ARTICLE I: ON INSURANCE (Insurance)

Insurance is a contract by which one takes upon himself the peril of some thing (fire of a house, shipwreck of a ship, etc.), and the other obliges himself to a price for peril of this kind undertaken. The instrument by which the contract is written is called "the policy": the insurer, "the underwriter."

1038. Questions. - Query 1° Whether the contract of insurance is licit?

Resp. Affirmatively. For equality is preserved when the due conditions concur, as Theologians commonly confess, and daily practice confirms.

Query 2° What are the conditions required for insurance?

Resp. They are the following: 1° that the price be proportioned to the peril, or established by an incorporated society according to the Charter of incorporation; 2° that the peril be true, and equally known to each party; 3° that the insured observe all conditions of the contract; 4° that the insurer have whence he can pay.¹

1039. • You will resolve. 1° He who accepts money by loan, with which he may buy merchandise to load a ship (to buy a cargo), in the contract which is called "bottomry" (n. 1036), is guilty of usury if he himself also furnishes insurance of the ship; for the peril of the money is removed, on account of which the great usury was promised. - But he who in this case gives money by loan, if he furnishes one security concerning the value of the ship and merchandise to be paid in the case in which the ship perishes, can receive both a premium for the security, and an increase by reason of the peril. "Although respondentia and bottomry are of themselves a species of insurance, yet the lender has an insurable interest in his securities, and therefore may protect himself from the sea-risk by insuring them. However, a policy on bottomry or respondentia cannot be subscribed by the borrower of the money; for if he were to become an insurer, this would be no longer a loan upon bottomry, but a cloak for usury."²

1040. • 2° They sin most gravely who burn their own houses so that they may receive from the insurance society money beyond their value, or, when a fire happens by chance or by the malice of another, exact money greater than their damage. But in what manner restitution is to be made in this case is in practice very often difficult to define, since very often it is not clear whether it is to be transmitted to the treasury of the insurance society, with the officials unjustly retaining it for themselves. But what some think, that it is impossible for restitution to arrive certainly to the true owners, and to each of them for the part due to himself, if it is to be made to so-called mutual insurance societies, or at least to those whose associates (stockholders) are many, on the ground that, after the damage brought on the society and before restitution, very many associates perhaps will have left it, and it is unknown who they are and by what portion they were associates, is trifling, and is valid only for the case of the dissolution of the society; for to associates who leave the society, others succeed with a right to the credits and an obligation to the debts of the society. But in the case in which it is clear that the restitution will not be transmitted to the treasury of the society, or distributed to the individual associates according to their pro rata part, it must be made to pious causes. Resolve the same, on account of parity of reason, concerning any restitution to be made to some society.

3° A shipmaster sins who by his negligence gives cause for the shipwreck of an insured ship, or deliberately directs it toward the shore where it is to perish, or conceals those things which, if they became known, would deprive the owner of the ship or merchandise of the right of insurance.

1041. • 4° The contract of life insurance is licit, by which, on account of a premium given once, or on account of money paid yearly, some society or some private person obliges himself to pay a certain sum of money when it happens that someone dies, provided a) account is had of age, health, and other circumstances, and b) the price to be paid by each contracting party is fair. For on each side there is a risk, and the lot of loss, as also of profit, is uncertain. But they sin who conceal those things which would have impeded insurance, for example a hidden grave infirmity, a more advanced age, etc., or those things which would have impeded payment of the insured price, for example suicide committed by the insured; likewise those who kill the insured so that they may obtain the price.