Life Insurance – Is It Wagering?

Dallas life insurance attorneys need to understand the difference between life insurance and betting when life insurance is obtained in a business setting.
A1998, Houston (14th) Court of Appeals case gives some guidance. The style of the case is, Tamez v. Certain Underwriters at Lloyd’s. Here is some relevant information.
This is an appeal from a summary judgment granted to the employer, NCS, of the deceased, Ramon Tamez. This court reversed the judgment of the trial court.
NCS had purchased an accidental death policy from Lloyd’s on Tamez. After Tamez’s death, NCS submitted a claim and was paid $250,000 in proceeds.
Tamiz contends a long line of Texas cases require an insurance beneficiary to possess an insurable interest in the insured’s life and that NCS does not meet the test regarding who has an insurable interest.
NCS first argues that the Texas Insurance Code does not require an insurable interest. Alternatively, NCS claims it has an insurable interest in the lives of its employees.
Citing a Texas Supreme Court ruling, this court said, bluntly expressed, insurable interest, is determined by monetary considerations, viewed from the standpoint of the beneficiary. Would he regard himself as better off from the standpoint of money, would he enjoy more substantial economic returns should the insured continue to live; or would he have more, in the form of the proceeds of the policy, should she die? Therefore it is said that if the situation is such that he might be led to conclude that he would profit by her death, the policy contract is void as to him since the public has a controlling concern that no person have an interest in the early death of another, an interest that may give rise to a temptation to destroy her life.
NCS argues it does have an expectation of pecuniary benefit in that “without employees, NCS would not generate revenue and would cease to exist as a viable entity.” NCS claims this is a fact of such common knowledge that a court may take judicial notice of it. While it may be true that NCS, like any other company, needs employees to generate revenue, NCS does not dispute that the basis for purchasing this insurance was to pay any benefits to the families of the deceased and to pay for costs associated with defending a lawsuit.
NCS raised an alternative argument, that NCS has an insurable interest because it sustains a substantial pecuniary loss upon the death of an employee in the form of funds paid to the families and expenses for potential liability in litigation.
The court did not accept the arguments of NCS and in its final ruling said, we conclude that NCS has no insurable interest in the life of its employees. Therefore this policy is void as to NCS.
The final result in this case was that NCS was not entitled to the life insurance proceeds.