Insurance Contracts CP - Law Reform Commission

took out a life insurance policy on her husband six days before his death. While Lord Kenyon held that a
wife is presumed to have an insurable interest in the life of her husband, after hearing the facts of the
case and seeing the evidence, ―particularly a letter from the plaintiff to a young man of her acquaintance‖
a claim on the policy was unseccessful (Mrs Reed was subsequently indicted for the murder of her
husband but acquitted).
(6) Debtors and creditors
2.82 A debtor has no insurable interest in the life of a creditor unless there is some consideration
present. Where a creditor promised a debtor that he would not seek to enforce a claim to a debt during
the creditor‘s lifetime, such a promise could not create a pecuniary interest in that life: Hebdon v West. 144
In the case of a creditor who seeks to insure the life of a debtor, such a contract was at one time
considered to be a contract of indemnity that would only enure to the benefit of the policyholder should
the debt remain unpaid following the death of the creditor. 145 This was overruled in Dalby v The India and
London Life. 146 The logic of Dalby case, that a policy of life insurance is a contract to a certain definite
sum at a future time, in consideration for payment of the premiums, is illustrated by Law v London
Indisputable Life Policy Co. 147 Law purchased from his son a contingent legacy of £3,000, payable to the
son when he reached 30 years of age. Law insured his son‘s life for two years, the son being at that time
28 years and four months old. The son reached his 30 th birthday and Law was paid the legacy.
However, the son died shortly thereafter and within the two year period of insurance. Wood VC held the
contract was one in which Law clearly had an insurable interest, even if the interest was not for the entire
period insured. The contract was not a wagering contract, nor would the court cut down the sum payable
in some way. MacGillivray 148 is critical of the ―unrealistic situation‖ that the 1774 Act produces in this way,
suggesting that in such case the American solution (whereby the creditor‘s interests should be the
amount of the indebtedness at the time of death, and the cost of the insurance with interest, any balance
being payable to the deceased debtor‘s estate) should be adopted into English law.
(7) Property insurance
2.83 Apart from Marine insurance and section 4 of the 1906 Act, there is no statutory insurable
interest requirement in Irish law relating to property. Although the 1774 Act, as extended into Ireland in
1866 has been held not to require an insurable interest for property insurance, 149 property insurance
cases also reflect a judicial sensitivity concerning fraudulent claims, particularly incendiarism. In Sadler‟s
Company v Badcock 150 Mrs Strode leased a house which was insured for £400. Her tenancy expired and
the property was destroyed by fire shortly thereafter. Mr Strode assigned the policy to the ―groundlandlords‖
who sought to enforce the policy. As Mrs Strode was required to have a property in the thing
insured at the time the insurance was made and at the time of the fire, she had no interest that could be
assigned as this policy was intended to insure Mrs Strode from damage, rather that insure the property
from damage. Lord Chancellor Hardwicke remarked that ―if the insured was not to have a property at the
time of the insurance or loss, any one might insure another‘s house, which might have a bad tendency to
burning houses.‖ In contrast, a wharfinger who insures a building and his own goods, as well as property
bailed with him and held ―in trust‖ for the owners of those goods is able to recover on the policy in respect
of third party goods held by the wharfinger on behalf of those third parties: Waters v Monarch Fire and
144
145
146
147
148
149
150
(1863) 3 B & S 218. It is through this category that ‗key employee‘ insurance is obtained for instance.
Godsall v Boldero (1807) 9 East 72.
(1854) 15 C.B. 365.
(1855) 1 K & J 223.
MacGillivray on Insurance, 12 th ed, para 1-087.
Church and General Insurance Company v Connolly High Court, 7 May 1981; Brady v Irish Land Commission
[1921] 1 IR 56.
(1743) 1 Wils. KB 8.
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