The Life Assurance Act 1774 (14 Geo. 3 c.48, also known as the Gambling Act 1774) was an
Act of Parliament
Acts of Parliament, sometimes referred to as primary legislation, are texts of law passed by the Legislature, legislative body of a jurisdiction (often a parliament or council). In most countries with a parliamentary system of government, acts of ...
of the
Parliament of Great Britain, which received the Royal Assent on 20 April 1774. The Act prevented the abuse of the
life insurance system to evade
gambling
Gambling (also known as betting or gaming) is the wagering of something of value ("the stakes") on a random event with the intent of winning something else of value, where instances of strategy are discounted. Gambling thus requires three el ...
laws. It was extended to
Ireland
Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic Ocean, in Northwestern Europe, north-western Europe. It is separated from Great Britain to its east by the North Channel (Grea ...
by the
Life Insurance (Ireland) Act 1866, and is still in force. Prior to the Act, it was legally possible for any person to take out life insurance on any other person, regardless of whether or not the beneficiary of the policy had any legitimate interest in the person whose life was insured. As such, the system of life insurance provided a legal loophole for a form of gambling: an insurance policy could be taken out on an unrelated third party, stipulating whether or not they would die before a set date, and relying on chance to determine if the "insurer" or "policy-holder" would profit by this event.
Provisions
The Act has only four sections:
*Section 1 seeks to deal with these abuses by stipulating that henceforth no assurance is to be made on the life of any person or persons, or on any other event, where the person for whose use the policy was made had "no interest" in the matter, or if it were clearly done for the intent of "gaming or wagering", and that any assurance made contrary to this requirement was deemed
null and void
In law, void means of no legal effect. An action, document, or transaction which is void is of no legal effect whatsoever: an absolute nullity—the law treats it as if it had never existed or happened. The term void ''ab initio'', which means " ...
.
*To aid in preventing this, section 2 required that any such policy include the names of the persons who stood to benefit by it.
*Section 3 stipulated that, in all cases where the insured party had a
legitimate interest in the life or event, they did not recover more than the value of their interest from the policy, guarding against the related abuse of deliberate
overinsuring.
*For the avoidance of doubt, section 4 stated that the Act did not extend to legitimate insurances of ships, goods or merchandise. Gaming or wagering in relation to British ships and merchandise was already prohibited by the
Marine Insurance Act 1745
The Marine Insurance Act 1745 (19 Geo. 2 c.37) was an Act of Parliament of the Parliament of Great Britain. The Act has been described as "the first significant statutory intervention in substantive marine insurance law".
Background
The purpose ...
.
Sections 2 and 3 were amended by the
Statute Law Revision Act 1888, and the requirement in section 2 to name the beneficiaries of a life insurance policy was relaxed by section 50 of the
National Insurance (Amendment) Act 1972, to allow insurance for a defined class or description of person.
The defendant company in the important contract law case of ''
Carlill v. Carbolic Smoke Ball Company'' (1898) had attempted unsuccessfully to rely the sections to avoid paying the claimant the fixed sum (£100), to any customer, for suffering from influenza despite using the ball. Such defence would have required the law viewing the reward as more of an assurance policy than a term suitable for a goods contract.
Effects
The Act did not define what an "
insurable interest
Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence, without repairment or damage, of the insured object (or in the case of a person, their continued survival). A person has an ...
" was, and it has since been held as the definite expectation of suffering a financial loss directly due to someone's death. It is generally accepted that a person has an insurable interest in the life of someone financially supporting them - for example, in the life of their parent whilst they are still a juvenile - but that this interest can cease if the situation changes. In a 1904 case, it was held that a man insuring the life of his elderly mother to pay funeral expenses, where he was not at all dependent upon her, was void. However, note that as long as an insurable interest existed at the time the policy was created, it remains valid even if the interest later ceases.
A person is considered to have an unlimited interest in their own life or in that of their spouse, a case the law considers broadly equivalent; even if not financially dependent on the other, it is legitimate to insure against their death. This does not reliably extend to
cohabiting
Cohabitation is an arrangement where people who are not married, usually couples, live together. They are often involved in a romantic or sexually intimate relationship on a long-term or permanent basis. Such arrangements have become increas ...
couples, however: whilst many insurers will accept such policies, as they have not been tested in court some could be invalid. Since the 2000s strong moves have intensified to pass clear statutory provisions in this regard, which have not yet borne fruit. The applicability to spouses was extended to
civil partners under section 253 of the
Civil Partnership Act 2004
The Civil Partnership Act 2004 (c 33) is an Act of the Parliament of the United Kingdom, introduced by the Labour government, which grants civil partnerships in the United Kingdom the rights and responsibilities very similar to those in civil ...
.
The Act co-governs (with other law) policies of life insurance, including investments that are packaged under the umbrella of life assurance, such as
endowment policies used to pay off
mortgages
A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any ...
.
[For example, the investor was only able to recover his own plus any dependancy share of his mis-sold investment in ''Fuji Finance Inc v. Aetna Life Insurance Co Ltd'' Ch_173,_[1996">997Ch_173,_[19964_All_ER_608.html" ;"title="996.html" ;"title="997Ch 173, [1996">997Ch 173, [19964 All ER 608">996.html" ;"title="997Ch 173, [1996">997Ch 173, [19964 All ER 608. He could not claim against the input he made to his co-owner's stake save to the extent he can be deemed to be a direct dependant.]
References
External links
*
{{UK legislation
Great Britain Acts of Parliament 1774
Insurance legislation