marine insurance. Property is there also the subject-matter of the contract; and hence our code treats these two contracts as contracts of indemnity. But a life is not property. It can not be valued so as to afford indemnity. The following authorities collected by Mr. Joyce rule that a contract of life-insurance is not a contract of indemnity. 15 Com. B. 365; 9 Ind. App. 139; 1 Kay & J. 228; 15 Md. 297; 24 N. J. L. 585; 29 N. Y. 282; 32 Hun, 311; 102 N. Y. 647; 9 R. I. 346; 108 Pa. St. 6; 138 Mass. 27; 35 Md. 188. For the doctrine that such contracts are not strictly contracts of indemnity, yet are in the nature of indemnity where a creditor insures his debtor’s life, the author refers to Bacon’s Benefit Societies & Life Insurance, § .163; 2 E. D. Smith, 294. That they are not contracts of indemnity such as fire and marine insurance contracts, he refers to 13 Wallace, 616.
As to the second proposition, the majority of the court rules that while a creditor, for the purpose of indemnifying himself against loss, has an insurable interest in the life of his debtor, this interest can not exceed in amount that of the indebtedness to be insured against, although it may include the cost of taking out and keeping up the insurance. While I do not dissent from this ruling, the conclusion of the court in my opinion is put upon a wrong doctrine, which very many of the cases cited by Presiding Justice Lumpkin will prove. A creditor has an insurable interest in the life of his debtor, and the amount of the debt and the expense of taking out and keeping *471up the insurance must be the basis of the insurance; yet it is neither practicable nor essential to the validity of such a contract that the amount insured must exactly equal these sums. Indeed it is impossible that it can be so. If one owes another one thousand dollars, and the latter takes óut a policy of insurance on the life of his debtor, while he is entitled to fix the amount at one thousand dollars and the interest thereon and the cost of paying the premium and keeping up such insurance, yet from the nature of things it is impossible for the parties to agree on an exact amount which will represent these items. The insurer may have to pay premiums for a quarter of a century ; he may not pay but one premium. The interest may run on the principal indebtedness for a year; it may run for twenty years. So that it is practically impossible to settle in advance on an amount which represents the principal and interest of the indebtedness and the cost of the insurance which will be due at the time of the death of the assured. It must be remembered that a contract of insurance must specify a given amount; must be made anterior to death; and being so, the amount necessarily has to be fixed at a time when the pecuniary interest of the creditor in the life of his debtor can not be ascertained. At the same time, in order to render the contract valid it must not be a wagering policy. Therefore a contract is valid and not subject to be attacked as a wagering policy, if the creditor insures for such a sum as, under all the circumstances — considering the amount of the debt, the expectancy of the debtor, the cost per annum of the insurance,— in good faith and by the exercise of reasonable judgment, is estimated to cover the debt and the outlay. If it should so happen that by reason of the early death of the debtor the creditor receives a sum which actually exceeds the amount of the debt and expenses, that sum belongs to him, and if not disproportionate originally, taking the debt as a basis, it is not a wagering contract, and the insurer would be held to perform it. I make no attempt to collect authorities which support this proposition. They are very numerous, and are to be found in all books on insurance which treat the subject.
A distinction must be drawn between a contract of insurance *472on his own life, made by one who is indebted to another, and who transfers the policy to his creditor for the security of his debt, and a contract which is made directly by the creditor with the insurer to insure the life of his debtor. In the first instance the contracting parties are the person whose life is insured and the insurer. In that case the creditor has no rights except such as may be given to him by the assignment of the policy. The object of the transfer is to secure the payment of the debt due the creditor. The assignment accomplishes nothing else; and if by any means the debt be paid prior to the decease of the debtor, the assignment has no force or effect, and the original contract is in force, and the beneficiaries named in the contract will take the proceeds of the policy. But where a creditor contracts directly with the insurance company for a policy on the life of his debtor, neither the debtor nor his representatives will at any time thereafter have any interest in that contract, nor under any circumstances would either of them be entitled to the proceeds of such contract, because the contractual relations exist between the creditor and the insurer independent of the debtor. In this case the Equitable company issued a policy payable to the representatives of Hudgins, and the contract entered into and upon which the money in question was collected was that on the death of Hudgins the company agreed to pay to his representatives the amount named in the policy. The policy under the usual rules was assignable. Hudgins, according to the testimony, declined to enter into this contract, but the Exchange Bank, which was the creditor of Hudgins, agreed that it would pay the premiums if it could have the benefits. To this Hudgins agreed, and transferred the policy. As a creditor, while the bank had a right to make a direct contract with the company to insure the life of Hudgins, it did not do so, but it received the policy, which was payable to the representatives of Hudgins, by assignment. Under the law the bank was not entitled to receive out of the assigned policy more than the amount of its debt and the expenses of keeping up the insurance. This being the limited right of the creditor, when, after the death of Hudgins, the money was paid to it as the holder of the policy, what direction *473should be given to the remainder of the fund ? The answer is had by reference to the original contract. That contract was an agreement to pay to the representative of Hudgins. It can make no difference who paid the premiums, except as to determine what amount the creditor should receive. That a creditor paid the premium did not affect the contract. That contract required the company to pay the amount of the policy to the representative of Hudgins, and by a legal assignment the company was directed to pay to the bank the amount of the policy. Under the law the only amount that the bank was entitled to retain when it so collected the sum agreed to be paid, was its debt, interest, and the expense of maintaining the insurance; and by virtue of the terms of the contract the balance which remained after such payment must go to the representative of Hudgins’s estate.
As stated, I have not attempted to collect the numerous authorities which support the propositions here laid down, but have contented myself in giving the line of reasoning which brings me to the conclusion at which a majority of the court has arrived; and, differing as to the reasoning of the case, I concur in the judgment.