§ 1. On Insurance

314. Notion. Insurance²⁰¹ is a contract by which someone assumes the risk of another's thing or person for a determinate premium, or, in other words, "it is a contract by which one person, for a certain price, obliges himself to compensate the damages which another can suffer from an involuntary event."²⁰² The object of this contract, therefore, is the risk assumed, which can occur in diverse things, e.g., the danger of fire, shipwreck, hail, death, etc. Today there exist very many kinds of insurance, which indeed are most useful if they are just. For through them the frequent ruin especially of men of moderate fortune is forestalled; and the things themselves are better guarded because of the supervision of the insurance company.

Requisites for just insurance. A contract of insurance is just:

1. If the insuring company truly pays those things which it ought to pay from the contract, and if the premium to be paid annually morally corresponds to the gravity of the risk in which the insured thing is placed;

2. if the insured sincerely declares the value of the thing and the dangers to which the thing is exposed, and does not bring the thing into danger through gravely culpable negligence;

3. if those things established by positive law or by particular stipulations justly entered into are faithfully observed.

In our days injustice can rarely arise from an excessively large insurance premium. For so many insurance companies exist that competition among them is great, and each one strives to reduce the premium as much as it can. Moreover, each person is ordinarily free to leave one company and enter another.

On the part of the insured, however, frauds and injustices are not rarely committed. For if the thing to be insured is not declared as it truly is, or if it is badly guarded with grave negligence or from direct intention, so that it perishes, or if changes are made in it which increase the danger of loss, etc., in these and similar cases injustice is committed, and a grave obligation of restitution is present if there is question of grave damage caused. (How restitution is to be made in these cases, however, see above, n. 231.)

Life insurance, which is also called a life annuity, is especially to be noted among the diverse kinds of insurance, both because of its frequency and because of the difficulties which it can cause in conscience. Life insurance can be effected in many and diverse ways. Difficulties can arise for the confessor only if the insured has employed frauds in the so-called "declarations," or if by illicit means he has violated the statutes of insurance, or if the physician has described too favorably the state of health of the person to be insured. Sometimes civil laws establish that, after a determinate time has elapsed, e.g., five years, the insurance company can no longer challenge the contract of insurance. These laws indeed seem just and useful, since they avoid very many lawsuits and render insurance companies more attentive. In practice, unless the fraud is most evident and an efficacious cause of grave damage, the confessor ought not readily to declare the contract of insurance null or oblige the insured to restitution. The reasons are: 1. because insurance companies are most cautious, so that they are very rarely led into grave error; 2. because civil laws favor the validity of the contract unless fraud truly substantial and manifest was present; 3. because it is often most difficult to determine from what disease death occurred, and whether the proximate cause of death had already existed long before. Therefore a positive doubt remains whether the fraud employed was truly an efficacious cause of grave damage. In doubt, however, an obligation of restitution is not to be imposed.

²⁰¹ There are some who are unwilling to number the contract of insurance among aleatory contracts, e.g., Koch, Moraltheol. § 149, because in aleatory contracts the danger of loss ought to arise solely from the contract itself. On the contrary, even before the contract of insurance there is already danger for him who seeks insurance, e.g., the danger of fire. This distinction seems to be of little moment and of no utility. Hence authors commonly number insurance among aleatory contracts, e.g., Lehmkuhl, Tanquerey, Noldin, Moran, etc.; because the chance of loss is not only on the part of the insurer, but also on the part of the insured, who perhaps pays the premium for many years without any emolument.

²⁰² Tanquerey, l.c. n. 915.