Case 18. Life Insurance

Titius insured his life with a certain company and assigned the policy to his wife so that, in the event of his death, she might have the means to support herself and the children. When questioned in the name of the company concerning his age, however, he said that he was 36 years old, while in fact he was 38. But it happened after five years that Titius, oppressed by misfortunes and indulging in drunkenness on account of melancholy, fell into a well and died. Since the insurance company knew nothing of the lie concerning his age or of the drunkenness that was the cause of death, it paid five hundred pounds to the wife without delay. The wife, however, doubted whether she could retain the money. Hence it is asked:

1. How many species of the contract of insurance are there?

2. What is the force of the conditions that are customarily attached to insurance?

3. What is to be said of the case?

1. How many species of the contract of insurance are there?

There are three: Marine, Fire, and Life insurance.¹

1 Manual of Moral Theology, vol. i, p. 554.

2. What is the force of the conditions which are usually annexed to insurance policies?

The effect of such conditions depends upon the intention of the parties to the contract, and in the case of insurance companies in general it is difficult to say what the intention is. The chief difficulty is to distinguish when the contract is absolutely null and void, so that no rights are conferred by it, and when it is only voidable at the option of the insurer. In general it may be said that if there were substantial mistake in the contract, it is null and void; if there were only accidental mistake, it is only voidable. Mistake will be substantial when the insurer did not intend to contract on the basis which in fact exists; it will be accidental when a full knowledge of the facts would not have prevented him from entering into the contract, but would only have varied its terms.¹

1 Manual of Moral Theology, vol. i, p. 555.

3. The case. Titius insured his life and assigned the policy to his wife. He gave his age as 36, whereas it was 38. The policy would not be void on this ground. The only effect of the truth being told would be to raise the amount of the premium. After five years Titius took to drink on account of misfortunes, and while in drink killed himself by falling into a well. The insurance company knew nothing about the lie nor about the cause of Titius’ falling into the well, and paid the insurance money. In insurance policies there is usually a suicide clause, but even suicide does not usually void the policy, especially when it has been assigned to another. A recent authority says: “Suicide of the assured was originally a reason for the avoidance of the policy. But even then, if the assured had bona fide assigned his policy and notice of the assignment had been given to the company before the suicide had taken place, the assignee would be entitled to the assurance money. And this is the law to-day, and can be relied upon in the event of the death of an assured by his own hand under such circumstances that his suicide is exempted from the risks assured against, provided of course that it is a bona fide assignee who makes the claim. But the modern practice of life assurance is either to make no distinction at all in the case of suicide, or to make only some limited or temporary distinctions.”¹

1 Knight, Business Encyclopaedia, under the entry “Life Assurance.”

The wife of Titius may therefore keep the money she has received from the insurance company. Titius should indeed have paid higher premiums than he did, in consideration of his being two years older than he said he was. The company will have the right to deduct the difference from the sum paid if it comes to know the real age of Titius.