ERROR TO THE COURT OF APPEALS OF THE STATE OF KENTUCKY
White, McKenna, Holmes, Day, Hughes, Van Devanter, Lamar, Pitney, McReynolds
MR. JUSTICE PITNEY delivered the opinion of the court.
In September, 1907, plaintiff in error, an Illinois corporation organized under the general laws of that State applicable to life insurance, issued to one George McCormick, a resident of Louisville, Kentucky, two policies, each insuring his life in the sum of $1,000, for the benefit of his nephew, Clarence Rupp, if living, otherwise for the benefit of the executors of the insured. After the death of the insured, which occurred in the same year, the present action was brought by Rupp against the Company in the Jefferson Circuit Court at Louisville. His petition set forth his relationship to the insured, and beyond this showed no insurable interest. It averred that the policies were issued upon McCormick's application, who also paid the premiums thereon, and this without plaintiff's instance, request or knowledge. The summons was served upon the Insurance Commissioner of the State. Section 631, Kentucky Statutes, 1909, provides: "Before authority is granted to any foreign insurance company to do business in this State, it must file with the Commissioner a resolution adopted by its board of directors, consenting that service of process upon any agent of such company in this State, or upon the Commissioner of Insurance of this State, in any action brought or pending in this State, shall be a valid service upon said company; and if process is served upon the Commissioner it shall be his duty to at once send it by mail, addressed to the company at its principal office."
The defendant Company made a special appearance to the action and moved the court to quash the return upon the summons on the ground that it was a corporation organized and existing under the laws of the State of Illinois; that at the time the policies in question were issued it had applied to the Superintendent of Insurance of the State of Kentucky for a license to transact business in that State,
and in case such license was issued to appoint said Superintendent of Insurance its agent for service of process; that the application for license was pending for some time; and that it was during this time that the policies sued on were issued, but that the application for license was afterwards rejected by the insurance department of the State; that the Company never appointed the Superintendent of Insurance its agent for service of process, and never consented that he might be served with or accept such service on the Company's behalf.
The motion was overruled, and the company thereafter filed an answer in which, without waiving its objection to the jurisdiction of the court over it, but reiterating that objection, it set up sundry defenses upon the merits, including an allegation of fraudulent representations in the application pursuant to which the policies were issued, and a denial that the plaintiff had an insurable interest in McCormick's life. To certain paragraphs of this answer plaintiff demurred, and the Circuit Court, upon the ground that this demurrer rendered it proper and necessary to determine the sufficiency of plaintiff's petition, reviewed that pleading, and reached the conclusion that by the law of Kentucky the relationship of uncle and nephew did not constitute an insurable interest, that one who could not take out a policy because of lack of interest could not hold it if assigned to him after its issuance, and that the same rule prevented a person from taking out a policy of insurance upon his own life in favor of another having no insurable interest. Therefore the court sustained the demurrer as against the petition, and, plaintiff having declined to plead further, judgment was rendered in favor of defendant.
Plaintiff appealed to the Court of Appeals, which held (138 Kentucky, 18) that while according to the law of Kentucky one who obtains a policy of insurance upon the life of another must have an insurable interest in that life,
it is otherwise with respect to a policy taken out by a person upon his own life, he paying the premium for the benefit of another having no insurable interest, and that such a policy is not a wagering transaction but is valid. The judgment of the Circuit Court was therefore reversed and the cause remanded for further proceedings. Thereafter defendant filed a "second amended answer" in the Circuit Court, withdrawing by the court's leave "each and every allegation of the original answer and the first amended answer herein," and -- "without waiving its plea to the jurisdiction of this court of the person of this defendant in this action" -- set up that defendant was a corporation organized and incorporated under an act of the Legislature of the State of Illinois approved June 22, 1893, entitled "An Act to incorporate companies to do the business of life or accident insurance on the assessment plan, and to control such companies of this State and of other States doing business in this State," etc., which contains in § 9 the following: "No corporation doing business of life insurance under this act shall issue a certificate or policy upon . . . a life in which the beneficiary named has no insurable interest. Any assignment of the policy or certificate to a person having no insurable interest in the insured life shall render such a policy or certificate void." It was further averred that under this act defendant had no power to issue any policy of insurance upon the life of any person in which the beneficiary named had no insurable interest; that the plaintiff Rupp was the nephew of the insured McCormick; that Pupp had no insurable interest by virtue of such relationship or otherwise in the life of the insured, and that the policies sued on were null and void. There was a tender of the amount of the premiums paid and a denial of further liability. The answer invoked the "full faith and credit" clause of the Federal Constitution, averring that to compel defendant to pay the policies
sued on would be a failure upon the part of the State of Kentucky of give full faith and credit to the act of the ...