Say the ratio out loud before you open Reasoning — recalling it unprompted is exactly what the exam pays for.
Facts
G and his wife W took out a joint life insurance policy. Both of them contributed to the premium. W committed suicide. G claimed under the policy.
The insurer resisted, contending that G had no insurable interest in the life of his wife.
Issue
Does a husband have an insurable interest in the life of his wife, and must it be proved?
Held
For the assured. The court rejected the insurer's contention and held that between husband and wife the interest is presumed. It need not be proved, and it need not be quantified.
Why the presumption exists, and what it is worth in an answer
Insurable interest in life is generally required to be pecuniary. A creditor may insure his debtor only to the extent of the debt; a father's interest in an employed son rests on the presumption that in old age he is likely to depend on that son; an employee has an interest in the life of his employer. In each of those cases the interest must be shown and its extent matters.
The presumptions are the exceptions to that requirement, and there are two:
- Everyone has an unlimited insurable interest in his own life. No amount of cover on one's own life is a wager.
- Each spouse has an insurable interest in the life of the other, presumed by law — this case.
The reason for the second presumption is the same as the reason for the first: the law is not prepared to treat the relationship of marriage as one in which the death of the other is a matter of financial indifference, and it declines to require a surviving spouse to prove dependency at the moment of grief.
The timing point, which is the examinable one
Because life insurance is not a contract of indemnity, insurable interest need exist only at the inception of the contract — Dalby v. India and London Life Assurance Co. Combine the two cases and you have the complete rule for life policies:
- Who? Oneself and one's spouse, by presumption; others on proof of a pecuniary interest.
- When? At the date of the contract only, and never again.
Contrast the property rule: interest at the time of the loss, under s. 8(1) of the Marine Insurance Act 1963, and, in fire insurance, at both the date of the policy and the date of the loss.
A caution about the facts
The insured died by suicide, and the case is not authority on the suicide clause. The insurer's only defence was want of interest. For the suicide problem use Beresford v. Royal Insurance Co, Barrandaile v. Hunter and Scottish Union & National Insurance Co v. N.R. Jahan Begum, and note that where the policy expressly provides for payment after a stated period, the object of the contract is the provision of a fund for dependants and s. 23 of the Contract Act is not engaged.