Background
John Burchard, needing money for surgery, sold his life policy to Dr. Grigsby for $100 plus Grigsby’s promise to pay the remaining premiums. Grigsby had no interest in Burchard’s life. After Burchard died, the insurer paid the money into court and asked it to decide between Grigsby and Burchard’s estate.
What the Court held
Writing for the Court, Justice Holmes explained that insurance bought on a life in which the buyer has no interest is a wager, and the law forbids it. But when the owner of a valid policy on his own life chooses to transfer it, that danger largely disappears. Life insurance had become a recognized form of investment and saving, and denying the owner the right to sell it would sharply reduce its value. The assignee was entitled to the proceeds. The Court separated this from cases where a person with an insurable interest lends his name to cover what is really a stranger’s wager from the start.
Why it matters
Grigsby is the foundation for the modern life settlement market and the starting point for disputes over stranger-originated policies, such as PHL Variable v. Price Dawe.
Read the opinion
Grigsby v. Russell, 222 U.S. 149 (1911) (Justia).
Not legal advice. This page summarizes general rules and the specific statutes cited. Your policy's wording, the state whose law applies, and whether the coverage came through an employer can all change the result. See the disclaimer and editorial policy.