Where did the photo of Mahatma Gandhi come on the note, do you know?
It is an undeniable truth that insurable interest is sine qua non of a contract of life insurance.32 In order to affect a life insurance contract, it is necessary that the person who is a party to the contract should have an insurable interest in the life of the person, for whom the policy is being bought. In Warnock v. Davis33 it was clearly laid down that in all life insurance there must be a reasonable ground, founded on the reasonable relations of the parties to each other, either pecuniary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured or otherwise the contract is a mere wager, by which the party taking the policy is directly interested in the early death of the assured. Thus, it is a tool to avoid moral hazards.34 To put it more bluntly, if a person is allowed to insure the life of any other person there is a possibility that money in the form of life insurance policy may lead to inducement to commit murder. The tendency or temptation to kill the insured life will be removed if a person is not permitted to take insurance on any one’s life, less relationship by blood or by financial relationship, because one stands to gain more by the continuance rather than by death of the life insured.
Moreover, if insurance is allowed without insurable interest, insurance could become insecurity. This aspect and significance of insurable interest was effectively demonstrated inthe case of Liberty National Life Insurance Company v. Weldon36, wherein a nurse took three insurance policies on the life of her two year old niece without the knowledge of her parents before administering soft drink mixed with arsenic, killing the insured child within a few hours. The nurse was prosecuted for murder. In such cases a restriction in form of insurable interest will counter this murder inducement.37Therefore, it is a well settled principle of law that for the validity of an insurance contract the existence of an insurable interest is a mandatory precondition. Earlier, insurable interest was not essential in life insurance.38 A contract of life insurance was simply enforceable at common law despite the absence of any relationship between the insured and the life insured.
The reason for this was that wagers in general were legally enforceable and thus courts had no option but to enforce wagers in the form of life insurance contracts. An increase in these practices which could serve as an inducement to murder, led to growing concern and ultimately, legislative action in form of the Life Assurance Act 1774 was taken.39 The English Life Assurance Act 1774 laid down three rules:- (a) In every contract of insurance, the insured or the person for whose benefit the insurance was affected must have an interest in the subject matter. (b) The person for whose benefit the policy was affected shall not recover more than the value of such insurable interest. (c) Every policy shall have inserted in the policy, the name of the person interested or for whose benefit the policy was taken. This Act for the first time required the insured to have an insurable interest in the life insured.40 The other relevant provisions of the Act required the names of the personsinterested to be inserted in the policy and declare that when the insured has an interest, he can recover no more than the amount of value of his interest.
Click For Information
It is an undeniable truth that insurable interest is sine qua non of a contract of life insurance.32 In order to affect a life insurance contract, it is necessary that the person who is a party to the contract should have an insurable interest in the life of the person, for whom the policy is being bought. In Warnock v. Davis33 it was clearly laid down that in all life insurance there must be a reasonable ground, founded on the reasonable relations of the parties to each other, either pecuniary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured or otherwise the contract is a mere wager, by which the party taking the policy is directly interested in the early death of the assured. Thus, it is a tool to avoid moral hazards.34 To put it more bluntly, if a person is allowed to insure the life of any other person there is a possibility that money in the form of life insurance policy may lead to inducement to commit murder. The tendency or temptation to kill the insured life will be removed if a person is not permitted to take insurance on any one’s life, less relationship by blood or by financial relationship, because one stands to gain more by the continuance rather than by death of the life insured.
Moreover, if insurance is allowed without insurable interest, insurance could become insecurity. This aspect and significance of insurable interest was effectively demonstrated inthe case of Liberty National Life Insurance Company v. Weldon36, wherein a nurse took three insurance policies on the life of her two year old niece without the knowledge of her parents before administering soft drink mixed with arsenic, killing the insured child within a few hours. The nurse was prosecuted for murder. In such cases a restriction in form of insurable interest will counter this murder inducement.37Therefore, it is a well settled principle of law that for the validity of an insurance contract the existence of an insurable interest is a mandatory precondition. Earlier, insurable interest was not essential in life insurance.38 A contract of life insurance was simply enforceable at common law despite the absence of any relationship between the insured and the life insured.
The reason for this was that wagers in general were legally enforceable and thus courts had no option but to enforce wagers in the form of life insurance contracts. An increase in these practices which could serve as an inducement to murder, led to growing concern and ultimately, legislative action in form of the Life Assurance Act 1774 was taken.39 The English Life Assurance Act 1774 laid down three rules:- (a) In every contract of insurance, the insured or the person for whose benefit the insurance was affected must have an interest in the subject matter. (b) The person for whose benefit the policy was affected shall not recover more than the value of such insurable interest. (c) Every policy shall have inserted in the policy, the name of the person interested or for whose benefit the policy was taken. This Act for the first time required the insured to have an insurable interest in the life insured.40 The other relevant provisions of the Act required the names of the personsinterested to be inserted in the policy and declare that when the insured has an interest, he can recover no more than the amount of value of his interest.
Click For Information