46. The term insurable interest is used to denote that interest appertaining to the insured which is exposed to injury or destruction by reason of the peril insured against. Such interest need not rise to the level of a legal right, and in general it may be said to exist whenever the insurer stands in such a relation to property or a person as to justify a reasonable expectation of financial benefit to be derived from the continued existence of such property or person.

The requirement of an insurable interest to support a contract of insurance is based upon considerations of public policy, which condemn as wagers all agreements for insurance of any subject in which the contracting parties have no such interest. The general theory of what constitutes an insurable interest rests upon the broad principle of indemnity, that lies at the very foundation of insurance law. Thus, in broad terms, one may insure property or life, when he stands in such relation to it that he will be benefited by its continued existence and damnified by its destruction. But what must be the character of the expected benefit, or of the loss that is feared? Must the expected benefit have such a legal basis that its conferring could be compelled by law, or the loss be such as would entitle the insured to damages against a tort feasor causing it?

An examination of the authorities shows conclusively that in answering this question a sharp distinction must be made between cases of property insurance and those of life insurance. While it is not necessary that the person insured shall have any title to the property insured, either legal or equitable, yet an expectation of benefit, to be

1 CONNECTICUT MUT. LIFE INS. CO. v. SCHAEFER, 94 U. S. 457, 24 L. Ed. 251.

2 See Crosswel v. Association, 51 S. C. 103, 28 S. E. 200, 203.

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derived from its continued existence, however lively and morally certain of realization it may be, will not afford a sufficient insurable interest unless that expectation has a basis of legal right. If such legal basis exists, an expected benefit, however remote, constitutes an insurable interest. This is well illustrated by Lord Eldon in his opinion in the great leading case of Lucena v. Craufurd: "Suppose A. to be possessed of a ship limited to B. in case A. dies without issue; that A. has 20 children, the eldest of whom is 20 years of age; and B. 90 years of age; it is a moral certainty that B. will never come into possession, yet this is a clear interest. On the other hand, suppose the case of the heir at law of a man who has an estate worth £20,000 a year, who is 90 years of age, upon his death-bed, intestate, and incapable from incurable lunacy of making a will; there is no man who will deny that such an heir at law has a moral certainty of succeeding to the estate; yet the law will not allow that he has any interest, or anything more than a mere expectation."

The facts in Lucena v. Craufurd well illustrate what is meant by an expectation supported by a legal basis. In that case certain commissioners were appointed under act of Parliament, with power to take possession and dispose of such vessels of the United Provinces. as might be brought into English ports. These commissioners insured certain captured Dutch vessels then at St. Helena, which were to be brought into English ports. Before reaching England the insured vessels encountered a storm, and were all lost or seriously damaged. The underwriters sought to escape liability on the ground that the insuring commissioners had no right or interest in the vessels until brought to an English port, and that the insurances were therefore void. But the Court of Exchequer Chamber held that the commissioners had an insurable interest at the time the policies. were taken out; that while they had no present legal right in the vessels themselves, yet they might expect to acquire such right in case the vessels made the voyage in safety. And this expectation was based upon an act of Parliament, which must operate if the vessels came to port. Hence, by the destruction of the vessels at sea, they were prevented from acquiring a legal right in them, and were, therefore, damnified."

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3 Baldwin v. Insurance Co., 60 Iowa, 497, 15 N. W. 300. "A man has no right to an indemnity because he has lost the chance to receive a gift." Lord Ellenborough, in Routh v. Thompson, 11 East, 428.

42 Bos. & P. N. S. 269, at page 324.

53 Bos. & P. 99.

• From the judgment of the Exchequer Chamber an appeal was taken to the House of Lords, which, however, did not finally pass upon the question of whether an insurable interest was present, but awarded a venire de novo on collateral grounds. 2 Bos. & P. N. R. 269. Lord Eldon, Lord Ellenbor

So it has been held that a stockholder may insure the property of the corporation, although he has no legal interest whatsoever in such property. His expectation of benefit to be derived from the continued existence of such property, however, is based upon his legal right as stockholder to demand participation in the profits of the corporation, or in its assets upon dissolution. But the employé of a railway corporation could not insure the engine he drove on the ground that its destruction would prevent the expected continuation of his employment; nor could a surety insure the property of his principal merely because he would look to such property for indemnification in case he should be obliged to pay his principal's debt. But it would be otherwise if the surety were secured against loss by a mortgage upon the principal's property, or if the creditor held a mortgage upon such property to which the surety, upon payment of the debt, might be subrogated."

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Turning to the cases on life insurance we find that no such limitation upon the character of the expectation exists. While the doctrine of insurable interest in lives, like that in property, seems from the authorities to be based on the theory of indemnity for actual loss, yet the expectation of benefit to be derived from the continued existence of a life need have no legal basis whatever.1 A reasonable probability is sufficient, without more. Thus a brother is under no legal obligation to support his sister, and the mere relationship does not give her an insurable interest in his life. Yet if he has been accustomed to contribute to her support, she may insure his life, on the theory that by his death she will lose expected future contributions, although such contributions would be essentially voluntary.11 Again a marked distinction between the rules affecting insurable interest in property and life, respectively, is seen in the relation re

ough, and Lord Erskine, however, opposed the decision of the Exchequer Chamber, and the weighty influence of their opinions is apparent in subsequent English cases, which seem to have settled the law contrary to the decision of this celebrated case. See Routh v. Thompson, 11 East, 426; Ebsworth v. Insurance Co., L. R. 8 C. P. 596. See, also, opinion of Story, J., in The Joseph, 1 Gall. 558, Fed. Cas. No. 7,533; 1 Arnould, Mar. Ins. §§ 304-306.

7 RIGGS v. INSURANCE CO., 125 N. Y. 7, 25 N. E. 1058, 10 L. R. A. 684, 21 Am. St. Rep. 716; WARREN v. INSURANCE CO., 31 Iowa, 464, 7 Am. Rep. 160.

8 See Grevemeyer v. Insurance Co., 62 Pa. 340, 1 Am. Rep. 420.

Hanover Fire Ins. Co. v. Bohn, 48 Neb. 743, 67 N. W. 774, 58 Am. St. Rep. 719.

10 WARNOCK v. DAVIS, 104 U. S. 775, 26 L. Ed. 924; LOOMIS v. INSURANCE CO., 6 Gray (Mass.) 399; Equitable Life Ins. Co. v. Hazelwood, 75 Tex. 338, 12 S. W. 621, 7 L. R. A. 217, 16 Am. St. Rep. 893; Carpenter v. Insurance Co., 161 Pa. 9, 28 Atl. 943, 23 L. R. A. 571, 41 Am. St. Rep. 880. 11 LORD v. DALL, 12 Mass. 115, 7 Am. Dec. 38.

quired between the extent of the interest insured and the amount of the insurance granted thereon. In property insurance the actual value of the interest exposed to loss is the limit of the insurance that can validly be placed thereon. That is to say, the actual pecuniary loss that will be suffered through the destruction of the property insured is the limit of valid insurance on such property. But this rule has no place in life insurance. Granted that an insurable interest exists, there is no limit to the amount of insurance that may be validly contracted for, save such as may be imposed by the discretion. of the parties, unless that interest has its origin in commercial relation. The insurable interest possessed by a father in the life of his minor child is said to rest upon the father's right to the child's services.12 The pecuniary advantage to be derived by the father from the continued existence of the child until majority could not, under the most favorable circumstances, amount to more than a few thousand dollars. Indeed, it is a matter of experience that ordinarily the continued existence of the child is pecuniarily a detriment, on account of the expense of support and education. Yet there is no rule of law that would prevent the father from insuring the life of his child in the sum of one million dollars, or any other large sum which might be agreed upon. A wife has a legal right to support from her husband, and may therefore insure his life.13 But in an action upon such a policy, evidence of the husband's incapacity to support his wife, either at the time of the issuance of the policy or at the time of his death, would be wholly irrelevant.*

Still another striking difference is seen to exist, in regard to insurable interest, between property and life insurance. In order that a contract of insurance on property shall be enforceable, an insurable interest must exist in the insured at the time of loss, but not, it seems,1 ,14 at the time of issue. But in life insurance the rule is reversed. A policy of life insurance is wholly invalid unless the assured possesses an insurable interest at the time when the contract is made, while the presence of such an interest at the time of loss is immaterial.15

These radical differences in regard to the doctrine of insurable interest found to exist between life and property insurance point to

12 Mitchell v. Insurance Co., 45 Me. 104, 71 Am. Dec. 529.

13 CONNECTICUT MUT. LIFE INS. CO. v. SCHAEFER, 94 U. S. 457, 24 L. Ed. 251.

* But see CURRIER v. INSURANCE CO., 57 Vt. 496, 52 Am. Rep. 134, in which a contrary rule is suggested.

14 Sun Fire Ins. Co. v. Merz, 64 N. J. Law, 301, 45 Atl. 785, 52 L. R. A. 330; Davis v. Insurance Co., 70 Vt. 217, 39 Atl. 1095.

15 CONNECTICUT MUT. LIFE INS. CO. v. SCHAEFER, 94 U. S. 457, 24 L. Ed. 251; DALBY v. ASSURANCE CO., 15 C. B. 365.

some fundamental distinction between the principles applicable. It is to be regretted that the courts have not worked out this distinction 16 and based their decisions consistently upon the differing principles obtaining in the determination of what is just between the parties and consonant with the public welfare. Not being guided by any such clearly defined principles, and assuming that the same theory of insurable interest is applicable in both property and life. insurance, they have heaped up a body of case law on insurable. interest, in regard to life insurance particularly, that is singularly confusing and unsatisfactory, and conducive to uncertainty in the law. It is believed that the true theory upon which this unfortunate conflict of authority could be done away with, and the law on this particular topic reduced to harmony and unity, can be discovered by recognizing the essential difference between property insurance and life insurance, and the consequent difference in the character of the insurable interest required in each.

Property insurance is essentially and entirely a contract of indemnity. Hence an interest for the loss of which the contract provides indemnity is an absolute essential to the valid existence of the contract. Nor is it difficult to determine when such an interest is present, the authorities being well agreed as to what constitutes an insurable interest in property. But life insurance is not essentially or principally a contract of indemnity. While possessing an element of pure insurance based upon indemnity, it is yet principally a contract of investment. It has been more aptly likened to a contract for an annuity, whereby the insured agrees to pay a fixed annuity during his life, in consideration of which the insurer agrees to pay a certain sum upon the death of the insured.17 But this contract is speculative by reason of the uncertainty of life; and the subject of the contract is human life, which the law has always protected with most jealous care. Therefore the law will not tolerate such contracts made for the mere purpose of speculation, since to do so would be to encourage the perpetration of murder and such other horrid crimes as tend to destroy the very foundations of society. But when made in good faith, for the purpose of accumulating a fund for the support, after the death of the insured, of those dependent upon him, the contract is one that encourages industry and thrift, and tends to relieve society of the burden of caring for its helpless members.

16 See remarks of Hoar, J., in Forbes v. Insurance Co., 15 Gray (Mass.) 249, 77 Am. Dec. 360.

17 DALBY v. ASSURANCE CO., supra; Central Bank v. Hume, 128 U. S. 195, 205, 9 Sup. Ct. 41, 32 L. Ed. 370, per Fuller, C. J.; NEW YORK LIFE INS. CO. v. STATHAM, 93 U. S. 24, 23 L. Ed. 789.