Facts: Suulan Chem asked an acquaintance, insurance agent Thuan Wu to purchase an insurance policy on the life of her young son, Michael. Wu purchased a short term policy through Surety Life Insurance. Later, without telling Chem, he renewed that policy and bought additional policies on Michael’s life through New York Life and three other companies for a total of $750,000. Wu planned to murder the boy and his mother and collect the insurance proceeds. Wu orchestrated the eight-year-old boy’s killing but failed to kill Chem. He was convicted of murder. Chem sought to collect the $750,000, but all of the companies refused to pay. She sued and the court dismissed the case ruling that Wu, who took out the policies without Chem’s knowledge, had no insurable interest in Michael’s life.

Questions:

1. Are the insurance policies void for lack of insurable interest?

2. How does life insurance work?

3. Why does the law require that the person taking out a life insurance policy have an insurable interest in the life of the insured?

4. Chem was Michael, the insured’s, mother. Why doesn’t she have an insurable interest?

5. But she was Michael’s mother! The policies named her as principal beneficiary! Aren’t those reasons enough to honor her claim?

6. Why, then, was Wu able to purchase them? These insurers didn’t care about contract legality when they were taking payment for the policies’ premiums.

7. Could the court nevertheless award Chem some amount of damages to compensate for her loss?