Crum v. Jackson National Life Insurance Company

In 1999 a man named Kelly Couch bought a $500,000 life insurance policy from Jackson National Life Insurance Company, falsely telling the company he was healthy when he actually knew he was HIV-positive. He intended from the start to sell the policy on the secondary market, and eight months later he did sell it to Sterling Crum, who knew about Couch's HIV status. After Couch died, Crum tried to collect the death benefit, but Jackson refused to pay and sued, arguing the policy was an illegal bet on a human life and therefore void from the start. A federal trial court agreed with the insurance company, and the case reached the United States Court of Appeals for the Eleventh Circuit, which asked the Supreme Court of Georgia to clarify what Georgia law requires. The Supreme Court of Georgia held that Georgia's insurance statute, not old case law, controls this question, and that statute does not ban a person from insuring his own life with a private plan to later sell the policy, as long as no third party helped arrange the policy in the first place.

Under Georgia's insurable-interest statute (OCGA § 33-24-3), a life insurance policy that a person takes out on his own life is not an illegal wagering contract merely because he privately intended to sell it later to someone with no financial stake in his life, so long as no third party was involved in getting the policy issued in the first place.

The decision affects people who buy and sell life insurance policies on the secondary, or viatical, market, including terminally ill policyholders seeking cash and investors who purchase such policies. Insurance companies in Georgia can no longer void these policies just because the original buyer privately planned to sell.

Certified question answered

1. The court explained that whether a life insurance policy is an illegal bet on a human life is decided by applying Georgia's insurable-interest statute (OCGA § 33-24-3), which requires that whoever benefits from a policy on someone else's life have a genuine financial or emotional stake in that person's continued life, rather than by a freestanding public-policy rule.
2. The court examined the statute's text and found it plainly allows a person to insure his own life and name any beneficiary he wants, regardless of whether that beneficiary has any stake in his life, and it only voids policies taken out 'upon another individual' without a third party's insurable interest, which does not cover a case where no third party was involved at the time the policy was procured.
3. The court traced the statutory history, noting that in 1960 the General Assembly repealed the older life insurance statutes and passed a new Insurance Code that adopted only some of the earlier court-made rules, so old decisions applying the repealed statutes cannot automatically be read into the current law.
4. Comparing the insurance company's cited older cases to the new statute's language, the court found that the broader rule the company wanted, barring policies bought with a mere private intent to later sell to someone without an interest, was not carried forward into the new statute, while a narrower rule against strawman schemes for a third party involved from the outset was consistent with the statute.
5. Because the statute's language does not include the intent-based limitation the insurance company argued for, and no surviving body of court decisions supports reading that limitation into the statute, the court concluded the policy here was not void simply because Couch intended to sell it before any third party was involved.

• life insurance
• viatical settlement
• insurable interest
• wagering contract
• certified question