Beresford v Royal Insurance Co Ltd [1938] AC 586 is an important decision of the House of Lords that deals with the intersection of contract law and public policy. The case highlights that even when a contract is lawful and valid on its face, it may still be rendered unenforceable if enforcing it would be contrary to public policy.
In Beresford v Royal Insurance Co Ltd, the court examined whether an insurance policy could be enforced where the insured had committed suicide, which at the time was considered a criminal act under English law.
Facts of Beresford v Royal Insurance Co Ltd Case
In Beresford v Royal Insurance Co Ltd, Major Rowlandson took out five life insurance policies with Royal Insurance Co Ltd in 1925. These policies collectively amounted to £50,000. Each of the policies contained a clause stating that if the insured died by his own hand, whether sane or insane, within one year from the commencement of the assurance, the policy would be void.
The clause clearly limited the insurer’s liability only in cases where suicide occurred within the first year of the policy. Outside this one-year period, the wording of the policy did not exclude liability for death by suicide.
In 1934, which was well beyond the one-year period mentioned in the policy, Major Rowlandson shot himself. Following his death, the claimant, acting as the administratrix of his estate, brought an action against Royal Insurance Co Ltd to recover the amount assured under the policies.
Thus, in Beresford v Royal Insurance Co Ltd, the key factual background revolved around a valid insurance contract, a suicide occurring outside the exclusion period, and a subsequent claim by the deceased’s estate.
Issues
The central issue in Beresford v Royal Insurance Co Ltd was:
- Whether the insurance company was liable to pay the assured sum under the policy when the insured had intentionally committed suicide.
A related issue that arose was:
- Whether a lawful contract could be rendered unenforceable on the grounds of public policy, particularly where enforcement would allow a person or their estate to benefit from a criminal act
Arguments and Contentions
The defendants, Royal Insurance Co Ltd, argued that since Major Rowlandson had committed suicide, the policies had become void. Their position was based on the fact of suicide itself.
On the other hand, the claimant contended that the policies should be enforced. Since the suicide occurred well after the one-year exclusion period, the terms of the contract, on their face, did not prevent recovery. Therefore, under the proper construction of the policy, the insurer had agreed to pay even in cases of intentional suicide occurring after the initial one-year period.
In Beresford v Royal Insurance Co Ltd, the dispute therefore involved both contractual interpretation and broader considerations of public policy.
Beresford v Royal Insurance Co Ltd Judgment
The House of Lords, in Beresford v Royal Insurance Co Ltd, held that on the true construction of the contract, the insurance company had indeed promised to pay the assured sum even if Major Rowlandson intentionally killed himself while sane, provided that the act occurred after the one-year exclusion period.
However, despite this interpretation of the contract, the court refused to enforce the claim. The House of Lords held that allowing the claim would be contrary to public policy.
Thus, although the contract was lawful and valid, it was ultimately held to be unenforceable in the circumstances.
Reasoning of the Court in Beresford v Royal Insurance Co Ltd
The reasoning in Beresford v Royal Insurance Co Ltd centred on the doctrine of public policy and the principle that no person should benefit from their own wrongdoing.
At the time, suicide was regarded as a crime under English law. The court considered that allowing the estate of Major Rowlandson to recover under the policy would effectively allow a benefit to arise from a criminal act.
The House of Lords referred to earlier authorities, including Crippen’s Case [1911] P 108, where it had been established that a person’s estate could not benefit from a crime committed by that person. This reinforced the broader legal principle against profiting from wrongdoing.
Lord Atkin’s statement in Beresford v Royal Insurance Co Ltd is particularly important. He observed:
“I think that the principle is that a man is not to be allowed to have recourse to a Court of Justice to claim a benefit from his crime whether under a contract or a gift… to hold otherwise would in some cases offer an inducement to crime or remove a restraint to crime”.
This reasoning emphasised that courts must not assist in enforcing claims that would undermine the law by encouraging or failing to deter criminal behaviour.
Conclusion
In conclusion, Beresford v Royal Insurance Co Ltd [1938] AC 586 is a leading authority on the doctrine of public policy in contract law. The House of Lords recognised that, on a strict interpretation, the insurance policy covered the situation in question. However, the court refused to enforce the contract because doing so would allow the estate of the insured to benefit from an act that was considered criminal at the time.