424
The Green Bag
surance premium were better understood the confusion over endowment policies, with the consent injustice to beneficiaries of the death benefit in such policies, would cease. In what is known as the ordi nary or whole life policy, the term of insurance is for the entire lifetime of the insured and the proceeds are available only on the happening of the single contingency insured against. With the endowment policy, the term of insur ance may be limited from one to eightyfive years and a double contingency is insured: (a) that the proceeds of the policy will be paid to the insured if he is alive at the maturity of the endow ment period, and (b), that a beneficiary nominated by the insured shall receive the proceeds of the policy if the insured shall die before the policy matures. The change from a single to a double con tingency does not alter the nature of insurance, and the term "investment" commonly applied to endowment and deferred dividend policies is clearly a misnomer. The primary object of all life in surance is the protection of a bene ficiary, even though it be for a limited time and accompanied by inci dental advantages to the insured; if these collateral benefits to the insured cannot be reached without destroying the beneficiary's interest in the con tinued life of the insured then they should not on principle pass to the trustee. It is the right of the benefi ciary and not the receipt of money which is involved. This right of the beneficiary may be vested and yet in accordance with the terms of the con tract be liable to be defeated by the happening of some condition subsequent. Thus if the insured travels in latitudes prohibited by the policy, or takes his own life contrary to a stipulation therein, or ceases to pay premiums, the right of
the beneficiary will be rendered nuga tory7.8 There is yet one phase of the subject introduced in Re Herr, supra, which is still to be considered, namely, the power reserved by the insured to change his beneficiary. This power has a very important influence in the decisions and its presence tends to nullify to a con siderable extent the protection to the beneficiary sought to be obtained by the state statutes of exemption. The question seems to have arisen for the first time in Re Orear, 178 Fed. Rep. 632. In that case a number of policies issued to the bankrupt contained a power which might be exercised by him to appoint a different beneficiary from the one named in the policy. On this point the court said : — All of the policies in controversy contained this provision: "The insured may nominate a beneficiary or beneficiaries hereunder, and may also change any beneficiary or beneficiaries nominated by him or named in the policy. Under this provision the insured was unequivo cally given the right and power to change the beneficiary in each policy without the concur rence of the beneficiary named in the policy and even against the will of such beneficiary. Not only so, but this power was one which he could exercise for his own benefit, and one which he could exercise to make the policy payable to his own estate. . . . This being so, the policies were property which under section 70a passed to the trustee upon the adjudication of Orear as a bankrupt.
This case has been followed in Re Herr, supra, in Re Dolan, 182 Fed. Rep. 949, and although not referred to in Re Loveland, 192 Fed. Rep. 1005, un doubtedly influenced the result reached in that case. The doctrine of Re Orear is the prevailing one, but it has been strongly criticised and on principle it does not seem to be in accord with the accepted views on powers. Pol 8 Vance on Insurance, 396; United States Casually Co. v. Kacer, 169 Mo. 391.
