Insurable Interest of the Assignee

The assignment of a policy and the appointment of a beneficiary, it should be noted, have been held by the courts to be subject to contract or statutory restrictions. The important question for consideration under this heading, however, is: Can a policy taken out by a person on his own life, and valid at its inception, be subsequently assigned to one who has no insurable interest in the life of the insured? In answering this question the courts are by no means a unit. An examination of the federal decisions shows the position of the United States Supreme Court to be somewhat in doubt. On the one hand, some of the decisions would indicate the courts' disapproval of such a practice,6 and the same ruling prevails in Alabama, Kansas, Kentucky, North Carolina, Pennsylvania, Texas and Tennessee. In other instances the court held that "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" (94 U. S. 457). And again: "A policy of life insurance, without restrictive words, is assignable by the assured for a valuable consideration equally with any other chose in action when the assignment is not made to cover a mere speculative risk and thus evade the law against wager policies" (117 U.S. 591). Richards in his analysis of the various decisions finds the doctrine of the highest court to be this: "Where a man effects insurance upon his own life for the benefit of another and pays the premiums, an insurable interest will readily be inferred from almost any kinship or intimate relationship, and where even a stranger buys the policy in good faith, his payment of a consideration will be regarded as creating an insurable interest, at all events to that extent." It may be added that many of the cases declaring an assignment without interest to be illegal involve a consideration of facts which indicate strongly that the transaction under consideration constituted an attempt to secure speculative insurance.

The weight of authority seems to support the doctrine that a policy valid at its inception is a mere chose in action which may, for value- or by way of gift, be assigned subsequently by the insured to anyone, irrespective of insurable interest of the assignee provided that the transaction is bona fide and not a device to conceal wagering, speculation in insurance, or attempts at evasion of the law. This doctrine, prevailing in most of the states, has been extended in some instances to permit a beneficiary or creditor holding a policy to assign the same to one possessing no insurable interest, provided such assignment has not for its purpose the concealment of wagering or speculative insurance. Generally speaking, assignments of policies are not regarded by the courts as creating -new contracts, but merely as continuing the old ones. The modern tendency in business seems to be in favor of making the transfer of life-insurance policies as free as possible, and if the transfer is effected with the consent of the parties, the courts are more and more inclined to regard objections on the ground of public policy as of little consequence.