1. Within the scope of the professional employment of an
attorney, the communications made to him by his client are
privileged, and, without the consent of the latter, he should
neither be required nor permitted by the courts of the United
States to testify concerning them.
2. A policy of life insurance originally valid does not cease to
be so by the cessation of the assured party's interest in the life
insured, unless such be the necessary effect of the provisions of
the instrument itself.
So held where, subsequently to
effecting an insurance by husband and wife upon their joint lives,
payable to the survivor on the death of either, they were divorced
a vinculo matrimonii, and she, having thereafter paid the
premiums to the time of his death, brought suit on the policy.
3. Any person has a right to procure an insurance on his own
life, and assign it to another, provided it be not done by way of
cover for a wager policy.
The facts are set forth in the opinion of the Court.
MR. JUSTICE BRADLEY delivered the opinion of the Court.
This was an action on a policy of life assurance issued July 25,
1868, on the joint lives of George F. and Franzisca Schaefer, then
husband and wife, payable to the survivor on the death of either.
In January, 1870, they were divorced, and alimony was decreed and
paid to the wife. There was never any issue of the marriage. They
both subsequently married again, after which, in February, 1871,
George F. Schaefer died. This action was brought by Franzisca, the
survivor.
On the trial of the cause, several exceptions were taken by the
defendant to the rulings and charge of the court, and this writ of
error is brought to reverse the judgment for alleged error in said
rulings and charge.
The first exception was for overruling certain testimony offered
by the defendant. The plaintiff, having offered herself as a
witness, on her cross-examination admitted that she had employed
one Harris as her attorney to file her petition for divorce, and
being questioned whether she had not stated to
Page 94 U. S. 458
him, to be embodied in the petition, that Schaefer had been a
habitual drunkard for a period of more than three years prior to
the date of filing the petition, denied that she had so stated to
him. (Had such been the fact, it would have falsified the statement
made in the application for insurance.) The defendant called Harris
and asked him whether the plaintiff had not so stated to him on
that occasion. The question was objected to and overruled as
calling for confidential communications between attorney and
client. The defendant alleges that herein the court erred because,
by the law of Ohio, such communications are not privileged. An
examination of the Ohio statutes renders it doubtful whether the
law is as the defendant contends. But if it were, the court did
right to exclude the testimony. The laws of the state are only to
be regarded as rules of decision in the courts of the United States
where the Constitution, treaties, or statutes of the United States
have not otherwise provided. When the latter speak, they are
controlling -- that is to say, on all subjects on which it is
competent for them to speak. There can be no doubt that it is
competent for Congress to declare the rules of evidence which shall
prevail in the courts of the United States not affecting rights of
property, and where Congress has declared the rule, the state law
is silent. Now the competency of parties as witnesses in the
federal courts depends on the act of Congress in that behalf passed
in 1864, amended in 1865, and codified in the Revised Statutes,
sec. 858. It is not derived from the statute of Ohio, and is not
subject to the conditions and qualifications imposed thereby. The
only conditions and qualifications which Congress deemed necessary
are expressed in the act of Congress, and the admission in evidence
of previous communications to counsel is not one of them. And it is
to be hoped that it will not soon be made such. The protection of
confidential communications made to professional advisers is
dictated by a wise and liberal policy. If a person cannot consult
his legal adviser without being liable to have the interview made
public the next day by an examination enforced by the courts, the
law would be little short of despotic. It would be a prohibition
upon professional advice and assistance.
The other exceptions were to the charge of the court, and
Page 94 U. S. 459
relate to two points -- first to the forbearance note given for
a portion of the last renewal premium and secondly to the alleged
failure of interest of the plaintiff in the policy caused by the
divorce of the insured parties.
First as to the forbearance note. Only one-half of the annual
premium was required to be paid in cash; the insured, if they
chose, could have a credit for the other half. This credit was
given upon the assured's signing an acknowledgment in the following
form:
"I hereby acknowledge a credit or forbearance of ___ dollars of
the premium on my policy No. ___, which amount shall be a lien on
said policy at six percent per annum until paid or adjusted by
return of surplus premium."
It was not a note promising to pay money, but a form of
acknowledgment by which the assured consented to a deduction from
the policy for nonpayment of a portion of the premium. As long as
George F. Schaefer took any interest in the policy, he signed this
acknowledgment for himself and wife, "George F. and Franz.
Schaefer," or for himself alone. One premium became due after the
divorce, and Franzisca Schaefer herself attended to the payment of
it -- paying the cash portion and authorizing her son by a former
marriage to sign the forbearance note, as it is called. He did so
in the name of both parties insured, thus: "Geo. F. & F.
Schaefer." The company accepted it. On what valid ground they can
now object to the transaction it is difficult to see. A joint act
was to be done. Only one of the parties could physically do it.
Either had a right to do it. This act was to pay or settle the
annual premium. The plaintiff, as one of the joint parties,
performed what was necessary to be done. George F. Schaefer could
not complain, for it was done in his interest, keeping the policy
alive for his benefit as well as Franzisca's. The company could not
complain, for they accepted both the money and the acknowledgment
in the form in which they were given. There is no pretense that any
deception was practiced upon them.
This point is really frivolous.
The other point, relating to the alleged cessation of insurable
interest by reason of the divorce of the parties, is entitled to
more serious consideration, although we have very little difficulty
in disposing of it.
Page 94 U. S. 460
It will be proper in the first place to ascertain what is an
insurable interest. It is generally agreed that mere wager policies
-- that is, policies in which the insured party has no interest
whatever in the matter insured, but only an interest in its loss or
destruction -- are void as against public policy. This was the law
of England prior to the Revolution of 1688. But after that period,
a course of decisions grew up sustaining wager policies. The
legislature finally interposed and prohibited such insurance, first
with regard to marine risks, by statute of 19 Geo. II c. 37, and
next with regard to lives, by the statute of 14 Geo. III. c. 48. In
this country, statutes to the same effect have been passed in some
of the states, but where they have not been, in most cases either
the English statutes have been considered as operative or the older
common law has been followed. But precisely what interest is
necessary in order to take a policy out of the category of mere
wager has been the subject of much discussion. In marine and fire
insurance, the difficulty is not so great, because there insurance
is considered as strictly an indemnity. But in life insurance, the
loss can seldom be measured by pecuniary values. Still an interest
of some sort in the insured life must exist. A man cannot take out
insurance on the life of a total stranger nor on that of one who is
not so connected with him as to make the continuance of the life a
matter of some real interest to him.
It is well settled that a man has an insurable interest in his
own life and in that of his wife and children, a woman in the life
of her husband, and the creditor in the life of his debtor. Indeed
it may be said generally that any reasonable expectation of
pecuniary benefit or advantage from the continued life of another
creates an insurable interest in such life. And there is no doubt
that a man may effect an insurance on his own life for the benefit
of a relative or friend, or two or more persons on their joint
lives for the benefit of the survivor or survivors. The old
tontines were based substantially on this principle, and their
validity has never been called in question.
The essential thing is that the policy shall be obtained in good
faith, and not for the purpose of speculating upon the hazard of a
life in which the insured has no interest. On this point, the
remarks of Chief Justice Shaw, in a case which arose
Page 94 U. S. 461
in Connecticut, in which state the present policy originated,
seem to us characterized by great good sense. He says:
"In discussing the question in this Commonwealth
[Massachusetts], we are to consider it solely as a question of
common law, unaffected by the statute of 14 Geo. III, passed about
the time of the commencement of the Revolution and never adopted in
this state. All, therefore, which it seems necessary to show, in
order to take the case out of the objection of being a wager
policy, is that the insured has some interest in the
cestui que
vie; that his temporal affairs, his just hopes and well
grounded expectations of support, of patronage, and advantage in
life, will be impaired, so that the real purpose is not a wager,
but to secure such advantages supposed to depend on the life of
another; such, we suppose, would be sufficient to prevent it from
being regarded as a mere wager. Whatever may be the nature of such
interest and whatever the amount insured, it can work no injury to
the insurers, because the premium is proportioned to the amount,
and whether the insurance be a large or small amount, the premium
is computed to be a precise equivalent for the risk taken. We
cannot doubt,"
he continues,
"that a parent has an interest in the life of a child, and,
vice versa, a child in the life of a parent, not merely on
the ground of a provision of law that parents and grandparents are
bound to support their lineal kindred when they may stand in need
of relief, but upon considerations of strong morals and the force
of natural affection between near kindred, operating often more
efficaciously than those of positive law."
Loomis v. Eagle Life Insurance Co., 6 Gray, 399.
We concur in these views, and deem it unnecessary to cite
further authorities, all those of importance being collected and
arranged in the recent treatises on the subject.
See May
on Insurance, secs. 102-111; Bliss on Life Insurance, secs.
20-31.
The policy in question might in our opinion be sustained as a
joint insurance, without reference to any other interest, or to the
question whether the cessation of interest avoids a policy good at
its inception. We do not hesitate to say, however, that a policy
taken out in good faith and valid at its inception is not avoided
by the cessation of the insurable interest unless such be the
necessary effect of the provisions of the policy itself. Of course,
a colorable or merely temporary interest would present
circumstances from which want of good faith and an intent to evade
the rule might be inferred. And in cases where the
Page 94 U. S. 462
insurance is effected merely by way of indemnity, as where a
creditor insures the life of his debtor for the purpose of securing
his debt, the amount of insurable interest is the amount of the
debt.
But supposing a fair and proper insurable interest, of whatever
kind, to exist at the time of taking out the policy, and that it be
taken out in good faith, the object and purpose of the rule which
condemns wager policies is sufficiently attained, and there is then
no good reason why the contract should not be carried out according
to its terms. This is more manifest where the consideration is
liquidated by a single premium paid in advance than where it is
distributed in annual payments during the insured life. But in any
case it would be very difficult, after the policy had continued for
any considerable time, for the courts, without the aid of
legislation, to attempt an adjustment of equities arising from a
cessation of interest in the insured life. A right to receive the
equitable value of the policy would probably come as near to a
proper adjustment as any that could be devised. But if the parties
themselves do not provide for the contingency, the courts cannot do
it for them.
In England, by the operation of the statute of 14 Geo. III, as
construed by the courts, the law has assumed a very definite form.
In a lucid judgment delivered by Baron Parke in the Exchequer
Chamber in the case of
Dalby v. Life Insurance Company,
decided in 1854, 15 C.B. 365, it was held that the true meaning of
the statute is that there must be an interest at the time the
insurance is effected, but that it need not continue until death;
the words of the statute being, "that no insurance shall be made on
a life or lives wherein the assured shall have no interest, or by
way of gaming or wagering," and "that in all cases where the
insured hath interest in such life, &c., no greater sum shall
be recovered than the amount or value of the interest." The word
"hath" was construed as necessarily referring to the time of
effecting the insurance, and not to the time of the death, that
being the only construction which would subserve the object of the
statute to discourage wagering, render the contract uniform and
certain and preserve a fixed relation between the premiums and the
amount insured,
Page 94 U. S. 463
as required by the principles of life assurance. This case
overruled the previous case of
Goodsall v. Boldero, 9 East
72, decided by Lord Ellenborough, in which, proceeding upon the
idea that life insurance is a mere contract of indemnity, it was
held that the interest must continue until death, and even until
the bringing of the action. Baron Parke, in commenting upon this
case, very justly says:
"Upon considering this case, it is certain that Lord
Ellenborough decided it upon the assumption that a life policy was
in its nature a mere contract of indemnity, as policies on marine
risks, and against fire, undoubtedly are, and that the action was,
in point of law, founded on the supposed damnification, occasioned
by the death of the debtor, existing at the time of the action
brought; and his lordship relied upon the decision of Lord
Mansfield in
Hamilton v. Mendes, 2 Burr. 1270, that the
plaintiff's demand was for an indemnity only. Lord Mansfield was
speaking of a policy against marine risks, which is, in its terms,
a contract for indemnity only. But that is not the nature of what
is termed an assurance for life; it really is what it is on the
face of it -- a contract to pay a certain sum in the event of
death. It is valid at common law, and if it is made by a person
having an interest in the duration of the life, it is not
prohibited by the statute."
As thus interpreted, we might almost regard the English statute
as declaratory of the original common law and as indicating the
proper rule to be observed in this country where that law furnishes
the only rule of decision.
Be this, however, as it may, in our judgment a life policy,
originally valid, does not cease to be so by the cessation of the
assured party's interest in the life insured.
Judgment affirmed.