Supreme Court of Canada
North American Life Ass. Co. v. Craigen (1886) 13 SCR 278
Date: 1886-05-17
The North American Life Assurance Company (Plaintiffs)
Appellants
And
Elizabeth Jane Craigen (Defendant)
Respondent.
1886: Feb. 26, 27, 1886: May 17.
Present—Sir W. J. Ritchie C.J., and Strong, Fournier, Henry and Taschereau JJ.
ON APPEAL FROM THE SUPREME COURT OF NOVA SCOTIA.
Life Assurance—For benefit of another—Wager Policy—14 Geo. 3 ch. 48.
The statute 14 Geo. 3 Cap, 48 enacts: 1. That no insurance shall be made by any person or persons, bodies politic or corporate, on the life or lives of any person or persons, or on any other event or events whatever, wherein the person or persons for whose use or benefit, or on whose account, such policy or policies shall be made, shall have no interest, or by way of gaming or wagering; and that every insurance made contrary to the true intent and meaning of this act shall be null and void to all intents and purposes whatsoever.
2. That it shall not be lawful to make any policy or policies on the life or lives of any person or persons, or other event or events, without inserting in such policy or policies the name or names of the person or persons interested therein, or for what use, benefit, or on whose account, such policy is so made or underwritten.
3. That in all cases when the insured hath an interest in such life or lives, event or events, no greater sum shall be recovered or received from the insurer or insurers than the amount or value of the interest of the insured in such life or lives, or other event or events.
Held, affirming the judgment of the court below, that this statute never was intended to prevent a person from effecting a bonâ fide insurance on his own life, and making the sum insured payable to whom he pleases, such insurance not being "By way of gaming or wagering" within the meaning of the first section of the act.
Held also, that section 2 of the said act applies only to a policy on the life of another, not to a policy by a man on his own life.
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Appeal from a judgment of the Supreme Court of Nova Scotia affirming the decision of the Court of Equity, dismissing the plaintiffs' bill.
The facts of the case pertinent to the present appeal are as follows:—
The action was brought to have cancelled a policy of life insurance, issued by the plaintiff company to Edmund Francheville Russell, in the sum of one thousand dollars, dated the 29th day of December, 1881, payable to the respondent.
Russell was a merchant in Halifax in 1881. The respondent was an intimate friend of his wife, and he desired to make some provision for her after his death. She had no pecuniary interest in his life, either at the time the policy was effected or at the time of Russell's death.
The application for the policy was made by said Edmund Francheville Russell, and dated 17th December, 1881; it applied for a policy for the sum of ten thousand dollars, payable to the estate of the applicant. On the 24th December, 1881, Edmund Francheville Russell wrote the following letter to J. S. Belcher, Esquire, agent of the plaintiff company:
"Halifax, N.S., December 24th, 1881.
"J. S. Belcher, Esq.,
"Dear Sir,—You will please make policies for the ten thousand dollars insureds in the North American Mutual Life Insurance Company on my life as follows: one policy for four thousand dollars in favor of Captain James E. Hadley, of Gruysboro; one policy for four thousand dollars in favor of Miss Jessie Richardson, of Sydney, Cape Breton; one policy of one thousand dollars in favor of Elizabeth Jane Craigen, of Halifax, N.S.; one policy for one thousand dollars in favor of##
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Annie Handford Craigen, of Halifax, N.S.
"Yours truly,
(Sgd.) "E. F. Russell."
The appellant company accepted the said proposal for insurance, and issued a policy of insurance to said Russell, insuring his life for the benefit of the said Elizabeth Jane Craigen in the sum of one thousand dollars. By the terms of the policy the company "insures the life of Edmund Francheville Russell, here" inafter called the assured, and promises to pay at its "said office in the city of Toronto to Elizabeth Jane "Craigen, of Halifax, Nova Scotia, her executors, "administrators or assigns, one thousand dollars," &c.
The appellant company was aware when the policy was effected that the respondent had no pecuniary interest in the life of Edmund Francheville Russell. On January 4th, 1882, Belcher, agent at Halifax of appellant company, wrote to the managing director at Toronto of appellant company a letter containing the following words: "I may say that Mr. "Russell is insuring for the benefit of these people— "his brother-in-law, sister-in-law, and two friends of "his wife. They do not know anything of his intention, "and he would not ask them to sign the documents "sent, as he does not wish them to know; "merely a favor on his part; he owes them nil; he "says in case of death he wants these amounts paid "without going through the hands of his executors."
On the 15th July, 1883, the company brought this action to have the policy delivered up to be cancelled, alleging in their bill that they first knew the want of interest in the defendant after the death of the assured, whereupon they immediately tendered a repayment of the premium and demanded the policy which was refused.
Mr. Justice Thompson dismissed the bill with costs.
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From this decision the appellants appealed to the Supreme Court of Nova Scotia in banco, which gave judgment dismissing the appeal and confirming the judgment appealed from. The present appeal was then taken.
J. K. Kerr Q.C. for the appellants.
We contend that the policy is within the terms of the statute of Geo. 3, and void as a wager policy. See Evans v. Bignold; Hodson v. Observer Life Assurance Soc.; Dowker v. Canada Life; Shilling v. Accidental Ins. Co..
The defendant must occupy one of two positions; either the policy was one effected for her benefit, which the statute forbids, or it is issued to Russell whose name is not in the policy in the manner contemplated by section 2.
When the application was made the company called Russell's attention to the want of interest in the beneficiary, and he replied that he was acting under advice and would take the policy as directed.
The following cases were cited: Vezina v. New York Life; Etna Ins. Co. v. France; Warnock v. Davis; Connecticut Mutual v. Sctwenk; Sadler's Co. v. Badcock.
Graham Q.C. for the respondent.
It will not be contended that a party cannot insure his own life. See 32 Albany L. J. 386, Nov. 14, 1885, commenting on the case of Warnock v. Davis. The writer of this article cites Triston v. Hardey to show that a policy is valid, even if the premium is paid by the beneficiary.
The company contract with Russell that they will
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pay Craigen. McQueen v. Phænix Mutual.
The company had knowledge of all the facts and cannot succeed unless the policy is absolutely void.
Sir W. J. RITCHIE C.J.—The bill in this case sets out that one Edmund Francheville Russell, on or about December 17th, 1881, made a proposition to the plaintiffs to insure his life in the sum of $10,000, and accompanied said proposal with a letter directed to the plaintiffs, through their agent at Halifax, dated the 24th day of said December, directing that the said sum of $10,000 be written in four policies, of which one was to be in favor of the defendant for $1,000; that the plaintiffs accepted such proposal and issued a policy insuring the life of the said Russell for the benefit of the defendant in the sum of $1,000; that the said Russell died, and the defendant having been called upon so to do made due proof of his death, but admitted that she had no interest whatever, beneficial, pecuniary or otherwise, either at the time of the making and executing such policy or at the time of the death of said Russell; that at the time the plaintiffs issued said policy they had no knowledge that the defendant had no beneficial or pecuniary interest in the life of the said Russell, and that on being fully satisfied of that fact they immediately tendered back to the defendant the premium paid on said policy, and informed her that they would not be bound by said policy to pay her any amount thereunder, and the defendant refused to accept the said premium or to deliver up the said policy; and the bill prayed that the policy should be declared null and void, and that the same be delivered up to the plaintiffs to be cancelled, and that the defendant be restrained by injunction from proceeding in any action at law upon the said policy against the plaintiffs, or assigning or disposing
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of said policy, and for other relief as may seem meet.
This bill was, in my opinion, properly dismissed. The injunction said to have been granted was, in my opinion, most improperly granted, as I have not the slightest doubt as to the liability of the company in this case. The policy was issued on the 29th of December, 1881, whereby the company, in consideration of the application for this policy, and the statements and agreements therein contained hereby made a part of this contract, and of the annual premium, $39.50, to be paid in advance to the company at its head office in the city of Toronto on the delivery of their policy, and thereafter on the 20th day of December in every year during the term of 19 years, insures the life of Russell, hereinafter called the insured, of Halifax, in the county of Halifax and province of Nova Scotia, and promises to pay at its said office, in the city of Toronto, to Elizabeth Jane Craigen, of Halifax, Nova Scotia, her executors, administrators or assigns, one thousand dollars with profits, first deducting therefrom the balance of the current year's premium, if any, and all loans on account of this policy, in sixty days after satisfactory proof at its said office of the death of the insured, during the continuance of this policy, under the following provisions. (Here follows certain conditions which are of no importance in this case.)
There is no pretence for saying that Russell did not insure his own life and pay the premium with his own money, making the loss payable on his death to Elizabeth J. Craigen, without her knowledge. I am clearly of opinion that he had a perfect right to insure his own life; that his interest supports the policy, and that the policy was not, in any sense of the term, a wager policy. It was obtained, and the premium paid, by a person who unquestionably had an interest in his own life, and was not obtained
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by the party now claiming the money, but was obtained without collusion with, or even the knowledge of, the party whom the assured designated to receive the amount upon his death.
Craigen's first connection with the policy appears to have occurred thus: Russell, about the 21st of January, 1882, delivered to her a sealed envelope directed to her, and requested her to use the contents for her own benefit in the event of his death, and after his death she opened the envelope and found the policy which had been effected by Russell on his own life, with his own means, and, as she says, without any direction from her and without any procurement or solicitation on her part and, in fact, without her previous knowledge.
Can it be doubted that a man has an insurable interest in his own life on which he may effect a bonâ fide insurance? And can it be that he cannot appoint any one to receive the money in the case of his death during the existence of the policy?
Against his doing so the statute 14 Geo. 3 cap. 48 has been invoked, which enacts:
First—That no insurance shall be made by any person or persons, bodies politic or corporate, on the life or lives of any person or persons, or on any other event or events whatever, wherein the person or persons for whose use or benefit, or on whose account, such policy or policies shall be made shall have no interest, or by way of gaming or wagering, and that every insurance made contrary to the true intent and meaning of this act shall be null and void to all intents and purposes whatever.
Second.—That it shall not be lawful to make any policy or policies on the life or lives of any person or persons, or other event or events, without inserting in such policy or policies the name or names of the person or persons interested therein, or for what use, benefit, or on whose account such policy is so made or underwritten.
Third.—That in all cases where the insured hath an interest in such life or lives, event or events, no, greater sum shall be recovered or received from the insurer or insurers than the amount or value of the interest of the insured in such life or lives or other event or events.
[Page 285]
This act never was intended to prevent persons from effecting bonâ fide insurance on their own lives; when once so effected the insured is at liberty to assign the policy to whom he pleases, and the assignee may recover without showing interest or payment of consideration, resting on the rights of the persons who effected the insurance, the statute applying only to the original parties to the policy. See Ashley v. Ashley.
It is quite another matter where an evasion of the statute is attempted by a person procuring one in whose life he has no legal interest to insure it with his money and for his benefit, though ostensibly for the advantage of the party insuring. In this case, as I have said, there was no attempt to evade the statute. Russell applied for the insurance on his own life, paid the premium out of his own money, and the company, with full knowledge of all the circumstances, issued to him a policy; the contract thus made with Russell not having the semblance of a wager policy, but being made in good faith, what possible objection, in law or in principle, can there be to his requiring the amount, in case of his death, to be paid, not to his personal representatives, but to a specific person whom he designates to receive the same? The loss could not be paid to Russell himself because it is not payable until he is dead and gone. What is there to justify the principle that the statement in the policy of the name of the person to whom he wishes the money to be paid on his death Vitiates the policy? What rule or principle of law is invaded by the parties, by mutual agreement, designating who shall be entitled to receive the proceeds when due instead of the personal representatives of the deceased? He could assign the policy; he could bequeath the policy; and I have yet to learn that he could not make it payable to trustees for the benefit of particular individuals.
[Page 286]
If he could, why could he not make it payable to the assignee, devisee or individual himself or herself?
Section 2 which has been so much relied on has, it appears to me, been entirely misapprehended on the argument. It applies only to a policy on the life of another, not to a policy by a man on his own life. The statute only requires that where a party makes an insurance on the life of another the policy shall contain the name of the person for whose use, benefit, or on whose account the policy is made; therefore where a third person is a person interested in the policy the name of that person so interested must, no doubt, be inserted. Section 3, read in connection with section 2, shows very clearly that section 2 refers to insurance on the lives of others, not to insurance by a party on his own life. But if section 2 be applied to a case like the present I do not see what the defendants have to complain of. The name of the party for whose benefit the assured caused the insurance to be effected, in other words, the party intended by the assured to be benefitted by the insurance on his death, does appear.
No English case has been cited nor, I think I can safely say, can be found, to sustain the plaintiffs' contention. In the United States of America decisions in different States of the Union are in direct opposition. I will refer to a few of them.
In Campbell v. The New England Mutual Life Insurance Co., the marginal note says:
An action may be maintained on a policy of life insurance obtained by a man on his own life, without proving an insurable interest therein in the person for whose benefit it is declared on its face to be made.
And in the same case Wells J. says:
The policy in this case is upon the life of Andrew Campbell. It was made upon his application; it issued to him as "the assured,"
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the premium was paid by him; and he thereby became a member of the defendant corporation. It is the interest of Andrew Campbell 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. The contract, (so long as it remains executory), the interest by which it is supported, and the relation of membership, all continue the same as if no such clause were inserted. Fogg vs. Middlesex Insurance Co.; Sanford vs. Mechanic's Insurance Co.; Hale vs. Mechanic's Insurance Co.; Campbell vs. Charter Oak Insurance Co.; Forbes vs. American Insurance Co..
It was not necessary, therefore, that the plaintiff should show that she had an interest in the life of Andrew Campbell by which the policy could be supported as a policy to herself as the assured. The defendants raise no question as to her right to bring this action if the policy can be supported for her benefit.
In Hogle vs. The Guardian Life Insurance Company the marginal note reads:
4. Any person has the right to insure his own life though he does it for the benefit of another; and he may have the loss payable to the assured or to his own assignee or appointee.
5. A policy of insurance effected by a person upon his own life may be disposed of as the insured sees fit.
Garvin J.:
The contract was with Warner, whose life was insured for her (the plaintiff's) benefit, and the promise is to pay her. The action is properly brought in her name. Lawrence v. Fox But whether this is so or not the plaintiff is the real party in interest and can maintain the action. (Code sec. 111). The insurance Was effected by Warner. He applied for it, paid the premium, took all the initiatory steps for proving it. It was delivered to Warner, and nothing is clearer than that Warner could make the loss payable to whom he pleased. He did so, making it payable to her. Therefore the question of whether she had an insurable interest in the life of her father does not and cannot arise. Any person has a right to insure his own life though he does it for the benefit of another. Rawls v. The American Ins. Co.. He
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may have the loss payable to the assured, or to his own assignee or appointee; and whichever be the form his interest in his own life is the same. There is therefore no question as to the plaintiff's interest in his own life. That question does not arise. St. John v. American Mutual Ins. Co.; Ruse v. Mutual Benefit Life Ins. Co..
A policy of insurance effected on one's own life may be disposed of as the insured sees fit. It is not material that the beneficiary, appointee, or assignee, have an interest in the life of the insured at the inception of the policy. A valid policy once made, it so remains if the conditions are complied with, Valton v. National Fund Life Ass. Co. On the termination of the life the sum insured is payable absolutely.
In Olmstead v. Keyes Earl J., after referring to the insurance authorities, says:
The rules, as gathered from these authorities, is that where one takes out a policy upon his own life as an honest and bonâ fide transaction, and the amount insured is made payable to a person having no interest in the life, or where such a policy is assigned to one having no interest in the life, the beneficiary in the one case, and the assignee in the other, may hold and enforce the policy if it was valid at its inception and the policy was not procured, or the assignment made, as a contrivance to circumvent the law against betting, gaming and wagering policies.
And in The Provident Life Insurance & Investment Co. v. Baum Ray J. says:
In consideration of eighteen dollars, the receipt of which is hereby acknowledged, The Provident Life Insurance and Investment Company do hereby insure Americus Baum against loss of life in the sum of $3,000, to be paid to Napoleon Baum or his legal representatives within ninety days after sufficient proof that the assured, at any time after the date hereof and before the expiration of this policy, shall have sustained personal injury caused by any accident within the meaning of this policy and the conditions hereunto annexed, and such injuries shall occasion death within ninety days from the happening thereof; sufficient proof being furnished to this company.
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And he goes on to say:
The position assumed by the appellant in argument that this policy is one of indemnity, and that the appellant must show an interest in the life of the assured, does not, we think, arise in this case. The policy in terms declares that the company insure Americus Baum against loss of life in the sum of three thousand dollars. It cannot be questioned that a person has an insurable interest in his own life, and that he may effect such insurance and appoint any one to receive the money in case of his death during the existence of such policy. It is not for the insurance company, after executing such a contract and agreeing to the appointment so made, to question the right of such appointee to maintain the action. If there should be any controversy as to the distribution among the heirs of the deceased of the sum so contracted to be paid it does not concern the insurers. The appellants contracted with the insured to pay the money to the appellee, and upon such payment being made they will be discharged from all responsibility. So far as the insurance company is interested the contract is effective as an appointment of the appellee to receive the sum insured.
The law, then, of this case is against the defendants, and I do not know that I have ever adjudicated on a case where the defendants had so little merits. The company appear to have suggested that the law would not allow a policy to be made payable to a person having no present insurable interest in the life of the assured, and yet, with the following letter from their agent,
Wm. McCabe Esq., Toronto:—
Dear Sir—I have at hand your favors of 27th and 29th ults., also policies for Mr. Russell; they all came together. I have also received your favor of 31st., with paper and envelopes to-day. I have read over your letters of 29th very carefully, and understand that Mr. Russell can not insure for the benefit of others, and that I am authorized to hand him his policies, which I have done; expected to have seen him to day but have not. I may say that Mr. Russell is insuring for the benefit of these people—his brother-in-law, his sister-in-law, and two friends of his wife. They do not know anything of his intention, and he would not ask them to sign the documents sent as he does not wish them to know, merely a favor on his part, he owes them nil; he says in case of death he wants these
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amounts paid without going through the hands of his executors.
Yours truly,
(Sgd.) Joseph S. Belcher.
and with this full knowledge they have a policy made out as Mr. Russell wished and received his premium. Could it be that with this knowledge they wickedly took Russell's money for what they thought would be a valueless policy and intended, in case of death, to repudiate it? And yet such is the only inference that can be drawn from this most unjust at tempt to defeat a righteous claim.
With all the circumstances as above detailed, there being no allegation, or pretence for saying, on this record that there was any concealment, fraud or evasion practised on the part of the insured or on that of the defendant in this case, it is difficult to understand how they could bring themselves to resist this claim. They have neither law, merits, nor justice on their side, and therefore, in my opinion, the appeal should be dismissed with costs.
STRONG J.—This is a suit in equity to have a policy of life assurance delivered up to be cancelled upon the ground that it was a wager policy, effected by or on behalf of a person having no interest in the life, and so void under the provisions of the Stat. 14 Geo. III. chu 48. The assurance was effected by Russell, whose life was the subject of it, and who paid the premium, there being nothing to show that at or before that time the defendant knew anything about the matter. The contract of the company contained in the policy was with Russell, and with Russell alone, and by the proper construction of the instrument the premiums were to be paid by Russell. Russell, it is true, afterwards handed over the policy to the defendant, but this, if it had any legal effect, operated only as a subsequent assignment. The well known rule of the law of
[Page 291]
contracts, that when a contract or covenant is made between two persons for the benefit of a third that third person is not to be considered a party to the contract and cannot sue upon it, applies here. The policy was, it is true, made payable to the defendant, but the defendant was not for that reason in a position to recover upon it, there being no privity of contract between her and the company, unless she has become entitled to sue by reason of some valid and effectual transfer made by Russell to her. It would be premature now to say whether there has been an effectual gift of the policy to the defendant or not. It is sufficient for the purpose of this appeal to say that the contract of insurance intended to be carried out by the policy, was at its inception an insurance effected by Russell on his own life and, as such, entirely unobjectionable. No statute or rule of law that I am aware of prohibits a policy of this kind. It is not one which the statute 14 Geo. 3 was designed to prevent. Every man has an insurable interest in his own life and he may, either by will or by act inter vivos by way of assignment, direct the payment of the sum assured to be made, at his death, to a third person, and as he may clearly do this by an assignment of the policy, subsequent to its being effected, so he may do the same by an instrument contemporaneous with the policy; and if he can do this by a contemporaneous instrument collateral to the policy, there is no reason why he may not effect the same end by a provision embodied in the policy itself, which is all that has been done here.
Of course, if it is made to appear by evidence that the undertaking of the person whose life is assured to pay the premiums is colorable, and that the premiums are in reality to be paid by a third person who has no insurable interest in the life and who is to have the benefit of the insurance, the policy will be a wager
[Page 292]
policy and so within the statute and void, but nothing of the kind appears here.
The statute 14 Geo. 3 no doubt applies and the validity of the policy is to be determined by it, for the contract of insurance must be considered as having been made at Toronto, the domicile of the defendants, and the law of Ontario has been properly put in evidence by proof or admission of the statute of the late Province of Upper Canada, establishing the law of England as it stood in 1791 as the rule of decision, which, it cannot be doubted, had the effect of introducing the statute in question as a governing enactment into the law of that province. But for the reasons already stated I am of opinion that the statute does not invalidate the policy. I attach no importance to the pretended variation of the policy by converting it into one effected by the defendant; inasmuch as for the reasons assigned by Mr. Justice Thompson in his judgment in the court below such variation never took effect.
The law applicable to this case is well stated in Olmstead v. Keyes, for although neither the statute of Geo. III. nor any similar statutory enactment is in force in New York, yet the courts of that state have repeatedly held that the common law had the same effect in forbidding wager policies on the lives of third parties as the statute had in England.
I may add that if this policy had been made in Nova Scotia, or if by reason of there being no proof of the lex loci—the law of Ontario—we had been called upon to determine the case by the law of Nova Scotia, where the statute is not in force, I should, had the facts warranted it, have felt no difficulty in adopting the New York rule, that a wager policy effected by a person having no interest in the life was, at common Jaw, against public policy and so void.
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There is a further reason for holding that this appeal must fail. This is a bill in equity, and the decision appealed from was pronounced before the Nova Scotia Judicature Act came into force. It is well established that a Court of Equity will not decree cancellation for matters of avoidance apparent on the face of the instrument impeached. The whole ground of equity insisted on by the appellants in the present case is that the policy is void on its face. This point was alluded to but not decided in Desborough v. Curlewis. It is manifest, however, that the inclination of the court in that case was in favour of the objection, which I think well founded in the present case, and a sufficient ground for the dismissal of this appeal if other and more substantial reasons were not also applicable.
The appeal should be dismissed with costs.
FOURNIER J.—I entirely concur in the opinion of His Lordship the Chief Justice, and especially in his last observation.
HENRY J.—The case as presented by the evidence here is that of a company who, with full knowledge of all the circumstances, enters into a contract, and after the contract has been performed by the insured goes into a Court of Equity and asks for an injunction against the parties entitled to be paid to restrain them from bringing an action. This is a most unjust proceeding, and I do not understand it; I am clearly of opinion that a man can insure his own life and, with the consent of the company, can make the insurance payable to whom he pleases. This is totally different from a wager policy, which means a party insuring another person's life to make money out of it. The statute is not applicable to a case of this kind, and the company has no right to ask any court to restrain the
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defendant from bringing an action. It is a most unrighteous proceeding on the part of the company.
The appeal should be dismissed with costs.
TASCHEREAU J.—I am also of opinion that this appeal should be dismissed for the reasons just given by His Lordship, the Chief Justice. I desire particularly to add that I also fully agree in all that has been said by His Lordship as to the nature of the contestation raised by the company against this claim. Such contestations by these companies are very much to be regretted, and are of a nature to prove a serious blow to the whole system of life insurance.
Appeal dismissed with costs.
Solicitor for appellants: W. F. MacCoy.
Solicitor for respondent: Geo. H. Fielding.
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