Scottish Court of Session Decisions

The facts of the case appear fully in the opinion of the Lord Ordinary.

On 27th July 1896 the following inter locutor was pronounced:—“Finds (1) that the defenders are not in a position to dispute the insurable interest of the pursuers in the life of Thorbjorn Jonasson, whose life was insured: … Therefore repels the defenders' pleas-in-law, and decerns against them for payment to the pursuers in terms of the conclusions of the summons: Finds the pursuers entitled to expenses,” &c.

Opinion.—“In this action the pursuers George Vair Turnbull & Company, merchants in Leith, sue the Scottish Provident Institution for payment of £2000 as the sum due under a policy of insurance, dated 24th December 1894, taken out by them on the life of Thorbjorn Jonasson (a merchant in Iceland, who was their agent in the disposal of merchandise sent by them to Iceland), and which became payable on the death of Jonasson on 9th April 1895.

The claim is resisted on two grounds—(1) want of interest in the life of Jonasson; and (2) fraudulent misstatements in the proposal and declaration on the faith of which the policy was issued.

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The objection of no interest is not a favourable one. It is a technical objection, or nearly so, seeing that the nature of the pursuers' interest does not affect the defenders' risk, and it rests on the Gambling Act (14 Geo. III. cap. 48), by which policies made by one on the life of another, in which he has no interest, are declared to be void. That was an enactment in the public interest, not in the interest of insurance companies. But no doubt the defenders are entitled to plead it. In this case the interest of the pursuers in, Jonasson's life depended on their business relations with him. They had a contract with him, dated 22nd March 1894, of a somewhat special kind, which may correctly enough, for the purposes of this case, be described as a contract whereby Jonasson was constituted the pursuers' agent in Iceland. The pursuers explain that they carried on a very lucrative business by means of their connection with Jonasson, and that it was of such a character that it would be very materially affected, and their profits would be greatly diminished, by Jonasson's death. Now, the proposal for insurance was made on the 13th of November, and at that time the nature of the pursuers' interest in Jonasson's life was explained to the defenders; and the pursuer George Vair Turnbull, depones that they were informed that it was a term of the contract with Jonasson—as in fact it was—that it should be terminable on 1st March of any year by either party on three months' notice. There is some conflict of evidence as to whether this term of the contract was communicated to the defenders, or rather some difference in the recollection of Mr Steuart, the defenders' inspector, and of Mr G. V. Turnbull, on the point. I think Mr Turnbull's recollection on this point is to be preferred; and, in any case, the defenders must be held to have known this, as they saw, or at all events could, had they chosen, have seen, the contract between the pursuers and Jonasson. This interest having been explained, the defenders were satisfied that it was an insurable interest. On 10th December 1894 their secretary intimated to the pursuers that they were disposed to accept the risk to a moderate amount at the premium stated, and asked the pursuers to state the sum for which they desired a policy. Accordingly the policy bears this note—‘The above-named Messrs George Vair Turnbull & Company having stated in a letter, dated 28th December 1894, that they have an insurable interest in the life of the said Thorbjorn Jonasson, no further proof of their interest will be required when this policy becomes a claim.’ It is admitted that the letter of 28th December merely put in writing what had been explained verbally to the defenders' inspector when the proposal was made. Now, it is not disputed that if the pursuers' connection with Jonasson had continued to be the same as it was when the proposal was made, the defenders could not and would not have disputed the pursuers' insurable interest or the amount of it; and I think it is not for the Court to consider whether the interest would or would not have been such as to satisfy the requirements of the Act 14 Geo. III. cap. 48.

But a material change had taken place in the pursuers' relations with Jonasson. He, by letter of 1st December 1894, which reached the pursuers on the 10th December, gave the pursuers notice that he would leave their service on the 1st March 1895. It is said that in certain proceedings between the pursuers and Jonasson's representatives, the pursuers contended (I confess I do not see on what grounds) that their contract with Jonasson was terminated at the date of that letter or earlier. But that is not what Jonasson's letter says; and I consider that I must take it that the contract endured until 1st March 1895 at all events, by which time it might have happened that Jonasson would have withdrawn his resignation.

Now, in these circumstances, the defenders put their defence in regard to the question of interest in two ways. They say (1) there was no interest at the date of the policy; and (2) that the interest, if it existed, had materially changed since it had been explained to the defenders at first, and was materially different from what it had been explianed to be. Now, I think it cannot be said that the pursuers had no interest in Jonasson's life at the date of the policy. The interest was the same in its nature as when the proposal was made, although, it may be, less in amount, and the defenders are in my opinion precluded from denying that that was in its nature an insurable interest. If so, then the policy could not be said in a question with the pursuers to be void under the Act of Geo. III. It must be regarded as a lawful policy. But then it is said that the resignation of Jonasson should have been communicated, but I do not see how this non-communication could vitiate the policy. The defenders do not aver that they would not have granted the policy had they known that Jonasson had resigned, and that his connection with the pursuers would come to an end on 1st March. After all, the whole change was, that that event had happened which was provided for in the contract with Jonasson, and the possibility of which was always contemplated. I do not know any authority for the proposition that such a non-disclosure could vitiate the policy. It is not as if the risk of the defenders was affected. For clearly it was not. The defenders referred to the case of Canning v. Farquhar, 6th March 1886, 16 Q.B.D 727, in which it was held that an insurance company was not bound to issue a policy when between the date of the acceptance of the proposal and the tender of the premium there had been a material aleration in the health of the proposer. But that is obviously a very different case to this.

It was not contended that the amount of the sum payable under the policy could be affected by the change of circumstances, nor is there any plea to that effect.

On these grounds I am prepared to repel the defenders' pleas founded on want of interest.”