Disposition of Life Insurance Proceeds When Owner Beneficiary Murders the Insured: Estate of Draper v. Commissioner

A beneficiary of a life insurance policy who has murdered the insured generally is barred from receiving the proceeds of the policy covering the life of the deceased. This rule reflects the common law maxim that no one shall be permitted to profit from his own wrong. Some courts have also denied the beneficiary recovery on the ground that it is unreasonable to hold that the insurer assumed the risk of the beneficiary's intentional killing of the insured. Other courts rely primarily on the rationale that public policy forbids construing contracts in a manner that encourages or rewards crime. Although these principles establish that a murderer should not receive the proceeds as beneficiary of a life insurance policy, they do not determine specifically who should receive those proceeds. In Estate of Draper v. Commissioner, the First Circuit Court of Appeals ruled that where an owner beneficiary murders an insured, the insured's estate is entitled to the benefit of the insurance proceeds. While the court of appeals ultimately confronted the issue of determining estate tax liability, resolution of that issue necessitated a detailed analysis of the underlying rights and liabilities of the various parties involved. This Note will focus on the problems attending disposition of proceeds of a life insurance policy when the owner beneficiary, who was the contracting party, has intentionally murdered the insured. Resolution of the conflicting claims of the parties requires analysis of the legal and equitable interests of the insured, the insurer, and the owner beneficiary. This analysis will suggest that the proper accommodation of the interests considered in Draper depends upon recognition of the legal significance of the beneficiary's ownership of the policy. The principle that one should not profit by his own wrong should not be extended to deprive the murderer of his pre-existing property rights, as owner, in the cash surrender value of the policy.