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After reading Tuesday’s assignment (specifically, the Appleman Treatise) I was left with several questions concerning exactly when insurable interest is established and the policy behind determining the rights of those said to possess such an interest.  

First, I found odd the case law establishing an individual’s right to purchase a life insurance policy on an ex-spouse.  From my understanding, according to Novern it is allowable for an ex to benefit from her former husband’s policy, assuming she did have insurable interest at the time of its inception (if they were married, affianced, living together, etc.), as long as he does not change her as his beneficiary.  That being said, it would make sense if her insurable interest in her ex would cease at the time of their divorce, again minus any pre-existing policies.  How does the court then rationalize the Meerwarth decision?  From the excerpt of this case we have in our reading, it seems that the court finds the requisite insurable interest though the marriage was dissolved before she attempted to obtain the policy; instead, the court disallowed her to obtain the policy on the ground that it would violate her ex’s right to privacy by forcing him to submit to a physical.  How would she have an insurable interest at the inception of the policy?  The reading mentions the “role of wife as creditor” before going on to discuss this case.  Are we to assume that she was obtaining the policy for his benefit and that is what gives her the interest?  

Second, in terms of the debtor-creditor relationship, I would be interested in learning more in depth the policy used to support the “creditor takes all” theory.  Why should a creditor take a windfall pay-out of a debtor’s policy?  How do “advances subsequent to the issuance of the policy,” as stated in  Baum, validate such a windfall?  Sure I may be biased, but the approach of Texas seems more in line with the public policy underlying both life insurance and contracts.  The creditor should have to account for the precise amount owed by the debtor and the collateral policy should serve only to reimburse them for that amount.  Also, I find it really interesting that a spouse can be a creditor.  Would a child support lien have the same effect of the judicially decreed settlement in Urguhart to make the owing spouse a debtor of the custodial spouse? 

In sum, I have been fairly impressed with how practical the law is in this area.  So far, it seems equity plays a more vibrant role than strict contractual interpretation.  I would not be surprised, however, if that statement becomes untrue in the context of business/employment theories.


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