This is аn appeal from a judgment which apportioned the proceeds of a group term life insurance policy between the widow of the decedent-insured and the named beneficiary of the policy, who was a former wife of decedent. Proceeds were divided on the basis of the time each hаd an insurable interest in the life of the decedent. We reverse and remand.
Elmer Hatch, the decedent, and Viola Hatch (now Johnson) were married for 11 years and 3 children were born of that marriage. They were divorced in 1957 with Viola being awarded custody of the three children, each of which has now reached mаjority. On March 18, 1961, Elmer Hatch applied for and received a group term life insurance policy as an inci *337 dent of his employment with the Union Pacific Railroad. At that time he was single and named his former wife, Viola Hatch, as beneficiary of the policy. On December 30, 1961, Elmer Hatch married Cora Ash-backer and onе child has been born of that marriage. On July 23, 1962, Viola Hatch married Martin A. Johnson and on June 3, 1964, Johnson adopted the three children born of the marriage of Viola and Elmer Hatch. Elmer Hatch died on June 25, 1972 never having changed the initial designation of his first wife as named beneficiary of the insurance policy.
Although the insurance рremiums were paid by Union Pacific as a fringe benefit of Elmer Hatch’s employment with the Union Pacific Railroad, nevertheless, it was stipulated between the parties that from December 30, 1961 (the marriage of Elmer Hatch and Cora Ashbacker) until the death of Elmer Hatch on June 25, 1972, the premiums for the insurance coverage were paid from the community assets of Elmer Hatch and Cora Ashbacker Hatch. Cf.
Givens v. Girard Life Ins. Co. of America,
Upon the death of Elmer Hatch both Johnson (his ex-wife, the named beneficiary) and Hatch (his widow) filed claims for the $10,000 proceeds of the policy. Travelers, the insurer, did not pay either party but rather filed this action in inter-pleader pursuant to I.C. § 5-321 and I.R. C.P. 22, joining both Johnson and Hatch as defendants. Johnson answered and cross-complained for the proceeds of the policy. Hatch answered and cross-complained asking for the proceeds of the insurance poliсy or in the alternative that she receive one-half of the proceeds of the policy from either the insurer or from Johnson. Travelers deposited the $10,000 with the court and, upon motion, was discharged from the case and also awarded its attorney’s fees and costs to be paid from the $10,000 deposit.
The triаl court on essentially uncontroverted and stipulated facts entered its memorandum decision and judgment on the basis of the “insurable interest” which Viola Johnson and Cora Hatch had in Elmer Hatch’s life. It held that Johnson, as the mother of Elmer Hatch’s children, had an insurable interest until June 30, 1964, when those children were adopted by her thеn husband Johnson. Following that date, the court held no insurable interest to exist in Johnson but rather to exist in his wife Cora until the time of death. The court, therefore, after deducting the $432.50 awarded to Travelers, prorated the policy amount to the parties on the basis of time each had an insurable interest in the life of Elmer Htаch, awarding Johnson $2,713.-20 and Hatch $6,854.40. This appeal by Johnson (the ex-wife) is taken from that judgment.
The facts herein are not controverted and the only issues presented are the legal and policy questions which flow from these facts. What interest, if any, has a community acquired in a term life insurance policy by virtue of the fаct that the premiums are paid from community assets ? May one spouse make a “gift” of community property assets without the knowledge and/or consent of the other spouse? If such a “gift” may be made by means of a life insurance policy, is that policy void or voidable by the other spouse following the death of the donor and if void or voidable, to what extent?
We note at the outset that neither Johnson nor Hatch argue in favor of upholding the decision of the trial court on its theory of “insurable interest.” No authority is cited in support of that theory of the trial court and inferentially at least each of the *338 parties concede error in so dividing and apportioning the proceeds of the policy. Appellant Johnson principally argues that because the insurance policy was acquired while decedent was a single man, it originally had and maintained the status of separate property notwithstanding the later mаrriage of the decedent and the utilization of community assets thereafter to pay the premiums. Appellant further argues that at best the widow Hatch is entitled to recovery of only one-half of the amount of the premiums paid following her marriage to the decedent. Respondent on the other hand argues that sinсe the premiums were paid with community assets, the policy and the benefits payable thereunder were community property. She asserts that notwithstanding the decedent’s status as manager of the community property he could not make a gift of substantial community assets without the knowledge and consent of the spouse and that any other rule will invite fraud upon a wife. In the alternativе respondent argues that she is entitled to at least one-half of the proceeds of the policy.
The policy implications of this case present problems of great conceptual difficulty. A life insurance policy is most usually a contract between an insurer and ,an insured that upon the paymеnt of premiums and the occurring of the death of the insured a certain sum will be paid to a designated beneficiary. By and large there has been permitted great freedom in entering such contracts and in naming the beneficiaries of the proceeds. However, when the premiums for a policy insuring one spousе are paid from community assets and the policy designates a non-spousal beneficiary, the question arises as to whether the disposition of the proceeds should be in accordance with the law of community property or with the terms of the policy. This question has received considerable schоlarly attention in community property states with differing results. See: Schwartz, Gifts of Community Property: Need for Wife’s Consent, 11 U.C.L.A.L.Rev. 26 (1963); Huie, Community Property Laws as Applied to Life Insurance, 17 Tex.L. Rev., 121 (1939), 18 Tex.L.Rev. 121 (1940) ; Hokanson, Life Insurance Proceeds as Community Property, 13 Wash.L. Rev. 321 (1938); Luccock, Life Insurance as Community Property, 16 Wash.L.Rev. 187 (1941). See alsо, cases collected at
Two dominant concerns arise; first, the protection of the surviving spouse from dissipation of the community property through the vehicle of insurance and second, permitting a married person to some extent protect the natural objects of his affection from disaster through the death of one upon whom they might be dependent. The resolution of this problem in favor of either of these conflicting interests necessarily presents harsh consequences for the unprotected party.
The resolution proposed by the aрpellant leads to the conclusion that the source of the first premium payment defines the character of the contract. Convenient as this proposition may appear it all but avoids the central policy considerations and leaves unanswered the question of what interest results from the use of community assets to pay the premiums.
Respondent’s position is likewise not determinative of other questions which can arise. Simply stated she would have us hold that there exists a “vested” right of some kind in the proceeds of a life insurance policy when such policy has been purchased with community funds. However, therе is a logical gap in concluding that a vested interest arises prior to the contingency of death which is the fundamental basis of the contract. If that be true, what happens when, in the simplest of cases, the insured merely stops paying the premiums ? Or, when the community is dissolved by divorce, can the non-insured spouse prоperly claim that the policy proceeds, as distinguished from cash or loan value, should be taken into consideration in making a division of property? More *339 over, if the community has an interest in the policy and the non-insured spouse predeceases the insured, should the law require that the proceeds of the policy be controlled by testamentary disposition?
In other community property jurisdictions there are wide differences of policy and conclusions on the questions presented by this case. In Louisiana, a husband may evidently insure his life in favor of some person other than his spouse, pay the premiums thereon from community аssets and the surviving wife may not claim the proceeds of the policy as community property.
Pearce v. National Life & Accident Ins. Co.,
A somewhat mid-view is taken by California where the rule seems to be that naming a third person as beneficiary when the policy premiums are paid with community property amounts to a gift of community property which the husband cannot make without the wife’s consent and such gifts while not void are voidable as to one-half. The surviving spouse following the death of the insured is entitled to recover one-half of the proceeds of the policy as community property.
New York Life Ins. Co. v. Bank of Italy,
The rule in Texas is still somewhat different. It permits a husband to insure his life, pay premiums with community funds and designate natural objects of his affection, such as parents or children, as beneficiaries. If the community funds so expended for premiums are not unreasonably out of proportion to other community assets remaining, the surviving spouse has no recourse. However, if the conduct of the insured husband indicates a design to defraud the wife, she may recover the proceeds of the policy.
Givens v. Girard Life Ins. Co. of America,
We are not completely without precedent in Idaho.
Gem State Mutual Life Assn. v. Gray,
However,
Anderson v. Idaho Mutual Benefit Assn.,
“It is the general rule in community property jurisdictions that a life insurance policy, insuring the life of either spouse, acquired after marriage and upon which the premiums are paid with community funds, is community property. * * * Where there is no consideration and the change оf the beneficiary is purely a gratuity, it is regarded as a gift of community property and, if substantial in amount and done without the wife’s consent, it is voidable by her. * * * Our conclusion is that the change of beneficiary by insured was an attempt to make a gift of the proceeds of the policy to the new beneficiary. If the premiums were paid with community funds the proceeds would be community property and the insured could not make such a gift without the consent of her husband, and if she did so without his consent, the gift is now, after her death, voidable by him as to his half interest therein.” at 377-380,292 P.2d at 762 .
Although there are factual differences between this case and Anderson, we are of the opinion that the legal doctrines enunciated there embrace the facts at bar. We, therefore, adopt the principles set forth in Anderson with the following caveats and restrictions.
Since the policy in the case at bar is a term life insurance policy, we need not determine if a property interest in that policy “vested” at the time of issuаnce or at the time when premiums were paid from community funds. As a term policy it had no value except in the event of the death of the insured.
Gaethje v. Gaethje,
We hold only that when an insurance policy is issued on the life of a married person without the knowledge or consent of the other spouse and (1) someone other than the insured’s spouse is the named beneficiary; and (2) no consideration passes between the insured and the named beneficiary; and (3) the premiums are paid with community assets; and (4) the insured dies; a community property interest exists as to one-half of the proceeds of the policy.
We emphasize that our conclusion herein respecting the ability of a spouse to make a gift of one-half of the proceeds of a life insurance policy is restricted solely to the arеa of life insurance. A sweeping determination of gift ability beyond the area of life insurance might do violence to the concept of community property and the need of one spouse to be protected against acts designed to deprive him or her of their share of the community property. It is established that one spouse at death may effectively dispose of his or her share of the community property to persons other than the surviving spouse. I.C. §§ 15-2-102, 15-3-101;
Kohny v. Dunbar,
Accordingly, we reverse and remand this case for distribution of the proceeds con *341 sistent with the above opinion, subject to an award of reasonable attorneys’ fees and costs to the respondent insurer.
All parties to bear their own costs on appeal.