An insurable interest must be a pecuniary one in the life assured. Accord ingly a father has not necessarily an insurable interest in the life of his son, though under some circumstances he might easily prove that he liad, and so be in a position to recover under the policy (Worthington v. Curtis ; Halfbrd v. ICymer). Nor has a child an insurable interest in the life of its parent, unless it is so young as to be legally entitled to maintenance by the parent. The following pronouncement of Lord Eldon, in Lncena v. Crawford (a case relating to the insurance of property), throws considerable light upon the subject :—" In order to distinguish that intermediate thing between a strict right or a right derived under a contract, and a mere expectation or hope, which has been termed an insurable interest, it has been said in many cases to be that which amounts to a moral certainty. I have in vain, however, endeavoured to find a fit definition for that which is between a certainty and an expectation, nor am I able to point out what is an interest unless it he a right in the property or a right derivable out of some contract about the property insured, which in either case may be lost upon sonic contingency affecting the possession or enjoyment of the party. Expectation, though founded upon the highest probability, is not interest, and it is equally not interest whatever might have been the chances in favour of the expectation. . . . If moral certainty be a ground for insurable interest, there arc hundreds, perhaps thousands, who would be entitled to insure. First the dock com pany, then the dockmasters, then the warehouse-keeper, then the porter, then every other person who to a moral certainty would have anything to do with the property, and of course get something by it. Suppose A. to be possessed of a ship limited to B., in case A. dies without issue; that A. has twenty children, the eldest [query, youngest] of whom is twenty years, it is a moral certainty that B. will never conic into possession, yet this is a clear interest. On the other hand, suppose the case of the heir-at-law of a man who has an estate worth £20,000 a year, and is ninety years of age, upon his deathbed intestate and incapable, from incurable lunacy, of making a there is no man who will deny that such heir-at-law has a moral certainty of siicceeding to the estate, yet the law will not allow that he has any interest or anything more than a mere expectation." A creditor has an insurable interest in the life of his debtor to the extent of his debt (Godsall v. Boldcro), and so he has in the life of a person who promises to pay a debt due from a deceased debtor (Van Lindenau v. Desborough). And the policy remains valid even though the debtor may have paid off the creditor. But, according to Hebden v. JVtst, a debtor does not acquire an insurable interest in the life of his creditor merely because the latter (without any consideration or circum stance which would make the promise binding upon him) promises that during his life he will not enforce payment from the debtor. A child was maintained by her step-sister, who was the plaintiff in Barnes v. London, Edinburgh, and Glasgow Assurance Co. The plaintiff, having promised the deceased mother of the child that she would take care of the child and help to maintain it, had taken out a policy of insurance upon the life of the child with the defendant company. The child having died, she brought the action against the company and succeeded therein, for it was held thlit she had an insurable interest in the child's life. But it should be noted that the com pany did not take any objection—which they could, have done—that the plaintiff had not in fact incurred any expenditure in respect of the child. '1'hey only resisted the claim on the broad ground that the woman had no pecuniary interest in the child's life at the time of the insurance, for there was no binding agreement on her part to take care of the child, but at most a voluntary promise to that effect. IIad they taken the above-mentioned objection, the plaintiff's insurable interest in the child's life would have been limited to the amount of the payments actually made by her on the child's account. Such an assurance is on the same lines as an assurance of a debtor. Where a creditor has effected a policy on the life of his debtor, he will be able, under Da/by v. India and London I,ife As.s.uranee Co., to recover there under upon the death of the debtor, even though, as already mentioned, the debt has been paid to hint during the debtor's life. All that is essential is that the amount so recovered on the debtor's death is not in excess of the true amount of the creditor's insurable interest at the time the contract of assurance was effected. And even on this poiht the companies are not very st.riet in the absence of fraud. To this extent the last-inentioned case has overruled the older case of Godsa// v. Boh/cro. 'Flicre the view was taken that a creditor's assurance of his debtor is substantially a contract of indemnity aoainst the loss of the debt. And this view is certainly a correct one at the • present day to a certain extent, though those res-ponsible for the later decisions would probably be inclined to deny it. That it is so would appear from the case et' Heinle,. v. West, already referred to, which also decided that where a person, having an insurable interest in the life of another, has insured that, life to the full extent of his interest in more than ono company, lie can only recover under one of the policies. But, notw ithstanding this, it is clear th2tt assurance by a creditor, as it now stands, is open to very serious objections, for instead of having something to lose by the death of his debtor, he may actually find himself in pocket thereby. " Where such policies are kept up at the debtor's expense," writes Mr. Porter in liis Lows qf In.ynronce, "they are a security given by him, and ftti Snell 110t Opl:Il i ObjeCt 1011 ; but where the creditor at his own expense insures the debtor, it is more economical for the creditor that the debtor should (lie quickly, since it enables hint to get his debt paid at less cost. . . . Unlike a mortgagee, he has no security for his debt, and indeed insures to make tip for the want of such a security, not to find a means of preserving the security which he has; and insurance enables hint either to get both his debt and his policy, when the interest supporting his policy is his inabilitv to get his debt, or to lei off his debtor at the expense of his insurers." If a debtor effects an assurance upon his own 1,,i2 as a security for his creditor upon terms that he, the (1(•blor, shall be responsible for the payment of the premiums, the creditor, as soon as he is fully paid off, is under all obligation to hand over the policy to the debtor (i.ce v. ; Dusdolt, v. Pigott); but the creditor may retain the policy after payment of the debt if he took it out upon his own responsibility, without any contract between the debtor and himself whereunder he was in a position to require the debtor to p:ty the premiums Writer v. (;arden).
issue of a policy is gcnerally preceded by some declaration by the assured, in the form of a proposal as a rule, having reference to the state of his health, his age, habits, and other facts as +he • company may require. This proposal is also usually accompanied by a medical examination of the intending assured, and at this examination the latter is required to answer certain further questions. And acquaintances of the proposer may also have to answer questions in the capacity of retirees. It is largely on the faith of the statements contained in the declaration and in the answers given at the time of the medical examination, and those given by the referees, that the company agrees to accept the proposal and i,sue policy. The statements must accordingly be accurate. But it may be that some statement has reference to a fact which is really an immaterial one, and is not one that would have much, if any, influence upon the decision of the company. A material fact should always be communicated to the company' ;
though a proposer need not state anything that flue company may know from some other source, nor what it ought to know, nor what it waives, nor what it takes upon itself time knowledge of (Carter v. Boehm). Where, however, it is:doubtful whether a particular tact was material or not, the decision of that question, in the event of an action being brought. on the policy, will most wide a jury. In Hubmwenin v. which was an action upon a policy of insurance, the claim was resisted on the ground that there had been fraud in effecting the policy by the suppression of a fact which the conditions of the assurance required the assured to disclose. These conditions required a declaration of the state of health of the assured, the policy was to be valid only if the statement were free from all misrepresentation and all reser vation. The declaration that was made described time assured as resident at Fisherton, but as a matter of fact she was then a resident in the gaol there. It .was decided that it ought to be submitted to the jury %%nether the omission of the fact of the imprisonment was or was not a material omission. A certain policy, the subject of the action Macdonald v. The Lazo Union, after stating the amount assured, the premium, &c., proceeded as follows:— Provided, nevertheless, that if the declaration in writing under the hand of the plaintiff, dated the 6th of March 1872, delivered at this office as the buds for the insurance, is not in every respect true, or if there has been any misrepresentation, concealment, or untrue averment in treating for the insurance, or if the conditions herein contained shall not be in all respects observed and performed on the port of the plaintiff and K. M. Taylor, then the insurance Oman be void, and the premium or premiums received in respect thereof shall be forfeited to the company.
On proposing the insurance, the plaintiff had ansaered in writing certain questions, and at the foot he had signed, tei the person proposing the insurance, a declaration, "I declare that the above particulars are truly set forth." Now Question 10 in the proposal was, " Has the life been proposed for insurance at this or any other office or offices; if so, at what offices ; was she accepted or declined?" The answer was " No." The policy was upon granted, but subsequently it was discovered that such answer was untrue to the knowledge of Mrs. Taylor, but not to time knowledge of the plaintiff. It was held that the proviso in the policy (by the terms of which the plaintiff was bound, having accepted it) avoided the assurance if the particulars in the declaration were untrue in fact, on a material matter, although not untrue to the plaintiff's knowledge. As Chief-Justice Cockburn said, the proviso was "a condition that the declaration signed by the plaintiff shall be true in point of fact—not merely in the sense of being true in the absence of fraud, that is, true as far as the plaintiff's knowledge went. It is the same thing to the company whether the representations contained in the declaration be fraudulent or whether they be not. The representation would have been fraudulent if the proposal Ar the insurance had been by the person whose lie was to be in.svred, and the company of course, under these circum stances, would be protected ; but it is equally important to them to be protected when the insurance is effected by a third person. . . The object of the proviso is that the company shall be protected against untruthful representations, whether those representations are untrue to the knowledge of the party effecting the insurance or not ; the terms would prima facie and naturally import, in the ordinary use of language, that the policy is vitiated if the representation, made as preliminary to the contract, was not in point of fact true. Whether untrue to the knowledge of the party proposing the life is to them a matter of very little importance." It may in the case of Canning v. Farquhar, that the health of' a proposed assured suffers a change between the time of the proposal and declaration and the date of his tender of the premium. It was there held that the nature of the risk having been altered at the time of the tender of the premium there was no contract binding the company to issue a policy. The action was brought against an insurance company for damages for breach of contract to grant a policy on the life of one Canning; the question was whether the company was bound to issue a policy. This turned, in the opinion of Lord-Justice Lindley, "on the question whether the otlice was bound to accept the premium m hich was tendered (hiring the lifetime of Calming." Ilia lordship proceeded : "It is said the office was so bound by contract, and we have to investigate this and see how it is made out. On the tith of _December Canning sent a proposal to the office. In that there was nothing about the premium that would be payable ; with that document was a declaration of the truth of certain statements made by Canning, which was to be the basis of the contract. That was followed by the usual reference to and an examination by the medical officer of the company. On the 14th of December the otlice made a communication to Canning, through Walters, that his proposal had been accepted subject to payment of a certain premium. I pause here for a moment to consider the effect of these negotiations. It was urged on the part of the plaintiff that there was then a complete contract binding the office on payment or tender of the premium to issue a policy of insurance. It is true that there had been an acceptance of Canning's offer, but he had not at this time assented to the company's terms; and until he assented to them there was no contract binding the company. The .company's accept ance of Canning's offer was not a contract but a counter offer." On the rith of January Canning, not haying then paid the premium, fell over a cliff, and seriously injured himself. On the 9th of January the premium was tendered to the company, which, being at the same time informed of the accident, refused to accept it. "I think," said his lordship, " there would be considerable difficulty, if there had been no change in the risk, in saying that the company", under such circumstances, night decline to accept the premium and issue the policy. In the case supposed the counter offer would be a continu ing offer; the tender would be an acceptance of it, and the company would be bound to issue the policy. But the case supposed is not the case we have to deal with here, because another element is introduced by reason of the material change in the risk in the interval between what I have called the counter offer and the tender of the prenlium. If Canning had tendered the money and had not informed the office of the alteration in the character of the risk, he would have been attempting to take advantage of an offer intended to cover one risk in order to make it cover another risk not known to the office. In other words, if he had paid the money without disclosing to the office the fact that his statements, which were true when he made them, were so no longer, he would have done that which would have been plainly dishonest. . . . It comes to this : there was no contract before the tender ; and the risk being changed the company's offer could not fairly be reganled as a con tinuing offer which Canning was entitled to accept. His tender was in truth a new offer for a new risk which the company were at liberty to decline." Assurance companies are generally very careful to fortify their position with regard to these declarations by making their policies expressly provide that the declarations are tha basis of the contract. Thus, in Thomson v Weems, the policy contained a proviso— That if anything averred in thc declaration herein before referred to shall be untrue, this policy shall be void, and all monies received by the said company in respect thereof shall belong to the said company for their own benefit.