Essay: Insurance law (essay plan)

FORFEITURE UNDER INSURANCE LAW
RESEARCH METHODOLOGY
OBJECTIVE
Objective of this project is to analysis the scope of Insurance police in two situations. Firstly, what will happen to the Insurance claim if the beneficiary deliberately killed the assured person for the amount of Insurance claim? Secondly, what will happen to the insurance policy, when an assured person deliberately killed himself to realise the insured amount for the benefit of his/her family member?
Research Question
1. Does the Insurance policy will be forfeited in a case where a beneficiary under the policy deliberately killed the assured person for the amount of insurance policy?
2. What will happen to the Insurance policy in a case where a person commits suicide for the realization of insurance amount by his family member?
Hypothesis
1. No person shall be allowed to make any profit arising from any criminal activity which he deliberately committed or happened to comment it deliberately.
2. In India, any act which is prohibited by Indian Penal Code is only criminal activity. Nothing is crime which is not prohibited anywhere as per the statute in India.
INTRODUCTION
Life Insurance policy or Life Insurance contract has not been statutory defined in India and U.K. However, this was defined in Dalby v London and India Life Assurance Company as
“a contract in which the insurer in consideration of a certain premium paid on periodical basis or on lump sum amount, agrees to pay to assured or to the person for whose benefit the policy is taken, a fixed sum of money on the happening of a particular event during the human life.”
The vary objective and purpose of taking life insurance policy is to safeguard the interest of his dependents viz. wife and children in case of premature death of the assured as a result of happening in any contingency. The event that is insured in life insurance is the death of assured arising from accident or disease. It does not matter whether death is caused by accidental or natural cause or even due to the criminal of a third party. Any contract which is against public policy or of which object is unlawful, is not enforceable in court of law.
One of the cardinal principles of legal theory based on public policy is that no man shall be allowed to take advantage of his or her own wrong. The maxim “ex turpi causa non oritur action’ means no cause of action arises out of one’s own wrong . Life Insurance is also a kind of contact and a beneficiary under insurance contract cannot be allowed to take advantage arising out of his own criminal act of killing the assured person for the insured amount .
In fact, there are two situations, first the killing of assured person by the beneficiary himself and second death of assured person as a result of suicide which need to be examined. Whether the rule of forfeiture is applicable to both the situations? Will the beneficiary under insurance contract get the benefit of arising from deliberate killing of the insured person? What will happen in the case where the insured person intentionally killed himself i.e. suicide? Will the beneficiary still gets the benefit in such suicide case?
Moreover, forfeiture of an Insurance claim is also done on the ground of non payment of premium after the expiry of three month period from the date of policy lapse required as per the section 50 of the Insurance Act, 1938. In the case of LIC v Mani Ram , the assured person took a life insurance policy from back date. He took the policy on 21st August 1995 by paying the premium amount. He took the policy from back date i.e. from 28th April 1995. The assured person died on 2nd August 1996. Insurance amount was claimed by the nominee. The LIC contended that the policy was forfeited on the ground of non payment of the premium amount after the due date has expired. LIC argued that the policy start from the month of April 1995 and the last date of payment of premium was April 1996. But the assured person had not paid it till August 1996. Even though the requisite of section 50 was fulfilled, a time of more than 3 month period had already been passed. The court also ordered in the favour of the LIC and held that the policy claim was forfeited.
Insurance Act provides 1938, also provide relief from this lapse of policy. As per section 113 of the act, the assured person can surrender the insurance policy and take back the premium paid by him. In case of surrender, the policy cannot be forfeited.
However, as discussed earlier in the Introduction, I will examine the two situation in detail i.e. firstly deliberate killing and secondly the case of suicide, in detail and will try to find out that will the policy will be forfeited.
DELIBERATE KILLING
The forfeiture rule is a rule of public policy, according to this rule it preclude a person from acquiring any kind of benefit arising from any unlawful activity . It disabled a person to take any kind of benefit arising from any unlawful killing . The basic principle behind this rule is that the criminal must not be allowed to take benefit from his crime. Those criminal who are the beneficiary under the policy of victim’s life cannot be allowed to take benefit from such killing .
Earlier in the case of the Prince of Wales & Association v Palmer , it was held that the policy itself will become void where the person take insurance so that he could collect by murdering the insured life. Whereas latter, when Dr. Crippen was hanged in 1910 for murdering his wife, his estate was not allowed to take any benefit arising from that policy. However, the contract itself was not declared void. Only he or his estate was precluded from acquiring benefit from his unlawful killing . The beneficiaries under a life insurance who has neither conspire in nor committed any criminal act which results in death of insured, will be able to acquire the benefit . A husband was beneficiary to the insurance policy of his wife’s life and his wife was killed while she was deliberately setting fire on her house. Her husband can acquire the benefit of policy as he was not involved in her killing . The fact that the murderer is the first beneficiary does not mean that other beneficiary would not take the benefit. The rule of forfeiture does not make the policy void per se. It makes it unenforceable against the murder.
It has been observed that there is always a high possibility to murder the any assured person for the benefit of another . If anyone is allowed to take insurance in name of another whether related to him by blood or not, it would increase the temptation to murder the assured person for the insured amount. However, this temptation would be highly reduced if it is permitted to insure those lives who are closely related by blood or by financial relation, where one stands to gain more by the continued life than by the death of the life insured. This is because as per section 27 of Hindu Succession Act, 1956 stated that a person who murdered or abet the commissioning of murder shall be disqualified from inheriting any property of the person murdered or any of the property in furtherance of succession. This is the reason why the concept of Insurable interest comes into picture.
However, there are still many instances where husband and wife having jointly insured their lives and one of them force the other to commit suicide or killed the other for the benefit of the insurance policy. In a recent case, a nurse working in Alabama managed to take a insurance policy for the life of his niece, a two year child, without the knowledge of the child parent. One day she visited to the house of the niece and gave her arsenic in the soft drink. The child died and the nurse claimed the insurance amount. The court not only declared the contract taken by the nurse void, but also held the insurance company liable to pay damages to the parent of the child. Therefore, no one can be allowed to take benefit from his own mistake .
SUICIDE CASES
Suicide was known by the latin expression ‘felo de se or felonia de se’ . The position of law in England was that when an assured killed himself while he was a sane, it amounted to felo de se a criminal act and therefore absolve the insurer from liability on the ground that no one can be benefited of his own wrong. Beresford v Royal Insurance Co. Ltd , is a leading case on this issue. Since 1925, Major Rowlandson had taken a life insurance policy on his life in $50,000 and premium is paid in respect of said insurance. In 1934, he was insolvent. He had borrowed around $60,000 including $40,000 from a personal friend to finance an invention. The invention was failed. On 3rd August he shot himself. Latter it was made clear that he shot himself for the purpose of policy money being made available for the payment of his debts.
In this case, there are two conflicting grounds of public policy . The first was the duty of the court to enforce the contract and the second was that no one can be allowed to benefit from his own crime or in other word no man can be allowed to insure himself against the commission of a crime.
The Court of first instance, Swift J, held that the sanctity of contract is of paramount importance. Swift J, held that the rule of public policy did not prevent the plaintiff from recovering. The matter went to house of House of Lords. Lord Atkin, held that contract in such case was not enforceable as there is no right of action from your own wrong. Lord Macmillan also agreed that payment in favour of representative of assured would give him a benefit and no criminal can be permitted to take benefit in any way by his crime. Therefore, the contract of insurance is forfeiture.
Moreover, it should be kept in mind that suicide is a felonious act in English law and hence it is a crime in England but committing suicide is not a crime in India either as per statute. In India, Attempt to suicide is punishable under section 309, IPC and abetment of suicide is punishable under section 306, IPC .Therefore English common law is inapplicable to India as criminal law in India is a creation of statute.
In Faquir Singh v Union of India , the insured died due to cardiac failure on account of rope around the neck. In this case, it was held that the denial of benefit of insurance policy on account of suicide is improper. In India, committing suicide is not a punishable offence. Unlike foreign law, as per Indian Penal Code, 1860 attempt to commit suicide is an offence. Hence, if a person commit suicide, his beneficiary under insurance policy is not debarred from claiming benefit.
CONCLUSION
It is the basic rule of any contact that the agreement must not be against public policy or the agreement must not be unlawful in the eye of law. Law cannot permit any such contract to be enforceable which may provoke any beneficiary to commit any criminal activity. Moreover, it is also a golden rule of criminal jurisprudence that no criminal should be rewarded for any criminal act done in pursuance of any profit arising from any contract. No contract is enforceable between A and B to kill C. This is because such contract is against public policy and unlawful.
Similarly, the forfeiture rule also suggests the same. According to this rule, if any person wants to make any benefit as a beneficiary after killing the assured person, his claim become redundant. The forfeiture rules say that his policy remains forfeited. However, in case of Suicide, the assured person or the beneficiary does not commit any crime. In case of Suicide, no criminal act is done by the beneficiary and hence he is liable to realize the insurance amount from the insurance company.
However, intentional suicide done for the benefit of the beneficiary is not only public policy but also commercially planed suicide. It is very hard to distinguish between murder and suicide of a person having huge amount of money for the beneficiary. Furthermore, it will also degrade the morality and value of human life against the economic interest of a few individual. Hence the forfeiture rule under the insurance law is being mandatory.
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