Insurance Contracts CP - Law Reform Commission

funeral expenses, and that provision, in my view implicitly conferred an insurable interest in the life of a
sister.‖
2.78 In England Rowlatt J, on the other hand, questioned whether the 1909 Act created a new
insurable interest; in Goldstein v Salvation Army Assurance Society 135 he thought it did not.
2.79 In Britain, the 1909 Act was repealed and replaced by the Industrial Assurance and Friendly
Societies Act 1929. 136 A significant feature of the 1929 Act was the expansion into endowment policies; in
the broader sense of social policy, individuals were being encouraged to make provision for dependants
via a number of endowment and whole life policies. The 1929 Act did not specifically address the
insurable interest question. 137
2.80 Part V of the Insurance Act 1936 effectively replicated the British 1929 Act, specifically
providing however that any policy of industrial assurance effected under section 50 was deemed to create
an insurable interest in the life of the person and that no such policy is to be deemed an indemnity policy.
But even this legislative change, modest though it was, produced some very technical and difficult court
decisions. Policies taken out in respect of funeral expenses under s.36(1) of the Assurance Companies
Act 1909 have been held to be policies of indemnity. When a proposer took out a number of policies on
the life of his mother, for burial expenses, payment by one company was held to discharge the claim in
full. Case-law holds that in the absence of fraud or a mistake of fact, the premiums were not recoverable
as all of the companies were at risk during the currency of the policy: Wolenberg v Royal Co-op Collecting
Society. 138 The existence of an insurable interest was also fatal to recovery of premiums. In Gallagher
and McPartland v The Industrial and Life Assurance Amalgamated Co Ltd, 139 M took out life policies on
his sister but after some time M‘s daughter, G, took over payment of the premiums. Clearly G had no
insurable interest but M‘s insurable interest at the commencement of the policy rendered the contract
valid until such time as M ceased to pay the premium: absent fraud by the company‘s agent, Dixon J held
the premiums irrecoverable: see also Wall and Wall v New Ireland Insurance Co. 140
2.81 Although industrial assurance legislation sought to prevent ‗moral hazard‘ by restricting the
availability of cover, there are other means of advancing criminal or undesirable practices. Sham
transactions whereby a limited policy of insurance is taken out by the life to be insured – each person has
an insurable interest in his or her life – with the premiums being paid by third party were likely to be
invalid via the law of misrepresentation: Wainewright v Bland. 141 The leading decision on section 2 of the
1774 Act is Shilling v The Accidental Death Insurance Company. 142 Thomas Shilling took out a policy of
life insurance upon his father James Shilling. Thomas effected the policy, apparently as agent of his
father who was in a hazardous occupation; however, James was not aware that his son had effected the
policy. When, following the death of James Shilling his Administratrix claimed on the policy, the company
pleaded non compliance with section 2 of the 1774 Act, reasoning that if a close relative could take out
insurance without that relative‘s knowledge or consent, the temptation to collect on the policy by
materialising the risk (in this case causing James Shilling‘s death) could well be irresistible to some
persons. The policy was held to be void. In Reed v Royal Exchange Assurance Company 143 Mrs Reed
135
136
137
138
139
140
141
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143
[1914] 2 KB 291.
19 & 20 Geo 5, c.28.
Section 1 of the 1929 Act provided that if a life cover was in place in such an endowment policy, only
reasonable funeral expenses could be payable.
(1915) 112 LT W36.
(1946) 80 ILTR 99.
[1965] IR 386.
(1835) 1 M & Rob 481; see also Collett v Morrison (1851) 9 Hare 162 (extends to life and trustee when both
appear on the policy).
(1858) 1 F & F 116.
(1795) 2 H & N 42. Recovery of premiums on such a wagering contract is not possible: Howard v Refuge
Friendly Society (1886) 54 LT 644.
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