On Life Insurance

630. Notions. Among the diverse contracts of insurance, life insurance, both because of its great frequency and because of the moral difficulties which it contains, merits special consideration.

a. A twofold diverse mode is especially distinguished according to which this contract is customarily entered: alpha. The one to be insured pays each year to an insurance society a certain sum of money under this condition, that immediately after his death a determined sum of money be repaid to his heirs or to a third person. beta. The one to be insured pays each year to the society a sum of money under this condition, that a determined sum be repaid to himself or to a third person if he arrives at a certain year of age, for example, the sixty-fifth year. But if he dies before the year determined in the agreement, the obligation of the society is extinguished.²

b. For the equality between the insurance society and the insured, on which the justice of the contract depends, it is required that the danger which the society assumes equal the premium which the insured pays. In the former mode the danger consists in this, that the insured dies before the premiums which the society accepts are equivalent to the sum to be paid. In the latter mode the danger consists in this, that the society must repay a sum which exceeds the premiums received, where the insured attains the determined year of age.

c. For forestalling detriment arising from this contract, the insurance society is accustomed to propose several questions to those to be insured, from which it tries to gather what duration of life the one to be insured can hope for. Now it is asked whether the contract of insurance must be held as valid or invalid if at any time a false response has been made to the proposed questions, whether by fraud or from error.

Concerning the question which the insurance society proposes about hidden sins committed from a depraved habit, it seems that one must say that the insurer does not have the right of questioning about moral defects, and therefore the one to be insured is not bound to manifest his hidden vices. Therefore denial of these is neither a lie nor makes the contract void. Nor is the society deceived or harmed by this: for it belongs to the physician to examine whether perhaps health has been affected by such a vice; but if this is not the case, there is no reason why the sum to be paid should be increased on that account.

¹ These things are taken from the excellent little work of Ph. Huppert, Der Lebensversicherungsvertrag (Mainz: Kirchheim, 1896).

² Huppert, l.c., p. 15 ss.

631. On the validity of the contract. 1. The contract is invalid if a circumstance is denied or kept silent by which the probability of life being prolonged for a longer time by the one to be insured is notably diminished, as if he were to keep silent about a vomiting of blood which he had previously suffered: for substantial error intervenes concerning the object of the contract, namely concerning the life to be insured.

a. The contract must be considered valid if the notable defect of health was hidden both from the one to be insured and from the physician: for the society must undertake upon itself dangers of life which arise from altogether unknown causes.

b. If the one to be insured concealed in good faith a notable circumstance, he has the right of recovering the premiums paid by him; but those in whose favor the insurance was made acquire no right of receiving the determined sum. If in bad faith he kept silent about a notable defect of health, he not only loses the right of receiving the insured sum, but he must also repair the damages which the society suffered by entering this invalid contract, for example, because of expenses. Yet societies are accustomed to declare that the annual premiums paid in this case pertain to them.

c. There are societies which in their statutes declare that a contract of insurance void because of false declarations is to be held as valid after it has lasted for five years. Therefore after this time has elapsed the contract can be held as valid, whether the false declaration was made in good faith or in bad faith.

2. The contract is valid, but must be reduced to equality, if a circumstance is denied or kept silent by which, had it been known, the insurer would indeed have made the contract, but would have demanded a greater premium, as if an illness is kept silent by which hope of prolonging life is diminished not altogether lightly only. Therefore there must be given to the society the premium which it would have demanded had the truth been known.

If therefore in the case of misfortune the entire insured sum is paid to an insured person who falsely declared accidental circumstances, he himself must restore a proportionate part from the sum accepted to the insurance society, or, according to the measure of the circumstances, to the poor.

3. The contract is valid and must be observed by each party if a circumstance of very slight moment is denied or kept silent, as if the one to be insured falsely denies that homeopathic remedies were used by him: for the insurer, even with the truth known, would have made the contract under the same conditions.

The statutes of societies which declare that any error in the responses invalidates the contract are opposed to justice in this matter; for the insured cannot be deprived of every right of his own because of a light error which does not harm the society in any way.¹

Note. By these things are presented the principles from which one must establish the obligations and rights of the insured if the matter is not brought to a judge. When the matter has been brought to a judge, one must stand by the judicial sentence even in conscience, unless the contract is invalid on the part of the insurance society.

a. The judge gives sentence according to the statutes of the insurance society, which generally declare the contract void because of false declarations made in bad faith and, as a penalty for the fraud committed, deprive the insured of every right in the premiums paid.

b. On the part of the insurance society the contract can be unjust and invalid, both because there is not a just proportion between the annual tax and the insured sum to be paid after the death of the insured, and because the procurators of the society fraudulently deceived the one to be insured.

¹ Huppert, l.c., p. 176 ss.

631*. On insurance of workers. Declarations. 1. This insurance tends to this, that workers, for the time in which they become unfit for labors and can no longer provide for themselves and their own, receive a certain revenue. Since the wage received for labor does not suffice for them to provide for themselves for times of this kind, poverty is guarded against by this means of insurance.

2. According as the causes are diverse on account of which workers cannot be free for labor, diverse insurances are distinguished: of the sick, of misfortune, of old age, etc.; Kranken-, Unfall-, Alters-Versicherung. In Germany, Austria, and Switzerland public laws compel either all workers, or at least those laboring in workshops in which there is greater danger of misfortune, to be insured. Therefore insurance of this kind is governed by public law, not by a contract privately entered. The tax of insurance is paid partly by the workers, partly by the masters; from this the workers acquire a right to the insured sum of money.

For the solution of cases. If in a particular case there is question of the worker's right to the insured sum, attention must be given to the words of the law, which, since it was made for the assistance of workers, admits as broad an interpretation in their favor as can be made.

a. The annual pension is paid only to those to whom a misfortune happens in the exercise of work (beim Betriebe); but that is considered to have happened in the exercise of work which has occurred in an action which in some way coheres with the exercise of the work, for example, in access to the place of labor, during lunch which is taken in the place of labor, during leisure which is taken in the place of labor.

b. Workers do not receive an annual pension if the misfortune happened by their fault; but those misfortunes alone are considered to have happened by the fault of the worker which have been caused deliberately or from great negligence, by no means those which have been caused from carelessness, rashness, or some light negligence.

c. He who unjustly received an annual pension, for example, by falsely narrating the cause of the misfortune, of himself is bound to return the sum received and cannot licitly receive a further one. But since he cannot confess the fraud committed without danger of grave damage, he licitly receives the annual sum under this condition, that the money received be distributed to the poor. But if the worker himself is truly poor and cannot be sustained in another way, he can retain for himself the pension, or at least part of it. That restitution be made not to the society but to the poor can more easily be permitted because the damage which has occurred to the contributors themselves by this fraud is light, since many concur for the insurance. Wherefore that restitution be made to those damaged is an obligation only under light obligation; but restitution which obliges only under light obligation can from a reasonable cause be made to the poor.

631**. Note. Lehmkuhl judges that contracts void by natural law because of false declarations can probably be held from the very statutes of insurance societies as valid until they are declared invalid by the society or by the judge; therefore the insured can licitly accept the insured sum if the contract is not rescinded by the society. Yet he is bound to repair the damage which he efficaciously inflicted on the society by his mode of acting. Hence:

a. Because he pays a tax less than the just amount, he is bound to increase this up to that quantity which the insurer would have demanded if he had known the defect, and he must restore the increase to the society.

b. Reparation of damage must be made also in the case in which the false declarations proceeded from inculpable error, because the error is the efficacious cause on account of which the society accepted an annual tax less than the just amount.

c. But if the death of the insured follows not because of the defect concealed, but from another cause, the increase of the annual tax is not to be enjoined, because the fraud is not the efficacious cause of the damage.

d. Indeed even in this case damage is not efficaciously inflicted on the society, in which the insured actually lived as long as, probably from statistics, it was foreseen that he would live: for there is present a proportion of equality between the annual tax and the sum of insurance.¹

¹ Lehmkuhl, Casus consc. I, n. 919 ss.