XXVII. RIGHT TO PROCEEDS. 1. Persons entitled to proceeds-Insurance of property. (b) Insurance of special interests-Husband and wife. (d) Lessor and lessee. (e) Death or insolvency of insured-Insurance of estate. (g) Mortgagees' and vendors' liens-"Loss payable to." (J) Same-Action on policy. (k) Assignees and pledgees. (1) Other liens. (m) Assignment after loss-Validity and sufficiency. (0) Employers' liability insurance. 2. Right to proceeds in life and accident insurance. (a) Scope of discussion. (b) Right to proceeds in general. (c) What law governs. (d) Policy payable to insured, his heirs or estate. (e) Policy payable to legal representatives. (f) Rights of persons designated as beneficiaries in general. (g) Policy payable to wife or widow. (h) Rights of divorced wife. (1) Policy payable to wife or children. (1) Policy payable to trustee. (k) Policy payable to any relative or person equitably entitled to fund. (1) Distribution among beneficiaries. (m) Rights of legatees. (n) Persons entitled to proceeds when designation is invalid or there is no designation. (0) Funeral benefits. (p) Endowment policies. (q) Vested interest of beneficiary. (r) Right to change beneficiary. (s) Mode of changing beneficiary. (t) Validity and effect of change. (u) Death of original beneficiary. (v) Policy procured with money wrongfully obtained. 8. Rights of creditors and assignees. (a) Rights of creditors in general. (b) Same-Mutual benefit certificates. (c) Persons paying premiums. (d) Exemption statutes in general. 1 LA 3. Rights of creditors and assignees (Cont'd). (g) Assignments in general. (h) Assignees without interest. (i) Collateral assignment of the policy. (j) Assignment for benefit of creditors-Bankruptcy. (k) Assignment of matured claim. 4. Actions to determine rights. (a) In general. (b) Pleading. (c) Evidence. (d) Trial and review. 1. PERSONS ENTITLED TO PROCEEDS-INSURANCE OF PROPERTY. (a) Scope of brief. (b) Insurance of special interests-Husband and wife. (c) Carriers-Warehousemen, etc. (d) Lessor and lessee. (e) Death or insolvency of insured-Insurance of estate. (g) Mortgagees' and vendors' liens "Loss payable to." (h) Same-Covenant by mortgagor or vendee to insure. (3) Same-Action on policy. (k) Assignees and pledgees. (1) Other liens. (m) Assignment after loss-Validity and sufficiency. (0) Employers' liability insurance. (a) Scope of brief. The rule that, in the absence of special equities or contractual provisions, the person whose interest is covered by a fire policy is entitled to the proceeds thereof is so axiomatic as to have been never questioned. Therefore the determination of the interest covered is generally conclusive as to the persons entitled to the proceeds. Reference is therefore made to the brief dealing with the interests covered by the policy as settling most of the questions touching the persons entitled to the proceeds. Nor will the amount 1 1 See ante, vol. 1, pp. 720-728, and pp. 763–782. of recovery by any person be here considered except in those cases where the sum is to be divided among various claimants, the recovery of one limiting the recovery of the other. There remains, however, a residuum of cases dealing more directly with the persons entitled to the proceeds, and dependent either on special equities existing between the parties, or on express contractual stipulations. These cases, and the rules governing therein, it is the purpose of this brief to treat. (b) Insurance of special interests-Husband and wife. It is a general rule that the proceeds of insurance on the interest of a life tenant belong absolutely to the life tenant, regardless of the value of the life tenancy as related to the amount of insurance. If the amount paid more than compensates for the interest, that is a matter between the life tenant and the company, in which the insured has no interest. Harrison v. Pepper, 166 Mass. 288, 44 N. E. 222, 33 L. R. A. 239, 55 Am It has, however, been held that where the insurance is taken out in accordance with a contract with the reversioner, and the full value of the property recovered, the sum so received should either be used in rebuilding, or the interest should be paid to the life tenant, the principal going to the reversioner on the termination of the life estate (Convis v. Citizens' Mut. Fire Ins. Co., 127 Mich. 616, 86 N. W. 994). And in some of the cases similar conclusions have been reached though the insurance did not appear to have been taken out in accordance with a contract. Thus in Rhode Island it has been held that where a fire policy is issued to a life tenant for the full value of the fee, though covering only his interest in the building insured, he should be held a trustee for the remainderman as to the excess of the amount received over the value of his life estate (Sampson v. Grogan, 21 R. I. 174, 42 Atl. 712, 44 L. R. A. 711). And in Clyburn v. Reynolds, 31 S. C. 91, 9 S. E. 973, it was held that the proceeds of a policy, payable to a life tenant, if collected after his death, should go to the remainderman, unless they were used in rebuilding the destroyed house. 2 See ante, pp. 3061-3078. This was decided on the theory that only the interest on the insurance money arising under such a policy should in any event be paid to the tenant, the principal being reserved for the remainderman. The court argued that it would be against public policy to permit a life tenant, occupying the position of a trustee, to place himself where it would be to his gain to destroy the trust property. But even though it be conceded that the remainderman is entitled to the excess over the value of the life estate, it is incumbent on him to show what such excess is, and, having failed to do so, he cannot recover (Grant v. Buchanan [Tex. Civ. App.] 81 S. W. 820). And where the life tenant collects the whole sum in good faith and invests it in other land, the resulting trust in favor of the remainderman is only for the exact amount of the insurance money applied on the purchase (Green v. Green, 56 S. C. 193, 34 S. E. 249, 46 L. R. A. 525). Where it appeared that the policy was taken out by the life tenant under a covenant of a mortgage jointly executed by himself and remaindermen, the life tenant was held to have no authority to waive the application of the proceeds to the mortgage debt. The policy under such circumstances would inure to the benefit of all the mortgagors, and the mere authority in the life tenant to take out the policy would not authorize him to thus dispose of the interests of the other mortgagors (Connecticut Mut. Life Ins. Co. v. Scammon [C. C.] 4 Fed. 263). The case of Hawes v. Lathrop, 38 Cal. 493, though anomalous, contains some features in common with the situation presented by insurance effected by a life tenant. The owner of property conveyed it to trustees for the purpose of establishing a school, but with a provision for reversion in case the school should be declared unsuccessful by the trustees. The trustees made an addition to the building, and insured the whole property. Subsequently the building was destroyed by fire, and the loss paid to the trustees, whereupon the trustees declared the school unsuccessful, and reconveyed the premises. Under these circumstances the court held that the owners of the property were in equity entitled to the insurance money. This decision, however, while of course involving a holding that the money stood in the place of the building, seems to have been in part at least based on the fact that no one else could establish any claim whatever. A joint owner of property in common may separately insure his interest against fire, and in case of loss recover and retain the insur ance. The rule against taking title or advantage to the prejudice of one's cotenants does not apply to such a transaction. Harvey v. Cherry, 76 N. Y. 436; Hammer v. Johnson, 44 III. 192; Clapp And obviously an arrangement between the joint owners will not entitle the joint owner, who is a stranger to the insurance policy, to recover thereon. Continental Ins. Co. v. Maxwell, 9 Kan. App. 268, 60 Pac. 539. See, also, Work v. Merchants' & Farmers' Mut. Fire Ins. Co., 11 Cush. (Mass.) 271. The surviving partner of a firm may however maintain an action on a policy of insurance issued to the firm, on a house belonging to them as tenants in common (Oakman v. Dorchester Mut. Fire Ins. Co., 98 Mass. 57). And where insurance was effected by a member of a firm in the firm's name on property of the firm, and the premium was paid from funds of the firm, though charged by the member to himself, the insurance was held to be for the benefit of the firm, though the member thus effecting it intended it for its own private benefit (Tebbetts v. Dearborn, 74 Me. 392). So, also, where it appeared that the owner of an undivided one-third interest in real estate had recovered from his co-owners two-thirds of the premiums paid for insurance, he was held estopped to claim the whole insurance money for his own use (National Bank v. Bond, 89 Tenn. 462, 14 S. W. 1078). The proceeds of a policy taken by an agent or trustee in his representative capacity goes of course to those beneficially interested in the property, and is not subject to the trustee's debts. Lerow v. Wilmarth, 9 Allen (Mass.) 382. See, also, Braden v. Louisiana State Ins. Co., 1 La. 220, 20 Am. Dec. 277, where an offset was not allowed the company of a debt owed by the agent. Where the company knows that insured is doing business solely as an agent, and the original contract ran to him as "agent," a renewal will be reformed by inserting such word and obliging the insurance company to pay the loss under it to the principal (Phonix Fire Ins. Co. v. Hoffheimer, 46 Miss. 645). |