Story Case

Mr. Cyrus Condor was a globe trotter who had visited many strange lands. While exploring an unfrequented part of the east coast of South America, he discovered what he deemed to be a very valuable deposit of asphalt. On his return to New York he conferred with his friend, Mr. Jacob Bond, who agreed to furnish funds to develop the asphalt mines. The profits and losses were to be shared equally by the two, and Mr. Condor was to take charge of affairs in South America. Mr. Bond insured for his own benefit, the life of Mr. Condor, before the latter sailed. Several months later, Mr. Cyrus Condor died of blood poisoning brought on by the bite of a scorpion. The insurance company refused payment to Mr. Bond on the ground that the contract was illegal. "Would you advise Mr. Bond to sue?

Ruling Court Case. Morell Vs. Life Insurance Company, Volume 10, Cushing, Massachusetts Reports, Page 282

William Morell and John Morell were partners in trade. Cyrus Morell, the plaintiff in this action, agreed to work for the partnership, and in return for his services, William was to go to California in search of gold, and give to Cyrus one-fourth of his profits. In addition to this, the partnership owed Cyrus a large sum of money. Before William left, Cyrus procured insurance on his life in the defendant company. William died in California. This was an action by Cyrus upon the policy. It was contended by the company that the policy was invalid, because Cyrus had no insurable interest in the life of William.

The court decided that Cyrus did have an insurable interest in the life of William. In the first place, the firm of which William was a member, owed Cyrus a large sum of money. William was personally liable as partner for the whole sum. For that reason, relation of debtor and creditor, Cyrus has an insurable interest in the life of William Morell.

The second reason was stated by Mr. Chief Justice Shaw: "But the court is strongly inclined to the opinion that the plaintiff had another interest in the life of the person, on whose life he was insured by the defendants. He had a subsisting contract with that person, made on a valuable consideration, by which he was to receive one-quarter part of his earnings in the mines of California for one year. Such an interest cannot from its nature be valued or apportioned. It was an interest upon which the policy attached. By the loss of his life within the year, the person whose life was insured lost the means of earning any more, and the plaintiff was deprived of receiving his share of such earnings, to an uncertain and indefinite amount." Judgment was given for Cyrus Morell.

Ruling Law. Story Case Answer

If there exists a contractual relation between two persons, whereby each will gain some pecuniary benefit from the relation, each has an insurable interest in the life of the other. A principal would have an insurable interest in the life of his agent, and the agent would likewise have an insurable interest in the life of the principal, provided, in either case, there was a contract of employment existing between them. The same applies to the relation of partnership. Each partner has an interest in the life of the other, because the death of either may result in pecuniary loss to the other. Thus, Mr. Bond, in the Story Case, as partner of Mr. Condor, should recover from the insurance company. He had an insurable interest in the life of Mr. Condor. Mr. Bond should be advised to bring suit.