A TREATISE UPON THE LAW OF LIFE ASSURANCE. PART I. CHAPTER I. THE NATURE OF THE CONTRACT AT THE COMMON LAW, AND AS MODIFIED BY THE STATUTE LAW. 1. THE contract of Insurance has been defined by Tindal, C. J., to be that in which a sum of money "as a premium is paid in consideration of the insurers incurring the risk of paying a larger sum upon a given contingency."(a) The contract of life insurance may be further defined to be that in which one party agrees to pay a given sum upon the happening of a particular event contingent upon the duration of human life, in consideration of the immediate payment of a smaller sum or certain equivalent periodical payments by another. This consideration in money is termed the premium or premiums, and is paid either in one sum, when it is termed a single premium; or by a succession of periodical instalments, usually yearly or half-yearly, in which case the first instalment is always paid in advance. The party receiving the premium and giving the security, is termed the assurer or insurer; the party paying the premium, and to whom or to whose representatives the security is made, the assured or insured; the contingency insured against, the risk; and the written instrument containing the contract, the policy. 2. The uses of such a contract are obviously manifold, "it having *been found by experience," to use the words of Charters of the Royal Exchange and London Assurance Corporations, "to be of [*2] JULY, 1853.-2 (a) Patterson v. Powell, 9 Bing. 329. benefit and advantage for persons having offices, employments, estates, or other incomes determinable on the life or lives of themselves or others, to make assurances on the life or lives upon which such offices, employments, estates, or incomes are determinable." By this means the merchant or professional man may secure for his family, by anticipation, that provision which would otherwise have required a long life of care to obtain. The debtor, whose income is dependent on his life and exertion, may protect his creditor from that loss which his early death would occasion, and thereby obtain time and opportunity for the gradual extinction of his liabilities. The tenant for life, or the annuitant, the lessee for lives or years determinable with lives, or the copyholder, may, by a moderate payment proportionate to his means, obtain for his property the advantages of a permanent investment, and thus in the latter case relieve it, at least to a great extent, from the onerous character of its .tenure. 2. In addition, however, to these legitimate uses, such a contract is obviously liable to abuse, and may become a matter of speculation or mere gambling, rather than of prudent investment; and to such an extent was this abuse formerly carried, that, in the year 1774, it became the subject of parliamentary discussion, (b) and a statute was passed *intitled "An Act for regulating Assurances on Lives, and for [ *3 ] prohibiting all such Insurances, except in cases where the persons insuring shall have an interest in the life or death of the person (b) From the year 1720 much of the legitimate business of the city of London was usurped by speculative or gambling assurances. "Policies were opened on the lives of public men with a recklessness at once disgraceful and injurious to the morals of the country. That of Sir Robert Walpole was assured for many thousands; and at particular periods of his career when his person seemed endangered by popular tumults, as at the Excise Bill, or by party hate, as at the time of his threatened impeachment, the premium was proportionately enlarged. When George II. fought at Dettingen, 25 per cent. was paid against his return. The rebellion of 1745, as soon as the terror which it excited had passed away, was productive of an infamous amount of business. The members of Garraway's, the assurers at Lloyd's, the merchants of the Royal Exchange, being unable to raise or lower the price of stocks any more by reports of the Pretender's movements, made sporting assurances on his adventures, and opened policies on his life. Sometimes the news arrived that he was taken prisoner, and the underwriters waxed grave. Sometimes it was rumoured that he had escaped, and they grew gay again. Thousands were ventured on his whereabouts, and tens of thousands on his head. The rebel lords who were captured in that disastrous expedition, were another source of profit to the speculators. The gray hairs of Lord Lovat did not prevent them from gambling on his life. The gallantry of Balmerino, and the devotion of Lady Nithsdale, raised no soft scruples in the minds of the brokers: and when the husband of the latter escaped from the Tower, the agitation of those who had perilled their money on his life, and to whom his violent death would have been a profit, is described as noisy and excessive. No sooner was it known that he had escaped, than fresh policies were opened on his re-capture; and great must have been the indignation of his high-minded wife when she afterwards heard this trait of city character." As subsequent events occurred, the same proceedings were repeated. "Successes and disasters were all the same to the assurers. seals of a Prime Minister or the life of a highwayman answered equally the purpose of the policy mongers; and India or Minorca, Warren Hastings or Admiral Byng, were alike to them if they could put money in their purses." "There was absolutely nothing on which a policy could be opened that was not employed as the opportunity of gambling."-Francis, Annals of Life Assurance, p. 140. The insured," and enacting that "no insurance should be made by any person or persons, bodies politic or corporate, on the life or lives of any person or persons, or on any event or events whatsoever, wherein the person or persons for whose use and benefit, or on whose account, such policies should be made, should have no interest, or by way of gaming or wagering; and every insurance made contrary to the true intent and meaning thereof should be null and void to all intents and purposes."(c) *This statute, which is commmonly called the Gambling Act, is extremely important, and calls for our consideration section by [*4] section; but, in the first place, it is desirable to consider what is the true nature of the contract as originally defined at common law, and afterwards the general scope and construction of the statute as modifying or explaining it. In so doing, we may premise that the statute does not extend to Ireland. When policies have been effected by persons resident in Ireland with English companies, the question may arise upon actions brought in that country, whether the statute operates upon them. As, however, the object of the statute is to discharge certain transactions *on the part of the assured, and not to relieve or benefit the insurers, it is conceived that it cannot do so.(d) [ *5] 4. Life insurances seems divisible into two classes; first, that in which the risk is, strictly speaking, a contingent event, or one that may or may not happen; as, for example, when a premium is paid to secure a sum of money if A. should die before B.: secondly, these in which the event assured against is certain, and the only element of uncertainty is the question of the length of time which will elapse before it will hap (e) 14 Geo. 3, c. 48. "An act for regulating insurances upon lives, and for prohibiting all such insurances, except in cases where the persons insuring shall have an interest in the life or death of the persons insured. I. "Whereas it hath been found by experience that the making assurances on lives or other events wherein the assured shall have no interest, hath introduced a mischievous kind of gaming: for remedy whereof be it enacted by the king's most excellent majesty, by and with the advice and consent of the lords spiritual and temporal, and commons, in the present parliament assembled, and by the authority of the same, That from and after the passing of this act, no insurance shall be made by any person or persons, bodies politic or corporate, on the life or lives of any person or persons, or on any other event or events whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies shall be made, shall have no interest, or by way of gaming or wagering; and that every assurance contrary to the true intent and meaning hereof shall be null and void to all intents and purposes whatsoever. "II. And be it further enacted, That it shall not be lawful to make any policy or policies on the life or lives of any person or persons, or other event or events, without inserting in such policy or policies the person or persons' name or names interested therein, or for whose use, benefit, or on whose account such policy is so made or underwrote. "III. And be it further enacted, That in all cases when the insured hath interest in such life or lives, event or events, no greater sum shall be recovered or received from the insurer or insurers than the amount or value of the interest of the insured in such life or lives, or other event or events. "IV. Provided always, That nothing herein contained shall extend or be construed to extend to insurances bona fide made by any person or persons on ships' goods or merchandizes; but every such insurance shall be as valid and effectual in the law as if this act had not been made." (d) See Ferguson v. Lomax, 2 Drury & War. 120. 238. pen, and the sum assured become, consequently, payable; as when the premium is paid to secure a sum of money upon the death of A. The first of these appears simply a wager, or mere aleatory contract, the premium being a stake put at hazard upon the chance of the contingency happening, or, according to Johnson's definition of a wager, "a thing pledged upon a chance." If the contingency occurs, the assurers lose the sum assured; if it does not, the assured loses the premium. A contract of the second class seems to differ from a mere wager, in the element of certainty involved, the event being sure to happen at some period, and may be thought to assimilate to a purchase at a proportionate price of a sum of money payable at a future day, the only risk being the profit of the transaction—a risk inherent to every contract, and more particularly to those of which the completion is future; as for example to the purchase of a cargo of merchandize which had been lately shipped, but has not yet arrived at the port of debarkation. On further examining, however, even an insurance for the whole term of life, it is remarkable that when the principles upon which it is adjusted are ascertained, it is found not indeed to be a wager, but the equivalent of a series of wagers. It is sometimes supposed that the insurers, in calculating the premium to be paid, ascertains the average term or expectation of life, as it is [ *6] called, of persons of the particular age, and according to this term fixes the rate. This is not the case. He ascertains the exact present value of the chance of having to pay the sum assured in every future year during which it is possible for the assured to live, assuming the payment to be made in the event of death at the end of the year, and the sum of all these chances is the single premium to be paid to him. Neither is the practice different when the premium is an annual one, for in this case the annual premium is the mere resolution of the single premium into its equivalent in another form, to meet the convenience of the assured.(e) 5. Such contracts differ very materially from marine and fire insurances, which have been always construed, in the absence of express stipulation, as contracts of indemnity, the assurer agreeing to indemnify the assured, to the amount named in the policy, against any loss or damage occurring to certain specific property by the event assured against. Life insurances are of course independent of the value of the subjectmatter of the insurance; and hence Emerigon, in his treatise on Insurance, remarks, (f) "At Naples, in Florence, in England, and various other places, it is permitted to make insurance upon the lives of people; but this kind of insurance are not properly so termed, they are really wagers." By the French law at that time life insurances were not permitted.(g) On the other hand, it has been laid down in a leading case, (d) which has been repeatedly recognised as law, that this, as well as the (e) See Milne on Annuities, vol. i. p. 167; Jones on Annuities, vol. i. p. 154. (f) Emerigon on Insurances, by Meredith, p. 157. (g) Ib. Life assurance in France was prohibited by law in 1681, and was not re-introduced until the latter part of the 18th century. See Ass. Mag. vol. 2, p. (h) Godsall v. Boldero, 9 East, 72. |