Accidental Death Policy And Insurable Interest

Dallas insurance lawyers need to be able to understand and explain what an “insurable interest” is when asked.
A 1972, Amarillo Court of Appeals case helps explain an insurable interest. The style of the case is, North River Ins. Co. v. Fisher.
Here is some information to know:
This litigation resulted from the refusal of an insurance company to pay the accidental death benefit provided for the insured’s death in its policy procured without the knowledge of the insured by one named beneficiary who had no insurable interest in the life insured. The trial court granted summary judgment decreeing liability under the policy with the proceeds payable to the named beneficiary as trustee for the benefit of the decedent’s estate, and this appeal ensued.
The recorded events preceding the suit are undisputed and to a great extent were stipulated. J. W. Walker contracted with Azzie Fisher to trim Walker’s trees between the hours of 11 A.M. and 1 P.M . on May 29, 1970. On the morning of that day Walker called the Woods & Davenport Agency, talked with James Wallace Davenport and stated he would like to have an accident policy on Azzie Fisher. Davenport agreed to issue the policy. As revealed by Walker’s testimony given at a prior hearing and made a part of the summary judgment proof, the following then occurred:
‘A Mr. Davenport asked me who would be the beneficiary.
‘Q What did you tell him?
‘A. I told him I didn’t know Azzie’s wife’s name. I didn’t know for sure that he had a wife. And he said, in that case, we’ll just make you the beneficiary. And I told him I was getting the policy for the benefit of Azzie’s family, if he had one.
‘Q Was that your intention?
‘A Yes, sir.’
A ‘trip accident and baggage policy’ of The North River Insurance Company, New York, New York, was issued. The policy was effective at 10 A.M. on May 29, 1970, for one day, and named Azzie Fisher as insured and Mr. J. W. Walker as beneficiary with his relationship to the insured shown as ’employer.’ The premium of eighty-five cents was paid by Walker. The policy provided schedules of payments for loss resulting directly and independently of all other causes from accidental bodily injury sustained by the insured and the maximum sum of $10,000.00 for loss of his life within 180 days after the date of accident. Provision was also included for the payment of medical expenses actually incurred not to exceed $1,000.00 as the result of any one accident.
About mid-day of the same day while trimming the trees, Fisher sustained an accidental bodily injury from which he died on October 27, 1970, 151 days after his accident. Fisher left surviving him his widow, Virginia Fisher, his son, Norland J. Fisher, and his daughter, Joe Lena Mitchell.
The insurance company paid $1,000.00 for medical expenses but refused to pay the accidental death benefit of $10,000.00. Fisher’s widow and children and J. W. Walker, then filed this suit against North River to recover the $10,000.00 death benefit. The undisputed facts are, and in fact it is conceded, that Walker never had an insurable interest in Fisher’s life. Walker’s interest as a plaintiff in the trial court was to receive the policy proceeds as the named beneficiary for the benefit of the decedent’s estate. The opposing parties filed motions for summary judgment. The trial court denied North River’s motion and granted Fishers’ motion, decreeing that Walker, as trustee for the benefit of Fisher’s estate, recover from North River the $10,000.00 policy death benefit proceeds.
North River presented two assignments, alleging error in the denial of its motion for summary judgment and in the granting of Fishers’ motion. The gravamen of North River’s complaint is that the policy is void as to all parties because Walker was without an insurable interest in Fisher’s life. Fishers’ counterpoints are to the contrary, it being their position that while the policy may be void as to Walker as beneficiary, it is valid and enforceable as between the other parties and the insurer.
It is clear that Fisher, the insured, having no knowledge of the application for insurance by Walker, could not consent to the issuance of the policy, but the lack of Fisher’s consent would not affect the insurable interest of the beneficiary, if in fact the beneficiary had an insurable interest in Fisher’s life. It is equally as clear that Walker was only the nominal beneficiary, named at the suggestion of North River’s agent when Walker, securing the policy for the benefit of Fisher’s family, did not know the insured’s family status, and that the real beneficiary was Fisher’s estate. His surviving widow and children, who were entitled to receive Fisher’s estate, had an insurable interest in his life. Thus, the determinative issue is narrowed to the question of whether, under Texas law, the insurance policy is void simply because it was procured by Walker who had no insurable interest in the insured’s life.
Here is the Court’s ruling:
When an insurance company has issued a policy upon the life of a person, payable to one who has no insurable interest in the life insured, the insurance company must nevertheless pay the full amount of the policy, if otherwise liable, because it has so contracted; and it is no concern of the insurer as to who gets the proceeds, except to see that it is paid to the proper parties, under its agreement. It is simply required to perform its contract, and the law will dispose of the money according to the rights of the parties. This rule does no wrong to the insurance company. It, having agreed to pay the money upon the death of a named person, ought not to be permitted to avoid liability upon its contract upon the ground that it has made an unlawful agreement, when that contract can be enforced in favor of a person who is in no wise concerned in the unlawful part of the transaction. Why should it be said that the policy issued by the company contrary to law should be held void as to it? The reason would seem to be equally strong to enforce the contract in favor of one who was entirely innocent of participation, as in favor of him who voluntarily places the insurance in the name of one who cannot lawfully receive it. If the insurance company may set up the illegality of such a contract, then the object of the law will be frustrated, and the making of such unlawful agreements by insurance companies will be encouraged, for they would thus be enabled to reap the benefit without incurring the risk of such business. If the insurer is held liable, and the payee in the policy is denied its benefits when unlawfully obtained, both parties to the unlawful contract will be denied relief, and the beneficial objects of insurance upon the life be attained, by giving the benefits to the estate of the insured, and no inducement will be offered to destroy the life upon which the risk is placed.
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