What are the Rights of the Bankrupt's Trustee to His Life Insurance Policies? BY SAMUEL DAVIS, LL.M. OF THE BOSTON BAR IN THE month of January, 1912, in the District Court of the United States for the District of Massa chusetts, Dodge, J., overruled the find ing of Referee Olmstead in the matter of Loveland, which finding denied the petition of the bankrupt Loveland's trustee that the bankrupt's life insurance policy be turned over to the trustee as part of the bankrupt estate. The referee's finding followed the case of Bailey v. Wood, 202 Mass. 562, and in the opinion of some careful students the District Court in reversing the referee left the law in an unsatisfac tory condition, no appeal having been taken to a higher court. An examination of the law as laid down in cases of this kind reveals a remarkable state of confusion, resulting from a large number of adjudications wholly irreconcilable with each other. The contradictory views announced by the courts may be attributed to a fail ure to properly appreciate the true nature of life insurance on the one hand and on the other, at least until the decision of Holden v. Stratton, 198 U. S. 202, in 1905, a misapprehension by many courts of the meaning of sec. 70o of the Bankruptcy Act of 1898. The baffling experience encountered in a search for principles is further due to the action of the courts in resting their decisions in similar problems on unlike factors, so that many times there is a comparison of unlike things if an attempt is made to reconcile cases. Courts have also assumed technically
incorrect views of life insurance in attempting to distinguish between vari ous kinds of policies. Very early in the history of life in surance in this country the various states enacted legislation intended to put life insurance on a different footing from other financial transactions. In 1844, just one year after the incorpora tion of the New England Mutual Life Insurance Company, the General Court of Massachusetts enacted that "any policy of insurance made by any insur ance company for the benefit of a mar ried woman, whether the same be effected by herself or by her husband or by any other person on her behalf, shall insure to her separate use and bene fit and that of her children, if any, in dependently of her husband and of his creditors and representatives" (St. 1844, ch. 82). This statute, after having been several times broadened by amendment, is the law of the Com monwealth today. Most if not all of the states of the Union have statutes of similar purport. The state of North Carolina has gone so far as to incorporate in its Constitu tion a. provision that a husband may insure his own life for the sole use and benefit of his wife and children, and in the case of the death of the husband the amount thus insured shall be paid over to the wife and children free from all claims of the husband's creditors.1 It has been held under this article 1 Const. North Carolina, Art. X, sec. 7.
