The Law of Burial Insurance
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Vanderbilt Law Review Volume 5 Issue 4 Issue 4 - June 1952 Article 6 6-1952 The Law of Burial Insurance Charles T. Cady Follow this and additional works at: https://scholarship.law.vanderbilt.edu/vlr Part of the Insurance Law Commons, and the State and Local Government Law Commons Recommended Citation Charles T. Cady, The Law of Burial Insurance, 5 Vanderbilt Law Review 800 (1952) Available at: https://scholarship.law.vanderbilt.edu/vlr/vol5/iss4/6 This Note is brought to you for free and open access by Scholarship@Vanderbilt Law. It has been accepted for inclusion in Vanderbilt Law Review by an authorized editor of Scholarship@Vanderbilt Law. For more information, please contact [email protected]. NOTES THE LAW OF BURIAL INSURANCE I. INTRODUCTION Burial insurance, used in the sense of a risk-shifting device to aid the less fortunate, has existed in the form of friendly societies from time im- memorial. 1 Indeed, it is probable that this noncommercial type was the first form of insurance. There is some evidence that such societies existed in Egypt, 2500 B.C.2 There exists more concrete evidence that they thrived in ancient China, India, Greece and Rome. 3 The Grecian societies, although largely religious and ritualistic, had as their main function the guarantee of a decent burial for their members.4 The existence around A.D. 117-138 of Roman societies, called collegia, is established beyond doubt by the finding of a marble bearing an inscription setting forth the by-laws., Although there is no documentary proof, it is probable that the societies survived the in- vasions and continued to exist in their ancient form until they were revived by the medieval guilds with many attributes of our modern mutual benefit organizations. 6 In modern insurance, the means for providing burial insurance have taken several forms. The first type is a standard policy written by regularly con- stituted life insurance companies under which the insured is guaranteed at death a funeral worth a fixed sum. These policies usually provide for a cash payment in lieu of services at the death of the insured, or can be surrendered for cash during the life of the policy7 The second type is entirely different. 1. Vance, Early History of Insurance Law, 8 COL. L. REv. 1, 3 (1908). 2. TRENERRY, TE ORIGIN AND EARLY HISTORY OF INSURANCE 173 (1926). This seems somewhat "far-fetched" to one noted authority on insurance. PATTERSON, CASES AND MATERIALS ON INSURANCE 80, n.2 (2d ed. 1947). 3. Vance, supra note 1, at 3. 4. Ibid. 5. Id. at 4, n.13: "An Association (collegium) constituted under the provisions of a decree of the Roman Senate and People, to the honor of Diana and Antinous, by which decree the privilege is granted of meeting, assembling and acting collectively. Anyone desiring to pay a monthly subscription for funeral rites may attend the meetings of the Association; but persons are not allowed, under the color of this Association, to meet more than once a month, and that only for the purpose of contributing for the sepulture of the dead. Ye who are desirous of becoming new members of this Association, first read through its laws carefully, and so enter it as not afterwards to complain, or to leave a subject of dispute to your heirs. It is absolutely required by the Association that anyone wishing to enter, shall pay an entrance-fee of one hundred sesterces, give an amphora of good wine, and pay as monthly dues five asses... " 6. PATTERSON, CASES AND MATERIALS ON INSURANCE 80 (2d ed. 1947) ; Vance, supra note 1, at 4. 7. See, e.g., specimen policies of Cosmopolitan Life Insurance Company, Memphis, and Consolidated Insurance Company, Nashville. The provision for cash Instead of burial services is required by some state statutes. See note 67 infra. 800 19521 NOTES This involves an arrangement whereby a group of people associate and provide for the burial of any member from a fund accumulated by regular payments or assessments from each member. Usually such associations are organized by enterprising undertakers who contract with the association to furnish the burial services for a stipulated price.8 A third type is worthy of mention. An insured under an industrial life policy can be assured of a burial by assigning the policy to an undertaker who will agree to furnish funeral services for the face amount of the policy.9 Since this is not strictly burial insurance but is otherwise orthodox industrial insurance, an extended discussion of this type is not warranted. Many problems of state regulation arise in connection with the two primary types, especially burial associations, where the possibilities of fraud make the need for regulation acute. It is the purpose of this Note to indicate and discuss some of these problems. Cases will be collected and discussed concerning the courts' treatment of the somewhat unrelated aspects of burial insurance contracts. The principal reason for choosing this topic for discus- sion is the fact that it has been practically ignored by legal writers. Texts and encyclopedias have treated it but briefly, and law reviews have almost com- pletely neglected it. Generally, state legislatures have been apathetic in acting on the problem. Yet its importance and scope cannot be minimized. Burial insurance has a strong natural appeal to the poor because of the horror conjured by the thought of being buried in potter's field. According to one study, in several southern states in 1943 one half the total population held membership 10 in burial associations. II. APPLICATION OF GENERAL INSURANCE STATUTES Burial insurance is life insurance since it is determinable upon human life and is dependent upon that contingency.'1 This is the almost universal holding of courts faced with the problem of applying state regulatory insurance laws to arrangements guaranteeing a burial at death.' 2 Burial insurance has been defined as "a contract based upon a legal consideration, whereby the obligor undertakes to furnish the obligee, or one of the latter's near relatives, 8. 1 APPLEMAN, INSURANCE LAW AND PRACTICE § 14 (1941). 9. See, e.g., assignment form of Life and Casualty Insurance Co. However, an assignment of this type is void by statute in Ohio as being in restraint of trade. See Robbins v. Hennessey, 86 Ohio St. 181, 99 N.E. 319 (1912), construing and holding constitutional what is now OHIo GEN. CODE ANN. § 666 (1946). 10. See PATTERSON, CASES AND MATERIALS ON INSURANCE 29 (1947), citing Botts, A New Development i, Burial Insurance, 21 JOUR. Am. INS. 9 (1944). 11. 1 JOYCE, INSURANCE § 336d (2d ed. 1917). 12. E.g., State v. Willett, 171 Ind. 296, 86 N.E. 68, 23 L.R.A. (N.s.) 197 (1908); Renschler v. State, 90 Ohio St. 363, 107 N.E. 758, 1915D L.R.A. 501 (1914) ; Oklahoma Southwestern Burial Ass'n v. State, 135 Okla. 151, 274 Pac. 642, 63 A.L.R. 704 (1928). See additional cases cited in note 27 in!ra. VANDERBILT LAW REVIEW [ Vol,, 5 at death, a burial reasonably worth a fixed sum."' 3 The fact that a burial policy is payable not in money but in services equal in value to money is not sufficient 4 to exclude it from classification as a life insurance contract.1 Of the many different standard forms of life insurance, burial insurance, as written by regularly constituted companies complying with state insurance laws, is most nearly like industrial insurance. The two have these features in common: (1) strong appeal to the low income group, (2) small or limited amount for which each type is written, and (3) small premiums usually collected at short periodical intervals by agents of the insurer. It has been said that industrial insurance amounts in fact to burial insurance because the benefits usually accrue to the insured rather than to his beneficiaries. 15 As insurance, contracts for burial benefits are perfectly valid provided there is corhpliance with state' regulatory laws.'0 These contracts are regarded favorably by the law as being socially desirable. 17 Few problems of state regulation arise out of the standard burial policies. These policies are usually written by regularly constituted life insurance companies at standard rates. Thus there is no twilight zone in which it is doubtful that state insurance laws are applicable, as is sometimes the case with burial associations. The insurer's books are subjected to periodical inspection by the insurance commissioner, and the provisions of the policy are carefully scrutinized. Since reserve requirements guaranteeing financial re- sponsibility are rigid under state insurance laws, companies offering this type of policy overcome one of the chief objections to burial associations.18 Companies entering this field have found it lucrative since they get no competi- tion from the large standard life companies which have chosen not to deal in this type of contract, probably because of the small amount involved and the necessity of dealing with a local undertaker.'0 Where volume of business and convenience warrant it, a company may organize and incorporate its 13. 1 JoYcE, INSURANCE § 7c (2d ed. 1917). See Sisson ex rel. Nardolillo v. Prata Undertaking Co., 49 R.I. 132, 141 Atl. 76 (1928). 14. See Benevolent Burial Ass'n v. Harrison, 181 Ga. 230, 181 S.E. 829 (1935), where it was held that an association offering funeral services was engaged in the life ,insurance business even though the statutory definition of a life insurance policy was a contract to pay a certain amount of money upon death. And see 1 CoucH, CYCLOPEDIA OF INSURANCE LAW § 32 (Cum.