CHAPTER II.

GENERAL PRINCIPLES.

Nature of the Contract.

EXCHEQUER CHAMBER, 1854.

DALBY v. INDIA & LONDON LIFE ASSUR. CO.

(15 C. B. 365.)

Insurance: how far a contract of indemnity, and when insurable interest must exist.

PARKE, B.-This case now comes before us on a bill of exceptions to the ruling of my brother Cresswell at nisi prius. It is an action on what is usually termed a policy of life assurance, brought by the plaintiff, as a trustee for the Anchor Assurance Company, upon a policy of £1,000 on the life of his late Royal Highness the Duke of Cambridge. The Anchor Life Assurance Company had insured the duke's life in four separate policies-two for £1,000 and two for £500 eachgranted by that company to a Mr. Wright. In consequence of a resolution of their directors, they determined to limit their insurances to £2,000 on one life; and, this insurance exceeding it, they effected a policy with the defendants for £1,000 by way of counter-insurance. At the time the policy was subscribed by the defendants, the Anchor Company had unquestionably an insurable interest to the full amount. Afterwards an ar rangement was made between the office and Mr. Wright for the former to grant an annuity to Mr. Wright and his wife, in consideration of a sum of money, and of the delivering up the four policies to be canceled, which was done; but one of the directors kept the present policy on foot by the payment of the premiums till the duke's death. It may be conceded for the purpose of the present argument that these transactions

between Mr. Wright and the office totally put an end to that interest which the Anchor Company had when the policy was effected, and in respect of which it was effected, and that at the time of the duke's death and up to the commencement of the suit the plaintiff had no interest whatever. This raises the very important question, whether, under these circumstances, the assurance was void, and nothing could be recovered thereon. We are all of opinion that it (the interest of the plaintiff which had terminated before the duke's death) was sufficient, and but for the case of Godsall v. Boldero, 9 East, 72, should have felt no doubt upon the question. The contract commonly called life assurance, when properly considered, is a mere contract to pay a certain sum of money on the death of a person, in consideration of the due payment of a certain annuity for his.life, the amount of the annuity being calculated in the first instance according to the probable duration of the life; and when once fixed it is constant and invariable. The stipulated amount of annuity is to be uniformly paid on one side, and the sum to be paid in the event of death is always (except when bonuses have been given by prosperous offices) the same on the other. This species of insurance in no way resembles a contract of indemnity. Policies of assurance against fire and against marine risks are both properly contracts of indemnity, the insurer engaging to make good, within certain limited amounts, the losses sustained by the insured in their buildings, ships, and effects. Policies on maritime risks were afterwards used improperly, and made mere wagers on the happening of those perils. This practice was limited by the 19 G. II., c. 37, and put an end to in all except a few cases; but at common law, before this statute with respect to maritime risks, and the 14 G. III., 3, c. 48, as to insurances on lives, it is perfectly clear that all contracts for wager policies and wagers which were not contrary to the policy of the law were legal contracts; and so it is stated by the court in Cousins v. Nantes, 3 Taunt. 315, to have been solemnly determined in the case of Lucena v. Craufurd, 2 Bos. & P. 324, 2 N. R. 269, without even a difference of opinion among all the judges. To the like effect was the decision of the court of error in Ireland, before all the judges except three, in The British Insurance Co. v. Magee, 1 Cooke & Alc. 182, that the assurance was legal-at common law. Their contract,

therefore, in this case to pay a fixed sum of £1,000 on the death of the late Duke of Cambridge, would have been unquestionably legal at common law if the plaintiff had had an interest therein or not; and the sole question is whether this policy was rendered illegal and void by the provisions of the statute 14 G. III., c. 48. This depends upon its true construction. The statute recites that the making insurances on lives and other events, wherein the insured shall have no interest, hath introduced a mischievous kind of gaming, and for the remedy thereof it enacts (§1.) "that no insurance shall be made by any one on the life or lives of any person or persons, or on any other events whatsoever, wherein the person or persons for whose use and benefit or on whose account such policy shall be made shall have no interest, or by way of gaming and wagering; and that every assurance made contrary to the true intent and meaning thereof, shall be null and void, to all intents and purposes whatsoever." As the Anchor Assurance Company had unquestionably an interest in the continuance of the life of the Duke of Cambridge, and that to the amount of £1,000, because they had bound themselves, to pay a sum of £1,000 to Mr. Wright on that event, thepolicy effected by them with the defendants was certainly legal and valid, and the plaintiff, without the slightest doubt, could have recovered the full amount if there were no other provision in the act. The contract is good at common law, and certainly not avoided by the first section of the 14 G. III., c. 48. This section, it is to be observed, does not provide for any particular amount of interest. According to it, if there was any interest, however small, the policy would not be avoided. The question arises on the third clause; it is as follows: "And be it further enacted, that in all cases where 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 assured in such life or lives, or other event or events." Now, what is the meaning of this provision? On the part of the plaintiff it is said it means only that in all cases in which the party insuring has an interest when he effects the policy, his right to recover and receive is to be limited to that amount; otherwise, under color of a small interest, a wagering policy might be made to a large amount, as it might if the first clause stood alone. The right to

recover, therefore, is limited to the amount of the interest at the time of effecting the policy; upon that value the assured must have the amount of premium calculated; if he states it truly, no difficulty can occur; he pays, in the annuity for life, the fair value of the sum payable at death. If he misrepresents by overrating the value of the interest, it is his own fault in paying more in the way of annuity than he ought, and he can recover only the true value of the interest in respect of which he effected the policy, but that value he can recover. Thus the liability of the assurer becomes constant and uniform, to pay an unvarying sum on the death of the cestui que vie, in consideration of an unvarying and uniform premium paid by the assured. The bargain is fixed as to amount on both sides. This construction is effected by reading the word "hath" as referring to the time of effecting the policy. By the first section the assured is prohibited from effecting an insurance on a life, or on an event wherein he "shall have" no interest— that is, at the time of assuring; and then the third section requires that he shall recover only the interest that he "hath;" if he has an interest when the policy is made, he is not wagering or gaming, and the prohibition of the statute does not apply to his case. Had the third section provided that no more than the amount or value of the interest should be insured, a question might have been raised, whether, if the insurance had been for a larger amount, the whole would not have been void; but the prohibition to recover or receive more than that amount obviates any difficulty on that head. On the other hand, the defendants contend that the meaning of this clause is, that the assured shall recover no more than the value of the interest which he has at the time of the recovery, or receive more than its value at the time of the receipt. The words must be altered materially to limit the sum to be recovered to the value at the time of the death, or if payable at a time after death, when the cause of action accrues. But there is the most serious objection to any of these constructions. It is, that the written contract, which, for the reasons given before, is not a wagering contract, but a valid one, permitted by the statute, and very clear in its language, is by this mode of construction completely altered in its terms and effect. It is no longer a contract to pay a certain sum as the value of a then-existing

interest in the event of death, in consideration of a fixed annuity, calculated with reference to that sum, but a contract to pay, contrary to its express words, a varying sum, according to the alteration of the value of that interest at the time of the death or the accrual of the cause of action, or the time of the verdict or execution, and yet the price or the premium to be paid is fixed, calculated on the original fixed value, and is unvarying, so that the assured is obliged to pay a certain premium every year, calculated on the value of his interest at the time of the policy, in order to have a right to recover an uncertain sum, namely, that which happens to be the value of the interest at the time of the death or afterwards, or at the time of the verdict. He has not, therefore, a sum certain, which he stipulated for and bought with a certain annuity; but it may be a much less sum, or even none at all. This seems to us so contrary to justice and fair dealing, and common honesty, that this construction cannot, we think, be put upon the section. We should, therefore, have no hesitation, if the question were res integra, in putting the much more reasonable construction on the statute, that if there is an interest at the time of the policy it is not a wagering policy, and that the true value of that interest may be recovered, in exact conformity with the words of the contract itself. The only effect of the statute is to make the assured value his interest at its true amount when he makes the contract. But it is said that the case of Godsall v. Boldero, 9 East, 72, has concluded the question. Upon considering this case, it is certain that Lord Ellenborough decided it upon the assumption that a life policy was in its nature a contract of indemnity, as policies on marine risks and against fire undoubtedly are; and that the action was, in point of law, founded on the supposed damnification occasioned by the death of the debtor existing at the time of the action brought, and his lordship relied upon the decision of Lord Mansfield, in Hamilton v. Mendes, 2 Burr. 1270, that the plaintiff's demand was for an indemnity only. Lord Mansfield was speaking of a policy against marine risks, which is in its terms a contract for indemnity only. But that is not the nature of what is termed an assurance for life; it really is what it is on the face of it, a contract to pay a certain sum in the event of death; it is valid at common law, and, if