United States Mutual Accident Ass'n v. Hodgkin , 4 App. D.C. 516 ( 1894 )

Mr. Justice Shepard

delivered the opinion of the Court:

The sole ground of defense made by the company is based upon the want of “ insurable interest ” in the plaintiff.

This contract has none of the ordinary features of what are called speculative or wager policies. It was not applied for or taken out at the request or instigation of the beneficiary. • She paid no assessment, and was apparently ignorant of the existence of the policy until it matured. It was the insured’s own voluntary act for reasons known only to himself. The beneficiary was not related to him, she was not his betrothed; she was simply that which he called her in making the designation — a friend. In the course of a general discussion of the question of insurable interest in a policy of regular life insurance, Mr. Justice Bradley, speaking for the Supreme Court of the United States, said: “There is no doubt that a man may effect an insurance on his own life for the benefit of a relative or friend; or two or more persons on their joint lives, for the benefit of the survivor or survivors. The old tontines were based substantially on this principle, and their validity has never been called in question. The essential thing is, that the policy shall be obtained in good faith, and not for the purpose of speculating upon the hazard of a life in which the insured has no interest.”

As said by the Supreme Court of Massachusetts: “ It is the interest of the assured in his own life that supports the policy. The plaintiff did not by virtue of the clause declaring the policy to be for her benefit, become the assured. She is merely the person designated by agreement of the parties to receive the proceeds of the policy upon the death of the assured.” Campbell v. Mut. Life Ins. Co., 98 Mass. 381. See also, Olmsted v. Keyes, 85 N. Y. 593 ; Cooke on Life Ins., Sec. 60, and cases cited. This doctrine is also subject to the qualification that the policy was not procured in this manner as “ a contrivance to circumvent the law against gaming and wagering policies.” Olmsted v. Keyes, supra. We think, therefore, that the defendant has no right to defeat the policy on the general ground that it is invalid because the beneficiary designated therein had no insurable interest in the life of the deceased member.

It remains now to consider the special defense relied on by the defendant, which is founded on the condition endorsed on the certificate, that, “All claims under this contract shall be subject to proof of insurable interest.” As it is plain that the plaintiff had no “ insurable interest,” as that term is applied in law, in the life of the member, the contention ,is that she is barred by the foregoing condition. It cannot be claimed for this association that it was wholly without power to permit certificates to be issued for the benefit of persons having no insurable interest, as there is no such restriction in the articles of association or the bylaws, or in any law authorizing its organization, as was the case in American Legion of Honor v. Perry, 140 Mass. 580 ; and other cases which might be cited. On the contrary, the general purposes of the association as set forth in Section 3 of Article 1, of the by-laws, quoted above, would plainly warrant the inference that its charity was to be unlimited, save by the act or declaration of the member himself. This inference, too, is strengthened by the language of Section 2, Article 7, which provides that the fund shall be paid “ to the person or persons whose names shall at the time of the death of said member be found recorded as his last designated beneficiariesand further that in case of the death of the designated beneficaries, the fund shall go, first, to the wife and children, if any, of the member, and second, to the next of kin as defined in the statute of distribution of the State of New York, unless the member shall have otherwise directed by will. It is a general rule of construction of policies of insurance also that any reasonable doubt which may arise as to the meaning or intent of a condition thereof, will be resolved against the insurer. From the last of the foregoing provisions of the by-laws (without regard to the original designation) it appears that two ways were provided by which the benefit of the policy might possibly accrue to persons who had no insurable interest in the life of the member. He might bequeath the benefit to strangers, or in case of failure of bequest it might go to “next of kin” who would have no insurable interest. If intended that the benefit should, in such cases, also, be “ subject to proof of insurable interest,” it would seem to be just that this should be made plainly to appear, and in the absence of the restriction the presumption should be to the contrary. The by-laws of the association are set out in full in the record, and we find nothing in them qualifying or restricting the operation of the provisions aforesaid.

But it is claimed, and we think justly, that the board of directors were empowered by the by-laws to change the conditions of insurance from time to time, and insert the new ones in the certificates or policy as issued. In the exercise of this power it does not appear that the directors made or recorded any change in the old by-laws. They simply exercised the power in adding to the certificate in controversy the condition with respect to the proof of insurable interest. Conceding the meaning claimed for this condition, as well as the power to insert it in the policy, it does not follow that the defense thereon founded can be maintained. The circumstances of the transaction estop the association from claiming the benefit of this condition. For if the directors had the unquestioned power to change the conditions of insurance and the classes of beneficiaries at pleasure, in the general form of certificates or policies adopted, they had the same right-to make a special contract with a member that might be a change from the new conditions also. They had adopted, we will grant, a general form of policy conditioned against the claim of any beneficiary who could not prove an insurable interest; but under the circumstances they must be held to have made a different contract with Frederick W. Uber. He was, we will say, presumed to know the provisions of the by-laws and articles of association when he became a member. Walsh v. Ætna Life Ins. Co., 30 Iowa, 133-144 ; Sup. Lodge K. P. v. Knight, 117 Ind. 489. Under these, however, as we have seen, he had the right to infer that he could name, as beneficiary, one who might not have an insurable interest in his life. In the application which was required, he designated R. Maud Hodgkin as his beneficiary, and described her distinctly as one “ whose relationship to me is that of a friend.” Here was a proposition to become a member of the association upon a distinct and unequivocal condition that the person designated by him — who clearly had no insurable interest in his life — should receive the benefit in the event of his death while a member. The application is in the form required, and is expressly referred to and made a part of the policy. This proposition was received, considered and accepted by the directors, who received the required fee and extended the certificate of membership. There was no misrepresentation and no mistake. This is no case of waiver by an unauthorized agent. It is the act of the association itself, and ought to estop it to say that the acceptance was upon a condition utterly at variance with the proposition for membership, and which would render the certificate wholly inoperative as regards the express intent of the assured. By this deliberate act the association must be presumed to have changed their new rule, and.to have gone back to the plan contemplated by the by-laws for the express purpose of receiving this applicant into their membership. Uber lived and paid his dues under this presumption ; he was careful to leave the policy so that it would be delivered in event of his accidental death to the beneficiary, and died believing that he had made a valid contract for her benefit.

To avoid the effect of this situation, the defendant sought to introduce proof that its officers received the impression from the description of the beneficiary, and acted thereon, that she was betrothed to the member, and error has been assigned on the exclusion of this proof. Had the proof been admitted it cannot be seen how the defendant would have been benefited, because it has generally been held that one occupying this relation to the insured has no insurable interest.

But the proof was clearly inadmissible. If the directors were misled by these words they have themselves alone to blame. The word friend, in its real, usual and well understood meaning, is one of the best and noblest in the language, and it is inconceivable that Uber could intend to mislead by its use. If the directors really attached a meaning to the word that is wholly unauthorized, they must suffer the consequences of their inexcusable mistake.

By what has been said with respect to the character of this policy and the right of the beneficiary to recover as against the association, we are not to be understood as undertaking to determine that the benefit of the policy accrues to the plaintiff as against others not before the court, who might assert the invalidity of her title and seek to claim the reversion of the policy. If the defendant had admitted the validity of the policy, but denied plaintiff’s right to the proceeds thereof for want of insurable interest, it could easily have protected itself against expensive and troublesome litigation through a bill of interpleader.

Irrespective, therefore, of the question whether plaintiff is the absolute owner of the proceeds of the certificate or not, she must recover in this action as maintained, because the policy, not being within the rules against wager policies, would not be void, even if the designated beneficiary could not take anything thereunder for her own benefit for want of insurable interest. The policy being a valid contract, the unauthorized designation only would fail, just as if she and the other beneficiaries had died, and the real interest therein would, under the by-laws, vest in the deceased’s “next of kin,” as defined in the New York statute of distribution. Rindge v. N. Eng. Mut. Aid Soc., 146 Mass. 286 ; Keener v. Gr. Lodge, A. O. U. W., 38 Mo. App. 543. In the last case the society was an association authorized by statute for “ the relief and aid of the families, widows, orphans and other dependents of deceased members.” The member designated as his beneficiary a woman whom he maintained, and who bore to him the relation of concubine, though she called herself and he designated her in. the application as his wife. He had a living wife at the time who also survived him. The wife and the designated beneficiary each claimed the fund realized from the policy. It was held that the beneficiary could not take under the purposes of the association as defined in the statute; but the policy was not void, and the widow was entitled to recover under- a clause thereof, similar to the one in the policy here sued on, just as if the designated beneficiary had died before the member. See also Britton v. Royal Arcanum, 46 N. J. Eq. 102 ; Palmer v. Welch, 132 Ill. 141 ; and Schonfield v. Turner, 75 Tex. 324, where it was said that the person designated, if not entitled to the benefit of the certificate, would be, if necessary, regarded as a trustee for the persons really entitled thereto. See also Warnock v. Davis, 104 U. S. 775, where the same principle is applied.

We find no error in the judgment appealed from, and it is therefore affirmed, with costs to the appellee.