Transmissibility of the Beneficiary's Interest

Where the beneficiary has been named absolutely and without any qualifying restriction, the important question arises: Are the rights of the beneficiary in the policy such as to pass to his or her representatives in case of death before the insured dies ? This question may be discussed conveniently from two standpoints: (1) when all the designated beneficiaries die before the insured, and (2) when some of them die before the insured but others outlive him. Assuming that the sole beneficiary designated in the policy dies before the insured, is the latter at liberty to make a new appointment? Frequently the difficulty is overcome by a clause in the policy, as is the case in the New York standard provision expressly providing to some such effect as this: "If no beneficiary shall survive the insured the policy shall be payable to the legal representatives of the insured." Beneficiary clauses also frequently contain stipulations to the effect that "if any beneficiary shall die before the insured, the interest of such beneficiary shall vest in the insured". In the absence of such provision, the courts have disagreed as to the powers which the insured may exercise in this respect. The majority of decisions permit him to make a new appointment and this ruling is regarded as the better one by legal writers on the subject. It is contended that since the insured's original intention as to the disposition of the proceeds of the policy has failed, the power to indicate a new beneficiary should revert back to him. His original intention to protect his wife and children, it is argued, cannot be construed as implying that he meant to waive all control over his own policy in case he should happen to become the sole survivor. To hold otherwise would seem inequitable and would likely prove ineffective since the insured could lapse his policy.

Now assuming in the second case, that the policy simply names the "wife and children" or the "children" as beneficiaries, and that it contains no conditions governing the matter, how shall the proceeds of the policy be shared when some of the designated beneficiaries die before the insured dies while others survive him? In other words, are those beneficiaries who outlive the insured entitled to the entire proceeds of the policy, or is the interest of the surviving beneficiaries still limited to the share which they originally held under the policy, while the respective interests of those beneficiaries who died before the insured's death pass to their representatives or assigns. Here again the courts are not in accord. Where the policy is payable to "the wife of the insured, if living, otherwise to their children", it is clear that the interest of the children is a contingent one, depending upon the life of the wife. But suppose that the husband survives the wife, shall the proceeds of the policy pass only to those children who survived the mother, or shall all the children living at the time of the issuance of the contract participate in the distribution. Some courts hold sometimes called the New York rule that only the children surviving the mother come into possession of the entire policy.6 Other courts, however, follow the rule sometimes called the Connecticut rule that all the children alive when the policy was issued acquire a vested right therein, and that the interest of those dying before their mother dies passes to their representatives.