#### W. P. HARDY v. ÆTNA LIFE INSURANCE COMPANY.

(Filed 6 April, 1910.)

1. Insurance, Life — Insurable Interest — Uncle.

The relationship of uncle and nephew does not of itself create an insurable interest of one in the life of the other.

2. Insurance, Life — Insurable Interest — Valid at Inception — Assignment — Valid.

A policy of life insuran&e taken by the insurant on his own life for the benefit of himself, or his estate generally, the policy being in good faith and valid at its inception, may, with the assent of the company, be assigned to one not having an insurable interest in the life of the insured, when the assignment is made in good faith, and not as a mere cloak or cover for a wagering transaction.

Appeal from W. B. Allen, J., at Fall Term, 1909, of LeNoiR.

Civil action heard on demurrer. From the complaint it appeared :

“2. That on or about 19 October,' 1904, Parrott M. Hardy, the uncle of the plaintiff, insured his life in the defendant company, and the said defendant company, in consideration of the stipulations set out in its contract of insurance, herein mentioned, did issue to the said Parrott M. Hardy three certain policies on his life, in the sum of $1,000 each, each being made payable to the executors, administrators or assigns of the said Parrott M. Hardy, and the said policies being numbers 62845, 62846 and 63215, which policies are herewith deposited in court with this complaint.

*287“3. That on 31 October, 1904, the said Parrott M. Hardy duly transferred and assigned two of the above-named policies of insurance, being Nos. 62845 and 62846, to tbe plaintiff, which said transfers were made at the request and desire of said Parrott M. Hardy, who was assured by the defendant’s agent that such assignments under the existing facts were valid and binding, and which assignments were made under the direction and with the assent and approval of the defendant company.

“4. That on 19 December, 1904, the said Parrott M. Hardy duly assigned and transferred the policy of insurance, being No. 63215, above mentioned, to the plaintiff, which said transfer was made at the request and desire of the said Parrott M. Hardy, who was assured by the defendant’s agent that such assignment, under the existing facts, was valid and binding, and which assignment was made under the direction and with the assent and approval of the defendant company.

“5. That on 8 April, 1908, the said Parrott M. Hardy died, and soon thereafter proper proofs of his death were furnished to the defendant company.

“6. That at the time of the issuing of the above-mentioned policies the plaintiff knew nothing about the transactions and was in no way connected with the same, but at the said time, as well as at the time of the tratnsfer hereinbefore mentioned, and until the death of the said Parrott M. Hardy, the plaintiff had a valuable and insurable interest in the life of the said Parrott M. Hardy, in that not only did the relationship of uncle and nephew-exist between them, but also there was actually a deep affection between them, and a mutual understanding that each should call on the other in time of need or distress, all of which was actually done; and especially did the said Par-rott M. Hardy look to and rely upon the plaintiff for at least twelve years immediately preceding his death, to aid and assist him in a pecuniary way, the relationship of debtor and creditor having existed between them in a large extent continuously during said time. And the said plaintiff having during' said time run risk and-hazard in his business, in order to be of continual assistance and help to the said Parrott M. Hardy, his uncle. That further, in the time of sickness and distress of the said Parrott M. Hardy, and especially during the last years of his life, he looked to the plaintiff for help and attention, which owing to the relationship herein set out was continuously administered by the plaintiff.

“7. That the defendant is now due the plaintiff, upon the said policies, the sum of $3,000 and interest on the same, for which demand has been duly made and payment refused by the defendant.”

*288By leave of court, T. W. Mewborn, as administrator of Par-rott M. Hardy, tbe insured, was allowed to interplead, and filed a petition claiming tbe amount due on tbe policies. Tbis petition admitted tbat tbe policies were taken out by Parrott M. Hardy, deceased; tbat tbey were valid at tbeir inception, and bad been assigned to plaintiff; but averred tbat plaintiff, as assignee, should not be allowed recovery on tbe policies, for tbe reason tbat tbe assignee, at tbe time of assignment made, bad no insurable interest in tbe life of tbe insured.

Tbe company demurred to tbe complaint, and later also to tbe petition, on tbe ground tbat at tbe time of tbe alleged assignment tbe plaintiff bad no insurable interest .in tbe life of tbe insured; tbe relationship between them being only tbat of uncle and nephew, and tbe additional facts set foi-th in item 6 of tbe complaint not creating such insurable interest; tbat tbe attempted assignment, therefore, bad tbe effect of avoiding tbe policy in toto, and tbat no recovery thereon could be bad in favor of either tbe plaintiff or petitioner.

There was judgment overruling tbe demurrer, and tbe company excepted and appealed.

G. V. Gowper and J. Paul FrizzeTle for plaintiff.

Rouse & Land and W. G. Munroe for defendant.

Loftin & Varser for interpleader.

Hoke, J.,

after stating tbe case: It is very generally held that tbe relationship of uncle and nephew does not of itself create an insurable interest in favor of either. Corson, exr. of McLean, 113 Pa. St., 438; Singleton v. Insurance Co., 66 Mo., 63; Dood Co. v. Green, guardian, 131 Ga., 568. And we are not called on to determine whether tbe additional facts set forth in section 6 of tbe complaint would bring about such an interest, for tbe reason tbat; on tbe facts as tbey appear, we are of opinion tbat if tbe assignment is otherwise valid, plaintiff has a right to recover tbe proceeds of tbe policies, whether at tbe time of tbe assignment be bad an insurable interest in the life of tbe deceased or not.

It is accepted doctrine here, and elsewhere, tbat in order to a valid policy of life insurance there must have existed an insurable interest at the time tbe contract is entered into, but tbe question whether such a policy, valid at its inception, can be assigned to one who has no insurable interest, has been very much discussed in tbe courts, and on tbis there is some conflict in tbe cases. We consider it, however, as established by tbe great weight of authority tbat where an insurant makes a contract with a company, taking out a policy on bis own life for tbe *289benefit of himself or bis estate generally, or for tbe benefit of another, tbe policy being in good faitb and valid at its inception, tbe same may, with tbe assent of tbe company, be assigned to one not having an insurable interest in tbe life of tbe insured; provided this assignment is in good faitb, and not a mere cloak or cover for a wagering transaction.

Decided intimation in favor of this general principle was given by this Court in tbe recent ease of Pollock v. Household of Ruth, 150 N. C., 211, and tbe position will be found sustained by a large number of authoritative and well-considered decisions and by text-writers of approved excellence. Insurance Co. v. Armstrong, 117 U. S., 591; Connecticut Mutual v. Schafer, 94 U. S., 457; Crosswell v. Association, 52 S. C., 103; Rylander v. Allen, 125 Ga., 206, annotated in 5 A. and E. Anno. Cases, 355; Murphey v. Redd, 64 Mississippi, 614; Brown v. Greenfield Insurance Co., 172 Mass., 498; Mutual Life v. Allen, 138 Mass., 24; Steinback v. Diepenbrock, exr., 158 N. Y., 24; Chamberlain v. Butler, 61 Neb., 730; Moore v. Guarantee Fund, 178 Ill., 202; Prudential Co. v. Liersch, 122 Mich., 436; Cooley’s Briefs on Insurance, vol. 1, p. 262 et seq.; Yance on Insurance, 1, p. 140 et seq.

To quote from some of tbe cases .referred to, in Steinback v. Diepenbrock, supra, it was held: “That one having no insurable interest in tbe life of another may acquire by assignment a valid policy upon bis life and enforce it to tbe full amount.” •

And in Murphey v. Redd, supra: “Tbe bolder of a valid policy of insurance on bis own life, payable to bimself or bis legal representative, may assign tbe same for a valuable consideration, as be may any other cbose in action, if there is nothing in tbe terms of the policy to prevent tbe assignment, and tbe assignee or purchaser of such policy, transferred according to its terms, is entitled to tbe proceeds of tbe same when due, notwithstanding be may have no insurable interest in tbe life of tbe insured.”

In several cases, where tbe opinion apparently upholds tbe contrary view, it will be found that tbe cause was correctly decided and sustainable on tbe ground that tbe policy, though taken out in tbe name of tbe insured, was procured in pursuance of a scheme and purpose to assign ^to one having no insurable interest, and that tbe proposed assignee was cognizant of tbe arrangement and took part in it. This was true in tbe case of Warnock v. Davis, 104 U. S., 775, and also in Cammack v. Lewis, 94 U. S., 643. In both of these cases tbe assignees were parties to tbe arrangement by which tbe policies were procured and assigned, and having no insurable interest in tbe life of *290the insured, the. facts disclosed, as far as the assignments were concerned, a clear case of wagering contract on the duration of a human life, forbidden by the law, and the assignments were not allowed to stand. Accordingly, we find the same high court, in Life Insurance Co. v. Armstrong, supra, under a different state of facts, deciding the general principle:

> “That a policy of life insurance, without restrictive words, is assignable by the assured for a valuable consideration equally with any other chose in action, where the assignment is not made to cover a mere speculative risk, and thus evade the law against wager policies, and payment thereof may be enforced for the benefit of the assignee, and, under the procedure of many States, in his name.”

Undoubtedly, however, there are decisions which directly hold that a life insurance policy, though valid at its inception, may not be as'signed to persons having no insurable interest in the life of the insured; and North Carolina has been referred to as upholding this view both in text-books and in decisions of other courts. If this is a correct interpretation of our cases on this subject, we would not hesitate to hold that they were not well decided; but, while some of them certainly give color to this view, we think that a more careful consideration of our decisions will disclose that in all of them, where the contract was declared void or set aside, it appeared that the assignment of the policy to one having no insurable interest was made in pursuance of a preconceived purpose, and that the assignee had suggested the arrangement or been a party to it.

In Hinton v. Insurance Co., 135 N. C., 314, this was expressly made the basis of the decision. In the case of Powell v. Dewey, 123 N. C., 103 — -and this is the case which more nearly justifies the statement that the courts of our State have decided against assignments of this character — it appears, we think, by fai-r intendment, that the partner and assignee having no insurable interest was cognizant of the scheme and took part in it. In that case the insured and the assignee were partners and associates in the insurance business, “and without any averment or claim of any indebtedness on the part of the insured, or that he was to furnish any labor, skill or otherwise, as his contribution in lieu of n\oney, procured a policy for the benefit of his co-partner, and immediately assigned the same to such copartner, the assignee paying all premiums thereon.” And the judge, in delivering the opinion, states as the ratio decidendi: “In the case before us, at the very time the policy was issued in which the life of the plaintiff was insured, there was an assignment of the policy to 'the beneficiary, who paid the first and all the premiums.”

*291Here, as stated, we think it clearly appears that the taking out of the policy and its assignment was a part of one and the same transaction, and the Court holding that one partner, without more, had no insurable interest in the life of the other, declared the entire policy void. True, the opinion may be somewhat misleading in giving too much weight to the payment of the “first and all the premiums,” apparently making this fact determinative, whereas, it is only evidential on the question of good faith (Rylander v. Allen, 125 Ga., 206, supra), but the decision was made to rest on the fact that this .was a transaction between these two insurance agents, in which they both took part, and that the taking out of the policy and the assignment, as stated, was one and the same transaction.

In College v. Insurance Co., 113 N. C., 244, the assignee was one of the contracting parties, and the policy'taken out for its benefit was clearly a wagering policy. And so in Burbage v. Windley, 108 N. C., 357, the contract of insurance was made directly with the company by one having no insurable interest in the life of the insured, and was against public policy. In Albert v. Insurance Co., 122 N. C., 92, also referred to and to some extent relied upon by defendant, the decision was in favor of the validity of a policy taken out by an insurant in favor of one having no insurable interest, and the case is not an authority in favor of defendant’s position.

In his learned and well-considered opinion in the case of Crosswell v. Insurance Co., 52 S. C., supra, the present Chief Justice of that State, speaking to the suggestion sometimes made in support of the view that these assignments are necessarily invalid, “That the same reasons which condemn a policy procured by one without an insurable interest in the life of an insured, should also condemn an assignment to one without such interest,” quotes with approval from May on Insurance, as follows:

> “On this point we quote from May on Insurance (Ed. 1891), see. 398A, which is in brackets, showing that it is new matter: ‘Indeed, the doctrine that the assignment of a policy to one without interest in the life is as objectionable as the taking out of a policy without interest, does not seem good sense. If this be so, it is difficult to understand how the designation of a beneficiary. outside of those having an insurable interest in the life can be upheld.. There seems to be a clear distinction between eases in which the policy is procured by the insured bona -fide of his own motion, and cases in which it is procured by another. It is a very different thing to allow a man to create voluntarily an interest in his termination, and to allow some one else to do *292so at tbeir will. The true line is the activity and responsibility of the assured, and not the interest of the person entitled to the funds. It is well established that a man may take out a policy on his own life payable to any person he pleases, and it is drawing a distinction without a difference to hold that he cannot take out a policy and afterwards transfer its benefits. An assignment by the beneficiary, or by an assignee, unless with the consent of the “life,” is, however, a very different matter, and involves what seems to be the real evil that the law is blun-deringly seeking to exclude, viz., the obtaining by B of insurance on the life of A, in contradistinction to its obtainment by A for B’s benefit.’ ”

And in Nance on Insurance, p. 140 et seq., the rule is thus stated: “That on principle, and according to the clear weight of authority, an assignment of a life policy to one having no insurable interest therein is perfectly valid, if made in good faith, and not as a cover for fraudulent speculation in life.”

And, referring to the opinions of Warnock v. Davis, 104 U. S., 775, and Cammack v. Lewis, 82 U. S., 643, and to the subject generally, the author says: “These confusing influences' have further been aided and abetted by a catch phrase, which, however, does not state the issue fairly, to the effect that the law will not allow a person to procure by assignment, insurance that he could not procure directly. A fair statement of the issue is found in the postulate that the law will allow the insured to designate a beneficiary under the policy as well by assignment as by original nomination.

> “The true principle governing the question may be derived from the statement of some generally accepted rules of law.:

> “(1) A person insuring his own life may designate any person whatever as beneficiary, irrespective of insurable interest in that beneficiary.

> “(2) The law requires an insurable interest only at the inception of the policy, as evidence of good faith. The presence of such interest at any subsequent .period is wholly immaterial.

> “(3) Life insurance, though based on the theory of indemnity at its inception, is not a contract of indemnity, but chiefly of investment. As a chose in action it has at any time after its issue a recognized value, termed the ‘reserved value.’

> “Hence we conclude that a policy of life insurance, validly issued to one having an insurable interest, becomes in his hands a valuable chose in action, which should be assignable as any other property right, unless such assignment be opposed to some clear rule of public policy.”

*293Tbis, we think,, correctly states the true doctrine, and applied to the facts admitted fully justifies the court below in overruling defendant’s demurrer, and the judgment to that effect is

Affirmed.