Cornell University Library The original of tiiis book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/cletails/cu31924052826157 CORNELL UNIVERSITY LIBRARY 3 1924 052 826 157 A TREATISE ON THE LAW OF INSURANCE IN ALL ITS BRANCHES, ESPECIALLY FIRE, LIFE, ACCIDENT, MARINE, TITLE, FIDELITY, CREDIT, AND EMPLOYERS' LIABILITY WITH AN APPENDIX OF STATUTES -^FFECTING THE INSUR- ANCE CONTRACT AND'VcOLLEC^ION OF FORMS GEORGE RICHARDS, M. A. OF THE NEW YORK BAR, FORMERLY LECTURER ON INSURANCE LAW IN THE SCHOOL OP LAW OF COLUMBIA UNIVERSITY AND THE NEW YORK LAW SCHOOL Third Edition, Enlarged and Rewritten THE BANKS LAW PUBLISHING CO. NEW YORK 1916 COPYBIGHT, 1892, Bt GEORGE RICHARDS COPTBIBHT, 1892, Bt GEORGE RICHARDS COPTBIOHT, 1909, By GEORGE RICHARDS PREFACE TO THIRD EDITION This volume, like prior editions, is designed primarily for the class room, and is the result of an effort to unite and harmonize the distinctive advantages of the general treatise with those of the case- book. In the present revision, or rather rewriting of this book, the coarse print text and fine print footnotes combined cover a very wide range. Believing that the safe counsellor in insurance law is one who (1) is well grounded in general principles and (2) is imbued with the spirit of many modern decisions, the writer has endeavored to treat this difficult subject with a large measure of thoroughness; but the coarse print text, to which, if necessary, study may be limited, is concise. To the legal proposition in the text there has usually been added explanation in the text, and, where deemed desirable, copious -illustration from the reports. Some of these illustrative cases are briefly given, but in numerous instances and especially in dealing with abstruse doctrines and with important clauses of modern policies the case system is followed to this extent that, instead of cursorily describing the cases cited, the writer has extracted the facts from the original reports with all the detail considered desirable, and so far as relevant to the point in hand, and has given the exact holding of the court in juxtaposition with the precise statement of facts in concrete form. The opinions of the courts occasionally are given in the footnotes and often are reflected in the general ex- planations of the text. This compact but accurate method of pre- senting the whole law of an important case, while quite consistent, if time allows, with the use of a supplementary case volume, is for certain purposes thought to be the most effective. The ruling and principle involved are thus most quickly apprehended, most firmly impressed upon the memory, and from time to time most easily re- viewed. The student having before him the exact premises and the exact conclusion may profitably be left in certain instances to con- struct the argument for himself and perhaps may be encouraged to subsequently compare his own course of reasoning with the well- iii IV PREFACE TO THIBD EDITION rounded and more logical opinion of the learned court to be found in the official report.^ To the voluminous footnotes have been rele- gated incidental and subsidiary points, occasional quotations from the opinions of the courts, together with very numerous citations. From the cases cited the instructor will find material on almost any point, from which he can cull statements of fact to be submitted to his pupils, leaving it to them, if he choose, to discover the principle applicable and the judgment to be rendered.^ in part I, general principles of insurance law are stated, explained and illustrated. In part II, the provisions of the policies are con- sidered clause by clause in the phraseology and sequence in which they occur in the several instruments, only scant attention being given to those many cases, which construe forms of policies no longer used, and which often are positively misleading. This arrangement is believed to be the most convenient for student and practitioner. In appendix chapter I will be found classified lists of references to the statutes of the state legislatures affecting the contract, with a specimen statute serving to show the general character of each group. These were made up from the original statutes of all the states. Chapter II of the appendix contains all the standard fire policies, a New York standard life policy, the ancient Florentine marine policy, other forms of modern policies, a large collection of special clauses, and binders, applications, proofs of loss, etc. Grateful acknowledgments are due to kind friends for their as- sistance voluntarily and unstintingly rendered. Prof. Robert D. Petty of the New York Law School assumed the great labor of read- ing over all the book in galley proof and drew upon his long experi- ence in teaching this branch of the law to offer many suggestions of highest value. Prof. Francis M. Burdick of the School of Law of Columbia University was so good as to furnish a list of illustrative cases which he had found specially well adapted for use in the class room. Harrington Putnam, Esq., of the New York bar, reviewed the proof of the chapters on general average and marine insurance and thus courteously brought to bear his learning on those subjects, much more profound than the writer's. He also prepared the example of an adjustment in general average spread out with explanations in appendix chapter III. Willis O. Robb, Esq., secretary, general ad- juster and expert of the loss committee of the New York Board 1 If the opinion or argument of the court is always furnished, as in the case- book, less opportunity is ailorded for independent thought on the part of the pupil. 2 This is a mental exercise which the successful lawyer must frequently sum- mon to his aid. PREFACE to THIRD EDITION V of Fire Underwriters, kindly wrote for this book a summary on the perplexing subject of non-concurrent apportionments given in the footnotes at pages 440-443. He also tabulated instances of the op- eration of the eighty and one hundred per cent coinsurance clauses as set forth in appendix chapter III. The special thanks of the writer are likewise due to Messrs. Eli- jah R. Kennedy, chairman of the committee which framed the New York standard fire policy, E. H. A. Correa, vice president of the Home Insurance Company of New York, E. J. Richards, resi- dent manager of the North British & Mercantile Insurance Company, Cecil F. Shalleross, resident manager of the Royal Insurance Com- pany, Seelye Benedict of the brokerage house of Benedict & Bene- dict, Hendon Chubb, marine underwriter, Clarence H. Kelsey, presi- dent of the Title Guarantee & Trust Company and to the insurance departments of all the states. Citations were verified by Mr. James J. Dillon, assistant librarian of the Bar Association. The index was prepared and the appendix chapter I was brought down by the au- thor of a well-known text-book on insurance law. II The following observations are offered, especially to instructors, in explanation of the method which finds embodiment in this book. The law of insurance is a branch of the wide law of contracts, but in certain of its underlying principles and also in its application to modern forms of policies it stands in marked contrast with other branches of the law. In its first stages, many of its peculiar doc- trines were founded upon trade usages, and the early decisions in controversies relating to marine insurance were for the most part ren- dered by arbitrators or by commissioners, acting outside the jurisdic- tion of the common-law courts of England, decisions which doubt- less gave shape to trade usages and thus through the medium of custom powerfully influenced the action of the Westminster and American courts when subsequently they came to apply and further develop the doctrines of insurance law. The custom of closing insurance contracts by preliminary binding- slips, the doctrines of indemnity, insurable interest, and highest good faith, the exacting doctrine of warranties, the implied condition that facts material to the risk must be disclosed, the implied warranties of seaworthiness of the ship, and against deviation from the course, the unexpressed exception of deck cargo, the obligation inferentially VI PREFACE TO THIRD EDITION resting upon marine underwriters to make payment towards gen- eral average and salvage, the obligation inferentially imposed upon the insured to become coinsurer for the amount of deficit, if his marine insurance is short of value — all, at once usages and legal dogmas, justly impress us as unusual when compared with principles governing in other departments of law. Certain of these familiar features in the law of insurance, though exceptional, are comparatively clear and in the main easily applied, but there are other developments in this branch of the law, now to be adverted to, which are more confusing, and in their nature perhaps quite as exceptional. Partly as an offset to this rigorous doctrine of warranties already mentioned, and in order to evade forfeitures deemed to be unconscionable, the courts have leaned towards an interpretation of the clauses of all policies, which shall be favorable to the insured. And naturally some of the judges lean further than others. In this regard, we may as well confess, the aim has been, not so much to ascertain and give effect to the legal in- tendment of the language employed, even though that language be prescribed by legislatures, as to^ascertain what the assured might fairly suppose it to mean,* and to relieve him from fatal conse- quences of any innocent breach of contract regarded by the court as technical rather than substantial. Manifestly such methods of in- terpretation must give uncertain results, results which cannot be predicted with confidence in advance by any course of a priori reasoning.^ This purpose of the courts has found expression in various rules or doctrines, the application of which, by no means concordant in the many jurisdictions of this country, has also exhibited a varying degree of departure from common-law canons as applied to other branches of the law, and which together with the doctrine of war- ranty embrace perhaps the larger part of what may be called the active and operative law of insurance to-day. Among these doctrines four may be mentioned: (1) the general rule that all ambiguities in 1 See Hermann v. Mechanics' Ins. Co., 81 N. Y. 188; Donley v. Ghns Falls Ir- Co., 184 N. Y. 107; Tisdell v. New Hampshire Ins. Co., 155 N. Y. 163. 2 In the last volume of the Insurance Digest by Deitch, 424 appeals are cited, a large minority of which show reversals. The comfortable theory that famil'- arity with a volume of leading cases will enable one safely to forecast the further rulings of the courts in matters relating to insurance is a delusion. This cannot be done either by the tyro or by the experienced lawyer. Doubtless most of the defeated parties m the cases mentioned were honestly advised by counsel that they had a fair prospect of success on appeal. In general only cases appealed reach the reports. A few of these cases constitute no substitute for a comprehensive digest of all. PREFACE TO THIRD EDITION VU the policy are to be resolved in favor of the insured; (2) the subsid- iary rule that a statement in the policy of present condition is not necessarily to be construed as a warranty of continuance; (3) the subsidiary rule that to prevent forfeiture of the whole contract and to save a part, the fire insurance contract, though stated to be "entire," shall be held divisible; and (4) the doctrine known briefly as "parol waivers and estoppels." * Involving the application either of the stringent doctrine of war- ranty or of some one of the four countervailing principles just men- tioned, hundreds of insurance Utigations are brought to trial every year, many of the distinctions drawn by the courts in their determina- tion are exceedingly fine, many of the conclusions of law reached are necessarily more or leps arbitrary, many points are decided one way in some states and other ways in other states. Moreover, the attitude of the courts in this regard has found much more than an echo among the legislatures of all the states, and numerous enactments affecting the terms of the contract have been adopted which, while bringing relief to the insured in special instances, have at the same time further complicated this branch of the law. It becomes obvious at a glance that a few isolated instances, a few reported cases, no matter how carefully selected, fail hopelessly to stand for the great body of insurance law as developed in recent times. Each decision is but a pin point on a vast surface.^ By what means, then, may this sub- ject of insurance law best be presented to student and practitioner? by text-book or case-book, or by aid of a book which, in its plan, shall omit the inconveniences, and borrow the meritorious features of each of the others? However perfect law may be when theoretically considered, we know that as applied by human tribunals it must always be re- garded as an imperfect and inexact science, but also a progressive science. While the opinions of the justices must always be tinged with error, time will bring detection and amelioration as to most of these errors. Cases once called leading are constantly being dis- tinguished or modified, if not overruled. Nor do the opinions of the courts, which occupy the major part of the official reports, con- 1 So far as it allows terms of the policy to be abrogated by parol evidence of what was said and done prior to the closing of the contract, tnis may be called a modem American doctrine. 2 Many years ago, when engaged for a season in lecturing at a law school, the writer was asked by the dean to make a selection of insurance cases to use with the class. A painstaking effort was made to meet the request, but it was found impossible to cover the subject with any degree of success by that method alone. The task would be much more difficult now. Vm PREFACE TO THIRD EDITION stitute, strictly speaking, any part of the law. As the late James C. Carter, himself an advocate of the case system, has admitted, the law "is alone found in those adjudications, those judgments, which from time to time its ministers and its magistrates are called upon to make." * Furthermore, we must concede that a judge, in deciding the pre- cise litigated point before him, often has no right and little oppor- tunity to address himself to the broader task of a lecturer, and for this reason doubtless in part it is, that some of the most illustrious of judges feel moved to write commentaries and scientific treatises on subjects with which they are specially familiar, to the great advantage of students and the profession. The hypothesis that a jurist can produce the happiest results towards furnishing a scien- tific exposition of a subject in its entirety, when his aim is to offer persuasive arguments for the determination of the narrow issues usually involved in litigated cases, carries no compliment to the bench. Court opinions when severed from their particular environ- ment of fact are proverbially misleading. A few instances out of many that might be gathered from insurance case-books must here suffice. Two interesting cases, rightly decided by prominent state courts,^ are given at length to describe the nature of representations and warranties. From the opinions we read : " The essential difference between a warranty and a representation is that in the former it must be literally fulfilled or there is no contract." But how about all those many warranties, not before the court, which are condi- tions subsequent, and which, if broken, avoid the contract at com- mon law, only from the time of breach? Again, we read: "An express warranty in a policy of insurance is a condition precedent the bur- den of proving performance of which rests upon the assured." But how about the innumerable decisions establishing the rule for most jurisdictions that in the case of many classes of warranties, not be- fore the court, the burden rests upon the insurer to allege and prove a breach? Again, we read: "A representation on the other hand is not part of the contract but is collateral to it." But how about the many statements contained in poUcies which the courts have con- strued to be representations only and not warranties? And how about the statutes of many states expressly converting warranties into representations? Again, from Lord Mansfield's famous opinion 1 1 Yale Law Jour. 147. Under the French system of jurisprudence opinions at large are not reported, but only the decisions of the courts. 'McLoon V. Commercial Ins. Co., 100 Mass. 472; Aetna Ins. Co. v. Gruhe P Minn. 82. ' ' PREFACE TO THIRD EDITION IX on concealments in marine insurance,^ we read: "The governing prin- ciple is applicable to all contracts and dealings. Good faith forbids either party by concealing what he privately knows to draw the other into a bargain from his ignorance of that fact and his believ- ing the contrary," a statement permissible perhaps as argument, but, in giving the impression that the effect of concealment on the va- lidity of the marine policy is the same as its effect in the case of other dealings, certainly not a safe guide. Again, from a leading English case given on subrogation,^ we read: "The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. That is the fundamental principle of insurance, and if ever a proposition is brought forward which is at variance with it, that is to say which either will prevent the assured from obtaining a full indemnity, or which will give to the assured more than a full indemnity, that proposition must cer- tainly be wrong." But how about the well-established rule that if marine insurance is short, the insured is coinsurer for the deficiency, and therefore in ease of loss, though less than the face of his policy, he may be entitled to collect only a minute fraction of indemnity? It was not within the plan of the compilers to vouchsafe explanations or qualifications as a part of these case-books. That would savor of the general treatise; and so the first impressions of the student, who relies upon them without other helps, are likely to be erroneous, touching the very fundamentals of insurance law. Not only then is it obvious that the expert master can deduce general principles from a wilderness of reported cases more suc- cessfully than can his inexperienced pupil, but it seems to follow also that for an accurate presentation of unchangeable doctrines and of the maturest views of the courts on mooted points as well, a good text-book furnishes a useful adjunct in the class room.^ Only thus can the results of past labors of myriads of workers in the judicial field be garnered and sorted out for present use. Within the broad 1 Carter v. Boehm, 3 Burr. 1906. 2 Co«te«am V. Preston, 11 Q. B. D. 380. 3 For the view that the text-book must play its part and that a discussion of selected cases is not the only process of legal culture, see articles by the Hon. Ed- ward J. Phelps and Prof. Christopher G. Tiedeman, 1 Yale Law J. 139, 150; Prof. .John Wurts, 17 id. 86; the Hon. Simeon E. Baldwin, 14 Harvard Law Rev. 258; Dean Chas. F. Carusi, 2 Am. Law School Rev. 213. X PREFACE TO THIBD EDITION scope of a general treatise principles can be concisely stated and systematically arranged, not only for purposes of study in the first instance, but also for subsequent reference and frequent review; the relations of different cases to one another can be compared and explained; decisions can be given with as great accuracy as in the official reports, but unincumbered by subsidiary points and volu- minous opinions; rulings seemingly inconsistent can be harmonized; historical developments can be briefly but adequately summed up, and many particulars and distinctions of greater or less importance which could not possibly be touched upon within the bounds of any selection of isolated cases, can be eniunerated or brought within the reach of general rules. Indeed, many legal doctrines are never more clear than when crystallized in the form of approved definitions. To this class in a measure belong the doctrines of insurable inter- est, seaworthiness and subrogation. A comprehensive treatment of these subjects with a few illustrative cases, especially border line cases, is more effective than a treatment by illustrative cases alone. The statement of the important rule that the insurance company, to serve an operative notice of cancellation under the New York stand- ard fire policy, must also tender the unearned portion of the pre- mium, if the premium has been collected, carries with it its meaning, and calls for little space in a book. On the other hand, such doctrines as warranty, proximate cause, waiver and estoppel, and others, when stated merely as abstractions, produce an impression of vagueness and haziness, and therefore any attempt to embody them in general rules must be accompanied by copious illustration and abundant application. Nevertheless, after all this is well done, we find that the application of such doctrines to concrete cases is not enough. The principles involved are so elusive and so difficult to master, that thorough explanation and analysis, in printed and permanent form, are required at the hands of someone who has made the tenor and trend of a perfect maze of decisions the subject of his special study and practice for a long term of years. What, then, is the criticism which the legal instructor may justly put upon the conventional text-book? Why did certain successful professors banish all general treatises from their class rooms some thuty-five years ago, actually discourage their pupils from consult- ing them and substitute in place of them voltunes of selected cases transcribed from the official reports? * Why did a high exponent of their views, the dean of a law school, dispose of all our text-books 1 See articles by Dean William A. Keener, and Prof. John C. Gray 1 Yale Law J. 143, 159. PREFACE TO THIRD EDITION xi with the published assertion, "The opinion of the court, giving the reasons for the conclusion reached, is really the only authoritative treatise which we have in our law " ? * The answer is not far to seek. The usual text-book does not limit itself to a statement of general principles or rules. It devotes the larger part of its space to a de- scription of a multitude of actual decisions separately noticed. The law of insurance is composed of upwards of thirty thousand reported cases, in the English language, to which must be added a great body of statutory law affecting the contract and the relations of the parties. Obvioxisly there must be condensation of some sort for the use of both student and practitioner. In the case-book a comparatively small number of cases are spread out more at length.^ In the text-book the abridgment is rather in the form and substance of every case. In the latter, the author endeavors in a few words of his own to give the pith and point of each case. This description in many instances owing to brevity is indefinite. The result is well-nigh a series of abstractions lacking not only perspective and color but also pre- cision. Nobody feels full confidence in such a meagre description of a case, convenient though it is for ready reference, until he has looked up the original in the reports to ascertain the exact scope of the decision. Even the accomplished barrister is never content with a perusal of his attorney's brief, but must resort to the official reports to make sure of the cases described. Accordingly, the conclusion was reached by a few teachers that students should be referred exclusively to original sources of au- thority supplemented by oral explanations. It was found by ex- periment, and must be conceded, that the official statement of facts, together with the precise holding of the court based upon them, makes a much more interesting and instructive subject for debate in the class room than a secondhand epitome of a case which amounts to little more than an abstract generalization. This revolt from the use of the text-book, however, went to a needless extreme in the other direction. Many conspicuous advantages of the general treatise were thus altogether lost. Students were overwhelmed with a mass of material, put together in volumes, which they under- stood fairly well, as they studied it from day to day, but which they could not carry in mind and which they were discouraged, by the magnitude of the task, from attempting to review. Index, table 1 1 Yale Law J. 145. 2 But it must be remembered that the official report is only an abridgment, made from the record at the discretion of the reporto', who may not be an expert in a particu^ branch of law. Xll PREFACE TO THIRD EDITION of contents, and syllabus, all were deliberately eliminated from some of the case-books. Definitions, general principles, rules, and explana- tions, which might have been concisely and admirably stated in the language of the learned editor were also omitted out of deference to the main object sought to be attained.* In spite of a bewildering number of selected reports, only a part of the required ground could ever be covered by the new method. The larger portion of each compilation was occupied, as in the official reports, with opinions voluminous, though often curtailed, separating the statements of fact from the decisions rendered by a long course of reasoning, only the drift of which could be remembered. Even points of counsel were often transcribed from the reports. In consequence, we find that in the insurance case-books little space is left for treatment of the clauses of the standard and other modern policies which con- stitute the principal subject of inquiry by our cHents. Reasons and explanations can be provided by the case method only as they chance to be given in reported cases. Thus in these insurance collec- tions we find no case explaining why the peculiar doctrine of war- ranty was adopted, none explaining the marked difference in the attitude of the courts towards marine and towards fire underwriters, none contrasting the effects of a transfer by subrogation and a trans- fer by abandonment. Yet one of these volumes of cases numbers over eleven hundred and sixty pages. Take any practical and important topic you may choose — the ap- praisal clause of the New York standard fire policy, the pro rata clause as applied to non-concurrent apportionments, the application of coinsurance clauses, the legal rights and relations existing between insured owners and insured first and second mortgagees and their respective insurers, assessments valid and invalid, waiver and es- toppel, — study only the necessarily sparse selection of cases spread out at length in the best case volume of practicable dimensions that human skill can devise, and then ask yourself whether it is possible out of such slender resources to gain anything approaching an ac- curate conception of that aggregation of decisions known as "the law." Will it be as sound a conception as one based upon the wealth of good material close at hand, properly digested and presented? You cannot build your house, if you are content to stop at the cellar foundation, nor can you make a single brick without the necessary iToo much disputation and friction over the issues of isolated cases it is sue- gested, has a narrowing influence upon the mind of the novice (Quietly to ponder over the meaning of well worded generalizations, the ripened product of many adjudications, also, is profitable. PREFACE TO THIRD EDITION XIU ingredients. Put your case-book to some test. Ascertain, for in- stance, whether it meets the needs of the practicing lawyer at any point or on anj' important subject. If not, the inference is clear; we must omit from our college hand-book much that the courts have said, in order to make room for much that the courts have done. And such is the very general consensus of opinion. By the adoption of this plan, involving the omission from indi- vidual cases of incidental points and voluminous opinions, the loss to the profession would be irreparable were there no official reports left extant, but the opportunity for gain in simplicity, accuracy, and thoroughness is very great; for example, not to speak of definitions, rules, general principles, and explanations, room is found for a greater number of iljustrative cases, detailed at some length, on the important subjects of warranty, proximate cause, waiver, and the clauses of modern policies, in the text of this treatise, covering with- out notes all told only about three hundred and sixty pages, than in all the insurance ease-books combined, including among them part II of the former editions of this book, while as to a few of the many topics omitted from the case-books it may be observed that more than one hundred cases are here cited under the cancellation clause of the standard fire policies, more than fifty on the divisibility of the New York standard fire policy ,i more than one hundred on assessments valid and invalid, more than one hundred on the employers' liability policy, more than forty on credit insurance, more than a dozen on title insurance, and more than forty on the sue and labor clause (rf the marine pohcy.^ 1 One of the recent questions for admission to the New York bar was based on this point. ' In only one case-book is there a case on the sue and labor clause, Atchison v. Lokre, 4 App. Cas. 755, holding, for England, that salvage charges and general average are not recoverable under that clause, but as to general average &e law in tills country is otherwise. CONTENTS PART I GENERAL PRINCIPLES OF INSURANCE LAW CEtAPTER I Introductory Nature, Origin, and Description of Insurance and Insta-ance Companies 1. Nature of Insurance. 2. Conditions Necessary. 3. Insurance Companies. 4. What Are Insurance Companies. 5. Corporations Classified. 6. Statutory Safeguards. 7. Contracts with Unlicensed Com- panies. 8. License to Procure from Non- admitted Companies. 9. Origin of Insurance and Insur- ance Law. 10. Lloyd's and Lloyd's Usages. i 11. American Lloyd's. 12. Fire Insurance. 13. Life Insurance. 14. Accident Insurance. 15. Classification of Risks. 16. Mortuary Tables. 17. Reserve. 18. Different Kinds of Policies. 19. Same Subject — Marine. , 20. Same Subject — ^Fire. 21. Same Subject — ^Life. 22. Mixed Risks, Sea and Land. 23. Reinsurance. Pages 1-25 CHAPTER n General Fbincifles of Insxtrance Law Nature and Charadxristics of the Contract 24. Indemnity the Object — Pure § 31. Wagers Void. 32. 25. Insurable Interest — Fire. 33. 26. Same Subject— Legal Title. 34. 27. Same Subject— Equitable Title. 35. 28. Illegal or Defective Title. 29. Same Subject — ^Representative 36. Capacity. 37. 30. Same Subject — Liens. 38. [XV] Same Subject — Possession. Same Subject — Contract Rights. Same Subject — Liability. Insurable Interest — Life. Ties of Afiection, Blood, or Mar- riage. Creditor in Life of Debtor. Same — ^To What Amount. Other Business Relations. XVI CONTENTS § 39. Insurable Interest — Marine. 40. Payee of Life Policy Need Have no Insurable Interest. 41. Same Subject — ^Assignee. 42. Express Restrictions. 43. Appointees — ^Assignees-^United States Supreme Court. 44. When Must Insurable Interest Exist — Marine Insurance. 45. Same Subject — Fire Insurance. 46. Same Subject — Life Insurance. 47. Temporary Suspension Does Not Avoid. 48. Insurance Does Not Always Grant Full Indenmity. 49. Insurance Grants Indemnity for Resiilts of Negligence. 50. Rule of Indemnity Qualified in Marine — ^Insured When a Co- insurer. 51. Double Insurance Contribution. 52. Subrogation, Fire and Marine. 53. Subrogation — Mortgagee. 54. Subrogation — Other Contract Rights. 55. Same Subject — Stipulation in Bill of Lading for Benefit of • Insurance. 56. Special Clause in Policy to Pre- serve Subrogation. § 57. Release of Party Primarily Lia- ble. 58. Right of Subrogation — How Prosecuted. 59. Insurable Interest as Related to Measure of Indemnity — Fire. 60. Personal Contract. 61. Premium When Returnable. 62. Premium When Apportionable — Marine. 63. Assignment of Policies. 64. Vesting of Rights in Beneficiaries — ^Regular Life Policy. 65. If All the Donee Beneficiaries Die Before Insured. 66. If Some of Donee Beneficiaries Die Before Insured. 67. Beneficiaries' Interests — Condi- tionally Vested or Contingent. 68. Right to Change Beneficiary Ex- pressly Reserved. 69. Mode of Changing Beneficiary. 70. Relations Between Insurer and Insured — Life. 71. The Contract Is a Property Right — Life. 72. Rights of Creditors to Life In- surance Premiums Paid by In- solvent Debtors. 73. Rights of Creditors as the As- sured. Pages 27-92 CHAPTER ra GENERA.L Principles — Continued Closing of Contract — General Rules of Construction 74. Introductory. 75. Fire Insurance Contract — ^How Closed. 76. Marine — How Closed. 77. Life Insurance — How Closed. 78. Requisites of Complete Contract. 79. The Particulars Sometimes Un- derstood. 80. Contract Closed by Parol. 81. Contract Closed by Binding Slip» § 82. Contract Governed by Terms of Usual Policy. 83. Same Subject — Form of Action. 84. Construction of Contract. 85. The Same— Policy Best Evi- dence. 86. Court Must Not Make New Terms. 87. Special Terms Prevail Over Gen- eral Form. CONTENTS XVII 88. Parol to Explain Ambiguity. § 92. 89. Trade Custom. 90. Construction Liberal to Insured. 93. 91. Forfeitures Not Favored. What Law Governs Construc- tion of Contract. Who Construes the Contract, Court or Jury. Pages 93-116 CHAPTER IV General Principles — Continued Representations and Concealments i 94. Introductory. 95. Concealment: Marine Insurance. 96. Concealment: Fire and Life. 97. Representations. 98. Mere Opinion or Belief Not Gen- erally Fatal. § 99. Test of Materiality. 100. Refers to What Time. 101. Materiality and Substantial Truth: Questions of Fact. Pages 117-133 CHAPTER V General Principles — Continued Warranties 102. Warranties: Introductory. 103. Definition of Warranty. 104. No Special Form Necessary. 105. Warranty Must Be Part of Con- tract. 106. What Reference SuflScient to Incorporate as Warranty. 107. Nature of Warranties. 108. Inability to Fulfill no Excuse. 109. Warranties Contrasted with Representations. 110. In Interpreting Warranties, Courts Lean Towards the In- sured. 111. Statements of Opinion, Expec- tation, or Belief. 112. Statement of Present Use. 113. Questions Unanswered or Par- tially Answered. 114. Whether Temporary Breach Avoids or Only Suspends Contract. 115. To Avoid Forfeiture, Contract Made Severable. 116. Void Means Voidable. 117. Burden on Insurer in Pleading and Proof. 118. Statutes Making Warranties Representations. 119. Such Enactments Valid and Controlling. Pages 134-157 CHAPTER VI General Principles — Continued Waiver and Estoppel § 120. Nature of Waiver and Estoppel in General. § 121. Election Once Made Is Fi> nal. u XVUl CONTENTS 122. Whether New Consideration Required. Action Usually upon Contract: Not for Rescission or Refor- mation. Disturbsmce of Contract by Parol. 125. Effect of Doctrine on Common- Law Rules of Evidence. 123. 124. i 126. Considerations Favoring Doc- trine of Parol Waivers. 127. Considerations Opposed to the Doctrine. 128. Practical Operation of Doc- trine. 129. Difficulty in Applying Doc- trine. Pages 158-167 CHAPTER Vn GENERAIi PkINCIPLES Waiver and Estoppel — Continued i 130. 131. 132. 133. 134. 135. 136. 137. 138. 139. 140. 141. 142. What Cannot Be Waived. § 143. What Can Be Waived— Stock 144. Companies. New Subject Not to Be Intro- 145. duced by Waiver. , 146. Waiver — Mutual Companies. 147. What Amounts to Waiver or Estoppel — ^Doctrine Ampli- 148. fied. The Same — ^Acceptance of Pre- mium. 149. The Same — Receipt of Overdue 150. Premiums. 151. The Same — Consent to Assign- ment of Policy. The Same — Renewal of Policy. 152. Effect of Prior Course of Deal- ing. 153. Subsequent Parol Permits. Knowledge of Breach — ^When a Waiver. 154. Rule in Federal Courts — ^Massa- chusetts — New Jersey. Silence Not a Waiver. Proofs of Loss — Technicali- ties. Denial of All Liability. Demanding Proofs of Loss. Demanding Additional Proofs of Loss. Where Policy Provides That Such Acts Shall Not Be a Waiver. Non-waiver Agreement. Taking Part in Adjustment. Company May JDefend on Other Grounds Than Those First Named. Claimant Not Concluded by Statements in Proofs of Loss. Retention of Proofs Waives Defects That Might Have Been Remedied. Waiver or Estoppel Must Be Pleaded. Pages 168-188 CHAPTER Vin General Principles — Continded Waiver and Estoppel by Agents § 155. Introductory. 156. Ostensible Authority. § 157. Undisclosed Instructions Not Binding upon the Insured. CONTENTS XIX I 158. Agency Determined by Pacts of Each Case. 159. Effect of Stipulations in the Contract Itself as to Who Are, or Are Not, Agents of the Company. 160. E£fect of Stipulations as to the Manner of Waiving. 161. The Same — Restrictions on Agents' Authority in Staad- ard Fire PoUcy and Other Policies. 162. Policy Restrictions, When Op- erative. 163. Authority of OflBcers of the Company. 164. Authority of Managers. 165. Lin>ited Authority of Solicitors —Life. 166. The Same — Exception as to First Premium. 167. Erroneous Answers Written into Application by Agent. 168. Agent's Interpretation of the Contract. 169. Mere Knowledge of Solicitor Works no Estoppel. 170. Notice of Restriction upon Solicitor's Authority. 171. Illiterate Applicants. 172. Authority of Commissioned Agent — Fire. 173. The Same — Restrictions upon Authority Coupled with Knowledge of Forfeiture When Policy Issues. 174. Conclusion. 175. Present Knowledge of Existing Facts Which Will Shortly Constitute Breach. 176. The Same — Subsequent Parol Waivers. 177. Overt Act with Authority to Perform the Act. 178. As to Pro^asions Relating to Proceedings After Loss. 179. Special Soliciting Agents — Fire. 180. Adjusters — Other Special Agents. Pages 189-220 CHAPTER IX General I^inciples — Continued Marine Insurance I 181. What Is Marine Insurance. 182. Implied Warranties. 183. Warranty of Seaworthiness. 184. Warranty of Seaworthiness — Time Policies. 185. Seaworthiness Is What. 186. Implied Warranty — ^Deviation. 187. Deviation by Delay. 188. Deviation, When Proper 189. Illegality. 190. Actual Total Loss. 191. Constructive Total Loss — ^What Constitutes. 192. Constructive Total Loss — Eng- land. § 193. Constructive Total Loss — ^Uni- ted States. 194. Notice of Abandonment. 196. Form of Notice of Abandon- ment. 196. Effect of Abandonment. 197. Particular Average. 198. Salvage Charges Recoverable. 199. Insurer Liable for General Av erage Loss. 200. Insurer Also Liable for Gen eral Average Contribution. 201. Measure of Indemnity. 202. Total Loss. 208. Partial Loss of Ship. XX CONTENTS i 204. Partial Loss of Freight. ! 208. 205. Partial Loss of Goods. 206. Apportionment of Valuation. 207. General Average Contribution 209. and Salvage Charges. Liability for Successive Losses Jfay Exceed Amount of Policy. One-third Off New for Old. Pages 221-259 CHAPTER X General Avbbage — ^Mabini! 210. General Average — ^Related to § Insurance. 211. General Average — Its Basis. 212. General Average Loss and Con- tribution Defined. 213. Distinction between General and Particular Average. 214. Obligation Rests upon Law Rather Than Contract. 215. Origin of General Average. .216. Requisites of General Average Act. 217. Negligence Cause of Sacrifice. 218. General Average Losses. 219. Deck Load. 220. Voluntary Stranding. 221. Port of Refuge and Other Ex- penses. 222. Illustrations. 223. The Lien for Contribution. 224. The Adjustment. 225. York-Antwerp Rules. 226. Contributory Value of Freight. Pages 260-273 PART II MEANING AND LEGAL EFFECT OF THE CLAUSES OF THE POLICIES CHAPTER XI The Standard Fihe Policy S 227. Introductory. 228. In Consideration of the Stipu- lations and Premium. 229. Premium — ^To Whom Payable. 230. The Term — ^Duration of . 231. Insures Against All Direct Loss by Fire, Except as Provided. 232. The Following Described Prop- erty. 233. Additions, Alterations, etc. 234. Fluctuating Stock, etc. 335. Location. § 236. Held in Trust. 237. As Interest May Appear. 238. For Whom It May Concern. 239. Measure of Damages. 240. The Same— Total Loss of Build- ing. 241. Measure of Damage — ^As Af- fected by Provision as to Re- pairing. 242. Coinsurance and Other Special Clauses Modifying Measure of Liability. CONTENTS XXI § 243. Insurance Payable Sixty Days After Satisfactory Proofs. 244. Reinstatement Clause. 245. There Can Be no Abandonment to Insurer. 246. This Entire Policy Shall Be Void. § 247. Temporaiy Breach. 248. Concealment — Misrepresenta- tion. 249. Interest of the Insured Not Truly Stated in the Policy. 250. Fraud or False Swearing. Pages 277-316 CHAPTER XII The Standard Fike Policy — Continued § 251. Waivers Must Be by Written 252. Other Insurance Prohibited. 253. Effect of Words— Valid or In- valid. 254. Effect of Coinsurance Clause and Other Limited Consent. 255. Factories — Operation and Stop- ping Work. § 256. Watchman. 257. Increase of Risk. 258. Mechanics — Repairs. 259. Interest of Insured — ^Uncon- ditional and Sole Ownership. 260. Leased Ground. 261. Chattel Mortgage. 262. Foreclosure. Pages 317-342 CHAPTER Xin The Standard Fire Policy — Continued § 263. Alienation Clause. 264. The Same — Incimibrances. 265. The Same — Executory Con- tracts of Sale. 266. The Same — Joint Owners — — Partners — Joint Insured. 267. The Same — Legal Process or Judgment. 268. Assignment of Policy — Or if This PoUcy Be Assigned Before Loss. 269. Memorandum Clause — Gener- ating Gas, Keeping Benzine, etc., Prohibited. 270. The Same — As Affected by the Subject and the Written De- scription. 271. Vacancy Clause. § 272. Vacancy Clause — Dwellings. 273. Vacancy Clause — Buildings Other Than Dwellings. 274. Certain Causes of Loss Ex- cepted. 275. Loss by Order of Civil Author- ity Excepted. 276. Loss by Theft Excepted. 277. Neglect of Insured After Fire. 278. Loss by Explosion Excepted Unless, etc. 279. Falling Building — Insurance Ceases. 280. Earthquake and Volcano Clause. 281. Memorandum Articles — Ac- counts., Bills, Currency, etc., Excepted. Pages 343-376 xxu CONTENTS CHAPTER XIV The Standabd Fibe Pouct — Contentted § 282. Survey, etc., When a War- ranty. 283. Who Are Agents of the Com- pany. 284. Renewals. 285. Cancellation. 286. Notice Must Be Peremptory, Explicit, Unconditional. 287. Cancellation by the Insured. 288. Cancellation ly the Company. § 289. Return Premium When Policy Becomes Void. 290. Mortgagee Clause. 291. The Same — Standard Mortga- gee Clause. 292. Subrogation by Contract. 293. Mortgagee Party to Appraisal. 294. Proofs of Loss — ^Form of Ac- tion. Pages 377-400 CHAPTER XV The Standard Fire Poucy — Concltjded i 295. Removal of Property for § Safety. 296. Notice and Proofs of Loss. 297. The Same — ^Immediate Written Notice of Loss. 298. The Same— Duty to Protect from Further Damage. 299. Forthwith Separate Damaged and Undamaged — Put in Best Possible Order — Make Complete Inventory, Stat- ing Quantity and Cost of Each Article and Amount Claimed Thereon — Exhibit Remains. 300. Same Subject — Statement or Proof of Loss. 301. Excusable Failing in Strict Compliance. 302. Where Served. 303. Same Subject — ^Plans — ^Magis- trate's Certificate. 304. Exhibit Remains — Submit to Examination. 305. When Required-, Production of Books of Accounts, Vouch- ers, etc. 306. Appraisal. 307. Standard Clause a Valid Con- dition. 308. Appraisers Competent, Disin- terested. 309. Scope of Appraisal, Entire Loss. 310. Conduct of Appraisal. 311. Unfinished Appraisals. 312. Scope of Award. 313. Setting Aside Awaid. 314. Enforoing Contract Is no Waiver. 315. Pro Rata Clause— Other In- surance. 316. What Is Other Contributing Insurance. 317. Policies with Nonconcurrent Terms. 318. Partially Concurrent Appor- tionments. 319. Reinsurance. 320. The Usual Reinsurance Rider 321. Special Contracts of Reinsur- ance. 322. Subrogation. 323. Subrogation— Tortious Fires CONTENTS XXUI 324. Subrogation — Negligence of | Water Company. 325. Subrogation — Order of CSvil Authority. 326. Limitation of Time to Sue. 327. When the Period Begins to Run. 328. Commencement of Action. 329. Construction of Limitation Clause. 330. Waiver of Limitation. 331. Insured Includes Legal Repre- sentative. 332. Mutual Companies. 333. Authority of Agents to Waive Limited to Writing. 334. Policy Not Valid Until Coun- tersigned. Pages 401-460 CHAPTER XVI Life Insurance Pouct i 335. Life Insurance Policy — ^Intro- ductory. 336. Designation of Beneficiary. 337. Other Beneficiaries. 338. Insurance Payable to Heirs or Legal Representatives. 339. Insurance Payable to Wife. 340. Insurance Payable to Children. 341. Insurance Payable to Family, Dependents, Survivors, etc. 342. Beneficiaries May Sue. 343. Anticipatory Breach. 344. Anticipatory Breach — Reme- dies Available. 345. Application Incorporated and Warranted. 346. Statutory Provisions. 347. Statements as to Health or Freedom from Disease. 348. Statements as to Medical At- tendance. 349. What Constitutes Medical At- tendance or Consultation. 350. Family Physician or Usual Medical Attendant. 351. History of Family and Rela- tives. 352. Statements as to Other Insur- ance. 353. Statements as to Age. 354. Statements as to Family Rela- tionship. 355. Statements as to Habits. 356. Statements as to Occupation. 357. Statements or Requirements as to Residence and Travel. 358. Statements About Bodily In- juries or Infirmities. Pages 461-494 CHAPTER XVn Life Pouct — Concluded } 359. Payment of Premiumis. } 362. 360. Statutory Notice of Premiimis Due. 363. 361. Extended or Paid-up Insure 364. ance. When Premium Is a Debt Col- lectible by Company. Assessments. Assessments Must Be Lawfully and Properly Levied, XXIV CONTENTS I 365. Pow» to Change Rate of As- sessments. 366. Notice of Assessment to In- sured. 367. Suicide Excepted. 368. Degree of Insanity Required to Save the Insurance. 369. Suicide and Self-destruction, Sane or Insane, Excepted. 370. Burden of Proof— Suicide, In- sanity. 371. Exception of Death by the Hands of Justice or in Vio- lation of Law. 372. In Violation of Law. 373. Suicide Not a Crime. 374. Death Must Be Caused by tin- lawful Act. 375. Authority of Agents. 376. Errors in Age to Be Adjusted. 377. Assignments. 378. Incontestable Clause. 379. Same Subject — Policy Pjo- cured by Fraud. 380. Incontestable from Date — Policy Procured by Fraud. 381. Same Subject — ^Insurable In- terest. 382. Same Subject— Suicide. 383. Same Subject — ^Death at Hands of Justice. Pages 495-536 CHAPTER XVin The Accident Policy § 384. Introductory. 385. Accident Defined — What Con- stitutes. 386. Injuries Effected Through Ex- ternal, Violent, and Acci- dental Means. 387. Sole and Proximate Cause. 388. Same Subject — "Immediately and Wholly Disable." 389. Same Subject — Loss of Bodily Member. 390. Exception of Hazardous Em- ployment: 391. Notice and Proof of Accident and Injury. 392. Right to Examination or Au- topsy. 393. Disappearances. 394. Suicide — Sane or Insane. 395. Visible Mark of Injury Re- quired. 396. Accidents Caused by Disease, etc., Excepted. 397. Intoxication or Narcotics. 398. Poison, etc. 399. Inhaling of Gas or Vapor. 400. Duelling or Fighting. 401. Intentional Injuries. 402. Voluntary Overexertion. 403. In Violation of Law. 404. Voluntary Exposure to Unnec- essary Danger. 405. Boarding or Leaving Cars in Motion. 406. Riding in or on Any Such Con- veyance Not Provided for Transportation of Passen- gers. 407. Walking or Being on Railway Bridge or Roadbed. 408. Due Diligence for Personal Safety and Protection. 409. Insurance Against Injuries Re- ceived While Traveling. Pages 537-^81 CONTENTS XXV CHAPTER XIX The Maeine Policy 410. Introductory. 411. Name of the Assured. 412. Lost or Not Lost. 413. Master's Name — Ship's Name. 414. The Subject of Insurance. 415. Same Subject — Ship. 416. Same Subject — Cargo. 417. Same Subject — Freight. 418. Commencement of Risk — Ship — Fieight. § 419, CoQunencement of the Risk — Cargo. 420. Same Subject — Indorsements — Declarations. 421. The Voyage. 422. Duration and Termination of Risk. Touch and Stay. 423. 424. Prohibited Waters. Pages 582-599 CHAPTER XX Marine Policy — Concluded I 425. Perils of the Sea. 426. Foundering at Sea. 427. Grounding. 428. Collision. 429. Stress of Weather. 430. Fire. 431. Perils of War, etc. 432. Arrests, Restraints of Kings, Princes, or People, etc. 433. Thieves. 434. Barratry. 435. Jettison. 436. All Other Perils, Losses, or Misfortunes. 437. Proximate Cause. 438. When Nearest Antecedent Cause Held Responsible. 439. Proximate Cause, How Far Followed in Its Results. 440. An Independent Intervening Cause. 441. Joint Action of Peril Insured Against and Peril Excepted. 442. Independent Cause, Producing Distinguishable Damages. 443. Proximate Cause as Limiting Insurers' Liability. i 444. Wear and Tear. 445. Original Defect. 446. Inherent Vice. 447. Application of Principles to Particular Average. 448. The Sue and Labor Clause. 449. Exemption of Loss under Five Per Cent. 450. Other Assurance Clause. 451. Warranted Uninsured. 452. Warranted Uninsured beyond a Specified Amount. 453. Warranted Free of Capture, •etc. 454. Want of Ordinary Care and Skill. 455. Other Perils Sometimes Ex- cepted. 456. Memorandum Clause — War- ranted Free from Average Unless General. Whether Constructive or Only Actual Total Loss Will Sat- isfy the Warranty. Total Loss of Part. 459. Unless Ship Be Stranded. 460. What Constitutes Stranding. 457. 458. XXVI CONTENTS { 461. Cargo on Deck— Cargo on Deck § 463. Warranty of Neutrality. Not Covered. 464. Riders. 462. Blockade— Warranted Not to 465. Adjustment. Abandon. Pages 600-651 CHAPTER XXI TrriiE, GUAEANTEE, AND LlABrLITT InSUKANCE { 466. 467. 468. 469. 470. 471. 472. 473. 474. 475. 476. 477. 478. Introductory. Title Insurance. Fidelity and Guarantee Insur- ance. Contract One of Insurance Rather Than Suretyship. A Contract of Highest Good Faith. Period of Risk. Stipulation to Give Immediate Notice of Misconduct. Knowledge of What Agents Is Imputed to the Employer. Credit Insurance. Employers' Liability Insur- ance. The Employer, Not the Injured Person, Is Insured. Period of Risk. Whether the Policy Is Indem- nity Against Liability or Sat- isfied Liability. § 479. Immediate Notice of Injury with Full Particulars Re- quired. 480. The Employer Must Not Settle Claims, Without Insurer's Consent. 481. The Employer Must Show a Liability Insured Against. 482. The Insurer Conducts Compro- mise or Defense in Accident Suit. 483. Judgment in Accident Suit Conclusive. ' 484. Effect of Insurer's Breach of Agreement to Defend. 485. Costs and Expenses of Acci- dent Suit. 486. Carriers' Liability Policy. Pages 652-678 CONTENTS XXVll APPENDIX CHAPTER I Statutes Statutes of American Legislatures Affecting the Insurance Contract Arranged in Groups viith a Specimen Statute of Each Group Pages 681-717 CHAPTER II Forms Blank Forms of Applications, Binding Slips, Ancient Florentine Policy, the Standard and Other Policies, a Collection of Special Clauses and Riders, Proofs of Loss, etc. Pajges 718-776 CHAPTER III Relating to Adjustment Examples of the Operation of Coinsurance Clauses. York-Antwerp Rules. Customary Deductions in Adjusting Partial Loss on Ship. An Example of an Adjustment in General Average. Pages 777-789 PART I GENERAL PRINCIPLES OF INSURANCE LAW THE LAW OF INSURANCE PART I GENERAL PRINCIPLES OF INSURANCE LAW CHAPTER I Introductory NaturBj Origirij and Description of Insurance and Insurance Companies § 1. Nature of Insurance. — There are certain serious casualties or Accidents, such as shipwreck, fire, and premature death or dis- ability, to which exposure is very common among mankind, but which actually occur in comparatively few instances. It is difficult or impossible to predict or prevent the happening of these mis- fortunes, but it is often of the greatest moment to those intimately concerned to guard against the loss of property or future earnings which their occurrence entails. This result may be accomplished by means of a general fund obtained by the imposition of a proportionate contribution, called the premium, upon many who are exposed to the common hazard, out of which the few who actually suffer may be indemnified. Insurance is the system for distributing losses of this charac- ter in the manner just described.* Its principal branches are fire, life (including also accident), and marine insurance; ^ and, as an institution, the development of these branches of insurance among •The contract of insurance is "a tion or injury of something in which contract whereby, for a stipulated con- the other party has an interest," sideration, one party undertakes to Claftin v. U. S. Credit System Co., 165 indemnify the other against certain Mass. 501, 43 N. E. 293, 52 Am. St. R. risks," People v. Rose, 174 111. 310, 528. The written instrument embody- 51 N. E. 246; 44 L. R. A. 124, citing ing the contract is called a policy, also many other definitions of insur- The party promising protection is called ance, "A contract, whereby for an the insurer or underwriter. The other agreed premium, one party undertakes party is called the insured or assured, to compensate the other for loss on a Great Brit., etc., Ins. Assn. v. Wyllie specified subject by specified perils," (1889), 22 Q. B. D. 724, 726. As to State V. Pittsburg, etc., R. Co., 68 Ohio benefits accruing from practice of ma- St. 9, 67 N. E. 93, 96 Am. St. R. 635. rine insurance, see 1 Duer, Ins., p. 64. "A contract of insurance is an agree- 2 The purposes for which insurance ment by which one party, for a con- corporations may be organized in New sideration, promises to pay money or York are enumerated in the Ins. Law its equivajent, or to do some act of of 1892, c. 690, as amended L. 1906, t^alue to the assured upon the destruc- c. 326 and L. 1907, c. 206. 1 [1] 2 THE LAW OF INSUKANCB civilized peoples of modem times has assumed a vast and increas- ing importance. Fire insurance concerns a larger number of persons probably than any other branch, though life insurance has become very popular, especially in this country,^ while marine insurance, from its nature, is somewhat restricted and localized, and both the business and the practice of the law of this class of insurance fall into the hands of specialists to a greater extent than in the case of any other. Certain other forms of insurance, some of them rapidly develop- ing, must not be overlooked, for example, insurance against loss by lightning, tornadoes, hail-storms, boiler explosions, automobile collisions, burglaries and thefts, injuries to plate glass, liability of employers for negligence of employees and for injuries to their employees, defaults or breaches of trust on the part of officers, trustees, agents, or employees, defects in real estate titles, death to live-stock, and to indemnify merchants for loss from giving credit. Insurance against accident to the body or health of persons may be considered a branch of life insurance, and subject to the same principles of law. § 2. Conditions Necessary. — The conditions which in general are necessary to the successful operation of a system of insurance are said to be these: There must be a risk of real loss which it ought to be beyond the power of either the insurer or the insured to avert or to hasten; a large number of persons must be liable to the like risk; the casualty contemplated must be likely to fall on a com- paratively small number of the persons exposed to the risk of it; the probabilities of its occurrence must be capable of being esti- mated beforehand with some approximation to certainty; the loss apprehended must be so considerable when it does occur as to be worth providing against; and the cost of that provision must be comparatively so small as not to be prohibitive. To this list of requisites may be added an honest administration, and some means of securing permanency and integrity to the gen- eral fund. § 3. Insurance Companies. — ^The bulk of the business of insur- ance is now transacted by corporations, which, on account of their exemption from liability to natural death, and their faciUty for rais- 1 The recent spread of industrial in- well-nigh to an equality with the num- surance among the working classes may ber of those insured against fire loss, bring up the number in life insurance INTRODUCTORY ing capital and extending their operations over wide areas of terri- tory, are peculiarly well adapted to serve in the capacity of insurers.' A not inconsiderable part of life insurance business, however, is in the hands of fraternal organizations and benefit societies, guilds, orders, Odd Fellows, Knights, and unions, of one sort oi: another, most of which are incorporated, and some of which are not. The mem- bers of these organizations are governed by their constitution and by-laws, as well as by the statutes. and common law of the land.^ 1 Where, however, no statute pro- hibits, individuals or unincorporated associations may lawfully engage in the business of insurance upon com- pliance with statutory regulations, Hoadtey v. Purifoy, 107»Ala. 276, 18 So. 220, 30 L. R. A. 351; Barnes v. People, 168 111. 425, 48 N. E. 91. Such associations in this country are often known as "Lloyds" or individual underwriters." See § 11. But it has been held that a statute confining the business of insurance exclusively to cor- porations is not an unreasonable inter- ference with the freedom of the in- dividual citizen and is a constitutional exercise of police power, Common- wealth V. Vrooman, 164 Pa. 306, 80 Atl. 217, 25 L. R. A. 250, 44 Am. St. R. 603, three judges dissenting. Com- pare as to constitutional right of citi- zen to pursue ordinary occupations without unreasonable interference, Butcher Union Slavghter House Co. v. Crescent City Live Stock, etc., Co., Ill U. S. 746, 4 S. Ct. 652, 28 L. Ed. 585; Lochner v. New York, 198 U. S. 45, 25 S. Ct. 539; Matter of Jacobs, 98 N. Y. 98; Schnaier v. Hotel & Import. Co., 182 N. Y. 83, 74 N. E. 561-. Wright v. HaH, 182 N. Y. 330, 75 N. E. 404. A statute limiting business of banking to corporations is held constitutional in State V. Woodmansee, 1 N. D. 246, 46 N. W. 970, 11 L. R. A. 420. But see State V. Scougal, 3 S. D. 55, 51 N. W. 858, 15 L. R. A. 477, 44 Am. St. R. 756. The interesting question involved in such an inquiry is not destined, proba- bly, to play a very important part eventually in the law of insurance, since it is easily within the power of a legislature to pass binding regulations governing the conduct of insurance, which it would be impracticable for in- dividual underwriters generally to ob- serve with any assurance of pecuniary profit to themselves. See § 6. Gvnd- Ung V. Chicago, 177 U. S. 183, 188, 20 S. Ct. 633; KnoxviUe Iron Co. v. Harbison, 183 U. S. 13, 21, 22, 22 S. Ct. 1. Individual underwriters have al- ready been driven out of business to some extent by state statutes. N. Y. Laws, 1903, c. 471, 1902, c. 297, 1892, c. 690, § 57. 2 Fidelity Mut. Life Assn. v. Mettler, 185 U. S. 308, 46 L. Ed. 922, 22 S. Ct. 662; Modem Woodmen v. Tevis, 117 Fed. 369, 54 C. C. A. 293; Treadway v. Hamilton Mut. Ins. Co., 29 Conn. 68; People V. Grand Lodge, 156 N. Y. 533, 51 N. E. 299 (holding that the con- stitution, by-laws, and certificate when authorized by law form the contract upon which the rights of the parties rest). "The modern mutual benefit life insurance organizations generally called benefit societies have a dual nature and in determining their re- sponsibilities, powers, and rights and those of their members this fact must never be lost sight of. . . . They are, in the first place, social organizations or clubs. . . . Tney are also business organizations. . . . These societies are the poor man's life insurance com- panies, for thev furnish to those of moderate income a cheap and simple substitute for life insurance." Bacon, Ben. Societies, §§ la-3. "A benevo- lent association which issues benefit certificates to its members payable from a fund maintained by assess- ments upon the certificate holders is in effect a mutual life insurance company and is governed by the general rules . of law applicable to sucli companies," Modem Woodmen v. Coleman, 68 Neb. 660 (1903), 94 N. W. 814, 96 N. W. 154. "The chief difference between ordi- nary contracts of life insurance com- panies and those usual in benefit soci- eties is that in the former the policy and documents referred to in it contain the agreement, while in the latter the certificate together with the charter and by-laws are to be looked to for the contract," Shipman v. Protected Home Circle, 174 N. Y. 398, 409, 67 N. E. 83, THE LAW OF INSURANCE § 4, What are Insurance Companies. — In the case of bene- ficiary and other associations, the furnishing of insurance may be only one of many objects of the organization, perhaps purely inci- dental at that, and the question sometimes arises whether the com- pany granting insurance is to be regarded as an insurance company. 63 L. R. A. 347. The same doctrine governs the distribution of assets after insolvency of the company, Belts v. ,Conn. Life Ins. Co., 78 Conn. 442, 62 Atl. 345. By-laws or other rules of the beneficiary association may be ex- pressly made a part of the contract of insurance by reference, Robson v. United Order of Foresters, 93 Minn. 24, 100 N. W. 381. But without express reference it has been held that they are binding upon the members, Conway v. Supreme Council, 131 Cal. 437, 63 Pac. 727; Farmers' Mut. Hail Ins. Assn. v. Slattery, 115 Iowa, 410, 88 N. W. 949; Maginnis v. Aid Assn., 43 La. Ann. 1136, 10 So. 180; Supreme Council V. Brashears, 89 Md. 624, 43 Atl. 866; Newton v. Northern Mvt. Relief Assn., 21 R. I. 476, 44 Atl. 690. United Modems v. CoUigan, 34 Tex. Gv. App. 173, 77 S. W. 1032. The member is bound to take notice of them, though not specifically referred to in his certificate or contract, Clark V. Mut. Res. Fund L. Assn., 14 App. D. C. 154, 43 L. R. A. 390; Pfister v. Gerwig, 122 Ind. 567, 23 N. E. 1041; Svlz v. Mut. Res. Fund Life Assn., 145 N. Y. 563, 568, 40 N. E. 242, 28 L. R. A. 379; United Modems v. CoUigan, 34 Tex. Ov. App. 173, 77 S. W. 1032. The association in its conln-act often expressly reserves the right to subse- quently change the constitution and by-laws. The members will then be bound by such changes if not unrea- sonable, Bowie v. Grand Lodge, 99 Cal. 392, 34 Pac. 103; GUmore v. Knights of Columbus, 77 Conn. 58, 58 Atl. 223 (occupation of switchman added to extra hazards). Covenant Mut. Life Ins. Co. v. Kentner, 188 111. 431, 58 N. E. 966; Shipman v. Pro- tected Home Circle, 174 N. Y. 398, 67 N. E. 83, 63 L. R. A. 347 (suicide clause made retroactive), but see Bott- jer v. Supreme Council, 78 App. Div. 546, 75 N. Y. Supp. 805, 79 N. Y. Supp. 684. But the courts are disposed to regard the rights of a member as so far vested that he should be protected from unreasonable changes in the by- laws, though he has agreed to be bound by changes, Hall v. West. Trav. Ace. Assn., 69 Neb. 601. 96 N. W. 170 (vertigo); Russv. Modem Brotherhood, 120 Iowa, 692 (1903), 95 N. Y. 207 (definition of "broken 1^" reason- able); Starling v. Supreme Council, 108 Mich. 440, 66 N. W. 340, 62 Am. St. R. 709 (definition of total disability); Aijers V. Grand Lodge, 188 N. Y. 280 (excluding occupation of liquor selling unreasonable); Evans v. So. Fier, etc., Assn., 152 N. Y. 453, 75 N. E. 317; Beach v. Supreme Tent, 177 N. Y. 100, 69 N. E. 281; Wiedynska v. Pulaski, etc., Soc, 110 App. Div. 732, 97 N. Y. Supp. 413; Williams v. Supreme Court' oil, 80 App. Div. 402, 80 N. Y. Supp. 713 (definition of total disability un- reasonable). Matter of Brown v. Order of Foresters, 176 N. Y. 132, 68 N. E. 145; Berg v. Verein, 90 App. Div. 474, 86 N. Y. Supp. 429; Strauss v. Mut. Res. Fund Life Assn., 128 N. C. 465, 39 S. E. 55; Sovereign Camp v. Fraley, 94 Tex. 200, 59 S. W. 879, 51 L. R. A. 898. As to proper and improper amendments see Parish v. N. Y. Produce Exchange, 169 N. Y. 34, 61 N. E. 977, 56 L. R. A. 149. Thus it has repeatedly been held that it is not permissible for the company to change the amount payable from $5,000 to $2,000, Supreme Council v. Jordan, 117 Ga. 808, 45 S. E. 33; Russ v. Su- preme Council, 110 La. 588, 34 So. 697, 98 Am. St. R. 469; Porter v. American Legion, 183 Mass. 326, 67 N. E. 238; Newhall v. Supreme Council, 181 Mass. Ill, 63 N. E. 1; Langan v. Supreme Council, 174 N. Y. 266, 66 N. E. 932. And see McAlamey v. Supreme Coun- cil, 131 Fed. 538; Smith v. Supreme Council, 94 App. Div. 357, 88 N. Y. Supp. 44. But the contract cannot be changed by subsequent amendments of constitution or by-laws if no such right is reserved. Miller v. TuUle (Kan 1903), 73 Pac. 88; Weber v. Supreme Tent, 172 N. Y. 490, 65 N. E 258 92 Am. St. R. 753 (unreasonable change from one to five years in self- destruction clause). Fargo v Supreme Tent, 96 App. Div. 491, 89 N. Y. Supp. 65 (suicide clause). INTRODUCTORY 5 and its certificate or contract, an insurance contract, within the meaning of the body of statutes and decisions relating to this subject. Thus, it has been held that the relief department of a railway company, organized to collect and manage a common fund and to make payments from it upon the death or injury of members, is not an insurance company, nor its establishment by tlie railway com- pany an act ultra vires; * nor the contract between the railway com- pany and the member an insurance contract.^ But where a corpo- ration in return for a specified consideration undertook to guarantee a fixed revenue per acre from farming lands, and agreed to pay such fixed amount for the crop irrespective of its actual value, the con- tract was held to be one of insurance,* and a corporation engaged in the business of gimranteeing the fidelity of persons holding places of trust, and the performance of contracts, or undertakings, is an insurance company/ Fraternal beneficiary associations and similar organizations are in general held to be life insurance companies,* but special regard 1 Donald v. CM., B. & Q. Ry. Co., 93 Iowa, 284, 61 N. W. 971, 33 L. R. A. 492; Maine v. Chi., B. & Q. R. Co., 109 Iowa, 260, 70 N. W. 630, 80 N. W. 315; State V. Pittsburg, etc., Ry. Co., 68 Ohio, 9, 67 N. E. 93, 64 L. R. A. 405, 96 Am. St. R. 635; Johnson v. Phil. & R. R. Co., 163 Pa. 127, 29 Atl. 854. But see Mason v. Mason, 160 Ind. 191, 65 N. E. 585. 2 Beck V. Pmn. R. R. Co., 63 N. J. L. 232, 43 Atl. 908, 76 Am. St. R. 211. Many railways have such departments coupled with hospital and other privi- leges, in return for which the member often must agree to release the lailway from common-law liability and to allow abatement of part of his salary. Such agreement is binding, Chi., B. & Q. R. Co. V. Curtis, 51 Neb. 442, 71 N. W. 42; Ringle v. Penn. R. R., 164 Pa. 529, 30 Atl. 492. The business of inspecting and certifying as to the sanitary condition of buildings and premises is not insurance, People v. Rosendale, 142 N. Y. 126, 36 N. E. 806. Nor an agreement in consideration of a specified annual payment to repair or replace bicycles injured or destroyed by accident, Commonwealth v. Provident Bicycle Assn., 178 Pa. 636, 36 Atl. 197, 36 L. R. A. 589. 3 State V. Hogan, 8 N. D. 301 , 78 N. W. 1051, 45 L. R. A. 166, 73 Am. St. R. 759. So also an agreement with a firm to purchase for a fixed price the unsatisfied accounts which it might have with insolvent or judgment debtors, Clafiin v. V. S. Credit System Co., 165 Mass. 501, 43 N. E. 293, 52 Am. St. R. 528. * American Surety Co. v. Pauly, 170 U. S. 133, 18 S. Ct. 563, 42 L. Ed. 987; People V. Rose, 174 lU. 310, 51 N. E. 246, 44 L. R. A. 124. As to whether contract is one of suretyship or one of insurance, see Dane v. Mtge. Ins. Corp. (1894), 1 Q. B. 54; Denton's Estate (1904), 2 Ch. 178. For comparison be- tween contract of guarantee and con- tract of insurance, see Anglo, etc., Bk. V. London, etc., Ins. Co. (1904), 10 C!om. Cas. 8; Seaton v. Heath (1899), 1 Q. B. 792. ^Supreme Lodge v. Wellenvoss, 119 Fed. 671, 674, 56 C. C. A. 287 ("they do not issue policies of insurance strictly speaking, but the benefit cer- tificate is a contract of insurance none the less")- Brown v. Modem Woodmen, 115 Iowa, 450, 88 N. W. 965; Catholic Knighis v. Board of Review, 198 111. 441 , 64 N. E. 1104; Staie v. Nichols, 78 Iowa, 747, 41 N. W. 4; Sherman v. Commonwealth, 82 Ky. 102, 105; Sims V. Commonwealth, 114 Ky. 827, 71 S. W. 929; Kern v. Supreme Council, 167 Mo. 471; 67 S. W. 252, as to foreign com- panies; Modem Woodman v. Coleman 68 Neb. 660, 94 N. W. 814, 96 N. W. 154; Alden v. Supreme Tent, 178 N. Y. 535, 71 N. E. 104 (construing N. Y. 6 THE LAW OF INSURANCE must be had to the phraseology of the statutes appHcable in each case.' § 5. Corporations Classified. — In this country insurance cor- porations are usually organized under general laws instead of special charters and are tlivided into stock, mutual, and mixed companies. A stock or proprietary company has for its basis a capital stock, owned by stockholders who constitute the corporation,^ and who may be quite distinct from the insured. Its profits over and above the liabilities of the company and required accumulations are di- vided in the shape of dividends among the shareholders. In strictly mutual companies there are no stockholders, but the insured themselves are the members of the company, entitled to manage its affairs through officers and agents and to receive any share of divisible surplus 'over and above the funds retained to meet losses and other liabilities.^ Thus, the members of a mutual com- pany in their aggregate or corporate capacity are the insurers while individually they are the insured. While a stockholder need not be one of those insured by his company, one insuring in a mutual company thereby becomes a member of the association and thus occupies in a sense the dual relationship of insurer and insured.^ The capital fund of such organizations is often obtained by cash premiums or assessable premium notes or both, contributed by the members ratably.* Ins. L. Art. 7); Lubrano v. Imperial Grand Lodge, 133 Cal. 686, 66 Pac 25; Council, 20 R. I. 27, 37 Atl. 345, 38 Schillinger v. Boes, 85 Ky. 357, 3 S. W. L. R. A. 546, where the benefit accru- 427; State ex rel. Royal Arcanum v. ing upon the death or disability of a Benton, 35 Neb. 463, 53 N. W. 567. member was conditioned upon the And see N. Y. Ins. L. § 57. collection of assessments. Supreme 2 Commercial Fire Ins. Co. v. Board Council V. Larmour, 81 Tex. 71, 16 of Revenue, 99 Ala. 1, 14 So 490 42 S. W. 633; Daniher v. Grand Lodge, 10 Am. St. R. 17. ' Utah, 110, 37 Pac. 245. Contra, Penn- 3 Carlton v. Southern Mut. Ins. Co., sylvania, where beneficiary associations 72 Ga. 371. are classed as philanthropic societies, * Treadway v. Ham.ilton Mut. Ins. Commonwealth v. Eq. Ben. Assn., 137 Co., 29 Conn. 68; Corey v Sherman 96 Pa. 412, 18 Atl. 1112; N. Masonic Aid Iowa, 114, 64 N. W. 828, 32 L r' A Assn. V. Jones, 154 Pa. 99, 26 Atl. 253. 490; Lehigh Valley Fire Ins Co v iNewtonv. S.W. Mut. L. Assn., 116 Schimpf, 13 Phila. (Pa) 515- Great Iowa, 311, 317, 90 N. W. 73; as to Brit., etc., Asso. v. Wyllie (1889) 22 Missouri statute see Toomey v. Su- Q. B.D. 710, and opinion of Mathew J preme Lodge, 147 Mo. 129, 48 S. W. 936 at p. 723. But a mere applicant 'for (suicide a defense); Hudnall v. Modem insurance is not yet a member Rus- Woodnwn, 103 Mo. App. 356, 77 S. W. seU v. Detroit Mut. Fire Ins Co 80 84, Rev. Stat. (Mo.) 1899, § § 1408-1410. Mich. 407, 45 N. W. 356; Eilenberg^ v. Fraternal beneficiary associations often Protective Mut. Fire Ins. Co. 89 Pa are expressly excepted from the appli- 464. ■ ■< cation of certain general insurance ^ Spruance v. Farmers' & M Ins laws, the state regarding them as so Co., 9 Colo. 73, 10 Pac. 285- Taylor v far pliilanthropio that they ought to North Star Mut. Ins. Co., 46 Minn 198 be specially encouraged, Marshall v. 48 N. W. 772. ' ' INTRODUCTORY 7 Cooperative assessment companies and fraternal beneficiary asso- ciations are organized upon the mutual plan and for tiie sole benefit of the members. In the case of an assessment company of any class assessments are generally levied to liquidate specific losses as they occur/ whereas in the regular or old-time companies a fixed premium is paid in cash in advance at stated intervals.^ Mixed companies partake of the nature of stock and mutual companies, and in them a certain portion of the profits is paid to the stockholders, and the remainder distributed among the insured. In the United States, as a general thing, in the laws governing the organization and scope of insurance corporations, the business of ocean-marine, fire, and life insurance, respectively, is kept some- what distinct and exclusive; in New York and elsewhere life com- panies are not allowed to take marine or fire risks,* but fire insurance companies are often organized to insure against inland marine disasters, lightning, and tornadoes.* § 6. Statutory Safeguards. — Every state has now its system )f statutory 'laws, not only governing the organization of insurance companies and associations, and prescribing their powers and duties but also regulating their business.^ For the better protection of the 1 McDonald v. Bankers' Life Assn., 154 Mo. 618, 55 S. W. 999; Modem Woodmen v. Colman, 68 Neb. 660, 94 N. W. 814, 96 N. W. 154; State v. Matthews, 58 Ohio St. 1, 49 N. E. 1034, 40 L. R. A. 418; State v. National Ace. Soc, 103 Wis. 208, 79 N. W. 220. The company ip bound to levy such assess- ment, Lawler v. Murphy, 58 Conn. 294, 20 Atl. 457, 8 L. R. A. 113 (con- taining specimen of certificate and by- laws); Railway Pass., etc., Assn. v. Robinsm, 147 lU. 138, 35 N. E. 168; Fitzgerald v. Eg. Reserve Fund, 15 Daly, 229, 24 N. Y. St. R. 493, 5 N. Y. Supp. 837, but not until proper proofs of death are received; Coyle v. Ky. Grangers, etc., Soc, 8 Ky. L. R. 604, 2 S. W. 676. Not for anticipated losses, Crossman v. Mass. Ben., etc., Assn., 143 Mass. 435, 9 N. E. 753. The existence of the lodge system of organization and social intercourse, often coupled with a secret ritual, seems to be a distinguish- ing feature of the fraternal benefit soci- ety, Supreme Commandery v. Hughes, 114 Ky. 175, 24 Ky. L. R. 984, 70 S. W. 405; Broiherhood Ace. Co. v. Linehan, 71 N. H. 7, 51 Atl. 266. And see N. Y. Ins. L. § 9. 2 Assessment company allowed to change to old line plan, Wright v. Minn. Mut. Life Ins. Co., 193 U. S. 657, 24 S. Ct. 549, 48 L. Ed. 832. And see Schwarzwalder v. Tegen, 58 N. J. Eq. 319, 43 Atl. 587. Some companies issue what is known as industrial in- surance for the benefit more especially of the working classes, the policies being for comparatively small amounts with weekly premiums, Russell v. Prudential Ins. Co., 176 N. Y. 178, 180, 68 N. E. 252, 98 Am. St. R. 656; New- bold Friendly Soc. v. Barlow (1893), 2 Q. B. 128. And see N. Y. Ins. L. §§ 91,92, 101. In some countries, notably Germany, the government conducts a system of industrial insurance. 3N.Y. Ins. L. §70. 4N. Y. Ins. L. §110. oStcOe V. Stone, 118 Mo. 388, 402, 24 S. W. 164, 25 L. R. A. 243, 40 Am. St. R. 388; State v. Ackerman, 51 Ohio St. 163, 190, 37 N. E. 828, 24 L. R. A. 298 (no license); for example, N. Y. General Insurance Law, 1892, c. 690, as amended L. 1906, c. 326. 8 THE LAW OF INSURANCE insured, it has become the custom throughout the states of this Union, as well as in England, to estabUsh an insurance department, or superintendent or commissioner of insurance, or other official * with whom, as a rule, foreign insurance companies doing business within the state, and domestic life insurance companies, with certain ex- ceptions, are required, upon organization or commencement of business within the state, to make deposits of money or equivalent securities, which are held as collateral by the department for the security of the insured.^ The insurance department receives stated reports under oath from each company, setting forth with some detail its business affairs and financial condition, including its assets and debts, amount of insurance, and other particulars.* It also has a visitorial power over the companies, to see that their investments are made accord- ing to law, and to examine their books and papers in case of sus- pected misconduct or insolvency. If it appear that any company falls below the statutory standard of solvency, proper steps may be taken to wind it up and distribute its assets. In addition to these safeguards, we find laws prescribing a mini- mum capital stock; laws governing the character of investments 1 However desirable and economical it might be to place a uniform and effective federal bureau in charge, Con- gress has no jiu-isdiction to superintend tiie business of insurance generally throughout the country, since it has repej,tedly been decided that the issu- ance of a policy by a corporation of one state to a citizen of another is not in- terstate commerce within the meaning of the federal constitution, Paul v. Virgtzia, 8 Wall. 168, 19 L. Ed. 357 (file); Phila. Fire Asso. v. New York, 11 J u. S. 110, 7 S. Ct. 108; Hooper v. California, 155 U. S. 648, 15 S. Ct. 207, 3J L. Ed. 297 (marine); A'. Y. Life Ins. Co. V. Cravens, 178 U. S. 389, 401, 20 S. Ct. 962 Oife, etc.); List v. Common- lueatth, 118 Pa. 322, 12 Atl. 277; D'Arcy V. Mut. Life Ins. Co., 108 Tenn. 568, 673, 69 S. W. 768. 2 Primarily, for the resident in- sured. Deposit with insurance depart- ment is a trust fund and cannot be withdrawn and used like general capi- tal, Lancashire Ins. Co. v. Maxwell, 131 N. Y. 286, 30 N. E. 192. Interest on deposited securities follows the principal; a receiver of the corporation cannot take it, People v. Ins. Co., 147 N. Y. 25, 41 N. E. 423. As to how far an insurance commissioner may or may not in his discretion refuse license to a foreign company applying for admis- sion to do business, see Am. Casualty Co. V. Fyler, 60 Conn. 448, 22 Atl. 494; People V. Van Cleave, 183 111. 330, 55 N. E. 698; Citizens' Life Ins. Co. v. Commissioner, 128 Mich. 85, 87 N. W. 126; U. S. Fidelity & G. Co. v. Linehan, 73 N. H. 41, 58 Atl. 956; Brotherhood Ace. Co. V. Linehan, 71 N. H. 7, 51 Atl. 266; People v. Payn, 59 N. Y. Supp. 851, aff'd 60 N. Y. Supp. 1146, 55 N. E. 849; State v. Vorys, 69 Ohio, 56, 68 N. E. 580; Bankers' Life Ins. Co., V. Fleetwood, 76 Vt. 297, 57 Atl. 239. The superintendent may be com- pelled by mandamus to grant license; or file proper certificate if comp.u y complies with the statute. People • Payn, 161 N. Y. 229, 55 N. E. 84 i : duties largely ministerial); Stair Vorys, 69 Ohio, 56, 68 N. E. .".'^ Similarity of name to that of lion e corporation is good ground for disci c- tionary refusal to grant certificate 1<> foreign corporation, Employers' As- surance Corporation v. Employers' Ins Co., 78 Hun, 446, 29 N. Y. Supp. 217. 3 Statute requiring such annual re- port is constitutional, Eaqle Ins. Co. V. Ohio, 153 U. S. 446, 1? S. Ct. 868. INTRODUCTORY 9 and restricting expenses, and commissions to agents; laws limiting the amount of insurance upon one risk; laws requiring the com- panies, before paying out dividends or profits, to accumulate and reserve a certain amount of assets with which to meet future lia- bilities; laws directing foreign companies to appoint a representative within the state upon whom service of papers can be made; ^ laws limiting business to authorized and licensed companies; ^ and laws prohibiting the removal of actions from state to federal courts upon penalty of loss of license to do business within the state.' The object of insurance is to compensate the insured for loss and not to prevent the occurrence of loss; but in many of the cities the fire insurance companies have established a system of patrol with statutory powers, wJiich does much to prevent the spread of fire^j and to protect from unnecessary injury or theft the property ex- ' posed during and after the conflagration. >l Any state has the right to control the conduct of insurance busi- 1 In the absence of superintendent, deputy may take his place, People v. Hopkins, 55 N. Y. 74, and be served with process, Quinn v. Royal Ins. Co., 81 Hun, 207, 30 N. Y. Supp. 714, but service by mail is not good, Farmer v. Nat. lAje Assn., 138 N. Y. 265, 33 N. E. 1075. Service on Labor Day is vahd, Flynn v. Union Surety & G. Co., 170 N. Y. 145, 63 N. E. 61. Judg- ment valid founded upon service of process upon insurance commissioner, Woodward v. Mvt. Res. Fund Life Ins. Co., 178 N. Y. 485; 71 N. E. 10; Biggs v. Mut. Res. Fund L. Assn., 128 N. C. 5, 37 S. E. 955. Designation of person to be served with process, McClure v. Supreme Lodge, 41 App. Div. 131, 59 N. Y. Supp. 764; Milwaukee TrustCo. v. Germania Ins. Co., 106 La., 669, 31 So. 298, 299. Discontinuance of busi- ness does not revoke power of attorney to insurance commissibiier, nor can company cancel tsrhile obligations re- main, Mutual Res. Fund Life Assn. v. Phelps, 190 U. S. 147, 23 S. Ct. 707; Collier v. Mut. Res. Fund Ldfe Assn., 119 Fed. 617 (but see 184 N. Y. 136); Johnston v. Mut. Res. Fund Life Assn., 104 App. Div. 544, 93 N. Y. Supp. 1048; Hunter v. L/ife Assn., 97 App. Div. 222, 89 N. Y. Supp. 849; Moore v. Life Assn., 129 N. C. 31, 39 S. E. 637. 2 A state may penalize the soliciting by agents within its borders, of con- tracts of insurance in unlicensed for- eign companies or declare such con- tracts void. Nutting v. Massachusetts, 183 U. S. 553, 22 S. Ct. 238, 46 L. Ed. 324; List v. Commonwealth, 118 Pa. 322, 12 Atl. 277, but cannot prevent its own citizens from making a valid contract outside the state with such a company though the property be located within the state, Allgeyer v. Louisiana, 165 U. S. 578, 17 S. Ct. 427, 41 L. Ed. 832; Hooper v. People, 155 U. S. 648, 15 S. Ct. 207, 39 L. Ed. 297; Commonwealth V. Biddle. 139 Pa. 605, 21 Atl. 134, 11 L. R. A. f61; French v. People, 6 Colo. App. 311, 40 Pac. 463; Pierce v. People, 106-^1. 11, 46 Am. Rep. 683, and see Baker v. Spaidding, 71 Vt. 16a, 42 Atl. 982; and a state cangpot'suoject to its laws and penalties th^ property of a foreign corporation situated outside the state, Douglass v. Ins. Co., 138 N. Y. 209, 33 N. E. 938. 3 Federal courts cannot by agree- ment be ousted of their jurisdiction, and a statute requiring such agreement from a foreign company as a pre- requisite to a license is unconstitutional. Home Ins. Co. v. Morse, 20 Wall. 450, 22 L. Ed. 367; but removal of cause by ] foreign company in violation of its agreement with the state has been held sufficient ground for revocation of its license to do business within the state inasmuch as the state may revoke a license either with or Without cause. Security Mut. L. Ins. Co. v. Prewitt, 202 U. S. 246, 26 S. Ct. 619. Doyle v. Ins. Co., 94 U. S. 535, 24 L. Ed. 148. 10 THE LAW OF INSURANCE ness by the enactment of suitable statutory regulations.* It may make a compliance with these by a foreign company the condition of doing business within the state, or it may capriciously shut its doors to a foreign corporation without any reason at all.^ But under the federal constitution which secures to the citizens of each state the privileges of citizens in the several states it has been held unconstitutional to impose upon individual non-resi- dents, such as unincorporated Lloyd associations, restrictions or conditions not imposed upon resident individuals.' § 7. Contracts with Unlicensed Companies. — Where a statute expressly declares the policy void if issued within the state by a foreign company which has not complied with statutory require- 1 Fidelity Mut. Lije Ins. Co. v. MeUler, 185 U. S. 308, 22 S. Ct. 662, 46 L. Ed. 922; Hancock Mut. Life Ins. Co. V. Warren, 181 U. S. 73, 21 S. Ct. 535; Allgeyer v. Louisiana, 165 U. S. 578, 17 S. Ct. 427, 41 L. Ed. 832; Comr- monweaUh v. Vrooman, 164 Pa. 306, 80 Atl. 217, 25 L. R. A. 250. A law mak- ing it a crime for an agent to allow a rebate on the premium is constitu- tional, People V. Formosa, 131 N. Y. 478, 30 N. E. 492. So is a law allowing a counsel fee or extra damages to the successful plaintiff if compelled to Uti- gate the issue of total loss. Farmers' & M. Ins. Co. V. Dahney, 189 U. S. 301, 23 S. Ct. 565; Ins. Co. v. MeUler, 185 U. S. 308, 22 S. Ct. 662. Ex- changes and associations of under- writers, needful to the systematic con- duct of the business are not illegal as trustg or in restraint of trade, though incidentally they may establish a fixed tariff of premium rates. Continental Ins. Co. V. Board, 67 Fed. 310; Queen Ins. Co. V. State, 86 Tex. 250; but see McCarter v. Firemen's Ins. Co. (N. J. Eq. 1905), 61 Atl. 705, reargu- ment granted, 66 Atl. 398. But such combinations may be forbidden by statute. 2 Doyle V. Continental Ins. Co., 94 U. S. 535; Phil. Fire Asso. v. N. Y., 119 U. S. 110, 7 S. a. 108; Barron v. Bumside, 121 U. S. 186, 7 S. Ct. 931. And what a state may do with corpo- rations of its own creation it may do with foreign corporations admitted into the state, Orient Ins. Co. v. Dagge, 172 U. S. 557, 19 S. Ct. 281; see also McClain v. Provident Sav. L. Assn. Soc., 110 Fed. 80, 49 C. C. A. 31. While, however, state legislatures may impose such conditions and limitations upon a foreign company as they deem proper, yet, after its admission its property must be dealt with on terms of equality with the property of the citizen. State v. Fleming 70 Ne;). 523, 97 N. W. 1063. Its vested rights must be respected, Manchester F. Ins. Co. v. Herriott, 91 Fed. 711. Insurance com- panies may be ousted for violating ex- press statutes against pools, trusts, etc. Stoie v. Fireanan's Fund Ins. Co., 152 Mo. 1, 52 a W. 595, 45 L. R. A. 363. Sending an unlicensed agent to adjust a loss is not " transact- i-' the business of insurance" within '■c state, People v. Gilbert, 44 Hun, ^22. Citizens of the state may obtain insurance by mail from foreign unau- thorized corporation, the contract be- ing made outside the state, People v. Indaiy, 20 Barbour, 68. s Staie V. Board of Insurance Com'rs, 37 Fla. 564, 20 So. 772, 33 L. R. A. 288; Barrws v. People, 168 111. 425, 48 N. E. 91; State v. Stone, 118 Mo. 388, 24 S. W. 164, 25 L. R. A. 243, 40 Am. St R. 388; Noble v. MitcheU. 164 U. S. 367, 17 S. Ct. 110, 41 L. Ed. 472. But compare State v. Ackerman, 51 Ohio St. 163, 37 N. E. 828, 24 L. R. A. 298, in which it was held that non-resident individuals must, like corporations, at least secure a license, cited apparently with approval in Hancock Mut. Life Ins. Co. V. Warren, 181 U. S. 73, 74, 21 S. Ct. 535. A corporation is not a citizen within this clause of the federal constitution, Barnes v. People, 168 lU. 425, 430, 48 N. E. 91. Waters- Pierce Oil Co. y. Texas, 177 U. S. 28 20 S. Ct. 518. • i^- «. INTRODUCTORY 11 ments of the state, it cannot be enforced by either party.* But if, as is usual, the act merely prohibits and penalizes the transaction of business until certain prescribed conditions have been fulfilled by a company seeking admission to the state, many cases hold that the company cannot escape the obligations of its contract by reason of its own dereliction ^ though not in a position to enforce the collec- tion of premiums, or assessments, from the insured.^ If, however, the act merely imposes upon the insurer or its agent a penalty for conducting the business of insurance in violation of the terms pre- scribed, in some jurisdictions the contract is held enforceable by both parties, the specified penalty being held to be exclusive of any other.-* 1 Wood V. Ins. Co., 8 Wash. 427, 36 Pac. 267, 40 Am. St. R. 917, holding also that if the contract is void where made it will not be enforced in another state. But see Western Mass. F. Ins. Co. V. Hilton, 42 App. Div. 62, holding that policy of non-admitted company will be enforced in New York if made in Massachusetts , and valid there. So also Swing v. Brister, 87 Miss. 516 (March, 1906), 40 So. 146, citing cases; and Siirine v. HiU, 165 Ind. 411 (Oct., 1905), and see § 6. The state has the power to pass such a statute, Pierce v. People, 106 111. 11, 46 Am. Rep. 683. 2 Watertoiim Fire Ins. Co. v. Rust, 141 lU. 85, 30 N. E. 772, statute is for pro- tection not injury of insured; Phinix Ins. Co. V. Penn. R. Co., 134 Ind. 215, 33 N. E. 970, 20 L. R. A. 405; Ganser V. Firemen's Fund Ins. Co., 34 Minn. 372, 25 N. W. 943; Marshall v. Reading Fire Ins. Co., 78 Hun, 83, 29 N. Y. Supp. 334, aff'd 149 N. Y. 617, po'licy of foreign company not void though agent failed to obtain statutory li- cense; Swan V. Watertown Fire Ins. Co., 96 Pa. 37. Mere mistake or neglect of state official will not render contract void, American Ins. Co. v. Butler, 70 Ind. 1; American Ins. Co. v. Pressell, 78 Ind. 442. ^ 3 Cincinnati Mitt. Health Assur. Co. V. Rosenthal, 55 111. 85, 8 Am. Rep. 626; Parker v. Lamb & Sons, 99 Iowa, 265, 68 N. W. 686, 34 L. R. A. 704; Williams V. Cheney, 8 Gray (Mass.), 206; Swing V. CameroTO (Mich.) (July, 1906), 108 N. W. 506, citing cases; Seamans v. Temjde Co., 105 Mich. 400, 63 N. W. 408, 28 L. R. A. 430, 55 Am. St. R. 457; Seamens v. MiU Co., 66 Minn. 205, 68 N. W. 1065 Cowan v. London Assur. Corp., 73 Miss. 321, 19 So. 298, 55 Am. St. R. 535; Commonwealth Mut. Fire Ins. Co. v. Hayden, 60 Neb. 636, 83 N. W. 922, 83 Am. St. R. 545; Haverill Ins. Co. v. Prescott, 42 N. H. 547, 80 Am. Dec. 123; (but see Union Ins. Co. V. SmaH, 60 N. H. 458); Swing V. Munson, 191 Pa. 582, 43 Atl. 342, 58 L. R. A. 223, 71 Am. St. R. 772; Rose V. Kimberly & C. Co., 89 Wis. 545, 62 N. W. 526, 27 L. R. A. 556, 46 Am. St. R. 855; but a premium paid cannot be recovered back, Leonard v. Washburn, 100 Mass. 251. An un- licensed insurer having paid a loss is entitled to subrogation, St. Louis, etc., R. Co. V. Commercial Union Ins. Co., 139 U. S. 223, 11 S. Ct. 554, 35 L. Ed. 154; St. Louis, etc., R. Co. v. Fire Assn., 55 Ark. 163; 18 S. W. 43, 60 Ark. 325, 30 S. W. 350, 28 L. R. A. 83; Lumbermen's Mut. Ins. Co. v. Kansas City, etc., R. Co., 149 Mo. 165, 50 S. W. 281; Phernx Ins. Co. v. Penn. R. Co., 134 Ind. 215, 33 N. E. 970, 20 L. R. A. 405. And the better view is that it is also entitled to compel its own agent to account for premiums collected, though on business unau- thorized by statute, Rocjord Ins. Co. V. Roger, 9 Colo. App. 121, 47 Pac. 848; Georgia Home Ins. Co. v. Bovlin, 137 Ala. 350, 34 So. 1012- Penn. Mut. his. Co. V. Bradley, 21 N. Y. Supo, 876, aff'd 142 N. Y. 660, 37 N. E. 569; contra. People's Mut. Ben. Soc. v. Lester, 105 Mich. 716, 63 N. W. 977, but the insurance company cannot recover on its agent's note for un- collected premiums on such business, New Hampshire Ins. Co. v. Kennedu, 96Tenn. 711,36S. W. 709. * State Mut. Fire Ins. Assn. v. 12 THE LAW OF INSURANCE § 8. License to Procure from Non-admitted Companies. — ^Many fire risks are so valuable or so hazardous that it is impossible to fully cover them in authorized companies. Statutes have been passed under which agents are licensed to protect the deficit with non-admitted companies.* § 9. Origin of Insurance and Insurance Law. — The origin of insurance is obsciu-e. Loans on bottomry are of ancient date, and from this maritime usage the earliest form of insurance may have developed. The practice of marine underwriting probably started in connection with the revival of commerce in the twelfth or thir- teenth century. At that time the ocean commerce of Christendom was largely undertaken by the Lombards, merchants of the north of Italy, who had established trading companies generally through- out Europe, and who appear to have carried the practice of ma- rine insurance wherever they had mercantile dealings. The word "policy " is of Italian derivation.^ At its initial stage, the contract of insurance was \mderwritten by individuals and was regulated by mercantile custom, which became the foundation of all the laws and codes subsequently enacted upon the subject. A recorded mention of insurance in England in 1548 indicates that the practice of insuring had been in vogue there for some time,' and somewhat later, on opening Queen Elizabeth's first parUament, Lord Bacon said: "Doth not the wise merchant in every adventure of danger give part to have the rest assured?" But for many years after its introduction into that country, the law of insurance was BrinUey Stave & Heading Co., 61 272, aft'd 178 N. Y. 551: Shepard v Ark. 1, 31 S. W. 157, 29 L. R. A. 712, Dams, 42 App. Div. 462; Surges v. 54 Am. St. R. 191; Pennypacker v. Jackson, 18 App. Div. 296, aff'd 162 Ins. Co. 80 Iowa, 56, 45 N. W. 408, 8 N. Y. 632, 57 N. E. 1105. L. R. A. 236, 20 Am. St. R. 395; 2 From Latin poUicUatio, a promise, Union Mid. Life Ins. Co. v. McMiUen, or possibly from polypticum, a folded 24 Ohio St. 67; Toledo Tie & Lumber writing. A "chamber of assurance" Co. V. Thomas, 33 W. Va. 566, 11 S. E. was established iiuthe city of Bruges 37, 35 Am. St. R. 925; and see Fritts as early as a. d. 13K) A form of policy V. Palmer, 132 U. S. 282, 10 S. Ct. 93, supposed to be the oldest extant, will 33 L. Ed. 317. be fovmd in the Appendix, ch. II, the 1 N. Y. Gen. Ins. L. § 137. Affi- original of which is in the Italian Ian- davits are filed showing the facts, guage, and was established by the stat- Such companies often give brief stipu- ute of Florence, January 28, 1523. The lation in substance to follow action and earliest extant English policy is dated adjustment of some prominent domes- 1613 and for the most part accords with tic company. If a broker improperly the present Lloyd's policy. See Mar- place order with non-authorized com- tin's History Mar. Ins. 46. pany he is personally responsible for 3 Perhaps introduced by representa- loss, Landusky v. Beime, 80 App. Div. tives of the Hanseatic League. INTRODUCTORY 13 unknown to the common-law courts, and insurance disputes were as a rule settled by the arbitration of mercantile men.^ The first reported insurance case belongs to the year 1589, and is mentioned by Sir Edward Coke,^ in which it was held, "where as well the contract as the performance of it is wholly made or to be done beyond sea, it is not triable by our law, but if the promise be made in England it shall be tried." In 1601 a special tribunal for the trial of marine insurance cases was established in England.* This court — which consisted of the judge of the Admiralty, the recorder of London, two doctors of the civil law, two common lawyers, and eight grave and discreet mer- chants, or any five of them — fell into disuse within a century after its organization, and by degrees insurance disputes began to come within the jurisdiction of the common-law courts of England. In 1756 Lord Mansfield was appointed Chief Justice of the Court of King's Bench, and during his long and illustrious career as a judge he was conspicuous in making the policy of insurance the sub- ject of careful study. From foreign ordinances,'* writings of jurists, and usages of trade, he d -ew and shaped the principles of insurance law. § 10. Lloyd's and Lloyd's Usages. — The body of rules or trade customs under which the business of insurance had grown up was known as "the usages of Lloyd's." To these usages and earlier maritime customs we must look to find an origin for such far-reaching and significant principles of insurance law as the following: namely, 1 "The contract of marine insurance tymes it hathe bene. And, whereas it is an exotic in the common law," Ins. hathe bene tyme ovt of mynde an usa^e Co. V. Dunham, 11 Wall. (U. S.) 1, 31- among the merchantes, both of tms 34, 20 L. ed. 90, in which an instruct- realme and of forraine nacyons, when ive account is given of the early history they make any great adventure (es- of insurance and insurance law. On peciallie into remote parts), to give the continent of Europe maritime and some Consideracion of money to other mercantile cases are relegated to special persons (which commonlie are in no commercial tribunals. small number), to have from them as- 2 Dowdale's case, 6 Coke R. 476; surance made for their goodes, mer- and see Crane v. Bell, 4 Coke's Inst. chandize, ships and things adventured, 139 (1546). or some parts thereof , at such rates and 343 Eliz. c. 12. "Whereas it ever in such sorte as the parties assurers a,nd hathe bene the policie of this realme by the parties assured can agree, which all good means to comforte and en- course of dealinge is commonlie termed courage the merchante, therebie to ad- a policie of assurance, etc." vance and increase the generall wealth < See, for example. Marine Ordi- of the realme, her Majestie's customes, nances of Louis XIV, published in and the Strength of Shippinge, which 1681, Title Sixth (reprinted in 30 Fed. Consideracion is nowe the more requi- Cas., p. 1211), Guidon de la Mar site because trade and traffique is not (Rouen, about 1600). at this present soe open as at other 14 THE LAW OF INSUIIANCE that the contract is one vberrimcc fidei, demanding a disclosure of all material facts affecting the risk; that acts of the insured which materially change and enhance the character of the risk during the pendency of the policy will avoid the contract; that there must be no deviation from the usual voyage as prescribed by custom; that the vessel must be seaworthy at the commencement of the risk in a voyage policy; that any statement appearing on the face of a marine policy is a warranty and must be rigidly complied with and that goods stowed on deck are not protected by the policy in the absence of a general trade usage to the contrary.* 1 Lloyd's was originally a coffee- house in London, a celebrated resort of merchants and underwriters. In 1688 it was located in Tower Street, but within three or four years from that date, the establishment was re- moved to the corner of Lombard Street and Abchurch Lane, where it became the world-renowned center for com- mercial intelligence and for the busi- ness of marine underwriting. After several other removals, it ultimately took possession of its apartments in the Royal Exchange. In 1769 the principsd merchants and underwriters frequenting the coffee-house formed themselves into a society with rules and regulations. In 1779 the society adopted the form of poUcy thencefor- ward known as " Lloyd's Policy," which closely resembles the policies now in use in the United States, and which corresponds with the policy prescribed by the EngUsh marine insurance act or codification of 1906, except that the words "Be it known that" have been substituted for the introductory words "In the Name of God, Amen," appear- ing in the earlier form, a change ef- fected in the year 1850. Justice EuUer characterized this instrument as "ab- surd and incoherent " Brough v. Whit- more, 4 T. R. 206; Lord Mansfield called it "a very strange instrument," Le Cheminant v. Pearson, 4 Taunt. 380; Justice Lawrence said it was "drawn with much laxity," Marsden v. Reid, 3 East, 579. Nevertheless, almost every word of it has been 'judicially construed, and therein consists its value, Simond v. Boydell, Doug. 268. In its stability it is in striking con- trast with the fire policy, which during its history has exhibited a series of shifting forms, which have given rise to much confusion and uncertainty both in the business and in the law of insurance. As the courts from time to time have adjudicated away by a strict construction the restrictions and exemptions from liabiUty named in the fire policy, its phraseology has been altered by the insertion of a more and more explicit wording in favor of the insurers, until in many instances the legislatures of the several states have been provoked to interference by sweeping statutory enactments which govern the contents and legal effect of the fire insurance contract within those states, Reilly v. Ins. Co., 43 Wis. 456, and see Appendix, ch. I. It was from early times the custom at Lloyd's rooms to pass around the proposed policy of the applicant among the members, and each member under- wrote or subscribed his name for such portion of the required amount as he wished to undertake, together with the date of subscription, until in this way, by successive subscriptions by differ- ent persons on the same policy, the desired amount was covered. In 1871 the Society of Lloyd's was incorporated by special act of parliament (34 Vict, c. xxi), one of the express objects of incorporation being the "collection, publication, and diffusion of intelli- gence and information with respect to shippii^." In the accomplishment of this object it has attained an unrivaled standard of perfection. Lloyd's mem- bers have developed a system of agency radiating everywhere throughout the maritime world, by which they are enabled to receive the promptest and most reliable information of all de- partures from and arrivals at ports, as well as of losses, casualties, and other useful shipping news. A standard London periodical has said: "Towering head and shoulders above the crowd of INTRODUCTORY 15 § 11. American Lloyds. — Modeled in a measure in imitation of the original society of English Lloyds, many unincorporated asso- ciations have been formed in this country, some with the object of transacting marine, and others with the object of transacting fire or other forms of insurance, and all known generally as American Lloyds. The basis of organization is a written agreement, resembling articles of copartnership of a limited liability, executed by the underwriters, who contribute to a common guaranty fund and who by a written power of attorney put the actual management in the hands of an agent, usually a broker or other expert. This agent or attorney, sometimes under the supervision of an executive com- mittee, solicits and attends to the business, signs each policy on be- half of the underwriters, settles losses, and receives a flat commission on premiums to cover compensation and office expenses.^ By this device the aim has been to evade in great measure the statutory re- quirements imposed upon insurance corporations, for instance, those relating to capital, reserve fund, and annual reports. With some notable exceptions the earlier American Lloyds proved to be a dis- appointment either to the underwriters or to the patrons, and such associations have now been largely brought within the reach of statutory regulations.^ institutions that have helped to win for England the maritime supremacy of the world, stands the corporation of Lloyd's. Its collapse would be more widely felt than that of any other commercial institution of the world." For history of marine insurance see Chalmers & Owen Ins. (1907), p. 170; Martin's History Lloyd's & Mar. Ins. (1876). For present Lloyd's cus- toms and practice of English Asso. of Average Adjusters see Chalmers & Owen Ins. (1907), pp. 173-177; Arn. Ins. (7th ed.), pp. 1523-38. As to legal effect of these rules of practice see Steamship C. Co. v. London, etc., Ins. Co. (1901), 6 Com. Cas. 297. 1 States V. Ackerman, 51 Ohio St. 163, 37 N. E. 828, 24 L. R. A. 298. 2 For form of Lloyd's accident policy see State v. Ackerman, 51 Ohio St. 163, 37 N. E. 828. Each underwriter is liable , but only to the amount subscribed by him on each policy, not for any part of the liability of his associates, liability being several but not joint, Barnes v. People, 168 111. 425, 48 N. E. 91; Im- perial Shale Brick Co. v. Jewett, 42 App. Div. 588, 60 N. Y. Supp. 35; Straus v. Hoadley, 23 App. Div. 360, 48 N. Y. Supp. 239. Estate of subscriber is liable after his death on policy issued before and the death does not revoke power of attorney, Durbrow v. Ep- pens, 65 N. J. L. 10, 46 Atl. 582. When the fund measured by the limited lia- bility is exhausted there must be further contribution if the policy was issued after its impairment, Burke v. Rhoades, 82 App. Div. 325, 81 N. Y. Supp. 1045, id. 79 N. Y. Supp. 407, 39 Misc. 208. If the policy so provide, the insured must bring test suit against the agent before suing underwriters, Enterprise Lumber Co. v. Mundy, 62 N. J. L. 16, 42 Atl. 1063, 55 L. R. A. 193; Ketchum v. Belding, 58 App. Div. (N. Y.) 295, 68 N. Y. Supp. 1099; Leiter V. Beecher, 2 App. Div. 577, 37 N. Y. Supp. 114; Lawrence v. Schaefer, 20 App. Div. 80, 46 N. Y. Supp. 719, but not if there be no attorney, American Lucol Co. v. Lowe, 41 App. Div. 500, 58 N. Y. Supp. 687. Judg- ment in the test suit is conclusive upon the underwriters, Conant v. Jones, 50 App. Div. 336, 64 N. Y. Supp. 189, but not if fraudulently procured, Cujf V. Heine, 58 N. Y. Supp. 324, 27 Misc: 498. The one-year Lmitation in the 16 THE LAW OF INSURANCE § 12. Fire Insurance. — Fire insurance as an organized system has had an origin comparatively recent, and it was not until after the great London fire of 1666 that it took any very practical shape, though back in Anglo-Saxon times there is evidence of attempts among friendly guilds to guarantee protection against fire and other calamities by mutual contribution. In 1681 the first regular office for insuring against loss by fire was opened by a combination of persons at the rear of the Royal Exchange, and in 1710 the Sun Fire Office, the earliest mutual and stock company, was organized in London. The first fire company established in the United States was "The Philadelphia Contributionship for Insuring Houses from Loss by Fire," incorporated on the mutual plan in 1752, one of its early directors having been Benjamin Franklin. § 13. Life Insurance. — The earliest practical embodiment in the direction of life insurance was the foundation in 1706 by royal charter in Great Britain of "The Amicable Society for a Perpetual Assur- ance Office." The scheme was simply to raise a fixed contribution from each member, and from the proceeds to distribute a certain sum each year among the representatives of those who had died during the year. No one was to be admitted under the age of twelve, nor above the age of fifty-five, but all were to pay the same rate of contribution. In 1734 the society made arrangements for guaranteeing that the dividend for each deceased member should not be less than £100, which was the first approach to an assurance of a definite sum at death, whenever that might occur. The Equitable Assurance Society of London, which was organized under a deed of settlement and commenced business in 1762, may be regarded as the pioneer of the modern system of life insurance. It issued policies for the assurance of fixed sums on single or joint policy for bringing suit applies only to Misc. 276. A Lloyd's association or- liiat suit and not to subsequent pro- ganized merely to be sold is not an leedings against the underwriters, association "engaged in business" Lawrence v. Schaefer, 20 App. Div. 80, within N. Y. Laws, 1892, c. GUO 46 N. Y. Supp. 719. If plaintiff join People v. Loew, 23 Misc. 574, 52 N. Y.' all the underwriters in one suit in- Supp. 799. Right of individual un- stead of suing them separately, de- derwriter under contract of reins' a - fendants must plead the misjoinder, ance, Thompson v. Colonial Assur. Isear v. Hoadley, 44 App. Div. 161, Co., 68 N. Y. Supp. 143, 33 Misc 37 60 N. Y. Supp. 609. Liable for no aff'd 70 N. Y. Supp. 85, 60 App. Div' greater proportion of loss than the 325. For statutory provisions relating policy bears to the whole insurance, to Lloyds, see N. Y. Ins. L. |8 57 121 Coo,i V. Loew, 69 N. Y. Supp. 614, 34 138, 139, 162. ' ' INTRO DUCTOEY 17 lives, or on survivorships, and for any terms. The premiums were regulated according to age. Lives were admitted with due regard to their state of health and other circumstances. The creation of corporations in America with power to insure lives and grant annuities d^tes back beyond the Revolution, one of the earliest companies being chartered in the colony of Pennsylvania as early as 1769, for the benefit of the families of Presbyterian clergy- men. But the business of life insurance did not assume conspicuous importance until within little more than a half century. The first reported life insurance case in the United States ^ shows the exist- ence of a contract of life insurance as early as 1809. It was in that case contended by the defendant that no valid contract of life insur- ance could be mad® within the state of Massachusetts, inasmuch as the law of England in that regard, it was said, had never been adopted in this country; but the court sustained the contract on the ground that it was not repugnant to the general policy of the law or to good morals, and that no reason had been given for con- demning such contracts, except by the French courts, which con- sidered "that it is indecorous to set a price upon the life of a freeman which is above all price"— a reason which was pronounced insuffi- cient. In the United States, life insurance has attained a greater relative importance among financial institutions than in any other country. During the years which immediately followed the close of the Civil War, it grew with unparalleled rapidity; new companies were estab- lished in great numbers; new features of insurance contracts were devised, and soliciting agents canvassed the country from one end to the other. It is to be observed that fire policies on the average are for a much .shorter term than life policies, and that a life com- pany is ordinarily obliged to accumulate for the payment of future losses a much larger amount of assets than is required in the conduct of the business of marine or fire insurance, since, unlike the perils of shipwreck and fire, the peril of death is sure to occur sooner or later to the persons whose life is insured. Moreover, popular modern forms of life insurance policies have involved the payment of deferred dividends of indefinite amount at stated periods in the distant future to fortunate survivors of a class.^ The result followed that large life companies in this country,^ in a wild race for su- premacy among themselves, amassed enormous amounts of assets ^ Lord V. Dall, 12 Maes. 115. s Conspicuously thjB three great New 2 Tontine and similar forms, see York companies, the Mutual, the Equit- § 21. able, and the New York Life. 2 18 THE LAW OF INSURANCE and surpluses which were not set aside for prof)osed betterments, or appropriated for present dividends, like the assets of a rail- road or industrial corporation, or kept subject to call like the as- sets of a savings bank, but were retained for purposes which only the company's actuaries could fathom, a colossal trust fund which carried with it, especially to the officers and finance committees, temptations of an exceptional and subtle character. The machinery of the insurance departments proved ineffective to protect the policy holders from evil consequences of startling proportions, and after a notable investigation by a committee of the New York legislature, statutes of a drastic character were recently adopted in that state.* § 14. Accident Insurance. — Accident insurance, which is a branch of life insurance, is an important development of later growth. Ordinary life insurance protects against the stipulated pecuniary loss occasioned to a man's family or to creditors, or others, by his death, whether caused by old age or accident. But ordinary acci- dent insurance protects only against losses caused by accident whether resulting in death or not. § 15. Classification of Risks. — In fire and marine insurance, risks are classified according to the degree of hazard, and the premi- ums graded accordingly. But in life insurance, as a rule, only healthy persons are' accepted, and consequently the premiums are scaled according to age; sometimes, however, special risks are taken involv- ing a hazardous occupation, or an unhealthy location of residence, for which an extra premium is paid. So also some companies, for an extra premium, insure persons of unsound health.^ In all branches "of insurance the amount of the premium is made to depend more or less upon average results which have been arrived at after 1 N. Y. Law, 1906, c. 326. The panies obliged to make equitable dis» Armstrong committee, the Hon. Chas. tribution of Burplus to pohcyholders at E. Hughes, counsel. The following stated periods. 7. Investments regu- results among others were accom- lated and control of subsidiary com- plished by these laws affecting life in- panics prohibited.— The New York court surance companies. 1. Policyholders had decided substantially that upon given a more effective voice in the maturity of his pohcy m a mutuai government of the companies. 2. Full comptany the policyholder coiild get publicity secured to pohcyholders in for his share of the surplus only what regard to management of companies' the directors saw fit to divide, Greeff affairs. 3. PoEcies limited to four v. Sodetfi, 160 N. Y. 19, 54 N. E. standard forms. 4. Pohcies safe- 712, 46 L. R. A. 288, 73 Am. St. R. guarded against forfeiture, warran- 659. ties being converted into representa- ^ Security Trust Co. v. Tarpey, 182 tions in absence of fraud. 5. Deferred lU. 52,54 N. E. 1041, "substandard dividend policies prohibited. 6. Com- jifike." INTRODUCTORY 19 elaborate observations and careful collection of statistics bearing upon the subject. In accepting or rejecting a proposed risk, the insurers are governed by their familiarity with these general rules of average. But it is also very important for them to gain a thorough acquaintance with the facts and circumstances relating to the particular case, to ascer- tain whether it falls within or outside the general rule. Formerly much of this information was obtained from the insured by means of a written document called an. application containing such interrogatories and answers as were appropriate to furnish the desired facts. But now in fire insurance the use of an application in detail is for the most part confined to certain farm properties and to e?;ceptional instanses. In the cities and towns generally the in- surers have come to rely very much upon their own means of exami- nation; and for use in the larger cities they have prepared elaborate and accurate insurance maps and surveys showing the character of the risk involved in every building. In marine insurance the rating of ships and statistics regarding them are to a considerable extent a matter of record, but more or less information is often required by the insurers from the insured in relation to the proposed risk. They should be advised from some source of the ownership, quality, and nationality of the vessel, the course of the proposed voyage, the character of the captain, the nature of the commodity carried, the state of political relations, and in time of war whether the ship is to sail with convoy. In marine insurance the scale of premiums varies very greatly ac- cording to circumstances, and may sometimes well nigh equal the value of the insured property. The subject of insurance is some- times insured "lost or not lost," provided neither party knows whether the risk has already terminated. § 16. Mortuary Tables. — The premiums to be charged for life policies are based upon calculations made from mortality tables - which are tabulated exhibits of the number of survivors and tl' number of those dying each subsequent year among a given number of persons taken at various given ages respectively.^ The table- 1 A considerable number of such structed by Dr. Thomas Price from the tables have been prepared at different renters kept in the parish of All times, the earliest of which are so Saints Northampton, England, for the rough and inaccurate that they possess forty-six years, 1735 to 1780. An- only a historical interest. Of the more other English table very extensively reUable tables which have been in use used by insurance companies was the in recent times may be mentioned the Carlisle Table, constructed by Mr. Northampton Table, which was con- Joshua Milne from materials furnished 20 THE LAW OF INStTRANCE which thus give the average duration of lives indicate the average amount which must be paid for losses. The assumption is made that the company will succeed in so investing its assets as to gain an average income therefrom of a certain per cent, say three and a half or four per cent annually in addition to receipts from premiums. The lower the specified estimated rate of future interest on assets the safer the standard of solvency, and the greater the amount of present assets required to satisfy that standard. The higher the estimated rate of future interest, the more danger that the company will fail to earn it and in order to meet its liabilities will be obliged to exhaust its surplus and impair its capital. A net premium is the rate at which, according to the table of mortality and interest, an insurance could be effected. But to this must be added in practice an important percentage which is called "loading," or "margin," in order to defray the expenses of the business, and to provide for a possible excess of mortality. A gross or office premium is the net premium increased by the loading. § 17. Reserve. — That portion of the premiums of a policy with the interest thereon which is required to be reserved or set aside as a fund for the payment of the policy when it becomes due is called the "reserve." ^ The mean or average duration of the life of an individual after any specified age, according to a given table of mortality, is called the "expectation of fife." Statistical observa- tions on the duration of human life point to the conclusion that, after the period of extreme youth is passed, the death rate among any given body of persons increases gradually with advancing age; and where the annual premium is fixed at a uniform rate during the life of the policy, as is customary in life insurance, it is evident that if the policy is surrendered by the insured before its expiration, the insurers can generally afford to make a return of a portion of the premiums which have been paid. Of the reserve value which the policy is estimated to have at the time of surrender, a part called "the surrender value," the company offers to pay to the insured by the labors of Dr. John Heyeham. much more carefuUy coUected statis- These materials comprised two enu- tics and giving more accurate results merations from the population of the C!onspicuous among these are the Earishes of Saint Mary and Saint Cuth- American Experience Table and the ert Carlisle in 1780 and 1787, and the Actuaries' or Combined Experience abridged bills of mortality of those two Table. The mathematics of the busi- PiJoir^^ J"*" u °"® ^^^ ^'^'^^ *° '"^' °^ gre^t practical consequence 1787. bince then many mortuary are managed by actuaries tables have been prepared in England i N. Y. Law, 1892 c 690 55 20'i and the United States, based upon 305, N. Y Law 1898 'c '85 INTRODUCTORY 21 in. return for the cancellation of the policy before its natural expira- tion.* From these same considerations it appears, also, that in the event of the insolvency and winding up of a life insurance company, there is a basis for calculating the present value of unexpired policies, by which an equitable distribution of assets may be made to all the policy holders in accordance with the laws of priority.^ The test of solvency is the rule which the insurance department is required to apply to determine the ability of a company to pay all losses which, according to the standard table of mortality and rate of interest, may occur. The UabiUties of a company consist of its actual unpaid losses, its expenses and contingent obligations, for the payment of \vhich*its assets are held liable. The whole amount insured is really a contingent obligation, but in testing the present solvency of a company, this is regarded as a liability only to the extent of the reserve on each policy.* § 18. Different Kinds of Policies. — The forms of printed poli- cies of insurance in use are varied and numerous. They are filled up in writing to suit each particular case, and are often further modi- fied by special clauses, which may be pasted or attached in the shape of printed riders to the more general form. A valued policy is one which specifies an agreed value of the subject-matter insiired; for example, a policy of $5,000, on "the ship Argus, valued at $10,000." In case of total loss of property such a valuation, if not dishonest, furnishes the basis of adjustment. An unvalued, sometimes called an open policy, is one in which the value of the subject insured is not specified but is left to be ascertained in case of loss. PoUcies on lives are valued. Policies on ships are usually valued. Fire policies on contents of buildings are usually unvalued and, in the absence of valued policy laws, so are fire policies on buildings. § 19. Same Subject : Marine. — A time policy is one in which the duration of the risk is defined at the beginning and at the end, by 1 In case of lapse for non-payment tion, People v. Association, 150 N. Y. of premium, company by statute must 94, 45 N. E. 8; People v. Ins. Co., 154 use reserve for benefit of assured to N. Y. 95, 47 N. E. 968. Claims valued purchase paid-up insurance, etc. Niel- as of date of beginning of action for sin V. Society, 139 Cal. 332, 73 Pac. dissolution. Equitable Reserve Fund 168. See Appendix of Statutes and Assn., 131 N. Y. 354, 30 N. E. HaskeU v. Society, 181 Mass. 341, 63 114. N. E. 899. ' As to statutory test of solvency, see 2 Reserve, how distributed on dissolu- N. Y, Ins. L. { 21, 22 THE LAW OF INSURANCE fixed dates, as, for example, from noon of January 1, 1907, until noon of January 1, 1908. A voyage policy is one in which, irrespective of time, the dura- tion of the risk is established by geographical termini; as, for exam- ple, from New York to Liverpool.* §20. Same Subject: Fire. — The term "open policy" or "run- ning policy " is sometimes employed to indicate a general form of insurance frequently used where the insured is likely to effect many successive insurances from the same company. It covers such goods, at such amounts of insurance, in such storehouses and places, and at such rates of premiums, as from time to time shall be agreed upon and indorsed on the policy or in a book attached thereto, the purpose being to obviate the necessity of executing a fresh policy for every transaction.^ A floating policy also is a general form of insurance, but usually upon goods within a certain specified area of territory,' or otherwise designated, and is intended to cover property which cannot well be described specifically because of its fluctuating quantity and loca- tion; as, for example, merchandise in freight. trains, warehouses, or lighters. The amount of goods covered by such a policy is ascer- tainable at the moment of loss only.* An excess policy, usually a floater, attaches only to property or to an excess of value not covered by the specific insurance.^ Insurance is said to be in the blanket form, as contrasted with specific, when different buildings or different classes of property are insured in an aggregate amount without apportionment; for exam- ple, a policy of $5,000 on a factory plant in its entirety, including buildings, machinery, and stock. While a policy of $5,000 on one of the buildings alone is called specific. A rent policy is an insurance 1 Comfoot V. Royal Exch. Assn. are left to be defined by subsequent Corp. (1903), 2 K. B. 363. For de- declaration, Smrwden v. Guion, 101 scription of "disbursement" marine N. Y. 458, 5 N. E. 322. policy, see International Nav. Co. v. *Golde v. Whipple 7 Add Div AtlarUic MiU. Ins. Co., 100 Fed. 304. (N. Y.) 48, 39 N. Y. Supp. 964f jlfoom Launch and trial trip policy, Jaclcson Fire Ins. Co. v. Powell 116 Ga 70^ V. Mumford (1904), 9 Com. Cas. 114. 43 S. E. 73. ' ' 2 Imperial Shale Brick Co. v. JeweU, s An excess floater, United Under- 169 N. Y. 143, 62 N. E. 167; CorUi- writers Ins. Co. v. Powell, 94 Ga 359 nsntal Ins. Co. v. Mtna Ins. Co., 138 21 S. E. 565: Peabodv \ L & L & G N. Y. 16 33 N. E. 724. /«>. Co., 171 Mass'' 114 ' (1898) 50 3 So also m marme msurance the N. E. 526; Fairchild v Ins Co 51 term "open policy" or "floating N. Y. 65, 69. As to blknket or c'om- pohcy is often used to mdicate one pound policies and specific policies see in which the ships or other particulars Page v. Sun Ins. Office 64 Fed. 1 94 INTRODUCTORY 23 on rents, usually, but not of necessity, in favor of the landlord.* A use and occupancy policy is adapted to indemnify one in occupa- tion of mill, factory, hotel, store, or other business premises, for loss of commercial use or earning capacity during the period after a fire and before reinstatement. The phrase "use and occupancy" being somewhat indefinite and such a policy being almost always valued ^ it is difficult to ascertain or define with precision the subject-matter of this class of insurance.* The contract seems in general to be in- tended to furnish indemnity for loss of estimated earnings or some part thereof which would have accrued from the business except for the fire.* It is analogous to rent insurance or insurance on profits and must be carefully distinguished from insurance on the buildings themselves or on their contents. § 21. Same Subject: Life. — The regular old-style life policy is payable on the death of the person insured, and the payment of premiums continues annually throughout life. The limited payment policy is payable at the death of the person insured, but the payment of premiums ceases after a certain limited period, say ten, fifteen, or twenty years. An endowment policy ^ is payable at the expira- tion of the endowment period or upon the earlier decease of the insured. A regular life policy is in the nature of an investment by the insured usually for the benefit of his family, or some member of it, while an endowment policy is intended as a contingent investment for his own benefit, being payable to himself if alive at the expiration of the period named. A term policy is one taken for a limited number of years, the policy being payable only in case of the death of the in- sured within that period. If he is alive at the end of the term, the insurance ceases altogether.* A joint-life policy is one payable on the earliest death of two or more persons insured. A survivorship policy is one payable on the death of the survivor of two or more persons. "See Appendix of Forms. Generally policy combines generally in its plan an by statute or by the lease a tenant is insurance of the life and an invest- relieved from pajring rent if premises ment of the money paid," Miller t. are rendered untenable by fire. Campbell, 140 N. Y. 457, 463, 35 N. £, 2 See Appendix of Forms. 651. ' Michael v. Prussian National Ins. « These four are now the statutory Co., 171 N. Y. 25, 63 N. E. 810. forms for New York though the super- < The aim is sometimes to cover intendent of insurance upon applica- expenses which continue in spite of tion is allowed to sanction other forms, fire General Ins. Law as amended 1906, } ^Walker v. Giddings, 103 Mich. 101. 344, 61 N. W. 512. "An endowment 24 THE LAW OF INSURANCE A tontine policy is one in which it is agreed that certain accumu lations or profits of the business shall be apportioned among those of the insured of a certain class surviving, at certain intervals; for example, every ten, fifteen, or twenty years.' The lapsed policies of the class forfeit their reserve and dividends to the survivors. A tontine dividend is the distribution of such profits among the sur- vivors who are entitled to it after the given period. A semi-tontine policy is one in which it is agreed that the dividends only shall be apportioned among the survivors of the class.^ § 22. Mixed Risks, Sea and Land. — To meet modern demands of commerce a marine policy is sometimes altered to include all kinds of risks by land and by water between certain termini.* § 23. Reinsurance. — A feature of insurance business which has developed into great magnitude is the practice of reinsurance. Where a company finds itself in embarrassed circumstances, or for any reason desires to limit its liability, in certain classes of risks, or in certain localities, or under a particular policy, it secures, if possi- ble, reinsurance from one or more other companies. The entire business of an insurance company is not infrequently absorbed in this way by some stronger competitor. The owner of an important risk, for example, a warehouseman or common carrier, often prefers to deal exclusively with one insurance company of high standing rather than with many companies. This course of procedure greatly simplifies for a railway company the serious business of adjusting numerous losses. Accordingly one policy is obtained by the assured from the company of his choice to the full amount required, some- times millions of dollars. But every prudent insurance company must limit its liability upon any one risk.^ The company issuing the original policy, called the straight or direct insurance, must 1 N. Y. Life Ins. Co. v. MiUer, 22 K. B. 665 (goods); Jacob v. Gaviller Ky. L. Rep. 230, 56 S. W. 975; Colum- (1902), 7 Com. Cas. 116 (prize fox bia Bank v. Equitable L. Assn. Soc, 79 terrier from London to Bombay thence App. Div. (N. Y.) 601, 80 N. Y. Supp. by rail to Lahore); Hyderabad D. Co v. 428; Ellison v. Straw, 119 Wis. 502, WiUoughby (1899), 2 Q. B. 530 (gold 97 N. W. 168. from mines in India to London); Yuill ^ Everson v. Eq. Life Assur. Co., 68 v. Robson (1907) 1 K. B. 696. The Fed. 258. Many life companies also in policy is also often made applicable to return for a present lump amount will inland marine insurance, lake, river or guarantee a stated annuity running for canal, Qvtbec Nav. Ins. Co. v. Bank, the life of the annuitant, or other (1870), L. R. 3 P. C. 234; Shelboume v. period, payable annually or at stated Ins. Co. (1898), 8 Asp. Mar. Cas. 445] mtervals. * Limits are also prescribed by ^Schloss Bros. v. Stevens (1906), 2 statute. INTRODUCTORY 25 therefore assume the burden of dividing up the excess of liability, if large, among many other companies, and this it does by taking out from them in its turn many policies of reinsurance, each for some share of this liabiUty.^ > For form of reinsurance nder see Appendix of Forms. CHAPTER II General Principles of Insurance Law Nature and Characteristics of the Contract § 24. Indemnity the Object — Pure Wagers Void. — From a con- sideration of the peculiar nature and varied application of insurance, as described in the foregoing introductory chapter, we come in this and the following chapters of Part First to the important study of certain general principles of insurance law, thorough familiarity with which is essential to a fair comprehension of the meaning and legal effect of numerous clauses and conditions, contained in policies and set forth in Part Second of this treatise. While all of these general principles serve as a guide to a sound interpretation of the purport of insurance contracts in their diversified forms, some of them peremptorily govern the rights of the parties, regardless of policy stipulations, as, for example, the rule requiring an insurable interest to support the contract, and the rule excluding a foreign enemy from the list of parties insurable; others form a supplement to the written contract, as effective as though expressed in the policy itself, as, for example, the implied warranties respecting seaworthiness, deviation and the legality of the adventure, an- nexed by inference of law to the contract of marine insurance. At the very outset it must be noted that insurance is essentially a contract of indemnity,^ and that from this cardinal principle arise 1 By this proposition is meant that insurance ... as appUed to injuries the object sought to be accomplished resulting in death, is really but a con- by the contract of insurance must be tract of life insurance limited to protection against a real loss to an specified risks; .... it must contain insured interest, not that the measure the essential element of indemnity for of indemnity allowed must he exactly loss," etc.. State v. Federal Investment commensurate with the loss. "Thus Co., 48 Minn. 110, 111, by Mitchell, J. the English court in a leading case de- In a learned and thoughtful opinion a clares that the doctrine of indemnity New York judge concludes that "a life "is really the basis and foundation of insurance is made under our statute all insurance law," Castellain v. Pres- for the indemnity of the assured. ton, 11 Q. B. D.. 380, 407, by Bowen, J. That is the purpose and object which And the Minnesota court says, "The makes it a lawful contract," Miller y. very essence of any definition of in- Eagle Life & H. Co., 2 E. D. Smith Buranoe is indemnity for loss in respect (N. Y.), 268, 295, by Woodruff, J. of a specified subject. . . . Casualty See also definition in Phillips, Ins., § 1. [27] 28 GENERAL PRINCIPLES OF INSURANCE LAW many of its distinctive characteristics, such as the rule requiring an insurable interest, the doctrine of double insurance contribution, and the right of subrogation accruing on settlement of a loss.^ Al- though the agreement is aleatory or speculative in one sense, that is, But if regard is had not to the general nature and predominant purpose of the contract, but to the measure of recovery actually pennitted under technical rules of law, some of them while convenient more or less arbitrary, some favorable to the assured, some to the underwriters, we may easily con- clude that rarely is a marine poUcy a strict contract of indemnity, and a life policy never. Indeed human life is incapable of money valuation; there- fore, in most instances, the life insur- ance company is held to the amount which it has agreed to pay, regardless of the actual value of the hfe insm'ed, or of the amoimt of other insurance. Moreover, premium rates are estimated upon the hypothesis that upon the death of the insured or other event named the hfe company will pay the full amount specified in its policy, and therefore the rule of law is now settled that if the life policy is vahd when issued, the assured, as for instance a creditor of the life insvffed, may lose all insurable interest, through payment of the debt, without invalidating his poUcy. See § 46. These considera- tions have induced some of the judges to declare that hfe insurance is not to be classified as a contract of indemnity, Dolby V. Ins. Co., 15 C. B. 365 (creditor insurance in question, "in no way resembles a contract of indemnity"); Emerick v. CoaUey, 35 Md. 188 ("in no way resembles 4 contract of in- demnity"); Mvt. L. Ins. Co. V. Allen, 138 Mass. 24 ("not a contract for indemnity for actual loss"); Scott v. Dickson, 108 Pa. St. 6 ("not a con- tract of indemnity"). But in these and similar instances the courts ap- parently were passing not so much upon the general nature of the con- tract as upon a narrower question, to wit, the relation in the particular instance between the measure of re- covery allowed and the extent of in- surable interest existing at the time of loss. In regard to this attempted exclusion of life insurance from the general rule, a recent author says, "Though the courts have seized upon this interpretation of the contract as a principle to conjure with, they have appUed it to uphold such contradictory decisions that it is doubtful if there is any real ground for the distinction attempted to be made between hfe and other forms of insurance in this re- spect." Cooley Ins. (1905), p. 90. And May says: "A distinction has sometimes been taken between marine and other insurances, and life insur- ance, on the ground that while the former have for their object to in- denmify for loss, the latter is an abso- lute engagement to pay a fixed sum on the happening of a certain event, without reference to any damage in fact suffered by the insured in conse- quence. But this distinction is super- ficial, and rests rather upon the mode of applying the principles and of de- termining the amount of indemnity, than upon any difference in the princi- ples themselves." May, Ins., § 7. By the California Qvil Code, §§2527, 2766, life insurance is a contract of in- demnity. So of civil codes generally. Some civil codes go so far as to provide that, "the sole object of insurance is the indemnity of the insured, and if he has no insurable interest the contract is void," Cal. Qvil Code, § 2551; Mon- tana Civil Code (1895), § 3405; No. Dak. Civil Code (1905), §5904; So Dak. Civil Code (1903), § 1807. *This doctrine, however, does not require that the insured should recover more than the face of his insurance when his loss exceeds that amount. "Indemnity is the prime object of in- surance," Deming v. Merchant's Cot- ton Press, etc., Co., 90 Tenn. 306, 347, 17 S. W. 89, 13 L. R. A. 518; Carpenter v. Prov. Wash. Ins. Co., 16 Pet. 495, 10 L. Ed. 1044; Eager v. AOas Ins. Co., 14 Pick. (Mass.) 141, 146, 25 Am. Dec. 363; Cummings v. Ins. Co., 55 N. H. 458; CasteUain v. Preston, 11 Q. B. Div. 380. The contracts of fire and marine insurance are much more rigidly governed by the doctrine of indemnity than is the contract of life insurance, Holmes v. GUman, 138 N. Y. 369, 381, 34 N. E. 205, 20 L. R. A. 566, 34 Am. St. R. 463; Crosswdl v. Conn. Indent. Assn., 51 S. C. 112, 28 S. E. 200. INDEMNITY THE OBJECT — PUEE WAGERS VOID 29 the parties may not know whether the event insured against will occur or not,* and in return for a comparatively small sum of money the one party assumes the risk of incurring liability to a much greater amount, nevertheless, compensation for a real loss, rather than a purely speculative venture, must be the aim and object, and con- sequently the party insured must be able to show an insurable interest in the subject of insurance, an interest of a material and valuable character, and not merely moral and sentimental, or else the contract will be altogether void. The doctrines of indemnity and of the necessity of an insurable interest are correlative and complementary in all bi-anches of the law of insurance.^ It must be observed, however, that in life insurance * a sufficient insurable interest an^d f(T a policy to any amount is, under ordinary circimistances, presumec. from certain near relationships. Thus, for this purpose the law tal^es it for granted that the life of a husband is valuable to his wife jjid the life of the wife to the husband; the 1 This proposition is true « ven as ap- plied to life insurance policies if we regard premature death as the peril insured against. 2 Imperial Fire Ins. Co. v Coos Co., 151 U. S. 452, 462, 14 S. Ct. 379, 38 L. Ed. 231, "contracts of insurance are contracts of indemnity;" Central Na- tional Bank v. Hume, 128 U. S. 195, 205, 9 S. Ct. 41, 32 L. Ed. 370, "life insurance is also a contract of in- denmity," court by Fuller, C. J.; Life Ins. Co. V. O'NeiU, 106 Fed. 800, 803, •15 C. C. A. 641, 54 L. R. A. 225, "the tendency of the recent decisions is to insist upon an actual or presumed pecuniary interest in every case, al- though such interest may no doubt be contingent and to some extent un- defined;" Helmetag's Admr. v. Miller, 76 Ala. 183, 187, 52 Am. Rep. 316, by weight of authority the "interest must be, in some sense, pecimiary; " Lewis v. Phoenix Mut. Life Ins. Co., 39 Conn. 100, 104, "interest must be required of a pecuniary nature;" Burton v. Conn. Mut. Life Ins. Co., 119 Ind. 207, 211, 21 N. E. 746, 12 Am. St. R. 405, ex- pected benefit must be pecuniary and not sentimental; CoTitinental Life Ins. Co. V. Volger, 89 Ind. 572, 575, 46 Am. Rep. 185, "the insurable interest must be a pecuniary interest;" Guardian M. L. Ins. Co. V. Hogan, 80 111. 35, 45, 22 Am. Rep. 180, there must be "reason- able expectation of some pecuniary advantage" and reconciling Ins. Co. v. Bailey, 13 Wall. 619, supposed by some to be authority for a different view; Society V. Dyon, 79 111. App. 100; Adams v. Reed (Ky.), 36 S. W. 568, life insurance is a contract of indem- nity; Rombach v. Ins. Co., 35 La. Ann. 233, 234, 48 Am. Rep. 239, "the in- surable interest in the life of another is a pecuniary interest;" Mutual Life Ins. Co. V. AUm, 138 Mass. 24, 27, 52 Am. Rep. 245, "it is necessary that the insured should have some pecuniary interest in the continuance of the life insured;" MoreU v. Ins. Co., 64 Mass. 282, 67 Am. Dec. 92, note by Judge Field, annotator, showing that a pe- cuniary interest is really the test; W Ait- more V. Supreme Lodge, 100 Mo. 36, 46, 13 S. W. 495, "the person who secures such policy must have a pecuniary in- terest;" Currier v. CorUinental Life Ins. Co., 57 yt. 496, 52 Am. Rep. 134, pecuniary interest necessary. The word "interest" in the English stat- ute is construed to mean "pecuniary interest," Halford v. Kymer, 10 Barn. & C. 724, 728; Charter Oak Life Ins. Co. V. Brant, 47 Mo. 419, 4 Am. Rep. 328; Exchange Bank v. Loh, 104 Ga. 446, 31 S. E. 459, 44 L. R. A. 372 (life insiu-- ance for a creditor a contract of in- demnity); Healey v. Mvt. Ace. Assn.. 133 lU. 556, 25 N. E. 52, 9 L. R. A. 371. 23 Am. St. R. 637 (accident insurance a contract of indemnity). 3 §34. 30 GENERAL PRINCIPLES OF INSURANCE LAW life of a father to his minor child and the life of the minor child to the father.' Pecuniary dependence, personal service, natural affec- tion,^ one or all, may be elements of this value. It is immaterial in certain jurisdictions whether all are present or whether all are absent. The fact that all are usually present is deemed justification for a convenient general rule.^ It must further be observed, most notably in life insurance,' but also in other classes of insurance as, for example, accident, and use and occupancy, that the interest of the insured in the subject in- sured may be incapable of exact pecuniary measurement, but none the less is essential as a prerequisite to the validity of the contract. Consonant with the general doctrine of indemnity, it follows that the sum named in the fire or marine policy is not the measure but the extreme limit of recovery.'* No matter how large the amount of insurance, the recovery is restricted to the loss actually sustained. The principle that the contract of insurance is one of indemnity is subject to modifications which will presently be noticed.^ Such modifications have been engrafted upon the general rule largely out of regard to convenience. Thus, the parties are permitted to agree in advance upon the value * of the subject of insurance by means of a valued policy, which in case of total loss is then, in the absence of fraud or intent to evade the law, conclusive evidence of the proper 1 Holmes v. Gilman, 138 N. Y. 369, husbands and some children for their 381, 34 N. E. 205, 20 L. R. A. 566, 34 fathers. An element of service or de- Am. St. R. 463; Geoffroy v. OUbert, 5 pendence or other pecuniary value is App. Div. 98, 100, aff'd 154 N. Y. 741. generaUy to be found in the case of the 2 lAfe Ins. Clearing Co. v. O'Neill, closest relationships, while love refuses 106 Fed. 800, 45 C. C. A. 641, 54 L. R. to conform to legal presumptions and A. 225; Wamock v. Davis, 104 U. S. at best is an uncertain and variable 755, 26 L. Ed. 924, parent in child or factor. It may ako be remarked that child in parent; Conn. Mid. Ins. Co. v. where the rule of insm-able interest as Schaefer, 94 U. S. 457, 24 L. Ed. 251. between those thus closely allied by But see Currier v. Ins. Co., 57 Vt. 496, marriage or blood is estabUshed, the 52 Am. Rep. 134, as to invaUd, help- discussion of reasons for it is largely less wife; Peoide's Mut. Ben. Soc. v. academic. Templeton, 16 Ind. App. 126, 44 N. E. s Nye v. Grand Lodge, 9 Ind. App. 809; Mitchell v. Ins. Co., 45 Me. 104, 131, 36 N. E. 429. 71 Am. Dec. 529. Some authorities in * Exceptions will be recognized here- seeking to explain the basis for the after. existence of an insurable interest as 5 That even the fire contract is not between husbapds and wives and always construed as one of strict in- parents and children have been dis- demnity see, for example, Foley v posed to discard the theory of the Farragut F. Ins. Co., 152 N. Y. 131 pecuniary value of the Ufe insured to- 46 N. E. 318; Michael v. Prussian Nat the beneficiary and have laid all the Ins. Co., 171 N. Y. 25, 63 N. E. 810 stress upon the ties of natural affection. « Michael v. Prussian Nat. Ins Co Nothing seems to be gained by such a 171 N. Y. 25, 63 N. E. 810- Irving v' narrow course of reasoning. Many a Manning, 6 G. B. 391, 1 H. l'. Gas 287 friend has more love for a friend and 307 (like Uquidated damages), cited with many an uncle has more love for his approval in Aitchison v. Lohre, L. R 4 niece than some wives have for their App. Gas. 755, 761. INDEMNITY THE OBJECT — PURE WAGERS VOID 31 basis of adjustment, although in fact the estimated and specified value may be erroneous at the time when it was made and far from accurate at the time of the loss.'' And so also akin to a valued policy on property is the regular life insurance policy, which is also classified as a valued policy, but in which, however, the amount specified as payable on the death of the insured or other event is not construed to be a controlling esti- mate of the whole value of the subject, towards the payment of which any other subsisting insurance must contribute, but simply a measure of the engagement of the particular insurer.^ I Snowden v. Guion, 101 N. Y. 458, 5 N. E. 322; Steamship Balmoral Co. (1902), A. C. 511; Woodside v. Globe Mar. Ins. Co. (1896), 1 Q, B. D. 105; The Main (1894), Prob. 320. Valued policy conclusive unless fraudulent, Patapsco Ins. Co. v. Biscoe, 7 Gill. & J. 293, 28 Am. Dec. 219; Sturm, v. Atlantic Mut. Ins. Co., 63 N. Y. 77; Vmsin v. Commercial M. L. Ins. Co., 62 Hun (N. Y.), 10, 11; Voisin v. Prov. Wash. Ins. Co., 51 App. Div. 553, 65 N. Y. Supp. 333. The amount written in the policy is also conclusive where the statute so provides, Home Fire Ins. Co. V. Bean, 42 Neb. 537, 60 N. W. 907, 47 Am. St. R. 711; ReiUy v. Frank- lin Ins. Co., 43 Wis. 449, 28 Am. Rep. 552. In the United States in order to recover upon a valued policy on profits it is not necessary to prove tha'^ there Vould have been profits, Canada Sugar Ref. Co. V. Ins. Co., 175 U. S. 609, 621, 20 S. Ct. 239; Patapsco v. CouUcr, o ^^t. 222, 7 L. Ed. 659. Compare Eyre v. Ghmer, 3 Camp. 276, 10 East, 218; Hodgson v. Glover, G East, 310 (giving English rule to the contrary). These infringements upon the strict theory of indemnity, however, are of practical convenience, for often the casualty which destroys the insured prop- erty destroys with it the best evi- dence of its value, and the estimate of the adjuster often differs widely from that of the insured. Accord- singly, some of the states have passed valued policy laws applicable to realty, which provide that in the ab- sence of fraud the value of the build- mg written in the policy shall be taken to be its true value and the amount of loss where the building is wholly de- stroyed. These laws are not to be commended, because they impose^ too arbitrary a standard of value and. encourage fraudulent overvaluation and arson, although it is said that they are not intended to disturb the general doctrine of indemnity, Ampfemaji v. Citizens' Ins. Co., 35 Mo. App. 308. Some courts say that if the companies exercise care which it is for the public jnterest they should use in making the valuation there will be no danger of overinsurance, Reilly v. Franklin Ins. Co., 43 Wis. 449, 458, 28 Am. Rep. 552. The difiiculty with this view is that in the case of most risks .of small amount the premium does not warrant the ex- pense of survey or examination. The local agent, especially in the country, is apt to write the value given and is often quite as friendly towards his neighbor, the insured, as towards the insurance company, his principal. A valued polio;- law is not unconstitu- tional as impairing right of contract, or depriving of life, liberty, or property without due process of law, etc. JEtna Ins. Co. V. Brigham 120 Ga. 925, 48 S. E. 348; Orient Ins. Co. v. Daggs, 172 U. S. 557, 19 S. Ct. 281. In the last case the Federal Supreme Court con- cluded that a valued policy law was not contrary to public poUcy. See also Dztgger v. Insurance Co., 95 Tenn. 245, 32 S. W. 5, 28 L. R. A. 796 (three- fourths clause of the policy held super- seded by the statute) . Another modi- fication of the doctrine of strict indemnity is the arbitrary rule of one- third off for repairs, new for old, in marine risks, Aitchison v. Lohre, L. R. 4 App. Cas. 755. 2 Bevin v. Conn. Mut. L. Ins. Co., 23 Conn. 244; Chisholm v. Nat. Cap. Ins. Co., 52 Mo. 213, 215, 14 Am. Rep. 414; Trenton Mut. L., etc., Co. v. Johnson, 24 N. J. L. 576, 581; MiUer v. Eagle L. & H. Co., 2 E. D. Smith (N. Y.), 268, 295. 32 GENERAL PRINCIPLES OF INSURANCE LAW The rule requiring an insurable interest to give support to the contract exists in this country irrespective of statutory provisions,* and everywhere is grounded upon important considerations of public policy.^ Without it the contract would be a wager, and a wager policy is more to be condemned than an ordinary wager, since it is not only at variance with sound business ethics, but it also offers peculiar inducements to the assured to bring about fraudulently the event insured against.* § 25. Insurable Interest — Fire. — The question, what constitutes an insurable interest, though important, is not of as much practical consequence as the amoimt of case law relating to it would indicate. As before shown, the contract of insurance is in general construed to be a contract of indemnity, therefore, in case of losses to property, recovery must usually be limited to damage actually sustained. Persons who have no real pecvmiary interest in property to protect seldom go to the fruitless expense of taking insurance upon it. It may be stated generally, that any legal or equitable estate, or any right which may be prejudicially affected, or any liability which may be brought into operation, by a fire, will confer an insurable 1 Rombach v. Ins. Co., 35 La. Ann. 233, 48 Am. Rep. 239; Lord v. DaU, 12 Mass. 115, 7 Am. Dec. 38; Rittler v. SmUh, 70 Md. 261, 16 Atl. 890, 2 L. R. A. 844; Singleton v. St. Louis Mut. Ins. Co., 66 Mo. 63, 27 Am. Rep. 321; Ruse v. Mut. Ben. L. Ins. Co., 23 N. Y. 516. Contra as to life insm-ance in some states, Vivar v. Supreme Irf)£^e,62N.J. L.455,20Atl. 36. (But see Meyers v. Schumann, 54 N. J. Eq. 414, 417, 34 Atl. 1066); Hurd v. Doty, 86 Wis. 1, 56 N. W. 371, 21 L. R. A. 746. And see Abbott v. Sebor, 3 Johns. Cas. (N. Y.) 39, 2 Am. Dec. 139 (marine) and Jvhel v. Church, 2 Johns. Cas. 333. New Jersey statute against wagers is not applied to insurance, Flagg v. Baldmn, 38 N. J. Eq. 219, 48 Am. Rep. 308. 2 Trinity College v. Travelers' Ins. Co., 113 N. C. 244, 18 S. E. 175, 22 L. R. A. 291. 3 The policy of the law is to preserve life, health, and property and not to encourage their impairment or de- struction. Ruse V. Mut. Ben. Life Ins. Co.,23N. Y. 516;andsee§34. Wager contracts of insurance. Fuller v. Met- ropolitan L. Ins. Co., 70 Conn. 647, 675, 41 Atl. 4; Gambs v. Covenant Mut. L. Ins. Co., 60 Mo. 44, 47; Guardian M. L. Ins. Co. V. Hogan, 80 111. 35, 44, 22 Am. Rep. 150. See also Conn. Mut. L. Ins. Co. V. Schaefer, 94 U. S. 457, 460, were at one time tolerated in England, Conn. Mut. Life Ins. Co. v. Schaefer, 94 U. S. 457„460, 24 L. Ed. 251, but subsequent- ly were forbidden by two statutes, ap- plicable to marine and life policies re- spectively. 19 Geo. II, c. 37; 14 Geo. Ill, c. 48. Although the Stat. 14 Geo. Ill, has never been part of the common law of Vermont its rule has generally been followed in this country as declar- atory of the common law, Cronin v. Vermont L. Ins. Co., 20 R. I. 570, 40 Atl. 497. The preamble of the earlier statute is as follows: "Whereas it hath been found by experience that the mak- ing of assurances, interest or no in- terest, or without further proof of in- terest than the policy, hath been pro- ductive of many pernicious practices whereby great numbers of ships with their cargoes have either been fraudu- lently lost and destroyed or taken by the enemy in time of war, and such assurances have encouraged the ex- portation of wool and the carrying on of many other prohibited and clan- desti^e trades," etc. In most of the states of the Union there are statutes against wagering contracts. INSURABLE INTEREST — FIRE 33 interest.^ Nor is an insurable interest disturbed by reason of the fact that sources of indemnification are available to the insured independent of his policy.^ A defeasible interest is insurable,^ as also is a contingent,'' or inchoate,^ or partial interest.* On the other hand, it has often been declared that a mere expectancy in property, for example, in favor of an heir apparent, during the clos- ing days of the life of the ancestor, even though the ancestor be intestate and a lunatic, will afford no basis for an insurable interest in the ancestor's property^ But it is not easy to reconcile some of the modern decisions with such a restriction.* While certain general principles relating to this subject are clear, numerous border-line decisions demand attention. Thus, in a 1 Bunyon, Ins. (5th ed.), p. 42. The Enghsh court says: "To be interested in the preservation of a thing is to be so circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction." Lu- cena v. Craufurd, 3 B. & P. 75. Simi- larly the N. Y. court says: "The rule is well settled that it is not necessary to support an insurance that the in- sured should have an interest, legal or equitable, in the property destroyed. It is enough if he is so situated with reference to it that he would be liable to loss if it be destroyed or injured by the peril insured against. The test of insurable interest is whether an injury to the property or its destruction by the peril insured against would involve the insured in pecuniary loss," Berry v. Am. Cent. Ins. Co., 132 N. Y. 49, 56, 30 N. E. 254, 28 Am. St. Rep. 548. The Mass. court says: "We think that the tendency of the modem deci- sions is to relax the stringency of some of the earlier cases and to ad- mit to the protection of the con- tract all property standing in such a relation to the person seeking insur- ance that its loss would probably directly affect his pecuniary condi- tion," Doyle V. American F. Ins. Co., 181 Mass. 139, 63 N. E. 394; Moran v. Uzielli (1905), 2 K. B. 555, 562, 563, in which the court says, "an interest to be insurable is not necessarily a right, legal or equitable, in or charge upon, or arising out of the ownership of the thing exposed to the risks in- sured against, and any interest may be insured which is dependent on the safety of the thing exposed to such risks, still it must in all cases at the time of the loss be an interest, legal or equitable, and not merely an expecta- tion, however probable. . . . The defi- nition of insurable interest has been continuously expanding." 2 Owner of unused revenue stamps though redeemable from the govern- ment if lost, United States v. American Tobacco Co., 166 U. S. 468, 17 S. Ct. 619, 41 L. Ed. 1081. Mortgagee regard- less of amount of other security, Excelsior Fire Ins. Co. v. Royal Ins. Co., 55 N. Y. 343, 14 Am. Rep. 271. Owner of buildings under construction though restorable without cost to him, Foley V. Mfrs. & Builders Fire Ins. Co., 152 N. Y. 131, 46 N. E. 318, 43 L. R. A. 664. 3 McCvichen v. Ingraham, 32 W. Va. 378, 9 S. E. 260; Stirling v. Vavghan, 11 East, 619, 629. 4 Fenn v. New Orleans Mut. Ins. Co., 53 Ga. 578. For example, reinsurance. 5 Hancox v. Fishing Ins. Co., 3 Sumn. (C. C.) 132. For example, an- ticipated commissions or profits, § 48; curtesy initiate, § 26; or expected future crops, Sawyer v. Dodge Co., 37 Wis. 503; Grant v. Parkinson, 3 Bos. & P. 85, n. 6 Inglis V. Stock (1885), 10 App. Gas. 263, 274. For example, partner, joint tenant, or tenant in common, Page v. Fry, 2 B. & P. 240; Moitke v. Mil. Mich. Ins. Co., 113 Mich. 166, 71 N. W. 463. ' See leading case of Lucena v. Craufurd, 3 B. & P. 75, 2 B. & P. N. S. 269, 1 Taunt. 325; Moran v. Uzielli (1905), 2 K. B. 555; Riggs v. Commer- cial Mut. Ins. Co., 125 ^r. Y. 7, 25 N. E. 1068, 10 L. R. A. 684, 21 Am. St. R. 716. 8 Home Ins. Co. v. Mendenhall, 164 111. 458, 45 N. E. 1078, 36 L. R. A. 374, and authorities cited. 34 GENEHAIi PBINCIPLES OF INSURANCE LAW Pennsylvania case, a turnpike company owning and operating a toll highway, insured a county bridge, upon the integrity of which its patronage depended, and indeed to the construction of which it had voluntarily contributed. But unfortunately it took out the policy as though it were owner of the bridge. The court held that there could be no recovery since the plaintiff, disclosed no insurable interest as owner of the bridge.^ This decision has often been misunderstood. If the insured had procured a valued policy on the use of the bridge or for loss of toll earnings, or had otherwise correctly described his interest in the preservation of the bridge, the contract ought to have been declared vaUd, although the prop- erty of the assured was not immediately exposed to the peril.^ This conclusion finds analogy in a South Carolina ease in which an insured superintendent, having in charge a stock of goods belonging to another person, had contracted for a salary for a term of years. The court was of opinion that his pecuniary interest in the preservation of the goods furnished sufficient evidence of an in- surable interest in them.' So also a stockholder has an insurable interest, though no title, in the corporate property, since its preser- vation is of pecuniarj"^ interest to him.* § 26. Same Subject— Legal Title.— That legal title affords a valid insurable interest in property is indisputable.* 1 Farmers' Mid. Ins. Co. v. New instance, in case of a railroad in a Holland Turnpike Co., 122 Pa. St. 37, distant colony where the engine could 15 Atl. 563; and see 144 Pa. St. 543. not be replaced for a considerable ^Cohnv. Virginia F. & M. Ins. Co., period. See authorities cited, §25, 3 Hughes, 272, Fed. Gas. No. 2,970; note 1, a?i5. Ties of Affection, Blood, or Marriage. — Ties of affection do not in themselves constitute an insurable interest.* As to how far ties of marriage or near kinship raise a conclusive presump- tion of insurable interest, the courts are not in harmony. A wife has a legal right to support from her husband,^ and even under modern statutes relating to married women a husband has a right to expect valuable services from his wife.^ For these reasons, coupled with the intimacy of the relationship, the sound rule seems to be that a wife should be conclusively presumed to have an in- surable interest in the life of her husband and the husband in the life of the wife.'* And when other relationships or kinships are accompanied by a reasonable expectation of pecuniary benefit to accrue from a continuance of the life insured, though not based upon Gray (Mass.), 249, 254, 77 Am. Dec. 360. Some of the states have statutes providing that no one can take out in- surance on another's Ufe without his consent, for example, N. Y. Ins. L. § 55. Am. Mut. Life Ins. Co. v. Ber- tram, 163 Ind. 51, 70 N. E. 258, 64 L. R. A. 935 (assessments can be re- covered back). Work v. Am. Mut. L. Ins. Co., 31 Ind. App. 153, 67 N. E. 458 (a felpny in that state to procure a policy on life of another without his consent; and held that premiums could not be recovered back though company knew the facts). Fulton v. Met. L. Ins. Co., 1 Misc. 478, 21 N. Y. Supp. 470, premiums may be recovered back [com- pare on this point the recent English case, Harse v. Pearl Life Assur. Co. (1904), 1 K. B. 658], and the Kentucky court has in numerous cases declared that a policy without such consent is void as against public policy, Griffens v. Equitable Assur. Soc., 119 Ky. 856, 84 a W. 1164 (held that premiums could be recovered); Met. Life Ins. Co. V. Asmus, 25 Ky. L. R. 1550, 78 S. W. 204 (the same holding); Met. Life Ins. Co. V. Smith, 22 Ky. L. R. 868, 59 S. W. 24, 53 L. R. A. 817; Met. Ufe Ins. Co. V. Blesch, 22 Ky. L. R. 530, 58 S. W. 436, and cases cited; Met. L. Ins. Co. v. Monohan, 102 Ky. 13, 42 S. W. 924. But it is difficult in the absence of stat- ute or contract provision to sustain the proposition either on principle or au- thority. See McCann v. Met. Life Ins. Co., 177 Mass. 280, 58 N. E. 1026; De- louche V. Met. L. Ins. Co., 69 N. H. 587, 45 Atl. 414. The insurance company before accepting an application gener- ally requires a medical examination of the person to be insured, involving his consent, but if the company acquiesces there is no approved doctrine of com- mon law to prevent a person, with a good insurable interest in the life of another, from taking out insurance to protect that interest without consult- mg the latter, for instance, a creditor to secure his claim, or a father in the life of his infant son, or a large share- holder in the life of a promoter upon whom the success of the venture de- pends. 1 Mutual Benefit Assn. v. Hoyt, 46 Mich. 473, 9 N. W. 497 (a friend); Lanouette v. Laplante, 67 N. H. 118, 36 Atl. 981; Harse v. Pearl Life Assur. Co. (1903), 2 K. B. 92, 72 L. J. K. B. 638, 89 Law T. 94, reversed on another point (1904), 1 K. B. 568. 2 Romhach v. Ins. Co., 36 La. Ann. 233, 48 Am. Rep. 239; Garribs v. Cme- nant Mut. Life Ins. Co., 50 Mo. 44; Reed v. Assur. Co., Peaks, Add. Cas., 70. . . , 3 Goodrich v. Treat, 3 Colo. 408; Currier v. Ins. Co., 57 Vt. 496, 52 Am. Rep. 134. 4 Connecticut Mut. Life Ins. Co. v Schaefer, 94 U. S. 457, 24 L. Ed. 251; Crotty V. Ins. Co., 144 U. S. 621, 627, 12 S. Ct. 749, 36 L. Ed. 566; Trenton Mut. L. & P. Ins. Co. V. Johnson, 24 N. J. L. 576. But see Currier v. Con- tinental Life Ins. Co., 57 Vt. 496, 62 Am. Rep. 134, in which there is the dictum; "cases may exist where the husband has no msurable interest whatever in his wife's Ufe. She may be a burden — a hopeless maniac or in- valid." TIES OF AFFECTION, BLOOD, OR MARfelAGE 43 any legal right, an insurable interest is established.^ Indeed in this country it has repeatedly been held that a woman has such a reasonable right to expect pecuniary advantage from the continu- iZ/f/e 7ns. Charing Co. v. O'Neill, 106 Fed. 800, 45 C. C. A. 641, 54 L. R. A. 225, and cases supra. As to who in New York can take out a policy on the life of a child and to what amount, see L. 1892, c. 690, sec. 55, and c. 437. But it has been held that an adult son has no insurable interest in the life of his father simply by virtue of the re- lationship,/ Prudential Ins. Co. v. Hunn, 21 Ind. App. 525, 52 N. E. 772; Chi. G. F. & L. Soc. v. Dyon, 79 111. App. 100; Guardian Mvt^L. Ins. Co. v. Hogan, 80 111. 35, 22 Am. Rep. 180; and see Bombach v. 7ras. Co., 35 La. Ann. 233, 48 Am. Rep. 239. Contra, Valley Mut. L. Assn. v. Teewalt, 79 Va. 421, 423. Nor a daughter simply by virtue of the relationship. Conti- nental Life Ins. Co. v. Volger, 89 Ind. 572, 46 Am. Rep. 185; but compare, contra, Farmers' dk Traders' Bk. v. Johnson, 118 Iowa, 282, 91 N. W. 1074 and many cases cited. Nor a stepson in his stepfather's Ufe when no de- pendence or responsibility for support exists, U. B. Nat. Aid Soc. v. Mc- Donald, 122 Pa. St. 324, 15 Atl. 439, 1 L. R. A. 238. Relationship coupled with payments of money by the son, Life Ins. Clearing Co. v. O'Neill, 106 Fed. 800, 45 C. C. A. 641, 54 L. R. A. 225. Again, a nephew has no insurable interest ib the life of an uncle, Reed v. Prov. S. lAfe Ins. Soc, 36 App. Div. (N. Y.) 250, 55 N. Y. Supp. 292; Mowry V. Home Life Ins. Co., 9 R. I. 346. See Singleton v. St. Louis Mut. Ins. Co., 66 Mo. 63, 27 Am. Rep. 321; or of an aunt. Appeal of Corson, 113 Pa. St. 438, 6 Atl. 213, 57 Am. Rep. 479; where he is in no way dependent upon her, American Mid. L. Ins. Co. v. Bertram, 163 Ind. 51 (1904), 70 N. E. 258; Wilton v. New York L. Ins. Co., 34 Tex. Civ. App. 156 (1904), 78 S. W. 403 (a niece with a mere probability of occasional gifts); nor a son-in-law in the life of a mother-in- law, Rombach v. Piedmont & A. Life Ins. Co., 35 La. Ann. 233, 48 Am. Rep. 239; or of a father-in-law, Ramsey v. Meyerg, 6 Pa. Dist. R. 468, 54 Leg. Intell. 317. But see Adams v. Reed, 18 Ky. L. R. 858, 38 S. W. 420, 35 L. R. A. 692. A brother has no insurable interest in the life of a brother, Lewis V. Phcenix Mvt. Life Ins. Co., 39 Conn. 100. But as to rule at common law, see Hosmer v. Welch, 107 Mich. 470, 67 N. W. 504, 65 N. W. 280, merely a dic- tum. Nor a person in the life of his cousin, Whiimore v. Supreme Lodge, 100 Mo. 36, 13 S. W. 495; Brett v. War- nick, 44 Ore. 511, 75 Pac. 1061; S(em- herg v. Levy, 159 Mo. 617, 60 S. W. 1114, 53 L. R. A. 438 (Rev. Stat. 1889, Mo., § 5853. Widowed sister had an insurable interest in brother's life). Again, certain relationships are so apt to involve a legal claim to services, support, or pecuniary obligation or advantage that their existence has been held in ^ome jurisdictions to es- tablish conclusively an insurable inter- est, Rombach v. Piedmont & A. L. Ins. Co., 35 La. Ann. 233; Trenton Mut. L. & F. Ins. Co. V. Johnson, 24 N. J. L. 576; Corson's Appeal, 113 Pa. St. 438, 6 Atl. 213, 57 Am. St. R. 479. Interest by consanguinity is s^id to exist only in favor of nusband, wife, parent, child, brother, or sister of insured, Wilton v. New York L. Ins. Co., 34 Tex. Civ. ' App. 156 (1904), 78 S. W. 403. Thus, as already stated, a wife has an insur- able interest in the life of her husband, and the validity of the policy will sur- vive a divorce, Conn. Mut. Life Ins. Co. V. Schaefer, 94 U. S. 460, 24 L. Ed. 251; Holmes v. Oilman, 138 N. Y. 369, 34 N. E. 205, 20 L. R. A. 566, 34 Am. St. R. 463; Baker v. Union Mut. L. Ins. Co., 43 N. Y. 283. Statutes in many states affect rights of wife and children. Charter Oak L. Ins. Co. v. Brant, 47 Mo. 419, 4 Am. Rep. 328. See Gambs v. Covenant Mut. L. Ins. Co., 50 Mo. 44; Ellison v. Straw, 116 Wis. 207, 92 N. W. 1094. Wife has insur- able interest in life of husband, Wash- ington Cent. Nat. Bk. v. Hume, 128 U. S. 195. 205, 9 S. Ct. 41, 32 L. Ed. 370, 16 Wash. L. Rep. 777. At com- mon law wife had insura.ble interest in her husband's life, so that policy taken out by him for her would be valid, and upon her cteath policy could be changed for second wife's benefit, Gambs v. Covenant Mut. Ins. Co., 50 Mo. 44. As to wife's insurable interest and statutes see note 53 L. R. A. 817-826. Interest survives divorce, Overhiser v. Overhiser, 63 Ohio St. 77, 50 L. R. A 552, 57 N. E. 965, 81 Am. St. R. 612 44 GENERAL PRINCIPLES OF INSURANCE LAW ance of the life of her fianc6 as to confer upon her an insurable in- terest in his life.^ Any element of dependency coupled with relationship will furnish the basis for an insurable interest.^ Thus, where the brother had supported and educated his sister, it was held that she had an in- surable interest in his life.* but compare Hatch v. Hatch, 35 Tex. Civ. App. 373 (1904), 80 S. W. 411. And the illegality of the marriage will not defeat it, Equitable Ldfe Assur. So. V. Paterson, 41 Ga. 338, 5 Am. Rep. 535. Especially if she believes it to be legal, Scott V. Scott, 25 Ky. 1356 (1904), 77 S. W. 1122. See Supreme Tent K. of M. of W. V. McAllister, 132 Mich. 69, 92 N. W. 770, 102 Am. St. R. 386. Mis- tress may have insurable interest in life of paramour, Lamphin v. Travelers' Ins. Co., 11 Colo. App. 249, 52 Pac. 1040. See Buoff v. John Hancock Mut. L. Ins. Co., 83 N. Y. Supp. 758, 86 App. Div. 447. A woman may insure the life of her fianc^, Chisholm v. National Capitol lAfe Ins. Co., 52 Mo. 213, 14 Am. Rep. 414; Bograt v. Thompson, 53 N. Y. Supp. 622, 24 Misc. 581; Taylor v. Travelers' Ins. Co., 15 Tex. Civ. App. 254, 39 S. W. 185; Opitz v. Karel, 118 Wis. 527, 95 N. W. 948. A father has an insurable interest in the life of his minor son, Loomis v. Ins. Co., 6 Gray (Mass.), 396; Mitchell v. Union Life Ins. Co., 45 Me. 104, 71 Am. Dec. 529; Grattan v. National L. Ins. Co., 15 Hun (N. Y.), 74. Indeed, it has been held by some courts in this country that children generally, without regard to age or position, have such an interest in a father's life. Reserve Mut. Ins. Co. v. Kane, 81 Pa. St. 154, 22 Am. Rep. 741; Valley Mut. L. Assn. v. Teewalt, 79 Va. 421, 423. See also Washington Cent. Nat. Bk. v. Hums, 128 U. S. 195, 205, 9 S. Ct. 41, 32 L. Ed. 370, 16 Wash. L. Rep. 777; Warnock v. Davis, 104 U. S. 775, 26 L. Ed. 924 (parent in child or child in parent) . Holmes v. Gil- man, 138 N. Y. 369, 34 N. E. 205, 20 L. R. A. 666, 34 Am. St. R. 463 (parent in child or child in parent). Daughter has insurable interest in father's life. Farmers' & Traders' Bk. v. Johnson, 118 Iowa, 282, 91 N. W. 1074, citing many cases, but daughter's policy on father's life taken out without his knowledge or consent held void, Metropolitan L. Ins. Co. v. Blesch, 22 Ky. L. Rep. 530, 58 S. W. 436. That child has no insurable interest in life of mother where there is no liability for support, etc., see People's Mut. Ben. Soc. V. Templeton, 16 Ind. App. 126, 44 N. E. 809. Son must aver some rea- sonable expectation of pecuniary bene- fit in mother's life, People's Mut. Ben. Soc. V. Templeton, 16 Ind. App. 260, 44 N. E. 809, 811. Held, under EngUsh statute, that a son's mere relationship does not impose upon him such an ex- pectation of having to pay his mother's funeral expenses as to give him an in- surable interest in her life, Harse v. Pearl L. Assur. Co., 72 L. J. K. B. 638, 89 Law T. 94 (1903), 2 K. B. 92, re- versed on another point in (1904), 1 K. B. 558, court holding that premi- ums could not be recovered back if contract was illegal and parties in pari delicto. In this case the policy was worded "son for funeral expenses." A liability for support under the poor laws may, however, give an insurable interest in a parent's life. Reserve Mut- Ins. Co. V. Kane, 81 Pa. St. 155, 22 Am. Rep. 741. But see Mut. Ben. Soc. v. Templeton, 16 Ind. App. 260, 44 N. E. 809, 811; Life Ins. Clearing Co. v. O'Neill, 106 Fed. 800, 45 C. C. A. 641, 54 L. R. A. 225. ^ Opitz V. Karel, 118 Wis. 527, 95 N. W. 948 (an interesting case, decid- ing also, that a gift of the policy to the lady was complete without written assignment, and was effective without the company's consent). 2 Berdan v. Mil. Mut. Life Ins. Co., 136 Mich. 396, 99 N. W. 411. 3 Lord V. DaU, 12 Mass. 115, 7 Am. Dec. 38; Carpenter v. U. S. Life Ins. Co., 161 Pa. St. 9, 28 Atl. 943, 23 L. R. A. 571, 41 Am. St. R. 880 (child in life of benefactor). Cronin v. Ver- mont L. Ins. Co., 20 R. I. 570, 40 Atl. 497 (niece under moral obligations to support aunt) . Barnes v. London, Edin- burgh & Glasgow L. Ins. Co., Law Rep. (1892), 1 Q. B. D. 864 (understanding that stepsister should be supported, held, a sufficient pecuniary interest). CREDITOR IN LIFE OF DEBTOR 45 The interest which one has in his own life, being incapable of exact pecuniary estimate, may be valued at any amount which the parties agree upon, and so generally of all insurable interests which are founded upon relationship.^ § 36. Creditor in Life of Debtor. — The rule is well settled that a creditor has an insurable interest in the life of his debtor^ which is said to survive a discharge in bankruptcy * or general as- signment for creditors.^ And the rule applies whether the creditor is assignee or insures his debtor's life; ^ and although the debt, is voidable,* or not enforceable on account of the statute of limita- tionsJ ^ In a recent case a nephew, an agent for life insurance companies, agreed with his uncle and his uncle's children to take out and main- tain $25,000 of insurance upon the Uncle's life, the children to have any balance of insurance money after return to the nephew of the amount of premiums and interest thereon, together with a bonus to him of $5,000. The uncle joined in and signed the application and also gave to the nephew promissory notes under seal, not for a past mcnt Co V. Conn. Mut. Ldfe Ins. Co., fc,244. V. Larkin, 127 ,Ind. 100, 26 ^a judgment creditor). Bel- fohnston, 114 Iowa, 265, 86 7; Hale v. Ldfe Ind. & Invesi- , 65 Minn. 548, 68 N. W. 182; Goodwin,v. Mass. Mut. Life Ins. Co., 73 N. Y. 480; Mace v. Association, 101 N. C. 122, 7 S. E. 674; Ulneh v. Rei- noehl, 143 Pa. St. 238, 28 W. N. C. 419, 13 L. R. A. 433, 24 Am. St. R. 534, 22 Atl. 862; Shxiffer v. Spangler, 144 Pa. St. 223, 22 Atl. 865. 3 Ferguson v. Mass. Mut. Ldfe Ins. Co., 32 Hun, 306, aff'd 102 N. Y. 647; Mutual Res. Fund L. Assn. v. Beatttj, 93 Fed. 747, 756, 35 C. C. A. 573, after discharge in bankruptcy and new promise to pay. 4 Manhattan lAfe Ins. Co. v. Hen- nessv, 99 Fed. 64, 39 C. C. A. 625. 5 First Nat. Bk. v. Terry, 99 Va. 194, 37 S. E. 843, 3 Va. Sup. Ct. Rep. 125. See Morris v. Georgia Sav. & Bkg. Co., 109 Ga. 12, 34 S. E. 378; 46 L. R. A. 506; Gordon v. Ware Nat. Bk., 132 Fed. 444, 446, 66 C. C. A. 580. Com- pare Equitable L. Ins. Co. v. Hazlewood, 75 Tex. 338, 16 Am. St. R. 893, 12 S. W. 621, 7 L. R. A. 217. 6 Rivers v. Gregg, 5 Rich. Eq. (S. C.) 274. ' Rawls V. Amer. Mut. Ldfe Ins. Co., 27 N. Y. 282, 84 Am. Dec. 280. Insur- able interest must not be based upon a mere moral claim, Guardian M. L. Ins. Co. V. Hogna, 80 111. 35, 22 Am. Rep. 180. Nor has a community cred- itor such an interest in the life of his debtor's wife, where there is no personal liability against her, Cameron v. Bar- cus, 31 Tex. av. App. 46, 71 S. W. 423. See Wheeland v. Atwood, 192 Pa. St. 237, 44 W. N. C. 386, 73 Am. St. R. 803, 43 Atl. 946 (as to assignments by wife to husband and by him to his own creditor) . A creditor of an infant , how- ever, for necessaries sold to him has an insurable interest in his life. Rivers v. Gregg, 5 Rich. Eq. (S. C.) 274. So a voidable note given for a debt con- tracted during the minoritjr of the debtor is sufficient to ^vo an insurable interest, because the mfant alone can avoid the note, Dwyer v. Ed%s, Park on Ins. 432. A creditor of a co- partnership has also an insurable in- terest in the life of each copartner, Morrell v. Trenton Mut. L. and F. Ins. Co., 10 Cush. (Mass.) 282, 57 Am. Dec. 92; Kennedy v. N. Y. Lift Ins. Co., 10 La. Ann. 809. 46 GENEKAL PRINCIPLES OF IKSURANCE LAW indebtedness, but apparently to evidence an insurable interest in the nephew. The policy sued upon, $10,000 in amount, was in terms payable to the nephew alone, and was taken out by him two years after execution of the agreement in order to replace policies of like amount in bankrupt companies payable to him and his cousins. By that time the nephew had actually paid out about $2,000 for premiums under the agreement, in part performance of which the new insurance was obtained. The court held that the policy was altogether valid and that the children, all of whom had intervened in the action brought by the nephew against the insurance com- pany, were entitled to their share of the proceeds, and that the nephew was entitled to his share in pursuance of the family arrange- ment described.^ § 37. Same — To What Amount. — As to the amoimt of insurance which shall be permitted in proportion to the amount of the debt, the views of different courts are not in harmony. Insurance limited to the face of the indebtedness, if such indebtedness remained un- paid, would fall short of indemnifying the creditor by the sum total of the premiums paid with interest thereon, and many comts have expressed the opinion that the creditor should be allowed to provide for an amount of insurance sufficient when collected to coj debt, together with such expense as may be required to policy in force and interest also.^ But the practical er ment in applying this plausible test is twofold; first, the vail the contract should be determined according to the motives of the parties and the prospect as viewed at its date rather than after the death of the insured; ^ and, second, the total amount of premiums as thus viewed with interest thereon will always exceed the whole face of the policy no matter how large or how small the amount of 1 Reed v. Prov. S. L. Assur. Soc, 36 2 CroUy v. Union Mut. lAfe Ins. Co.. App. Div. 250, 55 N. Y. Supp. 292. 144 U. S. 621, 12 S. Ct. 749,36 L. Ed. Compare a case in which a creditor, 566; Wheeland v. Atwood, 192 Pa. St. the sole payee named in policy, was 237, 44 W. N. C. 386, 73 Am. St. R. regarded as trustee for wife of insm'ed, 803, 43 Atl. 946; Ulrich v ReinoeU A. L. & H. Ins. Co. v. Robertshaw, 26 143 Pa. St. 238,28 W.N. C. 419, 13 L. r! Pa. St. 189. And compare two other A. 433, 24 Am. St. R. 534, 22 Atl. 862; cases in which there had been no prom- Equitable lAfe Ins. Co. v. Hazdwood, 75 ise by the insured to repay the pre- Tex. 338, 12 S. W. 621, 7 L. R.'A. 2'l7, miums to the person who took out the 16 Am. St. R. 893; First Nat. Bank v! insurance and in which the insurance Terry, 99 Va. 194, 37 S. E. 843. was for the benefit in part of himself a Conn. Mut. Life /res. Co. v. Luchs and in part of wife of the insured, West 108 U. S. 498, 2 S Ct 949 27 L Ed' V. Sanders, 104 Ga. 727, 31 S. E. 619, 800; CuHiss v. Mna Life Ins Co 90 held void; Burbage v. Windley, 108 Cal. 245, 27 Pac. 211, 25 Am. St.' R. N. C. 357, 12 S. E. 839, 12 L. R. A. 114, further advances were contem- 400, held void. plated, policy valid. CREDITOR IN LIFE OF DEBTOR — TO WHAT AMOUNT 47 insurance, leaving to the creditor nothing at all to apply upon the debt.i On the other hand, to permit the creditor to take out insurance, greatly in excess of the debt, offers a clear inducement to the creditor to shorten the debtor's life and, therefore, contravenes a recognized principle of public policy.^ Two inconsistent rules have been evolved from the considerations just mentioned. One may be called the Texas rule which allows the creditor to take out as much insurance as he pleases, but limits his interest in the recovery to the amount of debt, premiums, and in- terest upon premiums, any balance to inure to the benefit of the debtor, for whom he is looked upon as trustee to that extent.^ This rule though simple is open to the grave objection that its appli- cation may deprive the creditor of the whole or a large portion of the insurance on which he alone has paid the premiums, and may turn it over to one who is altogether a stranger to the contract of insurance. The other rule has been adopted by the United States Supreme Court. It provides, though more indefinitely, that the creditor's insurance must not so largely exceed the amount of the debt as to indicate a wagering contract rather than a bona fide effort to obtain security for the indebtedness.^ 1 Exchange Bank v. Loh, 104 Ga. 446, Laplante, 67 N. H. 118, 36 Atl. 981; 471, 472, 31 S. E. 459, 44 L. R. A. 372, Riner v. Riner, 166 Pa. St. 617, 31 Atl. Little, J., exposes the fallacy of the 437, 45 Am. St. R. 693. doctrine that the insurable interest is * Cammack v. Lewis, 15 Wall. 643, limited to the amount of the debtor's 21 L. Ed. 244 (policy held void where liability. Where the poUcy is taken debt was $70.00 and policy $3,000). out by the debtor and assigned to the Rittler v. Smith, 70 Md. 261, 16 Atl. creditor as collateral, the interest of 890, 2 L. R. A. 844 (insurance in mu- the assignee is Umited to the debt, tuals $6,500, collection $2,124, debt Morris v. Georgia Sav. & Bkg. Co., 109 $1,000, held valid). Givens v. Veeder, 9 Ga. 12, 34 S. E. 378, 46 L. R. A. N. M. 256, 50 Pao. 316; TaWert v. 506. Storum, 7 App. Div. 456, 39 N. Y. 2 Reg. V. Flanagan, 15 Cox Or. Gas. Supp. 1047; Appeal of Corson, 113 Pa. 411. Defendant, poisoned her debtors St. 438, 6 Atl. 213, 57 Am. Rep. 479 after insuring their lives. (policy for $2,000 valid, debt $743). 3 Cheeves v. Anders, 87 Tex. 287, Grant v. Kline, 115 Pa. 618, 9 Atl. 150 28 S. W. 274, 47 Am. St. R. 107; (policy for $3,000 valid, debt $743). Equitable Life Ins, Co. V. Haalewood, 75 Cooper v. Weaver's Adm., (Pa. St.) Tex. 338, 16 Am. St. R. 893, 12 S. W. 11 Atl. 780, and Cooper v. Shaeffer, 621, 7 L. R. A. 217; Schonfield v. Tur- 20 W. N. C. (Pa.) 123, 11 Atl. 548 ner, 75 Tex. 324, 12 S. W. 626, 7 L. R. (pohcy for $3,000 void, debt $100). The A. 189; Mvt. Life Ins. Co. v. Blodgett, Pennsylvania court has also formu- 8 Tex. Civ. App. 45, 27 S. W. 286; lated the rule that the creditor may Morris v. Georgia L. IS. & B. Co., 109 insure his debtor's life in an amount Ga. 12, 34 S. E. 378, 46 L. R. A. 506; egual to the debt together with all Strobe V. Meyer Bros. Drug Co., 101 premiums according to Carlisle Tables Mo. App. 627, 74 S. W. 379; and see tp Of expectant and interest on debt and similar effect, Weigelman v. Bronger, premiums, Wheeland v. Atwood. 192 96 Ky. 132, 28 S. W. 334; Lanouette v. Pa. St. 237, 44 W. N. C. 386, 43 Atl. 946, 48 GENERAL PRINCIPLES OF INSURANCE LAW § 38. Other Business Relations. — Any property or commercial relationship may lawfully be the subject of an insurable interest. Thus, one holding a property interest contingent upon another's arriving at a specified age may insure against the loss that he would suffer by the earlier termination of the other life.* 73 Am. St. R. 803; McHcde v. Mc- DcmneU, 175 Pa. St. 632, 34 Atl. 966; Shaffer v. Spangler, 144 Pa. St. 223, 22 Atl. 865; Ulrich v. ReinoeM, 143 Pa. St. 238, 28 W. N. C. 419, 22 Atl. 862, 13 L. R. A. 433, 24 Am. St. R. 534; Grant's Adm. v. Kline, 115 Pa. St. 618, 9 Atl. 150. This rule is impracticable and would allow a policy no matter how large inasmuch as the amount of premiums and interest by the tables always exceeds the amount of the policy. Fallacy in Pennsylvania rule explained in Exchange Bank v. Loh, 104 Ga. 446, 31 S. E. 459, 44 L. R. A. 372, by Little, J. 1 Law V. Policy Co., 3 Eq. 338, 1 Kay & J. 223. For the same reason an employer may take out accident in- surance to protect himself from loss by reason of his Uability for the negU- gence of his employees in engines, cars, vehicles of any sort, elevators, and in the use of machinery and so forth, Am. Employers' lAability Ins. Co. v. Fordyce, 62 Ark. 562, 36 S. W. 1051, 54 Am. St. R. 305; Employers' lAor- bility Assur. Corp. v. Merrill, 155 Mass. 404, 29 N. E. 529. A tenant of a landlord who has only a life interest in the premises demised may insure the landlord's life, Sides v. Knicker- bocker lAfe Ins. Co., 16 Fed. 650. Some of those pecuniarily interested in the preparations for the coronation of the King of England insured his life. So also a partner has an insurable in- terest in the life of a copartner. Conn. Mvt. Life Ins. Co. v. Luchs, 108 U. S. 498, 27 L. Ed. 800, 2 S. Ct. 949; Mvt. Life Ins. Co. v. Armstrong, 117 U. S. 591, 6 S. Ct. 877, 29 L. Ed. 997; but the wife of a partner has no such interest Met. lAfe Ins. Co. v. O'Brien, 92 Mich. 584; 52 N. W. 1012; but compare Powell v. Mvt. Ben. L. Ins. Co., 123 N. C. 103, 105, 31 S. E. 381, 68 Am. St. R. 818. So in case of joint venture, Miller v. Eagle Life & Health Ins. Co., 2 E. D. Smith (N. Y.), 268; Beuin v. Conn. Mut. L. Ins. Co., 23 Conn. 24'4; Mitchell v. Union Life Ins. Co., 45 Me. 104, 71 Am. Dec. 529; Trenton Mut. L. & F. Ins. Co. v. Johnson, 24 N. J. L. 676. A clerk in life of em- ployer, master in life of servant, Hebdon v. West, 3 Best & Smith, 578; Hilliard v. Sanford, 6 Ohio Dec. 449. 4 Ohio N. P. 363. Master in life of his slave, Summers v. United States Ins. Annuity & Tr. Co., 13 La. Ann. 504;' Woodfin V. Asheville Mut. Ins. Co., 51 N. C. 558. A surety on a bond in the life of the principal, though no breach of the bond occur, Scott v. Dickson, 108 Pa. St. 6, 56 Am. Rep. 192; Embry v. Harris, 107 Ky. 61, 52 S. W. 958; Hebdon v. West, 3 Best & Smith, 579; Branford v. Saunders, 25 Weekly Re- porter, 650; but the principal has no such interest in the life of the surety and therefore the fact that a member is surety for a building association does not give the corporation an in- Btirable interest in his Ufe if he is not indebted to it, Tate v. Building Assn. 97 Va. 74, 33 S. E. 382, 45 L. R. A. 243, 75 Am. St. R. 770. It cannot be held, however, as matter of law, that one who is furnishing funds to carry on the business of a corporation has no insurable interest iu the life of its manager and promoter. Mechanics' Nat. Bk. V. Comins, 72 N. H. 12, 55 Atl. 191, 101 Am. St. R. 650. It is reported that some of the stockholders in companies financed by Mr. J. P. Morgan have taken out insurance upon his life. In North Carolina held that a denominational college sustained and controlled by the Methodist church has no insurable interest in the life of a member of that church. Trinity College v. Travelers' Ins. Co., 113 N. C. 244, 18 S. E. 175, 22 L. R. A. 291 (the question arises whether the policy should not have been held valia^inas- much as the insured himself made the application for it. This point was con- sidered but not passed upon in Reed v. Prov. S. L. Assur. Soc., 36 App. Div. 250, 55 N. Y. Supp. 292). A policy taken out by one " as protector of the insured whenever he stood in need of protection" gives no insurable inter- est, Anctil V. Manufacturers L. Ins. Co., L. R. (1899), App. Cas. 604; § 2590, Civ. Code Lower Can. An as- INSURABLE INTEREST — MARINE 49 § 39. Insurable Interest — Marine. — The same general prin- ciples are applicable as in fire insurance. Thus, the owner of a vessel has in all cases an insurable interest in it, even when it has been chartered by one who covenants to pay him its value in case she is lost during the voyage.^ So also the charterer has an in- surable interest in the vessel,^ and anyone interested in cargo ' or in freight may insure his interest.* signee in bankruptcy, Re McKinney, 15 Fed. 535, or under an assignment for creditors, Barbour's Adm. v. Larue's Assignee, 106 Ky. 546, 51 S. W. 5, has no insurable interest in the life of the insolvent. 1 Hobbs V. Hannam, 3 Okmp. 93. And though vessel is not enrolled in his own name, McColMn v. Cheenwich Ins. Co., 10 N. Y. St. R. 390; and see Oliver v. Greene, 3 Mass. 133, 3 Am. Dec. 96 (plaintiff owned one-half and was re- sponsible for other half); Kenny v. Clarkson, 1 Johns. (N. Y.) 385, 3 Am. Dec. 336, holding that the owner, though there be a bottomry bond, may insure his interest generally, but the holder of the bond must insure his in- terest eo nomine. International Marine Ins. Co. V. Winsmore, 124 Pa. St. 61,23 W. N. C. 204, 16 Atl. 516 (owners in joint venture with lien for advances). The insurable interest of the owner of a ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry. The lender on bottomry may insure his in- terest in the ship to the amount of the loan, Robertson v. United Ins. Co., 3 Johns. Gas. (N. Y.) 499; Read v. Mid. Safety Ins. Co., 5 N. Y. Super. Ct. 54; Smith v. WiUiams, 2 Caine's Gas. (N. Y.) 110. 2 The Gvlnare, 42 Fed. 861. And a charterer agreeing to keep vessel in- sured, Bartlett v. Walter, 13 Mass. 267, 7 Am. Dec. 143. 3 Wiggin v. Mercantile Ins. Co. , 7 Pick, ^ass.) 271; Prov. Wash. Ins. Co. V. The Sidney, 23 Fed. 88; Pouverin v. La. State M. & F. Ins. Co., 4 Rob. (La.) 234. * Clark v. Ocean Ins. Co., 16 Pick. (Mass.) 289; Adams v. Warren Ins. Co., 22 Pick. (Mass.) 163; McGraw v. Ocean Ins. Co., 23 Pick. (Mass.) 405; Gordonw. Am. Ins. Co., 4Denio (N. Y.), 360 (thou^ goods not yet laden aboard). Williams v. Ina. Co., 1 Hilt. (N, yj 345; Riley v. Delafield, 7 Johns. (N. Y.) 522 (no insurable in- terest) . The owners may insure freight though the vessel sail under a charter party, Hodgson v. Mississippi Ins. Co., 2 La. 341; Adams v. Warren Ins. Co., 22 Pick. (Mass.) 163. The charterer may also insure it, Barber V. Fleming, L. R. 5 Q. B. 59. The in- sured may hold either a legal or an equitable title or no title at all to the property insured, Locke v. North Am. Ins. Co., 13 Mass. 61 (different in- terests may be insured and sometimes each to full value of property) ; and see NoHh Brit. & M. Ins. Co. v. L. & L. & G. Ins. Co. (1877), 5 Ch. D. 569. Mortgagor may insure, Willes v. People's Fire Ins. Co., 19 N. Y. 184 (though mortgage cover full value) Higginson v. Datl, 13 Mass. 96 (vessel) Schultz V. Pacific Ins. Co., 14 Fla. 73 (freight pledged). Mortgagees may insure Clark v. Washington Ins. Co., 100 Mass. 509, 1 Am. Rep. 135. Also vendor under executory contract, Bell V. Western Mar. & F. Ins. Co., 5 Rob. (La.) 423, 39 Am. Dec. 542; Gordon v. Mass. F. & M. Ins. Co., 2 Pick. (Mass.) 249; Slocovich v. Oriental Mut. Ins. Co., 13 Daly (N. Y.), 264. Also vendee though title has not passed, Rider v. Ocean Ins. Co., 20 Pick. (Mass.) 259; Kenny v. Clarl.son, 1 Johns. (N. Y.) 385, 3 Am. Dec. 336. And though contract is oral or voida- ble, Amsinck v. Am. his. Co., 129 Mass. 185. Similarly vendees of goods who will get title to them, only on their delivery nave an insurable interest in them, though contract be "no arrival no sale," Harrison v. Fortktge, 161 U. S. 57, 16 S, Ct. 488, 40 L. Ed. 616. A stockholder in the company has an insurable interest in its steamers, Seaman v. Enterprise F. & M. Ins. Co., 18 Fed. 250, 21 Fed. 778. And even in shipments on its steamers, Mannheim Ins. Co. v. Hollander, 112 Fed. 549. 50 GENERAL PRINCIPLES OF INSURANCE LAW Any lien or interest in the nature of a lien for advances for repairs or for other purposes will give an insurable interest.* A person may insure to protect his own property or he may insure in a representative capacity for the protection of the interests of others, as where a charterer takes out insurance for the benefit of himself and the owner,^ or where an agent' or carrier insures his own interest or liability and for whom it may concern.'* § 40. Payee of Life Policy Need Have no Insurable Inter- est. — By the weight of authority a person taking out insurance upon his own life may be trusted to designate in his discretion any person whatever as beneficiary, whether such beneficiary have an insurable interest or not,* provided the transaction is not a mere 1 Merchants' Mut. Mar. Ins. Co. v. Baring, 20 WaU. (U. S.) 159, 22 L. Ed. 250; Phoenix Ins. Co. v. Parsons, 129 N. Y. 86, 29 N. E. 87. A surety liable to value of cargo in case of condemna^ tion by court has an insurable interest therein, Russell v. Union Ins. Co., 1 Wash. C. C. 409, 4 Dall. 421, Fed. Cas. No. 12,146, 1 L. Ed. 892. So also a person giving a bond for release of an attached vessel, Firemen's Ins. Co. v. PoweU, 13 B. Mon. (Ky.) 311. But advances voluntarily made without authority may give no insurable in- terest, China Mut. Ins. Co. v. Ward, 59 Fed. 712, 8 C. C. A. 229, 20 U. S. App. 292; Buchanan v. Ocean Ins. Co., 6 Cow. (N. Y.) 318; and see Lee v. Barreda, 16 Md. 190. Supercargo has an insurable interest to extent of his commissions, N. Y. Ins. Co. v. Rob- inson, 1 Johns. (N. Y.) 616. Master with commission on cargo, Holhrook V. Brown, 2 Mass. 280. Commission merchant consignee of cargo, Putnam V. Mercantile Mar. Ins. Co., 5 Mete. (Mass.) 386. Assignee of commission. Wells V. Phila. Ins. Co., 9 Sere. & R. (Pa.) 103. 2 Compare § 29. Murdoch v. Frank- lin Ins. Co., 33 W. Va. 407, 10 S. E. 777, 7 L. R. A. 572. 3 Buck V. Chesapeake Ins. Co., 1 Pet. (U. S.) 151, 7 L. Ed. 90. But agent without personal interest must not insure on his own account or as owner. Sawyer v. Mayhew, 51 Me. 398. * Van Natta v. Mut. Sec. Ins. Co., 2 Sandf. (N. Y.) 490; Cunard S. Co. v. MaHen (1902), 2 K. B. 624; The Syd- ney, 23 Fed. 88. Independent insur- able interests may exist at the same time in the same property. Thtis, be- sides the owner of a cargo, a consignee with lien on it for advances, Ebsworth v. Alliance Mar. Ins. Co. (1873), L. R. 8 C. P. 596; the insurer of the cargo, § 33; the carrier who transports it, Cunard S.S. Co. v. MaHen (1903), 2 K. B. 511, have each a separate in- surable interest in the cargo. s Where insurance is taken out by third parties, the insured person must almost always practically join in the application by submitting to a medical examination. The New York Supreme Court has raised the interesting and important query whether joining in the application of another is not legally equivalent to the voluntary appoint- ment of a beneficiary in a poUcy taken out by the insured himself. The learned justice, now chief justice of the Court of Appeals, could find no sub- stantial difference, Reed v. Prov. Sav. Life Assur. Soc, 36 App. Div. 250, 55 N. Y. Supp. 292; Conn. Ins. Co. v. Schaefer, 94 U. S. 457, 460, 24 L. Ed. 251 (for benefit of a relative or friend). JStTM L. Ins. Co. V. France, 94 U. S. 561, 24 L. Ed. 287, for benefit of sister. Foster v. Preferred Ace. Ins. Co., 125 Fed. 536, a. brother. U. S. Mut. Ace. Assn. v. Hodgskin, 4 App. D. C. 516; Mercharvts' L. Assn. v. Yoakum, 98 Fed. 251, 39 C. C. A. 56; Am. Life Ins. Co. v. Barr, 68 Fed. 873, 32 U. S. App. 444, 16 C. C. A. 51 (accident policy). Allen V. Hartford L. Ins. Co., 72 Conn. 693, 45 Atl. 955; Union Fraternal League v. Walton, 109 Ga. 1, 34 S. E. 317, 77 Am. St. R. 350, 46 L. R. A. 424; BloomingUm Mut. Ben. Assn. v. Blue, 120 111. 121, 60 Am. St. R. 658, 11 N. E. PAYEE NEED HAVE NO INSURABLE INTEREST — ^ASSIGNEE 51 device to evade the law against wagering contracts. And the rule has been held applicable though the beneficiary pays the premiums.^ Other courts on grounds of supposed public policy have held that the insured must not appoint as beneficiary one having no insurable interest.^ Indeed, the Federal Supreme Court has stated broadly: "It is the settled law of this court that a claimant under a life in- surance policy must have an insurable interest in the life of the in- sured." " § 41. Same Subject — Assignee. — In Uke manner, under the pre- vailing rule, and in order not to impair the usefulness and com- mercial value of life insurance, many courts have held that a person taking out insurance upon his own life may subsequently assign the policy in good faith to anyone either for value or by way of gift, whether the assignee have an insurable interest or not.^ This 331; Met. Life Ins. Co. v. Brown, 159 Ind. 644, 65 N. E. 908; Heinlein v. Imperial L. Ins. Co., 101 Mich. 250, 59 N. W. 615, 25 L. R. A. 627, 45 Am. St. R. 409 (mother for benefit of son who paid firBt premium). Albert v. Mut. L. Ins. Co., 122 N. C. 92, 30 S. E. 327, 65 Am. St. R. 693; HUl v. United L. Ins. Assn., 154 Pa. St. 29, 25 Atl. 771, 31 W. N. C. 483, 35 Am. St. R. 807 (ton- tine arrangement held valid). Cross- well V. Connecticut Indem. Assn., 61 S. C. 103, 28 S. E. 200; Clements v. N. Y. Life Ins. Co., 101 Tenn. 22, 46 S. W. 561, 42 L. R. A. 247, and note, 70 Am. St. R. 660 (unlawful pre- existing agreement). Ashley v. Ashley, 3 Sim. 149; Vezina v. Ins. Co., 6 Can. Sup. a. 30. 1 Fidelity Miit. Life Assn. v. Jef- fords, 107 Fed. 402, 46 C. C. A. 377, 53 L. R. A. 193 (brother the appointee but he had agreed to make some provisiop for children of insured) . A ndent Order V. Brovm, 112 Ga. 546 (1901), 37 S. E. 890; Heinlein v. Imperial L. Ins. Co., 101 Mich. 260, 59 N. W. 615, 25 L. R. A. 627, 45 Am. St. R. 409. Mother in- sured for benefit of son who paid first premium, 2 AT. Y. Life Ins. Co. v. Brovm, 23 Ky. L. R. 2070, 66 S. W. 613; GilbeH V. Moose, 104 Pa. 74, 78, 49 Am. Rep. 570 ("If we admit that one man may insure his life for the benefit of another who is neither a relative nor a creditor our whole doctrine concerning wager- ing policies goes by the board; the very foundation of that doctrine is that no one shall have a beneficial interest of any kind in a life policy who is not presumed to be interested in the preservation of the life insured. . . . Moreover, if such a transaction were permitted the wager could always be concealed under the mere form of the policy," held, policy not void but in- surance reverts to estate of insured). Equitable Life Ins. Co. v. Hazlewood, 76 Tex. 338, 16 Am. St. R. 893, 12 S. W. 621, 7 L. R. A. 217, insurance may be collected for benefit of the estate of insured. 3 Crotty V. Union Mid. Ins. Co., 144 U. S. 621, 623, 12 S. Ct. 749, 36 L. Ed. 566, citing also Wamock v. Davis, 104 U. S. 775, 26 L. Ed. 924; Conn. Mut. Life Ins. Co. v. Schaefer, 94 U. S. 457, 24 L. Ed. 251, in which, however, there is a dictum that insured might ap- point his friend, and in the federal supreme court any intimate relation- ship seems to import an insurable in- terest, Cammack v. Lewis, 15 Wall. 643, 21 L. Ed. 244; but see Gordon v. Ware Nat. Bk., 132 Fed. 444, 65 C. C. A. 680, and cases cited. * Mut. Life Ins. Co. v. Armstrong, 117 U. S. 591, 6 S. Ct. 877, 29 L. Ed. 997 (valid if valuable consideration). Gordon v. Ware Nat. Bk, 132 Fed. 444, giving long lists of cases pro and con and holding that federal court would not be controlled by law of state where assignment was made (on last point compare Miller v. Campbell, 140 N. Y. 457, 36 N. E. 651, 56 N. Y. St. R. 787; Groff v. Mut. Life Ins. Co., 92 111. App. 207); Fitzgerald v. Ins. Co., 66 Conn. 116, 13 Atl. 673, 17 Atl. 411, 52 GENERAL FKINCIPLES OF INSURANCE LAW doctrine has been further extended to allow to a creditor or to any lawful beneficiary holding a policy the right to assign it to one hav- ing no insurable interest, provided in each case the transaction is not a mere cloak to conceal a wager.^ Other courts condemn such a rule, holding in effect that in such a case motive is immaterial,^ 7 Am. St. R. 288 (owner of policy has the world for a market). Union Frct- temal League v. Walton, 109 Ga. 1, 34 S. E. 317, 77 Am. St. R. 350, 46 L. R. A. 424; Rylander v. Allen, 125 Ga. 206, 53 S. E. 1032, giving long list of author- ities; MaHin v. Stvbbings, 126 111. 387, 18 N. E. 657, 9 Am. St. R. 625; Met. Life Ins. Co. v. Brown, 159 Ind. 644, 65 N. E. 908; Farmers' & T. Bk. v. Johrir- son, 118 Iowa, 282, 91 N. W. 1074; Re Hearing, 26 La. Ann. 326 (but see Hays V. Lapeyre, 48 La. Ann. 749); 19 So. 821; 35 L. R. A. 647; Rittler v. Smith, 70 Md. 261, 16 Atl. 890, 2 L. R. A. 844; King v. Cram, 185 Mass. 103, 69 N. E. 1049 (whether assignee is purchaser or donee); Dixon v. Nat. L. Ins. Co., 168- Mass. 48, 46 N. E. 430; Mnt. L. Ins. Co. V. AUen, 138 Mass. 24, 52 Am. Rep. 245; Prudential Ins. Co. v. lAersch, 122 Mich. 436, 81 N. W. 258; Murphy v. Red, 64 Miss. 614, 1 So. 761, 60 Am. Rep. 68; Chamberlain v. Butler, 61 Neb. 730, 86 N. W. 481, 54 L. R. A. 338, 87 Am. St. R. 478 (commercial value and usefulness should be fostered rather than crippled) . Mechanics' Nat. Bk. V. Comins, 72 N. H. 12, 55 Atl. 191 ; Vivar v. Supreme Lodge, 52 N. J. L. 455, 20 Atl. 36; Steinhack v. Diepen- brock, 158 N. Y. 24, 62 N. E. 662, 44 L. R. A. 417, 70 Am. St. R. 424; Wright v. Mut. Ben. L. Assn., 118 N. Y. 237, 23 N. E. 186, 6 L. R. A. 731, 16 Am. St. R. 749; Olmsted v. Keyes, 85 N. Y. 593; St. John v. Am. Mut. L. Ins. Co., 13 N. Y. 31, 64 Am. Dec. 529; McDonough v. ^tna L. Ins. Co., 78 N. Y. Supp. 217, 38 Misc. 625 (endow- mentpoUcy). Eckel v. Renner, ilOlno, 232; Clark v. AUen, 11 R. I. 439, 23 Am. Rep. 496; CrossweU v. Conn. Ind. Assn., 51 S. C. 103, 28 S. E. 200; Clement v. N. Y. Life Ins. Co., 101 Tenn. 22, 46 S. W. 561, 42 L. R. A. 247, and note, 70 Am. St. R. 650; Fairchild v. Association, 51 Vt. 613; Bursinger v. Bank, 67 Wis. 75, 30 N. W. 290, 58 Am. Rep. 848; Strike v. Ins. Co., 95 Wis. 583, 70 N. W. 819. Contra, that assignee must have in- surable interest, Wamock v. Davis, 104 U. S. 775, 26 L. Ed. 924; Alabama G. L. Ins. Co. V. Mobile Mut. Ins. Co., 81 Ala. 329, 1 So. 561; Stoelker v. Thornton, 88 Ala. 241, 6 So. 680, 6 L. R. A. 140; Missouri Valley Life Ins. Co. v. Sturges, 18 ICan. 93, 26 Am. Rep. 761 ; Missouri Valley Life Ins. Co. V. McCrum, 36 Kan. 146, 12 Pac. 517, 59 Am. Rep. 537; Bromley v. Wash. L. Ins. Co. (Ky. 1906), 33 S. W. 17, 35 Ins. L. J. 498; N. Y. Life Ins. Co. v. Brown, 23 Ky. L. R. 2070, 66 S. W. 613 (assignee cannot recover but estate of insured can). Schlamp v. Bemer, 21 Ky. L. R. 324, 51 S. W. 312; McDonald v. Birss, 99 Mich. 329, 58 N. W. 359; Heusner v. Mid. Life Ins. Co., 47 Mo. App. 336; Mutuxd Life Ins. Co. v. Richards, 99 Mo. App. 88, 72 S. W. 487 (vahd only to extent of premiums paid by assignee). Powellv. Dewey, 12ZN.C. 103, 31 S. E. 381, 68 Am. St. R. 818; Carpenter v. V. S. Life Ins. Co., 161 Pa. St. 9, 15, 28 Atl. 943, 41 Am. St. R. 880, 23 L. R. A. 571; GUbeH v. Moose, 104 Pa. St. 74, 49 Am. Rep. 570; Downey V. Hoffer, 110 Pa. St: 109, 20 Atl. 655; Ruth v. Katterman, 112 Pa. St. 251, 3 Atl. 833 (good only to amount paid by assignee) . Hoffman v. Hoke, 122 Pa. St. 377, 15 Atl. 437, 1 L. R. A. 229; Equitable Life Ins. Co. v. Hadewood, 75 Tex. 338, 351, 12 S. W. 621, 16 Am. St. R. 893, 7 L. R. A. 217 (but pro- ceeds may be collected for estate of insured). Dugger v. Mut. L. Ins. Co. (Tex. Civ. App.), 81 S. W. 335; RoUer V. Moore, 86 Va. 512, 10 S. E. 241, 6 L. R. A. 136; Tate v. Commercial . „. Assn., 97 Va. 74, 33 S. E. 382, 45 L. R. A. 243, 75 Am. St. R. 770. 1 Gordon v. Ware Nat. Bk., 132 Fed. 444, 65 C. C. A. 580, giving for many states the rule pro and con; Farmers' & Traders' Bk. v. Johnson, 118 lowa. 282, 91 N. W. 107i: Mechanics' Nat. Bk. V. Comins, 72 N. H. 12, 55 Atl. 191, 101 Am. St. R. 650 (but the insured also joined in the assignment). Steinr- back V. Diepenbrock, 158 N. Y. 24, 52 N. E. 662, 44 L. R. A. 417, 70 Am. St. R. 424, 48 Cent. L. J. 175, and note (if, in good faith, to be treated like any other chose in action). 2 17. B. Mut. Aid Soc. v. McDonald, APPOINTEES — ASSIGNEES — UNITED STATES SUPKEME COURT 53 inasmuch as the transaction inherently and necessarily contravenes what they consider to be sound public policy. They contend that to vest all title to the expected insurance moneys in a claimant who has no interest in the preservation of the life insured, and especially if without the knowledge and consent of the insured himself, is sub- stantially to abrogate altogether the doctrine of the necessity of an insurable interest.'^ § 42. Express Restrictions. — It must be observed, however, that appointments of beneficiaries and assignments alike are sub- ject to statutory or contract restrictions.^ § 43. Appointees— Assignees — United States Supreme Court.^- Exactly what view of this subject is entertained by the Federal Su- preme Court cannot be stated with certainty. Certain expressions in their opinions would seem to require further explanation.^ In 122 Pa. St. 324, 15 Atl. 439, 1 L. R. A. 238, 9 Am. St. R. Ill; Downey v. Hoffer, 110 Pa. St. 109, 20 Atl. 655. 1 Crotty V. Union Mut. L. Ins. Co., 144 U. S. 621, 623, 12 S. Ct. 749, 36 L. Ed. 566, dictum; Wamock v. Davis, 104 U. S. 775, 26 L. Ed. 924, dictum; Alabama G. L. Ins. Co. v. Mobile Mut. Ins. Co., 81 Ala. 329, 1 So.' 561; Missouri Valley L. Ins. Co. v. McCrum, 36 Kan. 146, 12 Pac. 517, 59 Am. Rep. 637; Gilbert v. Moose, 104 Pa. St. 74, 78, 49 Am. Rep. 570; Roller v. Moore, 86 Va. 512, 10 S. E. 241, 6 L. R. A. 136; and see Mut. L. Assur. Co. v. Ander- son (Can.), 1 N. B. Eq. 466. ^Ancient Order v. Brown, 112 Ga. 545 (1901), 37 S. E. 890; Nat. Exch. Bk. V. Bright, 18 Ky. L. Rep. 588; 36 S. W. 10; Pradeniiallns. Co. v. lAersch, 122 Mich. 436, 81 N. W. 258; Supreme Conclave v. Dailey, 61 N. J. Eq. 145, 47 Atl. 277; McCord v. McCord, 40 App. Div. (N. Y.) 275, 57 N. Y. Supp. 1049. Produce Exchange gratuity fund). Kimball v. Lester, 43 App. Div. 27, 59 N. Y. Supp. 540, aff'd 167 N. Y. 570, 60 N. E. 1117. But such statute cannot be retroactive, Moore v. Chi. Guar. F. Life Soc., 178 111. 202, 52 N. E. 882. Claimant must show interest if policy so provide, Page v. Bumstine, 102 U. S. 664, 26 L. Ed. 268. But company may waive the clause. Bank V. Comins, 72 N. H. 12, 66 Atl. 191. 3 Thus, the court says: "It is the settled law of this court that a claim- ant under a life insurance policy must have an insurable interest in the life of the insured," Crottij v. Union Mid. Ins. Co., 144 U. S. 621, 623, 12 S. Ct. 749, 36 L. Ed. 666. And in one of the cases cited in support occur the follow- ing statements: "If there be any sound reason for holding a policy invalid when taken out by a party who has no interest in the life of the assured it is difficult to see why that reason is not as cogent and operative against a party taking an assignment of a policy upon the life of a person in which he has no interest. The same ground which in- validates the one should invalidate the other, so far, at least, as to restrict the right of the assignee to the sums ac- tually advanced by him. In the con- flict of decisions on this subject we are free to follow those which seem more fully in accord with the general policy of the law against speculative contracts upon human life," Wamock v. Davis, 104 U. S. 776, 782, 26 L. Ed. 924. But the agreement in that case was clearly speculative and other courts have dis- tinguished the case and endeavored on that ground to avoid the rule, for example. Chamberlain v. Butler, 61 Neb. 730, 86 N. W. 481, 54 L. R. A. 338, 87 Am. St. R. 478; Steinback v. Diepenbrock, 158 N. Y. 24, 52 N. E. 662, 44 L. R. A. 417, 70 Am. St. R. 424; Gordon v. Ware Nat. Bk., 132 Fed. 444, 66 C. C. A. 580. But in another case the United States Supreme Court has said, "there is no doubt that a man may effect an insurance on his own life 54 GENERAL PRINCIPLES OF INSURANCE LAW endeavoring to harmonize and apply the various statements quoted in the notes, lower federal courts have since concluded that if a pol- icy is taken out in good faith an appointee or assignee without &,ny insurable interest whatever may maintain claim; ^ while other courts have understood the Federal Supreme Court to mean that regardless of motive if the appointee or assignee is altogether devoid of iijisurable interest the transaction can only be interpreted as an ev^ion or violation of the law, a mere cover for a wager.^ The question perhaps turns very much upon what is understood by the elastic phrase "insurable interest." The doctrine of the highest court seems in general to be this: Where a man effects insurance upon his own life for the benefit of another and pays the premiums, an insurable interest will readily be inferred from almost any kin- ship or intimate relationship, and where even a stranger buys the policy in good faith, his payment of a consideration will be regarded as creating an insurable interest, at all events to that extent, some- what analogous to the insurable interest of a creditor.^ § 44. When Must Insurable Interest Exist — Marine Insur- ance. — In the law of marine insurance |;he rule must be considered well settled that if the insurance is taken out in good faith with in- tent to cover an expected interest, and if an interest exists at the time of the loss, it is not essential that any interest should have been actually acquired at the time of making the contract or at the time of the issuance of the policy."* The policy, of course, however, for the benefit of a relative or friend, 591, 597, 6 S. Ct. 877, 29 L. Ed. 997; or two or more persons on their joint and see Merchants' Life Assn. v. lives, for the benefit of the survivor or Yoakum, 98 Fed. 251, 39 C. C. A. 56. s irvivors," Conn. Mut. Life Ins. Co. v. Contra, that assignee must have in- Schaefer, 94 U. S. 457, 460, 24 L. Ed. surable interest, Svnck v. Home Ins. 251. Again, the same court held that Co., 23 Fed. Cas. 550; Langdon v. the relationship between a party and Union Mut. L. Ins. Co., 14 Fed. 272. :i.nother for whose benefit he effects an i Foster v. Preferred Ace. Ins. Co., insurance upon hits life, if a good and 125 Fed. 536; Gordon v. Ware Nat. Bk., valid consideration in law for any gift 132 Fed. 444, 65 C. C. A. 580, indubit- ot grant, furnishes no ground for the ably well decided on the facts, imputation that the transaction was by 2 Mut. L. Ins. Co. v. Lane, 151 Fed. way of cover for a wager policy, jEtna 276; RoUer v. Moore, 86 Va. 512, 10 Life Ins. Co. v. France, 94 U. S. 561, S. E. 241, 6 L. R. A. 136. 364, 24 L. Ed. 287 (a brother appointed 3 Mut. L. Ins. Co. v. Lane, 151 his sister). And again: "A policy of Fed. 276. life insurance, without restrictive * Boston Ins. Co. v. Ghbe Fire Ins words, is assignable by the assured for a Co., 174 Mass. 229, 54 N. E. 543 75 valuable consideration equally with Am. St. R. 303; Barnes v.L.E.&G L any other chose in action when the as- /tcs. Co., L. R. (1892), 1 Q. B. D 864- signment is not made to cover a mere Eng. Mar. Ins. Act, 1906, § 6. Thus, in speculative risk, and thus evade the an early English case it was held that law against wager policies, N. Y. Mut. an averment of insurable interest at Ufe Ins. Co. v. Armstrong, 117 U. S. the time of the commencement of the WHEN MUST INSURABLE INTEREST EXIST — FIRE 55 will not attach to the risk until the assured has acquired his in- terest.* § 45. Same Subject — ^Fire Insurance. — Many declarations of a general character may be found in the opinions of courts and in text-books to the effect that in the law of fire insurance an insurable interest at the time of making the contract, as well as at the time of loss, is required.^ But it would appear that the exigencies of business demand precisely the same rule in the case of policies against fire only, as in the case of policies against marine risks including fire.^ This conclusion has received express adoption or approval risk as well as at the time of loss, was sufficient and that no allegation or proof of insurable interest at the time of effecting the insurance was re- quired. Rhind v. Wilkinson, 2 Taunt. 237 (the court also said: "It is every day's practice to insm-e goods on a return voyage before the goods are bought"). Anderson v. Morice (1876), 1 App. Cas. 713. So also the federal supreme court adopts the same rule as laid down by Arnoidd, 1 Mar. Ins., 238. Hooper v. Robinson, 98 U. S. 528, 537, 25 L. Ed. 219; Haven v. Gray, 12 Mass. 71 (return cargo, from proceeds of outward cargo) . Sutherland v. Pratt , 1 1 Mees. & W. 296. "Lost or not lost." 1 Boston Ins. Co. v. Globe F. Ins. Co., 174 Mass. 229, 54 N. E. 543, 75 Am. St. R. 303 (marine fire risks, reinsur- ance). Sawyer v. Dodge Co. Mvt. Ins. Co., 37 Wis. 503, 545. But may insure in good faith "lost or not lost," Suth- erland V. Pratt (1843), 11 M. & W. 296. 3 Among these see, for example, Sadler's Co. v. Babcoek, 2 Atk. 554, 556, Lord Hardwicke; Carpenter v. Prov. Wash. Ins. Co., 16 Pet. (U. S.) 495, 503, 10 L. ed. 1044; Ohio Farmers' Ins. Co. V. Vogel, 30 Ind. App. 281 (1903), 65 N. E. 1056; Clinton v. Norfolk Mvt. F. Ins. Co., 176 Mass. 486, 489, 57 N. E. 998, 50 L. R. A. 833, 79 Am. St. R. 325; Howard v. Albany Ins. Co., 3 Denio (N. Y.), 301; Fowler v. Ins. Co., 26 N. Y. 422; LockhaH v. Lundsford, 87 N. C. 149, 151, 42 Am. Rep. 514; Chrisman v. State Ins. Co., 16 Ore. 283, 288, 18 Pac. 466; Dickerman v. Fire Ins. Co., 67 Vt. 99, 30 Atl. 808; Shep- pard V. Ins. Co., 21 W. Va. 368, 379 (stated only "as a general rule"). As a summing up of many authorities collected Iw them the editors of the Lawyers' Reports, Annotated, say: "The general rule is that the insured must at the time of insurance and also at the time of loss have an insurable interest in the property burned in order to recover on a fire policy." 52 L. R. A. 330-334. Whether "the learned editors have based this con- clusion upon the express warranties of the fire policy does not appear. 3 The rule requiring an insurable- interest should be invoked only to prevent the evils of wagering con- tracts, not to disturb the sane and orderly course of business. So far as the public welfare is concerned there is no adequate reason why a man intend- ing next week to buy a stock of goods, whether to be put on ship board or in a warehouse, should not be allowed to take out his insurance to-day to guard against loss by fire or other peril after he shall have become owner. If he neglects insurance until he has ac- quired title it may be too late. If the goods are valuable it may require policies from many companies to pro- tect them. To secure these may in- volve considerable expenditure of time. Meanwhile the loss may occur. It is not always practicable to make purchases and insurances simultane- ously. No injustice is done to the in- surance company by the adoption of the safe and convenient method of pro- cedure since until the insurable interest is acquired the risk will not attach and the underwriters will not become liable. The doctrine of the text gains con- firmation from the well-established rule that where the policy is vaUd at its inception it may be made to cover after-acquired property. Hooper v. Ins. Co., 17 N. Y. 424; Hoffman v Ins. Co., 32 N. Y. 405, 88 Am. Dec. 337; Wolfe ■». becurity Fire Ins. Co., 56 GENERAL PRINCIPLES OF INSURANCE LAW in several more recent adjudications and text-books/ and must be considered as supported by the weight of authority, inasmuch as the declarations to the contrary though numerous are mostly mere dicta and of a general character. § 46. Same Subject — Life Insurance. — In the case of life in- surance, the general rule is that the insurable interest must exist at the time the contract is made,^ but that though it may chance to cease altogether before the matiuity of the contract, the contract will not thereby be avoided.^ Thus, a creditor who has taken a policy upon the life of his debtor, may, on the death of the insured, recover the full amount of the insurance, notwithstanding the debt may have been previously paid.'* This rule when rightly regarded is not so much at variance with the doctrine of indemnity as in harmony with it. Premiums for marine and fire policies are in most instances trivial in amount compared with the face of the policy and are estimated upon a probability that the peril named will not occur, but not so in life insurance. The rate of premium for the life policy is large, since it is based upon the known fact that the event upon 39 N. Y. 49, and so also by the rule that in the absence of express pro- vision to the contrary, temporary sus- pension of interest does not avoid § 47. 1 Sun Ins. Office v. Merz, 64 N. J. L. 301, 45 Atl. 785, 52 L. R. A. 330 (reinsurance but the rule is the same). Boston Ins. Co. v. Globe Fire Ins. Co., 174 Mass. 229, 54 N. E. 543, 75 Am. St. R. 303; Davis v. New England F. Ins. Co., 70 Vt. 217, 39 Atl. 1095; and see Mills V. Farmers' Ins. Co., 37 Iowa, 400; Sawyer v. Dodge Co. Mvt. Ins. Co., 37 Wis. 503; Bunyon (5th ed.), p. 52; Vance, § 48; Joyce, § 901; El- liott, § 45; May (4th ed.), § 100 A. 2 Barnes v. London E. & G. Life Ins. Co., L. R. (1892) 1 Q. B. D. 864. 3 Conn. Mid. Life Ins. Co. v. Schaefer, 94 U. S. 457, 24 L. Ed. 251; Manhattan L. Ins. Co. V. Hennessy, 99 Fed. 64, 39 C. C. A. 625 (sufficient if assignee has interest at time of assignment). Over- hiser v. Overhiser, 63 Ohio St. 77, 57 N. E. 965 (policy survives divorce). Appeal of Corson, 113 Pa. St. 438, 6 Atl. 213, 57 Am. Rep. 479. Contra, Cheeves V. Anders, 87 Tex. 287, 28 S. W. 274, 47 Am. St. R. 107. 4 Dalhy v. India & London & Life Assur. Co., 15 C. B. 365 (a leadingcase overruling GodsaU v. Boldero, 9 East, 72), Amick v. Butler, 111 Ind. 578, 12 N. E. 518, 60 Am. St. R. 722; Ferguson V. Mass. Mvt. Life Ins. Co., 32 Hun, 306, afif'd 102 N. Y. 647. Contra, Cheeves v. Anders, 87 Tex. 287, 28 S. W. 274, 47 Am. St. R. 107 (recovery limited to debt and expense of insur- ance). As to Pennsylvania rule see § 37. If policy is taken out by debtor and assi^ed absolutely to creditor, the creditor in some jurisdictions may col- lect the whole, Mut. Life Ins. Co. v. Anen, 138 Mass. 24, 52 Am. Rep. 245; Wright v. Mvt. Ben. Life Ass., 118 N. Y. 237, 23 N. E. 186, 6 L. R. A. 731, 16 Am. St. R. 749. In other jurisdic- tions the creditor is limited to the debt and expense of keeping up insurance, Cheever v. Anders, 87 Tex. 287, 28 S. W. 274, 47 Am. St. R. 107, and § 37. If, however, a policy taken out by the debtor is merely assigned or pledged conditionally as collateral security for the debt, the debtor paying the pre- miums, any balance over the debt will belong to the debtor, Central Nat. Bk. V. HuTne, 128 U. S. 195, 9 S. Ct. 41, 32 L. Ed. 370; Exchange' Bank v. Loh, 104 Ga. 446, 31 S. E. 459, 44 L. R. A. 372. The burden is then upon the creditor to show the continuance and amount of the debt, Crotty v. Union Mvt. Life Ins. Co., 144 U. S. 621, 12 S. Ct. 749, 3G L. Ed. 566. INSURANCE DOES NOT ALWAYS GRANT FULL INDEMNITY 57 which payment is to be made to the insured will certainly occur, and if a creditor aftei: paying premiums for a long term of years were likely at the end to lose all return from his insurance, it would practically prevent the use of this important kind of security. He would in such case receive no indemnity, but on the contrary, would be largely out of pocket for premiums which the company would retain with- out making fair return.^ § 47. Temporary Suspension does not Avoid. — If there is no provision in the contract prohibiting a change of interest, a tem- porary suspension of the interest of the insured does not vitiate a policy of insurance, but only suspends its operation.^ § 48. Insurance does not always Grant Full Indemnity. — Only such damages as are caused proximately by the specified perils are covered by the policy. This rule, also, is grounded upon con- siderations of utility, and ordinarily limits the scope of the contract because of the inconvenience of attempting to form an estimate after loss of the extent of remote, uncertain, and fluctuating elements of damage. Thus, the incidental loss of trade, or of the use of a build- ing or ship while being repaired,' or of prospective profits,^ or any pretium affectionis attaching to the property destroyed, is too re- mote, and is not supposed to enter into the calculation of the con- tracting parties. Where, however, the parties do in fact expressly take into their account these more remote items of damage, they may make them the subject of a valid insurance. Thus, the loss of use and occupation,^ or of expected profits ® may be specifically insured as such, and frequently is. In marine insurance profits are iMut. Life Ins. Co. v. Allen, 138 Re Wright & Pole, 1 Adol. & E. 621; Mass. 24, 52 Am. Rep. 245. Stock v. Inglis, L. R. 9 Q. B. D. 708. ^ Hancox v. Fishing Ins. Co., 3 ^Michael v. Prussian Nat. Ins. Co., Siimn. 132, 140; Lane v. Maine Mut. 171 N. Y. 25, 63 N. E. 810; Tanenhaum Fire Ins. Co., 12 Me. 44, 28 Am. Dec. v. Freundlich, 81 N. Y. Supp. 292, 39 150; Worthington v. Bearse, 12 Allen Misc. 819; Same v. Simon, 81 N. Y. (Mass.), 382, 90 Am. Dec. 152; Clinton Supp. 655, 40 Misc. 174, aff'd 84 App. V. Norfolk Mut. F. Ins. Co., 176 Mass. Div. 642. 486, 57 N. E. 998, 79 Am. St. R. 325. « Patapsco Ins. Co. v. Coulter, 3 3 Thus, a policy on a bridge does not Pet. (U. S.) 222, 7 L. Ed. 669; Barclay cover incidental loss of tolls from the v. Cousins, 2 East. 544; FosdicA; v. adjacent turnpike belonging to plain- Norwich Mar. Ins. Co., 3 Day (Conn)., tiff. Farmers' Ins. Co. v. New Holland 108; French v. Hope Ins. Co., 16 Pick. Turnpike Co., 122 Pa. 37, 15 Atl. 563. (Mass.) 397; Tom v. Smith, 3 Caines * Niagara Fire Ins. Co. v. Hefiin, 22 (N. Y.), 245; Abbott v. Sebor, 3 John. Ky.L.Rep.l212,60S.W.393:#a2/esv. Cas. 39; Be Hogan, 8 N..D. 301, 78 Ins. Co., 170 Mass. 492, 49 N. E. 754; N. W. 1051, 45 L. R. A. 166, 73 Am. Niblo V. Ins. Co., 1 Sandf. (N. Y.) 551; St. R. 759. 58 GENERAL PRINCIPLES OF INSURANCE LAW generally added in the shape of a percentage to the value of the goods.^ What results of fire, accident, and marine casualties are proxi- mate, and what are remote, will be considered under the clauses of the policies. § 49. Insurance Grants Indemnity for Results of I^egligence. — Where the loss is caused proximately by the peril insured against, the fact that the negligence of the insured or his agent con- tributed to the disaster will not deprive him of the protection of his policy; because it is of the nature and purpose of insurance to grant indemnity for the results of carelessness as well as of accident. This ^rule, as originally adopted by the courts, was arbitrary, but is also eminently just and sensible.^ In the case of fire insurance, for example, the security offered to the insured by his policy would be seriously impaired if it were open to the insurers to plead in defense contributory negligence on the part of the insvired or his servants; since many if not most fires have their origin in some act of carelessness. Accordingly the in- sured has the right to look to the company for indemnity notwith- standing any amount of carelessness in occasioning the loss,' pro- 1 A policy on profits is valued, causing -wreck); Busk v. Royal Exch. Mumford v. HaUett, 1 John. R. (N. Y.) Assur. Co., 2 B. & Aid. 72 (negligence 433. of mate in not extinguishing fire); 2 Union Ins. Co. v. Smith, 124 U. S. Walker v. MaHland, 5 B. & Aid. 171 405, 8 S. Ct. 534; Gove v. Farmers' (seamen all asleep); Bishop v. Pent- Mid. Fire Ins. Co., 48 N. H. 41, 97 land, 7 B. & Cr. 219 (gross neglect of Am. Dec. 572; Mathews v. Howard Ins. mate in not using rope strong enough Co., 11 N. Y. 21. The rule is applica^ to fasten boat to pier); Redman v. ble as well to marine insurance; neg- Wilson, 14 M. & W. 476 (unskillful ligence of master and mariners, Orient loading on home voyage); Davidson v Ins. Co. V. Adams, 123 U. S. 67, 8 S. Ct. Bumand, L. R. 4 C. P. 117 (damage 68; 31 L. Ed. 63 (also of owners); by sea water from leaving machinery Phoenix Ins. Co. v. Erie & W. Transp. valves open). But it has been said Co, 117 U. S. 312, 6 S. Ct. 750, 29 that by wrongful act of owners directly L. Ed. 873; Hutchins v. Ford, 82 Me. causing the loss though falling short of 363, 19 Atl. 832; Louisville Ins. Co. v. fraud, the insurer is relieved, Stand- Monarch, 99 Ky. 578, 36 S. W. 563, ard Mar. Ins. Co. v. Nome Beach, etc., (river policy). Willful negligence or Co., 133 Fed. 636, and cases cited misconduct may fall within "bar- p. 649. ratry," Trinder v. Thames, etc., Ins. 3 Columbian Ins. Co. v. Lawrence, Co. (1898), 2 Q. B. 114, 67 L. J. Q. B. 10 Pet. 507, 9 L. Ed. 512; Des Moines ■ N. S. 666, 78 L. T. R. 485 (a loss of Ice Co. v. Niagara Fire Ins. Co., 99 freight by stranding by negligent act of Iowa, 193, 68 N. W. 600; St. Paid F. master or part owner). Holdsworth v. Moreover, the pernicious practice of upon the law of the state where the overinsuring should not be fostered, assignment is made, Spencer v. but discouraged. Myers, 150 N. Y. 269, 44 N. E. 942, 2 A few states, however, have statu- 34 L. R. A. 175, 55 Am. St. R. 675. tory provision, not expressly confined Claims for losses under a fire policy are to marine insurance, that the premium assignable like other choses in action, is apportionable and returnable pro Roger WiUiams Ins. Co. v. Carrington, rata, where there is overinsurance hy 43 Mich. 252, 5 N. W. 303; Nease v. several insurers, Cal. Civ. Code, § 2620; Insurance Co., 32 W. Va. 283, 9 S. E. Montana Civ. Code, § 3494; No. Dak. 283. As soon as loss occurs and even Civ. Code, § 5967; So. Dak. Civ. Code, before adjustment the claim is assign- § 1865. able, Greenwich Ins. Co. v. Columbian 3 Traders' Ins. Co. v. Newman, 120 Mfg. Co., 73 111. App. 560. Ind. 54, 22 N. E. 428; Lyford v. Conn. ^ Sparks v Marshall, 2 Bingham F. Ins. Co., 99 Me. 273, 58 Atl. 916. N. C. 761; Earl v. Shaw, 1 Johns. Cas. < Earl V. Shaw, 1 Johns. Cas. (N. Y.) (N. Y.) 314, 1 Am. Dec. 1^7. 314, 1 Am. Dec. 117 (marine). Palmer « M.l. Life Ins. C .. v. Allen, 138 V. Mvt. Life Ins. Co., 77 N. Y. Supp. Mass. 24, 52 Am. Rep. 245 • 869, 38 Misc. 318; N. Y. Mvt. Life Ins. 7 Robinson v. Dujall, 79 Ky. 83, 42 Co. V. Armstrong, 117 IT. S. 591, 6 S. Ct. Am. ilep. 208; Griswold v. Sawiier, 125 877, 29 L. Ed. 997 (life). Robinson v. N. Y. 411, 416. 1.6 N. E. 464, in which CaioT, 78 Md. 72, 26 Atl. 959. The the court said: "It is elementary law validity of the assignment depends tha,t where a policy is for the benefit VESTING OF RIGHTS IN BENEFICIARIES 79 ever, that the executor or administrator of the insured may im- peach the vaUdity of an assignment of the policy, if founded upon an immoral and illegal consideration.^ § 64. Vesting of Rights in Beneficiaries — Regular Life Policy. If a person, having an insurable interest in the life of another, takes out a valid policy on that life, but for his own benefit, and pays the pre- miums, it is evident that the policy is his own property.^ The per- son whose life is insured has no right to the policy, nor has he any control over it, but very frequently it happens, that the insured in procuring a policy upon his own life has it made payable to others, for example, his wife and children, or near relatives or dependents, often without their kitowledge and in most instances without any consideration moving from them. The question then arises, when and to what extent the interest of such beneficiaries or payees becomes a vested right. ^ Actual payment of insurance money, of course, must await the maturity of the policy and must also be sub- ject to the continued observance on the part of the insured of all its conditions precedent, and warranties.'* But when does the interest of the beneficiary thus gratuitously designated become so far a property right that neither the insured nor his creditors can destroy or impair it? The arrangement, though in certain of its aspects a chose in action,^ in others is obviously in the nature of a gift or voluntary trust for the benefit of the person or persons named as payees,* and, as in the case of all gifts, the court will strive primarily to effectuate the probable intent of the donor.'' It is a laudable of persons named therein, to whom 577, 66 N. W. 697, 47 L. R. A. 681 the sum insm'ed is payable, it cannot (warranty against suicide). Behling v. be assigned without the consent of the N.. W. L. Ins. Co., 117 Wis. 24, 93 persons named and all of them. The N. W. 800 (default in paying a pre- insured may destroy the policy by mium) ; compare Union Cent. Life Ins. omitting to pay the premiums and thus Co. v. Buxer, 62 Ohio St. 385, 391, 57 failing to keep it in life, but he cannot N. E. 66, 49 L. R. A. 737. impair the interests of the persons s Olmsted v. Keyes, 85 N. Y. 598. named as beneficiaries by a surrender > Small v. Jose, 86 Me. 120, 29 Atl. or assignment thereof: " Opitz v. Karel, 976; Preston v. Conn. Mvi. Life Ins. 118 Wis. 527, 95 N. W. 948, 62 L. R. A. Co., 95 Md. 101, 51 Atl. 838; Ryan v. 982, 99 Am. St. R. 1004. Rothweiler, 50 Ohio St. 595, 35 N. E. ^Harrison v. Northwestern, etc., Co. 681; Cleaver v. Mvt. Reserve Fund, 1 (Vt.), 66 Atl. 787 (married man as- (1892), Q. B. 153, 61 L. J. Q. B. 128, signed the policy to his mistress in 66 L. T. 220. consideration of illicit relations). ^ Farleigh v. Cadman, 159 N. Y. 169, 2 Rawh V. Am. Mut. L. Ins. Co., 27 173, 53 N. E. 808 ("a gift, whether in N. Y. 282, 84 Am. Dec. 280. the form of a trust, or otherwise, al- 3 "An interesting question," Mvt. ways involves the intention of the Life Ins. Co. v. mU, 178 U. S. 347, donor"). If a; husband insures his 20 S. Ct. 914, 44 L. Ed. 1097. life for his wife, and pays all the pre- i McCoy V. Relief Assoc, 92 Wis. miums with money embezzled from 80 GENERAL PRINCIPLES OF INSURANCE LAW thing for a person when solvent to make secure provision for the future necessities and comfort of those who are naturally and properly dependent upon him, and to obtain this result it would seem proba- ble, that the donor would intend to relieve the objects of his bounty from any danger of interference by his possible future creditors. It may be stated as the general rule that if no phraseology in the contract indicates a different intent, the right of the beneficiary becomes vested as soon as the contract is made,^ though the policy his firm, the proceeds of the policy will belong to it; but if the first pre- mium is honestly paid by him, and subsequent premiums with money stolen from his firm, the proceeds of the policy will belong to the wife, charged with a hen to the firm for the amount of its money used for pre- miums. Holmes v. Gilman, 138 N. Y. 36J, 34 N. E. 205, 20 L. R. A. 566, 34 Am. St. R. 463. 1 Chief Justice Fuller says: "It is indeed the general rule that a policy, and the money to become due under it, belong the moment it is issued, to the person, or persons named in it as the beneficiary or beneficiaries, and that there is no power in the person procuring the insurance, by any act of his, by deed or by will to transfer to any other person the interest of the person named." Central Nat. Bank v. Hume, 128 U. S. 195, 206, 9 S. Ct. 41, 44, 32 L. Ed. 370; Franklin L. Ins. Co. V. GaUigan, 71 Ark. 295, 301, 73 S. W. 102, 100 Am. St. R. 73; Lemon v. Phoenix Life Ins. Co., 38 Ctonn. 294; Glanz v. Gloeckler, 104 111. 573, 44 Am. Rep. 94; Weather- hee V. N. Y. Life Ins. Co., 182 Mass. 342, 65 N. E. 383; Laughlin v. Nor- cross, 97 Me. 33, 53 Atl. 834; Preston v. Connecticut Mut. L. Ins. Co., 95 Md. 101, 51 Atl. 838; Bicker v. Charier Oak Life Ins. Co., 27 Minn. 193, 6 N. W. 7/1, 38 Am. Rep. 289; United States C-svalty Co. v. Kacer. 169 Mo. 301, GJ 3. W. 370, 55 Cent. L. J. 127, 58 L. R. A. 436; Shipman v. Home Circle, 174 N. Y. 398, 67 N. E. 85, 63 L. R. A. 347; Gamer v. Germania lAfe Ins. Co., 110 N. Y. 266, 18 N. E. 130, 1 L. R. A. 256; Bidler v. State Mut. Life Assur. Co., 55 Hun (N. Y.), 296, 28 N. Y. St. R. 491, 8 N. Y. Supp. 411, aff'd 125 N. Y. 769, 36 N. Y. St. R. 1011, 27 N. E. 409; ErUwistle v. Trav- ders' Ins. Co., 202 Pa. St. 141, 51 Atl. 759; D'Aroy v. Conriecticvi Mut L. Ins. Co., 108 Tenn. 567, 576, 69 S. W. 768; Washington L. Ins. Co. v. Ber- wald, 97 Tex. Ill, 115, 76 S. W. 442; MaHin v. McAUister, 94 Tex. 567, 63 S. W. 624, 56 L. R. A. 585 (not com- munity but separate property); and see MUes V. Connecticut Mut. lAfe Ins. Co., 147 U. S. 177, 13 S. Ct. 275, 37 L. Ed. 128. The general rule as to vested rights in tlurd parties applies equally to endowment policies, Pingrey v. Ins. Co., 144 Mass. 374, 382, 11 N. E. 562; Lockwood v. Ins. Co., 108 Mich. 334, 66 N. W. 229; McGlynn v. Curry, 81 N. Y. Supp. 855, 82 App. Div. 431, 433; but see Talcott v. Field, 34 Neb. 611, 52 N.. W. 400, 33 Am. St. R. 662. Thus, the rights of the beneficiary will not be affected by the suicide of the insured in the absence of a warranty against suicide, and provided the poUcy was not procured with the intent to commit suicide. See § 34. Nor will the divorce of a wife disturb her rights as beneficiary under such a policy, Overhiser's Adm'x v. Overhiser, 63 Ohio St. 77, 57 N. E. 965, 50 L. R. A. 552, 81 Am. St. R. 612. The interest of the beneficiary being vested is also assignable, N. Kr Mut. Life Ins. Co. v. Armstrong, 117 U. S. 591, 6 S. Ct. 877, 29 L. Ed. 997; Hewlett v. Home for In- curables, 74 Md. 350, 24 Atl. 324, 17 L. R. A. 445; Wirgman v. MiUer, 98 Ky. 620, 33 S. W. 937. But he can assign only his interest and if that be contingent or conditional until it is perfected he cannot assign the policy itself or its surrender cash value, Bathbome v. Hatch, 90 App. Div. (N. Y.) 161, 85 N. Y. Supp. 775, aff'd 181 N. Y. 584, 73 N. E. 1131. By statute in New York L. 1896, c. 272, § 22, "a policy of insurance on the life of any person for the benefit of 'a mar- ried woman is also assignable . . with the written consent of the as- sured." This Act known as the Do- mestic Relations Law supersedes prior VESTING OF RIGHTS IN BENEFICIARIES 81 may not come into his possession and he may have no knowledge of its existence. The courts of England and Wisconsin, however, have not given their approval to this broad principle, and notably the Wisconsin court regards such a gift as revocable during the lifetime of the donor, or shorter pendency of the poUcy.^ It need hardly be stated that the beneficiary will not be permitted to recover if he intentionally brings about the death of the insured.^ But in such an event, if the insured has committed no breach of contract, a resulting trust in the insurance money is inferred in favor of his estate, since it would be harsh indeed to adjudge the contract void when the contracting party himself has violated none of its terms.' It is a familiar priliciple, however, that the insured is under an implied obligation to do nothing to wrongfully accelerate the ma- turity of the policy. Thus in a recent Massachusetts case, a mem- ber of a mutual benefit association had named the plaintiff, who was his wife, beneficiary in a certificate which was silent regarding suicide. As the appointment was revocable, she had no vested rights in the insurance. The insured committed suicide by shooting himself while he was of sound mind. The court declared it to be settled, upon sound principles, and by a great weight of authority, that, although a policy contains no suicide clause, there is no lia- acts and applies to insurance existing son v. Gutterson, 60 Minn. 278; 52 before passage of the act, Matter of N. W. 530; Tompkins v. Levy, 87 Ala. Thompson, 184 N. Y. 36; Kittel v. 263, 268, 6 So. 346, "to wife, her heirs, Dom^er, 175 N. Y. 205, 67 N. E. 433; executors or assigns," held, that her but the clause of § 22 of said act au- interest ceased on her death, thorizing a married woman by will or 2 ^_ y. Mvt. Life Ins. Co. v. Arm- written acknowledged assignment to strong, 117 U. S. 591, 6 S. Ct. 877, 29 dispose of a policy on her husband's L. ed. 997; Schmidt v. Ldfe Assn., 112 life for her benefit, refers to a policy Iowa, 41, 83 N. W. 800, 51 L. R. A. taken out by herself in her own name 141, 84 Am. St. R. 323; Cleaver v. or in the name of a trustee. It does Mut. Reserve Fund Assn. (1892), 1 not refer to a policy taken out by the Q. B. 147 (case of Mrs. Maybrick); husband in her favor in which she had Prince of Wales, etc., Assoc, v. Palmer, only a contingent interest, Bradshaw 25 Beav. 605; Quebec Official Rep., 9 V. Mia. L. Ins. Co., 187 N. Y. 347, 80 Q. B. 499; and see Conn. Mut. L. Ins. N. E. 203. As to what is husband's Co. v. Hillmon, 188 U. S. 208, 23 S. Ct. consent, see Sherman v. Allison, 77 294. But rights of beneficiary will not App. Div. 49, 80 N. Y. Supp. 148. As be defeated by such acts if he was to when rights of beneficiary are liable insane, Holdom v. Ancient Order, 159 for debts of beneficiary see Amberg v. 111. 619, 43 N. E. 772, 31 L. R. A. 67, Ins. Co., 171 N. Y. 314, 63 N. E. 1111; 50 Am. St. R. 183. Ellison V. Straw, 116 Wis. 207, 92 3 Schmidt v. lAfe Assn., 112 Iowa, N. W. 1094. 41, 83 N. W. 800, 51 L. R. A. 141, 84 1 Estate of Breitung, 78 Wis. 33, 46 Am. St. R. 323; Ryan v. Rothweiler, 50 N. W. 891, 47 N. W. 17; Ellison v. Ohio St. 595, 35 N. E. 681; Walsh v. Straw, 116 Wis. 207, 92 N. W. 1094; M. L. Ins. Co., 133 N. Y. 408, 419: Foster v. Gile, 50 Wis. 603, 7 N. W. 555; 31 N. E. 228; Cleaver v. Reserve Fund Be Policy of Scottish Eq. Life Assur. L. Assn. (1892), 1 Q. B. 147. So. (1902), 1 Ch. 282; and see Gutter- 6 82 GENERAL PRINCIPLES OF INSURANCE LAW bility under it to the legal representatives of the insured, if his death is intentionally caused by himself when of sound mind. The court further concluded that the same result must follow where the in- sured had named the claimant as in that case by an appointment which was revocable.^ On the other hand, about three months earlier in the same year, the Nebraska court adopted the opposite view, and held broadly that, where a policy or certificate of life insurance is taken out in good faith, suicide will not defeat recovery by a third party bene- ficiary, unless the contract so provides in express terms.^ The high- est court of New Jersey also had previously come to the same con- clusion, presenting opinions discussing both sides of the question, but holding by a majority vote, that it is immaterial whether the rights of the beneficiary are vested or revocable.' Indeed the opin- ions of the courts in the last two cases go further than this, and favor the view that a policy, payable to the estate of the insiu^, without a suicide clause, shall not be defeated by his intentional self-destruction, unless he took out the policy with the purpose of killing himself, since the proceeds do not profit the wrongdoer but pass to some innocent recipient. This view is opposed to the funda- mental notion that insurance is a contract of the highest good faith, demanding the exercise of fair dealing between the parties during its continuance, as well as at its inception, and by many courts is deemed inconsistent with a soxmd regard to public welfare. In an interesting case where the policy by its terms became pay- able to the insured, he committed the crime of murder for which he was convicted and hanged. After the commission of the crime he assigned the poUcy to the plaintiffs. The judgment of conviction not being res ddjudicata as against them, they offered but were not allowed to prove that it was in fact imjust. The court held that the evidence was not admissible and that they could not recover, since it would be contrary to public policy to uphold an insurance indemnifying for loss occasioned by miscarriage of justice in the courts.* § 65. If all the Donee Beneficiaries Die Before Insured. — Where by extraneous evidence it is shown that the beneficiary has a prior 1 Davis V. Supreme Council (Mass., N. J. L. 274, 49 Atl. 650, 64 L. R. A. 1907), 81 N. E. 294 (citing federal, 676. state, and English cases). 4 BuH v. Union Cent. Life Ins. Co., 187 ^Lange v. Roycd Highlanders (Neb., U. S. 362, 23 S.Ct. 139, 47 L.Ed. 216. 1907), HON. W. 1110. Compare Box v. Lanier, 112 Tenn. 3 Campbell v. Supreme Conclave, 66 393, 79 S. W. 1042, 64 L. R. A. 458. iF ALL THE DONEE BENEFICIARIES DIE BEFORE INSURED 83 binding agreement with the insured to the effect that the pohcy shall be procured, the rights of the beneficiary under the policy are vested and will pass to his representatives if he dies before the insured.! Or where the beneficiary aids in maintaining the in- surance or otherwise parts with value in connection with the trans- action, it may the more easily be inferred that the intention was to give him a vested right as of the time of the issuance of the policy .^ But usually beneficiaries are appointed gratuitously. If in that event the sole beneficiaries named in the policy die before the in- sured, their would-be donor, is it within his power in the absence of other evidence of intent and with the consent of the company to make a fresh appointment? Upon this point the courts are divided in their opinions. By the better reason as well as by the weight of authority he must be allowed to do so, on the ground that his proposed settlement or trust having failed his policy is still within reach of his power of disposal.' The fact that he originally planned to make provision for his wife or children, if surviving him, affords slender reason for the inference that he intended to deprive himself of control over his property in the event that he should himself be sole survivor.* 1 Cade V. Head Camp P. J. W. of W., 27 Wash. 218, 67 Pac. 603; Fingrey v. Nat. Ufe Itis. Co., 144 Mass. 374, 11 N. E. 562; Smith v. National Ben. Soc, 123 N. Y. 85, 25 N. E. 197, 9 L. E. A. 616. 2 Spengler v. Spengler, 65 N-. J. Eq. 176, 55 Atl. 285. 3 Especially if policy is still in his possession. The difficulty has been met in New York by the following clause contained in its standard life policies. Ins. L. § 101, "Whenever the right of revocation has been re- served, or in case of the death of the beneficiary under either a revocable or irrevocable designation, the insured, if there be no existing assignment of the policy made as herein provided, may designate a new beneficiary with or without reserving right of revoca- tion, by filing written notice thereof at the"' home office of the company, accompanied by the policy for suitable endorsement thereon, and if no bene- ficiary shall survive the insured the policy shall be payable to the legal representatives of the insured." The N. Y. Standard forms of life insurance policies are not applicable to indus- trialpolicies. * Tompkins v. Levy, 87 Ala. 263, 268, 6 So. 346 (interest of wife ceased on her death). Ryan v. Rothweiler, 60 Ohio St. 595, 35 N. E. 679; Shields v. Sharp, 35 Mo. App. 178, 182; Loco- motive Em. Ins. Assn. v. Winterstein, 58 N. J. Eq. 189, 196, 44 Atl. 199 (in- terest reverts to insured). Bickerton V. Jaques, 28 Hun (N. Y.), 119, 12 Abb. N. C. 25; Mut. Ben. Life Ins. Co. v. Atwood, 24 Grat. (Va.) 497, 18 Am. Rep. 652; Foster v. Gile, 50 Wis. 603, 7 N. W. 655, 8 N. W. 217 (a gift rev- ocable until death of insured), Ker- man v. Howard, 23 Wis. 108 (same as last). Re Policy Scottish Eq. Life As- sur. Soc. (1902), 1 Ch. 282 (all interest reverts to insured who has paid the premiums). Obdsal v. WMi, 2 Keen (Eng. Ch.), 100. Contra, Franklin Life Ins. Co. v. Galligan, 71 Ark. 295, 73 S. W. 102, 100 Am. St. R. 73; Harley v. Heist, 86 Ind. 196, 45 Am. Rep. 285; Preston v. Connecticut Mut. Life Ins. Co., 95 Md. 101, 51 Atl. 838 (insured wrote letter to company stat- ing that he had no intent that interest should vest if the beneficiary, his mother, died; nevertheless by a mere legal fiction he was deprived of his policy and the money on his death was given to his mother's estate). The Massachusetts court noticed but did 84 GENERAL PRINCIPLES OF INSURANCE LAW Any rule depriving the insured of the right of disposal, in such a case, over a policy taken out and kept alive by him, would not only be inequitable but also in many cases ineffective, for when the next premium became due he might allow the policy to lapse.^ While this doctrine may be open to criticism on the score of uncertainty in holding the title in abeyance for a time, it tends to the accom- plishment of essential justice, and is, therefore, sounder than a rule which is likely to defeat the probable purpose of the dpnor. Nor is any satisfactory solution of the difficulty furnished by the Indiana court in its suggestion that if the insured desires to avoid the transfer of his money to a stranger, he can so expressly provide in the policy.^ The insured has little opportunity to shape the phraseology of the policy and usually takes what the company gives him without thought of remote contingencies. If, however, the language of the policy or charter of the company or statute clearly indicates that the policy must be issued for the sole use of the beneficiary named and his representatives, such language will be taken as evidence of the intent of the parties.^ But in case a new appointment is not made by the insured, the representatives of the deceased appointees and not the representatives of the insured, will be entitled to the pro- ceeds of the insurance,* though not so, if the interest of the bene- ficiary is expressly conditioned upon survivorship.* § 66. If Some of Donee Beneficiaries Die Before Insured. — If without any condition of survivorship the policy is simply made payable to several beneficiaries, for example, to "wife and children" not decide the point in Millard v. pletes the gift in his lifetime by some Brayton, 177 Mass. 533, 542, 59 N. E. miequivocal act or declaration"). P 436, 52 L. R. A. 117, 83 Am. St. R. 294. S. Bank v. Webb, 21 R. I. 218, 42 Atl. I Clark V. Durand, 12 Wis. 223. 874; Sherman v. Savings Bank, 138 The doctrine of the text finds strong Mass. 581. confirmation in those cases already ^ Harley v. Heist, 86 Ind. 196, 45 cited which hold that where the inter- Am. Rep. 285. est of the beneficiary is defeated by his ' Phoenix Mvt. Life Ins. Co. v. Dun- own fraudulent conduct the right to ham, 46 Conn. 79, 33 Am. Rep. 14; recover on the poUcy shall revert to the Robinson v. Duvall, 79 Ky. 83, 42 Am ' insured; also in the many saving bank Rep. 208; Brown v. Grand Lodge A. O. trust deposit cases which hold that the U. W., 208 Pa. St. 101, 57 Atl. 176" trust heading alone unaccompanied by Waldum v. Homstad, 119 Wis! 312*, a delivery of the pass book to the bene- 96 N. W. 806. ficiary fails to establish an irrevocable * Geoffroy v. Gilbert, 5 App. Div. 98, trust, provided the depositor has fur- 38 N. Y. Supp. 643, aff'd 154 N. y! nished evidence of origmal purpose by 741 , 49 N. E. 1097, and cases supra ; subsequently withdrawing or dealing Robinson v. DuvaU, 79 Ky. 83, 42 Am', with the fund as though it were his Rep. 208. own. For example, MaUer of Totten, s HasHns v. Kendall, 158 Mass 224 179 N. Y. 112, 125, 71 N. E. 748 (a 227, 33 N. E. 495; Btiidshaw v. Mut. tentative trust merely, revocable at L. Ins. Co., 187 N. Y. 347, 80 N. E. will imtil the depositor dies or com- 203. BENEFICIAKIES' INTERESTS 85 or " to children," how shall the interests vest in the event that one or more beneficiaries survive the insured while one or more do not survive him? Shall the gift be regarded as made to a class of bene- ficiaries jointly, only those taking who are ahve at the death of the insured and they taking the whole, or shall the interests be con- strued to vest separately so as to pass to the representatives or as- signs or creditors of those dying before the insured? Here again the views of the courts are irreconcilable.* § 67. Beneficiaries' Interests — Conditionally Vested or Contin- gent. — By a common phrase in the ordinary life policy or certificate the money is made payable to "the wife of the insured, if living, otherwise to their chikiren." Here the children's interest is purely contingent,^ but where the contingency occurs, that is, where the wife dies before the insured, in what children does the interest vest? In those alive at the time the policy issues or solely in those surviv- ing their mother? Here again the courts divide.' The insured 1 Some courts consider it more equitable and more in accordance with the probable intent of the donor to hold that the entire interest passes to the surviving beneficiary or benefici- iaries, In re Seyton, 34 Ch. Div. 511; Continental Life Ins. Co. v. Webb, 54 Ala. 689; Doty v. Dickey (Ky.), 96 S. W. 544: BeK v. Kinneer, 101 Ky. 271, 40 S. W. 686, 72 Am. St. R. 410; Fish V. Massachusetts L. Ins. Co., 186 Mass. 358, 71 N. E. 786, in which the point was alluded to but not definitely decided. Andrus v. Ins. Assn., 168 Mo. 151, 167, 67 S. W. 582 (but the point was not passed upon). Farr v. Grand Lodge, 83 Wis. 446, 454, 53 N. W. 738, 35 Am. St. R. 73, 18 L. R. A. 249. Especially where the deceased child leaves no issue, Robinson v. Du- vall, 79 Ky. 83, 42 Am. Rep. 208; and see Amberg v. Manhattan Life Ins. Co., 171 N. Y. 314, 63 N. E. 1111, as to creditors of beneficiary before maturity of policy. See also the second or alter- native decision of the New York court at page 158 in U. S. Trust Co. v. Mut. Ben. Life Ins. Co., 115 N. Y. 152, 21 N. E. 1025. Other courts, perhaps un- necessarily assuming that the general rule as to vested interests must apply, have taken the opposing view, Small V. Jose, 86 Me. 120, 29 Atl. 976 (but cases cited are not in point). Hooker v. 8vgg, 102 N. C. 115, 8 S. E. 919, 11 Am. St. R. 717, 3 L. R. A. 217; Conig- land v. Smith, 79 N. C. 303; Conn. Mvt. Life Ins. Co. v. Baldwin, 15 R. I. 106, 23 Atl. 105; and see Fidelity Trust Co. v. Marshall, 178 N. Y. 468, 71 N. E. 1130, in which judges stood four to three on an analogous point. 2 Chamn v. FeUowes, 36 Conn. 132, 4 Am. Rep. 49. The wife's interest also is contingent and wholly depend- ent upon her survivorship, Bradshaw v. Mut. L. Ins. Co., 187 N. Y. 347, 80 N. E. 203; Herr v. Reinoehi, 209 Pa. St. 483, 58 Atl. 862. 3 The New York rule: Some courts hold that the children alive when their mother dies take vested several inter- ests in the whole, Mich. Mut. L. Ins. Co. w.Basler, 140 Mich. 233, 103 N. W. 596, citing cases pro and con; Smith v. .^tna Life Ins. Co., 68 N. H. 405, 44 Atl. 531, citing Walsh case below; Bradshaw v. Mvt. L. Ins. Co., 187 N. Y. 347, 80 N. E. 203; FidelUy Trust Co. V. MarshaU, 178 N. Y. 468, 71 N. E. 8; Walsh v. Mut. Life Ins. Co., 133 N. Y. 408, 31 N. E. 228, 28 Am. St. R. 651 (the court, however, concludes that the rule is sustained by precedent rather than principle). U. S. Trust Co. V. Mut. Ben. Life Ins. Co., 115 N. Y. 152, 21 N. E. 1025: Braddock v. Man- hattan L. Ins. Co. (Pa. Com. Pleas), 36 Ins. L. J. 372; and see Helmken v. Meyer, 118 Ga. 657, 45 S. E. 450 (1903); Continental Ldfe Ins. Co. v. Webb, 54 Ala. 688. Both husband and wife cannot join in defeating the children's contingent right, ErUwisUe 86 GENERAL PRINCIPLES OF INSURANCE LAW cannot make himself the beneficial "survivor" by murdering hig wife in whom all interest was vested, provided she survived him.* § 68. Right to Change Beneficiary Expressly Reserved. — The in- terest of a beneficiary under a certificate or policy of a fraternal order or mutual benefit or similar association is ordinarily revocable and not vested, the right to make a new appointment being ex- pressly reserved by the constitution or by-laws to which each mem- ber is amenable.^ But any restrictions as to the classes of permitted beneficiaries contained in the certificate, charter, or by-laws of the V. Ins. Co., 202 Pa. St. 141, 51 Atl. 759. Except as statutes permit, for instance, N. Y. Law, 1896, ch. 272, § 22. The Connecticut rule: Other courts hold that all the children aHve when the policy issues take vested rights and the representatives take the interest of those dying before their mother. Continental Life Ins. Co. v. Palmer, 42 Conn. 60, 19 Am. Rep. 530; Estate of Conrad, 89 Iowa, 396, 56 N. W. 535, 48 Am. St. R. 396; Voss v. Conn. Mvt. L. Ins. Co., 119 Mich. 161, 77 N. W. 697; Glenn v. Bums, 100 Tenn. 295, 45 S. W. 784. A child bom after issu- ance of the policy comes in for a share, Roquemore v. Dent, 135 Ala. 292, 33 So. 178; ScuU v. .lEtna L. Ins. Co., 132 N. C. 30, 43 S. E. 504. As to the bur- den of proof where the insured and the primary Jjeneficiaiy die lq a com- mon disaster see FvUer v. Linzee, 135 Mass. 468, holding that fact of sur- vivorship is a condition precedent for representative of beneficiary to prove. But see following cases hold- ing that the interest is conditionally vested in beneficiary and that burden is upon the representative of the in- sured to divest it, U. S. Casualty Co. V. Kacer, 169 Mo. 301, 69 S. W. 370, 58 L. R. A. 436, 92 Am. St. R. 641; Cmaman v. Rogers, 73 Md. 403, 21 Atl. 64, 10 L. R. A. 550. Last case cited in Young Women's Christ. Home, 187 U. S. 401, 23 S. a. 184. But under the certificate of fraternal and bene- ficiary associations the interest ordi- narily is not vested until the death of the assured. Supreme Council v. Kacer, 96 Mo. App. 93, 69 S. W. 671; Males v. Sovereign Gamp, 30 Tex. Civ. App. 184, 70 S. W. 108; Screwmen's Ben. Assn. v. Whitridge, 95 Tex. 539, 68 S. W. 501. Where policy is payable to wife and child but if not living to the executor of insured, executor takes nothing if either wife or child survives. Fish V. Ma^s. lAfe Ins. Co., 186 Mass. 358, 71 N. E. 786. 1 Box V. Lanier, 112 Tenn. 393, 79 S. W. 1042, 64 L. R. A. 458, the repre- sentatives of the wife were allowed to recover under an oral assignment. ^ Hoeft V. Supreme Lodge, 113 Cal. 91, 45 Pac. 185, 33 L. R. A. 174 (inter- est styled a mere expectancy). Wood- men's Ace. Assn. V. Hamilton, 70 Neb. 24, 97 N. W. 1017 (statute allowed change). McGrew v. McGrew, 190 111. 604, 607, 60 N. E. 861; MaHin v. Stub- Ungs, 126 111. 387, 18 N. E. 657, 9 Am. St. R. 620; Bunyan v. Reed, 34 Ind. App. 295, 70 N. E. 1002; Schoenan v. Grand Lodge A. O. U. W., 85 Minn. 349, 88 N. W. 999; Spengler v. Spengler, 65 N. J. Eq. 176, 55 Atl. 285; Supreme Council V. Adams, 68 N. H. 236, 44 Atl. 380; Shipman v. Protected Home Circle, 174 N. Y. 398, 67 N. E. 83, 63 L. R. A. 347 (future by-laws are retroactive if contract 'so provides). Sabin v. Phinney, 134 N. Y. 428, 31 N. E. 1088, 30 Am. St. R. 681; Fan- ning V. Supreme Council, 84 App. Div. 205, 82 N. Y. Supp. 733, aff'd 178 N. Y. 629, 71 N. E. 1130 (first beneficiary not allowed to recover though she stiU held the certificate). Leftwich v. Wells, 101 Va. 255, 43 S. E. 364; StoU v. Mut. Ben. L. Ins. Co., 115 Wis. 558, 92 N. W. 277 (subject to change of appointment by last will and testament). In the ordinary life policy also a right to change beneficiary may be expressly reserved, Mente v. Townsend, 68 Ark. 391, 398, 59 S. W. 41; Atlantic Mut. L. Ins. Co. v. Gannon, 179 Mass. 291, 294, 60 N. E. 933; Cellery v. John Harir- cock Mvt. L. Ins. Co., 68 N. Y. Supp. 128, 57 App. Div. 227; Canavcn v. John Hancock Mut. L. Ins. Cc 39 Misc. 782, 81 N. Y. Supp. 304 '(pre- scribed methods of substitution must MODE OF CHANGING BENEFICIARY 87 association/ or in any statute,^ must be observed. And it has been held that the widow properly designated might contest a sub- sequent unlawful appointment.* Nor will the insured be allowed to designate a new beneficiary where the first appointment is made in pursuance of a binding contract with the first appointee.'* Nor bj the weight of reason and authority can he do so where no right is reserved by statute or by the contract or rules of the association, for there the general rule relating to vested interests should be applied.^ It is often asserted that a third party named as bene- ficiary in the certificate or poHcy of a fraternal or beneficiary asso- ciation has nothing in the nature of a property right, contingent or otherwise, until the death of the insured, but a mere expectancy of benefit. This proposition, however, is of very doubtful accuracy. Authority and reason oppose it.* § 69. Mode of Changing Beneficiary. — The appointment of a new beneficiary can be accomplished only in compliance with any pre- scribed formalities. The association may rely upon its regulations regardless of the intent of the insured.'' But if it choose, the society be observed unless waived). For stat- utes allowing change of beneficiary see Appendix, ch. I. 1 Alexander v. Parker, 144 111. 355, 33 N. E. 183, 19 L. R. A. 187, "de- pendents;" Re Globe Mut. Ben. Assn., 135 N. Y. 280, 32 N. E. 122, 17 L. R. A. 547, only adults (compare Chi. Mut. L. Indemnity Ass'n v. Hunt, 127 III. 257, 20 N. E. 55, 2 L. R. A. 549); Tepper v. Supreme Council, 59 N. J. Eq. 321, 45 Atl. Ill; Brovm v. Grand Lodge, 208 Pa. St. 101, 57 Atl. 176. 2 WaUum v. Homstad, 119 Wis. 312, 96 N. W. 806. 3 Grand Lodge v. Connelly, 58 N. J. Eq. 180, 43 Atl. 286. *Grimbley v. Harrold, 125 Cal. 24, 57 Pac. 558, 73 Am. St. R. 19; Jory v. Supreme Council, 105 Cal. 20, 38 Pac. 524, 26 L. R. A. 733, 45 Am. St. R. 17; Leaf V. Leaf, 92 Ky. 166, 17 S. W. 354; Smith V. Ben. Soc., 123 N. Y. 85, 26 N. E. 197, 9 L. R. A. 616; Cade v. Head Camp, 27 Wash. 218, 67 Pac. 603. But voluntary payment of dues by the first beneficiary will not necessarily estop the insured from making a new ap- pointment, Spengler v. Spengler, 65 N. J. Eq. 176, 55 Atl. 285. 5 Franklin L. Ins. Co. v. Galligan, 71 Ark. 295, 301, 73 S. W. 102, 100 Am. St. R. 73; HiU v. Groesbeck, 29 Colo. 161, 67 Pac. 167; Pittinger v. Pittinger, 28 Colo. 308, 64 Pac. 195, 89 Am. St. R. 193; Manning v. Ancient Order, 80 Ky. 136, 5 S. W. 385, 9 Am. St. R. 270; Weisert v. Muehl, 81 Ky. 336; Loco- motive Engineers' Ins. Ass. v. Winter- stein, 58 N. J. Eq. 189, 44 Atl. 199; Martin v. Mfrs. Ace. Co., 60 Hun, 535, 40 N. Y. St. R. 17, 15 N. Y. Supp. 309. Contra, Carpenter v. Knapp, 101 Iowa, 712, 70 N. W. 764, 38 L. R. A. 128. ^Jarvis v. Binkley 206 111. 541, 69 N. E. 582, holding the interest to be contingent and assignable in equity. Supreme Council v. Tracy, 169 111. 123, 48 N. E. 401; Hopkins v. Hopkins, 92 Ky. 324, 327, 17 S. W. 864 (interest is vested conditionally)- and see Grand Lodge v. Connelly, 58 N. J. Eq. 180, 43 Atl. 286 (first appointee may contest second appointment if unlawful). So also Brown v. Grand Lodge, 208 Pa. St. 101, 57 Atl. 176. ' Conway v. Supreme Council C. K. A., 131 Cal. 437, 63 Pac. 727; Masonic Mut. Ben. Soc. v. Burkhart, 110 Ind. 189, 10 N. E. 79, 11 N. E. 449; Modern Woodmen of Amer. v. Little, 114 Iowa, 109, 86 N. W. 216; McCarthy v. Su- preme Lodge, 153 Mass. 314, 26 N. E. 866, 11 L. R. A. 144, 25 Am. St. R. 637; Grand Lodge A. 0. U. W. v. Gandy, 63 N. J. 692, 53 Atl. 142 (otherwise it wUl GENERAL PRINCIPLES OF INSURANCE LAW may waive its regulations and the original beneficiary cannot com- plain of the lack of formality or regularity.* Statutory provisions permitting the insured to make a new appointment are not applicable where the interest of the first-named beneficiary has become vested for value paid.^ § 70. Relations between Insurer and Insured — Life. — The policy holder is not a cestui que trust of the company and hence, in the absence of fraud, cannot call upon the company to disclose to him their affairs in general, or to render an account for his share of divi- dends or profits; ^ and he is not a partner in the company.'* As not take away the benefit from the beneficiary); Fink v. Fink, 171 N. Y. 616, 625, 64 N. E. 506; Eagan v. Eagan, 68 N. Y. Supp. 777, 58 App. Div. 253, 255, 256. See also Brown v. Grand Lodge U. O. U. W., 208 Pa. St. 101, 104, 57 Atl. 176. So also any method of change prescribed in a regular life policy must be respected, Leonard v. Harney, 173 N. Y. 352, 66 N. E. 202. • Atlantic Mvi. L. Ins. Co. v. Gannon, 179 Mass. 291, 60 N. E. 933 (as to signature of the designated officer of the society). Metropolitan L. Ins. Co. v. Anderson, 79 Md. 375, 29 Atl. 606; Supreme Court Order of Patricians v. Davis, 129 Mich.'^SlS, 88 N. W. 874; Allgemeiner Arbester Bund v. Adam- son, 132 Mich. 86, 92 N. W. 786; Schoe- nau V. Grand Lodge, 85 Minn. 349, 88 N. W. 999; Webster v. Wilcox, 57 App. Div. (N. Y.) 558 (estoppel by oral agreement). Kimball v. Lester, 43 App. Div. 27, 59 N. Y. Supp. 540, aff'd 167 N. Y. 570, 60 N. E. 1113. But waiver must be made before rights attach under the rules, Smith v. Har- manj 28 Misc. 681, 59 N. Y. Supp. 1044. When insured has done all within his power to effectuate substitu- tion, equity may grant relief in proper cases, Supreme Council v. Cappella, 41 Fed. 1 (stating rules for granting re- lief). Grand Lodge v. NoU, 90 Mich. 37, 51 N. W. 268, 15 L. R. A. 350, 30 Am. St. R. 419 (certificate was . lost and could not be surrendered for substitu- tion). Heydorf v. Conrack, 7 Kan. App. 202, 52 Pac. 700 (insured died before new certificate was actually issued). Marsh v. Am. Legion of Honor, 149 Mass. 512, 21 N. JE. 1070 (first beneficiary acted in collusion with officer of society). Lahey v. Lahey, 174 N. Y. 146, 66 N. E. 670, 95 Am. St. R. 554 (insured could not surrender cer- tificate for substitution for first bene- ficiary held it) . The court will, so far as possible, give effect to the intention of the parties, and will consider an at- tempted change of beneficiary com- plete without undue regard to techni- calities, Luhrs v. Luhrs, 123 N. Y. 367, 33 N. Y. St. R. 688, 25 N. E. 388. The change of appointment may be sustained without the issuance of a new certificate of insurance, Bishop V. Grand Lodge, 112 N. Y. 627, 21 N. Y. St. R. 811, 20 N. E. 562. But not -so if the contract makes the issu- ance of the new certificate an essential to validity of the appointment, Kerrt- per V. Modem Woodmen, 70 Kan. 119, 78 Pac. 452. Though beneficiary has no vested interest he may contest in- sured's mental capacity to make new appointment, but gratuitous payment of part of assessment by beneficiary gives no vested rights. Grand Lodge A. 0. U. W. V. McGrath, 133 Mich. 626, 95 N. W. 739. A right vested by death of insured cannot subsequently be divested by legislative act or municipal charter, Kavanagh v. Board of Police Pen. Fund, 134 Cal. 50, 66 Pac. 36. Amendment to laws not retroactive unless contract provides for it, Roberts V. Cohen, 60 App. Div. 259, 70 N. Y. Supp. 57, aff'd 173 N. Y. 580, 65 N. E 1112. ^ Smith V. National Ben. Soc, 12'i N. Y. 85, 33 N. Y. St. R. 67, 25 N. E 197. ^Gadd V. Eq. Life Assur. Soc., 97 Fed. 834; Everson v. Eq. Life Assur. Soc., 71 Fed. 570, 18 C. C. A. 251; Greeff v. Eq. L. Ass. Soc., 160 N. Y. 19, 30, 54 N. E. 712, 46 L. R. A. 288, < People V. Security Life Ins. etc., Co., 78 N. Y. 114. CONTRACT IS A PROPERTY RIGHT — LIFE 89 soon as the risk attaches, the insured, under the usual form of policy, becomes debtor to the insurer for the first premium, if it has not been paid. But as to any future premiums payable in advance, the relation of debtor does not exist until the risk attaches for the cor- responding period. The contract usually contains no promise on the part of the insured to pay the premium, but its payment is simply made a condition of the continuance of the contract.* If such premium is not paid the contract terminates. § 71. The Contract is a Property Right — Life. — A life insurance policy taken out by the insured upon his own life and payable to himself or his estate is his own property, subject to his control, and liable to the payment qf his debts, unless exempt by statute.^ But prior to payment of the insurance money the policy represents merely a chose in action, and is not subject to attachment or execution, except as in New York by statute.* It may, however, be reached 73 Am. St. R. 659, holding that assured was only entitled to a share of such por- tion of the surplus as the directors saw fit to distribute, and construing N. Y. Law, 1892, c. 690, § 56, which limited to attorney general the right to bring proceedings for accounting or injunc- tion; but see Pierce v. Eq. Assut. Soc, 145 Mass. 56, 12 N. E. 858, 1 Am. St. R. 433. Same law applied to co-operative or assessment Ufe insurance associa- tions, Swan V. Mvt. Res. Fund L. Assn., 155 N. Y. 9, 49 N. E. 258. This law was repealed in the interest of policyholders by L. 1006, c. 326, pro- viding policyholders may have right to attach a special fund, Bahcock P. P. Mfg. Co. V. Ranous, 164 N. Y. 440, 58 N. E. 629. Unless directors abuse their discretion policyholders cannot de- mand a discovery and a decree for a dividend, Hudson v. Knickerbocker Life Ins. Co., 28 N. J. Eq. 167. Under tontine plan the company need not keep the funds in each class separately invested, Bqgardus v. N. Y. Life Ins. Co., 101 N. Y. 328, 4 N. E. 522. Only on the expiration of tontine period does the relation of debtor and creditor arise between company and assured, N. Y. Life Ins. Co. v. Miller, 22 Ky. L. Rep. 230, 56 S. W. 975; Romer v. Eq. Life Assur. Co., 102 111. App. 621; Avery v. Eq. Life Assur. Soc., 117 N. Y. 459, 23 N. E. 3; Columbia Bk. v. Eq. Life Assur. Soc, 79 App. Div. 601, 80 N. Y. Supp. 428; EUison v. Straw, 119 Wis. 502, 97 N. W. 168. 1 Goodwin v. Mass. Mut. Life Ins. Co., 73 N. Y. 480; Worthington v. Charter Oak Life Ins. Co., 41 Conn. 372, 19 Am. Rep. 495. 2 Washington Central Bk. v. Hume, 128 U. S. 195, 208, 9 S. Ct. 41, 32 L. Ed. 370; Kelley v. Mann, 56 Iowa, 625, 10 N. W. 211; Coates v. Worthy, 72 Miss. 575, 17 So. 606; McCutcheon's Appeal, 99 Pa. St. 133, 137; Dulaney v. Walsh (Tex. Civ. App.), 37 S. W. 615, aff'd 90 Tex. 329, 38 S. W. 748 (cannot de- prive creditors by his bequest). An assignment by way of gift to a son is in fraud of existing creditors. Friedman Bros. v. Fennell, 94 Ala. 570, 10 So. 649. > 3 Code Civ. Pro. § 648; Trepagnier v. Rose, 18 N. Y. App. Div. 393. aff'd 155 N. Y. 637, 49 K.E. 1105. Where policy is not matured it represents only a contingent obligation and cannot be reached oy writ of fi. fa., Boisseau v. Bass, 100 Va. 207, 40 S. E. 647, 57 L. R. A. 380. The interests of third parties as beneficiaries are not in gene- ral subject to claims of creditors of the insured unless the policy was taken out in fraud of cremtors, Central Bk. V. Hume, 128 U. 8. 195, 9 S. a. 41, 32 L. Ed. 370; Hendrie Mfg. Co. v. Piatt, 13 Colo. App. 15, 56 Pac. 20^; Schae- fer's Est., 194 Pa. St. 420, 45 Atl. 311. A third party paying premiums upon bankrupt's policy is entitled to get back premiums from receiver, Be T^fer (1907), 1 K. B. 865. 90 GENERAL PRINCIPLES OF INSURANCE LAW by proper proceedings in equity, unless it is by statute exempted from the claims of creditors.* After the insurance money is paid to a beneficiary it becomes liable to levy and attachment for his debts like his other money. ^ § 72. Rights of Creditors to Life Insurance Premiums Paid by In- solvent Debtors. — Some of the courts hold that in the absence of actual fraud it is not presumptively in fraud of creditors even at common law for an insolvent, charged with the duty of supporting wife and children, to make moderate provision for their future by taking out or keeping up insurance in their favor as beneficiaries.* 1 Bassett v. Parsons, 140 Mass. 169, 3-N. E. 547. 2 MaHin v. Martin, 187 111. 200, 58 N. E. 230; Bull v. Case, 165 N. Y. 578, 59N. E. 301. Thus, money due upon a matured policy upon the life of a hus- band payable to his wife is subject to levy for wife's debt, Amberg v. Man. Life Ins. Co., 171 N. Y. 314, 63 N. E. 1111. And where tontine accumula^ tions have become payable to the in- svu-ed they are subject to his debts though his wife is the ultimate bene- ficiary under the policy, Ellison v. Straw, 119 Wis. 502, 97 N. W. 168. Until assured elects which option un- der tontine poUcy he will select there is no debt from the company and nothing for creditor to attach, Colum- bia Bk. V. Eq. L. Assur. Soc, 79 N. Y. App. Div. 601, 80 N. Y. Supp. 428; but see Troy v. Sargent, 132 Mass. 408. 3 Central Nat. Bk. v. Hume, 128 U. S. 195, 9 S. Ct. 41, 32 L. Ed. 370; Masonic Mut. Life Assn. v. Paisley, 111 Fed. 32; Hendrie, etc., Mfg. Co. vT Piatt, 13 Colo. App. 15, 56 Pac. 211; State v. Tomlinson, 16 Ind. App. 662, 677, 45 N. E. 1116, 59 Am. St. R. 335; Johnson v. Alexander, 125 Ind. 575, 25 N. E. 706, 9 L. R. A. 660. Statutes in some states define a limit of insur- ance exempt as against creditors (for "instance, see, Cooley, Ins., p. 3795, note), restricting annual premiums to 8500. N. Y. Domestic Relations Law, 1896, c. 272, § 22, provides, "A mar- ried woman may, in her own name, or in the name of a third person, with his consent, as her trustee, cause the life of her husband to be insured for a definite period, or for the term of his natural life. Where a married woman survives such period or term she is entitled to receive the insurance money, payable by the terms of the policy, as her separate property, and free from any claim of a creditor or representative of her husband, except, that where the premium actually paid annually out of the husband's property exceeds five hundred dollars, mat poi- tion of the insurance money which is purchased by excess of premium above five hundred dollars, is primarily liable for the husband's debts." This clause refers not to insurance taken out by the husband in favor of his wife, but to insurance procured by her in the manner described, Bradshaw v. Mut. Life Ins. Co., 187 N-. Y. 347, 80 N. E. 203. The clause provides not that pre- miums shall be apportioned and part thereof turned over to the creditors of the insured, but that if there is the specified excess of insurance money above that purchased for $500, annu- ally, that excess shall go to the credit- ors regardless of whether the premiums therefor were paid during solvency or insolvency of the insured. The ex- emption from claims of creditors rests not on contract, but upon legislative grant, affecting a remedy, and there- fore is held to apply to proceeds of policies issued before the enactment, Matter of Thompson, 184 N. Y. 36, 40, 76 N. E. 870; 185 N. Y. 574, 78 N. E. 1113. The burden rests upon the creditors of the insured to establish the existence of such excess insurance over and above that purchased by $500, annually, Kittel v. Domeyer, 175 N. Y. 205, 67 N. E. 433. The proceeds of the insurance are not general assets of the estate of the insured, but con- stitute a special fund created by statute for a special purpose, to be applied on the claims of creditors only after decree obtained, establish'ing their right. Matter of Thompson, \8b N. Y. 574, 78 N. E 1113. And see RIGHTS OF CREDITORS TO LIFE INSURANCE PREMIUMS 91 Other authorities take the opposite view.^ Some of these holding that the creditors are entitled to receive from the insurance money an amount equal to the premiums paid subsequent to insolvency.^ Others less satisfactorily holding that the creditors are entitled to share in the insurance money in the ratio which the amount of premiums paid after insolvency bears to the total premiums.* Heilbron's Est., 14 Wash. 536, 45 Pac. 153; Feam v. Ward, 80 Ala. 555, 2 So. 114; Kittelv. Domeyer, 175 N. Y. 205, 67 N. E. 433 (administrator must hold fund until it is ascertained whether other assets will pay creditors). Stokes V. Amerman, 121 N. Y. 337, 24 N. E. 819 (the excess is in fraud of creditors and it seems creditor may preserve insurance from forfeiture by paying future premiums). Wyman v. Gay, 90 Me. 36, 37 Atl. 325 (limit of annual premium $150). Mahoney v. James, 94 Va. 176, 26 S. E. 385 (premiums paid out of exempted earnings). Held, under California statute, that no part is exempt from creditors if annual premium exceed $500, Estate of Brovm, 123 Cal. 399, 55 Pac. 1055, 69 Am. St. R. 74. Mississippi statute construed, Cozine v. Grimes, 76 Miss. 294, 24 So. 197 (limit $5,000 of insurance). Other decisions under exemption laws. Cook V. Allen, 119 Iowa, 226, 93 N. W. 93; Donaldson's Estate, 126 Iowa, 174, 101 N. W. 870; O'Melia v. Hoffmeyer, 119 Iowa, 444, 93 N. W. 497; Murdy v. Shyles, 101 Iowa, 549, 70 N. W. 714, 63 Am. St. R. 411; Larrahee v. Palmer, 101 Iowa, 132, 70 N. W. 100; Cooper v. WrigU, 110 Tenn. 214, 75 S. W. 1049; Roberts v. Winton, 100 Tenn. 484, 45 S. W. 673, 41 L. R. A. 275; Ease v. Worthan, 95 Tenn. 505, 32 S. W. 458, 30 L. R. A. 609; Harvey v. Harrison, 89 Tenn. 470, 14 S. W. 108.''-. Right to exemption imder constitution of the insurance company, Carson v. Vicks- burg Bank, 75 Miss. 167, 22 So. 1, 37 L. R. A. 559; Fisher v. Donovan, 57 Neb. 361, 77 N. W. 778, 44 L. R. A. 383; Bishop v. Grand Lodge, 112 N. Y. 627, 21 N. Y. St. R. 811, 20 N. E. 562, cited and explained in Suh v. Mutual Res. Fund L. Asm., 145 N. Y. 563, 576, 40 N. E. 242, 65 N. Y. St. R. 513, 28 L. R. A. 379; Johnston v. Catholic Mut. Ben. Assoc, 24 Ont. App. 88. But compare Jones v. Patty, 73 Miss. 179, 18 So. 794 (rights of creditors not con- cluded by charter or contract of com- pany). If statute does not allow designation of creditor as beneficiary he cannot recover, Clarke v. Schwar- zenberg, 162 Mass. 98, 38 N. E. 17. 1 Prof. Williston's review in 25 Am. Law Review, 185. 2 Bartram v. Hopkins, 71 Conn. 505, 42 Atl. 645, also construing Connecti- cut statutes; Houston v. Maddux, 179 111. 377, 53 N. E. 599, also construing Illinois Statutes; Stokes v. Coffey, 8 Bush. (Ky.) 533; Kiely v. Hickox, 70 Mo. App. 617, also construing Missouri Statutes; Shaver v. Shaver, 35 App. Div. (N. Y.) 4 (intimation). Stigler's Ex'x v. Stigler, 77 Va. 163. But if wife pays premiums out of her separate es- state creditors of insured can claim nothing, Estate of Goss, 71 Hun, 120, 24 N. Y. Supp. 623; Weber, Loper & Co. v. Paxton, 48 Ohio St. 266, 26 N. E. 1051. 3 Feam v. Ward, 80 Ala. 555, 2 So. 114; Pullis v. Robison, 73 Mo. 201, 39 Am. Rep. 437; Merchants', etc.. Trans. Co. V. Borla-yi, 53 N. J. Eq. 282, 31 Atl. 272, and Ehslish cases cited. The application of tho last rule to the case where the insured was solvent at the date of the contract and pays later premiums to keep policy from lapsing is clearly unsound. Re Harrison (1900), 2 Q. B. 710; Holmes v. Gilman, 138 N. Y. 369, 383, 34 N. E. 205, 20 L. R. A. 572, 34 Am. St. R. 470. U. S. bankruptcy act allows bankrupt to own and carry a policy free of creditor's claims after turning over to the trustee its surrender cash value, R. S. §§ 4745, 4747. If the policy really has a sur- render value payable to the bankrupt and enforceable by him the rule applies, though no surrender value be expressed in the pol'cy, Hiscock v. Mertens, 206 U. S. 202, 27 S. Ct. 488. So also if the policy in fact has a cash value though technically no surrender value, Gould V. N. Y. Ufe Ins. Co., 132 Fed. 927. So also a contingent interest passes * " the trustee. In re Coleman, 136 Fed 818. But to give the trustee any r gtit, the surrender value must be by the contract, not by mere act of grais or indulgence on the company's part, Pvls^er V. Hussey, 97 Me. 434, 64 Atl. 92 GENERAL PRINCIPLES OF INSURANCE LAW § 73. Rights of Creditors as the Assured. — To secure his debt, the creditor sometimes takes out insurance, payable to himself, upon the life of his debtor. As before remarked, under the subject of insurable interest,' different views prevail regarding the amount of insurance money that he may be permitted to recover. Some courts, regarding the contract of insurance solely as an engagement between the insured and the insurer, enforce it according to its terms. If the contract is valid when entered into and its conditions have been comphed with by the insured, they allow to him on its maturity the entire amount of insurance money, no matter how largely the fund may exceed the indebtedness then subsisting, no matter though the debt may be altogether paid, or satisfied,^ or barred by the statute of IJKnitatioTis.' Other courts, adhering more closely to the doctrine that the insurance contract must not needlessly be made a source of profit, limit the creditor to the debt, including interest thereon, together with all expenses of keeping up the insurance. As to any balance of insurance money, since the insurance company ought not to retain it, they hold that the creditor is trustee for the debtor or his estate.'* 1076. The bankrupt may retain the policy if it has no surrender value, In re Josephson, 121 Fed. 142, aff'd 124 Fed. 734; In re Welling, 113 Fed. 189 (semi-tontine held to have no surren- der value); In re Buelow, 98 Fed. 86. Hence trustee must allege in his com- plaint a cash surrender value, Haskell V. Equitable Idfe Ins. Soc, 181 Mass. 341, 63 N. E. 899. But the trustee takes nothing if the proceeds of in- surance are exempt by state statute, Holden v. Stratton, 198 U. S. 202, 49 L. Ed. 1018; or jf the bankrupt is a third party beneficiary not entitled to the surrender value, In re McDonnell, 101 Fed. 239. Nor can the trustee disturb the contingent interest of a third party in the bankrupt's policy, Haskell v. Equitable Life Ins. Soc, 181 Mass. 341, 63 N. E. 899. Premiums paid by wife, In re Diack, 100 Fed. 770. A fire policy does not pass to trustee without consent of insurance company, but claim for fire loss occurring before appointment of trustee passes to trus- tee, Fuller v. N. Y. Fire Ins. Co., 184 Mass. 12; Futler v. Jameson, 184 N. Y. 605, 186 N. Y. 60. 1 § 37, and oases cited. '^ Dolby V. Assuranxx Co., 15 C. B. 365; Central Nat. Bk. v. Hume, 128 U. S. 195, 9 S. a. 41, 32 L. Ed. 370; Amick v. BvOer, 111 Ind. 678, 12 N. E. 518, 60 Am. Rep. 722; Fergusm v. Ins. Co., 32 Hun, 306, aff'd 102 N. Y. 647; Shaffer v. Spangler, 144 Pa. St. 223, 22 Atl. 865. 3 Toumsend v. Tyndale, 165 Mass. 293, 43 N. E. 107, 52 Am. St. R. 513; Rawls v. Ins. Co., 27 N. Y. 282, 84 Am. Dec. 280; Conn. Mut. lAfe Ins. Co. V. Dunscomb, 108 Tenn. 724, 69 S. W. 345, 58 L. R. A. 694, 91 Am. St. R. 769. 4 Goldbawm v. Blum, 79 Tex. 638, 15 S. W. 564, there was an assignment of the policy to creditor. Exch. Bank V. Loh, 104 Ga. 446, 31 S. E. 459, 44 L. R. A. 372, there was an assignment of the policy to the creditor. Tate v. Commereial Bldg. Assn., 97 Va. 74, 33 S. E. 382, 45 L. R. A. 243, 75 Am. St. R. 770,Jiere also there was an assign- ment. And see didum in Wamjock, v. Davis, 104 U. S. 775, 26 L. Ed. 924. If a policy is assigned conditionally by the debtor to the creditor as col- lateral, or maintained by the debtor with like purpose, by aU the authorities the creditor can only retain enough of the proceeds to indemnify himself, Amiek v. BvOer, 111 Ind. 578, 12 N. E. 518; Met. L. Ins. Co. v. O'Brien, 92 Mich. 584, 52 N. W. 1012; Coon v. Sumn, 30 Vt. 6. And if assigned for existing debts it will not cover sub- sequent debts, Lfevy v. Taylor, 66 Tex. 652, 1 S. W. 900. CHAPTER III Genera k Principles — Continued Closing of Contract — General Rvles of Constrv£tion § 74. Introductory. — The course of business in closing insurance contracts is in a measure sui generis. Many important classes of contracts have no vafidity at all unless evidenced by writing; and whenever parties see fit to reduce their engagements to the form of a written instrument whether required by law to do so or not, it is in general to be preiiumed that the contents of the formal docu- ment correctly and couclusively record the final results of their negotiations, and that its execution and delivery precisely define the time when the agreement is to go into operation. But, in the actual conduct of their affairs, men do not always take the trouble to conform to any such legal presumptions when convenience or exigencies of business suggest a different course. Often a man wants to insure his house, or goods, or ship without delay. In most of the states of the Union there is no law preventing a valid oral contract of insurance, or contract by written binding slip, and thus it frequently happens that an insurance is closed before the insured has seen his policy, or has become familiar with its conditions. In fact, the policy may never be delivered to him at all; or not until after the loss has occurred, for which it is intended to grant in- demnity.* 1 Thompson v. Adams, L. R. 23 measure of damages for breach see Q. B. D. 361 (1889). A contract of in- City of Detroit v. Grummond, 121 Fed. surance must be distinguished from a 963, 58 C. C. A. 301; Landusky v. contract to procure insurance as by a Beime, 80 App. Div. 272, 80 N. Y. broker. For breach of the latter en- Supp. 238, afTd 178 N. Y. 551, 70 gagement an action for damages will N. E. 1101; Miner v. Tagert, 3 Bin. lie, Jacksonvitle, etc., Nav. Co. v. (Pa.) 204; Wunderlich v. Palatine F. Hooper, 160 U. S. 514, 16 S. Ct. 379, Ins. Co., 104 Wis. 395, 80 N. W. 471; 40 L. Ed. 515; Brant v. Gallup, 111 111. McAlpine v. Trustees, 101 Wis. 468, 487, 53 Am. Rep. 638; Backus v. Ames, 78 N. W. 173. If the agreement to 79 Minn. 145, 81 N. W. 766 (if such procure insurance is absolute the party insurance cannot be procured, owner neglecting to fulfill becomes liable him- should be promptly notified so as to self as insurer, De Tastett v. Crou- have opportunity to effect insurance sillat, 7 Fed. Cas. 542, 2 Wash. C. C. himself); Threshing Mach. Co. v. Dar- 132; Soule v. Union Bk., 45 Barb. naU, 13 S. D. 279, 83 N. W. 266. As to (N. Y.) 111. So also party refusing to 93 94 GENERAL PRINCIPLES OF INSURANCE LAW § 75. Fire Insurance Contract — How Closed. — Important fire risks, wlietlier on mercantile or other properties, and whether lo- cated in city or country, are apt to be put in charge of city brokers.' take the insurance is liable in dam- ages, Tanenbaum v. Greenwald, 67 App. Div. 473, 73 N". Y. Supp. 873, See also 81 N. Y. Supp. 292, 82 N. Y. Supp. 1116; Tanevhaum v. Federal Match Co., 189 N. Y. 75. 1 An insurance broker as such is agent for the insured, Sellers v. Ins. Co., 105 Ala. 282, 16 So. 798- Parish V. Rosebud M. & M. Co., 140 Cal. 635, 74 Pac. 312; Commonwealth Mut. Fire Ins. Co. V. Knahe, 171 Mass. 265, 50 N. E. 516; Am. Fire Ins. Co.^v Brooks, 83 Md. 22, 34 Atl. 373; NoHhrop v. Piza, 43 App. Div. 284, 60 N. Y. Supp. 363, aff'd 167 N. Y. 578, 60 N. E. 1117; AUen v. German Am. Ins. Co., 123 N. Y. 6, 25 N. E. 309; Crown Point Iron Co. v. JStna Ins. Co., 127 N. Y. 608, 28 N. E. 653, 14 L. R. A. 147; Fire Assn. v. Hogwood, 82 Va. 342, 4 S. E. 617; Davis Lumber Co. v. Hart- ford Fire Ins. Co., 95 Wis. 226, 70 N. W. 84; 37 L. R. A. 131 (construing Wisconsin statutes); United Firem.en's Ins. Co. V. Thomas, 92 Fed. 127, 34 C. C. A. 240, 47 L. R. A. 450. But see Indiana Ins. Co. v. Hartwell, 123 Ind. 177, 24 N. E. 100. He is, however, a middleman between the insured and the company, Arff v. Ins. Co., 125 N. Y. 57, 25 N. E. 1073, 10 L. R. A. 609, 21 Am. St. R. 721. Payment of premium to broker is not payment to the company, Pottsville Mut. Fire Ins. Co. V. Improvemsnl Co., 100 Pa. St. 137; unless made so by statute or custom (§ 76), and whether the broker is also agent for the company may be a ques- tion of fact. Sun Mut. Ins. Co. v. Saginaw Barrel Co., 114 111. 99, 29 N. E. 477. Many states have statutes affecting this question, for example, see Welch v. Fire Assn. of Phih,., 120 Wis. 456, 98 N. W. 227 and appendix of statutes. The broker receives a, commission in the shape of a, per- ' centage out of the premiuin, Devens v. Mechanics' & Traders' Ins. Co., 83 N. Y. 171; McGrath v. Home Ins. Co., 88 App. Div. 153, 84 N. Y. Supp. 374. He earns full commission though policy be canceled before expiration, Am. Steam Boiler Co. v. Anderson, 130 N. Y. 134, 29 N. E. 231. Contra, dictum, Devereux v. Ins. Co., 98 N. C. 6, 3 S. E. 639. But by custom in order to keep on good terms with the company the broker makes return of his commission to the company pro rata, inasmuch as the company is obliged on cancellation to pay back to the insured the un- earned premium without credit for its Eayment to broker. The broker may e generally in charge of his customer's insurance with continued authority. Standard Oil Co. v. Ins. Co., 64 N. Y. 85. Or he may be employed to fill a specific order, his authority then ter- minating on procuring and transmit- ting the policies, Hermann v. Ins. Co., 100 N. Y. 411, 3 N. E. 341, 53 Am. Rep. 197; Green v. Star fire Ins. Co., 190 Mass. 586, 77 N. E. 649. If in charge, generally, he keeps track of the policies with the aid of nis expiration . sheets which are checked every day. If he undertakes to procure insurance or to renew on expiration and does not, he is personally responsible for the omission, and is entitled to the pre- mium as an insurer, De Tastett v. Crou- sillat, 7 Fed. Cas. 542, 2 Wash. C. C. 132. He owes to the insured, his prin- cipal, the duty of an expert, Milliken V. Woodward, 64 N. J. L. 444, 450, 4& Atl. 796, and miast furnish insurance in authorized and solvent companies, Landusky v. Beime, 80 App. Div. 272, 80 N. Y. Supp. 238, aff'd 178 N. Y. 551, 70 N. E. 1101; Burges v. Jackson, 18 App. Div. 296, 46 N. Y. Supp. 326, aff'd 162 N. Y. 632, 57 N. E. 1105; Shepard v. Davis, 42 App. Div. 462, 59 N. Y. Supp. 456, but is not respon- sible for subsequent insolvency, Minne- apolis, etc., V. Home Ins. Co., 55 Minn. 236, 56 N. W. 815, 22 L. R. A. 390. But often at the same time the broker is also local agent for one or more com- panies and then it frequently happens that as broker he will place the in- surance with his own companies and as underwriter will execute the policies, thus representing both parties to the transaction. This anomalous situation has not yet been very thoroughly de- fined and sifted by the courts in con- nection with insurance contracts. The general rule is that an agent acting for both parties cannot make a valid con- tract, Phoenix Ins. Co. v. Hamilton, 110 Ga. 14, 35 S. E. 305; Manchester F. Assur. Co. v. Ins. Co., 91 111. App. 609; FIRE INSURANCE CONTRACT — HOW CLOSED 95 To procure insurance the broker or a clerk from his placing depart- ment, having prepared a binder, ^ presents it to the application clerk of an insurance company together with a brief application slip, which the broker fills up- in pencil at the counter of the company, giving certain essentials of the contract, name of the insured, loca- tion of the property, amount of insurance wanted, and indicating whether the property is building, or contents,^ or other insurable interest. The counter clerk turns to his insurance map, and, if he accepts Empire State Ins. Co. v. Am. Cent. Ins. Co., 138 N. Y. 446, 34 N. E. 200; JV. Y. Cent. Ins. Co. v. Nat. Protection Ins. Co., 14 N. Y. 85; Utica Ins. Co. v. Toledo Ins. Co., 17 Barb. (N. Y.) 132, except with their consent, No. Brit. & M. Ins. Co. V. LambeH, 26 Ore. 199, 37 Pac. 909, or by ratification, Hiiggins, etc., Co. V. People's Ins. Co., 41 Mo App. 530. He cannot issue a valid policy to himself, Wildberger v. Hartford Fire Ins. Co., 72 Miss. 338, 17 So. 282, 28 L. R. A. 220, 48 Am. St. R. 558, but for one purpose he may be agent for the insured, for another purpose he may represent the company, Wood v. Fire- men's Ins. Co., 126 Mass. 316, 319; Gaysville Mfg. Co. v. 7ns. Co., 67 N. H. 457, 36 Atl. 367; Northrup v. Oermania Ins. Co., 48 Wis. 420, 4 N. W. 350, 33 Am. Rep. 815, 19 Am. L. Reg. N. S. 291, note. And see Fiske v. Royal Exch. Assur. Co., 100 Mo. App. 545, 75 S. W. 382; East Texas Fire Ins. Co. v. Blum, 76 Tei. 653, 13 S. W. 572; East Texas Fire Ins. Co. v. Brown, 82 Tex. 631, 18 S. W. 713. So also as to one of the companies on the risk, he may be agent for it and as to other companies he may be agent for the assured, Smith V. Prussian Nat. Ins. Co., 68 N. J. L. 674, 54 Atl. 458. Policies and permits proposed by brokers are so far in stere- otyped printed forms, and rates of pre- mium are likewise so far fixed either by tariff associations or by practice that the c6urts would doubtless be reluctant to hold the insurance void because the agent in good faith represented both parties in the same transaction, unless it appeared that he could not be loyal to both. See Schuessler v. Ins. Co. of the Co. of Phila., 103 App. Div. 12, 15, 92 N. Y. Supp. 649, aff'd, 185 N. Y. 578, 78 N. E. 1112, in which the brokerage and underwriting depart- ments of a prominent insurance office closed a contract held enforceable, but the dual relationship was not pleaded as a defense. If, however, an exercise of discretion is called for so that fulfill- ment of duty towards one principal is incompatible with full loyalty towards the other the contract made for both may be avoided by either non-assenting party, Brit.-Am. Assur. Co. v. Cooper, 6 Colo. App. 25, 40 Pac. 147; Empire State Ins. Co. v. Am. Cent. Ins. Co., 138 N. Y. 446, 34 N. E. 200. If either principal has prior knowledge of the dual relationship in the agent, he is estopped from objecting to a contract which he has tacitly permitted to be made, No. Brit. & M. Ins. Co. v. Lambert, 26 Ore. 199, 37 Pac. 909. The insured should be advised to em- ploy a broker to take charge of any important risk. In preparing "forms," maneuvering for lower premiums, watching for expirations, and in gen- eral supervision a broker's services and advice are valuable and cost the in- sured nothing, since his commission comes out of premium. If the broker is negligent in preparing the "forms," or in accepting policies with inappro- priate clauses, he is personally liable. Walker v. Block (Pa. St., 1907), 65 Atl. 799. i^ee Appendix, ch. II, Forms. 2 Sometimes "the forms," a printed or typewritten rider, containing the description of the property, and special clauses, e. g., privileges for other in- surance, unoccupancy, lightning clause, etc., prepared ay the broker to be pasted on the policy, are dehvered at the same time. Appendix, ch. II, Forms. If the broker does not furnish his "forms" until after the contract has been closed by the binder, it leaves the matter of special clauses in unsat- isfactory and indefinite shape, unless the contract is a renewal, unfortu- nately this indefinite situation fre- quently exists for several days. 96 GENERAL PRINCIPLES OF INSURANCE LAW the application, he adds to the binder the name of his company and the amount accepted and signs the binder with his name or initials under the printed word "accepted." If nothing is written or said about premium or term, market or reasonable rate ^ and one year ^ are by usage of the trade understood.* The broker usually hastens off with his binder leaving the applica- tion slipi* There are no copies exchanged or book entries made and there is no time for making them. The broker continues the rounds of the insurance offices until the gross amount at the head of his binder is covered.^ Credit for premium is given by the company.* The policies may not be prepared and issued for weeks.'' Though they all cover in identical terms the one risk, they may be delivered at different times and just as the convenience of the underwriters may dictate. If the insurance is taken at a local agency the agent, after filling out and executing the policy, sends to the head office of the company an exact transcript * of the written part, including the description and special clauses. This transaction, so familiar to the insurance world, bears little resemblance to a conveyance of real estate or to ordinary commercial bargains, and certain of its peculiar characteristics challenge atten- tion: (1) The act and time of delivery of the policy itself are of comparatively trifling significance;* (2) the contract is complete 1 Machine Co. V. Ins. Co., 50 OUo St. 454, 24 N. E. 699. Usually the broker 549, 35 N. E. 1060, 22 L. R. A. 768. is not liable to the company for the 2 Concordia Fire Ins. Co. v. Heffron, premium even though the insured 84 111. App. 610. fail to pay, Touro v. Cassin, 1 Nott. 3 See § 79. If he accepts only tem- & McC. (S. C.) 173, 9 Am. Dec. 680, porarily or conditionally, he stamps unless there is a trade usage or statute or writes the qualification upon the to the contrary as in marine insurance binder; for example, "subject to sur- in England, Mar. Ins. Act (1906), J 53; vey and immediate cancellation," or Universal Ins. Co. v. Merchants' Mar "for two days only," etc. The vast Ins. Co. (1897), 2 Q. B. 97; Mannheim majority of policies on mercantile Ins. Co. v. Hollander, 112 Fed 549. risks run for the term of a year. Where the broker is liable for the pre^ * By aid of the slip and the "forms" mium as principal he may sue the in- or description furnished by the broker sured for it though he has not actually the policy clerk subsequently prepares paid it, Ward v. Tucker, 7 Wash 399 a formal policy which is executed by a 35 Pac. 1086. As to broker's lien upon higher officer. a marine policy see Fisher v. Smith 5 A company IS willing to write only (1878), 4 App. Cas. 1; Westwood v. a limited line on onensk, but a less valu- BeU, 4 Camp. 349; McKensie v. Neoins, able property, whether mercantile or 22 Me. 138, 38 Am. Dec. 291. In Eng- dwelling, IS often covered by one poUcy. land fire insurance is done more on a 'This IS a mere act of courtesy cash basis, premiums usually being towards the broker. The insured paid in advance, usually is still liable for the premium, ' Thompson v. Adams L R 23 and the company may sue him for its Q. B. D. 361. ' recovery immediately, in spite of its s Called a daily report, Clemments v. customary mdulgence, Kardsen v. German Ins. Co. (if S Cir Ct •> 36 SunFireOifice,122N.Y.545,25N.-E. Ins. L. J 114 "■■'=■ ■^"^- ■^^■)' ^ 921; Lipman v. Ins. Co., 121 N. Y. » Thompson y. Adams, L. R. 23 MARINE — HOW CLOSED 97 and closed when the application clerk signs and delivers the regular binder; ^ (3) the regular binder is the same thing in effect as the usual policy, for which it stands as a convenient, temporary substi- tute, and, whether it so states or not, embraces by inference all the clauses of the poHcy; ^ (4) important provisions of the contract, especially rate and term, are often understood by usage although nothing may be said or written respecting them until the policy is issued; ' (5) the officers and managers of the insurance company have no knowledge of the contract except from the written evi- dence coupled with trade usage. There is no machinery for report- ing to them any extraneous conversations or alleged understandings at variance with the terms of the policy. § 76. Marine — How Closed. — Both in England and in this country marine insurances are usually closed by binding slips, or covering notes, through the intervention of agents or brokers for the assured.^ But in dealing with certain insurance companies of high repute in this country, it has become the custom for the marine broker to use a memorandum which is at once an application, and, after signature by the underwriter, a binder. This slip, temporaiily the sole written evidence of the contract, is confidingly left with the underwriter, who has signed or initialed it, and M'lth its aid the Q. B. D. 361; Xenos v. Wickham, L. R. 2 H. L. 296. 1 Van Tassel v. Greenwich Ins. Co., 151 N. Y. 130, 45 N. E. 365, 28 App. Div. 163, 161 N. Y. 413, 54 App. Div. 386, 66 App. Div. 531, 184 N. Y. 607. The trials (6) and hearings on appeal (10) in this remarkable case numbered sixteen. The binder was finally sus- tained as equivalent to a standard one-year policy and subject to the standard five-day cancellation clause, though the binder specified no rate and though no policy was ever delivered or premium paid. 2 Hicks V. Brit.-Am. Ins. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424; Ldpman v. Ins. Co., 121 N. Y. 454, 24 N. E. 699, 8 L. R. A. 719, and § 81. 3 Smith, etc., Co. v. Prussian Nat. Ins. Co., 68 N. J. L. 674, 54 Atl. 458 (reasonable rate inferred); Machine Co. v. Ins. Co., 50 Ohio St. 549, 35 N. E. 1060, 22 L. R. A. 768 (custom- ary rate and terms inferred); Con- cordia Fire Ins. Co. v. Hejfron, 84 111. App. 610 (one-year term understood). And see Brit.-Am. Ins. Co. v. Wilson, 77 Conn. 569 (:ate not fixed). 7 < In England insui-ed is liable to the broker for the premium and the broker to the company, Mat. Ins. Act (1906), § 53; Universal Ins. Co. v. Merchants', etc., Ins. Co. (1897), 2 Q. B. 93; Power V. Butcher, 10 B. & Cr. 340. The broker is not agent for the insurer. Em- press Ass. Corp. v. Bowring (1905), 11 Com. Cas. 107. By British revenue law unless the slip is stamped and contains particulars required for a policy it is not admissible in evidence as a -con- tract, Home Mar. Ins. Co. v. Smith (1898), 2 Q. B. 351. But is legal evi- dence to clear up ambiguity after policy issues. Mar. Ins. Act p906), §§21, 22, 89, lonides v. Pac. Mar. Ins. Co. (1872), L. R. 7 Q. B. 517. Said Act, § 21, provides, 'ia contract of marine insurance is deemed to be concluded when the proposal of the assured is ac- cepted by the insurer, whether the policy be then issued or not," etc. If no revenue law applies, binder may be sued on in England as in this country, Bhuigwandass v. Ins. Co. (1888), 14 App. Cas. 83. 98 GENERAL PRINCIPLES OF INSURANCE LAW policy is subsequently written up and delive»ed to the broker, though meanwhile a loss may have occurred.^ § 77. Life Insurance — ^How Closed. — Before issuing a policy a life company usually requires the insured to submit to a medical exami- nation and to respond to numerous questions detailed on a printed application blank,^ the answers to which are written in by the coir.- pany's agents. The application, including the physician's report, is filed with the company. Except as statutory provisions have in- tervened,' it has not been customary to furnish the insured with a copy of the application, or afford him any oppoi1;umty of comparing his answers with the terms of his policy subsequently delivered. Usually the' contract is not complete until the first premium is paid and the policy delivered,^ because of express provisions to that effect in the policy, which must be respected; ^ but, not infrequently, the local agent of the life insurance company collects the first pre- mitmi from the applicant provisionally, and gives him in return a conditional binding receipt subject to approval of the application by the home office and issuance of the policy. Upon exercising such approval, and signing the policy, it has been held, the company becomes liable, although its action has not been made known to the insured, and although the policy remains with the agent un- delivered until after the death of the insured.^ It is evident also that an application for insurance may be accepted and the contract closed by letter as well as by binder or delivery of the poUcy.'' § 78. Requisites of Complete Contract.— The essential terms which must be agreed upon to make a valid policy are said to be these: The names or description of the parties, the rate of premium,* the property or life insured, the risk insured against, the term or 1 See Appendix, ch. II, Forms. dinary litigations in -which the plain- 2 See forms, Appendix, ch. II. Some tiff was at first defeated on the ground times provisional insurance is given to that the contract was not closed A^ Y cover until decision of main office. Zi/e Im. Co. v. Mcintosh", 86 Miss 236 3 See Appendix, ch. I and N. Y. Ins. 38 So. 775, but subsequently suc^ t?^'r -^ . c T> ceeded, on the ground that the com- TT ='-o^^*,'i**a'"-^'?'"'oo^o ^^'^t' ^^ P^y- ^y ^ letter sent to the insured, XT V T-t' 1 n n^W' °'^J^ V. wafi estopped to deny the insurance of ^:,^;,^^4'f*- ^°.-d^ ^- ^- ^^^' ^^ ^^^ PoWcy. ^- 'Y- I^le Im. Co. V. ■*-*'»f ^V -^"i ^ ^ !?■ „ Mcintosh (1906), 41 So. 381. ^ "^J-^^^i ^^- ^2- ''■'B'^<^<^'<^, 104 ' Waters v. Security L. dk Ann Co. Ga. 67, 30 S E. 273; but compare (N. C, 1907), 57 S. E. 437 (citing Starr v. MiU. L. Ins. Co., 41 Wash. 228, many cases). 83 Pac. 116. „ „, ^ *.Eng. Mar. Ins. Act (1906), § 23, .■J,^^Z ''■ ¥.f- ^ ^'^- ^°:i. ^^ ^^^- °™*« '■^^ ^ an essential; "reasoimble 226, 83 Pac. 116. Compare the extraor- rate" being presumed, § 31 of the Act. REQUISITES OF COMPLETE CONTRACT 99 duration of the insurance, and the sum or sums insured;* and to constitute a contract of insurance there must be, as in other cases,^ a meeting of the minds of the parties — that is, a mutual assent, either express or imphed, to all the provisions of the contract.* Thus, if both parties intend that the insurance shall cover a cer- tain ship or a certain house, the contract will not necessarily be in- validated because by mutual mistake they misname it in the policy; but if one party has in mind one ship, and the other party has in 1 Eames v. Ins. Co., 94 U. S. 621, 629, 24 L. Ed. 298; Commercial F. Ins. Co. v. Morris, 105 Ala. 498, 18 So. 34; Trustees of Church v. Brooklyn Fire Ins. Co., 28 N. Y. 161; Bradley v. Stand. L. & A. Ins. Co., 112 App. Diifc 536, 541. 98 N. Y. Supp. 797. See Hartford F. I. Co. V. Trimble, 25 Ky. Law R. 1497, 78 S. W. 462. Whether contract is written or parol, same rule applies, Cleveland Ou Co. v. Noninch Ins. Co., 34 Ore. 228, 55 Pac. 435. It ia also essential that there should be mutu- ality of obligation, Reynolds v. Mvt. F. Ins. Co., 34 Md. 280, 6 Am. Rep. 337. Closing of contract or delivery of policy and liability for premiums are concurrent, Hardvnck v. State Ins. Co., 20 Ore. 547, 26 Pac. 840, but time of payment of premium may be postponed without disturb- ing the binding effect of the contract, King v. Cox, 63 Ark. 204, 37 S. W. 877; Jones v. N. Y. Life Ins. Co., 168 Mass. 245, 47 N. E. 92; Pac. Mvt. Ins. Co. V. Shaffer, 30 Tex. Civ. App. 313, 70 S. W. 566. Court refused specific performance where insured would not nave been bound for premium except for ratification after loss of his agent's unauthorized act in taking insurance, Ins. Co. V. Schall, 96 Md. 225, 53 Atl. 925, 61 L. R. A. 300. As to general rule that the person for whose oenefit the insurance is taken may adopt and ratify it even after loss, see Waring v. Ind. P. Ins. Co.. 45 N. G. 606. 6 Am. Rep. 146: Herhimer v. Rice, 27 N. Y. 163, 179, but in these and other similar eases the person taking out the in- surance was liable for the premium and no question of lack of mutuality of obligation arose. The English act provides: "Where a contract of marine insurance is in good faith effected by one person on Behalf of another, the person on whose behalf it is effected may ratify the contract even after he is aware of a loss," Mar. Ins. Act (1906), §86; Williams v. Ins. Co. (1876), 1 C. P. D. 757, 764; Boston Fruit Co. V. Brit:, etc., Co. (1906), App. Cas. 336. But compare KeigUey V. Durant (1901), App. Cas. 240. 2 Michigan Pipe Co. v. Mich. F. dk M. Ins. Co., 92 Mich. 482, 62 N. W. 1070, 20 L. R. A. 277. 3 'Clark V. Ins. Co. 89 Me. 26, 35 Atl. 1008, 35 L. R. A. 276; Goddard v. Ins. Co., 108 Mass. 56, 11 Am. Rep. 307 (building not agreed upon); Zimmer- mann v. Dwelling House Ins. Co., 110 Mich. 399, 68 N.. W. 215, 33 L. R. A. 698; Prescott v. Jones, 69 N. H. 305, 41 Atl. 352; BeU v. Peabody Ins. Co., 49 W. Va. 437, 38 S. E. 64k Sheldon v. HecklaFire Ins. Co., 65 Wis. 436, 27 N. W. 315 (the companies not agreed upon). Thus, the court says: "Ajq un- evinced mental determination to accept a proposition to enter into a contract is not sufiicient to establish the con- tract," Bradley v. Stand. L. & A. Ins. Co., 112 App. Div. 536, 541. There is no contract, where, after a proposition submitted, a new condition is an- nexed and the former proposition is subsequently accepted, but without the added condition, Travis v. Nederland Life Ins. Co., 104 Fed. 486, 43 C. C. A. 653; Stephens v. Capital Ins. Co., 87 Iowa, 283, 54 N. Y7. 139. A contract is closed when unconditional acceptance of offer is duly mailed, Tayloe v. Merchants' Fire Ins. Co., 9 How. 390, 13 L. Ed. 187; Busher v. New York Life Ins. Co., 72 N. H. 551, 58 Atl. 41; Hartford Steam B. Insp. Co. v. Lasher StocUng Co., 66 Vt. 439, 29 Atl. 629, 44 Am. St. R. 859; and see Fames v. Ins. Co., 94 U. S. 621, 24 L. Ed. 298. Execution and delivery of the policy in accordance with application evidence a completed transaction, and constitute a contract. Travelers' Ins. Co. v. Jones (Tex. Civ. App.), 73 S. W. 978; and. see Orier v. Mtct. Life Ins. Co., 132 N. C. 542, 44 S. E. 28. So also when such a policy is duly deposited in post o£Sce, postage prepaid, TripU 100 GENERAL PRflJCIPLBS OF INSURANCE LAW mind another ship, although the two ships may have the same name, there is, speaking generally, no contract.* Whatever may be the rule in the case of other classes of contracts, it is apparent that time is of the essence of the insurance contract- even to the very instant agreed upon for the commencement and the termination of the risk. Link, etc., Assn. v. Williams, 121 Ala. 138, 26 So. 19, 77 Am. St. R. 34, but not if the delivery of the policy is con- ditional, Hartford Fire Ins. Co. v. Wihon, 187 U. S. 467, 23 S. a. 189, 47 L. Ed. 261; HamicUll v. N. Y. Life Ins. Co., Ill N. Y. 390, 18 N. E. 632, 2 L. R. A. 150. Neglect to reply to an application raises no presumption of acceptance, More v. N. Y. Bowery F. Ins. Co., 130 N. Y. 537, 29 N. E. 757; Ross V. N. Y. Life Ins. Co., 124 N. C. 395, 32 S. E. 733; Royal Ins. Co. v. Beatty, 119 Pa. St. 6, 12 Atl. 607, 4 Am. St. R. 622. Nor does unreasonable delay, Ala. Gold. L. Ins. Co. v. Mayes, 61 Ala. 163; Winchell v. loica State Ins. Co., 103 Iowa, 189, 72 N. W. 503; Brink v. Merchants' & F. Mut. Ins. Co., 17 S. D. 235, 95 N. W. 929; Conn. Mut. L. Ins. Co. V. Rudolph, 45 Tex. 454; but see Phwnix Ins. Co. v. Hale, 67 Ark. 433, 55 S. W. 486; Pickett v. German F. Ins. Co., 39 Kan. 697, 18 Pac. 903;. Mallette v. Brit.-Am. Assur. Co., 91 Md. 471, 46 Atl. 1005; Robinson V. U. S. Ben. Soc., 132 Mich. 695, 94 N. W. 211. Retention of premium by insurance company is some evidence that contract was closed, Tticker v. Dairy Mut. Ins. Co., 116 Iowa, 37, 89 N. W. 37; MouUon v. Masonic Mut. Ben. Assn., 64 Kan. 56, 67 Pac. 533, and see Keen v. Mut. L. Ins. Co., 131 Fed. 559. It premium has been paid or acknowledged and policy has been signed in accordance with application and held or transmitted to company's agent for delivery, it has been held by several courts that the contract is com- plete though agent has failed to deliver it, he being regarded as agent or trus- tee for the insured, Harrigan v. Home lAfe Ins. Co., 128 Cal. 531, 58 Pac. 180; N. Y. Life Ins. Co. v. Babcock, 104 Ga. 67, 30 S. E. 273, 42 L. R. A. 88, 69 Am. St. R. 134; Mut. Life Ins. Cq. v. Thom^ son, 94 Ky. 253, 22 S. W. 87; Hallock v. Commercial Ins. Co., 26 N. J. L. 268; Porter v. Mut. Life Ins. Co., 70 Vt. 504, 41 Atl. 970; Xenos v. Wickham (1867), L. R. 2 H. L. 296 (marine policy to be kept until assured called for it); Rob- erts V. Security Co. (1897), 1 Q. B. 111. (burglary policy); and see Wagner v. Supreme Lodge, 128 Mich. 660, 87 N. W. 903; Supreme CouH v. Dams, 129 Mich. 318, 88 N. W. 874; but com- pare Heiman v. Phwnix Mut. L. Ins. Co., 17 Minn. 153, 10 Am. Rep. 154; Hamblet v. City Ins. Co., 36 Fed. 118. 1 Hughes v. Mercantile Mut Ins. Co. , 55 N. Y. 265, 14 Am. Rep. 254; and see Sanders v. Cooper, 115 N. Y. 279, 22 N. E. 212, 5 L. R. A. 638, 12 Am. St. R. 801. But if the contract as written is without ambiguity, until reformed it is conclusively presumed to express the intent of the parties. See § 85. Policy to be binding on company must, of course, be executed by one having real, Planters' & Peoples' Mut. Fire Assn. v. De Loach, 113 Ga. 802, 39 S. E. 466, or apparent. Continental Ins. Co. v. Ruck- man, 127 111. 364, 20 N. E. 77, 11 Am. St. R. 121; Western Home Ins. Co. v. Hague, 41 Kan. 524, 21 Pac. 641, au- thority. Miller v. Northwestern Life Ins. Co., in Fed. 465, 49 C. C. A. 330; Gillespie, etc., Mut. F. Ins. Co. v. Prather, 105 111. App. 123. Or his un- authorized act must be ratified by it, Mohr Distilling Co. v. Ohio Ins. Co., 13 Fed. 74; Glens FaUs Ins. Co. v. Hop- kins, 16 111. App. 220. His authority is apparent if he is furnished with blank policies, signed by proper officers. Am. Employers' L. Ins. Co. v. Barr, 68 Fed. 873, 16 C. C. A. 51, 32 U. S. App. 444. Insured is not bound by secret instructions to agent, of which he is ignorant, Commercial Fire Ins. Co. v. Morris, 105 Ala. 498, 18 So. 34; Brou-n v. Franklin Fire Ins. Co., 165 Mass. 565, 43 N. E. 512, 52 Am. St. R. 534; Ruggles v. Am. Cent. Ins. Co., 114 N. Y. 415, 21 N. E. 1000, 11 Am. St. R. 674 (apparently general agent). A solicitor of a life company has no ap- parent authority to conclude a contract of insurance. Cotton States 'Life Ins. Co. V. Scurry, 50 Ga. 48; Miller v. Northwestern Mut. L. Ins. Co., Ill Fed. 465, 49 C. C. A. 330. As to territorial jurisdiction of agent compare Light- body V. No. Am. Ins. Co., 23 Wend. THE PARTICULARS SOMETIMES UNDERSTOOD 101 § 79. The Particulars Sometimes Understood. — It is not neces- sary in order to close the contract that all the particulars should, be made the subject of express negotiation between the parties; for it may well be \mderstood, in the absence of any express declaration to the contrary, that the usual form of policy,^ or statutory form, if there be one,^ is intended, or that the market rate ^ or a reasonable re 10 * of premium is to apply,* or the same rate ® or the same terms as before 7 (N. Y.) 18, and Hahn v. Guardian Assur. Co., 23 Ore. 576, 32 Pac. 683, 37 Am. St. R. 709, -n-ith Ins. Co. v. Thornton, 130 Ala. 222, 30 So. 614, 55 L. R. A. 547, 89 Am. S^ R. 30. A mere solicitor, or agent, employed to receive and forward applications can- not conclude a contract, Greenwich Ins. Co. V. Waterman, 54 Fed. 839, 4 C. C. A. 600, 6 U. S. App. 549; O'Brien v. A'ew Zealand Ins. Co., 108 Cal. 227, 41 Pac. 298; Sun Fire Office v. Wich, 6 Colo. App. 103, 39 Pac. 587; but the agent exceeding his authority might become personally liable to the insured in damages for his misrepre- sentations or deceit, Gilmore v. Brad- ford, 82 Me. 547, 20 Atl. 92 (deceit); Moritross v. Roger Williams Ins. Co., 49 Mich. 477, 13 N. W. 823 (agency revoked); Krceger v. Pitcaim, 101 Pa. St. 311, 47 Am. Rep. 718 (misrepresen- tations). An agent issuing policy of an unauthorized company is personally liable to insured. Noble v. Mitchell, 100 Ala. 519, 14 So. 581, 25 L. R. A. 238 (statute); McBride v. Rinard, 172 Pa. St. 542, 33 Atl. 750 (statute). See N. Y. Ins. L. § 50, requiring certifi- cate. Such statutes are constitutional, NohU V. MitcheU, 164 U. S. 367, 11 S. Ct. 110, 41 L. Ed. 472. Agent held liable where company was insolvent, .Morton v. HaH, 88 Tenn. 427, 12 S. W. 1026. Agent of insurance company \vith power to insure has apparent power to renew policy, International Tr. Co. V. Norwich U. F. Ins. Soc, 71 Fed. 81, 17 C. C. A. 608, 36 U. S. App. 277. Payment of premium is some- times expressly made essential to the completion of the contract, Eq. Life A.ssur. Soc. v. Pettus, 140 U. S. 226, 11 S. a. 822, 35 L. Ed. 497; RusseU v. Prudential Ins. Co., 176 N. Y. 178, 68 N. E. 252, 98 Am. St. R. 656; Roberts V. ^tna Life Ins. Co., 101 111. App. 313. 50 also approval by the home office may be made a prerequisite though premium has been paid to agent of the company. Pace v. Provident Sav. Life Assur. Soc, 113 Fed. 13, 51 C. C. A. 32; St. Paid Fire & M. Ins. Co. v. KeUey (Neb. Apl. 1902), 89 N. W. 997; Pickett V. German Fire Ins. Co., 39 Kan. 697, 18 Pac. 903. So also de- livery of policy sometimes made es- sential, Ray V. Security T. & L. Ins. ,Co., 126 N. C. 166, '35 S. E. 246; especially in life insurance, Paine v. Pac. Mut. Life Ins. Co., 51 Fed. 689; 2 C. C. A. 459; Langstaff v. Met. Life Ins. Co., 69 N. J. L. 54, 54 Atl. 518. iDe Grove v. Met. Ins. Co., 61 N. Y. 602, 19 Am. Rep. 305; Newark Mach. Co. V. Kenton Ins. Co., 50 Ohio St. 549, 35 N. E. 1060, 22 L. R. A. 768. ^ Hicks V. Brit.-Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424. 3 Train v. Holland Purchase Ins. Co., 62 N. Y. 598; Cleveland Oil Co. v. Norwich Ins. Co., 34 Ore. 228, 55 Pac. 435. * Brit.-Am. Ins. Co. v. Wilson, 77 Conn. 559; Newark Mach. Co. v. Xen- ton Ins. Co., 50 Ohio St. 549, supra; Smith & Wallace Co. v. Prussian Nat. Ins. Co., 68 N. J. L. 674, 54 Atl. 458. 5 Cooke v. Ins. Co., 7 Daly (N. Y.), 555; Audubon v. Ins. Co., 27 N. Y. 216. 6 Baldwin v. Phcenix Ins. Co., 107 Ky. 356, 54 S. W. 13, 92 Am. St. R. 362; Post v. jEtna Ins. Co., 43 Barb. 351; but compare where company had various forms of policies at different rates, Cotton v. Southwestern Mut. L. Ins. Co., 115 Iowa; 729, 87 N. W. 675. ' Ames-Brooks Co. v. .^tna Ins. Co., 83 Minn. 346, 86 N. W. 344. Contract may be closed and yet certain particu- lars be left open to be agreed upon when information is obtained. "Rea- sonable rate" may then be understood, ScammeU v. China Mut. Ins. Co., 164 Mass. 341, 41 N. E. 649, 49 Am. St. R. 462; Eng. Mar. Ins. Act (1906), § 31. 102 GENERAL PRINCIPLES OF INSURANCE LAW Even the essentials of the contract may often be agreed upon, inferentially, by reference to a prior course of dealing between the parties.* Thus, if A, whose fire insurance policy is about to expire, goes to the office of the insurer, and requests a renewal for a year, and re- ceives the answer from the proper representative of the company that he may consider his policy as renewed, and that the poUcy or renewal receipt will be sent in the course of a few days, and that he may then pay the premium, the contract of renewal is complete and binding, whether the new policy or renewal receipt may chance to be delivered -before a fire or not.^ § 80. Contract Closed by Parol. — An oral contract of insurance or an oral contract to issue a policy in future is valid, unless prohibited by statute, and will be binding from the time the oral contract is complete, although the loss occur before a policy is issued.* The statute of frauds is not applicable to a contract of insurance, reinsurance, or renewal.* Ciiy Fire Ins. Co., SO N. Y. 402, 10 Am. Rep. 495; Van Loan v. Farmers' Mvt. Fire Ins. Co., 90 N. Y. 280: Lenox v. Greemoich Ins. Co., 165 Pa. St. 575, 30 Atl. 940. Contra, Bishop V. Ins. Co., 49 Conn. 167; Bell v. Ins. Co., 5 Rob. (La.) 423, 39 Am. Dec. 542; but aU terms must be expressly or impliedly agreed upon, § 78. The oral contract becomes merged in the policy when the latter is accepted. Merchants' Mvt. Ins. Co. V. Lyman, 15 Wall. 664; Roberts v. Security Co. (1897), 1 Q. B. Ill (protection note). A renewal may be by parol, Squier v. Hanover Fire Ins. Co., 162 N. Y. 552, 57 N. E. 93, 76 Am. St. R. 349. So also reinsurance, Merchants' Ins. Co, v. Union Ins. Co., 58 111. App. 611. Application may ex- pressly provide that no liability shall attach until delivery of policy, Mc- Cully v., Phcenix Mvt. Life Ins. Co., 18 W. Va. 782. * None of the clauses of the statute applies, Springfield F. & M. Ins. Co. v. De Jamett, 111 Ala. 248, 19 So. 995; Phoenix Ins. Co. v. Spiers, 87 Ky. 286, 8 S. W. 453; Sanford v. Orient Ins. Co., 174 Mass. 416, 75 Am. St. R. 358, 54 N. E. 883; Wiebeler v. Milwaukee, etc., Ins. Co., 30 Minn. 464, 16 N. W. 363; but see Klein v. L. & L. & G. Ins. Co., 22 Ky. L. R. 301, 57 S. W. 250. Stat- ute of Frauds is not applicable even to reinsurance, Merchanis' Ins. Co. v. 'es V. Am. Central Ins. Co., 114 N. Y. 418, 21 N. E. 1000; Winne v. Niagara Fire Ins. Co., 91 N. Y. 190; Boice V. Thames & M. Marine Ins. Co., 38 Hun (N. Y.), 246. The court will infer the intention of the parties if it can from the circumstances, Concordia F. Ins. Co. v. Heffron, 84 111. App. 610 (no express agreement as to term, or premium, term of one year assumed). 2 Fames v. Home Ins. Co., 94 U. S. 621, 24 L. Ed. 298; Wiebeler v. Mil. Mach. Mvt. Ins. Co., 30 Minn. 464, 16 N. W. 363; AngelX v. HaHford Fire Ins. Co., 59 N. Y. 171, 17 Am. Rep. 322. A promise by the local commissioned agent to renew, with credit for the premium is sufficient, Squier v. Havr over F. Ins. Co., 162 N. Y. 552, 57 N. E. 93, 76 Am. St. R. 349. An agreement to renew means upon same terms as before if no change mentioned, Ins. Co. v. Wahh, 54 111. 164; Mallette v. Brit.-Am. Assur. Co., 91 Md. 471, 46 Atl. 1005. ^Relief Fire Ins. Co. v. Shaw, 94 U. S. 574, 24 L. Ed. 291; 7ns. Co. v. CoU, 20 Wall. (U. S.) 560, 22 L. Ed. 423; Howard Ins. Co. v. Owen's Admx., 94 Ky. 197, 21 S. W. 1037; MaOette v. Brit.-Am. Assur. Co., 91 Md. 471, 46 Atl. 1005; Hwhs v. Brit.-Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424; J'isfe v. Cottenet, 44 N. Y. 538; 4 Am. Rep. 715; EUis v. Albany CONTRACT GOVERNED BY TERMS OF USUAL POLICY 103 § 81. Contract Closed by Binding Slip. — The regular binder is present insurance, like a policy.^ It is a temporary, convenient sub- stitute or equivalent for the policy or renewal receipt pending the execution of the formal instrument.^ It becomes merged in the policy after the poUcy is delivered.^ § 82. Contract Governed by Terms of Usual Policy. — Whether the contract of insurance is closed orally or by a binding slip, if there is no express agreement to the contrary the legal presumption is that the usual form of policy is to follow.* Hence the stipulations and conditions of the policy are binding upon the insured from the Union Ins. Co., 58 111. Aft). 611; Se- cvrity F. Ins. Co. v. Kentucky, etc., Co., 7 Bush (Ky.), 81, 3 Am. Rep. 301 (contra, Egan v. Firemen's Ins. Co., 27 La. Ann. 368); or to a fidelity or guaranty policy as answering for the debt or default of another, Fidelity & Cos. Co. V. Ballard, 20 Ky. L. R. 1169, 48 S. W. 1074. The usual individual contract of suretyship is apt to be gratuitous; not so with an insurance contract, Tebbets v. Mercantile, etc., Co., 73 Fed. 95, 19 C. C. A. 281; Bank of Tarboro v. Fid. & Dep. Co., 128 N. C. 366, 38 S. E. 908. Moreover, an insurance company is fairly well pro- tected by its records and usual course of business. Although the charter of a company provides that the contract of insurance must be in writing, this re- quirement is by most courts held to be a direction to the company, and not binding upon an innocent party who has parted with value to the company in good faith or relied upon protection under an oral contract, Franklin Fire Ins. Co. V. Colt, 20 Wall. 560, 22 L. Ed. 423; Palmer v. Hartford Fire Ins. Co., 54 Conn. 488, 9 Atl. 248; Phcenix Ins. Co. V. Ireland, 9 Kan. App. 644, 68 Pac. 1024; Parish v. Wheeler, 22 N. Y. 494; Lloyd v. West Branch Bank, 15 Pa. St. 172; and see Goodhue v. Hartford Fire Ins. Co., 175 Mass. 187, 55 N. E. 1039. A preliminary oral contract is vahd, Sanford v. Orient Ins. Co., 174 Mass. 416, 75 Am. St. R. 358, 54 N. E. 883. Same rule applies to mutuals. Brown v. Franklin Mvt. Fire Ins. Co., 165 Mass. 565, 43 N. E. 512, 52 Am. St. R. 534; Zell v. Herman Farmers' Mut. Ins. Co., 75 Wis. 521, 44 N. W. 828; but under the rules of a fraternal associa- tion the issuance of a certificate may be essential to the completion orf the con- tract, Wagner v. Supreme Lodge, 128 Mich. 660, 87 N. W. 903. But the representative of the company to bind it, by parol or otherwise, must be one having actual or apparent authority, and stipulations in the application or policy in restriction of his authority will, if true in fact, be binding upon the insured, at all events after notice of them is received, Ins. Co. v. Norton, 96 U. S. 240, 24 L. Ed. 689; Walsh v. Hart- ford Fire Ins. Co., 73 N.Y. 5, § 78, note. 1 Belt V. Am. Cent. Ins. Co., 29 App. Div. 546, 53 N. Y. Supp. 316, aff'd 163 N. Y. 555. For course of business in use of, see §§ 75, 76. As to English law, see § 76, note. 2 Van Tassel v. Greenwich Ins. Co., 151 N. Y. 130, 45 N. E. 365, subse- quent appeal, 28 App. Div. 163, . 51 . N. Y. Supp. 79. After trials and hear- ings on appeals, sixteen in number, this binder, which had an exceptional phrase upon it, was finally and without dissent sustained as equivalent to the usual policy, 184 N. Y. 607; Lipman V. Niagara Fire Ins. Co., 121 N. Y. 454, 24 N. E. 699, 8 L. R. A. 719; Karelsen v. Sun F. Office, 122 N. Y. 545, 25 N. E. 921; and see Hicks v. Brit.-Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424; Smith, etc., Co. V. Prussian Nat. Ins. C^., 68 N. J. L. 674, 64 Atl. 468. 3 Lipman case, 121 N. Y. 454, supra; Roberts v. Security Co. (1897), 1 Q. B. 111. * Vining v. Franklin Fire Ins. Co., 89 Mo. App. 311; Agricultural Ins. Co. v. Fritz, 61 N. J. L. 211, 39 Atl. 910; Newark Machine Co. v. Kenton Ins. Co., 50 Ohio St. 549, 566, 35 N. E. 1060, 22 L. R. A. 768. Same rule in marine insurance, Ruger v. Firemen's Fund Ins. Co., 90 Fed. 310. 104 GENERAL PRINCIPLES OF INSURANCE LAW moment of closing the contract, although the policy may not be received until after the loss, and although, through ignorance of its conditions, he may have forfeited his rights thereimder.* For example, the insured, though suing on the binder or preliminary oral contract, must observe the provisions of the fire insurance policy re- lating to, proofs of loss and limitation of time for bringing action.^ And in like manner the terms of the usual policy are binding upon the company. Thus, it can cancel Ihe binder during its life only by complying with the provisions of the standard five-day cancellation clause.^ § 83. Same Subject — Form of Action. — Where the agreement is for present insurance and loss occurs before the policy is issued, the action may be brought as at common law upon the binder or oral contract, including in it by inference the terms of the standard or usual policy.'* 1 De Grove v. Metrop, Ins. Co., 61 N. Y. 602, 19 Am. Rep. 305; Idpman V. Niagara Fire Ins. Co., 121 N. Y. 451, 24 N. E. 699; Sanborn v. Fireman's Ins. Co., 16 Gray (Mass.), 448. ^ Hicks V. Brit.-Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 824. Contra, for example, Nebraska Ins. Co. V. Seivers, 27 Neb. 541, 43 N. W. 351; Hardvnck v. Stale Ins. Co., 23 Oreg. 290, 31 Pac. 6^6. But if the company repudiate liability and re- fuse to issue a policy, no proofs of loss nesd be served, Campbell v. 7ns. Co., 73 Wis. 100, 40 N. W. 661. 3 Van Tassel v. Greenwich Ins. Co., 151 N. Y. 130, 45 N. E. 365, finally after many trials and appeals affirmed, 181 N. Y. 607; but the fifteen-day binder expires at the end of the period specified. Underwood v. Greenwich Ins. Co., 161 N. Y. 413, 55 N. E. 936. ( ha adoption of the N. Y. city fifteen- day binder followed this litigation). After delivery of policy the insured is conclusively presumed to be ac- quainted with its terms and is bound by them, whether he has read the policy or not, Fletcher case, 117 U. S. 519, 6 S. Ct. 837, 29 L. Ed. 934; Monitor Mid. Fire Ins. Co. v. Buffum, 115 Mass. 343; Allen v. Gemum-Am. Ins. Co., 123 N. y. 6, 25 N. E. 309. * Van Tassel v. Greenwich Ins. Co., 151 N. Y. 130, -15 N. E. 365, 184 N. Y. 607, 28 App. Div. 163, 51 N. Y. Supp. 79; Hicks v. Brit.-Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424; Belt v. Am. Cent. Ins. Co., 29 App. Div. 546, 53 N. Y. Supp. 316, aff'd 163 N. Y. 555, 57 N. E. 1104; Kerr v. Union Mar. Ins. Co., 124 Fed. 835; but see Nebraska Ins. Co. v. Seivers, 27 Neb. 541, 43 N. W. 351; Hardvnck V. State Ins. Co., 23 Oreg. 290, 31 Pac. 656; Campbell v. Ins. Co., 73 Wis. 100, 40 N. W. 661 (contract to insure). After policy has been accepted the prior agreement becomes merged in it, Merchants' Mid. Ins. Co. v. Lyman, 15 Wall. 664, 21 L. Ed. 246; KlHs v. Niagara Fire Ins. Co., 117 Mich. 469, 76 N. W. 155; Roberts v. Security Co., (1897), 1 Q. B. 111. A present con- tract of insurance must be distin- guished from a promise to grant or renew insurance in future, Misselhom V. Mut. Res. Fund Life Assn., 30 Mo. App. 589; Consumers' Match Co. v. German Ins. Co., 70 N. J. L. 226, 57 Atl. 440; Taylor v. Phwnix Ins. Co., 47 Wis. 365, 2 N. W. 559, 3 N. W. 584. The latter contracts also in most juris- dictions may be made by parol, and unless the loss occur before the speci- fied future date when risk is to attach are enforceable, EUis v. Albany City Fire Ins^ Co., 50 N. Y. 402, 10 Am. Rep. 495; McCabe v. ^Stna Ins. Co., 9 N. D. 19, 81 N. W. 426, 47 L. R. A. 641; BaUvoin v. Phosnix Ins. Co., 107 Ky. 356, 54 S. W. 13, 92 Am. St. R. 362; by suit for specific performance before loss, Tayloe v. Merchants' Fire Ins. Co., 9 How. 390, 13 L. Ed. 187; or after loss either by suit for specific per- POLICY BEST EVIDENCE 105 § 84. Construction of Contract.— The general rules of law must be invoked to arrive at a proper construction of the insurance con- tract.* But the more important of these rules in their relation to insurance law demand special notice. § 8S. The Same— Policy best Evidence.— In the absence of fraud or mutual mistake the written contract, if there be one, is the best and only admissible evidence of what the contract is as to all mat- ters which it purports to cover.^ formance or for damages for breach of agreement, Sprout v. Western Assur. Co., 33 Ore. 98, 54 Pac. 180. If no policy has been delivered before loss suit may be upon the agreojnent, Fire Ins. Co. V. Sinsabaugh, 101 111. App. 55; Preferred Ace. Ins. Co. v. Stone, 61 Kan. 48, 58 Pac. 986; Sanford v. OrierU Ins. Co., 174 Mass. 416, 54 N. E. 884, 75 Am. St. R. 358; CampbeU v. Am. Fire Ins. Co. 73 Wis. 100, 40 N. W. 661. As to whether in action for breach of promise to issue policy, the provisions and limitations contained in policy are applicable, compare Hicks v. BrU.-Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424, with Hardwick v. Staie Ins. Co., 23 Ore. 290, 31 Pac. 656; Sanford v. Orient Ins. Co., 174 Mass. 416, 54 N. E. 883, 75 Am. St. R. 358; CampbeU v. Ins. Co., 73 Wis. 100, 40 N. W. 661. So also the assured may maintain action in equity to com- pel the issuance of a new paid-up life policy, Wilcox v. Eq. Assur. Soc., 173 N. Y. 50, 65 N. E. 857, 93 Am. St. R. 579; or to require the insurer to live up to a poUcy already issued, Lankan v. Supreme Council, 174 N. Y. 266, 66 N. E. 932. 1 Liverpool & London & Globe Ins. Co. V. Kearney, 180 U. S. 132, 21 S. Ct. 326, 45 L. Ed. 460; HaH v. Standard Ins. Co., L. R. 22 Q. B. D. 499. 2/ns. Co. v. Mowry, 96 U. S. 544, 24 L. Ed. 674; Ins. Co. v. Lyman, 15 Wall. (U. S.) 664, 21 L. Ed. 246; Mich. Shingle Co. v. London & Lan. Ins. Co., 91 Mich. 441, 51 N. W. 1111; Thurston v. Burnett & B. Dam Ins. Co., 98 Wis. 476, 74 N. W. 131. All parts of the written contract must if possible be harmonized, Gunther v. L. & L. & G. Ins. Co., 134 U. S. 110, 10 S. Ct. 448; Griffin Iron Co. v. L. & L. & G. Ins. Co., 68 N. J. L. 368, 54 Atl. 409; Ger- man Ins. Co. V. Roost, 55 Ohio St. 581, 45 N. E. 1097, 36 L. R. A. 236. A con- temporaneous parol promise in regard to the premium cannot be shown, Thompson v. Ins. Co., 104 U. S. 252, 26 L. Ed. 765. In a leading case the court says: "It is a fundamental rule, in courts both of law and equity, that parol contemporaneous evidence is in- admissible to contradict or vary the terms of a valid written instrument," Northern Assur. Co. v. Grand View Bldg. Assn., 183 U. S. 308, 318, 22 S. a. 133, 46 L. Ed. 213, reviewing many decisions. That is still osten- sibly the rule, but under the doctrine of waiver and estoppel as applied to insurance contracts in many juris- dictions it may be questioned whether it should not be called the exception rather than the rule. See Chapters VI- VIII. An application made part of the contract is admissible, Northwestern lAfe Assur. Co. v. Tietze, 16 Colo. App. 205, 64 Pac. 773, or any clause at- tached to policy and incorporated, Hartford Fire Ins. Co. v. Post, 25 Tex. Civ. App. 428, 62 S. W. 140. As to life insurance policy, see N. Y. Ins. L. § 58. Some of the terms may be in- dorsed upon the back of the policy and signed by the proper officers or agents, Bushnell v. Fanners' Mut. Ins. Co., 91 Mo. App. 523. The binding slip, if there be one, has been held admissible to explain ambiguity in policy, Saurir- ders V. Agricultural Ins. Co., 167 N. Y. 261, 60 N. E. 635; Phcmix F. Ins. Co. V. Gumee, 1 Paige Ch. 278; lonides v. Pac. Fire Ins. Co., L. R. 6 Q. B. 674, 7 Q. B. 517; Eng. Mar. Ins. Act (1906), § 89. Compare Empress Assur. Corp. V. Bowring (1905), 11 Com. Cas. 107. Evidence is not admissible to show that property other than that specified was covered by the policy, Franklin Fire Ins. Co, v. Hellerick, 20 Ky. Law R. 1703, 49 S. W. 1066; Sanders v. Cooper, 115 N. Y. 279, 22 N. E. 212, 5 L. R. A. 638, 12 Am. St. R. 801. Or that marine risk was to begin at a place other than that specified, Robertson v. 106 GENERAL PRINCIPLES OF INSUBANCE LAW It is to be observed that the language of the policy is not in all cases conclusively binding and effective; for grounds may sometimes exist for relief in equity. Thus, in a clear case of mutual mistake of fact * — that is, where it plainly appears ^ by evidence outside the contract that the real agreement of the parties is other than that evidenced by the policy ' — or where there is a mistake on one side French, 4 East, 130, or that the char- acter of occupancy of property was intended to be other than that de- scribed in poUcy, Jennings v. Chenango Mut. Ins. Co., 2 Denio (N. Y.) , 75. And a pamphlet, circular, or prospectus is- sued by the insurance company is not ad- missible in evidence to disturb the terms of the policy, although the insured may have incurred a forfeiture in con- sequence of reliance upon its represen- tations, Fowler v. Metropolitan Ins. Co., . 116 N. Y. 389, 22 N. E. 676, 5 L. R. A. 805; since all prior and contempora^ neous negotiations, promises, and state- ments, whether written or oral, become merged in the contract, Ins. Co. v. Layman, 15 Wall. (U. S.) 664, 21 L. Ed. 246; Douglas v. Knickerbocker Life Ins. Co., 83 N. Y. 492; Liverpool & L. & G. Ins. Co. V. Richardson Lumber Co., 11 Okla. 585, 69 Pac. 938. Anything printed, written, stamped, or attached as riders, appearing in the body of the policy or on the margin is part of the contract, Wright v. Association, 118 N. Y. 237, 23 N. E. 186, 6 L. R. A. 731, 16 Am. St. R. 749; Mascott v. Ins. Co., 68 Vt. 253, 35 Atl. 75; but mere refer- ence in the policy to extrinsic papers does not make them a part of the con- tract unless the policy unequivocally so states, Mutual Life Ins. Co. v. Cohen, 179 U. S. 262, 21 S. Ct. 106, 45 L. Ed. 181; Am. Popular Life Ins. Co. v. Day, 39 N. J. L. 89, 23 Am. Rep. 198; Bur- riU V. Ins. Co., 5 Hill (N. Y.), 188, 40 Am. Dee. 345; Ky. & L. Mut. Ins. Co. V. Southard, 8 B. Mon. (Ky.) 634. Even indorsements on the back, though referred to, are no part of the contract unless expressly made so, The Majestic, 166 U. S. 375, 17 S. Ct. 597, 41 L. Ed. 1039; PoHer v. Ins. Co., 160 Mass. 183, 35 N. E. 678; Harris v. 7ns. Co., 5 Johns. (N. Y.) 368. The signifi- cance of the distinction is that ex- trinsic matters are not warranties, but at most only representations, and questions of materiality and good faith in respect to them ordinarily go to the jury. Extraneous evidence whether written or oral is proper to identify and describe the subject-matter of the con- tract, Saunders v. Agrictdtwal Ins. Co., 167 N. Y. 261, 60 N. E. 635; N. Y. Ins. Co. V. Thomas, 3 Johns. Cas. 1. In interpreting the meaning and legal effect of the policy the court must apply the written language of the con- tract to the subject-matter as thus identified and described, Moore v. Fire Ins. Co., 199 Pa. St. 49, 52, 48 Atl. 869, 85 Am. St. R. 771; Lower Rhine & W. Ins. Assur. v. Sedgwick (1899), 1 Q. B. 179, 190. Court is en- titled to look at situation of parties, subject-matter, and surroundijag cir- cumstances, Phetteplace v. Bnt. & For. Ins. Co., 23 R. I. 26, 31, 49 Atl. 33, citing many cases. A conditional de- livery may be proved bjrparol. Under- wood V. Greenwich Ins. Co., 161 N. Y. 413, 55 N. E. 936; HaHford Ins. Co., Wilscm, 187 U. S. 467, 23 S. Ct. 189, 47 L. Ed. 261. To establish waiver or es- toppel in those jurisdictions where permitted, extrinsic evidence by parol of contemporaneous knowledge of facts and conversations at variance with policy, is freely admitted. See North- em Assur. Co. V. Grand View Bldg. Assn., 183 U. S. 308, 22 S. a. 133, 46 L. Ed. 213, in which, by a divided court, the practice is disapproved, and this disapproval is reiterated in Hart- ford Fire Ins. Co. v. Wilson, 187 tJ. S. 467, 478, 23 S. a. 189, 47 L. Ed. 261. 1 Dougherty v. Greenwich Ins. Co., (N. J.) 33 Atl. 295. 2 The evidence must be "clear, un- equivocal and convincing," United States V. Budd, 144 U. S. 154, 12 S. Ct. 575; Spalding v. Crocker (1897), 2 Com. Cas. 189. A mere preponderance of evidence is not sufiicient. Trustees V. Delaware Ins. Co., 93 Wis. 57, 66 N. W. 1140. As to whether case must be established "beyond a reasonable doubt," compare Wall v. Meilke (Minn. 1903), 94 N. W. 688; Southard v. Curley, 134 N. Y. 148, with Boyertown Nat. Bank v. Hartman, 147 Pa. St. 558; Highlands v. R. R. Co., 209 Pa. St. 286 3 DaUon v. MU. Mack. Ins. Co., 126 Iowa, 377, 102 N. W. 120; Slobodisky v. POLICY ^EST? EViDEisrOE 107 and fraud inducing it on the other, the written contract may in a proper case be reformed in equity to correspond with the real agree- ment.^ PhoBnix Ins. Co., 52 Neb. 395, 72 N. W. 483. 1 Heame v. Mar. Ins. Co., 20 Wall. 488, 490, 22 L. Ed. 395; Maker v. Hibemia Ins. Co., 67 N. Y. 283; Brvce V. Lorillard Ins. Co., 55 N. Y. 240; Steinbach v. Prudential Ins. Co., 62 App. Div. (N. Y.) 133, 70 N. Y. Supp. 809; Scheussler v. Ins. Co. of Co. of Phila., 103 App. Div. 12, 92 N. Y. Supp. 649, aff'd 185 N. Y. 578. This case is an extreme one, for the agent of the company intended tp insert the warranty complained of. There was no fraud and no mutual mistake of fact. The plaintiffs had simply omitted to disclose the character of the risk. Compare Travelers' Ins. Co. v. Hender- son, 69 Fed. 762, 16 C. C. A. 390, and Goddard v. Ins. Co., 108 Mass. 56, 11 Am. Rep. 307; Harris v. Columbiana County Mutual Ins. Co., 18 Ohio St. 116, 51 Am. Dec. 448. - See Bimstein V. Stuyvesant Ins. Co., 83 N. Y. App. Div. 436, 82 N. Y. Supp. 140, and Trenton Potteries Co. v. Tiile Guar. & Trust Co., 176 N. Y. 65, 68 N. E. 132. If action could not be successfully maintained after reformation such re- lief will not be granted, Thompson v. Phcmiix Ins. Co., 136 U. S. 299, 10 S. Ct. 1019, 34 L. Ed. 408. If company promises to renew and changes terms of former policy, equity will reform. Palmer v. Hartford Ins. Co., 54 Conn. 488, 9 Atl. 248; Thomason v. Capital Ins. Co., 92 Iowa, 72, 61 N. W. 843; Hay V. Star F. Ins. Co., 77 N. Y. 235, 33 Am. Rep. 607; but judgment on insurance contract is a bar to an action to reform it, Washburn v. Great West. Ins. Co., 114 Mass. 175; Steinbach v. Relief Fire Ins. Co., 77 N. Y. 498, 33 Am. Rep. 655. Contra, Grand View Bldg. Assn. v. Northern Assur. Co. (Neb.), 102 N. W. 246, where recovery was allowed after defeat in United States supreme court, 183 U. S. 308; and see same case, 203 U. S. 103, in which recovery in state court was left undisturbed. But pendency of action on policy is no bar to action by de- fendant for reformation, Nat. F. Ins. Co. V. Hughes, 189 N. Y. 84. Mere knowledge by company's agent of exists ing facts at variance with terms of policy may be made basis of reforma- tion, Fitchner v. Fidelity Mut. Fire Assn., 103 Iowa, 276, 72 N. W. 530; Grand View Bldg. Assn. v. Northern Assur. Co. (Neb.), 102 N. W. 246. Mistake of only one party is no ground for reformation, Mceller v. Am. Ins. Co., 52 Minn. 336, 54 N. W. 189; Hart- ford Ins. Co. V. Haas, 87 Ky. 531, 9 S. W. 720. If name of wrong owner is furnished the company, reforma- tion cannot be granted to insert the true owner, Schmid v. Virginia F. & M. Ins. Co. (Tenn. Ch. App.), 37 S. W. 1013; Cushman v. New Eng- land Ins. Co., 65 Vt. 569, 27 Atl. 426; but reformation will be granted if mistake as to owner or interest is mutual, SnM v. 7ns. Co., 98 U. S. 85, 25 L. Ed. 52, or as to description of property. Home Ins. & B. Co. v. Lewis, 48 Tex. 622. While mistake of law is in general said to present no ground for reformation, Westchester Fire Ins. Co. v. Wagner (Tex. Civ. App.), 38 S. W. 214, yet mistake of law, especially if induced by com- pany's agent, as to meaning of Ijin- guage employed in policy has often been made basis of reformation where both parties intended to accomplish a different result, Sias v. Roger Williams Ins. Co., 8 Fed» 183; Woodbury Savings Bank v. Charter Oak Ins. Co., 31 Conn. 517; Longhurst v. Star Ins. Co., 19 Iowa, 364; Esch v. Home Ins. Co., 78 Iowa, 334, 43 N. W. 229, 16 Am. St. R. 443; Hartford F. Ins. Co. v. McCarthy, 69 Kan. 555, 77 Pac. 90; Lansing v. Commercial Union Ins. Co. (Neb.), 93 N. W. 756; Eastman v. Provident Mut. R. Assn., 65 N. H. 176, 18 Atl. 745, 5 L. R. A. 712, 23 Am. St. R. 29; Maher v. Hibemia Ins. Co., 67 N. Y. 283. Reformation and recovery may be had in same action, German Ins. Co. V. Davis, 6 Kan. App. 268, 51 Pac. 60; Maryland Home Ins. Co. v. KimmeU, 8^ Md. 437, 43 Atl. 764; G^and View Bldg. Assn. v. Northern Assur. Co. (Neb.), 102 N. W. 246; N. Y. Ice Co. V. Northwestern Ins. Co., 23 N. Y. 357. Where similar re- lief is granted at law under the doc- trine of waiver and estoppel no refor- mation Ls necessary, German Ins. Co. V. Miller, 39 111. App. 633; Am. Cent. Ins. Co. V. McLanathan, 11 Kan. 533; lOS GENERAL PRINCIPLES OF INSURANCE LAW Similarly, either party may obtain in equity a rescission of the contract for fraud or mutual mistake with a reinstatement of the parties.^ But it is important to notice that after a fire or marine loss, or after a loss under a life policy, unless the Ufe poUcy has run for a large part of its anticipated duration, this form of relief would be unsatisfactory, the premium being so much less than the face of the policy. § 86. Court Must not Make New Terms. — A court must not use its discretion to modify the conditions or provisions of the contract entered into by the parties in order to effectuate what it might con- sider a more equitable arrangement than that resulting from an enforcement of the strict terms of the policy.^ The doctrine of waiver and estoppel, especially_as applied in some jurisdictions, comes into sharp conflict with this elementary proposi- tion of law.* § 87. Special Terms Prevail over General Form. — If there is any inconsistency between the written and the printed words of the policy, the former prevail, because they are framed and inserted with reference to the particular contract, and the parties do not generally take the trouble to revise or alter the formal printed conditions.* Snith V. Commonwealth Ins. Co., 49 N. Y. 6,25 N. E. 309. "The courts may Wis. 322, 5 N. W. 804; but where the not make a contract for the parties," mistake goes to the identity of- the Imperial F. Ins. Co. v. Coos Co.^ 151 entire subject-matter, by the weight U. S. 452, 462, 14 S. Ct. 379, 38 L. Ed. of authority, the only remedy is by 231. "We cannot make a new con- reformation, Collins V. St. Paul F. & tract for them nor refuse to enforce M. Ins. Co., 44 Minn. 440, 46 N. W. the contract they made for them- 906; Sanders v. Cooper, 115 N. Y. 279, selves," EllioU v. Fanners' Ins. Co., 22 N. E. 212, 5 L. R. A. 638, 12 Am. St. 114 Iowa, 153, 155, 86 N. W. 224. R. 801. Compare Kansas F. Fire Ins. 3 gee ch. VI, infra. Plaia, ordinary Co. V. Saindon, 52 Kan. 486, 35 Pac. and popular .sense to be given, /m- 15, 33 Am. St. R.-356; State Ins. Co. v. perial Fire Ins. Co. v. Coos Co., 151 Schrcch, 27 Neb. 527, 43 N. W. 340, 6 U. S. 452, 463, 38 L. Ed. 231; Homer L. R. A. 524, 20 Am. St. R. 696. v. Mercantile Town Mid. Ins. Co., 93 1 Union Cent. Life Ins. Co. v. Pott- Mo. App. Ill; Stojie v. Granite State ler, 33 Ohio St. 459, 31 Am. Rep. 555. Fire Ins. Co., 69 N. H. 438, 45 Atl. See La Marche v. Sew York Life Ins. 235; Robertson v. French, 4 East, 135; Co., 126 Cal. 498, 58 Pac. 1053. Hart v. Standard Mar. Ins. Co., 22 2 The contract must be enforced as Q. B. D. 499. written unless it would work a fraud, * Hagan v. Scottish Union Net. Ins. RusseU V. Prudential Ins. Co., 176 N. Y. Co., 186 U. S. 423, 46 L. Ed. 1229, 22 S. 178, 68 N. E. 252, 98 Am. St. R. 656; Ct. 862; Phomix Ins. Co. v. Plemming, Stexart v. Union Mul. L. Ins. Co., 155 65 Ark. 54, 39 L. R. A. 789, 67 Am. St. N. Y. 257, 49 N. E. 876, 42 L. R. A. R. 900, 44 S. W. 464; NicoUet v. 7ns. 147; Peabody v. Satterlee, 166 N. Y. Co., 3 La. 366, 23 Am. Dec. 458; Harper 174, 59 N. E. 818, 52 L. R. A. 956; v. .V. Y. City Fire Ins. Co,, 22 N. Y. Allen V. German Am. Ins. Co., 123 iiZ; Sullivan v. Spring Garden Ins. Co., TRADE CUSTOM I m C>n the same principle, it is held that the special clauses or riders stamped on the pohcy, or printed and attached to it, prevail over the more general terms of the usual printed form.^ § 88. Parol to Explain Ambiguity. — If the language of the policy- is ambiguous and fairly open to doubt, of which the court is to judge, parol evidence is admissible to explain the real meaning of the parties.^ § 89. Trade Custom. — In seeking to arrive at the meaning of the contract, usage may be resorted to, in order to make definite what is 34 App. Div. 128, 54 N. Y. Supp. 629; Faust V. 7ns. Co., 91 Wis. 158, 64 N. W. 883, 30 L. R. A. 783, 51 Am. St. R. 876; Robertson v. French, 4 East, 130. This doctrine is frequently in- voked by the assured to justify an apparent violation of the memoran- daai clause of the fire insurance policy prohibiting the use of certain articles or uses. In the same way, insurance "as a manufacturer of brass clock works" permits the use of all such arti- cles as are ordinarily employed in that niaiiufact'jrc, and the making of them for that pjrpo.se, if such be the ordi- li ,:y course of the business, although t!io aso of such articles be prohibited as ercrra, hazardous by the printed terms o.' the policy, Dr- ant v. Pough' eepsie ,.L I. Ins. Co., 17 N. Y. 200. And see llaic J \. Dorchester Fire Ins. Co., 12 Gray (.liass.), 545. So as to general printed clauses applicable to a voyage policy left in an English Lloyd's policy filled r.p and intended as a time policy, D ul'ieon V. Pembro. c, 2 App. Cas. 284. Sim Urly as to controlling effect of V ords wi'itten in the margin or at the foot of policies, and especially marine rol'cies, Chadse:/ v. Guion, 97 N. Y. 3.' !; Swwnerton v. Ins. Co., 37 N. Y. 17 1, 93 Am. Dec. 560; Bruce v. In.s. Co,, 58 Vt. 253, 2 Atl. 710. So it has been held that the words restricting the liability of the insurers "against actual total loss only," written upon the margin, prevail over any incon- s'stent printed provisions in the body of the policy, Burt v. Brewers and Maltsters Ins. Co., 9 Hun (N. Y.), 383, aff'd 78 N. Y. 400. Written indorse- ment on face of policy ''covering loss by lightning" prevails over printed clause exempting company from lia- bility, N-r^rs v. Ins. Co., 130 Pa. St. 113, 15 Atl. 915, 2 L. R. A. 52. •■ St. Paul F. & M. Ins. Co. v. Kidd, 55 Fed. 238, 5 C. C. A. 88, 14 U. S. App. 201; Ounther v. L. & L. & Globe Ins. Co., 34 Fed. 501; Jackson v. Brit.- Am. Assur. Co., lOQ Mich. 47, 63 N. W. 899, 30 L. R. A. 636; Benedict v. Ocean Ins. Co., 31 N. Y. 389; Mascott v. Granite State Ins. Co., 68 Vt. 253, 35 Atl. 75. A specific stipulation governs the more general. Northwestern L. Ins. Co. v. Hazelett, 105 Ind. 212, 4 N. E. 582, 55 Am. Rep. 192. A rider pasted or attache i to face of policy is part of contract and need not be referred to, Washburn & Moen Mfg. Co. v. Reliance Mar. Ins. Co., 106 Fed. 116; Hardy v. Ins. Co., 166 Mass. 210, 44 N. E. 209, 33 L. R. A. 241, 55 Am. St. R. 395; Quinn v. Fire Assn., 180 Mass. 5G0, 62 N. E. 980; Sha^.-man v. U. S. Credit S. Co., 92 Wis. 366, 66 N. W. 528, 32 L. R. A. 383, 53 Am. St. R. 920 (an indorsement on the contract). 2 Orient Mut. Ins. Co. v. Wright, 1 Wall. 456, 17 L. Ed. 505; Riclerson v. Hartford Fire Ins. Co., 149 N. Y. 307, 43 N. E. 856, but holding also that a party cannot be asked what his intent v/as, Rickerson v. German-Am. Ins. Co., 6 App. Div. 550, 39 N. Y. Supp. 547; Daniels v. Hudson River Fire Ins. Co., 12 Gush. (Mass.) 416, 59 A:ii. Dec. 192. So circumstances in connec- tion with the execution of the policy may be considered in determining tli2 intention of the parties, Pietri v. Segue- not, 96 Mo. App. 258, 69 S. W. 105i. In case of doubt may show the cir- cumstances surrounding the parties at time of execution, Borigut v. Spring- field F. & M. Ins. Co., 34 Minn. 352, 25 N. W. 796; Boyd v. Mississippi Home Ins. Co., 75 Miss. 47, 21 So. 708; Bole v. N. H. Ins. Co., 159 Pa. St. 63, 28 Atl. 205; McKeesport Mack. Co. v. Ben Franklin Ins. Co., 173 Pa. St. 53, 34 no GElSfERAii PRiiSrCIPLES OF INSURANCE LAW uncertain, clear up what is doubtful, or annex incidents, but not to vary or contradict its terms.'' Trade usage may be shown to explain the meaning of technical words or phrases.^ Atl. 16; Can- v. Montefim-e, 33 L. J. ' Q. B. 256. This is not to dispute the written contract but to put the court in the position of the parties in inter- preting its probable meaning. Only circumstances known or presumed to be known by both parties are relevant for such a purpose, Rickerson v. Hartford P. Ins. Co., 149 N. Y. 307, 43 N. E. 856; Hydames S. Co. v. Ind. Mid. . etc., Co. (1895), 1 Q. B. 500. In case of doubt the interpretation subsequently put upon the contract by the parties in its performance may be evidence of their intent, Manhattan Life Ins. Co. v. Wright, 126 Fed. 82, 61 C. C. A. 138; Brooklyn Ins. Co. v. Butcher, 95 U. S. 269, 273, 24 L. Ed. 410, "the practical interpretation of an agreement by a party to it is always a consideration of great weight." The New York court says: "The practical construction put upon a. contract by the parties to it is sometimes almost conclusive as to the meaning," NicoU V. Sands, 131 N. Y. 24, 29 N. E. 818. And see Woohey v. Funke, 121 N. Y. 92, 24 N. E. 191; Phetteplace v. Brit. & For. Ins. Co., 23 R. I. 26, 49 Atl. 33. An admission by the insured as to what property was intended to be covered was received against him in Leftwich V. Royal Ins. Co., 91 Md. 596, 46 Atl. 1010. I Moore v. United States, 196 U. S. 157, 166, 25 S. a. 202; UUard v. Kentucky, etc., Co., 134 Fed. 168; Grace v. Ins. Co., 109 U. S. 283, 3 S. Ct. 207, 27 L. Ed. 932; Connelly V. Assn., 58 Conn. 552, 20 Atl. 671, 9 L. R. A. 428, 18 Am. St. R. 296; Glendale Woolen Co. v. Ins. Co., 21 Conn. 19, 54 Am. Dec. 309; Bomzewski V. Middlesex Assur. Co., 186 Mass. 589, 72 N. E. 250; Mooney v. Howard Ins. Co., 138 Mass. 375, 52 Am. Rep. 277. The New York court says: "Custom or usage is presumed to enter into the in- tention when it is found as a fact, not only that it existed, but was uniform, reasonable and well settled, and either known to the parties when the con- tract was made or so generally known as to raise a presumption that they had it in mind at the time," London Assur. Corp. v. Thompson, 170 N. Y. 94, 99, 62 N. E. 1066. The actual in- tent of only one party is not to be shown by extrinsic testimony nor are customs known only to imderwriters competent against the assured, Rick- erson V. Hartford F. Ins. Co., 149 N. Y. 307, 43 N. E. 856. Custom admissible as to time of attaching of the risk, Cleveland Oil Co. v. Norwich Ins. Co., 34 Ore. 228, 55 Pac. 435. It is not competent to show custom to accept applications from persons who have attempted suicide, Louis v. Conn. Mvt. L. I. Co., 58 App. Div. 137, 68 N. Y. Supp. 683, aff'd 172 N. Y. 659, 65 N. E. 1119. Nor to show that a life company has sometimes accepted past- due premiums, Easley v. 7ns. Co., 91 Va. 161, 21 S. E. 235. Nor tc show the imiversai understanding and prac- tice of the trade in respect to the vro rata phrase of the reinsurance rider, Home Ins. Co. v. Continental Ins. Co., 180 N. Y. 389, 73 N. E. 65. And where term of reinsurance is definitely de- scribed, custom to issue for same term as direct insurance cannot be shown, Milwaukee Mechanics' Ins. Co. v. Palatine Ins. Co., 128 Cal. 71, 60 Pac. 518. Opinion cannot be received as proof of usage, Greenwich Ins. Co. v. Waterman, 54 Fed. 839, 4 C. C. A. 600. Unjust and unreasonable custom though general will not be enforced, Seccomb v. Provincial Ins. Co., 10 Allen (Mass.), 305. 2 Western Assur. Co. v. Altheimer Bros., 58 Ark. 565, 573, 25 S. W. 1067; Ins. Co. V. McMillan, 31 Ala. 711; Union Ins. Co. v. Am. Ins. Co., 107 Cal. 327, 40 Pac. 431 28 L. R. A. 692, 48 Am. St. R. 140; Houghton v. Water- town Ins. Co., 131 Mass. 300; Phoenix Ins. Co. V. Rykmd, 69 Md. 437, 16 Atl. 109, 1 L. R. A. 548. But Alabama company reinsuring New York com- pany is not presumed to know New York customs, German Am. Ins. Co. v. Commercial Ins. Co., 95 Ala. 469, 11 So. 117, 16 L. R. A. 291. Every under- writer is presumed to know the usages of the trade he insures. If he does not he ought to inform himself, Heame v. Mar. Ins. Co., 20 Wall. 488, 492, 22 L. Ed. 395; Parsons v. Mass., etc., Co., 6 Mass. *197, *204; McCaU v. Sun CONSTRUCTION LIBERAL TO INSURED 111 Trade usage has always played a particularly important part in the law of marine insurance. "^ § 90. Construction Liberal to Insured. — The contract of insurance being a unilateral contract framed mainly in the interest of insurers, and the insured being compelled to accept the form offered, in order to secure, insurance, any ambiguity as to the purpose or meaning of its terms, or what property was intended to be covered, will be construed in favor of the insured.^ Mut. Ins. Co., 66 N. Y. 505, 513; Mer- chants osed, too numerous to be antici- pated est inquired about, known only to the owners and those in their em- Eloy; while in the latter it is, or may e, seen and inspected before the risk is assumed, and its construction, situa- tion, and ordinary hazards as well appreciated by the vmderwriter as by the owner, in. marine insurance the underwriter, from the very necessities of his imdertaking, is obliged to rely upon the assured, and has therefore the right to exact a full disclosure of all the facts known to him which may in any way affect the risk to be assumed. But in fire insurance no such necessity for reliance exists, and, if the underwriter assumes the risk without taking the trouble to either examine or inquire, he cannot very well, in the absence of all fraud, complain that it turns out to be greater than he anticipated. And so are the latest and best authorities," Hartford Protection Ins. Co. v. Harmer, 2 Ohio St. 452, 59 Am. Deo. 684. The New York court concluded that the rule in fire is the same as that in marine concealment: fire and life 125 But to those versed in the practical methods of closing contracts of insurance as already detailed/ this plausible explanation is hardly satisfying, and the reasons given in the text are more accurate and forcible. In comparison with the facilities of the insured in ac- quainting himself with the character of his own stock of merchandise or other personal property, its value and amount, the title, chattel mortgages upon it, precautions in management, and other important particulars relating to it as a marketable risk, a doubt may well be entertained whether the underwriter, when issuing his binder upon it in usual course, holds a position relatively as advantageous as when asked to insure, upon its rating and official description, the average ship, though at the time harbored in a foreign port or out upon the high sea; and many a sliip is insured at home, and many a distant building with its contents, located sometimes in a foreign land, is insured against fire.^ Indeed for the underwriter, before issuing his binder, to insist upon making his own separate and independent examination into all the facts fairly bearing upon the risk of loss of personal property, would cost much more than the average premium, and would be regarded by the public as intolerably inconvenient. It is, therefore, clear that some measure of responsibility must re- main with the insured to see to it, that, through faults of omission on his part, the fire or life insurance company is not misled into an erroneous estimate of the risk. Indeed, in England the rule is made applicable to all kinds of in- surance, that the non-disclosure of a material fact, whether inten- tional or unintentional, will avoid the contract.* insurance, where the subject-matter is St. 520, 36 Am. Rep. 676; Harrower v. located at a distance, Clarkson v. Hutchinson (1870), L. R. 5 Q. B. 690; Western Ins. Co., 33 App. Div. 23, 53 Laing v. Union Ins. Co. (1895), 11 N. Y. Supp. 608. Times L. R. 369. Each party is bound 'See §§74-76,94. to know matters of general intelligence 2 Many western and southern rail- or of public notoriety, including general roads, warehouses, factories, and other usages of trade which are open to his Sroperties, have been insured from inquiry equally with that of the other, few York City or Chicago, though now Carter v. Boehm, 3 Burr. 1906; Bulkley resident agency laws frequently in- v. Protection Ins. Co., 4 Fed. Cas. 614; lervene to localize the business. De Longuemere v. N. Y. Fire 7ns. Co., s London Ass. Co. v. Mansel, L. R. 10 Johns. (N. Y.) 120. Matters of 11 Ch. D. 363; Moens v. Heyworth, mere opinion or belief need not be 10 M. & W. 166; Carter v. Boehm, 1 stated and only good faith is required W. Bl. 693; s. c. Smith's Lead. Cas. with respect to them. Chalaron v. Neither party is bound to volimteer Ins. Co., 48 La. Ann. 1582, 21 So. 267, information of matters which the other 36 L. R. A. 742; Smith v. The Columbia knows, or which in the exercise of ordi- Ins. Co., 17 Pa. St. 263, 55 Am. Dec. nary care the other ought to know, 646. But a fact which the insured and of which the former has no reason ought to have known to be material, to suppose him ignorant, or those of it is said, must be disclosed, Dennison which the other waives communica- v. Thomaston Mut. Ins. Co., 20 Me. tion, Armenia Ins. Co. v. Paul, 91 Pa. 125, 37 Am. Dec. 42. 126 GENERAL PRINCIPLES OP INSURANCE LAW The English rule doubtless is simpler and more easily applied, and, from the underwriter's point of view, is more logical, since, as already stated, a misdescription of the risk results equally from a non- disclosure, and an affirmative misrepresentation of a material fact.* The American rule, however, on the whole seems more reasonable. To the insured and to most courts, a clear distinction is obvious between making a positive misstatement, however innocent, re- garding one's own property, and merely keeping silence as to some particular not already covered by the express stipulations of a care- fully prepared and voluminous instrument, whether application or policy.^ But when it comes to the practical application of -the American rule, as is often the case with legal doctrines founded upon fraud, we find that the definitions of the courts lack imiformity and pre- cision. A New York court, adopting the phraseology of a text- writer, has defined concealment as the willful withholding of some fact material to the risk, which the insurer had a right to know, and which the insured was under a duty to disclose.' The Missouri court has met the question more squarely in holding, that to imfavorably affect his policy the insured must know the fact to be material, and must also intentionally neglect to commimicate it. In common with many other courts it also holds that when a detailed application is used, fatal concealment cannot, without bad faith on the part of the insured, be predicated on an omission to volunteer facts concerning which no express inquiry is made.^ But perhaps the most satisfactory and workable version of the American rule is that approved by a Federal Circuit Court and by the Supreme Coiirt of South Carolina. The former court sustained a submission to the jury of two questions: (1) was the fact which the plaintiff omitted to disclose material? (2) Was it known, or should it have been known, to him to be a material fact?* The 'Thus in a life insurance case, Mr. the information thought it material," Justice Bayley said: "I think that in Lindenau v. Desbarovgh, 8 Barn. & C. all cases of insurance, whether on ships, 586. houses, or lives, the imderwriter should 2 Daniels v. Hudson R. F. Ins. Co. be informed of every material circum- 12 Gush. (Mass.) 416, 59 Am. Dec. 192 stance within the knowledge of the (silence as to matter the insured does assured; and that the proper question not consider important is not fatal), is whether any particular circumstance 3 ATnmcon Artistic Gold S 'Co v was in fact material, and not whether Glens Falls Ins. Co., 1 Misc 114 il8 the party believed it to be so. The * Boggs v. American Ins. Co 30 contrary doctrine would lead to fre- Mo. 63. ' quent suppression of information, and ^ Peker Mfg. Co. v. St. Paxd F & it would often be extremely difficult to M. Ins. Co., 41 Fed. 271. ' show that the party neglecting to give concealment: fire and life 127 other coxirt by its Chief Justice sustained as correct a charge to the jury, that the insured, the same plaintiff with the same issue as in the last case, was bound not to withhold any fact. which he knew, or had reason to believe, would be likely to influence the insurer -in fixing rates or rejecting the insurance.^ The Maine court has adopted thd same view.^ And a similar doctrine in West Virginia, in refer- ence to defective answers in an application for life insurance, is in- dicated by the declaration of the court that, "legal fraud may exist when there is no intention to deceive." ^ Where the insurer makes special inquiries) as by requiring the execution of an application, it may generally be assumed that the information asked for .is all that is required.'* Other incidental matters relating to the risk, or particulars about the title, or nature and extent of interest not asked for, need not be volunteered, unless believed to be material.^ This, in practice, constitutes an im- portant modification of the general rule requiring a full disclosure of all material facts, inasmuch as a written application is almost invariably made the basis of a life policy, and the fire policy by its own terms provides for certain disclosures; ® but even then the applicant must evince good faith, and would be guilty of a wrongful concealment if he withheld intelligence which would clearly affect the judgment of the insurer; as, for example, that attempts had lately been made to set fire to his house.^ 1 Pelzer Mfg. Co. v. Sun Fire Office, 629, 13 S. K. 77; Johnson v. Scottish 36 S. C. 213, 15 S. E. 562 (non-dis- Union & Nat. Ins. Co., 93 Wis. 223, closure of provision in lease depriving 67 N. W. 416 (here based on statute); insurer of right of subrogation). Roloff v. Farmers' Home Mut. Ins. Co. 2 Dennison v. Thmuiston Mut. Ins. (Wis., Jan., 1907), 110 N. W. 261 (con- Co., 20 Me. 125, 37 Am. Dec. 42. tents of disclosed lease); but this rule 3 Schwarzback v. Ohio Val., etc., offers no excuse for a violation of the Union, 25 W. Va. 655. express conditions of the policy. Cases * Clark V. Ins. Co., 8 How. (U. S.) to the contrary like Dooly v. Hanover 235, 240, 12 L. Ed. 1061; Cross v. i?". /ras. Co., 16 Wash. 159, 47 Pac. 508, National Fire Ins. Co., 132 N. Y. 133, 58 Am. St. R. 29, cannot be considered 30 N. E. 390; Browning v. Home Ins. sound. Co., 71 N. Y. 608; Gates v. Madison, « Parsons v. Lans, 97 Minn. 98, 106 etc., Ins. Co., 5 N. Y. 469, 55 Am. Dec. N. W. 485. Thus the standard fire 360; Pelzer Mfg. Co. v. Sun Fire Office, policy calls for special permit if there 36 S. C. 213, 270, 15 S. E. 562; Union be a chattel mortgage, but real estate Assur. Soc. v. Nails, 101 Va. 613, 44 mortgage need not be disclosed unless S. E. 896, 99 Am. St. R. 923. inquiry be made. Van Kirk v. Citizens' ^ McCklland v. Greenwich Ins. Co., Ins. Co., 79 Wis. 627; American Artistic 107 La. 124, 31 So. 691; Seal v. Farm- Gold S. Co. v. Glens Falls Ins. Co., 1 ers', etc., Ins. Co., 59 Neb. 253, 80 Misc. (N. Y.) 114. N. W. 807; Graham v. American Fire ' Bebee v. Hartford Co. Mut. Fire Ins. Ins. Co., 48 S. C. 195, 26 S. E. 323, 59 Co., 25 Conn. 51, 65 Am. Dec. 553; Am. St. R. 707; Southern Ins. Co. v. Waldm v. Ins. Co., 12 La. 134, 32 Am. Estes, 106 Tenn. 472, 62 S. W. 149, 52 Dec. 116; Curry v. Commonwealth Ins. L. R. A. 915, 82 Am. St. R. 892 (liens); Co., 10 Pick. (Mass.) 535; NoHh Am. WythemUe Ins. Co. v. StuUz, 87 Vir. Ins. Co. v. Throop, 22 Mich. 146; 128 GENERAL PEINCIPLES OF INSURANCE LAW In failing to fill out a statement in the application as to the amount of incumbrances on the property, the court held that the applicant was not guilty of a fatal concealment of a material fact, since the company had notice that the question was not answered.^ If the company accepts an application on the face of which it appears that there is a failure to answer a question, or in which the answers "are i nperfect or incomplete and not necessarily false, in the absence of l)ad faith the company cannot claim forfeiture on the ground of concealment.^ In fire insurance, questions of concealment and misrepresentation rre now governed by the express warranty on that subject con- Icined in the policy. § 97. Representations. — A representation is an oral or written statement of facts or circumstances made at the time of or before the closing of the contract and relating to the proposed adventure, upon the faith of which the agreement is made.^ The circumstances represented may be matter of fact or of expectation or belief. The term "representations" as here employed does not refer to state- ments which are incorporated into the contract and expressly made warranties, but rather to collateral matter of inducement.* It is a general rule in the law of insurance, that a material misrepresentation CampbeU v. Victoria Mut. Ins. Co., 45 ^ Phcenix Mut. lAfe Ins. Co. v. U. C. (Q. B.) 412. Contra, German Raddin, 120 U. S. 183, 7 S. Ct. 500, 30 Am. Ins. Co. v. Norns, 100 Ky. 29, L. Ed. 644; Conn. Mut. Life Ins. Co. v. 37 S. W. 267, 66 Am. St. R. 324. Must Luchs, 108 U. S. 498, 2 S. Ct. 949, 27 disclose that at time of application a L. Ed. 800. It is held generally in this fire was raging near the property, country that concealment cannot be Orient Ins. Co. v. Peiser, 91 111. App. predicated on an omission to answer a 278; or that the applicant for life in- question propounded by the insurer in surance was about to fight a duel, the application, Tiefenthal v. Citizens' Penn. Mut. Life Ins. Co. v. Mech. S. Mut. F. Ins. Co., 53 Mich. 306, 19 Bank & Trust Co., 72 Fed. 413, 435, N. W. 9; Carson v. Jersey City F. Im. 19 C. C. A. 286, 38 L. R. A. 33; but Co., 43 N. J. L. 300, 39 Am. Rep. 584; held that married woman need not Armenia Ins. Co. v. Paul, 91 Pa. 520, disclose pregnancy, Merriman v. Grand 36 Am. Rep. 676; or on a partial dis- Lodge (Neb.), 110 N. W. 302, 36 Ins. L. closure, if on its face partial, Phomix J. 340. Ignorance on the part of the Ins. Co. v. Stocks, 149 111. 319, 36 N. E. agent of the insurer that the insured 408; Miotke v. MU. Mech. Ins. Co., 113 was a woman does not show fatal con- Mich. 166, 71 N. W. 463. cealment, Mechanics' & Traders' Ins. 3 Clark 'v. Ins Co 8 How (US) Co. V. FUi'id, 20 Ky. Law Rep. 1538, 235, 12 L. Ed. 1061.'' 49 S. W. 543. Antecedent threats of < Camjiell v. Ins. Co., 98 Mass. 381. incendiarism from parties, since dead, For example the life policy usually need not be disclosed, Arkansas Mut. makes the application a part of the F. Ins. Co. (Ark. 1907), 36 Ins. L. J. contract and its statements or answers 1 "d 7 r,, ^ E- T ^ ,- warranties. These again by statute in ^Parkerw Ots^oCo.P Ins. Co., 47 many states are made analogous to aFdl6rN'Y.'6l5,''6i]j.l!Ti3r' ^f ""'^*^*'°'"' ''' "-'"^""^^ REPRESENTATIONS 129 of fact by either party or his authorized agent, whether innocent and unintentional, or willful and fraudulent, renders the policy voidable at the option of the other party ,^ provided the misrepresentation ib not too remotely connected in time with the transaction.^ For example, an incorrect statement that no lamps were used in the picker room of a cotton factory insured was held to avoid a policy which was issued upon the faith of this representation.* It is important to observe that, unlike warranties, mere representa- tions of fact need be only substantially correct.* Thus a broker, in offering a risk to the underwriter, showed the latter his written instructions, which comprised a statement re- specting, the vessel, ^that "she mounts twelve guns and twenty men:'" in point of fact, the vessel had not this precise force on board; but she had an armament of guns and swivels, with a crew of men and boys, which in both particulars was equivalent to, though not identical with, the force specified.. It was held that the statement made to the underwriter, being a representation, was satisfied by the substantial fulfillment, though had it been a warranty nothing less than a strict and literal fulfillment would have sufficed.* A policy on ship and goods from Nassau to the Clyde was effected on the 18th of June, 1814. The broker showed the underwriters a letter, dated April 2, in which it was stated, the Brilliant, the ship insured, "will sail on the 1st of May." In fact, the ship had sailed on the 20th of April, and on the 11th of May had been captured by an American privateer. These facts were wholly unknown to the parties by whom the representation was made, yet it was held that the pohcy was avoided for misrepresentation.* 1 Armour v. Transatlantic F. Ins. it is usually the insurance company Co., 90 N. Y. 450; Blackburn v. Vigors, that seeks to have the policy adjudged L. R. 17 Q. B. Div. 553, 561, 12 App. void for misrepresentation. Cas. 539. Mvist be both material and 2 Bamett v. Bamett, 83 Va. 504, 2 untrue to avoid, if not made a war- S. E. 733. ranty, Fidelity & C. Co. v. AlpeH, 67 3 Clark v. Ins. Co., 8 How. (U. S.) Fed. 460, 14 C. C. A. 474, 28 U. S. App. 235, 12 L. Ed. 1061. 393. "Fraud need not be pleaded to * Jeffrey v. United Order, 97 Me. 176, make the complaint non-demurrable, 53 Atl. 1102 (statements in an applica- for there is in every contract of insur- tion which were not made warranties) ; ance, in the , absence of an express pro- ^tna Ins: Co. v. Simmons, 49 Neb. vision on that head, an implied condi- 811, 69 N. W. 125 (warranty must be tion of the truth of all material rep- literally true, representation only sub- resentations of the insured on the faith stantially so); Suckley v. Delafield, 2 of which the contract is made," Evans Caines (N. Y.), 222; Jefferson Ins. Co. V. Columbia Fire Ins. Co., 40 Misc. v. Cola. 568, 28 So. 646; Neal v. Gray 124 Ga. 510, 52 S. E. 622, Cotton States L. I. Co. v. Lester, 62 Ga. 247, 35 Am. Rep. 122: JUinois Life Assn. V. Wells, 102 111. App. 544, aff'd 200 III. 445, 65 N. E. 1072; Mudd v. German Ins. Co., 22 Ky. L. R. 308, 56 S. W. 977; Appkton v. Phomix Mut. L. I. Co., 59 N. H. 541, 47 Am. Rep. 220; Schceller v. Grand Lodge, 110 App. Div. (N. Y.) 456; Bryan v. National L. I. Assn., 21 R. I. 149, 42 Atl. 513. Where the insurer allows a person on several occasions to solicit life insurance and deliver policies with- out cash premiums, but for notes, it is estopped from denying due receipt of premium^ Tooker v. Security Trust Co., 26 App. Div. 372, aff'd' 165 N. Y. 608, 58 N. E. 1093; De Frece v. N. L. Ins. Co., 136 N. Y. 144, 32 N. E. 556. Com- pany is estopped to claim forfeiture for non-payment of premium where its general agent has written requesting the insured to hold the amount until called for, and on several occasions the premiuni had not been called for until several days after maturity, Jitna Life Ins. Co. y. Fallbw, 110 Tenn. 720, 77 S. W. 937. So an instruction to agents, recited in a letter of a general agent, that if the premium is paid more than thirty days after it is due there must be a health certificate, is evidence against the company that credit is allowed, Kendrick v. Mvtual Ben. L. I. Co., 124 N. C. 315, 32 S. E. 728, 70 Am. St. R. 592. And the continued acceptance of checks for several years will waive a right to forfeit the policy for failure to pay as directed by the usual notices, HalloweU v. Life Ins. Co., 126 N. C. 398, 35 S. E. 616. ^Thompson v. Ins. Co., 104 U. S. 252, 259, 26 L. Ed. 765; Schmertz v. United States L. I. Co., 118 Fed. 250, 55 C. C. A. 104; Haydel v. Mutual Res. F. L.A., 104 Fed. 718, 44 C. C. A. 169. Permit to store fireworks for a certain period is a waiver of a known for- feiture but will not operate beyond the period named, Betcher v. Capital Fire Ins. Co., 78 Minn. 240, 80 N. W. 971. 3 Iowa Life Ins. Co. v. Lewis, 187 U. S. 335, 348, 23 S. Ct. 126; Orient Ins. Co. V. McKnight, 197 111. 190, 64 N. E. 339; Baichelder v. Queen Ins. Co., 135 Mass. 449; Pechner v. Ins. Co., 65 N. Y. 195. 4 Kotwicki V. Thuringen Ins. Co. 134 Mich. 82, 95 N. W. 976. KNOWLEDGE OF BREACH 175 trial judges of allowing proof of waiver and estoppel under general allegation of full performance, placed insurance companies largely at the mercy of dishonest claimants.^ In consequence, the New York standard fire policy, and often other policies, fire, life, and accident, provide in substance that no officer or agent shall have power to wai\c' except by written agreement indorsed upon or attached to the policy. Such limitations upon the authority of agents, thus brought to the attention of the assured by the policy itself and sometimes by the terms of the application, powerfully affect the decisions in many jurisdictions and have rendered practically obso- lete a large number of earlier cases. § 141. Knowledge o£ Breach — When a Waiver. — If at the time of closing the contract the insurers have knowledge of the existence of a cause of forfeiture which would invalidate the policy from the time of its inception, they are held, by accepting the premium or deliver- ing the policy, to waive the forfeiture, or to be estopped from in- sisting upon it. This is the rule in most of the state courts.^ The rule has also been extended to the case where though the agent had *no knowledge of the facts relating to incumbrances the assured expressly left it to him to ascertain, and the company was held to have waived forfeiture since the company had assumed the burden of ascertaining the facts.* Constructive knowledge of the fact of a former application growing out of the circumstance that if the company had searched its records it might have found it, however, is not sufficient to excuse a breach of warranty by reason of an un- 1 Northern Assur. Co. v. Grand'View ^ Skinner v. Norman, 165 N. Y. 565, Bldg. Assn., 183 U. S. 308, 364, 22 571,59 N. E. 309,80 Am. St. R. 776 (in S. Ct. 133, 46 L. Ed. 213. which the court said: "When a person ^Loring v. Dutchess Ins. Co., 1 Cal. has sufficient information to lead him App. 186, 81 Pac. 1025 (1905); John- to a fact he shall be deemed conversant son V. Mtna Ins. Co., 123 Ga. 404, with it"). A line of cases holds that 51 S. E. 339 (1905); German Ins. insurer has waived warranties regard- Co. v. Shader (Neb.), 93 N. W. 972, ing title and sole ownership if he issues 60 L. R. A. 918 (citing cases from some standard pohcy without making spe- twenty-seven states to same effect); cific inqwries, Sharp v. Scottish Union Leviis V. Guardian F. Ins. Co., 181 /ns. Co., 136 Cal. 542, 69 Pac. 253, 615; N. Y. 392. For full consideration National F. Ins. Co. \. Lumber Co. ,217 of this subject see §§ 173-175. As to 111. 115, 127; Glens Falls Ins. Co. v. contrary rule in federal and other Michael (Ind.), 79 N. E. 905; Miotke v. courts see § 142. This doctrine is Mil. & M. Ins. Co., 113 Mich. 166; applicable to the implied warranty Phila. Tool Co. v. Brit.-Am. Assur. of seaworthiness in a marine policy. Co., 132 Pa. St. 236. Such decisions Knowledge of unseaworthy condition are unsatisfactory. The policy itself at the time of its issuance works pointedly demands a true disclosure, estoppel, Hoxie v. Home Ins. Co., Parsons v. Lane, 97 Minn. 98, 106 32 Conn. 21, 85 Am. Dec. 240; The- N. W. 485; Westchester F. Ins. Co. v. baud v. Great Western Ins. Co., 155 Ocean View P. Pier Co. (Va., 1907), N. Y. 616, 50 N. E. 284. 56 S. E. 684. 176 GENERAL PRINCIPLES OF INSURANCE LAW true statement in the application since the company has not under- taken or agreed to investigate.'' But mere knowledge by the insurers at any time of the existence of 'facts amounting to cause of forfeiture does not of itself accomplish a waiver or estoppel. If it did, the company could never take ad- vantage of a forfeiture, for the moment it became aware of it, it would be debarred from insisting upon it. There must exist, in addition to a knowledge of the breach and in conjunction with it, some positive act of recognition or confirmation of the continuing validity of the insurance, such, for example, as delivering the policy, or accepting the premium, or indorsing a permit, upon which, in connection with the knowledge, a waiver may be predicated, and by force of which the contract otherwise avoided may be said to be acquiesced in or revived.^ But in finding a waiver the court must not extend the insurer's act of indulgence to other transactions, though relating to the same policy, unless some practice or continued course of dealing warrant- ing it is shown. The insurer alone has the power to do that. Thus, where a waiver .of forfeiture for other insurance on the same property, without written permit, was inferred because the defendant's agent - had knowledge of the other insurance at the time he issued the de- fendant's policy, the court held that a subsequent increase in the amount of the other insurance, procured by the plaintiff without the defendant's consent, vitiated its policy and defeated recovery upon it.' In like manner, though the court infer from the coinsurance clause a consent to other insurance, this consent will not by implica- tion be extended to a permit for excessive or overinsurance.'* § 142. Rule in Federal Courts— Massachusetts— New Jersey.— The federal courts and those of Massachusetts and New Jersey adhere more closely to the doctrine of the common law,^ and hold that in an action on contract a waiver of a forfeiture existing at the inception of the contract cannot be established by parol testimony ^ Rhode V. Met. Life Ins. Co., 129 Mexico Lumber Co., 10 Colo. Am 223 Mich. 112, 88 N. W. 400; Hackett v. 236, 51 Pac. 174. See § 143, infra ' ,Supreme Council, 44 App. Div. 524, 3 Kelly w. L. & L. & G Ins Co 'aflf*d 168 N. Y. 588, 60 N. E. 1112. (Minn., 1907), 111 N W 395 Contra, O'Rourke v. John Hancock Mid. i Cutler v. Royal Ins Co 70 Conn Life I Co^, 23 R. I. 457, 50 Atl. 834, 91 566; Woolford v. Phoenix Im. Co., 190 Am. St. R. 643 „ „ , Mass. 233, 76 N. E. 722; but see PooJ 2 CUmans v. kuprevK Assembly Royal v. Milwaukee Mech. Ins Co 91 Wis Soc, ete., 131 N. Y. 485, 30 N. E. 496; 530; Catoosa Springs v. Linch, 18 Weed V. London & Lan. Ins. Co., 116 Misc. (N. Y.) 210 N. Y. 106; Merchants' Ins. Co. v. s Weston v. Enies, 1 Taunt 115 SILENCE NOT A WAIVEE 177 of what was said and done at or before the closing of the contract.* In all jurisdictions a sufficient ground of estoppel may be shown by parol, but the practice is not uniform as to when recourse must be had to an equity forum.^ § 143. Silence not a Waiver. — Mere silence or inaction on the part of the company after knowledge of a forfeiture by the insured will not in general operate as a waiver. The company has not con- tracted to search out the insured and advise him as to the legal effect of the provisions of the policy.' To hold the contrary is to make a new agreement for the parties. But this rule is modified with respect to irregularities in the proofs of loss which upon notice might be corrected.* Mere failure to reply to a letter from the in- sured stating that at some future date he will pay a premium about to fall due is no waiver.^ Nor is failure to answer a letter from the insured an admission that a person, calling on the insured in respect to a loss under the policy, has authority to adjust the loss or waive proofs.® In connection with the cancellation clause of the fire policies in common use a very practical illustration of this general rule is fur- nished. By the weight of authority and reason the right to cancel under the clause imposes no duty upon the insurers, upon learning of a forfeiture, to do so, nor does the mere failure to cancel furnish a sufficient ground for claiming a waiver or an estoppel. The sound- 1 Allen V. Mass. Mut. Ace. Ass., 167 court says, "Did this court intend to Mass. 18; Thomas v. Commercial Union approve the proposition that to cause Ass. Co., 162 Mass. 29; Dimick v. Met. a forfeiture some affirmative action Life Ins. Co., 69 N. J. L. 384, 401, 55 was necessary by the company — a Atl. 291; Martin v. Ins. Co., of No. Am. declaration to that effect and the sur- 57 N. J. L. 623, 31 Atl. 213; Northern render of the premium notes? To hold Assur. Co. V. Grand View Building the latter would be to hold that this Assn., 183 U. S. 308, 22 S. Ct. 133, 46 court intended to reverse a number of L. Ed. 213. Referring to that case the decisions made upon careful considera- same court has since said: "There is no tion." Mere silence or neglect to act attempt, by parol testimony, to con- is no waiver, RundeU, v. 7ns. Co., 128 tradict any stipulations of the policy, Iowa, 575; Betcher v. Capital Fire I. something which we have recently held Co., 78 Minn. 240, 80 N. W. 971; Keith cannot be done," Hartford F. Ins. Co. v. Ins. Co., 117 Wis. 531, 94 N. W. v. Wilson, 187 U. S. 467, 478, 23 S. Ct. 295; Sun Mut. Ins. Co. v. Dudley, 65 189 Ark, 240, 248, 45 S. W. 539; Gibson El. 2 Iowa Life Ins. Co. v. Lends, 187 Co. v. L. & L. cS: G. Ins. Co., 159 N. Y. U. S. 335, 348, 23 S. Ct. 126; NoHhem 418, 427,. 54 N. E. 23; Armstrong v. Assur. Co. V. Grand View Bldg. Assn., Agricultural Ins. Co., *130 N. Y. 560, 183 TJ. S. 308, 361, 22 S. Ct. 133; Met- 29 N. E. 991. ropolitan Life Ins. Co. v. McTague, 49 « See § 144, infra. N. J. L. 587, 60 Am. Rep. 661; Carson ^ Dale v. Continental Ins. Co., 95 V. Jersey City Ins. Co., 43 N. J. L. 300, Tenn. 38, 31 S. W. 266. 39 Am. Rep. 584. ' Parker v. Farmers' Fire Ins. Co. 3 Iowa Life Ins. Co. v. Letvis, 187 188 Mass. 257, 74 N. E. 286. U, S. 335, where at pp. 350, 351 the 12 178 GENERAL PRINCIPLES OF INSURANCE LAW ness of this conclusion becomes the more apparent when it is notea that the contract makes the right to cancel an option, not an obli- gation.' There are, however, many cases in which courts have adopted the opposite view, holding that a failure affirmatively to assert a forfeit- ure within a reasonable time after acquiring knowledge is a waiver by the company.^ These cases create for the insurer a new obliga- tion, and without new compensation they practically impose upon him the intolerable burden of investigating every rumor of forfeiture, and, if it turns out to be based upon fact, of looking up the assured and serving upon him notice of cancellation with proportionate re- turn of premium. In other cases the court concluded that special circumstances had thrust upon the insurer the duty of affirmative action. Thus where the assured wrote the company that the policy was at a certain bank, that he did not remember its conditions, that he had taken out additional insurance and further said, "if there is an}rthing that confficts with your policy, advise me," the company was held estopped.* § 144. Proofs of Loss — Technicalities. — Technical requirements as to the form and contents of the proofs of loss, or time of their ser- vice, or time for bringing suit, will more readily be held to be waived than essential elements of the contract which more vitally affect the risk.* Thus waiver of service of proofs within the specified '^ Betcher Y. Capital Fire Ins. Co., 78 of loss, the company should have Minn. 240, 80 N. W. 971; Straker v. affirmatively objected to the other in- Phoenix Ins. Co., 101 Wis. 413, 421, 77 surance lest the insured should settle N. W. 752. Contra, Phoenix Ins. Co. v. with other companies to his prejudice. Grove, 215 111. 299, 74 N. E. 141; Pol- * Cleaver v. Traders' Ins. Co., 40 lock V. German P. Ins. Co., 127 Mich. Fed. 711; Searle v. Dwelling House 460, 473, 86 N. W. 1017. Ins. Co., 152 Mass. 263; Eastern B. R. 2 Cassimus v. Scottish Union & Nat. Co. v. Relief Ins. Co., 105 Mass. 570; Ins. Co., 136 Ala. 256, 33 So. 163; Jennings v. Metropolitan Life Ins. Co., GUns Falls Fire Ins. Co. v. Michael 148 Mass. 61; Trippe v P F So- (Ind., 1905), 74 N. E. 964; Swedish- dety, 140 N. Y. 23, 28, 35 N. E. 316, Am. Ins. Co. v. Knutson, 67 Kan. 71, 37 Am. St. R. 529; Goodwin v. Mass. 72 Pac. 526, 100 Am. St. R. 382; Afirf. Li/e/ns. Co., 73 N. Y. 480. As to Kalmvtz v. Northern Mut. Ins. Co., 186 agent's authority to waive see ch. VIII, Pa. St. 571, 40 Atl. 816; Morrison v. infra. It is held that a manifest dis- Ins. Co., 69 Tex. 353; see Norris v. tinction should be observed in giving HaHford Fire Ins. Co., 57 S. C. 358, construction to the two classes of con- 35 S. E. 572 (fjiilure to cancel policy, ditions, those that operate upon the and return unearned premium is evi- parties and the contract prior to the dence if or jtuy to consider upon ques- loss, and those which have for their tion of an intention to waive). general object to define the mode in 3 Ranch v. Millers' Mvt. F. Ins. Co., which an accrued loss is to be estab- 131 Mich. 281; Everett v. London, etc., lished,adjusted,andrecovered after the Ins. Co., 142 Pa. St. 332, 21 Atl. 819, reciprocal rights and liabilities of the 24 Am. St. R. 499, in which the court parties have become fixed by the oc concluded that upon receiving proofs currence of the peril insured against, DENIAL OF ALL LIABILITY 179 ji i may be found by the jury from evidence fairly tending to show it, though without written agreement on the policy.^ § v,4S. Denial of all Liability. — A positive denial by the insurer of all' liability under the policy, it has often been held, relieves the insuAid from the duty of furnishing notice or proofs of loss,^ or of death,* or correcting proofs already furnished,* or submitting to a person j,l examination, or to an appraisal under the terms of the policy. In such a case, it is said, the proofs do not tend to induce the ina^jrer to pay and are useless.* The argument is that, if the insurer declares the policy annulled upon other grounds, the in- sured tt/ed not go to the unnecessary trouble and Expense of a further compliance with the terms of the contract intended to supply the insui jr with evidence of the nature and extent of its liability.* McNaMy v P. Jm. Co., 137 N. Y. 389, 398, 33 N. i. 475. 1 "The New York court said: "It is well settled that when liability has become fixeil by the capital fact of loss within the !«inge of the responsibility assumed in the contract, courts are reluctant to teprive the insured of the benefit of th it liability by any narrow or technical construction of the con- ditions and stipulations which pre- scribe the for aal requisites by means of which the acurued right is to be made available for Ms indemnification," Ser- gertt v. L. & L. & G. Ins. Co., 155 N. Y. 349, 3i'i5, 49 N. E. 935, Bart- lett, J.; Gray v. Blum, 55 N. J. Eq. 553, 38 Atl. 64 5; Snyder v. Ins. Co., 59 N. J. L. 544, 37 Atl. 1022, 59 Am. St. R. 625. But S(5e Travelers' Ins. Co. v. Myers, 62 Ohio St. 529, 57 N. E. 458, and cases cited. 2 Royal Ins. C \v. Martin, 192 U. S. 149, 48 L. Ed. 385, 24 S. a. 247; Con. Ins. Co. v. Parkes, 142 Ala. 650, 39 So. 204; Fros.\ v. No. Brit. & Mer. Ins. Co., 77 Vt, 407, 60 Atl. 803; Continental Ins. C i. v. Daniel, 25 Ky. Law. Rep. 1501, .'8 S. W. 866: Pru- dential Ins. Co. V. Devoe, 98 Md. 584, 56 Atl. 809; Gerrtnger v. North Caro- lina Home Ins. Co. 133 N. C. 407, 45 S. E. 773; Scottish Union & Nat. Ins. Co. V. Moore (Fts. Civ. App.), 81 S. W. 573; Cooper v, Ins. Co., 96 Wis. 362, 71 N. W. 606. 3lona Life Ins. ''.'o. v. Lewis, 187 U. S. 335; Knickerbixker Life Ins. Co. V. Pendleton, 112 U. S 696, 5 S. Ct. 314. i Virginia F. & Mar. Ins. Co. v. Qoode. 95 Va. 762, 30 S. E. 370, 371, 6 Phoenix Ins. Co. v. Kerr, 129 Fed. 723. As to waiving service of proofs of loss by conduct of the agent see Sergent v. Liverpool, L. & G. Ins. Co., 155 N. Y. 349, 355, 49 N. E. 935; Bishop v. Agri. Ins. Co., 130 N. Y. 488, 29 N. E. 844; Frost v. No. Brit. & Merc. Ins. Co., 77 Vt. 407, 60 Atl. 803. As to not waiving see Hicks V. Brit.-Am. Ass., 162 N. Y. 284, 56 N. E. 743. And as to agent's author- ity to waive, see also Dobson v. Hart- ford Fire Ins. Co., 86 App. Div. 115, aff'd 179 N. Y. 557, 71 N. E. 1130; Smaldone v. Ins. Co. of North Am. 162 N. Y. 580, 57 N. E. 168; Germania Fire Ins. Co. V. Pitcher, 160 Ind. 392, 64 N. E. 921; Snyder v. Ins. Co., 59 N. J. L. 544, 37 Atl. 1022, 59 Am. St. R. 625. ' On principle this rule is not clear or satisfactory, Armstrong v. Ins. Co., 130 N. Y. 560, 29 N. E. 991. It is based on the assumption that if some agent of the company has denied lia- bility the company has no occasion to investigate the facts or to commit the insureJ to the sworn statement pro- vided for by the policy. If the con- tract methods of investigation were aimed solely at ascertaining the amount of loss, and if the company was surely right in its opinion that a fatal breach had occurred, the justice of the rule would be more apparent. But where the company turns out to be wrong in its opinion and ultimately is required to pay the claim, the question arises, ought it to have been deprived of the benefit of important contract provi- sions for ascertaining the nature and amount of loss, a compliance with 180 GENERAL PRINCIPLES OF INSURANCE LAW § 146. Demanding Proofs of Loss. — Demanding the usual verified proofs of loss in itself effects no waiver or estoppel. No matter how many grounds of forfeiture the company may suspect or believe to exist, it is entitled to insist upon the contract provisions framed for the very purpose of enabling it to pass upon and estimate intelli- gently the nature and amount of the loss.^ Among these, many legislatures have seen fit to prescribe that as a preliminary to any action the assured must make up and swear to a statement of the particulars of the loss.^ Manifestly no intention to waive can be gathered from a mere request for a fulfillment of this reasonable requirement, and as to estoppel the essential element of injury or prejudice to the insured is lacking, since the insured is bound by his contract to do the very same thing though the company make no affirmative request at all.^ The request may benefit the in- sured by calling his attention to a condition precedent which might which, by the terms of the contract, is made an absolute condition precedent to any right of recovery, and a fulfil- ment of which on the part of the as- sured naturally precedes an intelligent and final answer by the company to the claim thus presented against it, Boruszweski v. Middlesex Mvt. Ins. Co., 186 Mass. 589. Simply because the assured is believed to have vio- lated one condition precedent why should the court permit him to violate with impunity another condition prec- edent? Again, assume that the ad- Cter or other agent of the company been led to believe that the claim of the assured is fraudulent, and is induced by the assured, as frequently occurs during the preliminary in- vestigation, to make some admission to .that effect, it is by no means clear either under the law of contracts or with regard to considerations of equity and public policy that a court is justified in ruling that, while the plain- tiff is entitled to enforce the policy, the company cannot pursue provisions of the same contract devised expressly for the purpose of enabling it when suspecting fraud to thoroughly venti- late the facts. This is obviously the main purpose of the contract require- ment for verification of proofs or state- ments and also for personal examina- tion under oath. The truth is that the company usually desires and reason- ably demands proofs of loss verified by the claimant, except as the claim is either recognized by itself or aban- doned by the assured. In any other event, if the policy is to be construed like other contracts, the company would seem entitled to them wimout submitting to the penalty of forfeiting its rights. No implication of waiver can arise from acts done in accordance with the contract, Parker v. Knights Templars, 70 Neb. 268, 97 N. W. 281; Hare v. Headley, 54 N. J. Eq. 545, 555, 35 Atl. 445. So far from involving the notion of waiver, the English court concludes that it is a natural incident of any insurance contract that the insured must furnish full information after loss, even though there be no express promise to do so, Harding v. Bussell (1905), 2 K. B. 83; BouUon v. Houlder Bros. (1904), 1 K. B. 784. Some cases go so far as to hold that denial of liability is a waiver of the clause giving the company sixty days after notice in which to pay loss and that suit may be brou^t at once, Edwards v. Firemen's Ins. Co., 43 Misc. 354, 87 N. Y. Supp. 507; Frost V. North British Mercantile I. Co., 77 Vt. 407, 60 Atl. 803. The soundness of this rule is doubtful. 1 Boruszweski v. Middlesex Mid. Ins. Co., 186 Mass. 589. 2 BovUon V. Houlder (1904), 1 K. B. 784; Harding v. BusseU (1905), 2 K. B. 83; Hicks v. Brit.-Am. Assn., 162 N. Y. 284, 56 N. E. 743 (N. Y. standard fire policy, used generally throughout the country, with the exception of a few states). 3 Peabody v. SaUerle, 166 N. Y. 174, DEMANDING PEOOFS OF LOSS 181 otherwise be overlooked. It cannot cause him unreasonable preju- dice.^ It must be observed also that one great difficulty with all parol waivers is that written terms of the contract are sought to be set 59 N. E. 818; Perry v. Caledonian Ins. Co., 103 App. Div. (N. Y.) 113. 1 As Vice Chancellor Emery says: "If the act relied on as indicating the intention is referable to other causes or reasons than a waiver of a right, it should not be construed to be such waiver," Hare v. Headhy, 54 N. J. Eq. 545, 555, 35 Atl. 445; Parker v. Knights Templars, 70 Neb. 268, 97 N. W. 281. The argument that the company ought not to put the insured to any further trouble if the contract is to be forfeited is more than offset by the consideration that a rule of con- struction must not be applied which may result in depriving the company of some of its most reasonable con- tract rights in the event that it shall decide or be compelled to fulfill the con- tract upon its part. Most of the cases that have held or intimated that ask- ing for the usual proofs of loss estops the company from subsequently setting up a prior known forfeiture have invoked the rule of the New York court as stated in the Titus case, TUus V. Glens Falls Ins. Co., 81 N. Y. 410; see § 147, infra, in which addi- tional and unusual requirements were demanded by the company involving considerable trouble and expense to the assured. That rule when applied to other cases may well receive modi- fications which the same court subse- quently engrafted upon it. Thus in a later case, held, without dissent, that calling for proofs of loss will not estab- lish waiver or estoppel, Armstrong v. Agricultural Ins. Co., 130 N. Y. 660, 567, 29 N. E. 991. The court says of the defendant: "It needs no argu- ment to show that it was justified in standing upon its legal rights and asserting them in the ordinary way and at the proper time, so long as in doing so it did not mislead the plain- tiff to his own harm. It had a right to base its defense to any claim made upon it upon the violation prior to the fire of any provision of the contract, and to require performance by the assured after the fire of those condi- tions which he had contracted to per- form and which were essential to his cause of action and preliminary to the assertion of any claim upon the policy. And in ' demanding strict compliance with such condition it did not waive any of its rights under the contract," Brown, J., all concurring. This case is cited with approval in Phoenix Ins. Co V. Flemming, 65 Ark. 54, 44 S. W. 464, in which it is held that a demand for proofs or books of account will effect no waiver of a known forfeiture "the elements of estoppel must exist." See also McCormick v. Springfield F. & M. Ins. Co., 66 Cal. 361, 5 Pac. 617. In a later case the New York court says, by Landon, J., all concurring: "It was a condition precedent to the maturity of the claim of the plaintiff that proofs of death specified in the contract should be furnished. The acts of the defend- ant in furnishing blanks in the first instance and giving instructions as to the manner of filling them were acts of courtesy. . . . All the papers con- stituting the proofs of death and its cause were part of the evidence proper for the defendant to ask and for the plaintiff to give in order to impart to the defendant that full knowledge of the facts which under the circumstances was material to the reserved question of Ronald's reinstatement as a mem- ber and also a condition precedent to any further acts to be relied upon as a waiver of forfeiture," Ronald v. M. R. F. L. Assn., 132 N. Y. 378, 384, 30 N. E. 739. See also Matthie v. Globe Fire Ins. Co., 174 N. Y. 489, 67 N. E. 57. In the last two cases, to be sure, there was in effect an express reserva- tion of rights or denial of liability by the company, but the policies to which the assured themselves are parties con- tain a clearer reservation of rights than does an ex parte declaration, and if a demand for preliminary formal proofs, with an intent not to abandon a known forfeiture, were so clear a fraud as to demand the interposition of the doc- trine of estoppel, an ex parte reservation must have little bearing on the result. In a Pennsylvania case the agent, with knowledge of a ground of forfeiture, said to the assured: "Go on and make out your proofs of loss." He also de- 182 GENERAL PRINCIPLES OF INSURANCE LAW aside by testimony which at best is uncertain and unreliable.' A claimant often asks the adjuster or agent some question in regard to proofs of loss. The adjuster may simply give his best impression in response. He can with courtesy do no less. The incident, really harmless and often trivial, figures at the trial as a demand for proofs of loss with knowledge of prior grounds of forfeiture.^ Opposed to the formidable array of authorities upon this practical point as cited in the notes, we find, however, numerous court opin- ions and text-books in which the statement is made broadly that calling for proofs of loss waives any known forfeiture, or estops the insurer from insisting upon it, but in most of such opinions by the judges it will be found that the remark was a mere dictum, and that in the facts of the case the company was shown to have put the assured to an unreasonable burden of trouble and expense by calling for additional or extraordinary proofs over and above what the policy prescribes as necessary without special demand.' § 147. Demanding Additional Proofs of Loss. — If with full knowl- edge of facts constituting forfeiture and without denying liability the insurer demands the additional proofs, to obtain which under manded a magistrate's certificate and bills or duplicates showing the prop- erty, but the court said: "He did noth- ing to mislead her, to place her in a worse position or to cause her to incur any expense which she would not have been obliged to incur had he remained silent," and the court held that no waiver or estoppel had been made out, Freedman v. Ins. Co., 175 Pa. St. 350, 34 Atl. 730. So also McCormick v. Ins. Co., 86 Cal. 260, 24 Pac. 1003, in which the court says: "It is an essential ele- ment of estoppel by conduct that the Earty claiming the estoppel should ave relied upon the conduct of the other, and was induced by it to do something which he otherwise would not have done." Quoted, with ap- proval, in First Nat. Bk. v. Maxwell, 123 Cal. 360, 367, 55 Pac. 980, 69 Am. St. R. 64; Wheaton v. Ins. Co., 76 Cal. 415, 18 Pac. 758, 9 Am. St. R. 216 n.; Boyd v. VanderbiU, 90 Tenn. 212, 16 S. W. 470, 25 Am. St. R. 676. The Iowa court says of the agent: "He left word for them that they should send in their proofs but this it was their duty to do in order to establish a right of recovery regardless of any sugges- tions on ms part," RundeU v. Anchor F. Ins. Co., 128 la. 575, 101 N. W. 517, 519; Phoenix Ins. Co. v. Stevenson, 78 Ky. 150. So also the federal court holds that a request for a carpenter's estimate of cost of rebuilding as a proof of loss which put the assured to an expense of $5.00 would not estop the company. Firemen's Fund Ins. Co. V. McGreevy, 118 Fed. 415, 55 C. C. A. 54a 1 Northern Assur. Co. v. Grand View Bldg. Assn., 183 U. S. 308, 22 S. Ct. 733. 2 The Tennessee court says: "It is inconceivable that there should be au- thority for the position that if the in- surer, after a loss, requires proof of loss, it thereby waives all right to set up as a defense that it is not liable by reason of the fact that it never had a valid contract at all," Boyd v. Ins. Co., 90 Tenn. 212, 219. 3 See, for example, Georgia Home Ins. Co. V. Goode, 95 Va. 751, 30 S. E. 366, 369, where copies of invoices were demanded; Planters' Mvt. Ins. Co. v. Loyd, 67 Ark. 584, 56 S. W. 44, 77 Am. St. R. 136; German Fire I. Co. v. Grunert, 112 111. 68; Phamix Assur. Co. V. Hunger, etc., Mfg^ Co. (Tex. Civ. App.), 49 S. W. 271; Reiner v. DweUing House Ins. Co., 74 Wis. 89, 42 N. W 208. WHERE POLICY PROVIDES THAT SUCH ACTS BE NOT WAIVER 183 the policy an affirmative request is necessary, as, for example, a magistrate's certificate, an appraisal, or examination of the assured under oath, or other information, to furnish which involves trouble or expense to the assured, in many cases the insurer is held to be estopped from relying upon the forfeiture, unless the policy, like the standard fire policy, expressly provides that such acts shall not constitute a waiver.^ It should be stated, however, that this rule, to say the least very dubious in principle,^ has in practice worked badly, since a jury rarely discriminates between full knowledge and mere suspicion, and the companies through fear of waiving their defenses are often induced to forego the benefit of contract methods of investigating, to which they are justly entitled.* § 148. Where Policy Provides that Such Acts Shall Not be a Waiver. — The standard and other policies often provide that re- quirements by the company regarding appraisal and examination of the insured vmder oath and of his papers, shall not be deemed a waiver. This constitutes a non-waiver agreement. By the weight of authority full effect is to be given to this restric- tion, and if an appraisal or examination of the assured, or of his books and bills, is demanded in good faith, no waiver or estoppel will result, since the company has a contract right to postpone its act of final election until these methods of investigation have been pursued.* 1 The rule invoked, originally laid St. R. X36; Smith v. St. Paul F. & M. down in Titus v. Glens Falls Ins. Co., I. Co., 3 Dak. 80, 13 N. W. 355; 81 N. Y. 410, 419, but slightly revised Replogle v. American Ins. Co., 132 Ind. by the same court in McNally V. 360, 31 N. E. 947; Grubbs v. North Caro- Phoenix Ins. Co., 137 N. Y. 389, 397, Una Home Ins. Co., 108 N. C. 472, 13 33 N. E. 475; Carpenter v. German-Am. S. E. 236, 23 Am. St. R. 62; Cannon v. Ins. Co., 135 N. Y. 298, 31 N. E. 1015; Home Ins. Co., 53 Wis. 585, 11 N. W. Roby V. Am. Cent. Ins. Co., 120 N. Y. 11. Contra, e. g., Freedman v. Ins. Co., 510, 24 N. E. 808 (no one of these 175 Pa. St. 350. The question may cases involved the standard fire policy easily be one for the jury, Walter v. which contains a limitation upon the Mutual City & V. F. I, Co., 120 Mich. power of the agent to waive), is stated 35, 78 N. W. 1011; Home Ins. Co. v. as follows: "When an insurance com- Phelps, 51 Neb. 623, 71 N. W. 303. pany, with knowledge of all the facts ^ phoenix Ins. Qo. v. Flemming, 65 constituting a breach of a condition Ark. 54; Boruszweski v. Ins. Co., 186 or a warranty, requires the assured by Mass. 589; Boyd v. Ins. Co., 90 Tenn. virtue of the contract to do some act or 212; London & L. Ins. Co. v. Honey, incur some trouble or expense, the for- 2 Vict. L. R. 7. feiture is deemed to have been waived, 3 Unless the companies suspect fraud as such requirement is inconsistent they rarely ask for the examination of with the position that the contract has the insured under oath, as provided ceased to exist, and consistent only with for by the policy. They must furnish the theory that the obligations of the the stenographer, and the proceeding contract are still binding upon both usually is much more expensive to parties," Planters' Mut. Ins. Co. v. them than to the assured. toyd, 67 Ark. 584, 56 S. W. 44, 77 Am. < Phoenix Ins. Co. v. Flemming, 65 184 GENERAL PRINCIPLES OP INSURANCE tAW § 149. Non-waiver Agreement. — In order to prevent the accept ance of proofs of loss or other acts in connection with an investiga- tion of loss from operating as a waiver of a forfeiture, a non-waiver agreement is frequently entered into between the insurer and in- sured by which it is provided that such acts shall not waive the rights of either party. Such a special agreement, executed by the parties after the loss, will be binding in accordance with its terms.* § 150. Taking Part in Adjustment. — If the company sends its adjuster to investigate the facts and to take part in an effort to ascertain the extent and nature of the loss before determining the proper course to pursue, the court ought not to be eager to infer a waiver of forfeiture, although the insured may have been put to some slight trouble or expense in connection with the investigation.^ Ark. 54, 44 S. W. 464, 39 L. R. A. 789, 67 Am. St. R. 900 (examination of books); Phenix Ins. Co. v. Searles, 100 Ga. 97, 27 S. E. 779; Boyd v. Ins. Co., 90 Tenn. 212 (estimates of loss and value); City Drug Store v. Scottish Union & Nat. Ins. Co. (Tex. Civ. App., 1898), 44 S. W. 21 (examination of ihsured); Oshkosh Match Works v. Manchester Fire Ass. Co., 92 Wis. 610, 66 N. W. 525 (examination of insured); Walker v. Phoenix Ins. Co., 89 Hun (N. Y.), 333, 35 N. Y. Supp. 374, re- versed on another point, 156 N. Y. 628, 633, where the Court of Appeals, with- out committing itself on this point, said: "Assuming that whatever was said or done between the representa- tive of the insurance company and the owner of the property which related solely to an appraisal is not to be re- garded as evidence of waiver owing to the provision in the policy relating to that subject" (but compare Gibson Elec. Co. v. L. & L. & G. Ins. Co., 159 N. Y. 418, 426, 64 N. E. 23); Johnson V. American Ins. Co., 41 Minn. 396, 43 N. W. 59 (arbitration); Queen Ins. Co. V. Young, 86 Ala. 424, 6 So. 116, 11 Am. St. R. 61 n. (appraisal); Briggs v. Fire- men's Fund, 65 Mich. 52, 31 N. W. 616 (arbitration); Holbrook v. BaUdse Fire Ins. Co., 117 Cal. 661, 49 Pac. 555 •(appraisal); London & L. Ins. Co. v. Honey, 2 Vict. L. R. 7 (arbitration of loss). As to what facts do not con- stitute waiver of failure to serve proofs of loss see Riker v. President, etc., F. Ins. Co., 90 App. Div. (N. Y.) 391, 83 N. Y. Supp. 546; Foumier v. German- Am. Ins. Co., 23 R. I. 36, 49 Atl. 98; but as to arbitration compare Elliott v. Merchants' , etc., Ins. Co., 109 Iowa, 39, 79 N. W. 452. 1 Fletcher v. Minneapolis F. & M. M. I. Co., 80 Minn. 152, 83 N. W. 29; Keet-Rountree, etc., Co. v. Merchants', etc., Co., 100 Mo. App. 504, 74 S. W. 469; Hayes v. U. S. Fire Ins. Co., 132 N. C. 702, 44 S. E. 404. But see Corson V. Anchor Mut. F. I. Co., 113 Iowa, 641, 85 N. W. 806. It is construed strongly against the company and liberally in favor of the insured, Pennsylvania Fire Ins. Co. V. Hughes, 108 Fed. 497, 47 C. C. A. 469. The policy imposes upon the parties no obligation to enter into such an agreement. 2 Matthie v. Globe Fire Ins. Co., 174 N. Y. 489, 67 N. E. 57; Young v. St. Paul Fire & M. I. Co., 68 S. C. 387, 47 S. E. 681. So conversations and trans- actions between the parties which indi- cate simply an attempt to obtain in- formation which might lead to a possible adjustment will not operate as a waiver of the defense of fraudulent concealment. Firemen's Fund Ins. Co. V. McGreevy, 118 Fed. 415, 55 C. C. A. 543; or of the condition of the policy as to proofs of loss, Riker v. Fire Ins. Co. of North America, 90 App. Div. 391, 85 N. Y. Supp. 546; or of the limitation clause for bringing action, Allen v. Dutchess Co. Mut. Ins. Co., 95 App. Div. 86, 88 N. Y. Supp. 530. An ad- justment, however, and an agreement to pay the amount due will operate as a waiver of any right to defeat recovery on the policy for breach of its con- ditions, Tillis V. Liverpool & L. & 6. 1. Co. (Fla., 1904), 36 So. 171; Wagner v COMPANY MAY DEPEND ON OTHER GROUNDS, ETC. 185 § 151. Company May Defend on Other Grounds Than Those First Named. — Stating to the assured after loss certain reasons or grounds for refusing payment is in general no waiver of other grounds of forfeiture, nor will the company be thereby estopped when it sub- sequently comes to litigation from setting up any other defenses that it may have. A number of decisions to the contrary, especially in Michigan,^ are opposed to the weight of authority and find slender support in rea- son.^ Elements of estoppel are generally lacking in such a case. There is no breach of contract obligation by the insurer, nor is there any misleading conduct to the prejudice of the assured. In no one of the cases here cited on .this subject, on the one side or the other, was it established that the assured would have abandoned his claim and refrained from instituting action if the insurer had remained altogether silent until litigation. The company owes no duty, until it interposes its defenses in a lawsuit, to assign its reasons for not paying. An assignment of reasons is not only gratuitous, but often largely a matter of lay opinion. The claimant generally knows more about the facts than the company does at all stages of the preliminary investigation, and much more at the outset.* And if he has not undertaken the litigation solely as a result of fraudulent or deceitful misrepresentations of fact by some agent duly authorized to stand in the place of the company, it is difficult to see how any adequate basis of estoppel has been established. This rule in favor of the insiirance company, however, must not Dwelling House Ins. Co., 143 Pa. St. Home Life Ins. Co. v. Pierce, 75 111. 338, 22 Atl. 885; Levy v. Peabody Ins. 426. Co., 10 W. Va. 560, 27 Am. Rep. 598, 2 Armstrong v. Agricultural Iv.s. Co., unless the settlement is procured by 130 N. Y. 560, 29 N. E. 991; McCollum fraud on the part of the insured. The v. Mut. Life Ins. Co., 55 Hun, 103, insurer cannot urge payment by mis- aff'd 124 N. Y. 642; Devens v. Me- take from want of knowledge of a chanics' & T. Ins. Co., 83 N. Y. 168, breach, it being its duty when claim is 173; Cassimus v. Scottish Union & Nat. made to ascertain the facts as to any Ins. Co., 135 Ala. 256, 269, 33 So. 163; breach, Smith v. Glens Falls Ins. Co., Lackmann v. Kearney, 142 Cal. 112, 62 N. Y. 85. 115, 75 Pac. 668: Welsh v. London 1 For example see Taylor v. Supreme Assur. Corp., 151 Pa. St. 607, 619, 25 Lodge, 135 Mich. 231, 97 N. W. 680; Atl. 142, 31 Am. St. R. 786: National Douville V. Farmer.?' Mut. Ins. Co., 113 Ins. Co. v. Broion, 128 Pa. St. 386, 18 Mich. 158, 71 N. W. 517; Smith v. Ger- Atl. 389; Findlay v. Union Mut. F. man Ins. Co., 107 Mich. 270, 65 N. W. Ins. Co., 74 Vt. 211, 52 Atl. 429, 93 236, 30 L. R. A. 368; Towle v. Ionia, Am. St. R. 885. Eaton & B. F. M. F. I. Co., 91 Mich. 3 Devens v. Mechanics' & Traders' 219, 51 N. W. 987; Casiner V. J'amers' Ins. Co., 83 N. Y. 168, 173 ("They Mvi. Ins. Co., 50 Mich. 273, 275, 15 may refuse to pay without specifying N. W. 452; Continental Ins. Co. v. any ground and insist upon any avail- Waugh, 60 Neb. 348, 83 N. W. 81; able ground"). 186 GENERAL PEINCIPLES OF INSURANCE lAW be extended to apply to an undisclosed defense which might upon timely notice after loss have been met and remedied.* Nor does the rule apply to the subject of amendments of pleadings after action is begun and after the issues therein have been framed. Every court exercises its own discretion to withhold the privilege of setting up new defenses, or to grant it, and with or without the imposition of terms, as seems to it reasonable.^ § 152. Claimant not Concluded by Statements in Proofs of Loss. — Statements in the proofs of loss are evidence against the claim- ant because they are in the nature of admissions,^ but by virtue of the line of reasoning described in the last section he may contradict and correct them on the trial.'* The essential elements of estoppel are lacking, except in the very rare instance in which the company might prove that it defended solely because of some error in the proofs. A striking instance of the general rule is furnished by the Van Tassel case, where after taking the defendant to the court of appeals the plaintiff was allowed to increase his claim from five thousand to ten thousand dollars and ultimately to recover judgment for the latter amount.^ It will be observed, however, that proofs of loss are not evidence on behalf of the claimant to prove the truth of their contents, but simply to prove his compliance with the clause of the policy requiring the preparation and service of proofs.* § 153. Retention of Proofs Waives Defects That Might Have Been Remedied. — For the insurers to retain the proofs of loss or death, without pointing out, within a reasonable time, any objection to their form or contents constitutes a waiver of such mistakes and defects as the insured could have remedied upon notice. Here is a clear ground of estoppel.'' Silence in such a case would be unrea- 1 See § 153. 94 U. S. 593; 24 L. Ed. 294, White v. 2 Pennsylvania Fire Ins. Co. v. Royal Ins. Co., 149 N. Y. 485, 44 N. E. Hughes, 108 Fed. 497, 502, 47 C. C. A. 77; Bentley v. Standard Ins. Co., 40 459; Wildey Cos. Co. v. Sheppard, 61 W. Va. 729, 23 S. E. 584; Names v. Kan. 351,59Pac. 651,47L. R. A. 650; Union Ins. Co., 104 Iowa, 612, 74 Button V. Patrons' Mut. F. I. Co., 191 N. W. 14. Pa. St. 369, 43 Atl. 219; Nat. Ins. Co. 5 Underwood, as Ex'r, v. Oreenunch V. Brovm, 128 Pa. St. 386, 18 Atl. 389; Ins. Co., 28 App. Div. (N. Y.) 163, 151 Phenix Ins. Co. v. Caldwell, 85 111. App. N. Y. 130, 45 N. E. 365. 104. ^ Lundvickv. Ins. Co., l2Slova.,Zl& 3 Ins. Co. V. Newton, 22 Wall. (U. S.) 104 N. W. 429; Scottish Union & Nat. 32, 35; Antes v. West. Ins. Co., 84 Ins. Co. v. Keene, 85 Md. 263, 37 Atl. Iowa, 355, 51 N. W. 7. 33; Tucker v. Colonial Ins. Co., 58 t Supreme Lodge v. Beck, 181 U. S. W. Va. 30, 51 S. E. 86. 49;- Conn. Ins. Co. v. Schwenk, 'Sutton v. Am. Ins. Co., 188 Pa. St WAIVER OR ESTOPPEL MUST BE PLEADED 187 sonably misleading. The aflBrmative act of keeping the proofs in- dicates acceptance and satisfaction with their form.^ Such objec- tions must be made promptly ^ and the insured must be allowed a reasonable time to make corrections.* § 154. Waiver or Estoppel Must be Pleaded. — The prime purpose of a pleading is to inform the opponent in advance of trial of the precise point of controversy. When the plaintiff relies upon waiver or estoppel in place of due performance of conditions precedent, he must, as a general rule, plead the facts either in the complaint or in some jurisdictions in the replication. This seems to be the sounder rule,* and certainly is the safer practice. There are, however, many cases announcing a contrary rule,^ and they have to support them the argument that a plaintiff ought not to be required to allege what he is not compelled to prove in order to make out his affirmative or prima fade case. Logically all the warranties of the policy must be shown to be fulfilled before the assured establishes his right to 380, 41 AtL 537; First Nat. Bank v. Am. Cent. Ins. Co., 58 Minn. 492, 80 N. W. 345; Faulkner v. Manchester Assur. Co., 171 Mass. 349, 50 N. E. 529; Virginia F. & M. Ins. Co. v. Goode, 95 Va. 762, 30 S. E. 370; Brock V. Des Moines Ins. Co., 106 Iowa, 30, 75 N. W. 683; Weed v. Hamburg- Bremen, 133 N. Y. 394, 31 N. E. 231; Cummer Lumber Co. v. Manufacturers' M. F. I. Co., 67 App. Div. (N. Y.) 151, 73 N. Y. Supp. 668. 1 Kieman v. Insurance Co., 150 N. Y. 198. 2 Welsh V. London Assur. Co., 151 Pa. St. 607, 25 Atl. 142, 31 Am. St. R. 786; De Witt v. Agri. Ins. Co., 157 N. Y. 353, 51 N. E. 977. 3 Cummins v. German-Am. Ins. Co., 197 Pa. St. 61, 46 Atl. 902. The in- surance company is under no obliga^ tion to furnish blanks unless imposed by statute and its refusal to do so is no waiver. Continental Ins. Co. v. Dor- man, 125 Ind. 189, 25 N. E. 213. An adjustment as to amount of loss waives proofs, Gerhart v. Northern Ass. Co., 86 Mo. App. 596. * For example, Hennessey v. Met. Life Ins. Co., 74 Conn. 699, 52 Atl. 490; McCoy V. Iowa State Ins. Co., 107 Iowa, 80, 77 N. W. 529; Eiseman v. Hawkeye Ins. Co., 74 Iowa, 11, 36 N. W. 780; Dwelling House Ins. Co. v. Johnson, 47 Kan. 1, 27 Pac. 100; Phenix Ins. Co. V. Bachelder, 32 Neb. 490, 29 Am. St. R. 443; Victors v. Nat. Prov. Union 113 App. Div. 715 (cannot show waiver under allegation of full per- formance); Allen v. Dutchess Co. Mut. Ins. Co., 95 App. Div. (N. Y.) 86, 87, 88 N. Y. Supp. 530; Ryer v. Prudential Iris. Co., 85 App. Div. 7, 9, 82 N. Y. Supp. 971; Todd v. Union Cos. & Surety Co., 70 App. Div. 52, 55, 74 N. Y. Supp. 1062; Meeder v. Prov. Sav. Life Assur. Sac, 58 App. Div. 80, 83, aff'd 171 N. Y. 432, 64 N. E. 167 (in which a trivial exception to general rule was allowed); Smith v. Wetmore, 167 N. Y. 234, 237, 60 N. E. 419, Elting v. Dayton, 70 App. Div. 52, 43 N. Y. St. Rep. 363, aff'd 144 N. Y. 644, 39 N. E. 493; Pioneer Mfg. Co. v. Phoenix Assur. Co., 110 N. C. 176, 28 Am. St. R. 673, 14 S. E. 731; St. Paul F. & M. Ins. Co. V. Hodge, 30 Tex. Civ. App. 257, 71 S. W. 386. 5 For example, N. J. Rubber Co. v. Commercial Union Assur. Co., 64 N. J. L. 580, 46 Atl. 777, 64 L. J. L. 51; Nickell v. Phoenix Ins. Co., 144 Mo. 420, 46 S. W. 435; Andrus v. Fidelity Mid. L. Ins. Ass., 168 Mo. 151, 161; McManus v. Western Assur. Co., 43 App. Div. 550, aff'd, without opin- tion, 167 N. Y. 602; Bogardus v. N. Y. Life Ins. Co., 101 N. Y. 328, 334 (dic- tum); Johnston v. Northwestern Live Stock I. Co., 94 Wis. 117, 68 N. W. 868; and see 169 N. Y. 310. 188 GENERAL PRINCIPLES OP INSURANCE LAW recover/ but the warranties of the life and fire policies are so in- tricate and numerous, and, to prove so many of them, would involve testimony of a negative character, that most courts hold, as matter of justice and convenience alike, that plaintiff need only allege and prove the fulfillment of certain essential affirmative conditions of the contract, for instance, the existence of insurable interest, the occurrence of the peril, the amount of loss, the service of proofs, and perhaps the amount of other contributing insurance.^ The defendant also must allege any defense of waiver or estoppel upon which it relies.^ The Connecticut court, however, has declared broadly that a party need not plead an estoppel in pais.* On the other hand, the Kansas court has declared as broadly that the plaintiff must plead and prove the performance of all conditions precedent to his right of recovery, or a waiver by the insurer.® ^Leonard v. State Mvt. Life Assur. ^ Grant v. Pratt, 87 App. Div. 490, Co., 24 R. I. 7, 51 Atl. 1049, 96 Am. 84 N. Y. Supp. 983. St. R. 698; Hennessey v. 7ns. Co., 74 * Bemhard v. Rochester German Ins. Conn. 699, supra. Co. (Conn.), 65 Atl. 134. 2 See § 117, supra. 6 Shawnee F. Ins. Co. v. Knerr, 72 Kaa. 385, 83 Pac. 611. CHAPTER VIII Genera l Principles — Continued Waiver and Estoppel by Agents § 155. Introductory. — A corporation or association, though a legal entity, can transact business only by personal representatives. Therefore it is only thipugh the medium of agents that an insur- ance company can mako or modify a contract.^ Whatever a policy or an application may declare as to lack of authority, the company's agent, by virtue either of express or implied instructions, is and must in fact and in law be vested with certain powers in performing the duties actually intrusted to him by the principal. Indeed to ap- point him to the position is to clothe him with some measure of authority.^ It is obvious, then, that the phraseology used by the companies or current in the trade to describe an insurance agent is not of ne- cessity controlling. More significant is it to ascertain the real or ap- parent grant of power as defined by the requirements of the act or the demands of the business, which the agent has been employed by the company to perform or to conduct on its behalf and in its interest.' Within the jurisdiction of many courts this circumstance is deemed more potent in determining the contract rights of the parties under the policy than any general stipulation regarding a limit to the agent's authority expressed in the printed policy itself.'* § 156. Ostensible Authority. — If the company holds out its agent to the public as authorized to do a particular act, or to transact a particular kind of business, this carries with it an authority to adopt the ordinary means, and do and say the appropriate things, to ac- complish the object for which the agent is employed.® ^ Stemaman v. Met. Life Ins. Co., ^ Wilder v. Continental Cas. Co. 170 N. Y. 13, 19, 62 N. E. 763, 88 Am. (U. S. C. C, Jan., 1907), 36 Ins. L. J. St. R. 625; Imperial Fire Ins. Co. v. 426. Dunham, 117 Pa'. St. 460, 12 Atl. 668. * Kilbom v. Prudential Ins. Co. 2 Union Mut. L. Ins. Co. v. WilUn- (Minn., 1906), 108 N. W. 861 (contain- son, 13 Wall. 222, 20 L. Ed. 617: Fire ing excellent discussion). Assn. V. Masterson fTex. CSv. App.), ^ Ins. Co. v. Wilkinson, 13 Wall. 83 S. W. 49. (U. S.) 222, 20 L. Ed. 617; Indian [189] 190 GENERAL PRINCIPLES OP INSURANCE LAW To determine the extent of the authority, then, regard must be had not only to the actual instructions given by the principal, which are seldom disclosed to the insured, but also to the character of the particular business involved * — whether, for example, it be simply that of sohciting for insurance, superintending the execution of the application and forwarding it to the home office; or whether it be that of investigating losses and reporting the result to the company; or whether it involve the ampler powers and wider discretions of making and modifying contracts, and of adjusting and settUng losses.^ § 157. Undisclosed Instructions not Binding upon the Insured. — If the natural and ordinary demands of the business actually in- trusted to the agent invest him with the power to adopt a certam course of action or representation, the principal is bound thereby, and may not be permitted to show that his undisclosed instructions of a different tenor and effect have been violated by the agent.* Hence, it often happens that an agent has power to bind his prin- cipal in flat disobedience of his express instructions.'* For the agent's wrongful or fraudulent acts of commission or omission, and for his material niisrepresentations or trickery within the scope of his ostensible authority as thus defined, the company is liable. Thus, where the soliciting agent of a life company, in filling up the application, fraudulently misstated the age of the assured, and filled out a physician's certificate, and forged the name of the examining physician thereto, and while the policy was in his hands for delivery changed the age of the assured as stated therein, so as to show his real age, and then delivered it, and neither the assured nor the company knew anything of these fraudulent acts, it was held, that the company was liable.* River State Bank v. Hartford Fire Ins. 142 N. Y. 382, 389, 37 N. E 615 25 Co., 46 Fla. 283, 35 So. 228; Hakn v. L. R. A. 637. Guardian Assur. Co., 23 Ore. 576, 32 * Ruggles-v. Am. Centrallns. Co.,\l^ Pac. 683, 37 Am. St. R. 709; Medley v. N. Y. 416, 11 Am. St. R. 674; Walsh German Alliance Ins. Co., 55 W. Va. v. HaHford Fire Ins. Co., 73 N. Y. 5, 9; 342, 47 S. E. 101; Alexander v. Con,- Sanford v. Orient Ins. Co., 174 Mass tinental Ins. Co., 67 Wis. 422, 30 N. W. 416, 54 N. E. 883, 75 Am. St. R 358 727, 58 Am. Rep. 869. ^McAHhur v. Home Life Ass., 73 1 Ins. Co. V. Edwards, 122 IT. S. 457; Iowa, 336, 5 Am. St. R. 684. But the Eastern R. R. Co. v. Relief Ins. Co., English court apparently regards the 105 Mass. 570. acts of the company's solicitor in writ- > Iowa Life Ins. Co. v. Lewis, 187 ing answiers in the application as done U. S. 335, 23 S. Ct. 126; American Ins. on behalf of the applicant who is held Co. V. Gallatin, 48 Wis. 36, 3 N. W. bound to read his application and see '72. to it that the answers are correct imder 3 Forward v. CorUinental Ins. Co., penalty of forfeiture if his warranties AGENCY DETERMINED BY FACTS OF EACH CASE 191 § 158. Agency Determined by Facts of Each Case. — Who are agents of the company, and whether brokers and agents are the representatives of the insured or of the insurers/ and what is the extent of their authority,^ are questions of fact to be determined by the circumstances of each case, and may be proved by parol whatever the poUcy says.^ As matter of law the principal is re- sponsible for the acts of his agent within the scope of his actual authority whatever the policy may say.* Nor can a by-law of an order or mutual company change the rule of law in this respect.'' By the prevailing rule in this country, a person employed by an insurance company to solicit the public to take insurance, and sign applications as a preliminary step, is to be regarded as the company's agent, although he aid the insured in filling up the application blank, and although he is paid by a commission out of the premium.® The obvious reasons for this rule are forcibly explained by the United States Supreme Court in the leading case of the Union Mutual InsuraTice Company v. WilMnsonJ are not fulfilled, Bigqar v. Rock Life Assur. Co. (1902), 1 K. B. 516. 1 Knights of Pythias v. Withers, 177 U. S. 260, 20 S. Ct. 611. 2 Frost V. North. Brit. & Mer. Ins. Co., 77 Vt. 407, 60 Atl. 803. 3/ns. Co. V. Wilkinson, 13 Wall. (U. S.) 222, 20 L. Ed. 617; Commercial Ins. Co. V. Ives, 56 111. 402; Kausal v. Minn. Farmers' Mict. Fire Ins. Co., 31 Minn. 17, 47 Am. Rep. 776; Stemaman V. Met. Life Ins. Co., 170 N. Y. 13, 19, 62 N. E. 763, 88 Am. St. R. 625, 67 L. R. A. 318. Often a question is presented for the jury, Milwaukee Mechanics' Ins. Co. v. Schallman, 188 111. 213, 59 N. E. 12; Lewis v. Guardian Fire & L.A.,1S1 N. Y. 392, 74 N. E. 224; Frost v. North. Brit, db Mer. Ins. Co., 77 Vt. 407, 60 Atl. 803. But, if the facts are undisputed, the relation- ship of agency may become a question of law, AUen v. German^Am. Ins. Co., 123 N. Y. 6, 25 N. E. 309. 4 Knighis of Pythias v. Withers, 177 T\ S. 260, 20 S. Ct. 611; Stemaman v. Met. Life Ins. Co., 170 N. Y. 13, 19, 62 N. E. 763, 88 Am. St. R. 625, 57 L. R. A. 318. 5 Matter of Brown v. Order of Forest- ers, 176 N. Y. 132, 68 N. E. 145. <^ State Ins. Co. v. Taylirr, 14 Colo. 499, 24 Pac. 333, 20 Am. St. R. 281; Continental Ins. Co. v. Pearce, 39 Kan. 396, 18 Pac. 291, 7 Am. St. R. 657 (actual relationship of agency cannot be subverted by any device of words in the policy). Medley v. Ins. Co., 55 W. Va. 342, 47 S. E. 101. See, however. Reed v. Ins. Co., 17 R. I. 785, 24 Atl. 833, 18 L. R. A. 496; Biggar v. Rock Life Assur. Co. (1902), 1 K. B. 516. ' 13 Wall (U. S.),222, 20 L. Ed. 617, in which the court by Justice Miller said: "If, however, we suppose the party making the insurance to have been an individual, and to have been, present when the application was signed, and soliciting the assured to make the contract of insurance, and that the insurer himself wrote out all these representations, and was told by the plaintiff and his wife that they knew nothing at all of this particular subject of inquiry, and that they re- fused to make any statement about it, and yet knowing all this, wrote the representation to suit himself, it is equally clear that for the insurer to insist that the policy is void be- cause it contains this statement, would be an act of bad faith and of the grossest injustice and dishonesty. And the reason for this is that the representation was not the state- ment of the plaintiff, and that the defendant knew it was not when he made the contract; and that it was made by the defendant, who procured the plaintiff's signature thereto. It is in precisely ^uch cases as this that 192 GENERAL PEINCIPLES OF INSURANCE LAW § 159. Effect of Stipulations in the Contract itself as to who are, or are not, Agents of the Company. — Policies of fire insurance fre- quently contain either one of these two stipulations: (1) That any courts of law in modern times have introduced the doctrine of equitable estoppels, or, as it is sometimes called, estoppels in pais. The principle is that where one party has Dy his rep- resentations or his conduct induced the other party to a transaction to give him an advantage which it would be against equity and good conscience for him to assert, he would not in a court of justice be permitted to avail himself of that advantage. And al- though the cases to which this prin- ciple is to be applied are not as Well defined as could be wished, the gen- eral doctrine is well understood and is applied by courts of law as well as equity where the technical ad- vantage thus obtained is set up and relied on to defeat the ends of justice or establish a dishonest claim. It has been applied to the precise class of cases of the one before us in nu- merous well-considered judgments by the courts of this country. Indeed, the doctrine is so well understood and so often enforced that, if in the transac- tion we are now considering. Ball, the insurance agent, who made out the application, had been in fact the underwriter of the policjr, no one would doubt its applicability to the present case. Yet the proposition admits of as little doubt that if Ball was the agent of the insurance com- pany, and not of the plaintiff, in what he did in filling up the application, the company must be held to stand just as he would if he were the prin- cipal. Although the very well-con- siaered brief of counsel for plaintiff in error takes no issue on this point, it is obvious that the soundness of the court's instructions must be tested mainly by the answer to be given to the question, 'Whose agent was Ball in filling up the application?' This question has been decided dif- ferently by courts of the highest respectability in cases precisely anal- ogous to the present. It is not to be denied that the application, logically considered, is the work of the assured; and if left to himself, or to such as- sistance as he might select, the person so selected would be his agent, and he alone would be responsible. On the other hand, it is well known — so well that no court would be jxisti- fied in shutting its eyes to it — that insurance companies organized under the laws of one State, and having in that State their principal business ofl5ce, send these agents all over the land with directions to solicit and procure applications for policies, fur- nishing them with printed arguments in favor of the value and necessity of life insurance, and of the special advantages of the corporation which the agent represents. They pay these agents large commissions on the premiums thus obtained, and the policies are delivered at their hands to the assiu-ed. The agents are stimu- lated by letters and instructions to activity in procuring contracts, and the party who is in this manner in- duced to take out a policy rarely sees or knows anylihing about the company or its officers by whom it is issued, but looks to and relies upon the agent who has persuaded him to effect in- surance as the full and complete representative of the company, in all that is said or done in making the con- tract. Has he not a right to so regard him? It is quite true that the reports of judicial decisions are fiilled with the efforts of these companies, by their counsel, to establish the doctrine that they can do all this and yet limit their responsibility for the acts of these agents to the simple receipt of the premium and delivery of the policy, the argument being that, as to all other acts of the ^ent, he is the agent of the assured. 'This propo- sition is not without support in some of the earlier decisions on the subject; and at a time when insurance com- panies waited for parties to come to them to seek assurance, or to forward applications on their own motion, the doctrine had a reasonable foundation to rest upon. But to apply such a doctrine in its full force to the system of selling policies through a^nts, which we have described, would be a snare and a delusion, leading, as it has done in numerous instances, to the grossest frauds, of which the in- surance corporations received the benefits, and the parties supposing EFFECT OF STIPULATIONS IN THE CONTKACT AS TO AGENTS 193 person, other than the assured, who may have procured the insur- ance to be taken shall be deemed to be the agent of the assured, and not of the company, in any transaction relating to the insurance; (2) that in any matter relating to the insurance no person, unless duly authorized in writing, shall be deemed the agent of the com- pany. And life policies often contain a provision, in substance, that agents are not authorized to make, alter, or discharge contracts, or to waive forfeitures, or to grant permits, or to receive for premiums anything but cash, or that certain designated officers are the only persons so authorized. These stipulations are not necessarily illegal or against public policy, and are held to be of binding force upon the insured if the recital as to agency contained in them is not untrue.^ Such stipu- lations, however, are not conclusively binding, because the relation- ship between the company and its agents is not created or determined by the policy but exists independent of the policy. This extrinsic fact, therefore, may always be shown by extraneous evidence when- ever such evidence is avaifeble.^ themselves insured are the victims. The tendency of the modem decisions in this comitry is steadily in the op- posite direction. The powers of the agent are, prima fade, coextensive with the business intrusted to his care, and will not be narrowed by limita- tions not communicated to the person with whom he deals. An insurance company, establishing a local agency, must be held responsible to the parties with whom they transact business for the acts and declarations of the agent, within the scope of his em- plojmient, as if they proceeded from the principal." This opinion has been quoted with approval by many state courts. See also FoUette v. Mut. Ace. Asso., 110 N. C. 377, 14 S. E. 923, 15 L. R. A. 668, 28 Am. St. R. 697. i/ns. Co. V. NoHon, 96 U. S. 234; Conway v. Phoenix Mvt. Life Ins. Co., 140 N. Y. 79, 35 N. E. 420; AUm v. German-Am. Ins. Co., 123 N. Y. 6; Whited V. Germania Fire Ins. Co., 76 N. Y. 415, 32 Am. Rep. 330; Merserau V. Phoenix Mut. lAfe Ins. Co., 66 N. Y. 274. 2 Thus the New York court says: "The power to contract is not unlim- ited. . . . Parties cannot ... by agree- ment change the laws of nature or of logic or create relations physical, legal 13 or moral which cannot be created. . . . The parties . . . could agree that the person who filled out part A of the ap- plication was the agent of the insm-ed and not of the company. . . . It is quite different, however, with the work of the medical examiner because that requires professional skill and experi- ance and the insurer permits it to be done only by its own appointee," Stervaman v. Met. Life Ins. Co., 170 N. Y. 13, 19, 62 N. E. 763; Matter of Brown v. Order of Foresters, 176 N. Y. 132, 137, 68 N. E. 145, 88 Am. St. R. 625, 57 L. R. A. 318, by O'Brien, J., Knights of Pythias v. Withers, 177 U. S. 260, in which the court says: "The position of the secretary must be deter- mined by his actual power and au- thority and not by the name which the defendant chooses to give him," and held that agency must be determined by the facts of the case and not by the stipulations of the policy. Power may be inferred from parol evidence of acts or course of dealing, Stewart v. Union Mut. Life Ins. Co., 155 N. Y. 257, 49 N. E. 876, 42 L. R. A. 147; Quintan v. Providence Wash. Ins. Co., 133 N. Y. 356, 364 et seq., 31 S. E. 31, 28 Am. St. R. 645; U. S. Life Ins. Co. v. Lesser, 126 Ala. 568, 28 So. 646; Thompson v. Traders' Ins. Co., 169 Mo. 12, 23, 68 S. W. 889. 194 GENEEAL PRINCIPLES OF INSURANCE LAW So also it is obvious that after the inception of the contract the company may, as matter of fact, change the scope of the authority of the persons employed by it, or alter the manner of bestowing au- thority upon them; therefore extrinsic evidence, if any there be, of such facts, must be competent.* As to how far the relationship of agency, existing between the insurer and his representative, may be affected by a stipulation in the contract between the insurer and the insured, authorities do not agree. The New York court seems to have settled upon the dis- tinction that a lay solicitor of the insurer, in his work of filling up the application, may by stipulation in the policy, subsequently delivered, be converted into the agent of the insured, while a medical examiner cannot.^ To neutralize the effect of such stipulations, or prohibit them altogether, many states have passed statutes on the subject.* § 160. Effect of Stipulations as to the Manner of Waiving. — Where i/ns. Co. V. Norton, 96 TJ. S. 234; Wilher v. WiUiamsbwgh City Fire Ins. Co., 122 N. Y. 443; Frost v. North Brit. & Mer. Ins. Co., 77 Vt. 407, 60 Atl. 803. Thus an agent of an insurance company may be shown to have an actual authority to waive a forfeiture for non-payment of premiums, al- though the policy itself declare that he has no such authority, Wyman v. Phcenix Mvt. Ins. Co., 119 N. Y. 274, 23 N. E. 907. So, also, if the agent has in fact an authority broad enough, he may by his acts, if done within the scope of his actual emplojrment, estop the company from claiming that an alleged violation of the letter of the contract really brought about by the agent himself shall constitute a de- fense, Messelhach v. Norman, 122 N. Y. 578, 26 N. E. 34. Certain states, by statute, have adopted the rule in effect that the soliciting agent and others shall be deemed agents of the insurers, no matter what the policy provides; see Appendix, ch. I and N. Y. Ins. L. § 59; such statutes are constitutional. Continental Life Ins. Co. v. Chamber- lain, 132 U. S. 304, 10 S. Ct. 87. Under these statutes acts and knowledge by such agents are imputed to company and may avail to estop it, despite the stipulation in the policy to the con- trary, Noble V. Mitchell, 100 Ala. 519, 14 So. 581, 25 L. R. A. 238; John Han- cock Mvt. L. Ins. Co. V. SchMnk, 176 111. 284, 51 N. E. 795; Fred Miller Brewing Co. v. Council Bluffs Ins. Co., 95 Iowa, 31, 66 N. W. 565; Bliss v. Potomac F. Ins. Co., 134 Mich. 212, 95 N. W. 1083; Bankers' L. Ins. Co. v. Bobbins, 55 Neb. 117, 75 N. W. 585; N orris v. Hartford F. Ins. Co., 57 S. C. 358, 35 S. E. 572; Wis. Cent. R. Co. v. Phcenix Ins. Co., 123 Wis. 313, 101 N. W. 703; Speiser v. Phoenix Life Ins. Co., 119 Wis. 530, 97 N. W. 207. 2 Stemaman v. Mvi,. Life Ins. Co., 170 N. Y. 13, 62 N. E. 763, 88 Am. St. R. 625; WHbe/r v. Williamsburgh City F. Ins. Co., 122 N. Y. 443, in which the court citing earlier New York cases said, "it was entirely competent for the parties to agree that a third person participating in the negotiations should, for the purpose of procuring the policy, be deemed an agent of the assured." Apparently the English court would take the same view as regards the work of transcribing into the application the oral answers of the insured, Biggar v. Rock Life Assur. Co. (1902), 1 K. B. 516; Contra, Kausal v. Minn. Farmers' M. F. Ins. Co., 31 Minn. 17, 16 N. W. 430, 47 Ani. Rep. 776. And see cases § 158 which hold in substance that a matter of fact cannot be disturbed by any device of words in a policy. 3 Appendix, ch. I and N. Y. Ins. L. § 59, and cases under this section, supra. RESTRICTION ON AGENTS' AUTHORITY, ETC. 195 the policy by its terms permits a waiver of its conditions, it generally provides that such waiver shall be made only by written agreement, indorsed upon the policy, or attached thereto. The declaration that a solicitor is not the company's agent or is not to be so regarded unless he holds a written commission, is of no avail, as before shown, unless true,^ and is subject for a notice more properly than for a stipulation, but an exclusive method of undoing or altering an important contract is fit subject for the mutual en- gagements of the parties. Indeed to provide that a waiver must be evidenced by writing is eminently reasonable and business-like, and full force and effect ought to be given to such a clause.^ The great majority of courts, however, decided that notwithstanding this clause agents having general powers to accept risks and close contracts, including the ordinary local or countersigning agents of fire com- panies, could waive this clause as well as any other clause.' § 161. The Same — ^Restriction on Agents' Authority in Standard Fire Policy and other Policies. — The clause last described having thus been nullified in most of the state courts by judicial interpreta- tion and by the appUcation to it of the very doctrine of parol waivers which its object was to eliminate, the committee appointed to frame a standard fire policy for New York adopted a further clause, in substance that no ofiicer, agent or other representative had or should be deemed to have power to waive, except by written agreement indorsed or attached to the policy.'* 1 See § 159, supra. provisions of the policy that anything ^ Assur. Co. V. Building Asso., 183 less than a distinct specific agreement, U. S. 308, 361, 22 S. Ct. 133; Gladding clearly expressed and indorsed on the V. Ins. Co., 66 Cal. 6; O'Leary v. policy, should not be considered as a Merchants' & D. & M. I. Co., 100 waiver of any printed or written condi- lowa, 173, 69 N. W. 420, 62 Am. St. R. tion or restriction therein, the court 555. The Massachusetts court says: recognize and afiSrm the law as settled "A company which has seen fit to pre- in this state that such condition can be scribe that the terms and conditions of dispensed with by the company or its its policy shall only be waived by its general agents by oral consent as well written or printed assent, has pre- as by writing," Weed v. London & scribed only a reasonable rule to guard Lancashire Fire Ins. Co., 116 N. Y. against the uncertainties of oral evi- 117, 22 N. E. 229; Phoenix Ins. Co. v. dence, and by this the insured has HaH, 149 111. 513, 36 N. E. 990; Ins. assented to be bound," Kyte v. Cow- Co. v. Shejfy, 71 Miss. 919, 10 So. 307; mercial Union Assur. Co., 144 Mass. Knarston v. Manhattan L. I. Co., 124 46, 10 N. E. 518. And note that the Cal. 74, 76, 56 Pac. 773; St. Paul F. & insurance company itself acquires M. I. Co. v. Parsons, 47 Minn. 352, 50 knowledge of the terms of its contract N. W. 240. The reasons for this doc- only as they are written, since the trine were much more persuasive as "daily report" contains nothing else, applied to older forms of policies in § 75, supra. use prior to the adoption of uniform 3 §§ 173, 175, infra. The New York and statutory fire policies, court voiced the prevailing opinion < Its phraseology was based upon a when it said: "Notwithstanding the New York decision, Walsh v. Hartford 196 GENERAL PRINCIPLES OF INSURANCE LAW In some jurisdictions this clause also, when invoked by the insurers, amounts to nothing.^ In many it amounts to little or noth- ing as applied to forfeitures occurring at the inception of the con- tract,^ and in some it amounts to little or nothing as applied to war- ranties relating to proceedings after loss.* But the clear trend of the later decisions in many courts is in the direction of giving to this and similar clauses full force and effect in actions brought upon the contract, and of referring the assured to the equity branch of the court when he asks for what, as before shown, is always equivalent to a reformation of the contract as written.'* Other courts ignore such stipulations, either holding that a com- pany cannot deprive itself of its inalienable authority to modify its contracts as it may choose, in writing or by parol,' or else deciding that the limitation specified in the policy is applicable only to ex- press waivers and not to estoppel incurred by misleading con- duct.« Fire Ins. Co., 73 N. Y. 5. To make the Erovision of practical avail against dis- onest claimants it was necessary to include in the restriction "officers" as well as "agents." A somewhat similar clause appears in many life policies. 1 See cases note 5, infra. 2 For example, German-Am. Ins. Co. V. Humphrey, 62 Ark. 348, 35 S. W. 428, 54 Am. St. R. 297; Beebe v. Ohio Farmers' Ins. Co., 93 Mich. 514, 32 Am. St. R. 519, 18 L. R. A. 481, 53 N. W. 818; Wood v. American Fire Ins. Co., 149 N. Y. 382, 44 N. E. 80, 52 Am. St. R. 733; Medley v. German AUiance Ins. Co., 55 W. Va. 342, 47 S. E. 101; Welch v. Fire Assn. of Phila., 120 Wis. 406, 98 N. W. 227. 3 For example, Indian River Stale Bk. V. Hartford Fire Ins. Co., 46 Fla. 283, 35 So. 228; Snyder v. Ins. Co., 59 N. J. L. 544, 37 Atl. 1022, 59 Am. St. R. 625; Dibbrell v. Georgia Home Ins. Co., lib N. C. 193, 14 S. E. 783, 28 Am. St. R. 678. See recent case of Bemhard v. Rochester German Ins. Co. (Conn.), 65 Atl. 134. * For example, see these notable de- cisions from six influential courts in the United States and England, North- em Assur. Co. V. Grand View Bldg. Assoc, 183 U. S. 308, 22 S. Ct. 133, 46 L. Ed. 213 (standard policy gives measure of agent's authority, and stipu- lations are not to be contradicted by parol); RiisseU v. Prudential Ins. Co., 176 N. Y. 178, 68 N. E. 252, 98 Am. St. R. 656 (limit of authority named must prevail and agent has no au- thority to waive cash payment of first premium by delivering the life insur- ance policy); Hicks v. BrU.-Am. Assur, Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R.. A. 424 (comitersigning agent has no power to waive service of proofs of loss under standard fire policy); Straker v. Phoenix Ins. Co., 101 Wis. 413, 77 N. W. 752 (such agent has no power to make subsequent parol waiver of prohibited increase of risk). Untrue statements in application or policy avoid the contract though the company's agent knew the truth when delivering the policy, Batchelder v. Queen Ins. Co., 135 Mass. 449; McCoy V. Met. lAfe Ins. Co., 133 Mass. 82; Dimick v. Met. Life Ins. Co., 69 N. J. L. 384, 55 Atl. 291; Biggar v. Rock Life Assur. Co. (1902), 1 K. B. 516. 5 An attempted illegal restriction upon corporate action, Beebe v. Ohio F. Ins. Co., 93 Mich. 514, 53 N. W. 818, 18 L. R. A. 481 n., 32 Am. St. R. 519; St. Paul F. & M. Ins. Co. v. Parsons, 47 Minn. 352, 50 N. W. 240; Home Ins. Co. V. Gibson, 72 Miss. 58, 17 So. 13; Burdick v. Security Life Assn., 77 Mo. App. 629; James v. Mut. Res., etc., Ass., 148 Mo. 1, 49 S. W. 978; Mna Life Ins. Co. v. Fallow, 110 Tenn. 720, 77 S. W. 937; Home Ins. Co. v. NichoU (Tex. Civ. App.), 72 S. W. 440; Kahn V. Traders' Ins. Co., 4 Wyo. 419, 34 Pac. 1059, 62 Am. St. R. 47. » Met. Life Ins. Co. v. SvUivan, 112 111. App. 500. AUTHORITY OF OFFICERS OF THE COMPANY 197 § 162. Policy Restrictions, when Operative. — Provisions in the policy as to who shall or shall not be deemed to be agents of the com- pany for purposes of waivers or declaring how agency shall be evi- denced, are in general binding upon the insured only from the time when he receives them.^ Such provisions are in their essence notices by the insurer rather than engagements by the insured. Therefore if not contained in the application they do not apply to transactions prior to the issuance of the policy.^ But the important stipulation that waivers can only be effected by written agreement indorsed on the policy has been held operative from date of the contract, no matter when the policy itself may be delivered, and though the insurance rest only in a binder.* § 163. Authority of OflScers of the Company. — Unless restricted by legislature, charter, or action of the directors, officers have, in general, authority to make and alter contracts, waive conditions and for- feitures, give permits, cancel policies, adjust losses, and compromise claims in their discretion.'* It is, however, well within the power of a legislature or of a board of directors to prescribe a form of policy stipulating that no officer or agent shall have, or be deemed to have, power to waive except in 1 Mutual Ben. lAfe Ins. Co. v. Robi- Alexander v. Germania F. Ins. Co., 66 son, 58 Fed. 723, 7 C. C. A. 444, 22 L. N. Y. 464; Woodv. Firemen's Ins. Co., R. A. 325. As to exclusive method of 126 Mass. 316; but the better view is waiving, to wit, by written agreement, that the policy cannot change the facts see § 161. and convert the company's agent into ^ Kausal V. Ins. Co., 31 Minn. 17, 16 an agent for the assured, Knights N. W. 430, 47 Am. Rep. 776 (see cases Pythias v. Withers, 177 U. S. 260; cited in Shotliff v. Modem Woodmen, Wilder v. Continental Cos. Co., 150 100 Mo. App. 138); Kister v. Lebanon Fed. 92. Mut. Ins. Co., 128 Pa. St. 553, 18 Atl. sfficks v. BrU.-Am. Assur. Co., 162 447, 15 Am. St. R. 696, 5 L. R. A. 646; N. Y. 284, 56 N. E. 743, 48 L. R. A. Soitth Bend, etc., Co. v. Dakota F. & 424. And see Hartford Fire Ins. Co. v. M. Ins. Co., 2 So. Dak. 17, 48 N. W. Wilson, 187 U. S. 467, 478. Contra, 310 (citing cases pro and con). Contra, Crouse v. Hartford F. Ins. Co., 79 Mich. McCoy V. Met. Life Ins. Co., 133 Mass. 249, 44 N. W. 496. Binders are usually 82; Biggar v. Rock Life Assur. Co. taken out through brokers who are (1902), 1 K. B. 516. But if notice or perfectly familiar with the terms of the agreement of restriction upon agent's policy. A clause in a policy limiting authority is in the application it is the authority of the agent is held by binding from date of execution of ap- Maryland court to apply only to plication, Kenyan v. Knights Templars, waivers after policy goes into effect, 122 N. Y. 247, 25 N. E. 299. And in Dulaney v. Fidelity & Cas. Co. (Md.), some cases it has been held that an 66 Atl. 614. agreement in the policy that the * Such matters are seldom attended solicitor shall be deemed the agent of to by boards of directors. The presi- the insured is binding as to transac- dent or other general officer of a cor- tions prior to receipt of policy, Wilber poration has power, •prima facie, to do v. Williamsburg Ciiy Fire Ins. Co., 122 any act which the directors could au- N. Y. 443, 25 N. E. 926; Rohrback v. thorize or ratify, Hastings v. Brooklyn Germania F Ins. Co., 62 N. Y. 47; L. I. Co., 138 N. Y. 473, 34 N. E. 289. 198 GENERAL PRINCIPLES OF INSURANCE LAW writing. The clause is reasonable and calculated to protect and benefit both parties. Its recital would seem to be prima facie true and binding even as to acts of oflBcers, and, according to the view of the United States Supreme Court, it imposes upon the assured the burden of proving by extrinsic evidence any actual authority to waive by parol in any given instance.^ § 164. Authority of Managers. — General managers of foreign in- surance companies and of domestic fire or marine companies, with regard to the doctrine of waiver and estoppel, in the absence of ex- press restrictions upon their authority made known to the iQsured, stand substantially in the place and stead of officers.^ § 165. Limited Authority of Solicitors — Life. — Solicitors or can- vassing agents of life insurance companies have as a rule no express authority to make, alter, or discharge contracts, or to waive for- feitures, or to grant permits. In this regard they are essentially special. agents and, with few exceptions, there is no reason why, in the ordinary course of business, they should be assumed by those dealing with them to have such authority.* § 166. The Same — Exception as to First Premium. — A local agent of a life company, who is intrusted with the business of taking appli- cations and closing the transaction by delivering the policy and col- lecting the premium, is held to have an implied authority to deter- mine how the premium then due shall be paid, whether by cash or, as is sometimes done, by giving credit, provided the application does not contain in substance notice that he has no power to waive.* By the weight of authority the agent is held to have this dis- cretionary power, although the policy expressly provide that the 1 NoHhem A. Co. v. Grand View Ark. 328, 88 S. W. 950; McGurk v. B. A., 183 U. S. 308, 361, 22 S. Ct. 133; Metropolitan Life, 56 Conn. 528, 1 L. Hagan v. Scottish U. & N. I. Co., 186 R. A. 563n.; Van Werdm v. Equitable U. S. 423, 433, 22 S. Ct. 862, in which Life A. Soc, 99 Iowa, 621, 68 N. W. the court declared that "a general S92; Eastern R. R. Co. v. Relief Ins. Co., agent" has no power to waive by parol 105 Mass. 570; Stuart v. Reliarux Ins. under standard fire policy. Farmers' Co., 179 Mass. 434, 60 N. E. 929; i^ros/ Mut. Ins. Asso. v. Price, 112 Ga. 264, v. North British Mercantile I. Co., 77 267, 37 S. E. 427; McSparran v. Ins. Vt. 407, 60 Atl. 803; see Phoenix Ins. Co., 193 Pa. St. 184, 193, 44 Atl. 317. Co. v. Bowdre, 67 Miss. 620, 7 So. 596, Contra, Lamberton v. Connecticut Fire 19 Am. St. R. 326. Ins. Co., 39 Minn. 129, 39 N. W. 76, 1 s Cotton Staies Life Ins. Co. v. Scurry, L. R. A. 222; Home Ins. Co. v. Gibson, 50 Ga. 48. 72 Miss. 58, 17 So. 13. 4 Boehen v. Williamsburg City Ins. 2 Ins. Co. V. Mahone, 21 Wall. (U. S.) Co., 35 N. Y. 131, 90 Am. Dec. 787. 152; Mut. Life Ins. Co. v. Abbey, 76 iSRSONteOUS ANSWERS WRITTEN INTO APPLICATION OF AGENT 199 first premium shall be paid in cash; ^' but this conclusion is based upon his possession of the document for purposes of delivery, and his instructions to deliver it, and consequently his power does not extend to subsequent premiums or premium notes.^ But where the application or policy gives notice that the agent has no authority to waive or to accept anything but cash and stipu- lates that the policy will not be binding until the first premium has been paid in cash, the contract restriction will prevail,^ though some courts take a different view.'* A soliciting agent has no implied authority to take in payment personal property, as, for instance, a horse,^ or services.^ § 167. Erroneous Answers Written into Application by Agent. — Where the company's soliciting agent by mistake or evil design in- serts erroneous answers in the application in place of correct oral answers of the applicant, by the weight of authority the company is estopped from relying upon forfeiture occasioned by the error, provided no restriction upon the agent's authority to waive is re- cited in the application.'' 1 Mid. Life Ins. Co. v. Abbey, 76 Ark. 328, 88 S. W. 950; Peck v. Wash. Life Ins. Co., 91 App. Div. 597, 600, aff'd 181 N. Y. 585. 2 Critchett v. Am. Ins. Co., 53 Iowa, 404, 5 N. W. 543; Roehner v. Knick. Life Ins. Co., 63 N. Y. 160; Life Ass. Co. V. Ward, 17 C. B. 645. 3 For example, Russell v. Prudential Ins. Co., 176 N. Y. 178, 68 N. E. 252, 98 Am. St. R. 656. * For example, State Ins. Co. v. Hale (Iowa, 1901), 95 N. W. 473. » Hoffman v. John Hancock Mid. I. Co., 92 U. S. 161, 23 L. Ed. 539. 6 Carter v. Cotton States L. I. Co., 56 Ga. 237; but see WiUcuts v. North- western Mut. M. L. I. Co., 81 Ind. 300. ^ Ins. Co. V. Wilkinson, 13 Wall. 222, 20 L. Ed. 617 (age of mother); Southern Ins. Co. V. Hastings, 64 Ark. 253, 41 S. W. 1093 (mortgage); Pamo v. Iowa M. M. Ins. Co., 114 Iowa, 132, 86 N. W. 210 (incumbrance); Ins. Co. v. Weeks, 45 Kan. 751, 26 Pac. 410 (watchman, etc.); Otte v. Hartford Life Ins. Co., 88 Minn. 423, 93 N. W. 608, 97 Am. St. R. 532 (health of insured); Nute et al. v. Hartford Fire Ins. Co. 109 Mo. App. 585, 83 S. W. 83 (title); Jacobs V. Northwestern Life Assurance Company, 30 App. Div. 285, 51 N. Y. Supp. 967, aff'd 164 N. Y. 682, 58 N. E. 1088 (rejected application for other in- surance); O'Brien v. Home Benefit So- ciety, 117 N. Y. 310, 22 N. E. 954 (diseases of insured and medical at- tendance); Miller v. Phoenix Mutual Life Insurance Co., 107 N. Y. 292, 14 N. E. 271 (age); Prudential Ins. Co. v. Haley, 91 111. App. 363 (age). Contra, for example, Biggar v. Rock Ins. Co. (1902), 1 K. B. 516; McCoy v. Met. Life Ins. Co., 133 Mass. 82; Martin v. Ins. Co., 57 N. J. L. 623, 31 Atl. 213; Franklin F. Ins. Co. v. Martin, 40 N. J. L. 568, 29 Am. Rep. 271. The last cases hold in accordance with the usual rule of law that if plaintiff is entitled to reformation, he must sue in equity. The mistake, however, is really the act of the agent, done in the course of his employment. He is the expert and largely dominates the trans- action. The application is usually sent to the company before the policy issues and, except where statutes compel, the applicant may have no copy or any op- portunity to compare it with the policy itself, which iisually declares the truth of the answers to be warranted. Until action is begun the claimant may be ignorant of the existence of any breach of contract. A detailed application, however, is now rarely used in fire in- surance, see § 75, but is usually part 200 GENERAL PRINCIPLES OF INSURANCE LAW Thus, where the applicant for life insurance, formerly a slave and not knowing the age at which her mother had died, had told the local agent that she could not tell what it was, and the agent from other sources of information erroneously stated the age at 40 years instead of 23, the court hdd, that the agent was the representative of the company and not of the applicant in transcribing the answers, and that the company was estopped from relying upon the breach of warranty contained in the application.^ Many courts, however, hold that if the error occurs because the applicant, though able, and having the opportunity, to read the application, neglects to do so, no estoppel will result. Pursuant to this view the breach of warranty is to be enforced, though the act of writing the erroneous answer is done by the agent of the company, and relief, if any, must be had in equity.^ In an English case, Biggar, the insured, was canvassed by the insurance company, and was induced to send in a proposal for in- surance against accidents. Cooper, the soliciting agent of the com- pany, instead of consulting Biggar as to the answers to be given, filled them in as best he might, and then invited Biggar to sign the paper, which he did without reading it. The answers inserted by Cooper were false in many particulars, but Biggar did not know it. The proposal contained a declaration by which the applicant agreed of the life insurance contract, see Iowa, 652, 85 N. W. 985; Smith v. § 77. There can be no question as to People's Mutual Live Stock I. Co., 173 the justice of the principal rule, no Pa. St. 15, 33 Atl. 567; Brown v. matter what may be the stipulation of Metropolitan L. I. Co., 65 Mich. 306, the policy, when the agent fills out and 32 N. W. 610, 8 Am. St. R. 894 (collu- also signs the application in the name sion, a question for jury); Speiser v. of the assured without the latter's Phoenix Mut. L. I. Co., 119 Wis. 530, knowledge. Then the document though 97 N. W. 207. labeled an application is not the appU- i Union Mvt. Ins. Co. v. Wilkinson, cant's proposal, but the agent's. This 13 Wall. 222, 20 L. Ed. 617 (opinion is true ootn of fire insurance and of life, of the court given in note § 158, supra). Benninghoff v. Agricultural Ins. Co., 93 2 New York Life Ins. Co. v. Fletcher, N. Y. 495; Moviry v. Agricultural Ins. 117 U. S. 519, 6 S. Ct. 837; Ryan v. Co., 64 Hun, 137, 18 N. Y. Supp. 834, World Mut. L. I. Co., 41 Conn. 168, aff'd 138 N. Y. 642; Lycoming Ins. Co. 19 Am. Rep. 490; Kansas, etc., Ins. Co. V. Jackson, 83 111. 302, 25 Am. Rep. v. Central Nat. Bk., 60 Kan. 630, 57 386; Baker v. Ohio Farmers' Ins. Co., Pac. 524; Mercer Co., etc., v. State Ins. 70 Mich. 199, 38 N. W. 216, 14 Am. Co., 61 Mo. App. 597; Virginia F. & M. St. R. 485; Van Houten v. Metropolitan Ins. Co. v. Morgan, 90 Va. 290, 18 S. E. L. Ins. Co., 110 Mich. 682, 68 N. W. 191; Biggar v. Rock Ins. Co. (1902), 1 982; Wells V. Metropolitan L. Ins. Co., K B. 516. Other courts make the dL=- 19 App. Div. 18, 46 N. Y. Supp. 80, tinction that if the applicant is de- aif'd 163 N. Y. 572; Leonard v. New terred from reading the application by England Mut. L. Ins. Co., 22 R. I. 519, representations or misleading conduct 48 Atl. 808. Whether the false answer of the agent the company will be es- is to be attributed to the fault of the topped. Van Houten v. Met. Life I. Co.. agent is usually a question for the jury, 110 Mich. 682, 68 N. W. 982. Schaeffer v. Anchrr Mut. F. I. Co., 113 agent's interpretation of the contract 201 that its statements should form the basis of the policy, and the policy contained the usual proviso that it was granted on the condition of their truthfulness. The King's Bench Division in rendering judgment for the company, decided that the company's solicitor, in filling up the application, acted as agent for Biggar. The English court also approved and adopted the views of the United States Supreme Court as expressed in New York Ufe Insurance Co. v. Fletcher,^ and held, that the insured, in allowing another to fill up his proposal, and in neglect- ing to read it, became responsible for its contents.^ But, on the other hand, it is clear that if the company's agent, without the consent or knowledge of the applicant, makes any addition or alteration in the proposals, after their execution or after the applicant supposes them to be complete, the company cannot predicate forfeiture upon the failure of the applicant to read the paper before delivering or forwarding it.^ If, however, the erroneous statements in the application are the result of fraud on the part of the insured or collusion with the agent, or if the insured knows that the answers are falsely transcribed, the company will not be estopped from insisting upon the letter of the contract.'* § 168. Agent's Interpretation of the Contract. — Many courts hold the insurance company to the solicitor's' interpretation of the mean- ing of the questions in the application or terms of the contract as explained by him to the applicant.^ 1 117 U. S. 519, 6 S. Ct. 837, 29 L. Co., 183 U. S. 25, .38, 22 S. Ct. 10; Ed. 934. Equitable Life Ins. Co. v. Hazelwood, 2 Biggar v. Rock Uje Assur. Co. 75 Tex. 338, 12 S. W. 621, 16 Am. St. (1902), 1 K. B. 516. Compare Contra, R. 893, 7 L. R. A. 217 (what consti- German Ins. Co. v. Gray, 43 Kan. 497, tutes a previous application for insur- 23 Pac. 637, 8 L. R. A. 70, 19 Am. ance); Continental Ins. Co. v. Chamber- St. R. 150 (cases cited); FoUette v. lain, 132 U. S. 304, 10 S. Ct. 87 (what Milt. Ace. Asso., 110 N. C. 377, 14 constitutes "other insm-ance"); Hatch- S. E. 923, 15 L. R. A. 668, 28 Am. kiss v. Phoenix Ins. Co., 76 Wis. 269, St. R. 693. 44 N. W. 1106, 20 Am. St. R. 69 (what ^ McM aster v. Ins. Co., 183 U. S. constitutes occupancy); Jacobs v. St. 25, 22 S. Ct. 10, 46 L. Ed. 64. Paul F. & M. Ins. Co., 86 Iowa, 145, * Ketcham v. Am. Mut. Aec. Ass., 53 N. W. 101 (what constitutes "in- 117 Mich. 521, 76 N. W. 5. Contra, cumbrance"). So also where the agent Keystone Mut. Ben. Asso. v. Jones, 72 has written into the application his Md. 363 (age misrepresented). Thus construction of the answers and not where the insured told the agent he the answers themselves as given by the could write the answer as he liked, applicant, the company is estopped, policy was held avoided. Blooming N. J. Mutual Life Ins. Co. v. Baker, 94 Grave Mut. Ins. Co. v. McAnemey, 102 U. S. 610; Am. Life Ins. Co. v. Mahane, Pa. St. 335, 48 Am. Rep. 209; and see 21 Wall. (U. S.) 152; Malleable Iran Lewis V. Phoenix Mut. Life Ins. Co., 39 Works v. Phosnix Ins. Co., 25 Conn. Conn. 100. 465; Hewey v. Met. Life Ins. Co., 100 ^McMaster v. New York Life Ins. Me. 523, 62 Atl. 600; O'Brien v. 202 GENEEAL PRINCIPLES OP INSURANCE LAW § 169. Mere Knowledge of Solicitor Works no Estoppel. — A solic- itor or canvasser has, in general, no authority, either real or apparent, to countersign the policy, change its terms or give permits. The mere possession of knowledge by him of facts constituting grounds of forfeiture, though at the inception of the contract, works no es- toppel.* Thus, where the written answers to the questions of the medical examiner regarding past ailments and medical attendance were incorrect, the policy was held avoided for breach of warranty, al- though the jury found that the facts had been truly disclosed to the company's solicitor, who, however, had nothing to do with transcrib- ing into the application the answers relating to the medical branch of the inquiry. And the unanimous judgment of the court below was reversed.^ § 170. Notice of Restriction upon Solicitor's Authority. — Where the application or premium note contains a notice or stipulation that the soliciting agent has no authority to waive or change the terms of the contract, or where the assured stipulates that the written statements of the application shall be the only statements upon which the contract is made, such notice or stipulation is by the weight of authority and reason held controlling, errors of the agent in trans- Honie Benefit Society, 117 N. Y. 310, N. W. 5. Contra, Bcetcher v. Hawkeye 22 N. E. 954 (health); Ins. Co. v. Ins. Co., 47 Iowa, 253. The acquisition Hancock, 106 Tenn. 513, 52 L. R. A. of knowledge of a ground of forfeiture 665, 62 S. W. 145 (title); Equitable does not in itself enlarge the powers of ikfe Ins. Co. v. Hazlewood, 75 Tex. 338, a special agent, though if he already 16 Am. St. R. 893, 7 L. R. A. 217 had authority to alter the terms of the (health and medical advice). The in- contract it might then in conjunction surance company is responsible for the with authorized acts of sufficient falsehood if its medical examiner in- gravity become a factor in operating correctly transcribes into the applica- an estoppel. If knowledge by a special tion true oral answers of the applicant, agent of a groimd of forfeiture could since the medical examiner must be work an estoppel simply because he was regarded as agent for the company doing something for the company only. Prudential Ins. Co. v. Haley, 91 when he acquired it, then the knowl- 111. App. 363; Butler v. Mich. Mut. L. edge of his office or errand boy might Ins. Co., 184 N. Y. 337, 340; Sterna- accomplish the same result, and the man v. Met. L. Ins. Co., 170 N. Y. 13; conclusion would be reached that the Ames V. Manhattan L. Ins. Co., 40 binding obligation of a solemn written App. Div. 465, 58 N. Y. Supp. 244, contract may be destroyed by the aff'd 167 N. Y. 584; Leonard v. State casual information acquired or found Mut. L. A. Co., 24 R. I. 7, 51 Atl. 1049, by a jury to be acquired by a subordi- 96 Am. St. R. 698. nate agent employed to do some trivial 1 Butler V. Mich. Mut. L. Ins. Co., act for the company without the con- 184 N. Y. 337, 77 N. E. 398; Jacobs v. nivance or knowledge of any of its Northwestern L. Ins. Co., 30 App. Div. responsible or commissioned repre- 285, 51 N. Y. Supp. 967, aff'd 164 N. Y. sentatives. 582; Clemans v. Supreme Assembly, 131 2 Butler v. Michigan Mut. L. Ins N. Y. 485, 30 N. E. 496, 16 L. R. A. 33; Co., 184 N. Y. 337, 77 N. E. 398. Ketcham v. Assoc, 117 Mich. 521, 76 ILLITERATE APPLICANTS 203 cribing the answers will not in general estop the company and the assured, unless illiterate, must stand upon his contract as written, since, in reality, such agent has no power to alter the written con- tract and notice of his limited authority is thus brought home to the assured.* Applying the doctrine that notice to an agent is notice to the principal and that the principal is responsible for any carelessness or misconduct of his agent in transacting the business in fact intrusted to him, other coxirts, however, have thrown the door wide open for the introduction of parol evidence to contradict the written policy, and where, as is usual, there is dispute as to what occurred, have submitted the issues of fact thus raised to the jury, irrespective of stipulations in the appliq^tion or policy. This view is based mainly on the ground that the act complained of is really the act of the company's agent, hence of the company, and that an estoppel derives its sanction from a paramount rule of law and not at all from the contract itself which indeed, its ostensible object is to subvert.^ § 171. Illiterate Applicants. — If the assured cannot read or is ignorant and illiterate and has given correct oral answers, the com- pany, regardless of policy stipulations, is held responsible for errors of its agent in transcribing.^ 1 Biggar v. Rock Ins. Co., 1 K. B. 301; Ryan v. World Mut. L. Ins. Co., 516 (1902); NoHh. Assur. Co. v. Grand 41_Coim. 168, 171, 172, 19 Am. Rep. View Build. Assn., 183 U. S. 308, 363, 490; Rinker v. Mna Life Ins. Co., 214 364, 22 S. Ct. 133 (cited and defined in Pa. St. 608, 64 Atl. 82 (evidence Hagan v. Scottish Ins. Co., 186 U. S. of correct answer and omission to 423, 433, 22 S. Ct. 862); N. Y. Life read application inadmissible). But Ins. Co. V. Fletcher, 117 U. S. 519, 6 if in fact the agent has general powers, S. Ct. 837; 7ns. Co. v. Norton, 96 U. S. his acts will estop the company, Ger- 240; 7ns. Co. v. Wolff, 95 U. S. 326; man Ins. Co. v. Gray, 43 Kan. 497, 23 Dimick V. Met. Life I. Co., 69 N. J. L. Pac. 637, 8 L. R. A. 70, 19 Am. St. R. 384, 55 Atl. 291, 66 L. R. A. 774; 150. Russell V. Prudential Ins. Co., 176 N.Y. ^ Lynchburg Fire Ins. Co. v. West, 178, 68 N. E. 252, 98 Am. St. R. 656; 76 Va. 575, 44 Am. Rep. 177; Stone v. Stewart v. Union Mut. L. Ins. Co., 156 Hawkeye Ins. Co., 68 Iowa, 737, 28 N. Y. 257, 49 N. E. 876, 42 L. R. A. N. W. 47, 56 Am. Rep. 870; Germania 147; McCollum v. Mut. L. Ins. Co., 55 7?is. Co. v. Wingfield, 22 Ky. Law R. Hun, 103, 8 N. Y. Supp. 249, aff'd 124 455, 57 S. W. 456; Improved Match N. Y. 642, 27 N. E. 412; Kenyan v. Co. v. Mich. Mut. Fire Ins. Co., 122 K. T. & M. M. A. Assoc, 122 N. Y. Mich. 256, 80 N. W. 1088; Welch v. 247, 25 N. E. 299; Hamilton v. Fid. Fire Assn. of Phila., 120 Wis. 456, 98 Mut. Ins. Co., 27 App. Div. 480, 50 N. W. 227; Globe Mut. Life Ins. Assoc. N. Y. Supp. 526; Bernard v. United v. Ahem, 191 111. 167, 60 N. E. 806. Life Assoc, 14 App. Div. (N. Y.) 142, 3 Capital F. Ins. Co. v. Montgomery 43 N. Y. Supp. 527; Allen v. Mass. (Ark., Jan., 1907), 100 S. W. 749; Mut. Ace Asso., 167 Mass. 18, 44 LaMarchev. New York Life I. Co. ,126 N. E. 1053; Batchelder v. Queen Ins. Cal. 498, 58 Pac. 1053; Dryer v. Securitj Co., 135 Mass. 449; McCoy v. Met. L. Fire Ins. Co. (Iowa), 82 N. W. 494; 7ns. Co., 133 Mass. 82; Fitzmaurice v. Rogers v. Phoenix Ins. Co., 121 Ind. Mut. L. Ins. Co., 84 Tex. 61, 19 S. W. 570, 23 N. E. 498; StaU Ins. Co. v 204 GENERAL PRINCIPLES OF INSURANCE LAW The ability to read and understand is the only defense which the applicant has against the wrongful act of the company's agent in failing to write the answers as given; and, especially where no copy of the application is furnished to the insured, the claimant is likely to know nothing of the mistake until after his action has been com- menced upon the policy. The equities in such a case are all against the company. The popularity of life insurance among the lower classes in this country gives ^ special importance to this doctrine. A good illustration is furnished in the New York reports. One Peter O'Brien, on becoming a member of a benefit society, signed the usual application, and by it, among other things, asserted that he had never had rheumatism and had never been attended by a physician. Both these answers were untrue, but O'Brien could neither read nor write, and the application, which was warranted to be the basis of the contract, and full, complete, and true, whether written by his own hand or not, was filled in by an agent of the so- ciety. The defendant's witnesses testified that the answers, as writ- ten, correctly recorded O'Brien's statements, but there was some testimony to the contrary which carried that issue to the jury. The verdict for the plaintiff was unanimously afiirmed by the New York Court of Appeals.^ The last case and others like it were cited with approval by the California court in an action by La Marche, an illiterate farmer of foreign birth, who had received a visit from the defendant's solicitor, Eaton. In consideration of a promissory note of La Marche for $430.50 in payment of the first premium, and of fourteen annual premiums of like amount to be paid during the years to come, Eaton promised him an endowment policy of $10,000, payable at the end of fifteen years or sooner. Eaton received the promissory note from La Marche, also his proposals signed in blank; but, before forwarding them to the company, Eaton filled up the application with terms caUing for a policy of much less liberal purport than that promised. The policy, executed in accordance with the written application, was sent to the plaintiff by mail; he returned it to the defendant with his objections, and, after having paid the promissory note, he Gray, 44 Kan. 731, 25 Pac. 197; Mullen outnumber all other kinds of life in- V. Ins. Co., 182 Pa. St. 150, 37 Atl. 988; surance policies. Hayes v. Saratoga & W. Fire I. Co., 81 2 O'Brien, v. Home Benefit Society, App. Div. 287, 80 N. Y. Supp. 888, 117 N. Y. 310, 22 N. E. 954. And aff'd 179 N. Y. 535; O'Brien v. Home see Clemans v. Supreme Assembly, Benefit Soc., 117 N. Y. 310, 22 N. E. 131 N. Y. 485, 30 N. E. 496, 16 L. R. 954. A. 33; Stemaman v. Ins. Co., 170 N. Y. 1 Industrial policies very largely 13, 62 N. E. 763, 57 L. R. A. 318, 88 Am. St. R. 625. AUTHORITY OF COMMISSIONED AGENTS— FIBE 205 sued the defendant for damages sustained. The nonsuit granted on the trial was reversed on appeal; the court holding that the insurer, and not La Marche, was responsible for the errors in the application.* § 172. Authority of Commissioned Agents — Fire. — The regular local or commissioned agents of fire insurance companies are said to be general agents, and except as restrictions upon their authority are inserted in the application or policy, or otherwise made known to the insured, they are held to have power to waive conditions and forfeitures, and to estop the company, without written permit.^ This conclusion is based largely upon the extent of their actual au- thority, which embraces such acts as accepting or rejecting proposals, countersigning, delivering, canceling, renewing policies, giving written permits, and fixing rates of premiums.* The fire policy in common use in this country does not make the payment of the premium a condition precedent to the validity of the contract, and the countersigning agent may extend credit to the insured, or not, as he chooses.^ The general custom where credit is given is for the agent to do so on his own responsibiUty. But in case the agent should make default in accounting to the company the policy will nevertheless be valid.^ And though the policy provide that it shall not take effect until the premium is paid in cash, the 1 La Marche v. N. Y. Life Ins. Co., filled up as occasion required," Car- 126 Cal. 498, 58 Pac. 1053. penter v. GermoTi^Am. Ins. Co., 135 ^Silverberg v. Phcmix Ins. Co., 67 N. Y. 298, 302, 31 N. E. 1015; Pit- Cal. 36, 7 Pac. 38; Walsh v. Hartford ney v. Glens Fails, 65 N. Y. 6. The Fire Ins. Co., 73 N. Y. 5; Alexander v. United States Supreme Court calls the Continental Ins. Co., 67 Wis. 422, 30 countersigning agent a general agent N. W. 727, 58 Am. Rep. 869. A party in Hagan v. Scottish Union Ins. Co., taking premium and delivering policy 186 U. S. 423, 433, 22 S. Ct. 862, is presumed to be agent of the com- though not strictly such in that or in pany with authority. Walker v. Lyon most cases. Another court says: F. Ins. Co., 175 Pa. St. 345, 34 Atl. 736. "Possession of blank policies and re- 3 Commissioned or countersigning newal receipts signed by the president agents hold a written commission, or secretary is evidence of such general granting them "full power to receive agency," Grabbs v. Farmers' Mvt. F. proposals for insurance [in a certain /ns. .Assoc, 125 N. C. 389, 397, 34 S. E. locality], to fix the rates of premiums, 503. to receive moneys, and to countersign, * KoUitz v. Equitable Mvt. Fire Ins. issue, and renew policies of insurance Co., 92 Minn. 234, 99 N. W. 892. If signed by the president and attested by the insured give a note for the pre- the secretary (or signed by the man- mium he cannot defend against pay- ager), subject to the rules and regula- ment of the note on the ground that tions of the company and to such in- the note is without consideration or structions as may from time to time be that the policy is void; only the com- given by the officers." The court says: pany can raise that point, Doi/fe v. HiH "It appears that MandeviUe was a (S. C, Oct., 1906), 55 S. E. 446; general agent of the defendant, clothed Kimbro v. N. Y. Life Ins. Co. (Iowa), with power to make contracts of in- 36 Ins. L. J. 57. surance and to issue policies, and was = Miller v. Ldfe Co., 12 Wall. (U. S.) furnished with printed forms which he 286, 20 L. Ed. 398. 206 GENERAL PRINCIPLES OF INSURANCE! LAW general agent has power to waive the provision and give credit, and will be held to have waived it if he deliver the policy without en- forcing payment,* provided the appUcation or policy does not give notice that he has no such power.^ § 173. The Same — Restrictions upon Authority Coupled with Knowledge of Forfeiture when Policy Issues. — Most of the standard * and other forms of fire policies now in use provide in substance that no officer or agent shall have, or be deemed to have, authority to waive orally. Most of the state courts, however, have continued to apply the rule that if the countersigning agent when he issues a policy has knowledge of facts constituting forfeiture the company will be estopped from taking advantage of the breach.* Since the notable decision of the United States Supreme Court in the Northern Assur. Co. case ^ repudiating this doctrine as unsound, at variance with the primary rule of evidence, and opposed by the weight of authority in England and in this country, many state courts and text-writers have nevertheless, with the federal decision before them, reiterated their former opinion.® 1 Bodine v. Exchange Fire Ins. Co., 51 N. Y. 117, 10 Am. Rep. 566; Boehen V. WiUiamshurgh City Ins. Co., 35 N. Y. 131, 90 Am. Dec. 787; Walsh v. HaHford Fire Ins. Co., 73 N. Y. 5. ^ Rvssell V. Prudential Ins. Co., 176 N. Y. 178, 68 N. E. 252, 98 Am. St. R. 656. 3 All, probably, at date of writing in 1907, except Maine, New Hampshire, Massachusetts, Minnesota, Iowa and South Dakota. The Wisconsin stand- ard policy has a further special provision that before the delivery of the policy and also after loss, knowledge of the agent of the company shall be knowl- edge of the company, Welch v. Fire Asso., 120 Wis. 456. See appendix of statutes, ch. I. * The reasons are set forth in many cases, for example, in Forward v. Con- tinental Ins. Co., 142 N. Y. 382, 37 N. E. 615, 25 L. R. A. 637. The court declares that the rule is well settled in that state, Lewis v. Guardian F. Ins. Co., 181 N. Y. 392, 74 N. E. 224. The New York courts "are anchored to the proposition," Wisotzkey v. Niagara Fire Ins. Co., 112 App. Div. 599, 602, 98 N. Y. Supp. 760, citing other late cases in highest court. Sim- ilar views have been expressed by many courts. See for example, the following late cases, German^Am. Ins. Co. V. Humphrey, 62 Ark. 348, 35 S. W. 428, 54 Am. St. R. 297 (chattel mortgage); Allen v. Home Ins. Co., 133 Cal. 29, 65 Pac. 138 (sole owner- ship); Swain v. Macon F. Ins. Co., 102 Ga. 96, 29 S. E. 147 (other in- surance); Hartford F. Ins. Co. v. Keating, 86 Md. 130, 38 Atl. 29, 63 Am. St. R. 499; Beebe v. Ohio Farmers' Ins. Co., 93 Mich. 514, 53 N. W. 818, 32 Am. St. R. 519, 18 L. R. A. 481; Andrus v. Maryland Cas. Co., 91 Minn. 358, 98 N. W. 200; Assur. Co. v. Phelps, 77 Miss. 625, 27 So. 745; Grabbs v. Farmers' M. F. I. Assn., 125 N. C. 389, 34 S. E. 503; Spalding v. New Hamp. F. I. Co., 71 N. H. 441, 52 Atl. 858 (other insurance); Gandy v. Orient Ins. Co., 52 S. C. 224, 29 S. E. 655; Welch v. Fire Assn. of Phila., 120 Wis. 456, 98 N. W. 227 (title). 5 183 U. S. 308, 22 S. Ct. 862, 46 L. Ed. 213, and approved or followed in Hagan v. Scottish Union & N. I. Co., 186 U. S. 423, 433, 22 S. Ct. 862; also in 187 U. S. 467, 478; 151 Fed. 961; 141 Fed. 877, 889; 138 Fed. 497; 133 Fed. 909; 129 Fed. 610 (cannot waive proofs of loss); 117 Fed. 369, and other cases. ^German Ins. Co. v. Shader (Neb., 1903), 93 N. W 972, 60 L. R. A. 918 RESTRICTIONS UPON AUTHORITY OF AGENTS, ETC. 207 In the famous federal case referred to, the plaintiff had received from the defendant its policy in standard form for $2,500, upon his household effects. On this policy an action was brought to recover for a loss by fire. The standard policy provides that it shall be avoided by other insurance without written consent, also that waivers shall be given only by written agreement and that no agent shall be deemed to have authority to waive in any other way. At the time the insurance was effected, plaintiff had a policy for $1,500 on the same property, issued by another company. According to the plain- tiff's testimony, which was flatly contradicted, this circumstance was mentioned at the time to the local countersigning agent of the de- fendant, who nevertheless signed and delivered the policy of the defendant without objection, and without attaching a written permit for other insurance. The plaintiff's parol testimony was received, over the defendant's objection and exception Judgment on the (citing corroborating decisions from some twenty-seven states); Orient Ins. Co. V. McKnight, 197 111. 190, 64 N. E. 339 (future increase of hazard); Chis- more v. Anchor F. Ins. Co. (Iowa, July, 1906), 108 N. W. 230 (vacancy; court considers the "overwhelming weight of authority" to be on its side); German- American Ins. Co. V. Yellow Poplar Lumber Co. (Ky.), 84 S. W. 551 (clear space clause); Parsons v. Lane, 97 Minn. 98 (Miimesota standard policy now resembles the Massachusetts form); Hartley v. Penn. F. Ins. Co., 91 Minn. 382, 98 N. W. 198, 103 Am. St. R. 512 (use of gasoline); Thompson v. Trad- ers' Ins. Co., 169 Mo. 12 (other insur- ance); Spalding v. New Hampshire F. Ins. Co., 71 N. H. 441, 52 Atl. 858 (other insurance) ; Benjamin v. Palatine Ins. Co., 80 App. Div. 260, 80 Supp. 256, aff'd, on opinion below, 177 N. Y. 589, 70 N. E. 1096 (pendency of foreclosure); Ins. Co. v. Rich- mond Mica Co., 102 Va. 429, 46 S. E. 463, 102 Am. St. R. 846 (sole owner- ship); Medley v. Ins. Co., 55 West. Va. 342, 47 S. E. 101, 105 (title); Welch v. Fire Asso. of PMla., 120 Wis. 456, 468, 98 N. W. 227, 231, in which, however, the court admitted that as an original proposition of law it would be difficult to sustain the rule, but thought that the legislature alone could interfere in that state. Ranged in general on the side of the federal courts we find the courts of England, Weston v. Ernes (1803), 1 Taunt. 115 (parol conversa- tions to show knowledge or intent not admissible); and see Biggar v. Rock Ins. Co. (1902), 1 K. B. 516 (answers erroneously inserted by agent not read by applicant). Canada: Shannon v. Gore Mut. Ins. Co., 2 Ont. App. 396 (other insurance) . Massachusetts : Har- ris V. North Am. Ins. Co., 190 Mass. 361 (unoccupancy); Thomas v. Corrir- mercial Union Ass. Co., 162 Mass. 29, 37 N. E. 672; and see Allen v. Mass. Milt. Ace. Assoc, 167 Mass. 18; Batchelder v. Queen Ins. Co., 135 Mass. 449. New Jersey: Dewees v. Man- hattan Ins. Co., 35 N. J. L. 366 (char- acter of occupancy); Martin v. Ins. Co. of NoHh Am., 57 N. J. L. 623 (leased ground); FranMin F. Ins. Co. v. Mar- tin, 40 N. J. L. 668, 29 Am. Rep. 271 (misdescription); and see Dimick v. Mel. Life Ins. Co., 69 N. J. L. 384. Oklahoma: L.&L.& G. Co. v. Richard- son Lumber Co., 11 Okla. 585, 69 Pac. 938 (clear space clause). Possi- bly Coimecticut: Sheldon v. Hartford Fire Ins. Co., 22 Conn. 235, 58 Am. Dec. 420 (but see McGurk v. Ins. Co., 66 Conn. 528, 540). And, assuming its earlier standard policy like the New York standard to be constitutional, Minnesota: Anderson v. Manchester F. Assur. Co., 59 Minn. 182, 50 Am. St. R. 400, 28 L. R. A. 609 (other insur- ance). With West Virginia swinging from one side to the other, Maupin v. Ins. Co., 63 W. Va. 557, 45 S. E. 1003 (iron safe clause), reversed by Medley V. Ins. Co., 55 W. Va. 342, 47 S. E. 101 (sole ownership). 208 GENERAL PRINCIPLES OF INSURANCE LAW verdict for the plaintiff was affirmed by the circuit court of appeak on the ground of waiver, Judge Sanborn writing a powerful dissent- ing opinion; but the judgments were reversed by the United States Supreme Court by a vote of six to three, in a decision of perhaps greater practical moment than any other rendered in the law of insurance within a half century; the court holding that the plaintiff's conversation with the agent, at variance with the pohcy, was inad- missible and should have been rejected.^ The recently expressed views of many state courts in opposition to the federal court lack consistency and cohesion; and, remarkable to relate, nowhere among their opinions is the vital question satis- factorily met and answered, whether the desirable result, sought to be accomplished by the doctrine of parol waivers, might not, as in all other cases, be better worked out in the equity branch of the courts. Indeed, the opinion of the West Virginia court, though not having that object in view, is a cogent argument in favor of sending 1 Northern Assur. Co. v. Grand View Bldg. Asso., 183 U. S. 308, 22 S. Ct. 133, 46 L. Ed. 213, in which the court by Justice Shiras sums up as follows: "What, then, are the principles sus- tained by the authorities, and ap- plicable to the case in hand? They may be briefly stated thus: That con- tracts in writing, if in unambiguous terms, must be permitted to speak for themselves, and cannot by the courts, at the instance of one of the parties, be altered or contradicted by parol evidence, unless in case of fraud or mutual mistake of facts; that this principle is applicable to cases of insurance contracts as fully as to contracts on other subjects; that provisions contained in fire in- surance policies, that such a policy shall be void and of no effect if other insurance is placed on the property in other companies without the knowl- edge and consent of the company, are usual and reasonable; that it is reasonable and competent for the parties to agree that such knowledge and consent shall be manifested in writing, either by indorsement upon the policy or by other writing; tnat it is competent and reasonable for insurance companies to make it a matter of condition in their policies that their agents shall not be deemed to have autnority to alter or contra- dict the express terms of the policies as executea and delivered; that where fire insurance policies contain pro- visions wher'eby agents may, by writing indorsed upon the policy or by writing attached thereto, express the company's assent to other in- surance, such limited grant of authority is the measure of the agent's power in the matter, and where such limita- tion is expressed in the policy, ex- ecuted and accepted, the insured is presumed, as a matter of law, to be aware of such limitation; that in- surance companies may waive for- feitures caused by non-observance of such conditions; that, where waiver is relied on, the plaintiff must show that the company, with knowledge of the facts that occasioned the for- feiture, dispensed with the observar- tion of the condition; that where the waiver relied on is an act of the agent, it must be shown either that the agent had express authority from the company to make the waiver, or that the company subsequently, with knowledge of the facts, ratified the action of the agent. , . . The plain- tiff's case, at its best, is based on the alleged fact that the agent had been informed, at the time he delivered the policy and received the premium, that there was other insurance. The only way to avoid the defense and escape from the operation of the con- dition, is to hold that it is not compe- tent for fire insurance companies to protect themselves by conditions of the kind contained in this policy, So to hold would, as we have seen RESTRICTIONS UPON AUTHORITY OF AGENTS, ETC. 209 this class of complainants into equity for reformation of their con- tracts.^ The Iowa court frankly has this to say: "The doctrine is peculiar to the law of insurance, and is founded on the laudable design of preventing the perpetration of a fraud through obtaining a premium by the issuance of a policy known to be void ab initio. As an original proposition, it would be difficult to defend this exception to the gen- eral rule that he who becomes a party to a contract is presumed to have knowledge of its contents and is bound thereby, unless pre- vented from ascertaining them by some artifice or deception. But such contracts are so common and of such universal use in the busi- ness world that they are ordinarily spoken of as commodities rather than individual agreements. Insurance is bought and sold, accord- entirely subvert well-settled princi- ples declared in the leading English and American cases, and particularly in those of this court. This case is an illustration of the confusion and uncertainty which would be occasioned by permitting the introduction of parol evidence to modify written contracts, and by approving the conduct of agents and persons ap- plying for insurance in disregarding the express limitations put upon the agents by the principal to be affected. It should not escape observation that preserving written contracts from change or alteration by verbal testi- mony of what took place prior to and at the time the parties put their agreements into that form, is for the benefit of both parties. In the present case, if the witnesses on whom the plaintiff relied to prove notice to the agent had died, or had forgotten the circumstances, he would thus, if he had depended to prove his contract by evidence extrinsic to the written in- strument, have found himself unable to do so. So, on the other side, if the agent had died, or his memory failed, the defendant company might have been at the mercy of imscrupu- lous and interested witnesses." In the lower court Judge Sanborn, dis- senting, closed with the following terse statements: "There seems to me to be no ground for waiver, by, or an estoppel of, the insurance company in tms case, for several reasons: 1. Be- cause the company expressly limited the power of its solicitor to make waivers or work estoppels of the char- acter here invoked to those made in u writing by indorsements upon the policy, and it brought notice of this limitation home to the insured by an express stipulation in the policy, which the insured accepted. 2. Because an indispensable element of an estoppel is some act, statement, or representa- tion which tends to deceive the in- sured, and thereby induces it to adopt a course of action or a state of inac- tion that it would not otherwise have taken, and this case contains no such elements. The insured knew that there was other insurance. It knew . that it was not indorsed on the policy. It knew that the solicitor had no power to deliver a valid policy without such an indorsement, and it knew that it agreed that, without this indorsement, its policy should be void; for all these things were written in the contract and the insured was charged with knowledge of its contents. 3. Because there can be no waiver without an intent to waive, and no intent to waive can be deduced, or inferred from the mere fact of knowledge, in the face of an express written stipulation to the contrary, made and delivered at the time. 4. Because no estoppel or waiver based on acts or knowledge prior to, or contemporaneous with, the making of an express written agreement on the subject, can prevail over the express terms of that con- tract, which as conclusively merges and supersedes all prior and con- temporaneous negotiations and un- derstandings by estoppel and by waiver as by words." 1 Medley v. Ins. Co., 55 W. Va. 342, 47 S. E. 101. 210 GENERAL PRINCIPLES OF INSURANCE LAW ing to the speech of the people. To omit reading the application before signing it or the policy upon its receipt is not deemed negli- gence as matter of law, as would be the case with other instruments. "^ If this opinion is to prevail, there is little left to those many rea- sonable requirements of the American statutory policies which are laid upon the insured for the protection of the imderwriter and the safety of the public. It is submitted that "the universal use" of the standard policy, mentioned by the court, might seem to be an added reason for presuming that the insured is acquainted with its contents, rather than an excuse for ignorance and carelessness; and such is the declaration of a neighboring court in the west.^ The New York court differs widely from the Iowa court and con- clusively presumes that the insured is acquainted with the poUcy provisions regarding waivers as from the time when he receives the policy; but, in the interest of fair dealing, refuses to apply his knowl- edge or his stipulations to forfeitures known to the countersigning agent at the inception of the contract.^ No matter how many standard policies the insured may have received previously; no mat- ter how familiar he or his broker may in fact be with all its contents; no matter though the alleged fact of the agent's knowledge, shown by parol, be in dispute and contradicted by the agent as well as by the written contract; no matter though the home ofRce have no knowledge of the groxmd of forfeiture; such forfeitures, if found by the jury to have been known to the agent, the company is held to have waived by the issuance of its pohcy or receipt of the premium.^ In one of the five New York cases last cited the insured was a corporation. In all the others the insured were business men, the policies in every case being upon their business properties. There was no claim in any of the cases that the insured had had no previous acquaintance with the New York standard policy. For aught that appeared, every one of them had taken out many such policies for a series of years. No point was made by the court in any of these cases that the insured in fact lacked familiarity with the terms of the contract. Nor was there any claim that the insurer had any knowledge of the ground of forfeiture other than the imputed knowl- edge of a local agent. Nevertheless, in all the cases, important 1 Chesmore v. Anchor F. Ins. Co. 142 N. Y. 382, 37 N. E. 615, 25 L. R. (la., 1906), 108 N. W. 230. A. 637; Wood v. Am. Fire Ins. Co., 3 Straker v. Phcenix Ins. Co., 101 149 N. Y. 382, 44 N. E. 80, 52 Am. Wis. 413, 419. St. R. 733: Robbins v. Spring fieU F. & 3 Lewis V. Guardian F. & L. Ins. Co., M. Ins. Co., 149 N. Y. 477, 44 N. E. 181 N. Y. 392, 74 N. E. 224. 159; Wisotzkey v. Niagara F. Ins. Co., t Forward v. Continental Ins. Co., 112App. Div. 599, 98 N. Y. Supp. 760. RESTRICTIONS UPON AUTHORITY OF AGENTS, ETC. 211 wananties of the statutory policy, upon which the insurers had reUed, were annulled by oral testimony. The real explanation of the attitude of the courts in these and similar cases can only be found in the narrow and illiberal methods' of certain insurers in the past, which have aroused antagonism on the part of judges, juries, and pubhc, and which, unfortunately for this branch of the law, have invited reprisals. The Virginia court takes a middle ground and forcefully defends it, holding that the policy stipulations regarding the limit of the agent's authority to waive will apply even to forfeitures known to the agent at the inception of the contract, provided the insurer can affirmatively show that the policy restriction had actually, and not merely constructively, been brought to the attention of the insured at that time.^ The Missouri court concludes that a local, countersigning agent with the usual authority, including the power to give written per- mits, is the alter ego of the principal, and that, as the principal has inherent, inalienable power to waive either orally or in writing, so has its agent .^ Doubtless such an agent is the alter ego of the principal in accepting or rejecting the risk, and in fixing a rate of premium and in performing other authorized acts, but where his actual in- structions, as well as the statutory form of policy delivered to the insured, expressly limit the scope of the agent's activities to the use of written permits, it is difficult to vmderstand how a court can find an extension of his power as matter of law, or simply by virtue of his position. The New HampsTiire court falls back on the doctrine of essential justice with these remarks: "If the rule thus followed conflicts with the rule which prevents a written instrument from being controlled by parol testimony, it has been so generally adopted and become so firmly fixed in the law of insurance that it must be regarded as an exception to the latter rule. It has the great merit of working justice in cases of this kind, and undoubtedly arose from the necessity of the situation in order to accomphsh that result." * But however it may have been in dealing with the unfair and varied forms of policies formerly in use, is it demonstrated to be of advantage to the public to give to all claimants, many of whom are either forgetful or dis- honest, the power of evading the provisions of a standard policy by 1 Virginia F. & M. Ins. Co. v. ^ Thompson v. Traders' Ins. Co., Richmond Mica Co., 102 Va. 429, 46 169 Mo. 12, 68 S. W. 889. S. E. 463, 102 Am. St. R. 846. s Spalding v. New Hampshire F. Ins. Co., 71 N. H. 441, 52 Atl. 858. 212 GENERAL PKINCIPLES OF INSURANCE IxAW oral testimony, in actions at law on the contract? The United State!? Supreme Court thinks that such a practice is detrimental to the general welfare, and many lower federal courts have since, with cor- dial approval, applied the rule laid down by the highest court, the rule always stoutly advocated by the courts of New Jersey and Massachusetts, and formerly in several cases by the highest court of New York. There seems unfavorable prospect of securing any measure of uni- formity in this branch of the law, the country over, for many years to come.^ Nor is it easy to harmonize the recent decisions in the Empire State alone. Where the sohcitor of a life company, knowing the facts, writes answers incorrectly into the application, it has re- peatedly been held in that state that the restriction upon his au- thority stated in the application will control. In those cases apparently the knowledge of the agent was not imputed to the company although he was conducting an employment authorized by it and relating to the inception of the contract.^ But, on the other hand. New York as well as other state courts, notwithstanding a contract stipulation limiting waivers to written permits, seems to stand for the proposition that knowledge of forfei- ture possessed even by a partner,' or by a clerk, of the countersigning agent, or by any subagent of the company, if obtained in the per- formance of some authorized act for the company, may be the basis of an estoppel, provided such knowledge is acquired before the policy issues, although the knowledge, be not commimicated to the agent signing the policy.'* 1 In a recent case, Mauvin v. Scot- < For example, Forward v. Conti- twh U. & N. Ins. Co., 53 W. Va. 557, nental Ins. Co., 142 N. Y. 382, 388, 37 45 S. E. 1003, Brannon, J., says: N. E. 615, 25 L. R. A. 637; Carpenter "Upon this subject of the power of v. Oerman^Am. Ins. Co., 1Z5N.Y. 298, agents to waive conditions imposing 31 N. E. 1015; Arff v. Star Fire Ins. on the party insured duties propeT for Co., 125 N. Y. 57, 25 N. E. 1073, 21 the protection of the insuring com- Am. St. R. 721, 10 L. R. A. 609; Ins. pany, there is a world of decisions, and Co. v. Randle, 81 Miss. 720, 33 So. 500; they are a wilderness of conflicting Pollock v. German F. Ins. Co., 127 cases." Mich. 460; Steele v. 7ns. Co., 93 Mich. 2 McCollum V. Mut. Ldfe Ins. Co., 84, 53 N. W. 514. But see the more 55 Hun (N. Y.), 103, 8 N. Y. Supp. recent decision as to a life insurance so- 249, aff'd 124 N. Y. 642, 27 N. E. 412; licitor in Butler v. Mich. Mut. L. Ins. Kenyan v. K. T. & M. M. A. Assoc, Co., 184 N. Y. 337, reversing 93 App. 122 N. Y. 247, 25 N. E. 299; Bernard Div. 619. The difficulty of recon- V. United Life Assn., 14 App. Tlrv. 142, ciling the New York cases in this 43 N. Y. Supp. 527; Hamilton v. F. regard is alluded to by the New Mut. Life, 27 App. Div. 480, 50 N. Y. York Supreme Court in Blass v. Supp. 526; Hewitt v. Am. Union Life Agricultural Ins. Co., 18 App. Div. Ins. Co., 85 App. Div. 279, 83 N. Y. 486, and by the Federal Supreme Court Supp. 232. in Northern Assur. Co. v. Grand View i Lewis V. Guardian F. Ins. Co., 181 Bldg. Assn., 183 U. S. 308 at p. 329 N. Y. 392, 74 N. E. 224. CONCLUSION 213 § 174. Conclusion. — Upon a careful review of the many conflict- ing decisions and opinions adverted to in the last section, we may well conclude with a Wisconsin jurist, that as an original proposition it would be difiicult to justify the special and exceptional favor shown by the courts to policyholders.^ We may also perhaps go further and conclude that the weight of reason is with the federal courts and those of Massachusetts, New Jersey, and England, con- vinced that the meaning and effect of a policy of insurance should not depend upon the uncertainties of oral testimony, and that their determination should not be left to the bias or caprice of a jury. In the law of insurance as in other branches of the law, it may seem to us to be more just and more expedient to adhere to the fundamental and long-established rule of evidence that except in cases of fraud or mutual mistake, for which relief may be obtained only in an equity forum, and within equity rules of procedure, the rights of the parties are to be governed by the plain terms of the contract as written. Although in a suit to reform the contract the burden of proof rests heavily upon the plaintiff,^ nevertheless a chancellor or judge sitting in equity has abundant power to grant adequate relief, and in most jurisdictions speedy relief, to an honest claimant who has been de- frauded, deceived, or misled by the representatives of an insurance company;' and none other should seek to evade his written engage- ments. 1 Welch V. Fire Asso. of Phila. , 120 criticises with evident feeling the de- Wis. 456, 468, 98 N. W. 227, 231 (but cision of the federal court; and this Wisconsin stands with the majority of recovery based on reformation was the state courts on the subject of subsequently left undisturbed by the waiver). United States Supreme Court, 203 U. S. 2 See I 85. 106, 27 S. Ct. 27. The plaintiff might 3 Fitchner v. FiddiiyMvi. F. Assoc, well have sought that form of remedy 103 Iowa, 276, 72 N. W. 530 (cited in in the first instance. That the sanction 183 U. S. 25, 39); KeUy v. Citizens' of the contract as written may be of Mut. F. Assn., 96 Minn. 477, 105 value to the insured is well illustrated N. W. 675; Gwattney v. Prov. Sav. by the Van Tassel case in which a Life Assur. Soc, 132 N. C. 925, 44 written binder, and a letter of the S. E. 659; Medley v. German Alliance company, claimed to be a cancellation /ns. Co., 55 W. Va. 342, 47 S. E. 101. of the binder, were before the court for The sequel to the famous Northern construction. First trial was short and Assur. Co. case (183 U. S. 308) is in- simple and on appeal the highest court structive. After being defeated by the decided in favor of the plaintiff that United States Supreme Court in an the binder was equivalent to a policy action on the contract the plaintiff and that the notice was not so worded went home to Nebraska, instituted a as to be effective. On a subsequent fresh action, this time for reformation appeal the Court of Appeals by a vote of the policy, was allowed to recover in of four out of seven judges concluded the state court notwithstanding the to let in parol evidence of custom and expiration of the one-year limitation conversations. There were six trials of the policy, Grand View Bldg. Assoc, of this case at circuit and ten hearings v. Northern Assur. Co. (Neb.), 102 on the merits on appeal. The last N. W. 246, in which the state court printed record covered more than 400 214 GENERAL PRINCIPLES OF INSURANCE LAW It would seem, at least, as though a form of contract prescribed by statute ought, in the absence of fraud or mutual mistake, to be enforced according to its written terms.^ The statutes providing for a standard fire poUcy give notice binding upon everybody that a prime purpose of the legislature is to secure "a uniform policy," not ,a form of contract depending upon the individual discretion or caprice of local agents.^ The provisions of the policy also amount to explicit agreement that, for the benefit of both parties, oral testi- mony shall not avail to disturb the contract, and that no representa- tive of the company below the board of directors shall be deemed to have authority to give oral permits or make oral changes. By its terms any proper modifications of the contract may be made, if in writing,' and such a business-like provision would seem to constitute no illegal restriction upon corporate action ^ as many courts infer; nor is it quite correct to say that the local agent in dealing with such a policy is "clothed with the power to make contracts" as the Miss- issippi and other courts declare.^ His authority rather woul4 seem to be limited to countersigning a statutory form of policy already, printed and executed by higher officers in blank, and to granting permits, but only written permits. Moreover, many provisions of the standard policy are precau- tionary in their character, and calculated to prevent arson and to encourage care in the management of an element always dangerous in a thickly settled community.* The insured public, in the last analysis, must pay for losses insured, and the entire community are interested, though thej' may not appreciate it, in compelling a rea- sonable enforcement of such warranties, approved as they are by many of our state legislatures.'' pages Meanwhile plaintiff had died that they have a diversified meaning and the defendant had gone out of and effect and may be far from con- business. See among other citations current. of this case, 72 Hun, 141, 151 N. Y. ^Ndson v. Traders' Ins. Co., 181 130, 45 N. E. 365, 28 App. Div. 163, N. Y. 472, 74 N. E. 421; Straker 161 N. Y. 413, 55 N. E. 936, 54 App. v. Phoenix Ins. Co., 101 Wis. 413, Div. 386, 66 App. Div. 531, 103 App. 419. Div. 610, 184 N. Y. 607. _ < See cases § 161. Though a more 1 Nelson v. Traders' Ins. Co., 181 ' general provision that no representa- N. Y. 472, 74 N. E. 421 (unreasonable tive had power to alter the contract by features of older form of policy have any method might easily be so con- iargely disappeared); (Simfcer v. Pfeoswia; strued, Home Ins. Co. v. Gibson, 7i Ins. Co., 101 Wis. 413, 77 N. W. 752 Miss. 58, 17 So. 13. (every man knows he is contract- ' Western Assur. Co. v. Phelps, 77 ing for standard policy and nothing Miss. 625, 640, 27 So. 745. else). The fire loss in this coimtry foi 2 Under the doctrine of waiver the 1906 exclusive of the San Francis':o insured with several policies in identi- conflagration was above normal. caj terms upon one risk finds often ' See Appendix, ch. I. SUBSKQUENT PAROL WAIVERS 215 § 17S. Present Knowledge of Existing Facts which will Shortly Constitute Breach. — The rule that issuing the policy with knowl- edge of a ground of forfeiture constitutes a waiver has been extended to the case where the general or countersigning agent knew at the inception of the contract that the property was unoccupied, and understood that the unoccupancy was likely to continue for more than the stipulated period of ten days.^ Thus, where on account of the great coal strike of 1905 the tenant of the insured, just before issuance of policy, had left his furniture and personal effects in the insured ho\ise in the country and had moved to a New York City hotel with his family for a few weeks, the com- pany's local countersigning agent, his near neighbor, being at all times fully cognizant of the facts, the company was held estopped.^ But knowledge by the agent of present vacancy will not avail to aid the insured if the agent has no reason to suppose that it will continue beyond the permitted period.* § 176. The Same — Subsequent Parol Waivers. — By the over- whelming weight of authority the policy restriction upon the au- thority of the countersigning agent is conclusive as regards the effect of his knowledge, declarations, and acts after the policy is issued, 1 Mil. Mechanics' Ins. Co. v. Brovm, be used again, Hartley v. Penn. F. Ins. 3 Kan. App. 225, 44 Pac. 35; Queen Co., 91 Minn. 382, 98 N. W. 198. And Ins. Co. V. Kline, 17 Ky. L. Rep. 619, so as to any prohibited use, Orient Ins. 32 S. W. 214; Chamberlain v. Brit.-Am. Co. v. McKnight, 197 111. 190, 64 N. E. Assur. Co., 80 Mo. App. 589; Blass v. 339; Mfrs. & Merchants' Ins. Co. v. Agricultural P. Ins. Co., 18 App. Div. Armstrong, 145 111. 469, 34 N. E. 553 481, 46 N. Y. Supp. 392, aff'd 162 N. Y. (company knew that sprinkler equip- 639; Cross v. Nat. F. Ins. Co., 132 N. Y. ment could not be installed within the 133, 30 N. E. 390; Short v. Home Ins. sixty days named). So also if agent Co., 90 N. Y. 16, 43 Am. Rep. 138; knows of other insurance though he Cone V. Niagara F. Ins. Co., 60 N. Y. may not know it to be outstanding at 619; Bear v. Ins. Co., 34 Misc. 613, 70 the precise moment when defendants' N. Y. Supp. 581. policy issues, Wenzel v. Property Mut. 2 N. Y. Mut. Savings & Loan Assn. Ins. Assn. (Iowa, Jan., 1906), 35 Ins. V. Westchester Fire Ins. Co., 110 App. L. J. 115. But the rule in the federal Div. 760, 97 N. Y. Supp. 436. Simi- and other courts is different, Kentucky, larly where agent knew that the mill etc., Co. v. Norviich Union F. Ins. Co., was likely to cease operations for more 146 Fed. 695. than ten days, Waukan MiUing Co. ' Ranspach v. Teutonia F. Ins. Co., V. Citizens' Mut. P. Ins. Co. (Wis.), 109 Mich. 699, 67 N. W. 967; Moore v. 109 N. W. 937 (citing many cases); Niagara P. Ins. Co., 199 Pa. St. 49, 48 Ladd V. .£tmi Ins. Co., 147 N. Y. 478, Atl. 869, 85 Am. St. R. 771; Queen Ins. 42 N. E. 197. So also if, under similar Co. v. Chadwick, 13 Tex. Civ. App. 318, circumstances, the agent promises to 35 S. W. 26; Conn. P. Ins. Co. v. indorse permit but does not. Queen Ins. Tilley, 88 Va. 1024, 14 S. E. 851, 29 Co. V. Straughan, 70 Kan. 186, 78 Pac. Am. St. R. 770; England v. Westchester 447; and see Dujmy v. Ins. Co., 63 P. Ins. Co., 81 Wis. 683, 51 N. W. 954, Fed. 680. So also if agent knows that 29 Am. St. R. 917. gasoline has been used and is likely to 216 GENERAL PRINCIPLES OF INSURANCE LAW unless the assured can show an actual authority of broader extent, which in most instances it is difficult to do.'' Thus, where during the term of a standard policy the assured in- formed the general agent of a change of ownership and got the reply, "I will see that the insurance is all right," held, no waiver, because no written consent was indorsed.^ But the distinctions drawn are sometimes fine. Thus, it was held that the company was estopped where the general agent, knowing that the policy was not in possession of the assured, had promised the vendee to go to the mortgagee, a bank in possession, and make indorsement consenting to change of title.^ This case was clearly sound. The action was brought, not on the original contract, but by the transferee and based upon the subsequent oral contract made with him. But in a similar case where action was brought upon 1 lovm Life Ins. Co. v. Levns, 187 V. S. 335, 348, 23 S. Ct. 126; Northern Asswr. Co. V. Grand View Bldg. Asso., 183 U. S. 308, 22 S. Ct. 133; Uppman V. ^tna Ins. Co., 120 Ga. 247, 47 S. E. 593; Kirkman v. Farmers' Ins. Co., 90 Iowa, 457, 57 N. W. 952, 48 Am. St. R. 454; Sutherland v. Ins. Co., 110 Mich. 668, 68 N. W. 985; Gould v. Dwelling House Ins. Co., 90 Mich. 302, 51 N. W. 455; Ermentrout v. Girard F. & M., 63 Minn. 305, 65 N. W. 635; Travelers' Ins. Co. V. Myers, 62 Ohio St. 529, 57 N. E. 458, 460; Hartford Ins. Co. v. Post, 25 Tex. Civ. App. 4c28;Oshkosh Match Works v. Manchester F. Asswr. Co., 92 Wis. 510, 66 N. W. 525. The court should instruct the jury that a written agreement of waiver is essential, Sullivan v. Met. lAfe Ins. Co. (Mont., Jan., 1907), 36 Ins. L. J. 314. Contra, for example, Orient Ins. Co. v. Mc- Knight, 197 111. 190, 64 N. E. 339 (an- ticipated increase of hazard); Spring- field, etc., Co. V. Traders' Ins. Co., 151 Mo. 90, 52 S. W. 238, 74 Am. St. R. 521; Wilson v. Assur. Co., 51 S. C. 540, 29 S. E. 245, Chief Justice dissenting (vacancy). 2 Northam v. Dutchess Co. Ins. Co., 166 N. Y. 319, 322, 59 N. E. 912, 82 Am. St, R. 655. Similarly as to other insurance coupled with the agent's reply "^,11 right I will attend to it," Baurrmrtel v. Prov. Wash. Ins. Co., i36 N. Y. 547, 32 N. E. 990; Frank- furter v. Home Ins. Co., 10 Misc. 157, 31 N. Y. Supp. 3; German Im. Co. v. Heiduk, 30 Kfeb. 288, 46 N. W. 481, 27 Am. St. R. 402 Similarly as to vacancy, O'Brien v. Prescott Ins. Co., 134 N. Y. 28, 31 N. E. 265. Change of posesssion, Carey v. German-Am. Ins. Co., 84 Wis. 80, 54 N. W. 18, 36 Am. St. R. 907, 20 L. R. A. 267. Increase of hazard from new adjacent building, Straker v. Phoenix Ins. Co., 101 Wis. 413, 77 N. W. 752. Commencement of foreclosure proceedings coupled with assurance of the agent that no harm would ensue therefrom, Quirdan v. Prov. Wash. Ins. Co., 133 N. Y. 356, 31 N. E. 31, 28 Am. St. R. 645; Moore V. Hartford F. Ins. Co., 141 N. Y. 219 ("standard policy was compelled to remedy existingevils of parol waivers"). Likewise, an oral promise of "the agent to indorse permit for removal of prop- erty to another location does not bind the company under the standard policy unless the written consent is actually indorsed, Parker v. Rochester German Ins. Co., 162 Mass. 479, 39 N. E. 179; Connecticut Fire Ins. Co. v. Smith, 10 Colo. App. 121, 51 Pac. 170. But where the countersigning agent actu- ally received the policy for indorse- ment, collected pay for it and repre- sented to the assured, who did not have the policy, that permit had been indorsed, the company was held es- topped, Morgan v. III. Ins. Co., 130 Mich. 427, 90 N. W. 40. If the in- sured gets a written permit he may attach it at any time to the poUcy, Bennett v. Western Underwriters, 130 Mich. 216, 89 N. W. 702. s Manchester v. Guardian Assur. Co., 151 N. Y. 88, 45 N. E. 381, 56 Am. St, R. 600. OVEHT ACT WITH AUTHORITY TO PERFORM THE ACT 217 the policy, held, that the transferee could not recover.^ And if, as matter of fact, the plaintiff can show that the agent has express authority to disregard the provisions of the poUcy and give oral permits, such oral permit will be effective.^ Or if knowledge of the situation is transmitted to superior ofScers or agents with more gen- eral powers and they by affirmative acts within the scope of their authority recognize the continued validity of the policy, it has been held that waiver is established under the standard policy.* § 177. Overt Act with Authority to Perform the Act. — Many com-ts draw a distinction between a mere declaration or promise made by the countersigning or other agent and an overt act done by him with authority, if such act is consistent only with the con- tinued validity of the policy. Under these circumstances it has been held that where the assured relies upon the act to his prejudice an estoppel is established as a paramount, inexorable inference of law, no matter what the policy provides in respect to the agent's au- thority to waive or to the method of waiver. Thus where an agent, whose duty it is to collect premiums, and make written indorsements, actually collects a premium or makes an indorsement with knowledge of previous forfeitures for which no written consent is given, the company is held to be estopped.^ 1 NoHham v. Dutchess Co. Mut. Ins. 61 N. Y. Supp. 45, aff'd 165 N. Y. 666, Co., 177 N. Y. 73, 69 N. E. 222. 59 N. E. 1127; Mtna Ufe Ins. Co. v. Compare, hojyever, Northam v. /n- Fallow, 110 Tenn. 720, 77 S. W. 937 temational Ins. Co., 45 App. Div. 177, (citing numerous cases); Northwestern 61 N. Y. Supp. 45, afif'd 165 N. Y. 666, Mut. L. Ins. Co. v. Freeman, 19 Tex. 59 N. E. 1127, in which recovery was Civ. App. 632; and see Bigelow v. allowed because agent collected pre- Granite State Ins. Co., 94 Me. 39, 46 mium with knowledge. Applying the Atl. 808. The same rule applies same distinction to a recent Texas though the premiimi is not collecte"d case, Home Mut. Ins. Co. v. Nichols until after loss. Mechanics' & T. Ins. (Tex. Civ. App., 1903), 72 S. W. 440, Co. v. Smith, 79 Miss. 142, 30 So. 362 we reach the conclusion that the judg- (tender back after trial begun is too ment was right but that the plaintSf late); Phoenix Ins. Co. v. Covey, 41 should have set up as his cause of ac- Neb. 724, 60 N. W. 12. And see Hart- tion the subsequent new parol con- /orii^. 7ns. Co. v. Orr, 56 111. App. 629; tract. ' Frasier v. New Zealand Ins. Co., 39 2 Continental F. Ins. Co. v. Brooks, Ore. 342, 64 Pac. 814 (as to vacancy, 131 Ala. 614, 30 So. 876 (the agent, citing many cases); Afittman v. United no longer in company's employ, testi- Mut. Ins. Co., 20 R. I. 10, 36 Atl. 1121. fied on this point for plaintiff); West. But if the whole premium is due Assur. Co. v. Williams, 94 Ga. 128, 21 despite the breach tne rule is other- S. E. 370; German Ins. Co. v. Gray, 43 wise, German Ins. Co. v. Emporia, etc., Kan. 497, 23 Pac. 637, 8 L. R. A. 70, Assoc, 9 Kan. App. 803, 69 Pac. 1092; 19 Am. St. R. 150; Niagara Ins. Co. v. Cohen v. Continental F. Ins. Co., 67 Lee, 73 Tex. 641, 11 S. W. 1024. Tex. 325, 3 S. W. 296, 60 Am. Rep. 24; 3 Hunt v. State Ins. Co., 66 Neb. 121, Joliffe v. Madison Mut. Ins. Co., 39 92 N. W. 921. Wis. Ill, 20 Am. Rep. 35. And see < For example, Northam v. Inter- Burner v. German-Am. Ins. Co., 103 national Ins. Co., 45 App. Div. 177, Ky. 370, 45 S. W. 109. The United 218 GENERAL PRINCIPLES OF INSURANCE LAW The Connecticut court defines, in no uncertain terms, the binding effect of a warranty in the law of insurance.' Nevertheless, it also recognizes that, despite the policy stipulation of the necessity of a written agreement to effect waiver, the collection of premiums will estop the company from insisting upon a prior known forfeiture.^ § 178. As to Provisions Relating to Proceedings After Loss. — The provisions of the policy relating to proofs of loss and adj.-^- ment are held to be more readily waived.* But by the better reason and authority the countersigning agent has no authority under the standard policy to waive by parol the service of proofs altogether,* unless it affirmatively appear that express authority has been granted him to do so.* But other courts hold to the contrary.* The countersigning agent has apparent authority to receive proofs and therefore to waive matters of merely technical character, for States Supreme Court says: "It is true that where an agent is charged with the collection of premiums upon policies, it will be presumed that he informs the company of any circumstances coming to his knowledge affecting its liability, and if subsequently the premiums are received by the com- pany without objection any forfeiture incurred will be presumed to be waived," Globe Mut. Ins. Co. v. Wolff, 95 U. S. 326, 332, 24 L. Ed. 387; Mo- Gurk V. Met. L. Ins. Co., 56 Conn. 528, 540, 16 Atl. 263, 1 L. R. A. 563; Ger- mania Fire Ins. Co. v. Hick, 125 111. 361, 7 N. E. 792, 8 Am. St. R. 384, in which the court says : " An insurance company that takes a premium for a policy under conditions in respect to matters known to exist, that would render the policy invalid, will not be permitted to say that it is not a bind- ing contract for that reason, and the company will be held as having the same knowledge of the condition and situation of the property as that pos- sessed by the agent transacting the business for it." This language is adopted and approved in Vesey v. Commercial Union Assur. Co., 18 So. Dak. 632, 101 N. W. 1074, citing many other authorities. Wing v. Harvey, 5 De G., M. & G. 265; Armstrong v. Turmiand, 9 Ir. C. L. R. 32. 1 FeU v. JoJptWancock Life Ins. Co., 76 Conn. 494,'57 Atl. 175 (occupation of lockmaker and no prior applica- tion for life insurance incorrectly warranted; policy avoided). 2 Hennessy v. Met. Life Ins. Co. , 74 Corni. 699, 52 Atl. 490. See also dictum of English court to same effect, Biggar v. Rock Life Assur. Co. (1902), 1 K B. 516. 3 See § 144, supra. < For example, Burlington Ins. Co. v. Kennerly, 60 Ark. 532, 31 S. W. 155; Rvthven v. Am. Ins. Co., 92 Iowa, 316, 60 N. W. 663; Kirkman v. Farmers' Mut. F. Ins. Co., 90 Iowa, 457, 57 N. W. 952, 48 Am. St. R. 454; Lohnes V. Ins. Co. of No. Am., 121 Mass. 439; Wadhams v. West. Assur. Co., 117 Mich. 514, 76 N. W. 6; Lumber Co. v. Citizens' Ins. Co., 136 Mich. 42, 98 N. W. 761; Ermentrout v. Girard F. & M. Ins. Co., 63 Minn. 305, 65 N. W. 635, 56 Am. St. R. 485, 30 L. R. A. 346; Gmild v. Dwelling House Ins. Co. 90 Mich. 302, 51 N. W. 455; Hicks v. BrU.-Am. Ins. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424; Travelers' Ins. Co. V. Myers, 62 Ohio St. 529, 57 N. E. 458, 460, 49 L. R. A. 760; Smith V. Ins. Cc, 60 Vt. 682, 15 Atl. 353; Oshkosh Match Works v. Manchester F. Assur. Co., 92 Wis. 510, 66 N. W. 525. 5 O'Leary Bros. v. Ins. Co., 100 Iowa, 390, 69 N. W. 686. ^Indian River State Bank v. Harl^ ford Ins. Co., 46 Fla. 283, 35 i5o. 228; Citizens' Ins. Co. v. Sto'-dard, 197 111. 330, 64 N. E. 355; F'cn-.' ~.s. Co. v. Munger, 49 Kan. 178, Sv. Pac. 120; Nickell V. Phomix Ins. Co., 144 Mo. 420, 46 S. W. 435; Snyder v. DweUing House Ins. Co., 59 N. J. L. 544, 37 AtL 1022, 59 Am. St. R. 625. ADJUSTERS— OTHER SPECIAL AGENTS 219 example, to extend the time of service and to excuse informality in their contents,^ and, according to some courts, to extend time for bringing suit.^ § 179. Special Soliciting Agents — Fire. — Solicitors for fire insur- ance have no authority to waive conditions or forfeitures, but only to receive proposals, forward them and do various other acts.^ The same rules apply in general as are applicable to solicitors for life insurance and the same contrariety of views among the courts is found.* If they are intrusted with the closing of a contract of in- surance, and allowed to make a delivery of the policy, it has been held that they have implied authority to determine how the premium shall be paid, and if they give credit the policy will still be binding, though in contradiction to its terms; ^ but not so, in the opinion of some courts, if the policy expressly provides that the agent has no such power.^ § 180. Adjusters — Other Special Agents. — A special agent ap- pointed to investigate the amount and character of a loss and report thereon has no implied authority to waive by parol an essential condition of the contract or a forfeiture, especially where, as is usual, the policy denies this power7 And if the policy expressly denies his power he cannot waive service of proof of loss.* By virtue of his 1 ScMoss V. Westchester F. Ins. Co. ers' M. F. I. Co., 69 N. H. 666, 45 Atl. 141 Ala. 566, 37 So. 701; Indian River 479. But see State Mut. Ins. Co. v. State Bk. v. HaHford Ins. Co., 46 Fla. La Tourette, 71 Ark. 242, 74 S. W. 283, 35 So. 228 (1903); Phenix Ins. Co. 300, Bunn, C. J., dissenting; Citizens' V. Hunger, 49 Kan. 178, 30 Pac. 120, Ins. Co. v. Crist, 22 Ky. L. R. 47, 56 33 Am. St. R. 360; Walher v. Lan- S. W. 658. cashire Ins. Co., 188 Mass. 560, 75 ''See §§165-171. N. E. 66; Hamden v. Mill. & Mech. ^ Bodine v. Exchange Fire Ins. Co., Ins. Co., 164 Mass. 382, 41 N. E. 658, 51 N. Y. 117, 10 Am. Rep. 566; 49 Am. St. R. 467; Farmers' F. Ins. Boehen v. Williamsburgh City Ins. Co., Co. V. Baker, 94 Md. 545, 51 Atl. 184; 35 N. Y. 131, 90 Am. Deo. 787. Thompson v. Traders' Ins. Co., 169 ' Russell v. Prudential Ins. Co., 176 Mo. 12 (informal proofs); Vesey v. N. Y. 178, 68 N. E. 252, 98 Am. St. R. Commercial Union, 18 So. Dak. 632, 656. 101 N. W. 1074. ' Northern Assur. Co. v. Grand View 2 Firemen's Fund Ins. Co. v. West- Bldg. Assn., 183 U. S. 308, 22 S. Ct. em Refrig. Co., 162 111. 322, 44 N. E. 133; Weed v. London & L. Fire Ins. 746. Co., 116 N. Y. 106, 22 N. E. 229; Mar- 3 Cassimus v. Scottish Union & Nat. vin v. Universal Life Ins. Co., 85 N. Y. /. Co., 135 Ala. 256, 33 So. 163; Lohnes 278, 39 Am. Rep. 657. But see V. Ins. Co. of N. A., 121 Mass. 439; Georgia Home Ins. Co. v. Allen, 128 Tate V. Citizens' Mut. Ins. Co., 13 Ala. 451, 30 So. 537. Gray (Mass.), 79; Elliott v. Farmers' * Kirkman v. Farmers' Ins. Co., 90 Ins. Co., 114 Iowa, 153, 86 N. W. 224; Iowa, 457, 57 N. W. 952, 48 Am. St. R. Hausen v. Citizens' Ins. Co., 66 Mo. 454; Contra, Reed v. Continental Ins. App. 29; Tabor v. Rockingham Farm- Co. (Del.), 65 Atl. 569. 220 GENERAL PRINCIPLES OF INSURANCE LAW position, however, he may have apparent authority to waive the time of service.' If an adjuster, as is not infrequently the case, is given power not only to adjust the amount of loss and report complications, but to dispose of the whole matter by giving a draft upon the company in settlement, at his sole discretion, it has been held that he has actual power after loss to waive forfeitures under the standard or any policy.^ This subject has occupied the attention of the highest court in Connecticut in connection with an elaborate citation of authorities.* The authority of clerks of agents or of insurers is, as a rule, limited to the performance of ministerial and clerical acts, and they are not to be allowed to disturb or alter the terms of the policy, unless such a result is naturally involved in the proper performance of the par- ticular act which they are employed to do.^ V. L. & L. & G. Ins. Co., his knowledge would postpone suit 155 N. Y. 349, 355, 49 N. E. 935. until after the lajjse of the year's lim- 2 Georgia Home Ins. Co. v. AUen, 119 itation for beginning action, held, that Ala. 436, 24 So. 399; Germania Fire the company was estopped from set- Ins. Co. V. Pitcher, 160 Ind. 392, 64 ting up the forfeiture, DibbreU v. N. E. 921, 66 N. E. 1003; Dobson v. Georgia Home Ins. Co., 110 N. C. 193, Hartford Fire Ins. Co., 86 App. Div. 14 S. E. 783, 28 Am. St. R. 678, Merri- lls, 121, 83 N. Y. Supp. 456, aff'd 179 man, C. J., dissenting. N. Y. 557, 71 N. E. 1130; Smaldose v. 3 Bemhard v. Rochester German Ins. Ins. Co. of North Am., 162 N. Y. 580, Co. (Conn. Dec, 1906), 65 Atl. 134. 57 N. E. 168. Where the adjuster con- < Waldman v. North British & M. tinned to make demands for dujilicate Ins. Co., 91 Ala. 170, 24 Am. St. R. vouchers a compliance with which to 883. CHAPTER IX GENEBiit Principles — Continued Marine Insurance § 181. What is Marine Insurance. — The law of marine insurance is in so many particulai"^, peculiar to that branch of insurance that it will be convenient to present by themselves some of the principles relating to it.* Marine insurance is an insurance against risks, connected with navigation, to which a ship, cargo, freight, profits, or other insurable interest may be exposed during a certain voyage or a fixed period of time.^ § 182. Implied Warranties. — There are three warranties which are understood in every contract of marine insurance, and are as efficacious as though they were written upon the face of the policy. These relate to seaworthiness, deviation, and the legality of the ad- venture. The last is sometimes classed as a condition rather than a warranty.* § 183. Warranty of Seaworthiness. — In every voyage policy upon ship, freight, cargo, or other interest, a warranty is implied, that, at the commencement of the voyage, the ship shall be seaworthy for the purpose of the particular adventure insured;^ otherwise the 1 InsiiraUe interest, concealment, liability of shipowner under contract representations, express warranties, to carry, Cunard Co. v. Marten (1902), and other matters, affecting the rights 2 K. B. 624 (1903), 2 K. B. 511: or of the parties to the marine policy, liability for colliding with another ship, have already received consideration. Tatham v. Burr (1898), App. Cas. 385. See ch. II-V. - s There is no implied warranty as ^ Scelberg v. Western Assur. Co., 119 to the nationality of a ship, or that Fed. 23, 28, 55 C. C. A. 601. Policy her nationality shall not be changed sometimes covers the goods on shore, during the risk, Dent v. Smith, L. R. 4 Pelly V. Royal Exch. Assur. Co. (1757), Q. B. 414 (British ship transferred to 1 Burr. 341. Or on quay, Ide v. Russian owners. Policy on gold.). Chalmers (1900), 5 C!om. Cas. 212. Or * Richelieu & O. Nav. Co. v. Boston on voyage partly by water and partly M. Ins. Co., 136 U. S. 408, 10 S. Ct. by land, see § 22. Liability confers 934, 34 L. Ed. 398; Long Dock Mills & insurable interest, see § 33. Thus, El. Co. v. Manrihei'm, Ins. Co., 116 Fed. [221] 222 GENERAL PRINCIPLES OF INSURANCE LAW policy does not attach.^ At best the dangers of ocean travel are manifold and serious. The underwriter who is asked to assume lia- bility for them is entitled, when he fixes the amount of his premium, to reckon on a suitable ship, properly manned, equipped, and sup- plied, with due regard to the character of the adventure proposed.^ An element of public policy also is manifestly involved in the re- quirement that the warranty of seaworthiness must be observed, and that the safety of all on board must be thereby to that extent secured. Where a vessel is lost by an undisclosed cause, the burden of proof on the issue of unseaworthiness may become an important factor in the litigation between insurers and insured. If soon after sailing, the ship founders or becomes so leaky or disabled as to be unable to proceed, and this cannot be explained by any stress of weather, or other known cause, the proper inference is that she was unsea- worthy.* The question whether a vessel insured was seaworthy is, however, ordinarily one of fact for the jury; and although the cause 886, aff'd 123 Fed. 861; Wahh v. WoMngton Ins. Co., 32 N. Y. 427; Greenock S. S. Co. v. Marit. Ins. Co. (1903), 2 K. B. 657; Dixon v. Sadler, 5 M. & W. 405. 1 But see § 1 14. Where the policy at- taches while the ship is in port, there is also an implied warranty that she shall, at the , commencement of the risk, be reasonably fit to encounter the ordinary perils of the port, Havghton V. Empire Mar. Ins. Co., L. R. 1 Exch. 206; Quebec Mar. Ins. Co. v. Commercial Bank, L. R. 3 P. C. 241; Paddock v. Franklin Ins. Co., 11 Pick. (Mass.) 227. 2 In a case between carrier and ship- per, the United States Supreme Court says, by Justice Clifford: "A carrier's first duty, and one that is implied by law, when he is engaged in transporting goods by water, is to provide a sea- worthy vessel, tight and stanch, and well furnished with suitable tackle, sails, or motive power, as the case may be, and furniture necessary for the voy- age. She must also be provided with a crew, adequate in number and suffi- cient and competent for the voyage, with reference to its length and other particulars, and with a competent and skillful master, of sound judgment and discretion; and in general, especially in steamships and vessels of the larger size, with some person of sufficient ability and experience to supply his place temporarily at least, in case of his sickness or physical disqualification," Propeller Niagara v. Cordes, 21 How. (U. S.) 7, 23, 16 L. Ed.. 41. Lord Cairnes says: "By 'seaworthy,' my lords, I do not desire to point to any technical meaning of the term, but to express that the ship should be in a condition to encounter whatever perils of the sea a ship of that kind, and laden in that way, may be fairly expected to encounter in crossing the Atlantic," Steel V. State lAne S.S. Co., 3 App. Cas. 72. And see § 185. The issue of sea- worthiness often arises in cases be- tween shipper and shipowner. A ship may be seaworthy, as between ship- owner and insurer on ship, though un- seaworthy as between shipowner and shipper of a particular cargo, Chalmers & Owen, Ins. (1907), 58. 3 Bullard v. Insurance Co., 1 Curt. 148, Fed Cas. No. 2,122; De Hart & Simey, Ins. (1907), 51, citing Arnould, § 725; Pickup v. Thames Ins. Co. (1878). 3 Q. B. D. 594, 47 L. J. Q. B. 749; Ajum Goolam Hassen v. Union Mar. Ins. Co. (1901), App. Cas. 362, 70 L. J. P. C. 34. Mr. Justice Wash- ington stated broadly that every war- ranty in the policy whether express or implied is a condition precedent to a right of recovery and that the insured cannot recover without first averring and proving performance, Craig v. V. S. Ins. Co., 1 Pet. C. C. 410, Fed. Cas. No. 3,340. See § 117, supra. WARRANTY OF SEAWORTHINESS 223 of loss be not proved, yet if there is evidence showing seaworthiness in the vessel at the inception of the voyage, and if it appear that she subsequently encountered marine perils such as might disable a stanch and well manned vessel, the jury may attribute the loss to the perils insured against.^ In a voyage policy on goods or other movables there is an implied warranty, that, at the commencement of the voyage, the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other movables to the destination contemplated by the policy.^ The fitness of the ship to carry the goods, however, should be decided with reference to the perils insured against by the policy. For example, where cattle are insured against mortality, the war- ranty is not satisfied when the appliances for ventilation are insuffi- 1 Walsh V. Washington Mar. Ins. Co., 32 N. Y. 427. See many cases on bxir- den of proof in this section infra. The underwriter may waive the breach of the implied warranty of seaworthiness or estop himself from insisting upon it, Thebaud v. Insurance Co., 155 N. Y. 516, 50 N. E. 284. An acceptance of a notice of abandonment is a waiver of a known forfeiture, Provincial Ins. Co. V. Leduc (1874), L. R. 6 P. C. 224, 43 L. J. P. C. 49; Arnould, § 690; De Hart & Simey, Ins. (1907), 43, note (e). 2 The Moon King (1895), 2 Q. B. 550, 558 (frozen meat). English and other courts hold that the burden is on the underwriter to establish unsea- worthiness, Ajum, Goolam & Co. v. Union Mar. Ins. Co. (1901), App. Cas. 362; Pickup v. Thames, etc., Ins. Co., 3 Q. B. D. 594; Eammoor v. Cal. Ins. Co., 40 Fed. 847; Ouy v. Citizens' Mut. Ins. Co., 30 Fed. 695; Perry v. Cobb, 88 Me. 435, 34 Atl. 378,. 49 L. R. A. 389. Other cases, more logically perhaps (see Hennessey v. Met. L. Ins. Co., 74 Conn. 699), but less conveniently, hold that the insured must furnish, in the first instance, at least, some general proof of seaworthiness, Tidmarsh v. Washington F. & M. Ins. Co., 4 Mason (U. S.), 439, Fed. Cas. No. 14,024; Lunt v. Boston Mar. Ins. Co., 6 Fed. 562, 567; Nome Beach Co. v. Munich Assur. Co., 123 Fed. 820; Berwind v. Greenwich Ins. Co., 114 N. Y. 231, 234, 21 N. E. 151; Van Wickle v. Mech. & T. Ins. Co., 97 N. Y. 350; Moser v. Sun Mut. Ins. Co., 1 Denio (N. Y.), 176, Duer, J.; and see The Southwark, 191 U. S. 1, 24 S. Ct. 1; The Edwin L. Uorrism, 153 U. S, 199, 210, 14 S. Ct. 823. It has been held, however, that upon the whole case the insurer must establish unseaworthiness by prepon- derance of evidence; Luvi v. Boston Mar. Ins. Co., 6 Fed. 562; Nome Beach Co. V. Munich Assur. Co., 123 Fed. 820; Bullard v. Roger Williams Ins. Co., Fed. Cas. No. 2,122; Adderly v. Am. Mut. Ins. Co., Fed. Cas. No. 75; and see Richelieu, etc., Co. v. Boston Mar. Ins. Co., 136 U. S. 408,. 428, 10 S. Ct. 934; but it has also been held that where rottenness, inherent de- fects, and other unseaworthiness, are expressly excepted, the burden is upon the insured to show that his loss is not within the exception, Reilly v. Ins. Co. , 81 App. Div. 314, 81 N. Y. Supp. 59. Last -editors of Arnould (7th ed.) give rule as to burden of proof one way. Arnould gave it the other, § 1277. As to what subsequently discovered de- fects do or do not create presumption of unseaworthiness at time of sailing, and when issue is for jury, see Voisin v. Prov. Wash. Ins. Co., 51 App. Div. 553, 557, 65 N. Y. Supp. 333; Star- buck v. Phoenix Ins. Co., 47 App. Div. 621, 62 N. Y. Supp. 264, 34 App. Div. 293, 54 N. Y. Supp. 293; Singletm v. Phcenix Ins. Co., 132 N. Y. 298, 30 N. E. 839; Thebaud v. Great West. Ins. Co., 155 N. Y. 516, 50 N. E. 284; Morse v. St. Paul F. & M. Ins. Co., 124 Fed. 451 , 122 Fed. 748; Long Dock Mills & El. Co. V. Mannheim Ins. Co., 123 Fed. 861. As to how warranty of sea- worthiness is affected by Barter Act see The Irrawaddy, 171 U. S. 187, 18 S. Ct. 831; Nordr-Deutscher Lloyd v. President, etc., of Ins. Co., 110 Fed. 420, 424-428, 49 C. C. A. 1. 224 GENERAL PRINCIPLES OF INSURANCE LAW cient; * but if cattle were insured against war risks only, it has been suggested that the ventilation of the hold would be immaterial.^ § 184. Warranty of Seaworthiness — Time Policies. — After much discussion it has been settled by the English courts that no warranty of seaworthiness is to be implied in a time policy. But where with the privity of the assured the ship is sent to sea in an unseaworthy state, the insurer is not hable for any loss attributable to unsea- worthiness.^ This distinction is placed by those courts upon the ground that the warranty of seaworthiness attaches, if at all, at the time of the commencement of the risk, and that to imply such a warranty in a time policy, which might begin to run when the vessel is in mid-ocean, would be inconvenient and unreasonable. In the United States, upon the question whether or not a warranty of seaworthiness is implied in time policies, the decisions are not in harmony. The Connecticut court has decided that no distinction in this respect exists between voyage and time policies,^ but the opinion of the court in that case can hardly be said to have considered or dis- posed of all the difficulties attaching to such a rule. By another court, it has been held, that the warranty is at any rate to be implied in those cases where the vessel insured by the time policy is, at the time of the commencement of the risk, at a port where repairs could bemade.^ In a more recent- case, however, the Illinois court has decided to abide by the English rule.^ In a still later case, the Federal Supreme Court uses the following language with regard to this subject: "In the in- surance of a vessel by a time policy, the warranty of seaworthiness is complied with if the vessel be seaworthy at the commencement of the risk; and the fact that she subsequently sustains damage, and is not properly refitted at an intermediate port, does not discharge the insurer from subsequent risk or loss, provided such loss be not the consequence of the omission. A defect of seaworthiness arising after the commencement of the risk, and permitted to continue froin bad 1 Sleigh v. Tyser (1900), 2 Q. B. 333, C. L. Rep. 171; Gibson v. SmaU, 24 69 L. J. Q. B. 626. So also seaworthi- Eng. Law and Eq. 17, 4 H. L. Cas. ness of a vessel engaged in the dressed 353, 17 Jur. 1131. meat trade extends to the refrigerating ^Hoxie v. Home Ins. Co., 32 Conn, apparatus needful for the preservation 21, 85 Am. Dec. 240. So, also, Mer- of the meat during transportation, The chants' Mut. Ins. Co. v. Sweet, 6 Wis. Southwark, 191 U. S. 1, 24 S. Ct. 1. 670. 2 De Hart & Simey, Ins. (1907), 52. ^Hoxie v. Pacific Mutual Ins. Co., 3 Dudgeon v. Pembroke, L. R. 2 App. 7 Allen (Mass.), 211, Bigelow, C. J.; Car Cas. 284, 46 L. J. Q. B. 409, 36 L. T. pen v. Washington Ins. Co., 12 Cush. 382, 2 Asp. M. C. 323; Thompson v. (Maas.) 517. Hopper, 34 Eng. Law and Eq. 266, 27 * Merchants' Ins. Co. v. Morrison, L. J. Q. B. 441, 6 E. & B. 173, 88 Eng. 62 111. 242, 14 Am. Rep. 93. SEAWORTHINESS IS "WHAT 225 faith or want of ordinary prudence or diligence on the part of the insured or his agents, discharges the insurer from Uability for any loss which is the consequence of such bad faith or want of prudence or diUgence, but does not affect the contract of insurance as to any other risk or loss covered by the pohcy and not caused or increased by such particular defect." ^ The learned revisers of Arnould's work on marine insurance, in a treatise of their own, with reference to a time policy, have this to say: "The authorities support the view that in order to prevent the assured from recovering, his conduct in sending the ship to sea in an unseaworthy state must amount to willful mis- conduct." ^ This states the rule more liberally to the insured than do most of the American authorities.* § 185. Seaworthiness is what. — A ship is seaworthy when reason- ably fit, in all respects, to encounter the ordinary perils of the seas, incident to the adventure insured.* 1 Union Ins. Co. v. Smith, 124 U. S. 405, 8 Sup. Ct. 534, 31 L. Ed. 497, Blatohfora, J. The New York court, without however citing any of the late cases, has stated the rule in the follow- ing words: "In every case of marine insurance by a general policy covering all perils of the sea, where the vessel insured is in port, there is an implied warranty that the vessel is seaworthy at the inception of the policy. It is a condition precedent to the risk, and if the vessel is not seaworthy the policy does not attach. In an action to re- cover for a loss upon such a policy, where the fact of seaworthiness at the time of issuing the policy is shown, it is immaterial what the vessel's condition is thereafter during the voyage, as loss from unseaworthiness is among the perils insured against. The plaintiffs, under such a policy, make out a prima facie case by showing seaworthiness af the inception of the risk. But in time policies there is implied a warranty that the vessel will oe kept in repair and made seaworthy at all times during the continuance of the risk, so far as that is reasonably possible, and this implied covenant imposes upon the insured the duty of active diligence to keep the vessel in good order and in a seaworthy condition," Bertvind v. Greenwich Ins. Co., 114 N. Y. 231, 234, 23 N. Y. St. R. 93, 21 N. E. 151, Brown, J. This language, probably, must be understood in a sense some- what similar to that employed by 15 Mr. Justice Blatchford in the case of the Union Ins. Co. v. Smith, 124 U. S. 405, 8 S. Ct. 534, 31 L. Ed. 497, since it is not to be supposed that the court could spell out of a policy, insuring even against barratry, an absolute and . continuous warranty, obligatory upon the assured and his agents during the voyage and in foreign ports, to Keep the ship as seaworthy as possible. Where at the time of the commence- ment of the risk a ship was not in port, but off on a distant voyage, it was neld that the implied warranty of sea- worthiness was not applicable, Jones V. 7ns. Co., 2 Wall., Jr. (U. S.), 278, Fed. Cas. No. 7,470, distinguished in Rouse V. Insurance Co., 3 Wall., Jr. (U. S.), 367, Fed. Cas. No. 12,089. 2 De Hart & Simey, Ins. (1907), 48, citing Thompson v. Hopper (1858), E. B. & E. 1038; Dudgeon v. Pembroke (1877), 2 App. Cas. 284; Tnnder v. Thames & M. Mar. Ins. Co. (1898), 2 Q. B. 114. 3 Capen v. Washington Ins. Co., 12 Cush. (Mass.) 517. < The Southwark, 191 U. S. 1, 8, 24 S. Ct. 1; Thebaud v. Great West. Ins. Co., 155 N. Y. 616, 519, 50 N. E. 284; Bouillon V. Lupton (1864), 33 L. J. C. P. 43. Illustrations from Chalmers & Owen, Ins. (1907) : (1) Policy on ship from Montreal to Halifax. At the time the ship sailed there was a defect in her boiler. The defect did not appear in the river, but disabled her when she got out to sea. She put back to port, 226 GENERAL PRINCIPLES OF INSURANCE LAW This requires that the ship on sailing should be tight and stanch in hull, properly rigged and laden. She must also be equipped and furnished with the requisite appurtenances, such as ballast, cables, anchors, cordage and sails, food, water, fuel and Ughts, and other necessary or proper stores and implements for the voyage; ' and also provided with a competent master, a sufficient number of com- petent officers and seamen,^ as well as with a pilot, when required by law or custom.' In a recent English treatise the statement is made, "as regards the pilot, the result of the authorities seems to be that, generally speaking, a ship is not seaworthy at the outset of the voyage, or on leaving an intermediate port (treating this as a new stage), without a pilot, where one is required by law or usage for safe navigation; but that it is not a breach of the warranty to enter a port without a pilot." * Custom, or statute, however, may control. And it is manifest that even for inland marine transit a ship must be provided with a good and reliable compass.^ A con- crete example will make clearer the application of the doctrine re- lating to seaworthiness. The schooner Caroline Mills was insured in California for one year, subject to the provisions of the California Civil Code, "to be enggged as an inter-island trader among the Sandwich Islands." The Code provides that, when the insurance is for a specified length and the defect was repaired. After- Wis. 163, 6 N. W. 606. As to quantity wards she proceeded on her voyage and of water required see Warren v. Manu- was lost in bad weather. IfeW, that she fadurers' Ins. Co., 13 Pick. (Mass.) was unseaworthy at the commence- 518, 522, 25 Am. Dec. 341; Deshon v. ment of the voyage, and that the in- Merchants' Ins. Co., 11 Mete. (Mass.) surer was not liable, Quebec Mar. Ins. 199. And as to equipment generally Co. V. Commercial Bk., L. R. 3 P. C. see Tidmarsh v. Washington F. & M. 234. (2) Steamer built for inland Ins. Co., 4 Mason (U. S. C. C), 439, navigation in Trinidad is insured from Fed. Cas. No. 14,024. Clyde to Trinidad. In a rather heavy 2 M'Lanahanv. Universal Ins. Co., 1 sea in the Atlantic she breaks asunder Pet. (U. S.) 170. and is lost. With the exercise of rea- 3 Whitney v. Ocean Ins. Co., 14 La. sonable care she might have been made 485, 33 Am. Dec. 595, and note 599- more fit for the ocean transit. The 601. Want jf a licensed pilot (under insurer is not liable, TurnbuU v. Jan- par. 4463, Rev. Stat. U. S., 1869) is no son (1877), 3 Asp. Mar. Cas. 433. defense imless averred and proved. Otherwise if all reasonable means had Old Dominion Ins. Co. v. Prank, 2 been used, Clapham v. Langton, 5 Ohio Dec. 93, 7 Ohio Dec. (reprint), B. & S. 729. 302. As to pilot in coasting trade see 1 Merchants' Ins. Co. v. Morrison, 62 Cox v. Charleston F. & M. Ins. Co., 3 111. 242, 246, 14 Am. Rep. 93; see also Rich. L. (S. C.) 331, 46 Am. Dec. 771. Hutchins v. Ford, 82 Me. 363, 370, 19 * De Hart & Simey, Ins. (1907), 49, Atl. 833. The ship must have sufH- citing Arnould, §§ 702, 704, 724; Phil- dent ground tackle and anchors, lips v. Headlam (1831), 2 B. & Ad. 380. Wilkie V. Geddes, 3 Dow. 57. Also ^Richelieu & Ont. Nav. Co. v. Bos- firewood, oil, and candles, Fontaine v. ton Mar. Ins. Co., 136 U. S. 408, 429, Phomix Ins. Co. of N. Y., 10 Johns. 10 S. Ct. 934, 34 L. Ed. 398 (ship un- (N. Y.) 58; also cables and anchors, seaworthy, though defect in compass Lawton v. Royal Canadian Ins. Co., 50 was not loiown). SEAWORTHINESS IS WHAT 227 of time, there is an implied warranty that the ship shall be seaworthy at the commencement of every voyage she may undertake during that time. Before the vessel started on her voyage, the owners, knowing that the chain cables attached to her anchor were old and weak, had them reenforced with six-inch hawsers. This, however, the experts on the trial showed to be an improper and unskillful method of strengthening iron cables for use among the coral reefs of the Hawaiian islands, because rope hawsers are liable to become chafed and cut by the rocks on the bottom. During a heavy swell, but without the existence of any storm or extraordinary violence of the elements, when anchoring a couple of miles off Honokoa, the chains and hawsers on both anchors of the vessel parted, as she surged upon them, impelled by the swell, and thereupon she was driven ashore by the wind and totally lost. Judge Hoffman decided that the warranty of seaworthiness was not fulfilled and dismissed the libel on the policy of insurance.^ The requirement as to competent officers and crew has reference to the particular voyage, whether, for example, a short coasting voyage, or a long sea voyage.^ The ship's cargo also must be properly stowed, and the weight of it not in excess of the vessel's safe carrying capacity.* The underwriters, however, are liable for injudicious acts of the master and crew in rendering a vessel unseaworthy during the voyage, for instance, by throwing overboard a part of the ballast, since the assured gives no warranty that the vessel shall continue seaworthy, or that the master or crew shall do their duty.* Accordingly, it may be said in general, that the implied warranty of seaworthiness is not broken merely because the vessel becomes unseaworthy during her 1 Pope V. Swiss Lloyd Ins. Co., 4 P. C. N. S. 1, 3 L. R. P. C. 234, 39 L. J. Fed. 153. P. C. 53. 2 Hutchins v. Ford, 82 Me. 363, 370, s Poley v. Tabor, 2 Post. & Fin. 663, 19 Atl. 832; Louisoille Ins. Co. v. 672; Cincinnati Mid. Ins. Co. v. May, Monarch, 99 Ky. 578, 18 Ky. L. Rep. 20 Ohio St. 211, 225-227. That con- 444, 36 S. W. 563. Thus, cattle ship dition is implied that cargo will be must have proper ventilation and stowed in safe and proper manner and enough attendants, Sleigh v. Tyser that policy is vitiated by breach of (1900), 2 Q. B. 333, 82 Law T. N. S. implied warranty that ship is sea- 804. Compass must be safe and suit- worthy, see Leitch v. Atlantic Mvt. Ins able, Richelieu & O. Nav. Co. v. Boston Co., 66 N. Y. 100, 108. Breach of a M. Ins. Co., 136 IJ. S. 408, 34 L. Ed. clause "warranted no iron . . . ex- 398, 10 S. Ot. 934. And machinery of ceeding net registered tonnage," Hart steam vessels must be properly con- v. Standard Mar. Ins. Co., L. R. 22 Btructed, Afyers V. The Girard Insurance Q. B. Div. 499, 6 Asp. M. C. 368. See Co., 26 Pa. St. 192, 193. Boilers must Beck v. Phomix Ins. Co., 130 N. Y. not be defective, Quebec Mar. Ins. Co. 160, 29 N. E. 137. V. Commercial Bk. of Cantida, 7 Moore * Dixon v. Sadler, 5 Mees. & Wels, 405, aff'd 8 Mees. & Wels. 895- 228 GENERAL PRINCIPLES OF INSURANCE LAW voyage; ^ or because a competent master becomes incompetent at a foreign port.^ In the case of an insurance being effected on cargo which is of such a nature or so stowed as to render the vessel unseaworthy, it will be no extenuation to show that in case of need the cargo can be readily jettisoned, for instance cargo stowed on deck, for the warranty of seaworthiness is to be considered in relation to the subject-matter insured, and cannot be taken to contemplate the destruction of that very cargo which it is designed to protect.* Neither the ignorance nor the innocence of the insured will avail to relieve him from the consequence of a breach of the warranty, though all reasonable precautions were taken to secure the seaworthi- ness of the vessel on sailing, and her unseaworthy condition arose from a latent defect, since an actual fulfillment of the impUed con- dition is indispensable.* Upon the same principle, an insurance on cargo is invalidated if the vessel sail unseaworthy, though the assured be ignorant of her state, or powerless to alter it.^ For example, in an action for salvage, it appeared that a steamship laden with cargo had become disabled at sea in consequence of the breaking of her crank shaft. Although the breakage was caused by a latent defect in the shaft, arising from a flaw in the welding, which it was impossible to discover, nevertheless the coxirt held that the implied warranty of seaworthiness had been violated.® A temporary defect, however, due to the neglect of some precaution at the time of sailing is not unsea- worthiness, if the state of the ship be such that, if the master and crew do their duty, no extra danger will be incurred. Thus the ship is not unseaworthy because a port-hole has been improperly left open, unless (as where the cargo has been piled up against it) it could not, if bad weather came on, be readily closed at sea.' The implied condition of seaworthiness is to be confined to the ship by which the insurance is effected, and cannot be extended to lighters employed to land the cargo.* 1 Capen v. Washington Ins. Co., 12 diligence has been employed, The Cush. (Mass.) 517; Deblois v. Ocean Ins. Irrawaddy, 171 U. S. 187, 18 S. Ct. 831. Co., 16 Pick. (Mass.) 303. But it is said = Oliver v. Cowley, Park, Ins. 470. to be the duty of the insured to, keep « The Glenfruin (1885), 10 Prob. Div. the vessel seaworthy during the risk if 103, 54 L. J. Adm. 49. practicable to do so. Paddock v. Prank- t De Hart & Simey, Ins (1907) 50, lin Ins. Co., 11 Pick. (Mass.) 227. citing Steel v. State Line SS. Co. (1877), 2 Copeland v. New England Mar. Ins. 3 App. Cas. 72; Hedley v. Pinkneu Co., 2 Mete. (Mass.) 432. (1892), 1 Q. B. 58, 61 L. J. Q. B. 179; 3 Daniels v. Harris, L. R. 10 C. P. 1, Gilroy v. Price (1893), App. Cas. 56. 2 Asp. M. C. 413 (wine stored on deck). s Lane v. Nixon, L. R. 1 C P 412, 4 The Southwark, 191 U. S. 1, 6, 24 35 L. J. C. P. 243; see Van Valkm- S. Ct. 1. But notfe the effect of the hurgh v. The Astor Mut. Ins. Co., 1 Harter Act on latent defect where due Bosw. (N. Y.) 61, 8EAW0KTHINESS IS WHAT 229 In a policy on goods or other movables there is no implied war- ranty that the goods or movables are seaworthy.^ This question was disposed of by an English case in which cocoanut oil, value to include ten per cent advance on invoice and charges, was insured at and from any port or ports in Cochin, to Marseilles. The insurer defended the action brought on the policy for a total loss with a plea that the goods insured were not seaworthy for the voyage at the time the ship set sail. To this plea the plaintiff demurred on the grounds, "that there is no implied warranty of the seaworthiness of the goods insured by a policy; and that the plea does not allege that the loss was at- tributable to the condition of the goods." The demurrer was sus- tained and judgment rendered for the plaintiff.^ The standard of seaworthiness required to satisfy the warranty is not uniform in every case, but variable according to circumstances. Thus, where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty, that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.* For instance, in a policy "at and from," the risk is divisible into two distinct parts, the risk in port and the risk at sea, and a different degree of seaworthiness is required at the commencement of each of these sections.* For purposes of coaling steamships, or renewal of any consumable stores, of which a sufficient supply for the whole voyage cannot be taken on board at the start, it may be appropriate to consider the voyage as divided into stages; and it may be a matter of proof as to where the necessity of the case requires each stage to be.* So where the voyage consists partly of river and partly of sea navigation, and requires a different state of equipment for each stage,* if the vessel be unseaworthy for any distinct stage of the adventure on entering upon it, the policy, it has been held, will be avoided, and no subsequent loss will be recoverable, though the de- 1 Koebel v. Saunders, 17 C. B. N. S. « The VoHigem (1899), p. 140, 68 71, 33 L. J. C. P. 310 (cocoanut oil). L. J. P. 49; Greenock SS. Co. v. MarU. 2 Koebel v. Saunders, 17 C. B. N. S. Ins. Co. (1903), 2 K. B. 657, 72 L. J. 71. If, however, the loss had been K. B. 868. "If the ship be not sea- alleged and shown to have been due to worthy at the commencement of an inherent vice in the goods, the insurer early stage, it seems to follow . . . would not have been liable. that the policy is avoided from that 3 The Vortigem (1899), P. 140 time, so that the insured cannot re- (coals). cover for a loss on a later stage, on * Greenock Steamship Co. v. Mari- which the ship sailed in a seaworthy time Ins. Co., L. R. (1903) 2 K. B. 657 condition," De Hart & Simey, Ins. (insufficient coal); McLanahan v. Uni- (1907), 51. vergal Ins. Co., 1 Pet. (U. S.) 170, » Bouillon v. Lupton, 33 L. J. C. P. 184. 37, 15 C. B. N. S. 113. 230 GENERAL PRINCIPLES OF INSURANCE LAW feet may have been remedied before loss, and the loss have occurred irrespective of it.^ The warranty of seaworthiness in general only attaches at the in- ception of the risk; so that in the case of an insurance out and home, if the risk be one and indivisible, the starting of the vessel outward in a seaworthy state will satisfy the warranty, and there will be no breachy though the vessel should be unseaworthy upon sailing on her homeward passage or from any intermediate port. The standard of seaworthiness may, also, have a relation to the character of the ship insured, and if an insurer agrees with full knowl- edge of the facts to insure a vessel incapable, from size or construc- tion, of being brought up to the ordinary standard of seaworthiness, the implied warranty will be satisfied if the vessel is made as sea- worthy as her capacity will admit of .^ For example, where both parties know that the vessel is not sea- going but constructed for river service.' The steamer Dos Hermanos, when the policy issued, was in process of construction at Philadelphia, for use as a river steamer near Frontera, Mexico. The voyage from Philadelphia to Frontera was insured, and the use for which the vessel was designed was made known to the underwriters. Though provided with suitable crew and proper equipment for the voyage, the steamer was not, in the character of her construction, seaworthy for ocean transit. After leaving the port of Philadelphia, she took the inside course through canals and bays as far as possible, but below Fort Macon it became necessary to go outside upon the open sea, and shortly afterwards the vessel was lost. The verdict of the jury in favor of the insured was sustained on appeal.* But as a general rule, the character of the voyage, rather than the purpose for which the ship was originally constructed, must deter- mine the question whether this warranty has been kept.^ It may not always be easy to draw the line with precision between certain doctrines, relating to the warranty of seaworthiness, which in their nature are somewhat inharmonious; thus on the one side, the general rules that the warranty appUes only to the condition of the vessel at the time of the inception of the risk, or time of starting, and i Quebec Marine Ins. Co. v. Com. Thebaud v. Phoenix Ins. Co., 52 Hun, Bank of Canada, L. R. 3 P. C. 495, 5 N. Y. Supp. 619. ^^ta W7I. ooTT^T, J ^Thebaud v. Phomix Ins. Co., 52 2 Burges v. Wickham, 33 L. J. Q. B. Hun (N. Y.), 495, 23 N. Y. St. R. 814, , mu 1. J n ^ -rjT . r ^ 5 N. Y. Supp. 619. Seaworthiness ap^ XT V K?«"ln 'm '■^ oTf *• ^"^^ ^°- ' ^^^ P"^^ *° ^^^ intended purposes to whicli 4 TO^^ 'w° h ■ , w , r ^ *J?« ^^^^^ '« *° fee applied, Paddock v. l.^V v'^iJ-.Srw*5lfQr/^^-^°- S-™^'^" I^- Co., 11 Pick. (Mass.) 155 N. Y. 516, 50 N. E. 834. Compare 227. IMPLIED WAREANTY — DEVIATION 231 that the underwriter may be held liable for results of negligence or even of barratry by master or mariner during the voyage; on the other side, the doctrines by virtue of which the voyage is divided into stages for various purposes, and the warranty of seaworthiness on the part of the insured is extended so far as to malte it applicable to acts of master and mariners or other representatives of the owners, during the pendency of the voyage. Where the nationality or neutrality of a ship or cargo is an express warranty, it is implied by the warranty of seaworthiness that the ship will carry the requisite documents to show such nationality or neutrality.^ § 186. Implied Warranty — Deviation. — There is a second implied warranty in marine insurance, namely, that there shall be no devia- tion.^ A deviation is a voluntary departure, without necessity or reasonable cause, from the usual and regular course of the voyage contemplated by the policy.* Whether an increase of the risk is occasioned,* or whether the ship may have regained her route before loss, or whether the deviation may have contributed to the loss, is immaterial,^ the insurer is discharged from liability as from the time of deviation.* Thus, in a leading case in which reformation of the policy was prayed for, a policy in favor of Hearne for $5,000 insured the bark Maria Henry, under his charter-party, valued at $16,000, "at and from Liverpool to port in Cuba, and at and thence to port of dis- charge in Europe." The insured vessel, loaded with coal, proceeded to St. lago de Cuba and discharged her outward cargo there. Thence she went to Manzanillo, another port in Cuba, where she took on • Elting v. Scott, 2 Johns. 157; Dec. 592; Snyder v. Atlantic Mutual Christie v. Secretan, 8 T. R. 192. Ins. Co., 95 N. Y. 196, 47 Am. Rep. 2 See English codification of law of 29; Coffin v. Insurance Co., 9 Mass. deviation and excuses therefor, Mar. 436. Ins. Act (1906), c. 41, §§ 46-49. ^Burgess v. Equitable Marine Ins. ^Hostetter v. Park, 137 U. S. 30, 40, Co., 126 Mass. 70, 30 Am. Rep. 654; 11 S. Ct. 1; MaHin v. Ins. Co., 2 Wash. Davis v. Garrett (1830), 6 Bing. 716; (C. C.) 254; Coffin v. Newburyport, etc., Thompson v. Hopper (1856), 6 E. & B. Ins. Co., 9 Mass. 436, 447; Kettell v. 948, 26 L. J. Q. B. 22. Wiggin, 13 Mass. 68; Thebaud v. 6 illustration from Chalmers & Owen, Great Western Ins, Co., 155 'N. Y. 516, Ins. (1907): Insurance on salvage 522, 50 N. E. 284 (in which it is said: pumps from A. to the SS. Alexandra "whether the departure amounts to a ashore in the neighborhood of D. "and deviation must be determined by the while there engaged at the wreck and motive, consequences, and circum- until again returned to A." The stances of the act"). pumps are lost on the wreck while it is * Maryland Ins. Co. v. Leroy, 7 being towed to N., a port of safety. Cranch, 26, 3 L. Ed. 257; Natchez Ins. This is a deviation, Wingate v. Fostei Co. v. Stantm 10 Miss. 340, 41 Am. (1878), 3 Q. B. D. 582. 232 GENERAL PRINCIPLES OF INSURANCE LAW board a, cargo of native woods. On the homeward voyage she was lost by perils of the sea. The company refused to pay the charterer upon the ground that the voyage from St.Iago de Cuba to Manza- nillo was a deviation from the voyage described, inasmuch as the policy specified "port" and not "ports." The court sustained the defense and also held that the testimony produced by the plaintiff tending to show a trade usage incident to such voyages to go to two ports in Cuba, one for discharge of outward cargo, and another for shipping a return cargo, was not sufficient to establish a mutual mis- take of the parties in the contract as written, and would not avail for reformation of the policy.* The Massachusetts court furnishes an instructive illustration. A vessel, named Christie Johnstone, was insured "at and from Plym- outh to the Banks, cod-fishing, and at and thence back to Plym- outh." She took the usual quantity of bait, insufl&cient, however, for the trip, the practice being to rely principally on catching squid on the Banks to use for bait. This year the squid, though formerly plenty, were very scarce, and, in order to procure bait, the master was obliged to go one hundred miles from the Banks to the port of St. Peters, the trip thither with return to the Banks occupying about a week. Subsequently while fishing on the Banks, the vessel sprung a leak in a severe gale and was totally lost. The insurance company claimed that the number of fish taken on the trip was of no concern to it, and that if the insured proposed either to fish or catch bait in other waters than those specified, he should have insured the fresh adventure. The court held that while the plaintiff's vessel might have delayed for any reasonable time upon the Banks for the purpose of the voyage, including, for example, the occupations of fishing or getting bait, without being guilty of deviation, yet to depart from the specified route, though necessary to the success of the fishing adventure, was an unwarranted deviation which avoided the policy iii suit.^ Trade usage plays an important part in fixing the proper course; ' but a deviation from the direct course of the voyage insured, though in conformity with usage, will not be covered unless made in further- 1 Heame v. Marine Ins. Co., 20 Wall. 3 Hosteller v. Park, 137 U. S. 30, 11 488. 22 L. Ed. 395. The plaintiff, how- S. Ct. 1 ; Parsons v. Manufacturers' Ins. ever, succeeded in getting a judgment Co., 16 Gray (Mass.), 463, 465: and see reforming a policy issued by another | 89. But custom is not admissible to company upon the same charter-party, disturb an imambiguous description of Equitable Safety Ins. Co. v. Heame, 20 prohibited waters, Odiome v. New Eng- Wall. (U. S.) 494, 22 L. Ed. 398. land Mut. Mar. Ins. Co., 101 Mass. 2 Burgess v. Equitable Mar. Ins. Co., 651, 3 Am. Rep. 401. 126 Mass. 70, 30 Am. Rep. 654. IMPLIED WAEBANTY — DEVIATION 233 ance of the adventure to which the policy relates; ^ and if the course of sailing between the places named is not fixed by mercantile usage, such a course must be pursued as would appear reasonably direct and advantageous to a master of ordinary skill and discretion.^ But no voyage for any lawful purpose is a deviation under a time policy "to all places on the globe." * If a vessel is insured to or from a district containing several ports not mentioned by name in the policy, she must visit them in their natural or geographical order; * but, if the ports are designated by name, they must be visited in the order in which they are mentioned in the policy.'' It is not essential, however, that a vessel thus insured should proceed to all the ports named. She may go to one or more and omit the rest. But such ports as she does call at must be visited in the order above described, and it is not lawful for her to revisit any.* This rule is binding unless the departure is warranted by recognized usage.'' A mere plan or intention to deviate without the overt act does not avoid; * until the deviation begins the policy is still in force.* But a mere deviation, with intention to return to the course and complete it, must be distinguished from a change of voyage, since the rules of law applicable are not precisely the same in both cases. There is a change of voyage, where, after the commencement of the risk, the 1 Pearson v. Commercial Union Assur. 5 Beatson v. Haworth, 6 T. R. 533, 3 Co., L. R. 1 App. Gas. 498. Where the Rev. R. 258; Marsden v. Beid, 4 East, course is defined by names of places in 576. a general printed bill of lading, it may ' Marsden v. Reid, 3 East, 576. be a deviation to adhere to such defini- ' McCall v. Sun Mutual Ins. Co., 66 tion if the character of the adventure N. Y. 505. A departure to learn demands a more direct route, Marget- whether a port not of destination is son V. Glynn, 1 Q. B. 337 (1892). Even blockaded is a deviation, Maryland a liberty to deviate may not authorize 7ns. Co. v. Woods, 6 Cranch (U. S.), 29. an independent voyage for a different Or to stop at intermediate ports be- object, Seccomb v. Provincial Ins. Co., tween two specified ports in the ab ■ 10 Allen (Mass.), 305. sence of necessity or custom, Mann- ^ Heame v. Marine Ins. Co., 20 heim Ins. Co. v. Atlantic dk L. S. R. Wall. (U. S.) 488, 22 L. Ed. 395; Co., Rap. Jud. Queb. 11 B. R. 200 Commonwealth Ins. Co. v. Cropper, 21 (1902), UK. B. 200. Compare Mc- Md. 311; Turner v. Protection Ins. Co., Call v. Sun Mid. Ins. Co., 66 N. Y. 25 Me. 515, 43 Am. Dec. 294; Reade v. 505. Commercial Ins. Co., 3 Johns. 352, 3 ^ Arnold v. Pac. Mid. Ins. Co., 78 Am. Dec. 495. If repairs become nee- N. Y. 7; Thellusson v. Ferguson (1780), essary the master need not always 1 Dougl. 361; Kewley v. Ryan (1794), 2 select the nearest available port, H. Bl. 343; Heselton v. Allnut (1813), Phelps, James & Co. v. Hill, 1 Q. B. 1 M. & S. 46; Hare v. Travis (1827), 7 605, 617 (1891). B. & Cr. 14. ^ Ellery v. New England Ins. Co., 8 o Marine Ins. Co. v. Tucker, 3 Pick. (Mass.) 14. Cranch, 357, 2 L. Ed. 466; Beams v. * Metcalfe v. Parry, 4 Camp. 123; Columbian Ins. Co., 48 Barb. (N. Y.) Clason V. Simmonds (1741), 6 T. R. 445. 533, n. 234 GENERAL PRINCIPLES OF INSURANCE LAW destination of the ship is voluntarily changed from the destination contemplated by the policy; and, in the latter case, according to the law of Great Britain,* the insurer is discharged from hability as from the time when the determination to change is manifested, although the ship may not in fact have left the regular course when the loss occurs.^ The same distinction seems to be recognized in this coun- try.^ If the ship originally set sail from a place of departure, or to a destination, other than that specified in the policy, the risk does not attach at all, since the insurance is then avoided from the inception of the contract.^ § 187. Deviation by Delay. — Unjustifiable delay in the prosecu- tion of the adventure under a voyage policy amounts to a deviation, and the insurer is discharged from liability as from the time when the delay becomes unreasonable.* This rule is exemplified by a case in a lower Federal court, in which iMar. Ins. Act (19061, § 45. 2Amould, §§380, 3S1, 386; Tasker V. Cunningham (1819), 1 Bllgh, 87. 3 MerriUv. Boyhton F. & M. Ins. Co., 3 Allen (Mass.), 247. Compare Beams v. Columbian Ins. Co., 48 Barb. (N. Y.) 445 (intent to deviate is not deviation); Simpson S. Co. v. Premier, etc., Assn. (1905), 10 Com. Cas. 198, 201 ("an in- tention to commit a breach, of course does not itself constitute a breach," by Bingham, J.). *Way V. Modigliani (1787), 2 T. R. 30; Simon v. Sedgwick (1893), 1 Q. B. 303. Where a policy on goods covered both sea transit and subsequent land transit, the court held that to deter- mine whether the risk attached, the terminus of the sea voyage only had to be considered, Simon v. Sedgwick (1893), 1 Q. B. 303, 62 L. J. Q. B. 163. ^Arnold v. Pac. Mvt. Ins. Co., 78 N. Y. 7; Audenreid v. Mercantile Mvt. Ins. Co., 60 N. Y. 482. Illustration from Chalmers & Owen, Ins. (1907): A ship is insured from England to the coast of West Africa and "during her stay and trade there" and badi: to England. After completing her cargo for homeward voyage, she delays sail- ing for a month to salve the cargo of another ship which has been wrecked. On the way home she is lost. The assured cannot recover, Company of African Merchants v. Brit. Ins. Co. (1873), L. R. 8 Exch. 154. In apply- ing this rule there must be kept m view the obieet of the voyage, the cause for the delay, the usage of trade, and whether the act was done in the exercise of good faith and sound dis- cretion or otherwise. No certain or fixed time can be said to be reasonable or imreasonable, Foster v. Jackson Ins. Co., 1 Edm. Sel. Cas. (N. Y.) 290, 305; New Jersey Lighterage Co. v. New York Mut. Ins. Co., 17 Jones & S. (N. Y.) 165, 168; Phillips v. Irving, 7 Man. & Gr. 325, 327. See Grant v. King, 4 Esp. 175, 176, the question here, how- ever, was whether the delay voided the policy or whether there was an abandonment of the original voyage. See § 186, supra,. Unreasonable delay in starting from initial port may pre- vent policy from attaching, Maritime Ins. Co. V. Steams (1901), 2 K. B. 912. Where a policy of insurance was ef- fected on a ship, at and from Montreal to Montevideo, and a delay occurred in the arrival of the vessel at Montreal, which, by converting the voyage from a summer into a winter one, materially affected the risk and rate of premium, it was held that the policy would not attach, De Wolf v. Archangel Mar. Bank & Ins. Co., 2 Asp. Mar. L. C. 273. Delay occasioned by seizure for debts for repairs is not excusable, Augusta Ins., etc., Co. v. Abbott, 12 Md. 348. Nor delay by the master for his own purposes, Mount v. Larkins, 8 Bing. 108, 21 E. C. L. 241 (and cases cited). Nor unnecessary delay waiting for documents, Himely v. Ins. Co., 1 Mill. Const. (S. C.) 154, 12 Am. Deo. 623. DEVIATION, WHEN PROPER 235 the defendant had insured the plaintiff $500, by valued policy, "on his commissions as supercargo of the Leonidas from Alexandria to Pernambuco, until landed." The vessel arrived off Pernambuoo at 9 A. M., but instead of going directly into port she came to anchor in the outer roadstead, while the master went to town for several hours to inquire about the market. A storm came on; the anchor dragged, and the vessel drifted ashore. The court instructed the jury that if the vessel could have proceeded to port without coming to anchor in the outer road, the stopping there was a deviation which discharged the underwriters. The insurance company got a verdict from the jury.^ In the following instances, on the other hand, the delay was held to be justifiable: where a ship was detained for six weeks by a belligerent cruiser; ^ where an American ship was delayed because of the impossibility of getting an American crew in a French port; * where a ship was detained more than four months for repairs, and by insufficient depth of water to cross the bar; * where a ship was delayed at an intermediate port to make it seaworthy for the next stage of the voyage; ^ where, in pursuance of a known usage of the trade, the ship stopped a reasonable time for selling out her cargo.* § 188. Deviation, when Proper. — A deviation is justifiable, and does not exonerate the insurers, if it is necessitated either by physical or by moral force. ^ The compulsion, however, must be real and not unsubstantial or imaginary. Thus, in an early case, the insurance was on goods on board the Margaret and Anne from Iceland to England. A total loss happened by fire; but prior to the loss, while the vessel still lay at Iceland, the captain of an English warship lying near by ordered the master of the Margaret and Anne to go out to sea to examine a strange sail. No violence or threats accompanied the order, but the master with- out remonstrance or protest, perhaps with a hope of sharing prize ^West V. Columbian Ins. Co., 5 'The necessity is not to be tested Cranch (C. C), 309, Fed. Cas. No. by the event but by all the circum- 17,421. stances attending the case, Byrne v. 'Scott V. Thompson (1805), 1 B. & Louisiana State his. Co., 7 Mart.N. S. P. N. R. 181. (La.) 126. See also Stocker v. Harris, 3 Grant v. King (1802), 4 Esp. 175. 3 Mass. 409, 418, where it is declared * Smith V. Surndge {1^1), 4 Ksp. 25. that the necessity must be real and ^Bouillon V. Lupton (1863), 15 mvpetioMS, Burgess y. Equitable Marine C. B. N. S. 113, 33 L. J. C. P. 37. Ins. Co., 126 Mass. 70, 79, 80, 30 Am. Columbian Ins. Co. v. Catlett, 12 Rep. 654; Riggin v. Patapsco Ins. Co., Wheat. 383, 6 L. Ed. 664. So also 7 Hur. & J. (Md.) 279, 289, 16 Am, where ship stopped to take on water, Dec. 302; KetteU v. Wiggin, 13 Mass Wood V. Pleasants, Fed. Cas. No. 68, 72. 17,961, 3 Wash. C. C. 201. 236 GENERAL PRINCIPLES OF INSURANCE LAW money, put out to sea, fired two guns at the strange sail, and, upon discovery that she was a neutral, returned to his moorings. Lord EUenborough decided that there was no duress, either physical or moral, exercised by the naval commander or his crew; and that, however laudable might have been the purpose of the master in obey- ing the direction of the captain of the warship, the deviation being without legal excuse, the voyage insured was at an end, and the policy forfeited.^ But in another case the motive for the departure was quite differ- ent, and the insured was held entitled to recover the loss of his ship by capture. The policy was upon the Samuel Cumming, at and from Jamaica, and Trinidad in the island of Cuba, to any port or ports of her discharge in the United Kingdom. In an unsuccessful quest for convoy the captain deviated slightly from the regular course, went around near Havana, and made a call of an hour at Moro Castle. Chief Justice Gibbs said that whatever is necessary for the safety of the ship, the captain may do as agent to the underwriters; and that it may be as justifiable to seek convoy as to avoid an enemy.^ If a vessel is forcibly diverted from her course by stress of weather,^ the compulsion of an enemy in time of war,* or the violence of a mutinous crew,® or refusal of the crew to proceed on the voyage,* such a deviation is excusable. If a vessel put into a port outside the ordinary course for repairs ' or necessary supplies,* or to set her cargo in order, or to procure proper officers, or to recruit the crew for the navigation,* or if she remain in her port of lading to avoid a capture,"* or depart from the usual course from the same motive, the divergence is excusable.''^ i Phelps V. Avldjo (1809), 2 Camp. ship was delayed by adverse winds 350. and danger and put into a place of ^D'AguUar v. ToUn (1816), Holt safety on its course and sent ashore N. P. 185. So also where there was a for provisions and the policy gave deviation to 'avoid capture, O'Reilly v. liberty to touch and stay. See Coles v. Gonne (1815), 4 Camp. 249. MaHne Ins. Co., 3 Wash. (U. S. C. C.) « Graham v. Commercial Ins. Co., 11 159, 163, per Washington, J.; Wood v. Johns. (N. Y.) 352; Delaney v. Stod- Pleasants, 3 Wash. (U. S. C C ) 201, dart, 1 Term Rep. 22, 1 Rev. Rep. 139. Fed. Cas. No. 17,961. 4 See ScoU v. Thompson, 1 Bos. & P. » Winthrop v. Union Ins. Co , 2 N. R. 181 (ship detained six weeks by Wash. (U. S. C. C.) 7, 17, Fed. Cas. a hostile cruiser). No. 17,901; Fernandez v. Great Western ' 5 See ElXon v. Brogden, 2 Strange, Ins. Co., 3 Robb. (26 N. Y. Super. Ct. 1264. 457, 475, per Morrell, J., case is re- 8 DnscoU V. Bovil, 1 Bos. & P. 313. versed 48 N. Y. 571 , 8 Am. Rep. 571. T Turner v. Protection Ins. Co., 25 ^°Whitneii\. Haven, IZUass. 172. Me. 515, 43 Am. Dec. 294; Hall v. Ins. n Post v. 'Phoenix Ins. Co., 10 Johns. Co., 9 Pick. (Mass.) 466; Silloway v. (N. Y.) 78; Goyon v. Pleasants, 3 Wash. Neptune Ins. Co., 12 Gray (Mass.), 73. (U. S. C. C.) 241, Fed. Cas. No. 5,647. 8 Thomas v. Royal Exchange Assur- Illustration from Chalmers & Owen, once, 1 Price, 195. In this case the Ins. (1907): Ship insured from Lyons DEVIATION, WHEN PROPER 237 A deviation is also proper when caused by circumstances over which neither the master nor the owner of the ship has any control/ or when necessary to comply with a warranty,^ or to avoid a peril whether insured against or not/ or when caused by barratrous con- duct of master or crew if barratry be insured against/ or when made in good faith for the purpose of saving human life, as, for example, for necessary treatment of a sick or wounded seaman,® or relieving another vessel in distress.® A departure from an ordinary course of the voyage with the object of saving persons whose lives are in jeopardy is allowed on the ground of humanity, but the same immunity will not be extended in favor of a deviation made solely for the purpose of saving property.^ Thus, in an English case, the plaintiffs chartered the defendants' steamship Olympias to carry a cargo of wheat from Cronstadt to the Mediterranean. Whilst on her voyage thither the defendants' cap- tain sighted the Arion in distress, and for £1,000 agreed to tow her into the Texel, which was out of his direct course. Whilst so doing, the Olympias stranded, and ultimately with her cargo was totally lost. To save the Arion and her cargo, it was necessary to take her to the Texel; but the deviation was not necessary to the safety of those on board her. Consequently it was held that there was a fatal deviation and that the plaintiffs were entitled to recover the value of their cargo against the defendants as owners of the ship in fault.* When the cause excusing the deviation or delay ceases to operate, to Galatz. She starts from Lyons on * Ross v. Hunter, 4 T. R. 33. July 24, properly equipped for the river 5 The Iroqiuns, 194 U. S. 240, 24 voyage. She is detained for three S. Ct. 640. See also Perkins v. Au- weeks at Marseilles to equip herself for gusta Ins. & Bkg. Co., 10 Gray (Mass.), the open sea voyage. This delay is 312, 71 Am. Dec. 654. justifiable, Bouillon v. Lupton (1863), ' Schooner Boston, 1 Sumn. 328. 15 C. B. N. S. 113. 7 Co. of African Merchants v. Brit- 1 "If a degree of force was exercised ish & Foreign Marine Ins. Co., L. R. towards" the master "which either 8 Exch. 154. See also Settle v. Per- physically he could not resist, or ■petual Ins. Co., 7 Mo. 379. But com- morally as a good subject he ought pare Woolf v. Claggett, 3 Esp. 257, 258, not to have resisted, the deviation is 6 Rev. R. 830. If the paramount justified," otherwise not. Phelps v. motive is to save life, and the saving of Auldjo, 2 Camp. 350, 351, per Lord property is incidental, the under- EUenborough. Cal. Civ. Code, § 2695, writer is liable, Williams v. Box of subd. 1. Bullion, 1 Spr. (U. S.) 57, Fed. Cas. 2 Going out of course to procure a No. 17,717; Crocker v. Jackson, 1 Spr. pilot is not a deviation, Pouverin v. (U. S.) 141, Fed. Cas. No. 3,398; Louisiana State Mar. & F. Ins. Co., 4 Scaramanga v. Stamp, 5 C. P. Div. Rob. (La.) 234. 295. 3 See Lee v. Gray, 7 Mass. 349; ^Scaramanga v. Stamp (1880), 5 Robinson v. Marine Ins. Co., 2 Johns. C. P. D. 295, 49 L. J. C. P. 674 (no (N. y.) 89; Scott v. Thompson, 1 Bos. question of insurance was directly in- & P. N. R. 181; Cal. Gv. Code, § 2695, volved). Bubd. 2. 238 GENEftAt, PRINCIPLES OF INSURANCE LAW the ship must resume her course and prosecute her voyage, with reasonable dispatch.^ In time policies, especially on voyages in inland waters, a devia- tion from the permitted course has been held to suspend and not to avoid the policy; ^ but these decisions are of very questionable sound- ness, and are not in accord with the current of authority.^ No such doctrine is recognized by the English common law,^ or by the English codification of marine insurance law.^ § 189. Illegality. — There is a third imphed warranty, that the adventure insured is a lawful one and that so far as the insured can control the matter the adventure shall be carried out in a lawful manner.* Illegality in any part of an integral voyage has been held to make the whole voyage illegal;''' but mere knowledge that there is some illegality in the performance of the voyage does not make the insured a party to the illegality when he has no control over the navi- gation of the ship.* The lawfulness of an American adventure or an American insur- ance, as the question comes before an American court, is determined by American law.® In relation to an American policy, an adventure is 1 Eng. Mar. Ins. Act (1906), § 49. Preliminary trial trips up and down a river by a new craft to test the ves- sel's capacity to make an ocean voyage may not be deviations, Thebavd v. Great Western Ins. Co., 155 N. Y. 516, SO N. E. 284. Compare Fernandez v. Great Western Ins. Co., 48 N. Y. 571, 8 Am. Rep. 571. 2 Greenleaf v. St. Louis Ins. Co., 37 Mo. 25; Hennessey v. Manhattan Fire Ins. Co., 28 Hun (N. Y.), 98; WUkins v. Ins. Co., 30 Ohio St. 317. Question of deviation often turns upon the phraseology or stipulation of the policy. 3 Cogswell v. Chubb, 1 App. Div. 93, 36 N. Y. Supp. 1076, aff'd 157 N. Y. 709; Odiorne v. New England Mut. Mar. Ins. Co., 101 Mass. 551, 3 Am. Rep. 401; Stetson v. Mass. Mut. Fire Ins. Co., 4 Mass. 330, 3 Am. Dec. 217. See § 114. *Amould, §§376, 377. sMar. Ins. Act (1906), § 46 (1). 8 Redmond v. Smith, 7 M. & G. 457. As to illicit voyages: (1) Where the sovereign of a coimtry to which the ship belongs prohibits his subjects from trading with a foreign country or port, whether the prohibition be a con- sequence of his declaring war against the foreign country, or be made by express ordinance for any cause at the will of the sovereign. (2) Voyages prohibited by the trade laws of a foreign state. (3) Transportation by a neutral of goods contraband of war and the law of nations and (4) a trade illicit lege loci and a trade illicit jure belli, see Richardson v. Marine Ins. Co., 6 Mass. 102, 111-115, 4 Am. Dec. 92, per Parsons, C. J. But noncompliance with law of Congress requiring a cer- tain quantity of water, well secured un- der deck, does not render the voj-'age illegal, so as to avoid insurance, War- ren V, Mjrs. Ins. Co., 13 Pick. Alass.) 518, 25 Am. Dec. 341. 7 Clark V. Protection Ins. Co., 1 Story, 109, Fed. Cas. No. 2,832; De Hart & Simey, Ins. (1907), 53; Ar- nould, §§ 735-739. 8 De Hart & Simey, Ins. (1907), 53; Cunard v. Hyde (1858), 27 L. J. Q. B. 408; Arnould, § 745. 9 So also an insurance in England either on enemies' goods or against British capture was held illegal by British court, Kellner v. Le Mesurier (1803), 4 East, 402, 403; Gamha v. Le Mesurier, 4 East, 407. Illustrations of illegality from Chalmers & Owen, Ins. (1907): (1) Time policy on ship. The ILLEGALITY 239 illegal which contravenes the laws or the war policy of this country. Thus, an insurance on an adventure prohibited by a United States revenue law, or on an enemy's property, or on an American subject's unlicensed trade with an enemy, is void.^ So also the carriage of contraband goods to an enemy of this country, or a voyage in breach of an American blockade would be an illegal adventure.^ Smuggling voyages, trading adventures to an enemy's port, and all other enterprises prohibited by the law of the land or by the law of nations, being illegal, no policy of insurance will be upheld if effected with the intent to cover them; but this prohibition has been held not to apply to trading adventures undertaken in violation of the revenue laws of other nations.' It has been urged, however, that a sound regard for international ethics must ultimately eliminate the exception, although now recognized both in England and Amer- ica.* But the reasons favoring the deliberate conclusions of the courts on this question are weighty, and are not likely to be ignored in the future. To learn all the laws of his home country furnishes a suffi- cient task for the average person insured. Any rule fastening upon the insured a sweeping obligation to make himself familiar in addition with the local laws and regulations of all foreign nations would be master with the cormivance of the owner, engages in smuggling. The ship is arrested in England. The in- surer is not liable, Pipon v. Cope, 1 Camp. 434. But smuggling or other illegal conduct without owner's con- nivance is barratry and covered, Cory V. Burr (1883), 8 App. Cas. 399. (2) Policy on a French ship effected in England, capture being insured against. After policy is effected war breaks out between France and Eng- land and the ship is captured by a British cruiser. The assured cannot recover on the policy, Kellner v. Le Mesurier (1803), 4 East, 396. 1 Likewise Mr. Justice Washington held that sailing under a British license during war between this countiy and England was illegal, Craig v. United States Ins. Co., 1 Pet. C. C. 410, Fed. Cas. No. 3,340. But see Hayward v. Blake, 12 Mass. 176. 2De Hart & Suney, Ins. (1907), 53, where it is also said: "The English courts pay no attention to the revenue laws of foreign states, and in case of a, war between foreign states they do not '■egard blockade running or the car- riage of contraband of war as illegal," citing Ex parte Abavasse (1865), 34 L. J. Bk. 17; The Hden (1865), L. R. 1 A. & E. 1. And see Parker v. Jones, 13 Mass. 173; Skidmore v. Destoity, 2 Johns. Cas. 77 (insurance sustained upon goods contraband of war, though captured by a British cruiser and con- demned). The United States Circuit Court held with the courts of England and Massachusetts "that a denial of entry or an interdiction of commerce at the port of destination is not a risk within the common policy," though a risk that could be expressly under- taken, Andrews v. Ins. Co., 3 Mason, 6, citing to the different doctrine, to wit, that the risk would fall within the common policy, the following New York cases, Suydam v. Mar. Ins. Co., 1 John. 181; Schmidt v. 7ns. Co., 1 John. 249; Craig v. Ins. Co., 6 John. 226. 3 Frads v. Sea Ins. Co., 8 Asp. Mar. Caa. 418 (edict Persian government); Lever v. Fletcher, Park, Ins. (8th ed.), 506. But policy would be void if as- sured concealed any material fact which he was bound to disclose, Parker V. Jones, 13 Mass. 173. Insm'ance against loss by a breach of foreign trade laws is legal, Parker v. Jones, 13 Mass. 173; Richardson v. Maine F. & M. Ins. Co., 6 Mass. 102, 4 Am. Dec, 92. * Hughes, Admiralty, 66. 240 GENERAL PRINCIPLES OF INSURANCE LAW onerous and would work injustice in many instances. To thus mul- tiply, in favor of the underwriters, the grounds for forfeiting the insurance moneys which they have agreed to pay in case of loss, would result in serious misfortune, and not infrequently would bring ruin to innocent parties. Policies upon risks which contravene either the statutes enacted to regulate trade and navigation, or the commercial treaties entered into with other coimtries, are void equally with those which run counter to the revenue laws, subject, however, to the exception, that, if the adventure can be carried on without violating the law, an illegal act performed in the prosecution of it will not invalidate the policy unless committed by or with the concurrence of the as- sured.^ Thus, where the defendant insured Means & Clark, for whom it might concern, in the sum of $20,000, on the ship Avon, valued at $28,000, for one year. She sailed from Maine to New Orleans, thence to Natchez and on her passage thence for Liverpool was totally lost by perils of the seas. The master, Arthur Child, was employed for the owners to obtain certain rigging and equipment for the ship. It was his intention to change a hempen cable for one of iron. While at New Orleans, Child, without privity of the owners, substituted for the hempen cable an iron cable, worth more than $400, which had been smuggled in and secretly put aboard the Avon at night, Child's object being to avoid payment of duties to the United States. Justice Story decided that, inasmuch as the policy was founded in no il- legality at its inception, the plaintiffs were entitled to recover $20,000 for a total loss.^ § 190. Actual Total Loss. — A loss may be total or partial. A 1 Wavjgh v. Morris, L. R. 8 Q. B. 202. knowledge of the owners, and con- Thus in a case where the master of a trary to their intentions, the policy vessel in the timber trade stowed a was not vitiated by it, Dvdgeon v. portion of the cargo on deck during the Pembroke, 2 Asp. Mar. L. C. 323, L. R. winter season, and, contrary to statute, 9 Q. B. 581, 1 Q- B. D. 96. It has been sailed without a clearance certificate held that a policy "for whom it may that the cargo was below deck, it was concern" covers belligerent property held that the illegaUty did not vitiate unless there is something in the case to the policy, it having been committed exempt it from the ordinary import of without the knowledge or privity of these words. Buck v. Chesapeake Ins. the owner, Wilson v. Rankin, L. R. 1 Co., 1 Pet. (U. S.) 151, 160, 7 L. Ed. 90. Q. B. 162. Otherwise if owner was As to illegality of part of the risk see privy to the illegality, Cunard v. Hyde Richardson v. Maine Ins. Co., 6 Mass. (1860), 29 L. J. Q. B. 6. Again, where 102, 4 Am. Dec. 92; Bird v. Apple- a ship not licensed by the board of ton, 8 T. R. 562, 565; and compare trade to carry passengers did carry Wilson v. Maryatt, 8 T. R. 41, 45, them, it was held, that, inasmuch as 46. , such carriage was the unauthorized 2 Clark v. Protection Ins. Co., 1 act of the master alone, without the Story, 109, Fed. Cas. No. 2,832. ACTUAL TOTAL LOSS 241 total loss may be actual or constructive. An actual total loss occurs where the subject-matter insured is destroyed or irreparably dam- aged, or where the assured is irretrievably deprived of it.^ Thus, for instance, where a vessel founders in mid-ocean in a gale,* or is captured by an enemy and condemned as a prize,' or where goods taken ashore from a wreck are plundered by the inhabitants of the coast.* Indeed, wherever the thing insured is by the operation of a peril insured against reduced to such a state as to be incapable of use under its original name or kind, there is an actual total loss. For example, if a ship is so injured by the perils of the sea as to be incapable of re- pair, the loss is actual,^ though her materials survive * either in frag- ments or bound together in the original form. And again, if goods are so badly damaged as to become incapable of use for the purpose intended, there is an actual total loss. As, for example, where dates were so impregnated with sewage and so fermented as not to be mer- ^ SceJherg v. Western Assur. Co., 119 Fed. 23, 55 C. C. A. 601 (ship was not lost in specie). See also The Blairmore (1898), A. C. 593, 67 L. J. P. C. N. S. 96 (ship foundered in bay and was raised, a constructive loss). But a wreck incapable of being brought to port is an actual total loss, Watker v. Protectitm Ins. Co., 29 Me. 317. Illus- trations from Chalmers & Owen, Ins. (1907) : (1) Hides are insured from Val- paraiso to Bordeaux. In consequence of sea damage they arrived at Rio in a state of incipient putridity and are sold there. Their state is such that they would be wholly putrid if carried on to Bordeaux. This is an actual total loss, Roux V. Salvador, 3 Bing. N. C. 266. (2) A ship is deserted in a sinking condition. She is afterwards towed into port by salvors and sold by order of the court for less than the salvage costs. This is an actual total loss, Crossman v. West (1887), 13 App. Cas. 160. If a ship can be taken to a port and repaired, though at an expense exceeding its value, it has not ceased to be a ship, Nova Scotia Mar. Ins. Co. V. Churchill, 26 Can. S. C. 65, 73, cit- ing Barker v. Jansen, L. R. 3 C. P. 303; and see Burt v. Brewers, etc., Ins. Co., 78 N. Y. 400. ^Ogdm v. N. Y. Mut. Ins. Co., 35 N. Y. 418 (total loss of passage money). Submersion of a vessel is or is not a total loss according to circumstances, SewaU V. U. S. Ins. Co., 11 Pick. (Mass.) 90. 16 ^ Rhinelander v. Ins. Co., 4 Cranch (U. S.), 29; Monroe v. British F. & M. Ins. Co., 52 Fed. 777, 5 U. S. App. 179, 3 C. C. A. 280; Saviyer v. Maine P. & M. Ins. Co., 12 Mass. 291; Watson v. Marine Ins. Co., 7 Johns. (N. Y.) 57. But not before sentence of condemna- tion while there is a spes recuperandi, Barney v. Maryland Ins. Co., 5 Har. & J, (Md.) 139. If ship is afloat, or can be put afloat, or at any expense can be repaired, she is not "an actual total loss," but tmderwriters by taking possession under a rescue clause may convert the loss into "an actual total loss," Carr v. Security Ins. Co., 109 N. Y. 504, 17 N. E. 369, 16 N. Y. St. R. 442. But it has been held that total loss of value in a ship though repair- able constitutes "an actual total loss," BuUard v. Roger Williams Ins. Co., 1 Curt. (U. S.) 148. * Boudrett v. Heutigg, 1 Holt (N. P.), 149. 5 Irving v. Manning, 1 H. L. Cas. 287: Murray v. Great Western Ins. Co., 72 Him, 282, aff'd on opinion below 147 N. Y. 711, 42 N. E. 724; Graves v. Washington M. Ins. Co., 12 Allen (Mass.), 391. 8 A mere congeries of materials use- able as a coal barge is not a ship. Merchants' S. Co. v. Commercial Mut. Ins. Co., 51 N. Y. Sup. Ct. 444; and see Cambridge v. And&rton, 2 Barn & C. 691. 242 GENERAL PRINCIPLES OF INSURANCE LAW charitable as dates.* So also where perishable goods are so much damaged that it is impossible for them to arrive at destination, and therefore they are justifiably sold at a port of distress, there is an absolute total loss.^ In the case of an actual total loss, no notice of abandonment need be given.* And where, after the lapse of a reasonable time, no news of the ship has been received, an actual total loss may be presumed.* § 191. Constructive Total Loss — What Constitutes. — It may be 1 As/or & Co. V. Blundell (1896), 1 Q. B. 123, 65 L. J. Q. B. N. S. 138, 73 L. T. Rep. 648; but see Williams v. Canton Ins. Co. (1901), App. Cas. 462. So where the remnants of a machine though about one-half in weight of the whole were of no value as a machine, GreaJt Western Ins. Co. v. Fogarty, 19 Wall. 640, 22 L. Ed. 216. So where hides and skins became putrid in mass, De Peyster v. 7ns. Co., 19 N. Y. 272, 75 Am. Dec. 331. So of rotten fruit, thrown overboard, Dyson v. Rowcroft, 3 B. & P. 474. It is held that there can be no actual total loss of a cargo of goods if any part arrive in specie at the port of destination and capable of use for the purpose in- tended, but only when they are physi- cally destroyed, or their value ex- tinguished by a loss of identity, Wash- bum Moen Mfg. Co. v. Reliance Mar. Ins. Co., 179 U. S. 1, 11, 21 S. Ct. 1, 45 L. Ed. 49 (cargo of wire); Morean V. 7ns. Co., 1 Wheat. (U. S.) 219, 4 L. Ed. 75 (cargo of com) ; Biays v. 7ns. Co. , 7 Cranch (U. S.), 415, 3 L. Ed. 389. WaUerstein v. Columbian Ins. Co., 44 N. Y. 204, 4 Am. Rep. 664 (coffee, total loss of value is "a total loss" if not an "actual total loss"); and com- pare Devitt V. Prov. Wash. Ins. Co., 173 N. Y. 17, and Corbett v. Spring Garden Ins. Co., 155 N. Y. 389, 50 N. E. 282. If any goods are left capa- ble of preservation in specie, an entire loss of value is not "an actual total loss," Hugo v. 7ns. Co., 7 How. (U. S.) 595, 12 L. Ed. -834; Robinson v. Common^ wealth Ins. Co., 20 Fed. Cas. No. 1002; Williams v. Kennebec Mut. Ins. Co., 31 Me. 455; Francis v. Boulton (1895), 65 L. J. Q.'B. 153. Where goods reach destination in specie, but, by reason of obliteration of marks, are incapable of identification, loss, if any, is partial, not total, Spence v. Union Mar. Ins. Co. (1868), L. R. 3 C. P. 427. Jettison of a cargo of cattle does not create an absolute total loss, whether they were jettisoned for the purpose of being saved or to lighten the vessel, if in fact a part are ultimately saved and sold as salvage, Monroe v. British & f . M. Ins. Co., 52 Fed. 777, 3 C. C. A. 280, 5 U. S. App. 179. As to total loss of freight see Silloway v. Neptune Ins. Co., 12 Gray (Mass.), 73; Hubbell v. Great West. Ins. Co., 74 N. Y. 246; Abbott V. Broome, 1 Caines (N. Y.), 292, 2 Am. Dec. 187; De Longuemere v. Phcenix Ins. Co., 10 Johns. (N. Y.) 127. As to total loss of profits see Patapsco Ins. Co. v. Coulter, 3 Pet. 222, 7 L. Ed. 659. As to sale by master see Patapsco Ins. Co. v. Sovthgate, 5 Pet. (U. S.) 604; Gardner v. Salvador, 1 Mood. & Rob. 116; Cambridge v. Anderton, 4 Dowl. & Ry. 203, 2 B. & Cr. 691; Martin v. Crokatt, 14 East, 465; Nova Scotia Mar. Ins. Co. V. Churchill, 26 Can. S. C. 65. ^Roux V. Salvador (1836), 3 Bing. N. C. 266, 7 L. J. Exch. 328. Likewise where the ship was justifiably sold be- cause not capable of being repaired with profit. Idle v. Royal Exchange Ass. Co. (1819), 8 Taimt. 755; Gordon v. Mass. F. &M. Ins. Co., 2 Pick. (Mass.) 249. But where the master having no funds for repairing the vessel, sold ner, it was held that there was not a total loss, Murray v. Hatch, 6 Mass. 465. Compare Am. Ins. Co. v. Ogden, 15 Wend. (N. Y.) 532, 20 Wend. (N. Y.) 287; Neilson v. Columbian Ins. Co., 1 Johns (N. Y.) 301. Sale because of lack of funds to repair at port of desti- nation does not constitute a total loss, Allen V. Commercial Ins. Co., 1 Gray (Mass.), 154. ^KaUenbach v. Mackenzie (1878), 3 0. P. D. 471. Assm-ed though suing for total may recover for partial loss if policy permit. King v. Walker, 2 H. & C. 384. ^ Ogden v. N. Y. Mut. Ins. Co., 35 N. Y. 418; Green v. Brown, 2 Strange, 1199. CONSTRUCTIVE TOTAL LOSS — ENGLAND 243 stated generally that there is a constructive total loss where the loss, though not actually total, is of such a character that the assured is entitled, if he thinks fit, to treat it as total by abandonment.^ § 192. Constructive Total Loss— England.— In the codification of marine insurance law, recently enacted in England, constructive total loss is thus described: (1) Subject to any express provision in the policy, there is a constructive total loss where the subject-matter insured is reasonably abandoned on account of its actual total loss appearing to be imavoidable, or because it could not be preserved from actual total loss without an expenditure which would exceed its value when the expenditure had been incurred. (2) In particular, there is a constructive total loss (i) where the assured is deprived of the possession of his ship or goods by a peril insured against, and (a) it is unlikely that he can recover the ship or goods, as the case may be, or (b) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered; or(ii) in the case of damage to a ship, when she is so damaged by a peril insured against that the cost of repairing the damage would exceed the value of the ship when repaired. In estimating the cost of repairs, no deduction is to be made in respect of general average contributions to those repairs payable by other interests, but account is to be taken of the expense of future salvage operations and of any future general aver- age contributions to which the ship would be liable if repaired; or (iii) in the case of damage to goods, where the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival.^ 1 Western Assur. Co. v. Poole (1903), notice of abandonment; (3) the ces- 1 K. B. 376, 383; Soelberg v. Western sion, in favor of insurer, by operation Assur. Co., 119 Feil. 23, 29, 55 C. C. A. of law, of whatever remains of subject 601. One case held a constructive insured, when insurer settles for a total total loss thoush there was no right of loss, Chalmers & Owen, Ins. (1907), 90. abandonment, but this was basef upon 2 Mar. Ins. Act (1906), §60. In- the special phraseology of the policy, surance on ship. The ship gets on a Devitt V. Prov. Wash. Ins. Co., 173 rock and the master bona fide comes to N. Y. 17, 65 N. E. 777. Unless a dif- the opinion that she cannot be saved, ferent intention appears from the He therefore sells her for £18. The terms of the policy, an insurance buyer gets her off the rock and repairs against total loss includes a con- her at a cost of £750, when she is structive, as well as an actual, total worth £1200. This, it is held in Eng- ioss, Adams v. Mackenzie (1863), 13 land, is not a total loss, Gardner v. C. B. (N. S.) 446; Sailing Ship Blair- Salvador, 1 Moo. & R. 116; Rodo- mm-e v. Macredie (1898), App. Cas. 598. canachi v. Elliott (1874), L. R. 9 C. P. The term "abandonment" is used in 518 (goods in besieged town); Wood- three different senses, (1) voluntary side v. Globe Mar. Ins. Co. (1896), 1 cession of remains of subject insured Q, B. 105 (valued policy); Rankin v. to insurer in case of constructive total Potter, L. R. 6 H. L. 83; Corbett v. loss; (2), incorrectly, as equivalent to Spring Garden Bank, 155 N. Y. 389 244 GENERAL PRINCIPLES OF INSURANCE LAW § 193. Constructive Total Loss — United States. — In the United States, for convenience and certainty, an arbitrary rule has been adopted to determine whether the insured is entitled to claim a constructive total loss.^ Where the cost of repairs or expenditures will exceed fifty per cent of the value of the ship or cargo when re- paired or restored, by the rule prevailing in this country, a construc- tive total loss is established entitling the assured to abandon.^ "The value of the ship when repaired," as referred to in this and the last section is, in a valued as well as in an open policy, the real repaired value. For this purpose, in the absence of agreement otherwise, a policy valuation does not govern.^ Whatever the actual damage to the thing insured, there may be a constructive total loss, where circumstances render it impracticable to continue the adventure to its conclusion;^ as, for example, in case 394, 50 N. E. 282. Expense of future salvage is to be included, Sewall v. U. S. Ins. Co., 11 Pick. (Mass.) 90; Kemp V. Halliday (1866), L. E. 1 Q. B. 520. ConstFuctive total loss as computed in England, Angel v. Mer- chants' Mar. Ins. Co. (1903), 1 K. B. 811 (ship valued at £23,000, total re- pairs amounted to £22,559. Held, owner could not add value of wreck to cost of repairs in order to make constructive total loss) ; The Blairmore, 67 L. J. P. C. N. S. 96, 100 (1898), App. Cas. 593. In referring to the method specified in the text of estimat- ing cost of repairs to a damaged ship it is said: "These words give further effect to the principle that the test of repairability is purely a physical or material one. The test is whether the vessel is worth repairing or not, with- out any regard being paid to the final incidence of the expenses of doing so. No deductions from such expenses should therefore be made merely be- cause some other interest is liable to contribute thereto, by way of general average or otherwise. But inasmuch as there may be in the future certain expenses incm-red not merely on the ship's account, but by way of salvage on account of and for the benefit of other parties as well, it is only the ship's proportion of such expenses which must be taken as forming the cost of her repairs, the rest being deemed to be incurred on behalf of the other interests thereby benefited. The words 'future general average contribution' must mean contribution to which the vessel would become lia- ble owing to future operations,'' De Hart & Simey, Ins. (1907), 71. 1 Ins. Co. of North Am. v. Canada Sugar Ref. Co., 87 Fed. 491, 493, 5 U. S. App. 22, 31 C. C. A. 65, reversed 175 U. S. 609, 20 S. Ct. 239. 2 Bradlie v. Maryland Ins. Co., 12 Pet. (U. S.) 378, per Story, J., 9 L. Ed. 1123; Scelberg v. West. Assur. Co., 119 Fed. 23, 31; Devitt v. Providence Wash. Ins. Co., 173 N. Y. I'T 21, 65 N. E. 777, per CuUen, J.; McConochie v. Sun Mid. Ins. Co., 26 N. Y. 477; Louisville Underwriters v. Monarch, 99 Ky. 578, 36 S. W. 563; Fidton Ins. Co. v. Goodn man, 32 Ala. 108; Jones v. West. Assur. Co., 198 Pa. St. 206, 47 Atl. 948. Suc- cessive losses may be added to make up the amoxmt, Taber v. China Mvt. Ins. Co., 131 Mass. 239. ^Irving v. Manning (1847), 1 H. L. Cas. 287. But policies often contain a clause stipulating that the agreed valuation shall be taken to be the repaired value; see North Atlantic S.S. Co. V. Burr (1904), 9 Com. Cas. 164. < Judge Story says: "The right of abandonment has been admitted to exist, where there is a forcible dispos- session or ouster of the owner of the ship, as in cases of capture; where there is a moral restraint or detention, which deprives the owner of the free use of the ship, as in case of embargoes, blockades, and arrests by sovereign authority; where there is a present total loss of the physical possession and use of the ship, as in case of submer- sion; where there is a total loss of the ship for the voyage, as in c*se of ship- wreck, so that the ship cannot be re- CONSTRUCTIVE TOTAL LOSS — UNITED STATES 245 of an embargo or capture/ or impossibility of forwarding cargo by a substituted ship,^ or breaking up of the voyage for the cargo by the total destruction of the ship without opportunity of reshipment,* but the master has no right to sell a wrecked vessel and so make the insurers liable for a total loss upon it, unless in a case of such extreme necessity as to leave no alternative.* With respect to freight, in case it is impossible to earn it, owing to a total loss of ship or cargo, the loss, as already shown, is actual and can be recovered without notice of abandonment. Where, however, the loss though probable is not ascertained, but depends upon chances of recovery or estimated expenditure, the claim falls within the category of constructive total loss, and requires the same kind of proof as in the case of similar claims upon ship or cargo. ^ If the ship is destroyed, or the voyage interrupted by a peril in- paired for the voyage in the port where the disaster happens; and, lastly, where the injury is so extensive, that by reason of it the ship is useless, and yet the necessary repairs would exceed her present value. None of these cases will, I imagine, be disputed. If there be any general principle, that pervades and governs them, it seems to be this, that the right to abandon exists, when- ever, from the circumstances of the cafie, the ship, for all the useful pur- poses of a smp for the voyage, is, for the present, gone from the control of the owner, and the time when she will be restored to him in a state to resume the voyage is uncertain, or unreason- ably distant, or the risk and expense are disproportioned to the expected benefit and objects of the voyage. In such a case, the law deems the ship, though having a physical existence, as ceasing to exist for purposes of utility, and therefore subjects her to be treated as lost," Pede v. Merchants' Ins. Co., 3 Mason, 27, 65, 19 Fed. 98. 1 Ruys V. Royal Exch. Assur. Corp. (1897), 2 Q. B. 135 (though ship was ultimately released and returned). ' Canada Sugar Ref. Co. v. Insur- ance Co., 87 Fed. 491, 493, reversed on anotherpoint, 17.5 U. S. 609, 20 S. Ct. 239. where on destruction of ship, whaling outfits are in safety at a port and can be sold, there is no construc- tive total loss of outfits, though no vessel is obtainable within a reasonable time for forwarding them, Taher v. China Mid. Ins. Co., 131 Mass. 239. 'Columbian Ins. Co. v. Catlett, 12 Wheat. (U. S.) 383, 6 L. Ed. 664. A sale of ship or cargo from necessity, as viewed at the time, is a total loss in this country, Hurtin v. Phcenix Ins. Co., 12 Fed. Cas. 1047; FuUer v. Kennebec Mut. Ins. Co., 31 Me. 325; Stephenson v. Piscataqua F. & M. Ins. Co., 54 Me. 55. Master presumed to have done his duty in ordering sale, Robinson v. Commonwealth Ins. Co., 20 Fed. Cas. 1002. But master must consult owners or insurers if practica- ble, Peirce v. Ocean Ins. Co., 18 Pick. (Mass.) 83, 29 Am. Dec. 567. * Gordon v. Mass. F. & M. Ins. Co., 2 Pick. (Mass.) 249; HaU v. Franklin Ins. Co., 9 Pick. (Mass.) 466, Peirce v. Ocean Ins. Co., 18 Pick. (Mass.) 83, 29 Am. Dec. 567; Taber v. China Mvi. Ins. Co., 131 Mass. 239. ^ Hart V. DelavMre Ins. Co., 11 Fed. Cas. 683; Lord v. Neptune Ins. Co., 10 Gray (Mass.), 109; Thwing v. Wash. Ins. Co., 10 Gray (Mass.), 443; Hub- beU V. Great West. Ins. Co., 74 N. Y. 246. As to constructive total loss of freight in England see Rankin v. Potter (1873), L. R. 6 H. L. 83, 102; Popham V. Ins. Co. (1904), 10 Com. Cas. 31; Hughes v. Sun Mut. Ins. Co., 100 N. Y. 58, 63, 2 N. E. 901, 3 N. E. 71 (total loss of freight defined). A loss of more than half a cargo of coal in specie by the perils insured against authorizes abandonment and claim for total loss of freight imder a valued policy, Boardman v. Boston Mar. Ins. Co., 146 Mass. 442, 453, 16 N. E. 26. As to constructive total loss of profits, see Canada Sugar R. Co. v. Ins. Co. 175 U. S. 609, 20 S. Ct. 239, 44 L. Ed. 292. 246 GENERAL PRINCIPLES OF INSURANCE LAW sured against, it 'is, in general, the duty of the master to transship the cargo ^ or other movables, if he can, and send them on to their desti- nation. In case of justifiable transshipment, the liability of the in- surer continues notwithstanding the landing or transshipment.^ § 194. Notice of Abandonment. — Where there is a constructive total loss, the assured may either treat it as a partial loss, or abandon the subject-matter insured to the insurer, and treat the loss as if it were an actual total loss.' There is no compulsion upon the assured to abandon,^ but upon exercising an election to avail himself of this privilege, he must, speaking generally, with reasonable diligence after receipt of reliable tidings of the loss,^ give to the insurer a notice of abandonment so that the latter may have opportunity to take any proper steps to recover the property or realize any salvage that may be obtainable.® An actual abandonment, however, if accepted by the underwriter, dispenses with the necessity of formal notice of abandonment.'' The object of the notice is to bind the assured by his election, and to give the underwriters opportunity of making the most of the aban- doned property.* Abandonment takes place in all cases of total loss, actual or constructive, but notice is only necessary in the latter case." 1 Bryard v. Commonwealth Ins. Co., Ins. Co., 120 Mich. 601, 79 N. W. 898. 13 Pick. (Mass.) 543; Center v. Ameri- What is reasonable time for abandon- con Ins. Co., 7 Cow. 564, aff'd 4 Wend. ment is a mixed question of law and (N. Y.) 45; Schieffelin v. N. Y. Ins. fact, Smith v. Ins. Co., 4 Mass. 668. Co., 9 Johns. 21. Two months, too late, Taber v. China 2 Chalmers & Owen, Ins. (1907), 81, Mvt. Ins. Co. 131 Mass. 239. A little and authorities cited. See Hansen v. short of one month, too late, Orrok Dunn (1906), 11 Com. Cas. 100. "It v. Commonwealth Ins. Co., 21 Pick, is probable that the insurer is liable for (Mass.) 456, 32 Am. Dec. 271. loss occurring in the course of trans- ' Rankin v. Potter, L. R. 6 H. L. 83, shipment, landing, or reshipment, as 119, 42 L. J. C. P. 169, 29 L. T. 142, well as for losses that take place on the 22 W. R. 1, 2 Asp. M. C. 65; Roux v. substituted vessel," De Hart & Simey, Salvador, 3 Bing. N. C. 286. This Ins. (1907), 70, citing Arnould, § 468. notice not only according to insurance The insurer is still liable for the cargo law but according to the universal which is of necessity carried overland, practice of merchants and under- because of the damage to the ship, Bry- writers is a necessary preliminary to a ant V. Commonwealth Ins. Co., 13 Pick. claim for a constructive total loss. It (Mass.) 543. is in effect an offer by the assured to the s Western Assur. Co. v. Poole (1903), underwriter to vest the property in the 1 K. B. 376, 384; Delaware Ins. Co. v. imderwriter so that he may thereafter Winter, 38 Pa. St. 176. deal with it as his own, West. Assur. * Mason v. Marine Ins. Co., 110 Co. v. Poole (1903), 1 K. B. 376, Fed. 452, 460, 49 0. C. A. 106. 383. 6 Roux V. Salvador, 3 Bing. N. C. 286; ' Canada Sugar Ref. Co. v. 7ns. Co., Gemon v. Royal Exch. Assur. Co., 2 176 U. S. 609, 618, 20 S. Ct. 239. Marsh. 88; Taber v. China Mid. Ins. » De Hart & Simey, Ins. (1907), 73, Co., 131 Mass. 239- Reynolds v. Ocean citing Kaltenbach v. Mackenzie (1878), Ins. Co., 22 Pick. (Mass.) 191, 33 Am. 3 C. P. D. 480. Dec. 727; Harvey v. Detroit F. & M. » De Hart & Simey, Ins. (1907), 73, NOTICE OF ABANDONMENT 247 An acceptance of an abandonment is not to be presumed from the mere silence of the insurers upon receiving the notice, but may be inferred from their acts as well as their words; that is, it may be con- structive as well as express,^ as, for example, where the insurers take possession of the property insured and do not return it within a rea- sonable time.^ When notice of abandonment is accepted the abandonment is irrevocable. The acceptance of the notice conclusively admits liability for the loss, and the sufficiency of the notice," and where notice of abandonment is properly given, the rights of the assured are not prejudiced by the fact that the insurer refuses to accept the abandonment.* Where, however, at the "time the assured elects to treat the claim as one of constructive total loss, there is no possibility that the underwriter could derive any advantage from notice, either because there is nothing to abandon,^ or because the disposal of the property was justifiably determined before the opportunity to give notice occurred, no notice is essential. For instance, where the news of the loss of the ship and of her sale reached the assured at the same time, it was held that the underwriters were liable for a total loss without notice of abandonment;* and the same conclusion was ar- citing Amould, § 1045. But as to the situation where there are several in- Burers, or where the subject-matter is not fully covered, see Amould, §§ 1187, 1188, 1215, 1216. For purposes of ad- justment of a marine loss, the subject- matter is considered always fully cov- ered, either by the underwriters alone, or, in case of short insvirance, by the underwriters and by the insured him- self, who is a coinsurer for the defi- ciency, see §§50, 201. ^Singleton v. Phoenix Ins. Co., 132 N. Y. 298, 30 N. E. 839; PTOvineitd Ins. Co. V. Ledvc, L. R. 6 P. C. 224, 43 L. J. P. C. 49, 31 L. T. 142, 2 Asp. M. G. 338, 22 W. R. 929. See Canada Sugar Ref. Co. v. Insurance Co., 175 U. S. 609, 618, 20 S. a. 239. ^Copelin v. Ins. Co., 9 Wall. (U. S.) 461. But this rule, relating to posses- sion, does not apply under a policy providing that the acts of insurers in recovering, saving, or disposing of the property insured shall not be consid- ored a waiver or an acceptance of an abandonment, Schuyler v. Phoenix Ins. Co., 134 N. Y. 345, 32 N. E. 25; Northwestern Transp. Co. v. Thames & M. Ins. Co., 59 Mich. 214, 26 N. W. 336. ^Richelieu & O. Nav. Co. v. Boston M. Ins. Co., 136 U. S. 408, 10 S. Ct. 934, 34 L. Ed. 398. Thus policy on ship with warranty not to be in Gulf of St. Lawrence after Nov. 15. After that date ship is wrecked in Gulf, but insurer with knowledge of fact accepts notice of abandonment. The insurer is liable, Provincial Ins. Co. v. Leduc (1874), L. R. 6 P. C. 224. And see De Hart & Simey, Ins. (1907), 43, note (e); also Eng. Mar. Ins. Act (1906), § 62 (6). < See Gould v. Citizens' Ins. Co., 13 Mo. 524; McBride v. Marine Ins. Co., 7 Johns. (N. Y.) 431; Jumel v. Marine Ins. Co., 7 Johns. (N. Y.) 412, 5 Am. Dec. 283. 5 Standard Mar. Ins. Co. v. Nome Beach L. & T. Co., 133 Fed. 636, 643; Canada Sugar Ref. Co. v. Ins. Co., 175 U. S. 609, 617, 20 S. Ct. 239, in which it is said "a policy upon expected profits does not seem to offer anything upon which an abandonment can operate." 8 Famworth v. Hyde, 2 Mar. L. R 187, 429. 248 GENERAL PBINCIPLES OF INSURANCE LAW rived at under similar circumstances in an action upon a policy of insurance on cargo.* The notice of abandonment to be effective must also be followed by actual abandonment, and there must be no retention of control by the assured.^ If the loss is the result of a peril not insured against there exists no right to abandon.' The right to abandon, it has been said by the United States Supreme Court, is to be determined by the situation at the time of the abandonment, and the rights of the assured turn upon the probabilities as reasonably to be gathered from the existing cir- cumstances and not of necessity upon the actual result.* In Eng- . land, it is said, a notice of abandonment, in order to be effective, must have been justified by the state of affairs existing not only at the time when it was given, but also at the time of action brought.* But many American courts lay controlling emphasis upon the situa- tion as fairly viewed at the time when the notice is given.* Mr. 1 Roxix V. Salvador, 3 Bing. N. C. 266. 2 Louisville Underwriters v. Pence, 93 Ky. 96, 19 S. W. 10. 3 Richelieu & 0. Nav. Co. v. Boston M. Ins. Co., 136 U. S. 408, 10 S. Ct. 934, 34 L. Ed. 398. * Sufficient if expense of recovery and repairs would probably exceed one-half value, Orient Mvt. Ins. Co. v. Adams, 123 U. S. 67, 75, 31 L. Ed. 63, 8 S. Ct. 68 (subsequent result though evidence is not decisive); Peek v. Merchants' Ins. Co., 19 Fed. Cas. 98; Fulton Ins. Co. v. Goodman, 32 Ala. 108, 127, 128 (repairs ultimately cost less than one-half value of vessel when repaired); Fontaine v. Phoenix Ins. Co., 11 Johns. (N. y.) 293; Louisville Unr- derwriters v. Monarch, 99 Ky. 578, 36 S. W. 563; Louisville Underwriters v. Pence, 93 Ky. 96, 104, 19 S. W. 10, 40 Am. St. Rep. 176. But in some cases it is held tliat where the underwriters have refused to accept abandonment, its validity must be determined by the actual and ultimate cost of repairs. Wood V. Lincoln & K. Ins. Co., 6 Mass. 479; Hall v. Franklin Ins. Co., 9 Pick. (Mass.) 466; Marmand v. MeUedge, 123 Mass. 173. Or by the ultimate result, Mclves V. Henderson, 4 M. & S. 576. As where ship was captured but re- stored before action brought, Bain- bridge v. Neilson (1808), 10 East, 329. The underwriters cannot defeat the effect of a valid notice of abandonment by intervening before action brought and raising and repairing the vessel at less than the estimated cost. Sailing Ship Blairmore Co. v. Macredie (1898), App. Cas. 607; Peele v. Merchants' Ins. Co., 3 Mason (U. S.), 27; but compare Massachusetts cases last cited. In Massachusetts it is held that the actual state of facts at the time of an abanr doninent, rather than the intelligence received by the insured, is the proper test of the right to abandon, Dorr v. Union Ins. Co., 8 Mass. 502; Hall v. Franklin Ins. Co., 9 Pick. (Mass.) 466. The right to abandon and recover for a constructive total loss depends on the state of facts when abandonment is made. Snow v. Union Mut. Mar. Ins. Co., 119 Mass. 592, 21 Am. Rep. 349; Greene v. Pac. Mvt. Ins. Co., 9 Allen (Mass.), 217 (whaler jammed fast in ice; constructive total loss). The redelivery of a captured vessel on bail does not defeat the right to aban- don, Lovering v. Mercantile Ins. Co., 12 Pick. (Mass.) 348. 6 De Hart & Simey, Ins. (1907), 73, citing Amould, §§ 1095-1102; Ruys v. Royal Exch. Ass. Corp. (1897), 2 Q. B. 135, 66 L. J. Q. B. 534; SaUing Ship Blairmore v. Macredie (1898), App. Cas. 593, 67 L. J. P. C. 96. For example, in case of captiire. Bain- bridge V. NeOson (1808), 10 East, 329. « Orient Mut. Ins. Co. v. Adams, 123 U. S. 67, 75, 8 S. a. 68, 31 L. Ed 63. EFFECT OF ABANDONMENT 249 Justice Story in an elaborate opinion, after reviewing the two doc- trines and the reasons and authorities bearing upon them, gave to the American rule the weight of his judgment.^ § 195. Form of Notice of Abandonment. — No specific form is necessary for the notice of abandonment, nor, unless required by the policy, is it essential that it should be made in writing, though it is customary and advisable so to give it. But the notice must be given in terms which indicate the intention of the assure^ to abandon to the insurer unconditionally his insured interest in the subject- matter.^ § 196. Effect of Abandonment. — Where there is a valid abandon- ment the insurer is entitled to take over the interest of the assured in whatever may remain of the subject-matter insured, and all pro- prietary rights incidental thereto.^ If there are several underwriters, they share in the transfer of the interest in proportion to the amount of their several subscriptions.* 1 Peele v. Merchants' Ins. Co., 3 Mason, 27, 19 Fed. Cas. 98. 2 Canada Sugar Ref. Co. v. Insurance Co., 175 U. S. 609, 20 S. Ct. 239; Im. Co. of N. A. V. Johnson, 70 Fed. 794, 37 U. S. App. 413, 17 C. C. A. 416; Bosley v. Chesapeake Ins. Co., 8 Gill & J. (Md.) 450, 22 Am. Dec. 337; North- western Transp. Co. v. Thames & M. Ins. Co., 59 Mich. 214, 26 N. W. 336. The word "abandon" need not be used in notice; any equivalent expression conveying notice of intention to aban- don is sufficient, Currie v. Bombay Na- tive Ins. Co., 6 Moore P. C. N. S. 302, 39 L. J. P. C. 1,22L.T. 317. If a writing is required by the policy such stipula- tion must be complied with, North- westem Transp. Co. v. Thames & M. Ins. Co., 59 Mich. 214, 26 N. W. 336. Clause requiring written transfer on abandonment construed in Harvey v. Detroit F. & M. Ins. Co., 120 Mich. 601, 79 N. W. 898. Compare The Manitoba, 30 Fed. 129; The Mary E. Perew, 15 Blatchf. (U. S. C. C.) 58. 3 Mason v. Mar. Ins. Co., 110 Fed. 452, 49 C. C. A. 106, 54 L. R. A. 700; Patapsco Ins. Co. v. Southgate, 5 Pet. (U. S.) 604, 8 L. Ed. 243; Northwest Trans. Co. v. Thames &M. Ins. Co., 59 Mich. 244, 26 N. W. 336; Cincinnati Ins. Co. V. DuffieU, 6 Ohio St. 200, 67 Am. Dec. 339\Stewart v. Greenock Ins. Co. (1848), 2 H. L. Cas. 182 Accord- ingly expenses properly incurred by the master from date of casualty will be chargeable to the underwriters, Gilchrist v. Chicago Ins. Co., 104 Fed. 566, 44 C. C. A. 43; Rankin v. PoUer, L. R. 6 H. L. 119; and, on the other hand, all the incidents of ownership pass as fully as though a deed of cession had been executed. The imderwriters, on paying total loss or amount of valuation in a valued policy, may seek to recover the property, or sell it, or do with it what they deem best, and they may keep the proceeds though in ex- cess of the amount of insurance paid. Mobile, etc., R. Co. v. Jurey, 111 U. S. 584, 594; Mason v. Marine Ins. Co., 110 Fed. 452, 460; North Eng. Ins. Assoc. V. Armstrong, L. R. 5 Q. B. 244, 24l8; Stewart v. Greenock Mar. Ins. Co., 2 H. L. Cas. 159, 183. But where salvage consists of damages from an- other vessel for collision the under- writers can only be indemnified out of the proceeds, giving to the assured any balance. The Livingston, 130 Fed. 746, since such a claim passes by virtue of the right of subrogation and not as an incident to the property in the ship, Simpson v. Thompson (1877), 3 App. Cas. 292. An abandonment rightfully made relates back to the time of the loss. Snow v. Ins. Co,, 119 Mass. 592, 20 Am. Rep. 349. * Gilchrist v. Chi. Ins. Co., 104 Fed. 250 GENERAL PRINCIPLES OF INSURANCE LAW And where the assured is insured for an amount less than the insur- able value, or in the case of a valued poUey, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of the uninsured balance, and therefore is entitled to his share of sal- vage.^ After abandonment, any acts subsequent to the casualty, per- formed by the assured or his agents in respect to the subject of insurance, are at the risk of the insurer and inure to his benefit, if done reasonably and in good faith.^ By the English rule, upon the abandonment of a ship, the insurer thereof is entitled to any freight in course of being earned and which is earned by her subsequent to the casualty causing the loss,' less the expenses of earning it, incurred after the casualty; and, where the ship is carrying the owners' goods, the insurer is entitled to a reason- able remuneration for the carriage of them, subsequent to the casu- alty causing the loss.^ In America many decisions award the pending freight, where it has been finally matiared by the underwriter, to him and to the owner of the vessel fro rata itineris which each has accom- plished.^ The doctrine of abandonment in marine insurance law must not be confused with that of subrogation. The doctrine of abandonment applies only to a total loss, whether actual or constructive, and in- volves a change of property in the thing insured. Abandonment is the cession of all interest in the thing insured which the assxired by necessary inference of law makes to the insurer by acceptance of payment for total loss. By abandonment, an actual change of owner- ship, from the insured to the insurer, is effected, and therefore if the thing abandoned, peradventure, prove to be of greater value than the amount so paid by the underwriters, they may possibly succeed in more than recouping their loss." But subrogation, on the other 566; Steioort v. Greenock Mar. Ins. Co., No. 12,342, case aff'd 13 Pet. (U. S.) 2 H. L. Cas. 183. A disbursement 387, 10 L. Ed. 213. See Peirce v. policy is entitled to its share of salvage, Ocean Ins. Co., 18 Pick. (Mass.) 83, 89, Brown v. Merchants' Mar. Ins. Co., 152 29 Am. Deo. 567; Chesapeake Ins. Co. Fed. 411. Abandonment relates only v. Stark, 6 Cranch (U. S.), 272, ex- to property at risk at the time of loss; plained in Columbian Ins. Co. v. not to property previously delivered or AsKby, 4 Pet. (IJ. S.) 137. disposed of. s See Ins. Co. v. Hadden (1884), 13 I Natchez, etc., Co. v. Louisville Un- Q. B. D. 706. denvriters, 44 La. Aim. 714; The Welsh * The Red Sea, 73 Law T. Rep. 462 Girl (1906) , 22 T. L. R. 475. (1896) , P. 20; Miller v. WoodfaU (1857), i Rankin v. Potter (1873), L. R. 6 27 L. J. Q. B. 120. H. L. 119; Jumel v. Marine Ins. Co., 7 5 Mason v. Marine Ins. Co., 110 Fed. .Johns. (N. Y.) 412, 413, 5 Am. Dec. 452, 457-459, 49 C. C. A. 106. 283: Mordecai & Co. v. Ins. Co., 12 "Mobile, etc., R. Co. v. Jurey, 111 Rich. L. (S. C.) 512; The Sarah Ann, 2 Sumn. (U. S. C. C.) 206, Fed. Caa. U. S. 584, 594. PARTICULAR AVERAGE 251 hand, involves no such change of property, and occurs whether the loss be total or partial. It is by subrogation that the insurer has the right to stand in the shoes of the assured, so as to enable the insurer, after indemnifying the assured for a loss, to enforce in his own in- terest all remedies which the assured may have against third persons, with the object of preventing the assured from recovering from his underwriters for a loss which has been made good to him from other sources.^ But the insurer's right by subrogation is limited in amount to a reimbursement for their payment, and for any balance recovered they must account to the insured, who, in the absence of an express assignment of his title, remains owner of the subject-matter of in- surance.^ § 197. Particular Average. — The term "particular average" in marine insurance sometimes is used in contradistinction to general average. It then means a partial loss insured against, of such a character that it is not the subject of general average contribution, but remains with the particular interest, or with the insurers of that interest.' The same term is used also in contradistinction, sometimes to sal- vage charges;^ and sometimes to particular charges, which, though they may be recoverable from the underwriters, are incurred, not to repair the damage, nor for the common safety, but to preserve or rescue the particular interest, as, for example, ship or cargo.^ The words "particular average," when occurring in the memorandum clause of the policy, mean partial loss.* 1 De Hart & Simey, Ins. (1907), 90. under the suing and laboring clause 2 The Livingston, 130 Fed. 746. as particular average, or as general 3 Wilson V. Smith, 3 Burr. 1550, average, according to circumstances," 1555; Price V. Al Ships, etc., Assoc, 22 De Hart & Simey, Ins. (1907), 76. Q. B. D. 580, 590. A shipowner's liability to pay life sal- * "The charges recoverable under vage is not covered by a policy in the maritime law by a salvor independ- usual form; but is sometimes specially ently of contract," Eng. Mar. Ins. Act insured against, Nourse v. Liverpool, (1906), ch. 41, § 65; Anderson v. Ocean etc., Assn. (1896), 2 Q. B. 16, 65 L. J. Mar. Ins. Co. (1884), 10 App. Cas. Q. B. 507. A clause "no claim to at- 107; Aitchison v. Lohre (1879), 4 App. tach for salvage charges" in a rein- Cas. 765. Referring to the case last surance against " total loss '"was held cited it is said: "The result of the de- to exclude liability under the sue and cision is that if the particular average labor clause, Western Assur. Co. v. claim together with the salvage charges Poole (1903), 1 K. B. 376, 72 L. J. exceed tne full sum insured, the excess K. B. 195. is not recoverable from the insurers. ^ Kidston v. Empire Mar. Ins. Co., It is to be noticed that this rule does L. R. 1 C. P. 535; MacArthur, Ins. not apply where the salvage services (2d ed.), 261. have Ibeen rendered under a contract "See ch. XX. "Particular charges with the salvors; in such a case the are not included in particular average," assured may recover the excess either Eng. Mar. Ins. Act (1906), c. 41, § 64, 252 GENERAL PEINCIPLES OF INSURANCE LAW The technical rules relating to adjustments of losses with marine underwriters are of more interest and utility to the expert average adjuster, and to the specialist in marine insurance law than to the general practitioner; and, therefore, need not. long detain us. The concise phraseology of the rules following in this chapter has been largely borrowed from the English codification passed by Pariiameat in 1906. § 198. Salvage Charges Recoverable. — Subject to any express provision in the policy, salvage charges, incurred in preventing a loss by perils insured against, may be recovered as a loss by those perils.* § 199. Insurer Liable for General Average Loss. — Subject to any express provision in the policy, where the assured has incurred a general average expenditure,^ he may recover from the insurer in respect of the proportion of the loss which falls upon him; and, in the case of a general average sacrifice, he may recover from the insurer in respect of the whole loss, without having enforced his right of contribution from the other parties liable to contribute,* ^ Aitchison v. Lohre (1879), 4 App. Cas. 765; Steamship Balmoral v. Mar- ten (1901), 2 K. B. 904. They do not fall under sue and labor clauses but recovery is limited by amount insured. Illustrations taken from Chalmers & Owen (1907), 95, 96: (1) A ship valued at £2,600 is insured with D. for £1,200. After encountering very bad weather the ship is rescued by a steamer with which no contract is made, and which afterward obtains an award of £800, as salvage money. The owner does not abandon the ship, but elects to re- pair her. D.'s proportion of the ex- penses of repair comes to £1,200; that is to say, the full sum insured. He is not liable for any portion of the salvage or general average expenses in excess of the £1,200, Aitchison v. Lohre (1879), 4 App. Cas. 755, cf. Mont- gomery V. Indemnity Mid. Mar. Ins. Co. (1900), 6 Com. Cas. 23. (2) Time policy on ship, which begins a voyage short of coal and engages the services of a tug to tow her to port of dis- charge. The owner of tug gets judg- ment for salvage services which the assured has to pay. The steamer met with no extraordinary weather and might in time have sailed to her port. The loss is not due to perils of the seas. but to improper deficiency of coal, BaUantyne v. McKinnon (1896), 2 Q. B. 455. 2 General average defined § 212. 3Eng. Mar. Ins. Act (1906), c. 41, § 66(4); Dickenson v. Jardine, L. R. 3 C. P. 639; The Mary Thomas (1894), Prob. 125. The distinction specified in the text between recovery for ex- penditure and recovery for sacrifice is thxis explained: "General average ex- penditures do not involve the loss or destruction of anything insured. The underwriter is only liable for his as- sured 's proportion of the amount ex- pended, and consequently he cannot be sued until there has been some kind of adjustment. It is different with a gen- eral average sacrifice. The insured may, in the first instance, recover the whole loss from the insurer, but when the ship, freight, and cargo belong to the same person, it is said that the assured is deemed to have the contribution of the other interests in his pocket, and can only recover a proportionate amount from the underwriter on each," De Hart & Simey, Ins. (1907), 77. citing Montgomery v. Indemnity, etc., Ins. Co. (1902), 1 K. B. 734, 741, 61 L. J. K. B. 467. TOTAL LOSS 253 provided, in either case, the peril, sought to be avoided by the general average expenditure or sacrifice, was one insured against.* § 200. Insurer also Liable for General Average Contribution.— Subject to any express provision in the policy, where the assured has paid, or is Uable to pay, a general average contribution ^ in re- spect of the subject insured he may recover therefor from the insurer,* provided the general average loss was incurred for the purpose of avoiding a peril insured against.* § 201. Measure of Indemnity. — The sum which the assured can recover in respect of a loss on a policy by which he is insured, in the case of an imvalued policy, to the full extent of the insurable value, or, in the case of a valued policy, to the full extent of the value fixed by the policy, is called the measure of indemnity.* Where there is a loss recoverable imder a marine policy, the in- surer, or each insurer ii there be more than one, is liable for such proportion of the measure of indemnity as the amount of his sub- scription bears to the value fixed by the policy, in the case of a valued policy, or to the insurable value, in the case of an unvalued policy.® That is to say, if not fully insured, the assured as to the deficiency is himself a coinsurer.'' § 202. Total Loss. — Where there is a total loss of the subject-mat- ifioHi V. Troop, 157 U. S. 386, 393, sEng. Mar. Ins. Act (1906), § 67 15 S.»Ct. 657; Harris v. Scaramanga, (1). L. R. 76 C. P. 496. » Lohre v. Aitchison (1878), 3 Q. B. 2 Defined § 212. D. 564, 565. Rule of adjustment dif- 3Eng. Mar. Ins. Act (1906), c. 41, fers in fire insurance, see § 50. §66(5); The Brigella (1893), p. 198, 'Thus a cargo valued at $10,000 is 7 Asp. Mar. Cas. 405. insured for $2,000, leaving the owner * Harris v. Scaramanga, L. R. 7 coinsurer for $8,000. The damage by C. P. 496. Thus the underwriters, sea perils is $1,500. Two-tenths or though not directly parties to a gen- one-fifth of the loss, $300, falls upon eral average adjustment, must make the underwriters, the balance, $1,200, good the loss of the assured, so fax as or four-fifths of the whole loss, remains the amount of the insurance permits, with the insured. Western Assur. Co. v. RaUi v. Troop, 157 U. S. 386, 15 S. Ct. Southwestern Trans. Co., 68 Fed. 923, 657; Potter v. Ocean Ins. Co., 3 Sumn. 16 C. C. A. 65. Illustration from (U. S. C. C.) 27; Padelford v. Board- Chahners & Owen, Ins. (1907), 102. man, 4 Mass. 548, 550. Where ship, A ship valued at £5,000 is insured for freight, and cargo, or any two of those £1,000. The ship is stranded, and the interests, are owned by the same as- owner spends £1,000 in trying to get sured, the liability of the insurer in her off, but eventually she is totally respect of general average losses or lost. The insurer must pay £1,000 contributions is to be determined as if on the policy, and £200 (i. e. , one- those interests were owned by different fifth) under the suing and laboring persons, Montgomery v. Indemnity Mut. clause. It is immaterial whether the Af. Ins. Co. (1901), 1 K. B. 147, aff'd real value of the ship be £4,500 or (1902) 1 K. B. 734. £5,500. 254 GENERAL PRINCIPLES OP INSURANCE LAW ter insured, if the policy be valued, the measure of indemnity is the sum fixed by the policy.* If the policy be not valued, the measure of indemnity is the insurable value of the subject-matter insured.^ § 203. Partial Loss of Ship. — In case of partial loss of the ship, subject to any express provision in the policy, the following rules apply: (1) Where the ship has been repaired, the assured is entitled to the reasonable cost of the repairs, less the customary deductions, but not exceeding the sum insured in respect of any one casualty.^ ' Sailing Ship Blairmore v. Macredie (1898), App. Cas. 610. In case of total loss the policy valuation makes settle- ment a simple matter. In case of a valued policy on freight or cargo, if a part only of the subject is exposed to risk the valuation applies only in pro- portion to such part, Davy v. Hallett, 3 Caines (N. Y.), 16, 2 Am. Dec. 241. Where profits are valued and insiu'ed, loss of profits is presumed from loss of the property out of which they were expected to arise, and the valuation of policy fixes their amount, Patapsco Ins. Co. V. Coulter, 3 Pet. (O. S.) 222. Where hull and machinery are sepa- rately valued, the parts thus separated are to be treated as distinct insurances, Am. S. S. Co. V. Indemnity Mvt. Mar. Ins. Co., 108 Fed. 421, aff'd 118 Fed. 1014, 56 C. C. A. 56. Unless the policy can be construed to intend a separate insurance on several articles, a total loss of part is only a partial loss, De Hart & Simey, Ins. (1907), 67. ^Irving v. Manning (1847), 1 H. L. Cas. 305, 307. In the absence of a policy valuation insurable value is as- certained as follows: In insurance on ship, the insurable value is the value, at the commencement of the risk, of the ship, including her outfit, provi- sions and stores for the officers and crew, money advanced for seamen's wages, and other disbursements (if any) incurred to make the ship fit for the voyage or adventure contemplated by the policy, plus the charges of in- surance upon the whole, Carson v. Mar. Ins. Co., 5 Fed. Cas. 178; Leavenworth V. Delafkld, 1 Caines (N. Y.), 573, 2 Am. Dec. 201; Moran Galloway v. Uzielli (1905), 2 K. B. 558 (disburse- ments); Broitgh v. Whitmore (1791), 4 T. R. 206 (stores and provisions for crew); Stevens v. Colurmrian Ins. Co., 3 Caines (N. Y.), 43, 2 Am. Dec. 247 (cost of insurance). The insurable value, in the case of a steamship, in- cludes also the machinery, boilers, and coals and engine stores, if owned by the assured, and in the case of a ship en- taged in a special trade, the ordinary ttings requisite for that trade, Ho- garth v. Walker (1900), 2 Q. B. 283 (fittings), but a policy on "hull and machinery," instead of "ship," may not cover coals and stores, Roddick v Ins. Co. (1895), 2 Q. B. 386. In in- surance on freight, whether paid in advance or otherwise, the insurable value is the gross amount of the freight at the risk of the assured, plus the charges of insurance, TJ. S. Shipmng Co. v. Empress, etc., Corp. (1907), 1 K. B. 259 (commission not to be added). In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the ex- penses of and incidental to shipping and the charges of insurance upon the whole. Usher v. Noble (1810), 12 East, 639, 646. In America instead of "prime cost" the actual or market value at time and place of lading is sometimes said to be the test, but in practice this is measured by the in- voice or cost price, Pleasants v. Mary- land Ins. Co., 8 Cranch, 55, 3 L. Etl. 486: Snell v. Delaware Ins. Co., 22 Fed. Cas. 713, 4 Dall. 430; Warren v. Franklin Ins. Co., 104 Mass. 518. Loss in raising money for the purchase is not to be added, Mintum v. Colwn- bian Ins. Co., 10 Johns. (N. Y.) 75. In insurance on any other subject- matter, the insurable value is the amount at the risk of the assured when the policy attaches, plus the charges of insurance, McArthur, Ins. (2d ed.), p. 69. ^Henderson v. Shankland (1896), 1 Q. B. 525; Pitman v. Universal Mar. Ins. Co. (1882), 9 Q. B. D. 192, 215; Aitchison v. Lohre (1879), 4 App. Cas. 762. The measure of indenmil^ is thus PARTIAL LOSS OF GOODS 255 (2) Where the ship has been only partially repaired, the assured is entitled to the reasonable cost of such repairs, computed as above, and also to be indemnified for the reasonable depreciation, if any, arising from the imrepaired damage, provided that the aggregate amount shall not exceed the cost of repairing the whole damage, computed as above.^ (3) Where the ship has not been repaired, and has not been sold in her damaged state during the risk, the assured is entitled to be indemnified for the reasonable depreciation arising from the unre- paired damage, but not exceeding the reasonable cost of repairing such damage, computed as above.^ § 204. Partial Loss of height. — Subject to any express provision in the pohcy, where there is a partial loss of freight, the measure of indemnity is such proportion of the sum fixed by the policy, in the case of a valued policy, or of the insurable value, in the case of an unvalued policy, as the proportion of freight lost by the assured bears to the whole freight at the risk of the assured under the policy.' § 205. Partial Loss of Goods. — Where there is a partial loss of goods, merchandise, or other movables, the measure of indemnity, subject to any express provision in the policy, is as follows: (1) Where part of the goods, merchandise, or other movables in- sured by a valued marine policy is totally lost, the measure of in- demnity is such proportion of the sum fixed by the policy as the insurable value of the part lost bears to the insurable value of the whole, ascertained as in the case of an unvalued policy.* (2) Where part of the goods, merchandise, or other movables insured by an unvalued marine policy is totally lost, the measure of indemnity is the insurable value of the part lost, ascertained as in case of total loss.^ theoretically, the cost of repairs, less fore the casualty less the amount for the improvement resulting therefrom. which she sold, Pitman v. Universal As to what are customary deductions Mar. Ins. Co. (1882), 9 Q. B. D. 192, see § 209 and Appendix, ch. Ill; also 51 L. J. Q. B. 561. Chalmers & Owens, Ins. (1907), 154. 3 f/. s_ Shipping Co. v. Empress, etc., As to "reasonable cost of repairs," see Corp. (1907), 1 K. B. 259; The Main RvxAon S.S. Co. v. London Ass. Co. (1894), P. 320. See Amould, |§ 878, (1900), App. Cas. 6, 69 L. J. Q. B. 86; 1041. Agenoria S.S. Co. v. Merchants', etc., * Ursvla^Bright S.S. Co. v. Amsinck, Ins. Co. (1903), 8 Com. Cas. 212. 115 Fed. 242, 245, and cases cited; 1 Stewart v. Steele (1852), 5 Scott Lamar Ins. Co. v. McGlashen, 54 111. N. R. 948. 513, 5 Am. Rep. 162, and see more in ^Stewart V. Steele (1852), 5 Scott deta.il ^236; Irving v. Manning (1847), N. R. 927. Where the ship was sold in 1 H. L. Cas. 305. her damaged state, it was held that the ^Irving v. Manning (1847), 1 H. L. amount recoverable was her value be- Cas. 305; Tobin v. Hartford, 32 L. J. 256 GENERAL PRINCIPLES OF INSURANCE LAW (3) Where the whole or any part of the goods or merchandise in- sured has been dehvered at its destination, the measure of indemnity is such proportion of the sum fixed by the policy, in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the difference between the gross sound and damaged values at the place of arrival bears to the gross sound value.^ It is important to discriminate between a particular average loss and a salvage loss on goods, since the measure of liability laid upon the underwriter is not the same in both. A salvage loss is a total loss C. P. 134, 136; Levns v. Rmker (1761), 2 Burr. 1167. A particular average on goods consists eiwier in damage to or total loss of part of the subject in- sured by operation of the perils in- sured against, Kidston v. Empire Mar. Ins. Co., L. R. 1 C. P. 535. 1 Johnson v. Sheddon (1802), 2 East, 580. "Gross value" means the whole- sale price, or, if there be no such price, the estimated value, with, in either case, freight, landing charges, and duty paid beforehand; provided that in the case of goods or merchandise customarily sold in bond, the bonded price is deemed to be the gross value. "Gross proceeds" means the actual price ob- tained at a sale where all charges on sale are paid by the sellers, Eng. Mar. Ins. Act. (1906), § 71(4). Thus it ap- pears that, in case of damaged cargo at destination, a loss percentage is ob- tained which is applied to the agreed valuation, if the policy is valued, other- wise to the origmal market or insur- able value, Lawrence v. N. Y. Ins. Co., 3 Johns. Cas. 217. The practical mode of ascertaining such ratio or per- centage of loss is usually based upon a comparison between the gross pro- ceeds of sales of property sound and property damaged at place of dis- charge, Lamar Ins. Co. v. McGlashen, 54 111. 513, 5 Am. Rep. 162; Lawrence V. N. Y. Ins. Co., 3 Johns. Cas. 216; Evans v. Commercial Ins. Co., 6 R. I. 47. If property is reconditioned the underwriter is liable for the reasonable expense, Francis v. BouUon (1895), 65 L. J. Q. B. N. S. 153, 73 L. T. R. 578. Illustrations from Chalmers & Owen, Ins. (1907), 107, 108: (1) Unvalued policy on coffee from Jamaica to Lon- don. The insurable value, i. e., the invoice cost, plus shipping expenses and charges of insurance, is £200. Half the coffee is damaged on the voyage. The value of the damaged coffee in London is half that of the undamaged coffee. The selling price in London fixes the measure or per- centage of depreciation, but not the amoimt the insurer has to pay. That must be determined by applying the depreciation to the insurable value, so that in this case the insurer has to pay £50, Usher v. NobU (1810), 12 East, 639 (the test adopted excludes the rise or fall of the London market). (2) Policy on 40 bales of cotton, which are shipped as part of a cargo of 1,600 bales of cotton belonging to different owners. Owing to sea perils 200 bales have to be jettisoned, and the rest are damaged and the marks wholly oblit- erated. The 1,400 bales are sold for the benefit of whom it may concern. This is a partial loss, and the assured is entitled to recover as if five of the forty bales had been jettisoned, and the rest damaged to the extent shown by the sale of the whole, Spence v. Union Mar. Ins. Co. (1868), L. R. 3 C. P. 427. (3) Policy on 1,700 packages of tea, valued at £6,000. Part of the tea is sea-damaged, and the remainder, which arrives undamaged, sells in consequence for a smaller price. The insurer is not liable for the deprecia^ tion so caused, Cator v. Great Western Ins. Co. (1873), L. R. 8 C. P. 552, 561; and see Brown Bros. v. Fleming (1902), 7 Com. Cas. 245 (damage to labels, etc.). (4) Policy on cargo of sheet iron in separate packages, average payable "on each packet separately or on the whole." Damage is sustained before the termination of the risk. The whole of the iron is ur;packed and examined. The damaged iron is sold, and the rest is repacked and sent on. The insurer is not liable for the ex- penses incurred in examining and re- packing the packages which were not damaged, Lysaght v. Coleman (1895), 1 Q. B. 49. GENERAL AVERA.GE CONTRIBUTION AND SALVAGE CHARGES 257 diminished by salvage, and takes place in relation to goods when there is either an absolute or a constructive total loss of the subject insured, but some remains of the property have been recovered by the assured.'' The underwriters are called upon to pay the difference between the insured value of the goods and the net proceeds of sale, ascertained by deducting from the gross proceeds the expenses of salvage. On the other hand, the method for computing a technical particular average loss is declared to be well established and is thus described: the damaged goods, upon reaching their destination, must be at once sold for the best price obtainable.^ It is then to be determined what the goods would have been worth in the same mar- ket had they been sound, and the difference between the sound value and the proceeds of»the sale of the damaged article gives the ratio of deterioration, and the underwriter is to pay this ratio or per- centage of loss on the policy value.' § 206. Apportionment of Valuation. — Where different species of property are insured under a single valuation, the valuation must be apportioned over the different species in proportion to their respective insurable values, as in the case of an unvalued policy. The insured value of any part of a species is such proportion of the total insured value of the same as the insurable value of the part bears to the in- surable value of the whole.* § 207. General Average Contribution and Salvage Charges. — Subject to any express provision in the policy, where the assured has paid, or is liable for, any general average contribution, the meas- ure of indemnity is the full amount of such contribution if the sub- ject-matter hable to contribution is insured for its full contributory value; but if such subject-matter be not insured for its full contribu- tory value, or if only part of it be insured, the indemnity payable by 1 MacArthur, Ins. (2d ed.), 241. as a salvage loss). Loss on goods ar- See Devitt v. Prov. Washington Ins. riving in specie sea-damaged and with Co., 61 App. Div. 390, 401, 70 N. Y. marks obliterated, so that they cannot Supp. 654 (in which there was a con- be delivered to their respective owners, structive total loss of canal cargo of must be adjusted according to the potatoes which the court holds to be rules of particular a\erage, Spence v. "a salvage loss." Some of the pota- Union Mar. Ins. Co., L. R. 3 C. P. 427. toes arrived in specie but salvage ex- * Where a valuation has to be ap- penses exceeded proceeds). portioned, and particulars of the prime 2 Usually by auction. cost of each separate species, quality, ^London Assur. v. Companhia de, or description of goods cannot be as- etc., 167 U. S. 149, 171, 17 S. Ct. 785, certained, the division of the valuation 42 L. Ed. 113 (where, by agreement, may be made over the net arriyed loss was converted into a constructive sound value of the different species, total loss and adjusted by the court qualities, or descriptions of goods. 17 258 GENERAL PRINCIPLES OF INSURANCE LAW the insurer must be reduced in proportion to the undwf insurance, and where there has been a particular average loss which constitutes a deduction from the contributory value, and for which the insurer is liable, that amount must be deducted from the insured value in order to ascertain what the insurer is liable to contribute. Where the insurer is liable for salvage charges the extent of his liability must be determined on the like principle.^ § 208. Liability for Successive Losses may Exceed Amount of Policy. — The rule obtains in marine insurance that if a partial loss is repaired or adjusted and there is a subsequent partial or total loss under the same policy, the insurer is liable for both, though exceeding the total amount underwritten.^ This rule, peculiar to marine insurance, secures only reasonable protection to the insured, who in case of partial loss to his property on a distant voyage is likely to receive no prompt report of the extent of loss and cost of restora- tion, and may, therefore, be in no position to take out further in- surance to equal the cost of repairs until, by reason of a subsequent total loss, it is too late. The chance of added liability occasioned by 1 McArthur, Ins. (2d ed.), 206, 210. In a recent case in England it was held that the assured was concluded for this purpose also by the agreed valua- tion in his policy, Balmoral Co. v. MaHen (1902), App. Gas. 511. There the policy value of ship was £33,000, her actual value adopted in the salvage action was £40,000. Held, that the in- surer was only liable to make good to the assured thirty-three fortieths of his general average losses. The law in the United States has been held to be otherwise. Here the recovery for gen- eral average loss to the ship and nec- essary salvage expenditures is not to be reduced in the proportion of the undervaluation in the policy but is to be based upon the actual value, Inter- national Nav. Co. v. Sea Ins. Co., 63 C. C. A. 663, 129 Fed. 13, 15; Inter- national Nav. Co. V. Brit. & For. Mar. Ins. Co., 100 Fed. 304. The contribu- tory value, for the purpose of general average, is the value at the port of ad- justment, whereas the insurable value IS the value at the commencement of the voyage. 2 Wood V. Ins. Co., 6 Mass. 479, 4 Am. Dec. 163; Brooks v. MacDonnell (1835), 1 Y. & C. 500, 515; Le Chemi- nant v. Pearson, 4 Taunt. 367; com- pare The Dora Foster (1900), Prob. 241. Rule is otherwise in fire insurance, 60 Neb. 116, 82 N. W. 313. In Christie V. Buckeye, 5 Fed. Gas. 653, the under- writer was held liable for full amount of policy for total loss, and in addition for the payment of prior general aver- age loss. So also in Barker v. Phoenix Ins. Co., 8 Johns. (N. Y.) 307, 5 Am. Dec. 339; Salius v. Commercial Ins. Co., 10 Johns. (N. Y.) 487. This doe- trine is held to be independent of any special clause in the policy, Matheson V. Equitable Mar. Ins. Co., 118 Mass. 209, 19 Am. Rep. 441. Where under the same policy a partial loss, which has not been repaired or otherwise made good is followed by a total loss, the assured can only recover for the total loss, Idvie v. Janson (1810), 12 East, 648 (stranding followed by cap- ture) . In England it has been held that where a partial loss takes place under one policy and a total loss under a con- secutive policy, the assured may re- cover for both, although the partial loss be unrepaired and however ex- tensive it may be, De Hart & Simey, Ins. (1907), 87, citing LMgett v. Secre- tan (1871), L. R. 6 C. P. 616, 40 L. J. C. P. 257; Woodside v. Globe Mar. Ins. Co. (1896), 1 Q. B. 105, 65 L. J. Q; B. 117. ONE-THIRD OFF NEW FOR OLD 259 this recognized doctrine of law is not forgotten by the underwriter when he estimates the rate of his premium. § 209. One-third off New for Old. — In the case of a partial loss of a ship or its equipments, the old materials are to be applied toward payment for the new, and, in general, a deduction of one-third from the cost of repairing or replacing the damage is made after deducting the value or proceeds of the old materials, and the marine insurer is liable for two-thirds of the balance of the cost.^ iEa^er v. Atlas Ins. Co., 14 Pick. (Mass.) 141; Byrnes v. Nat. Ins. Co., 1 Cow. (N. Y.) 265, 276 (where the court says: "The true rule seems to bje this, to apply the old materials towards payment for the new and to allow the deduction of the one-third new for old, upon the balance"). But certain ex- ceptions to this rule are allowed, see Chahners & Owen, Ins. (1907), 154, for example, in the case of iron ships. Anchors, Brooks v. Oriental Ins. Co., 7 Pick. (Mass.) 259, 269; metal sheath- ing, see Prince v. Equitable Safety Ins. Co., 12 Gray (Mass.), 627; chain .cables, etc., Orrok v. Commonwealth Ins. Co., 21 Pick. 456, 32 Am. Dec. 277; Dunham v. Com. Ins. Co., 11 Johns. (N. Y.) 315, 6 Am. Dec. 374. For deductions, see Appendix, ch. III. As to new ship on first voyage see Pirie v. Steele, 2 Mood. & R. 49. The charter party may be so worded as to make the outward and homeward passage only one voyage, Fenwick y. Robinson, 3 C. & P. 323. CHAPTER X General Average — ^Marine § 210. General Average — Related to Insurance. — This subject belongs not only to admiralty law, but also to the law of insurance, since general average losses, incurred to avert a peril insured against, are held by legal construction or inference to be covered by tlie marine policy.' Thus,, while in the first instance the owner of ship or of cargo, regardless of whether his interest is insured, is obligated to make contribution in proportion to the value of his property saved by a general average sacrifice or expenditure, yet by virtue of in- surance law, if he is so fortunate as to be insured, he reclaims from his underwriters the ainount of this contribution.^ Therefore it will be observed, that an adjustment of a general average loss, if incurred to avert a peril insured against, concerns not only the owners of ship, freight, and cargo at risk, but also their respective sets of underwriters as well. The English law and that of the Federal courts of the United States differ as to the extent to which the underwriter is thus answer- able. By the law of England, the shipowner reclaims in full, pro- vided the poUcy value amounts to the value assessed for contribu- tion.' By the New York decisions * as well as by those of the Federal courts,^ the policy valuation is conclusive, and the underwriter who covers this agreed policy value is answerable for the entire general average assessment, even though based upon a valuation exceed- ing that stated in the policy. § 211. General Average— Its Basis.— The rule of general average has its basis in the community of interest existing between the owners of ship and cargo, by reason of which losses intentionally inctirred 1 See §§ 199, 207. Included in Eng. s Steamship Balmoral Co. v. Marten Mar. Ins. Act (1906), § 66. (1902), a. c. 511. zMcArthur, Mar. Ins. (2d ed.), 206, * Providence & Stonington SS. Co. v. "The law of average and contribution Phoenix Co., 89 N. Y. 559. had existed for ages before the practice « Int. Nav. Co. v. Atlantic Mid. Co., of insurance was known," Price v. 100 Fed. 304, 316. Nobk, 4 Taunt. 123, 126, by Heath, J. [260] DISTINCTION BETWEEN GENERAL AND PARTICULAR AVERAGE 261 for the common safety ought to be equitably apportioned among the interests thereby benefited.^ § 212. General Average Loss and Contribution Defined. — A general average loss, is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice. Any extraordinary sacrifice or expenditure, voluntarily and reasonably made or incurred, in time of danger, for the purpose of preserving the property imperilled in the common adventure, is a general average act, provided it be done by the master or one in his stead authorized to act.^ The party on whom the general average loss falls is entitled, subject to the conditions im- posed by maritime law, Jo a ratable contribution from the other parties interested, and this is called a general average contribution.^ § 213. Distinction between General and Particular Average. — The distinction between a general and a particular average lies in the fact that in the former case there is a general distribution of the loss among the parties to the adventure, while in the latter case there is a special application of the loss to one or more of the parties.'* Every partial loss is particular average in relation to the party who first sustains it, whether that loss is ultimately to be made good by a general contribution or to remain where it falls.^ 1 "It is founded upon the plainest loss, short of total, falling directly principles of common justice," Louis- upon a particular property. General viUe UmienDriters v. Pence, 93 Ky. 96, average is the liability or claim falling 103, 40 Am. St. R. 176, 19 S. W. 10, upon that property from the loss of or per Holt, C. J. "Average contribution damage to something else," Bargett v. is the creation of the maritime law and Orient Mvt. Ins. Co., 3 Bosw. (N. Y.) is founded in the great principles of 385; Potter v. Ocean Ins. Co., 3 Sumn. equity," Dike v. Propeller St. Joseph, 6 (U. S. C. C.) 27, 39; Firemen's Ins. Co. McLean (U. S. C. C), 573, 575, Fed. v. FUzhugh, 4 B. Mon. (Ky.) 160, 164 Gas. No. 3,908. et sea. 2 Ralli V. Troop, 157 U. S. 386, 400, = Price & Co. w.Al Ships Ins. Assoc, 403, 404, 15 S. Gt. 657; Hobson v. 22 Q. B. D. 580, 590; Peters v. Warren Lord, 92 U. S. 397; Star of Hope, 9 Ins. Co., 1 Story (U. S. C. G.), 463, Wall. (U. S.) 203, 228; The Strathdon, 469, Fed. Gas. No. 11,034. For in- 94 Fed. 206, 208; Van Den Toom v. stances of particular average on ship Leeming, 79 Fed. 107; Iredale v. and how computed, see Marine Ins. Traders' Ins. Co. (1900), 2 Q. B. 515, Co. v. China, etc., S. Co., 11 App. Gas. 519; Svensden v. Wallace, 13 Q. B. D. 573; Ruabon S. Co. v. London Assur. 69, 84. Gompare Compania La Flecha (1900), App. Gas. 6. Obviousljr it is V. Brauer, 168 U. S. 104, where it is likely to make a great difference in the held that a jettison must be reason- result, whether the loss remains with ably necessary. the particular interest or whether it is 3 Svensden v. Wallace (1885), 10 distributed among all, Dent v. Smith, App. Gas. 415. L. R. 4 Q. B. 414; but if all interests * See Orrok v. Commonwealth, 21 are insured, it is usually a question be- Pick. (Mass.) 456, 32 Am. Dec. 271. tween the different sets of under- "Particular average is the damage or writers. The liability to contribute, 262 GENERAL PRINCIPLES OF INSURANCE LAW Thus, in an old case, the English ship Brothers was captured by a French privateer. The English captain and most of the crew were taken out and replaced by a French prize crew. On the way to Mar- seilles in a heavy storm, the Frenchmen, after consulting the English mate, necessarily threw overboard the ship's guns, anchors, chains, and a quantity of stores from the middle deck in order to lighten the laboring vessel. Before reaching Marseilles the ship was recaptured by the English mate, with the aid of others aboard, and brought to Gibraltar. The owner of the ship made a claim on the owner of the cargo, for contribution to the jettison. Lord Ma,nsfield, holding that the act was justifiably done for the common safety, allowed the claim.^ But where the captain of a Spanish ship, on the point of being boarded by an enemy, threw overboard a bag containing $100,000, not to avert a common danger, but to prevent the enemy from getting the money, the insurers of the money paid the loss without claiming the benefit of general average.^ § 214. Obligation Rests upon Law Rather than Contract. — ^The right to general average and its correlative obligation are not founded necessarily upon contract, but arise from the common law of the sea, which is applicable to all who are engaged in maritime com- merce.^ Therefore the right and the obligation exist as between the owners of ship, freight and cargo whether their interests are in- sured or not insured.* § 21S. Origin of General Average. — The earliest trace of this ancient rule of maritime law is to be found in an extract from the Rhodian law which was incorporated in the Roman civil law.* Thence it found its way into the common law of England and of the United however, exists independent of insur- char^ and expenses, Burton v. Ertg- ance, and tlierefore the liability of the lish,!,. R. 12 Q. B. D. 218, 220, cited insurer under the policy may not be and relied on in Marwick v. Rogers, 163 commensurate with that of the as- Mass. SO, 52, 47 Am. St. R. 436, 39 sured under the contract of affreight- N. E. 780. ment, The Brigella (1893), P. 195. * The Brigella (1893), V. 195,7 Asp. For example, if goods are insured Mar. Cas. 404. warranted free from capture, general sXhe Rhodian law provides "if average expenses incurred to avoid goods are thrown overboard in order capture would not fall upon the under- to lighten a ship, the loss incurred for writei". the sake of all shall be made good by 1 Price V. Noble, 4 Taimt. 123. the contribution of all," Columbian Ins. 2 BuOer v. Wildman, 2 B. & Aid. 398. Co. v. Ashby, 13 Pet. (U. S.) 331, 338, 3Ralli v. Troop, 157 U. S. 386, 400, 10 L. Ed. 186: Lowndes, Gen. Av., 1; IS S. Ct. 657; Ruabon S. Co. v. London Anderson, v. Oeam SS. Co., 10 App, Assur. (1900), App. Caa. 6. t)ock Cas. 107, 114. ftfiQUiSltfilS OF GENERAL AVSRAGE ACl' 263 States and became an implied condition both in the contract of affreightment and the policy of marine insurance.* § 216. Requisites of General Average Act. — To justify a general average contribution the following conditions must be fulfilled: (1) When the act is performed the danger must be imminent/ (2) It must be a common peril threatening both ship and cargo.^ (3) The sacrifice or expense must be voluntarily made or incurred to avoid the peril and for the common safety or for the common benefit.'' (4) The general average act must be followed by some measure of success, since, if the whole be lost, the sacrifice of part is proved to be of no avail, and there is nothing saved upon which contribution can be laid ■ ^ but either ship or cargo may become a total loss without defeating general average, provided the gen- eral average act was justifiable when performed and was presently successful.* (5) The act must be directed by the master of the ship, or by someone in his stead authorized to represent the owners of all interests included in the common adventure. Thus the scuttling of a ship by the municipal authorities of a port against the protest of the commanding officer, to extinguish a fire in her hold, is not a general a'-erage loss,' but if a sacrifice, as in the case of pouring iRaUiv. Troop, 157 V.S. 386,393, (U. S.) 331, 338, 10 L. Ed. 186; 15 S. Ct. 657. See Nimich v. Holmes, Scudder v. Bradford, 14 Pick. (Mass.) 25 Pa. St. 3m, 371, 64 Am. Dec. 710. 13, 15, 25 Am. Dec. 355; Nimick v. 2 Hobson V. Lord, 92 U. S. 397, 400; Holmes, 25 Pa. St. 266, 64 Am. Dec. Ralli V. Troitp, 157 U. S. 386, 400, 710. As to how far success is an es- 15 S. Ct. 657. sential element by the English and 3 Barnard v Adams, 10 How. (U. S.) continental practice see Arnould, Mar. 270, 303, 13 L Ed. 417. Ins. (7th ed.), §§ 912, 979, 980. It has * J. P. Donaldson, 167 U. S. 599, been stated that the operation of the 602; Ralli v. Troop, 157 U. S. 386, 403; rule turns more in England upon the Hobson V. Lord, 92 U. S. 397, 400; immediate and not the ultimate suc- Van Den Toom v. Leeming, 79 Fed. cess than it does in the United States 107; Iredale v. China Traders Ins. Co. and on the continent, 1 Ency. Laws, ' (1900), 2 Q. B. 515, 519. Thus where Bng. (ed. 1897), 428. masts, spars, rigging, and sails, were ' Columbian Ins. Co. v. Ashby, 13 first carried away by the elements and Pet: (U. S.) 331; Patten v. Darling, 1 left hanging over the vessel's side, and Cliff. (U. S. C. C.) 254, 266; Lee v. afterwaSs were cut loose for the com- GrinneU, 5 Duer (N. Y.), 400, 421, mon safety, the owner of the cargo Hoffman, J. But see Cage v. Reilly, 3 saved by being taken out of the ship Wash. (U. S. C. C.) 298, Fed. Cas. and brought into poH, was held not No. 2,538 (jettison unsuccessful); and liable for contribution, Nickerson v. Marshall v. Gamer, 6 Barb. (N. Y.) Tyson, 8 Mass. 467. 394 (no sacrifice, since stranding was B Ralli V. Troop, 157 U. S. 386, 403, involuntary). 15 S. Ct. 657; Hobson ^ . Lord, 92 U. S. TRalli v. Troop, 157 U. S. 386, 15 397, 403; Star of Hope, » Wall. (U. S.) S. Ct. 657. If master is disabled who- 203, 229, 230, 19 L. Ed. 638 ("if noth- ever is in active command may act for ing is saved there cannot be any such him, Lavirence v. Minium, 17 How. contribution"); Barnard v. A '"•' Vet. not imder control of the maater of a 264 GENERAL PRINCIPLES OP INSURANCE LAW water into the hold of the vessel to the injury of the cargo with the purpose of extinguishing a fire, is made at the request of the master, the damage is general average.* A jettison must be made in good faith and with prudence, and ought, so far as possible, to begin with the most bulky and least valuable articles. But, of necessity, the master of the ship must be left free to take such steps as he deems necessary for the preserva- tion of the interests intrusted to his care.^ § 217. Negligence Cause of Sacrifice. — A party whose negligence has made the sacrifice necessary cannot claim contribution in gen- eral average; * and the shipowner may be responsible in this respect for the negligent acts of his master and crew. tug to the same extent as the tug and its cargo, and where the master casts off and abandons the barges with the intention and effect of saving the tug no contribution can be had against the tug. There is no such conmiunity of interest between the owners of the tug and the owners of the barges and no such single maritime adventure as are contemplated within the meaning of the law of general average, J. P. Donaldson, 167 U. S. 599, 17 S. Ct. 951. "The sacrifice (a) must be voluntary and for the benefit of all; (b) must be made by the master or by his author- ity; (c) must not be caused by the fault of any party asking the contribu- tion; (d) must be successful; (e) must be necessary," Hughes, Adm., 39. Where for the common safety it be- comes necessary to land goods, ac- cording to the English rule when the goods nave once been put in a place of security they cease thereafter to be at the risk of the general venture and being themselves in safety they are held to constitute no sacrifice and the act of interrupting the voyage to land them, Iredale v. China Traders Ins. Co. (1900), 2 Q. B. 515, or any expense in- curred in reshipping them, Svendsen v. Wallace, 10 App. Cas. 404, is held to afford no justification for general av- erage contribution. In this coimtry the tendency of the courts is to extend the conmiunity of interest between the ship and the cargo if both are still sub- ject to the master, though there may be physical separation, Pacific Mail S.S. Co. V. Calif omia Vintage Co., 74 Fed. 564, 570; Nelson v. Belmont, 21 N. Y. 36; Sevan v. Bank, 4 Whart. (Pa.) 301. 1 The Roanoke, 59 Fed. 161, 8 C. C. A. 67. 2 "Much is deferred in such an emergency to the judmnent and de- cision of the master," Star of Hope, 9 Wall. (U. S.) 203, 229. In former times, when merchants voyaged with their wares their consent was held necessary to a jettison, and the captain was also required to consult with his officers or with some of his crew, then perhaps more nearly his equals than in later times. But even then the final decision rested with the captain, RaUi V. Troop, 157 U. S. 386, 399, 15 S. Ct. 657. Although such a conference has long since been discontinued in prac- tice, there is a sense in which it is still held in theory, inasmuch as the master becomes agent for the owner of the cargo as well as for the shipowner in times of emergency, with authority to bind both parties in the adoption of such measures as are expedient in the common interest, Gratitudine, 3 Chas. Robinson, 240; Nimick v. Holmes, 25 Pa. St. 366, 372, 64 Am. Dec. 710, per Lowrie, J. Although such consultation may be highly proper there is no weight in the objection that it is nec- essary, Columbian Ins. Co. v. Ashby, 13 Pet. (U. S.) 331, 343, 344, per Story, J. "It would defeat the main utility of general average, if at the moment of emergency, the captain's mind were to hesitate as to saving the adventure, through fear of casting a burden on his owners," Shepherd v. Kottgen, L. R. 2 C. P. D. 578, 583, per Grove, J. 3 Balli V. Troop, 157 U. S. 386, 403, 15 S. C!t. 657; Portsmouth, 9 Wall. (U. S.) 682; Trinidad Shipping & Trad- GENERAL AVERAGE LOSSES 265 The City of Para sailed from Aspinwall for New York with a gen- eral cargo, valued at $232,561,76. Through the negligence of the master she stranded upon a reef at the southwest corner of Old Providence Island. After ineffectual attempts to get her off, the master justifiably jettisoned part of the cargo and flooded the ship for the benefit of both ship and cargo. The ship and remaining cargo were salved. The court held that these measures were general aver- age acts, and that the owners of the cargo jettisoned, but not the shipowners, were entitled to a general average contribution.^ § 218. General Average Losses. — For the benefit of the common adventure imperilled, a carrier by water may scuttle the ship itself,^ or cut away any of her appurtenances,' or jettison the whole or any part of the cargo,^ or incur expenses with like purpose.® Thus it will be seen that the principal kinds of losses for which a general average contribution is appropriate are naturally classified under three heads: ing Co. v. Frame, Alston & Co., 88 Fed. 528; RoUnson v. Price, L. R. 2 Q. B. D. 91; The Parana, L. R. 1 Prob. Div. 452; Strang, Steel & Co. v. A. Scott & Co., 14 App. Gas. 601, 608. The Harter Act has not changed this rule, and where a vessel though seaworthy at the be- ginning of the voyage is afterward stranded through the negligence of the master, the shipowner has no right to general average contribution for sacri- fices subsequently made in successful efforts to save vessel, freight, and cargo, since the negligence of the master is attributable to the shipowner, The Irrawaddy, 171 U. S. 187, 18 S. Ct. 831. But the shipowner in such a case may himself bfe liable to contribute for the benefit of the owners of cargo which has been justifiably sacrificed. The Srathdon, 94 Fed. 206. >^ Pacific Mail S. Co. v. N. Y., etc., Mining Co., 74 Fed. 564, 20 C. C. A. 349. ^Achard v. Ring, 31 L. T. 647, 2 Asp. Mar. Cas. 422. 3 Tackle, Birkleyv. Presgrave, 1 East, 220; masts, spars, rigging. The Mary Gihbs, 22 Fed. 463; Patten v. Darling, 1 Oiff (U. S.), 254; Potter v. Prov. Wash. Ins. Co., 4 Mason (U. S.), 298; sails, Margarethe Blanca, 14 Fed. 59. ^To save her from foimdering or to float her when stranded, or facilitate escape from enemy, Ralli v. Troop, 157 U. S 386, 393; Laiurence v. Minium, 17 How. (U. S.) 100; Johnson v. Chapman, 19 0. B. (N. S.) 563, 15 L. T. 70; discharge of cargo. Reliance Mar. Ins. Co. V. N. Y. Mail S.S. Co., 77 Fed. 317. Damage to cargo necessarily arising from a forced discharge is allowable as feneral average, Gregory v. Orrall, 8 'ed. 287. If unloading is necessary to the raising of a vessel for repair the expense is general average, but if the cargo is unloaded merely for its own benefit it is not a general average charge, Firemen's Ins. Co. v. Fitzhugh, 4 B. Mon. (Ky.) 160, 167. Damage to cargo caused by water entering the ship's hold through holes made by the fall of a mast cut away is general average, Maggrath v. Church, 1 Gaines (N. Y.), 196; Saltus v. Ocean Ins. Co., 14 Johns. (N. Y.) 138. Also damage to the cargo by water admitted into the ship's hold to extinguish a fire. White- cross Wire & Iron Co., Ltd., v. SaviU, 51 L. J. Q. B. 426, 4 Asp. M. G. 531, 8 Q. B. D. 653. See Nimick v. Holmes, 25 Pa. St. 366, 64 Am. Dec. 710, and compare English rule, Stewart v. West Indian & Pac. Steamship Co., 28 L. T. 742, L. R. 8 Q. B. 88. Also loss of cargo consumed as fuel to work a steamer's engines or a donkey engine in time of peril, provided the supply of fuel was originally sufficient, Robinson V. Price, 2 Q. B. D. 295, 3 Asp. M. C. 407, 36 L. T. 354. Also passengers' baggage, though itself not liable to contribute, Heyc v. North German Lloyd, 33 Fed. 60, aff'd 36 Fed. 705, 2 L. R. A. 287. Provisions do not con- tribute, even when the cargo of the ship consists only of passengers. Brown V. Stapyleton, 4 Bing. 119. B § 221. 266 GENERAL PRINCIPLES OF INSURANCE LAW sacrifices of parts of the ship, saorifices of cargo, and extraordinary expenses.* § 219. Deck Load.^In the United States and England the courts allow a jettison of deck load to be included in general average, provided a custom of the trade can be shown justifying the loading of the goods on deck.^ But, if no such custom is proved, a claim for jettison of deck load cannot be allowed in general average,' although if a deck load is saved by a general average act, it must itself contribute.* § 220. Voluntary Stranding. — In the United States the voluntary stranding of a ship when in peril is held to be a general average act, and that irrespective of the question whether the vessel ultimately becomes a total wreck or not.* And this includes repairs thereby necessitated.^ A voluntary stranding is not allowed as a general average act by English practice in the absence of express agreement.' § 221. Port Of Refuge and other Expenses. — The most frequent cause of general average expenses occurs where a vessel in peril puts into a port of refuge for repairs to enable her to continue the voyage. » Lowndes, Gen. Av. (1888), 20. In America the whole ship may be sacrificed and perhaps totally lost by a general average stranding, § 220. 2 Taunton Co. v. 7ns. Co., 22 Pick. (Mass.) 108; Harris v. Moody, 30 N. Y. 266, 86 Am. Dec. 375; Wood v. Phoenix Ins. Co., 8 Fed. 27. See Compania La Flecha v. Brauer, 168 U. S. 104, 18 S. Ct. 12. But compare Sproat v. DonneU, 13 Shep. (Me.) 185, 45 Am. Dec. 103. As to English rule see recent case, A-poUmaris Co. v. Nord Deutsche Ins. Co. (1904), 1 K. B. 252. 3 The Milwaukee Belle, 2 Biss. (U. S. C. C.) 197, Fed. Gas. No. 9,627; The John H. Cannon, 51 Fed. 46; The Hettie Ellis, 20 Fed. 507. The reason why such a jettison of goods stowed on deck gives to their owner no claim to contribution is that they ought not to be there, 1 Parsons, Ship. & Ad. 354. * There must be an actual intention to throw the deck cargo overboard in order to constitute a general average apt, The Adele Thackera, 24 Fed. 809. s Fowler v. Rathbones, 12 Wall. (U. S.) 102, 20 L. Ed. 281; Star of Hope, 9 Wall. (U. S.) 203, 19 L. Ed. 638; Barnard v. Adams, 10 How. (U. S.) 270, 13 L. Ed. 417; Columbian Ins. Co. V. Ashby, 13 Pet. (U. S.) 331, 10 L. Ed. 186; Norwich & N. Y. Transp. Co. v. Ins. Co., 118 Fed. 307; Emery v. Huntington, 109 Mass. 431, 12 Am. Rep. 725. ON. W. Transfer Co. v. Cord. Co.. 24 Fed. 171. But general average is not allowed in favor of the shipowner if the voluntary stranding was made necessary by negligent navigation of the ship, The Irrawaddy, 171 U. S. 187, 18 S. Ct. 831. 7 Arnould, Mar. Ins. (7th ed.), 1 938; MacArthur, Mar. Ins. (2d ed.), 195, note. The English rule is said to be defended mainly upon two grounds: (1) that the stranding is not a sacrifice at all, nor the result of any selective discrimination between different inter- ests, but, on the contrary, is an at- tempt to put both ship and cargo into a situation of less peril; and (2) that in practice it is impossible to distinguish between damages received by the ship and cargo prior to stranding, which are admittedly particular and not general average, and losses sustained after or in consequence of stranding, which it is claimed should come into general average. The York Antwerp rules on this as on some other points, have struck a compromise between conflict ing views, Appendix infra, oh. III. ILLUSTRATIONS 267 The general average practice in such a case in the United States differs in some particulars from the rules prevailing in England.^ By the law of this country, wages and provisions of the crew are allowed, in general average, from the time of deviating from the voyage for the purpose of putting into a port of refuge, until the voyage is resumed, or until the cargo and vessel are separated, or until there is no longer a reasonable prospect that the voyage will be continued.^ The expenses of entering the port, and of unloading, warehousing, and reloading the cargo, are allowable, provided the voyage is re- sumed, or so long as there is a fair prospect of its continuance.* Before actually selling or pledging the cargo, however, in a port of refuge, the master is bound to communicate with its owners if it is possible, in order to take their instructions.* Goods or money paid for ransom from capture * or for salvage,* or for other services rendered for the common benefit, are also allowed in general average. Thus the necessary expense for tugs to release a stranded vessel,^ or the necessary expense to extinguish fire.* But if the expense is not incurred for the common safety, then it is chargeable, in particular average, to that interest which it was intended to benefit.* § 222. Illustrations. — The difficulty of determining whether strand- ing should be regarded as a general average act is shown in some of the cases following. The brig Hope bound for Barbadoes was assailed by a hurricane in Chesapeake Bay. She was steered towards a point in the shore for safety, and anchored in three fathoms of water. Sails were furled, and all efforts made by use of cables and ancho)-s to prevent her going 1 Svendsen v. Wallace, L. R. (1885) s Woods v. Olsen, 99 Fed. 451. 10 App. Cas. 404. In America the ' S.S. Balmoral Co. v. Marten (1901), scope of general average is much 2 K. B. 896; The Eliza Lines, 102 Fed. broader than in England, and often 184. extends to expenses incurred after the '' Magdala S.S. Co. v. H. Baars Co., common danger has ceased, The Star 101 Fed. 303. of Hope, 9 Wall. 203, 19 L. Ed. 638; » The Strathdon, 101 Fed. 600. Hobson V. Lord, 92 U. S. 397, 23 L. Ed. « McGaw v. Ocean Ins. Co., 23 Pick. 613 405; Douglas v. Moody, 9 Mass. 548; 2 Hobson V. Lord, 92 U. S. 397; The McAndrews v. Thatcher, 3 Wall. (U. S.) Star of Hope, 9 Wall. (U. S.) 203, 19 347; Ocean St. C. Co. v. Anderson, 13 L. Ed. 638. Q. B- D. 651. Salvage charges, allow- 3 The Joseph Farwell, 31 Fed. 844; able in general average, include all Da Costa v. Newnham, 2 Term R. 407. liabilities for services rendered by When expense of refitting not general persons, other than the ship's corn- average, see Jackson v. Chamock, 8 pany, for the joint preservation of ship TennK. 609, 5 Rev. R. 425. and cargo from the marine peril, Mc * The JvUa Blake, 107 U. S. 418. Arthur, Mar. Ins. (2d ed.), 171. 268 6ENBKAL PRINCIPLES OP INSURANCE LAW on shore. The gale increased, the brig struck adrift, and dragged three miles; the windlass was ripped up, and the chain cable parted. The vessel then brought up below Craney Island, where she thumped on the shoals, and her head swinging round brought her broadside to the sea. The captain finding no possible means of saving the vessel and cargo, and preserving the lives of the crew, ran her on shore. After the storm she was left high and dry on a bank. The vessel was substantially a total loss; the lives aboard and the whole cargo were saved. The court by Justice Story held, that the insurers of cargo were liable for general average in favor of the owners of the brig; and that the values of both brig and the freight which she was earn- ing were proper subjects of the general average.^ The ship Brutus, with cargo aboard for New York was lying at anchor in charge of the first mate in the outer roads at Buenos Ayres, about seven miles from shore. A gale had commenced, and next morning the ship began to drag her anchors. About nine o'clock in the evening, the gale increasing, the best bower anchor parted with a loud report. About ten o'clock, the small bower parted, and the ship commenced drifting broadside with the wind and waves. The chains were then shipped, and the vessel got before the wind; two men were put to the wheel and one to the lead, and it was determined to run the ship ashore for the preservation of the cargo and the lives of the crew. The shore towards which the ship had been drifting had banks and shallows. If the vessel had been driven on these by the tempest she would have been lost, together with cargo and crew. For the pur- pose of saving the cargo and crew anyhow, and possibly the ship, she was steered up the river and beached. The ship was not broken up, though somewhat damaged, and the cargo being uninjured was trans- shipped to destination. It being found that it would cost more than the ship was worth to get her off, she was sold. The court held that the voluntary stranding of the vessel in a less perilous place than that towards which she seemed to be drifting was a general average act and that the owners of the cargo must contribute to make good the general average loss.^ 1 Columbian Ins. Co. v. Ashby, 13 (elaborate opinion by Justice Clifford Pet. (U. S.) 331, 10 L. Ed. 186. Simi- regarding general average), larly the same court held that a volun- 2 Barnard v. Adams, 10 How. 270, tary stranding because of a smoulder- 13 L. Ed. 417 (Daniel, J., rendering a ing but extensive fire in the hold of the dissenting opinion). The court also ship was a good general average act held that, as to a part of the cargo although the master had no knowledge seriously damaged on continuance of of the existence of the particular reef the voyage after transshipment, con- upon which the vessel grounded. Star tribution should be assessed on its of Hope, 9 Wall. 203, 19 L. Ed. 638 value at the home port, and not at place of disaster. ILLUSTRATIONS 269 The schooner Major William H. Tantum, loaded with a cargo of iron, went for refuge inside the Delaware breakwater. The bad weather developed into a great storm, and the vessel gradually dragged her anchors until but a single anchor chain remained, and the vessel was drifting towards the beach broadside on. The master, fearing for the lives of those on board, determined to ship his cable and run ashore, head on. The cable was accordingly shipped, and the vessel, without canvas, paid off and went head on the beach. Afterwards she turned broadside to the sea and became a total loss. Part of the cargo was saved and forwarded to destination. The court concluded that while the master by slipping his cable, hastened the inevitable result, and also bettered the chance of safety to those aboard, yet, as no benefit accrued to the cargo, no case of general average was made out by the shipowner.^ The libellant, claiming general average contribution, had shipped his cargo of flour on the steamship Wordsworth for Rio de Janeiro. On leaving Sandy Hook the steamer met a heavy sea and shipped much water. The next day the carpenter reported the fore-peak full of water. This compartment held 150 tons. The master after ex- amination, conjectured that a hole must have been stove in below, and opened the sluices of the collision bulkhead to transfer the water to the engine room where there were powerful pumps.' Water was thus accumulated in a compartment where the flour was stored and the damage in question was incurred. The master knew that water .^ .^ damage would be thus caused but, believing that there was a hole forward, thought that his method furnished the only means of safety to the adventure. In fact the leak arose from a break in the port hawse-pipe, and when discovered was quickly repaired. The court decided that the opening of the sluices was a necessary condition of any further prosecution of the voyage, as the situation appeared to the master at the time, and that the loss attending his act, though it turned out to be a mistake, was a sacrifice in the interest of all con- cerned, which would support a decree for the libellant.^ The plaintiffs shipped a deck cargo of cattle and sheep on board the Edenbridge for carriage from Buenos Ayres to Deptford, under contract which provided that the ship should call at no BraziUan port. By order of the Board of Agriculture foreign animals could not land in the United Kingdom if the ship conveying them had touched at a Brazihan port. During the voyage the ship sprung a leak, and the master, for the safety of all concerned, put into a Brazilian port 1 The Major William H. Tantum, 49 2 The Wordsworth, 88 Fed. 313. Fed. 252, 1 C. C. A. 236. 270 GENERAL PRINCIPLES OF INSURANCE LAW for repairs. In consequence the plaintiffs were obliged to sell theii live stock elsewhere and at lower prices than would have been realized in the English market. The court held that this depreciation must be made good in general average.* Shippers chartered the iron ship Lodore to carry a cargo of coals from Cardiff to Esquimault. During the voyage the coal heated to such an extent that it was necessary for the safety of the whole ad- venture for the vessel to bear up the River Plate and subsequently put into Buenos Ayres. In this port of refuge the coal was landed, and upon survey was found to be in such a condition as to be incapable of being carried with safety to its destination. The master accord- ingly abandoned the voyage, and the chartered freight was lost to the owners. The coal was condemned and sold. The insurers of chartered freight were willing to recognize liability to the owners of the ship, but claimed by way of set-off that the loss of freight was the subject of general average contribution. The court held that while the bearing up the river to Buenos Ayres was a general average act, nevertheless there had been no sacrifice of freight for the common safety in time of danger. This conclusion was put upon the ground that the coal was condemned by reason of its inherently worthless condition and the voyage abandoned after the commpn danger had ceased.^ 1 Anglo- Argentine, etc., Agency v. 3 C. P. 375. (3) Policy on cargo of Temperly Shipping Co. (1899), 2 Q. B. com from Varna to Marseilles, general 403. average "as per foreign statement." Airedale v. China Traders' Ins. Co. The ship springs a ledc, part of the (1900), 2 Q. B. 515. Illustrations corn is sea-damaged, and the voyage from Chalmers & Owen, Ins. (1907), has to be broken up at Constantinople. p. 99: (1) Policy on goods. Certain Average is adjusted according to the goods are jettisoned by a general law prevailing there, and the damage average act. The insurer of these to the wheat is charged to general goods must pay the insured value of average, though, according to English them as an ordinary loss under the law, it would be particular average policy, but he then stands in the place excluded by the memorandum. The of the assured as regards claims for insurer is liable to pay this sum, Mavro contribution from the other con- v. Ocean Mar. Ins. Co. (1875), L. R. tributories,Z)icHnswiv. Jardt7ie(1868), 10 C. P. 415. (4) Policy on goods. L. R. 3 C. P. 639. (2) Policy on ship Both ship and goods belong to same from London to Liverpool and thence owner. In stormy weather the mast to Calcutta. The ship strands on a has to be cut away for the safety of bank in Ireland. Half the cargo, con- ship and cargo. The shipowner is en- sistine of salt, is jettisoned. The re- titled to a general average contribution mainder is brought back much dam- from the insurer on goods in respect of aged to Liverpool. The amount to be the general average sacrifice, Mont- made good in general average must be gomery v. Indemnity Mvt Mar Ins ascertained by valuing the jettisoned Co. (1901), 1 Q. B. 147 aff'd (1902) 1 salt at the price it would have fetched K. B. 734. (5) Policy on ship Under in Liverpool, and the probability that charter party the ship sails iA ballast it would liave been damaged like the for Savannah, where she is to load a rest must be taken into accoimt, cargo of cotton for England On the Fhtcher v. AUmnder (1868), L. R. voyage out the ship grounds and a THE ADJUSTMENT 271 § 223. The Lien for Contribution. — After a sacrifice, the master has a maritime lien for the contributory amounts due from the interests that have been saved and still in his possession.^ Although this contributory sum cannot be ascertained until after discharge, the lien is enforceable before parting with the goods, and the master is authorized to exact security in the form of a general average bond.^ The execution of such a bond is not an admission of liability. It merely stands as a security in place of the goods. In New York, the practice is for the consignee of the goods to sign the bond, which is guaranteed by his insurer, or in the absence of any local insurer, the usage is to take a cash deposit sufficient to secure the eventual contribution from such merchandise. Such a bond often contains the cargo owner's express promise (which would probably be implied) to give full particulars of the value of his goods for the information of the adjusters, as may be required. § 224. The Adjustment. — It is the duty of the shipowner and his agents to take such steps as may be reasonable, and within a reason- able time, to provide that all general average contributions whether due to himself or others are adjusted and collected.* The sacrifices and expenses allowed in general average are apportioned over the aggregate value of the property saved, as computed at the time and place of adjustment; ■* but the property which has been sacrificed must bear its share as a contributor no less than if it had been saved, for, in legal theory, general average contribution is to be so regulated as to make it in result iromaterial to each interest at risk, whose property shall in the first instance have been taken, whose money spent, or whose credit pledged, for the safety of all.^ The practical effect of such an adjustment is that the party upon whom the general average loss most heavily falls in the first instance receives the benefit general average loss is incurred in re- Cas. 373; Crooks v. Allan (1879), 5 spect of the ship's machinery. The Q. B. D. 38; Strang S. & Co. v. Scott chartered freight is liable to contribute (1889), 14 App. Cas. 607. and the amount of the contribution *McArthur, Mar. Ins. (2d ed.), can be deducted from the sum due 196. under the policy on ship. Steamship, 5 Lowndes, Gen. Av., 38; Amould, etc., Co. V. London, etc., Ins. Co. (1901), Ins., §§ 970, 974. See Royal Mail Co. 6 Com. Cas. 291. v. English Bank (1887), 19 Q. B. D. iDupont de Nemours & Co. v. 371, 372. Wages of the crew do not Vance, 19 How. (U. S.) 162. contribute, Arnould, § 972. As to 2 Wellman v. Morse, 76 Fed. 573; passenger luggage see Heye v. North Huth V. Lamport (1885), 16 Q. B. D. German Lloyd, 33 Fed. 60, 36 Fed. 705. 442. An illustration of a general average 3 Wavertree Sailing S. Co. v. Love, 66 adjustment is given in Amould, Ins., L. J. P. C. 77, 76 L. T. 576 (1897), App. § 991. 272 GENERAL PRINCIPLES OF INSURANCE LAW of the general average contribution, and the payment is thus made proportionate to the benefit received.^ The proper time for adjustment is the time of the completion of the voyage, or of the separation of the interests. An adjustment made at the end of the voyage, if valid there, is, in general, valid anywhere. Any port reached, subsequent to the general average act, at which the interests are separated, may be the end of the voyage for this purpose.^ An adjustment of general average begins by a statement of the facts, usually embodying an extract from the master's protest, together with copies of the local surveys if they are relied on to justify the course pursued. In dealing with the various expenditures, the adjuster has to separate those items which are chargeable' to all interests, from those that are applicable only to cargo, or which may apply only to certain parts of the cargo (special charges) as dis- tinguished from the expenses that are to be borne solely by the shipowner. This separation is usually shown by the use of different parallel columns. A detailed statement of the contributing interests (ship, freight, and cargo) follows, from which is found the ratio of contribution stated in a percentage carried out to six or more decimal places. Where' the. insurance on the properties is known to the ad- juster, a settlement under the policies is often appended, showing the sums due from each underwriter. Harrington Putnam, Esq., of the New York bar has courteously prepared for this book the example of a general average adjustment given in the Appendix.' 1 Harris v. Moody, 30 N. Y. 266; adjustment, Star of Hope, 9 Wall. 203, Wheaton v. China Mvt. Ins. Co., 39 19 L. Ed. 638. 'Whereas the latter is Fed. 879. As to rule for ascertaining the value at the commencement of the general average contribution in respect voyage. So that even when the sub- to goods jettisoned, see Fletcher v. ject-matter is fully insured, the in- AUxander, L. R. 3 C. P. 375, 380. As surers are not liable for the whole to general rule for adjustment of gen- amount of the general average con- eral average see GiUett v. EUis, 11 111. tribution assessed against that subject- 679, and The Eliza Lines, 102 Fed. 184. matter if the contributory value is The general principle of contribution greater,"DeHart&Simey, Ins. (1907), may be summed up in one sentence: 83, citing S.S. Balmoral Co. v. Martm " It must be determmed how much bet- (1902), App. Gas. 511, 71 L. J. K. B. ter off, in a pecuniary sense, each owner 819. of property exposed to hazard on ship- 2 Barnard v. Adams, 10 How. (U. S.) board would be in the event of a safe 270, 13 L. Ed. 417; Eliza Lines, 102 arrival than in the event of a total loss; Fed. 184; Bradley v. Cargo of Lumber, and on this aniount, which represents 29 Fed. 648. The policy often states the benefit derived by each from the by what rules or customs the adjust- sacrifice which has saved the ship, each ment shall be made, De Hart v. Comr must contribute," Lowndes, Gen. Av., pania, etc. (1903), 1 K. B. 109, aff'd 304. The contributory value, for the (1903), 2 K. B. 503; Hendricks v. purpose of general average and the in- Australasian Ins. Co., L. R. 9 C. P surable value may differ, inasmuch as 460. the former is the value at the port of * Appendix, ch. III. CONTRIBUTORY VALUE OF FREIGHT 273 § 225. York Antwerp Rules. — The rules of practice for the ad- justment of general average losses vary greatly in detail in different countries and in different ports. The regulations most frequently used by agreement are the York-Antwerp rules, adopted at Antwerp in 1877 by the Association for the Reform and Codification of the Law of Nations, and amended at their Liverpool conference in 1890.^ By aid of these rules, set forth in the Appendix, the practice of adjusting general average has been brought into harmony on many important points. § 226. Contributory Value of Freight. — In respect to the con- tributory value of the freight interest, which cannot always be easily ascertained, an arbitrary rule has been adopted in New York. While the full amount of freight is contributed for in general average where the loss of freight is total, only fifty per cent of that amount is called upon for contribution.^ That is supposed to be a rough estimate of its net value at the end of the voyage, after expenses have been deducted from gross freight.* Other ports in the United States deduct one-third.* The usage in England is to compute the net freight interest for contribution by deducting the estimated amounts saved, such as wages and port charges, instead of relying on any arbitrary ratio,^ and this is also the provision of the York-Antwerp Rules.® 1 These as amended are given in the general average sacrifice made on the Appendix, ch. III. De Hart v. Com- outward voyage. Steamship Caris- pania, etc. (1903), 1 K. B. 109 (general brook Co. v. London & Provincial Mar. average payable as per foreign state- & Gen'l Ins. Co., L. R. (1902) 2 K. B. ment). For Lloyd's Rules, see Amould 681. (7th ed.), 1523-1538. * Gourlie, Gen. Average, p. 534; 2 RatMione Y. Fowler, 6 Clutch. (U.S. Humphreys v. Union Ins. Co., 3 C. C.) 296. Mason. 429 (1824). 3 Chartered freight of homeward 5 2 Arnould, Ins., § 989. voyage is held liable to contribute to a " Rule XVII. 18 PART II MEANING AND LEGAL EFFECT OF THE CLAUSES OF THE POLICIES PART II MEANING AND LEGAL EFFECT OF THE CLAUSES OF THE POLICIES CHAPTER XI The Standard Fire Pouct § 227. Introductory. — All our labor hitherto has been in a sense preparatory. General principles in insurance law may be called in- struments, with the aid of which the rights and obligations of the parties, insurers and insured, created under the contracts between them, must be investigated and developed. It is comparatively seldom that the insured, or the beneficiary appointed by him, calls upon his legal adviser until he finds himself in difficulty. An appre- ciation of diiEcuIty usually means that the casualty insured against has occurred, and that a claim under the insurance policy exists. Then at once starts up the practical inquiry on the one side, is the claim well foimded in the law? And on the other, the equally prac- tical question, does the law furnish a good defense? All the clauses of the principal contracts of insurance, fire, life, accident, arid marine, merit our attention. And among the conventional forms of policies, first in order of importance come the standard fire policies. The dissimilarities existing in earlier times between numerous forms of fire policies in common iise^ resulted in inconveniences and uncertainties,* especially in cases where the same property was in- sured by pohcies in different companies, which often thus furnished inconsistent provisions for the adjustment of the one loss sustained by the one party. It frequently happened that, though overinsured, the plaintiff could not recover full indemnity. Moreover, many policy clauses devised in the interest of the companies, were unreasonably technical, and were commonly printed in type so fine as to be well- nigh unintelligible without the aid of a magnifying glass.^ Such 1 Peabody v. Satterlee, 166 N. Y. 174, » De Laney v. Ins. Co., 52 N. H. 59 N. E. 818; Bourgeois v. Northwestern 581. Nat. Ins. Co., 86 Wis. 606, 57 N. W. 347. [277] 278 MEANING AND LEGAL EFFECT OF FIRE POLICY considerations * have influenced the legislatures of many states to adopt a uniform fire policy,^ the use of which is made compulsory so far as property situated within the particular state is concerned.' A legislature has the constitutional power to prescribe the form of a policy of insurance, and to provide, as some state legislatures have enacted, that copies of all papers referred to in the policy as parts thereof, shall be attached thereto; and it may also prescribe, as a penalty for the nonobservance of this regulation, that, if this is not done, such papers shall not be considered a part of the policy or be received in evidence.'* The New York law, however, does not re- quire that the application shall be attached to the standard fire policy. In framing a statutory form of fire policy Massachusetts was the pioneer state.^ In 1886 New York adopted a standard fire policy," the terms of which are in great part followed either by statutory enactment or by the usual practice of the stock fire companies throughout all the country, with the exception of a few states, the statutory policies of some of these taking as their basis the Massa- chusetts form.^ As the Minnesota court says, "the Massachusetts 1 Moore v. Hanover F, Ins. Co., 141 N. Y. 219, 224, 36 N. E. 191. 2 Forms of the standard policies given in Clement, Ins. (1905), to that date. 3 Appendix, ch. I. 1 Considine v. Met. Life Ins. Co., 165 Mass. 462, 43 N. E. 201. And see Business Men's League V. Waddill, 143 Mo. 495, 45 S. W. 262, 40 L. R. A. 501. ' L. 1873, c. 331. The use was not compulsory. Repealed 1881, c. 161, Connecticut passed an act, L. 1867, c. 121, for a policy, but none was framed under it. Repealed L. 1868, c. 7. The Massachusetts policy now in use was framed under a later act. Closely following many of its provi- sions are the forms of policies since adopted by New Hampshire, Minne- sota, Maine, and South Dakota: but the standard policies in use in South Dakota and New Hampshire, at the close of 1907, contain numerous impor- tant departures. The legislatures of New York and other states have been bombarded with crude and ill-advised measures proposed from time to time to alter the standard policy. Any such measure should be framed in the inter- est of the whole country and by some expert commission, representative of many states, so as to diminish and not multiply this dissimilarities now ex- isting between the various statutory fire policies. Compare the method of drafting, revising, and enacting the English codification of marine insur- ance law as described in the preface to Chalmers & Owen, Ins. (1907). 8L. 1886, c. 488. General Laws, 1892, c. 38; N. Y. Ins. L., §121. Policy framed by a committee of the New York Board of Fire Underwriters, E. R. Kennedy, Esq., chairman, in conference with a committee of the National Board of Fire Underwriters, and by William Allen Butler, Esq., and other counsel of New York and Con- necticut. ' P. 278, n. 5, supra. A form of English fire policy is gryen in Bunyon, Ins. (190&), 5 etseq. Where the act providing for a policy has turned over to a commis- sioner or a commission the legislative function of framing in future an ex- clusive form of contract it has been held to be unconstitutional as in the case df the Michigan, King v. Con- cordia Ins. Co. J 140 Mich. 258, 103 N. W. 616; Mmnesota, Anderson v. Manchester Assur. Co., 59 Minn. 182, 63 N. W. 241 (but see later Minn. Act Appendix, oh. I); Pennsylvania, O'NM V. American Ins. Co., 166 Pa. St. 72, 30 Atl. 943; South Dakota, Phoenix INTRODUCTORY 279 and New York standard policies went into effect about the same time and have formed the models for the legislation in other states." ^ The use of a standard policy, including its provisions and type, is, in general, made obligatory by the statute upon all corporations, and in some states a penalty is imposed for violating the act, but any policy, though in purport inconsistent with the provisions of the act, is nevertheless binding upon the company issuing it, and may be enforced against the company according to its terms as written.^ The standard policies, like earlier forms, having been drafted by insurance men or largely under their superintendence, the same general rules of construction are said to prevail as of old.* But the standard policy has been declared by at least one court to be a statutory law as well as^'a contract,'* and, giving recognition to the fact that its proAnsions are drawn with better regard to the interests of both parties than those of fire policies formerly in vogue, the courts in construing them are giving less emphasis to the maxim "the law abhors a forfeitiore," and more to the rule that the terms of the con- tract should be enforced fairly, according to their plain import.* In connection with the subject of "warranties in an earlier chapter, a general comparison was instituted between the provisions of the marine policy, and those of the fire policy; and the attitude of the courts in the past towards each policy was adverted to, as evinced by their interpretation of the meaning and legal effect of the con- Ins. Co. V. Perkins, 101 N. W. 1110, ^ Hevnns v. London Assur. Corp., 184: and Wisconsin, Dowlmg v. Lancashire Mass. 177, 68 N. E. 62, 64. Ins. Co., 92 Wis. 63, 65 N. W. 738, ^ Chichester v. New Hampshire F. statutes. But after such a policy has Ins. Co., 74 Conn. SIO, 51 Atl. 545; been framed by agencies outside the Reed v. Wash. Ins. Co., 138 Mass. 572, legislature, the legislature may, with- 577 (construed as a contract rather out violating the federal constitution, than a statute); Davis & Co. v. Ins. Co. adopt an exclusive form of policy, af- of N. A., 115 Mich. 382, 73 N. W. 393; fecting property within the state, to be KollUz v. Eq. Mut. Fire Ins. Co., 92 used Dy incorporated companies, Re Minn. 234, 99 N. W. 892; Matthews v. Opinion of Justices, 97 Me. 590, 55 Atl. American Cent. Ins. Co., 154 N. Y. 449, 828; KoUitz v. Eg. Mut. F. Ins. Co., 48 N. E. 751, 61 Am. St. R. 627, 39 92 Minn. 234, 99 N. W. 892; O'Neill v. L. R. A. 433; Maisel v. Fire Assn. of American Ins. Co., 166 Pa. St. 72, 30 Phila., 59 App. Div. (N. Y.) 461, 69 Atl. 943. Companies doing business in N. Y. Supp. 181. the state need not use the statutory * Temple v. Niagara Ins. Co., 109 policy of that state if the property is Wis.*S72, 85 N. W. 361. located in another state, Loomis v. s Arm.strong v. Western Man. M. I. Lewis, 62 App. Div. 433, 71 N. Y. Co., 95 Mich. 137, 54 N. W. 637; Supp. 62. Nelson v. Traders' Ins. Co., 86 App. ^wad-Rice Lumber Co. v. Royal Ins. Div. 66, 67, 83 N. Y. Supp. 220, aff'd Co. (Minn., 1906), 108 N. W. 871 (in- 181 N. Y. 472, 74 N. E. 421; Quintan surer has no authority to add to the v. Prov. Wash. Ins. Co., 133 N. Y. 356, New York standard policy a clause 365, 31 N. E. 31; Hart v. Stand. Mar. warranting the maintenance of a Ins. Co., L. R. 22 Q. B. D. 499. designated clear space about the in- 501. sured prenuses). 280 MEANING AND LEGAL . EFFECT OF FIRE POLICY ventional forms of the marine policy on the one hand and of the fire policy on the other* We shall in this and following chapters examine the clauses of the New York standard policy, in the sequence in which they occur in the instrument itself, noticing the more important variations con- tained in the standard policies of other states, but giving only scant attention to those numerous decisions, which the general xise of standard forms of fire policies has rendered largely obsolete in this country.^ § 228. In Consideration of the Stipulations and Premium. — The policy is not an absolute agreement to grant indemnity to the in- sured ^ for the loss occasioned by the casualty insured against, but the insurer's promise to pay is made dependent upon the fulfillment by the insured of certain provisions of the contract which are called conditions or warranties. As already shown, if any one of these is violated or unperformed, the policy is avoided,'* and there can be no recovery unless the policy is subsequently revived by the insurer.^ The conditions for the most part are expressed in the contract itself, and to solve their proper meaning, force, and effect, must be a chief concern in the study of fire insurance law.' These conditions may be divided into three classes; those precedent to a valid inception of the contract, those relating to the contract during the pendency of 1 See § 107, p. 140, note 3, supra. knowledged to be inoperative and of no 2 Precisely, or in the main, follow- avail." Sometimes valued policy and ing the New York form, are the stand- other statutory provisions intervene; ard policies of Connecticut, Louisiana, in some standard policies the corn- Michigan, New Jersey, North Carolina, pany's permit may be by oral assent or North Dakota, Oregon, Rhode Island, agreement; in some standard policies West Virginia, and Wisconsin; but in there are provisions as to breaches of some, especially those of Michigan and certain warranties limiting forfeiture Wisconsin, there are important differ- to such breaches as contribute to the ences. The standard policies of Iowa loss; in some there are special provi- and South Dakota do not adhere to the sions relating to cancellation, subroga- phraseology either of the New York or tion, proofs of loss, and appraisal; and Massachusetts forms, and contain im- in some there are special provisions portant modifications in favor of the making the insurance company re- insured. In Pennsylvania the stand- sponsible for the knowledge or acts of ard policy law adopting the New York the agent or solicitor. The state legis- form was adjudged unconstitutional; latures are industrious, and the status but in practice the New York form is at the close of 1907 is no safe guide for used. In Missouri the companies were a later date. It is obvious, therefore, required by statute to adopt a uniform that the contents of every policy in policy to be approved by the fire in- question must be critically examined Burance commissioner. The New York as occasion demands. form was so adopted with the following 3 Chichester v. N. H. Fire Ins. Co., clause added: "it is hereby agreed on 74 Conn. 510, 513, 51 Atl. S4S. the part of the company issuing the * There are exceptions to this rule. nolicy that any provisions of said policy 6 Imperial F. Ins. Co. v. Coos Co., 151 i I conflict with the statutes of the state U. S. 452, 14 S. Ct. 379. of Missouri are distinctly held and ac- « See Appendix, ch. II. IN CONSIDERATION OF STIPULATIONS AND PREMIUMS 281 the risk, and those which appertain to the presentation and en- forcement of the claim of the assured after loss. As regards the premium, the insurer is entitled to its pay- ment upon the delivery of the policy or closing of the contract,^ unless otherwise understood;^ but ordinarily the payment of the premium is not made a condition of the fire policy, nor its non-pay- ment a ground of forfeiture.' A premium is generally paid in cash or check,* but may be paid by notes or credit.^ While on the one hand, as just shown, the insured is in general presumed to have allowed credit for the premium if the policy is delivered without requiring payment in advance; * so also, on the other hand, a promise to pay the premium is impUed as against the insured from his acceptance of the policy, although shortly thereafter he may change his mind and return it as not wanted.' If the company accepts a credit with its agent instead of actual payment as required by the policy, such a transaction is equivalent to payment so far as the company is concerned.* 1 Mayck v. Merchants' & M. Fire Ins. Co. (Del. Super.), 54 Atl. 952; Taylor v. LovxU, 3 Mass. 331, 3 Am. Dec. 141; N. Y. Lumber, etc., Co. v. Peoples' F. Ins. Co., 96 Mich. 20, 55 N. W. 434; Schaffer v. Mvt. F. Ins. Co., 89 Pa. St. 296. The delivery of the policy and the payment of the premium are declared to be reciprocal or con- current considerations, Ins. Co. v. Leims, 187 U. S. 335, 235 Ct. 126. 2 Firemen's Ins. Co. v. Kuessner, 164 111. 275, 45 N. E. 540; Western Assur. Co. V. McAlpin, 23 Ind. App. 220, 55 N. E. 119. 3 Ohio F. Ins. Co. v. Stovrman, 16 Ind. App. 205, 44 N. E. 558. And credit is inferred if agent delivers policy without exacting advance payment, Germania F. Ins. Co. v. MuUer, 110 HI. App. 190; Kollitz v. Equitable Mvt. Ins. Co., 92 Minn. 234, 99 N. W. 892; Church v. La Fayette F. Ins. Co., 66 N. Y. 222. Under cancellation clause company often cancels for non-pay- ment, Citizens' Fire Ins. Co. v. Swartz, 21 Misc. 671, 47 N. Y. Supp. 1107. But mutual companies often require prepayment of the premlimi, Wainer V. MUford Mut. F. Ins. Co., 153 Mass. 335, 26 N. E. 877, 11 L. R. A. 598; Mulrey v. Shawmvt Mut. F. Ins. Co., 4 Allen (Mass.), 116, 81 Am. Dec. 689; Buffum V. Fayette Mut. Fire Ins. Co., 3 Allen (Mass.), 360. But the company may accept payment by giving credit to the broker in a personal account with him. White v. Connecticut Fire Ins. Co., 120 Mass. 330. A promise by the insurer to temporarily "hold" cer- tain expired policies, credit for the premium being given to the assured, is binding, Baker v. Westchester Fire Ins. Co., 162 Mass. 358, 38 N. E. 1124. * Penn. L. Mvt. F. Ins. Co. v. Meyer, 126 Fed. 352, 61 C. C. A. 254; WaUs v. Home Ins. Co., 114 Ky. 611, 71 S. W. 650; Greenwich Ins. Co. v. Oregon Imp. Co., 76 Hun, 194, 27 N. Y. Supp. 794. 5 Carson v. Jersey City Ins. Co., 43 N. J. L. 300, 39 Am. Rep. 584. A note taken in place of cash for premium becomes a bindii^ obligation when the risk attaches, Merchants' Ins. Co. v. Clapp, 11 Pick. (Mass.) 56; Lynn v. Burgm/ne, 13 B. Mon. (Ky.) 400. But note may be collected though insur- ance is suspended for default in its pay- ment, Robinson v. German Ins. Co., 51 Ark. 441, 11 S. W. 686; Phenix Ins. Co. V. RoUings, 44 Neb. 745, 63 N. W. 46. A note given for premium is negotiable, Mclntire v. Preston, S Oilman (m.), 48, 48 Am. Dec. 321: Union Ins. Co. v. Greerdeaf, 64 Me. 123. A voidable policy is sufficient consid- eration for a premium note, Piynipton v. Dunn, 148 Mass. 523, 527, 20 N. E. 180. 8 See also § 75, supio. 7 Western F. Ins. Co. v. Guriai. 116 App. Div. (N. Y.) 610. 8 Jones V. Mna Ins. Co., 13 Fed. Cas. 282 MEANING AND LEGAL EFFECT OF FIRE POLICY In mutual companies premiums are often paid, in whole or in part, by premium or deposit notes of the insured, which are held by the company, and from time to time assessed to pay losses and expenses.' 938; LungslToss v. German Ins. Co., 57 Mo. 107: GaysviUe Mfg. Co. v. Phoenix Mut. F. Ins. Co., 67 N. H. 457, 36 Atl. 367; Trainv. Holland-Purchase Ins. Co., 62 N. Y. ^8; WytheviUe Ins. Ss B. Co. V. Tmger, 90 Va. 277, 18 S. E. 195; and see Mechanics' & T. Ins. Co. v. iifut., etc., Bldg. Assn., 98 Ga. 262, 25 S. E. 457. And if agent pays the company, latter cannot forfeit the policy, though it provides that company will not be liable, "vmtil the premium be actually paid," Horns Ins. Co. v. Gilman, 112 Ind. 7, 13 N. E. 118. Compare Her- ring V. Am. Ins. Co., 123 Iowa, 533, 99 N. W. 130; Dunham v. Morse, 158 Mass. 132, 32 N. E. 1116. Credit was fiven to the broker in White v. Conn. '. Ins. Co., 120 Mass. 330. Where the standard policy has been delivered by the insurer without payment of the premium recovery thereon for a loss cannot be defeated on the ground of non-payment of premium, Healy v. Insurance Co., 50 App. Div. 327, 63 N. Y. Supp. 1055; see § 172, supra. And see Weisman v. Commercial F. I. Co., 3 Penn. (Del.) 224, 50 Atl. 93. Unless the company has repudiated liability on other grounds, Knicker- bocker L. Ins. Co. V. Pendleton, 112 U. S. 696; Stokes v. Mackay, 147 N. Y. 223, 41 N. E. 496; Howe Ins. Co. v. Adler, 71 Ala. 516, the premium, if unpaid, should be duly tendered by the insured before the commencement of action on the policy, Famum v. Phcrnix Ins. Co., 83 Cal. 246, 23 Pac. 869; Van Tassel v. Greenwich Ins. Co., 28 App. Div. 163, 169, 51 N. Y. Supp. 79; Hardwick v. Staie Ins. Co., 20 Oreg. 547, 26 Pac. 840. Any unearned premium, however, paid to the com- pany need not be tendered back by it as a condition of defending action, unless required by statute, Georgia Home Ins. Co. v. Rosenfield, 95 Fed. 358 (no waiver of forfeiture to retain it); Parsons v. Lane, 97 Minn. 98, 106 N. W. 485; Senor v. Western M. Mvt. F. Ins. Co., 181 Mo. 104, 79 S. W. 687. Insured who seeks to rescind is liable for premium until time of rescission. Am. Ins. Co. v. Garrett, 71 Iowa, 243, 32 N. W. 356. As to obligation for premium when company is insolvent see Ins. Commissioner v. Peoples' F. Ins. Co., 68 N. H. 51, 44 Atl. 82; Merchants' Mut. Ins. Co. v. Under- wood, 3N. Y. Super. Ct. 474; Equit. Ins. Co. V. Harvey, 98 Tenn. 636, 40 S. W. 1092. 1 New Hampshire Mvt. F. Ins. Co. v. Band, 4 Fost. (N. H.) 428. Power to assess is ordinarily limited by losses and expenses. Farmers' Mut. F. Ins. Co. v. Knight, 162 111. 47G, 44 N. E. 834; Sinnissipi Ins. Co. v. Farris, 26 Ind. 240, 342; Ionia, etc., Ins. Co. v. Ionia C. Judge, 100 Mich. 606, 59 N. W. 250; excluding those accrued prior to mem- bership. Mutual F. Ins. Co. v. Jean, 96 Md. 252, 53 Atl. 950; Detroit Mfrs. M. F. Ins. Co. V. Merrill, 101 Mich. 393, 59 N. W. 661; Sands v. lAlienthal, 46 N. Y. 541. Liability to assessment continues so long as member's insur- , ance continues. Planters' Ins. Co. v. Comfort, 50 Miss. 662; Morgan v. Hog Raisers' Mut. Ins. Co., 62 Neb. 446, 87 N. W. 145. But is limited by face value of premium note, Davis v. Oshkosh, etc., Co., 82 Wis. 488, 52 N. W. 771. Member is liable for losses occurring prior to his withdrawal, Peake v. Yule, 123 Mich. 675, 82 N. W. 514; or during term of his policy though assessment is subsequent, Baegener v. Willard, 44 App. Div. 41, 60 N. Y. Supp. 478; Susquehanna, etc., Ins. Co. V. Mardorf, 152 Pa. St. 22, 25 Atl. 234. Sometimes there is a cash premium and assessments besides, DwinneU v. FeU, 90 Minn. 9, 95 N. W. 579; BwMey v. Columbia Ins. Co., 83 Pa. St. 2%Bi Whipple v. U. S. Fire Ins. Co., 20 R. I. 260, 38 Atl. 498. Leyjr of assessment is not always a condition precedent to liability of the compamr under its charter. Wood v. Farmers' L. Assn., 121 Iowa, 44, 95 N. W. 226; Thorrdiurg v. Farmers' L. Assn., 122 Iowa, 260, 98 N. W. 105; Nashua P. Ins. Co. v. Moore, 55 N. H. 48. But usually notes are conditional and a due assessment is essential to fix liability of maker, Hagan v. Merchants' & B. Ins. Co., 81 Iowa, 321, 46 N. W. 1114. Validity of assessment ordinarily is determined by laws of state where company is incorporated, Warner v. Detkridge, etc., Co., 110 Mich. 590, 68 N. W. 283. In general, the company cannot make an assessment until a THE TERM 283 If the risk attaches, the premium is not returnable,* except as pro- vided by the terms of the agreement, as in the case of the standard fire policy or by statute; but if the policy is void ab initio, or if the risk never attaches and there is no fraud on the part of the insured, and the contract is not against law or good morals, the insured is entitled to recover back the premium paid,^ but if the policy is void for fraud the premium is not returnable,* unless the policy so provide. §229. Premiiim — To whom Payable. — A general or local -agent with power to countersign policies has apparent authority to collect premiums. In that regard his acts are those of the company.^ § 230. The Term. — Prom the day of at noon. "Noon" in the absence of statutory provisions to the contrary, or evidence of a different intent, has been held to refer to solar and not standard time.* loss has occurred, Wolcott v. State F. Mvt. Ins. Co. (Neb., 1906), 110 N. W. 628. Premium notes in mutual companies are generally made a lien upon the property insured, Woodfin v. Asheville Mvt. Ins. Co., 6 Jones (N. C), 558. The Iowa standard fire policy provides that the company shall not be liable if insured defaults in payment of premium or assessment note, provided notice as required by law has been given, but acceptance of payment is waiver. 1 Parsons v. Lane, 97 Minn. 98, 119, 106 N. W. 485 (citing many cases); Hendricks v. Ins. Co., 8 Johns. (N. Y.) 1,5. i Parsons v. Lane, 97 Minn. 98, 119, 106 N. W. 485 (citing many cases); Itis. Co. v. Pyle, 44 Ohio St. 19, 4 N. E. 465, 58 Am. Rep. 781. 3 Blaeser v. MUwarukee Mvt. Ins. Co., 37 Wis. 31, 19 Am. Rep. 747. *Mavck V. Merchants' & Mfrs.' F. Ins. Co. (Del.), 54 Atl. 952. As to payments to solicitors, see Andes F: Ins. Co. v. Loehr, 6 Daly (N. Y.), 105; Long Creek Bldg. Assn. v. State Ins. Co., 29 Oreg. 569, 46 Pac. 366. As to pay- ments to brokers, see Am. Fire Ins. Co. V. Brooks, 83 Md. 22, 34 Atl. 373; Globe & R. Fire Ins. Co. v. Rabbins, 43 Misc. 65, 86 N. Y. Supp. 493; Louns- bury V. Duckrow, 22 Misc. 434, 50 N. Y. Supp. 927; Citizens' F. Ins. Co. v. SwaHz, 21 Misc. 671, 47 N. Y. Supp. 1107. 5 Jones V. German Ins. Co., 110 Iowa, 75, 81 N. W. 188, 46 L. R. A. 860 (cases cited); Meier v. Phoenix Ins. Co., 12 Ins. L. J. (N. S.) 192. And see Searles v. Averhojf, 28 Neb. 668, 44 N. W. 872; Parker v. State, 35 Tex. Cr. R. i2, 29 S. W. 480. Whether solar or standard, may be construed as a question of intent, Globe & R. F. Ins. Co. V. Moffat, 154 Fed. 13 (May, 1907) (citing cases); or of well-known custom, Rochester German Ins. Co. v. Peaslee Co. (Ky.), 87 S. W. 1115. In marine insurance time is to be taken at the place where the contract is made. Walker v. Protection Ins. Co., 29 Me. 317. In fire insurance, however, the hcvs of the property has been regarded as controlling, Globe - X ?i.^^"*^ ^'"- ^"^ ■*"■ later case cited first). And see Soidh- MaHm (Miss.), 16 So. 417; Rickerson v. west L. & Z. Co. v. Phoenix Ins Co 27 Hartford Fire Ins. Co., 149 N. Y. 307, Mo. App. 446; Marsh v. N. H. Ins Co., 43 N. E. 856 (a separate five-story rear 70 N. H. 590, 49 Atl. 88- Marsh v factory, held, covered, though the front Concord Ins. Co., 71 N H 253 51 Atl was a store and dwelling); Maisel v. 898; Griffing Iron Co v L &'l & G FireAssn of Phila., 59 App. Div. 461, Ins. Co., 68 N. J. L. 368, 54 Atl. 409: 69 N. Y. Supp. 181 (the rear was for a Home Mvt. Ins. Co. v. Roe, 71 Wis. depth of only about two inches on the 33, 36 N. W. 694. FLUCTUATING STOCK, ETC. 291 rate of more than one a year, new maps and riders being prepared at much longer intervals. After this rider, before the court for con- struction, was prepared for the policies a large and valuable building was erected, separated about thirty or forty feet from the nearest building of the plant, and into it machinery from one of the old buildings was transferred. On its completion more blanket insurance was taken out by binding slips, all the insurance fully covering the value of the buildings and their contents. The new building, of course, was not shown on the map or rider which were made before the construction of the latest building was begun. The court, inter- preting the privilege as allowing reasonable additions to the plant held that the new building and its contents were covered by the policy.^ If a building though physically separate from the building described in the policy is connected with it in use the court may readily con- clude that it is covered by the term "additions;" for instance, where the addition was four feet distant from the main building.^ And clearly applicable is the rule where there is no other structure except the independent building to answer to the description of "addi- tions." 3 § 234. Fluctuating Stock, etc. — A policy upon merchandise in a store appUes to the stock successively in the store from time to time.'* It would be incredible to suppose that the parties to the policy intended that the merchant, on protecting himself with insurance, must discontinue his regular business of buying and selling goods, in order to reap the benefit of his insurance on his business stock.* Therefore it is wholly immaterial whether the merchandise, on hand 1 Arlington Mfg. Co. v. Colonial Ins. v. /Etna Ins. Co., 32 N. Y. 405; Hooper Co., 180 N. Y. 337, 73 N. E. 34. v. Hudson River Fire Ins. Co., 17 ii.Y. Contraj Arlington Mfg. Co. v. Norwich 424. The same mle applies to ma- Union F. Ins. Co., 107 Fed. 662, 46 chinery, furniture, and clothing, Cum- C. C. A. 542. mings v. Cheshire Co. Mut. F. Ins. Co., 2 Gvthrie Laundry Co. v. Northern 55 N. H. 457; horses and cattle, Mills Assur. Co. (Okla., 1906), 36 Ins. L. J. v. Farmers' Ins. Co., 37 Iowa, 400; 146 (citing many eases); Gross v. MU. Tomkins v. Hartford Ins. Co., 22 App. Mech. Ins. Co., 92 Wis. 656, 66 N. W. Div. 380, 49 N. Y. Supp. 184; grain, 712 (three feet away). And see Fergu- Coleman v. Phcenix Ins. Co., 3 App. Div. son V. Lumbermm's Ins. Co. (Wash., 65, 38 N. Y. Supp. 985; Johnston v. 1907), 88 Pac. 128 (eighteen inches Ins. Co. (Neb.), 102 N. W. 72; vehicles, away but connected with shaft and Beyer v. St. Paul F. & M. Ins. Co., 112 belt). Wis. 138, 88 N. W. 57; implements 3 Phoenix Ins. Co. v. Martin (Miss., geaeiaWy, Johnson v. Farmers' Ins. Co., 1894), 16 So. 417 Qaundiy covered 126 Iowa, 565, 102 N. W. 502; contente though independent. "Twonstory brick of bam, Farmers' Mid. F., etc., Assn. building and additions thereto."). v. Kryder, 5 Ind. App. 430, 31 N. E. * Manchester F. A. Co. v. Feihelman, 851. 118 Ala 308, 23 So. 759; Am. Cent. Ins. ^ Hoffman v. Mna Ins. Co., 32 N. i. Co. V. BothchUd, 82 lU. 166; Hoffman 405. 292 MEANING AND LEGAL EFFECT OF FIRE POLICY at the time of the loss, be acquired before or after the issuance of the policy. Such merchandise whenever acquired will be covered to the amount of the policy, simply by virtue of a general description, without the aid of any special permit. § 235. Location. — While located and contained as described herein and not elsewhere. Place is ordinarily material to the contract and of the very essence of the risk.^ With varying location the risk is apt to vary, and whether it does or not the insurers have the right to know what risk they are assuming,^ and often decline an insurance because of the amount already placed by them upon, or in, the same building.' If a permit for removal is obtained, goods are not protected in transit * unless the policy so provides,' but are protected in the old place until removed.* But it has been held that where the clause in the policy is simply in the words, "the following described property contained in" a certain building, the location is not material, if the nature of the property makes it clear that it must have been the intention of the parties to protect it by the policy whether in the particular place or not. In that event a designation of place is looked upon as merely descriptive and to be controlled by the necessary use of the thing insured.^ In the case of furniture * or stock * described as contained ^Bryce v. Lorillard Fire Ins. Co., 55 ''Boyd v. Miss. Home Ins. Co., 75 N Y. 240; Davison v. London & Lan. Miss. 47, 21 So. 708; Niagara. Fire Ins. Fire Ins. Co., 189 Pa. St. 132, 42 Atl. 2. Co. v. EUiott, 85 Va. 962, 9 S. E. 694. 2 Ohio Farmers' Ins. Co. v. Burget, For example, where a horse, described 65 Ohio St. 119, 122, 61 N. E. 712, 55 as in a barn; was insured against fire or L. R. A. 825. lightning, the court was of opinion that 3 Bradbury v. Fire Ins. Asso., 80 Me. it was not the intention of the parties 396; Sampson v. Security Ins. Co., 133 to retain the protection of the policy Mass. 49; English v. Franklin Fire Ins. only in the event that the horse was Co., 55 Mich. 273, 54 Am. Rep. 377; kept in the bam all the time waiting Wall V. East River Mut. Ins. Co.,7N. for a fire or a stroke of lightning, Y.Z70; London and Lancashire Ins. Co. Haws v. Fire Asso., 114 Pa. St. 431; V. Lycoming Fire Ins. Co., 105 Pa. St. Longueville v. West. Assn. Co., 51 Iowa, 424, 432; Lyons v. Providence Washing- 553, 33 Am. Rep. 146. Where an oil- ton Ins. Co., 14 R. I. 109, 51 Am. Rep. tank was carried away by a flood to 364; Theobald v. Railway Passengers' another part of the tract named in the Assur. Co., 10 Exch. 45. policy and took fire there, the com- ^Ooodhue v. Ins. Co., 184 Mass. 41, pany was held, TTestem, etc.. Pipe Lines 67 N.E. 645. v. Home Ins. Co., 145 Pa. St. 346, 22 ^ Kratzenstein v. Western Assur. Co., Atl. 665, 27 Am. St. R. 703. And a 116 N. Y. 54, 22 N. E. 221, 5 L. R. A. trotting horse was held covered out- 799. side the counties in which defendant ' Kunzze v. Amer. Exch. Fire Ins. was authorized to do biisiness, there Co., 41 N. Y. 412; SharpUss v. Ins. being no restriction in the policy, Eddy Co., 140 Pa. St. 437. Standard policy v. Farmers' Mvt. Ins. Co., 20 App. Div. has special clause regarding removal of 109, 46 N. Y. Supp. 695. property endangered by fire. * Green v. Ins. Co., 91 Iowa, 615, 60 8 English v. Ins. Co., 55 Mich. 273, 21 N. W. 340, 54 Am. Rep. 377. HELD IN THUST 293 in a certain building, however, the designated location is without doubt an essential element of the contract. The addition of the words "and not elsewhere" in the New York standard policy seems to eliminate all ground for contention. Under it, location is a warranty; * and parol evidence to show that the agent knew at the time the policy issued that the property was in another building was held inadmissible in an action on the contract.^ Clothes on a clothes-line outside in the yard are not covered where the loca- tion is described as the building.' But it is held that the building itself may be moved if the risk is not increased.* And personal prop- erty may be moved from one structure to another within the described premises insured, if the nature of the business or occupancy involves notice that such shifting might be expected.^ This clause is not a part of the Massachusetts standard policy; * but the Massachusetts court limits location to the premises as de- scribed in the policy.'' § 236. Held in Trust. — Their own, or held by them, in trust or on commission, or sold hut not delivered. ■ Such special phrases connected with the description are sometimes employed in the policies of carriers, warehousemen, commission and other merchants, to show that the assured though holding property of others is to secure the full measure of insurance upon all the prop- erty insured, whether the title is or is not vested in him. " Held in triist " means simply that the goods or property are in the N. W. 189; Lyons v. Prov. Wash. Ins. privilege and not obligation, Sharpless Co., 14 R. I. 109, 51 Am. Rep. 364. v. HaHford F. Ins. Co., 140 Pa. St. Ambiguity of description was con- 437, 21 Atl. 451. struea against the plaintiff preparing " Westfield Cigar Co. v. Ins. Co. of it in London Assur. Corp. v. Thompson, North Am., 169 Mass. 382, 47 N. E. 170 N. Y. 94, 62 N. E. 1066. 1026 (question of location of goods in 1 Village of L'Anse v. Fire Assn. of building communicating, but with dif- Phila., 119 Mich. 427, 78 N. W. 466; ferent street number, was sent to Cahr V. Nat. Fire Ins. Co., 80 Hun, jury). 309, 62 N. Y. St. R. 341, 29 N. Y. i^Westfield Cigar Co. v. Ins. Co. of Supp. 1031; Brit.-Am. Assur. Co. v. A'. A., 165 Mass. 541, 43 N. E. 504 Miller, 91 Tex. 414, 44 S. W. 60, 39 (if ambiguity, issue is for jury); Mead L. R. A. 545, 66 Am. St. R. 901. v. Phoenix Ins. Co., 158 Mass. 124, 32 2 jEtna Fire Ins. Co. v. Brannon Ji.'E.Q'ib; Sampson v. Security Ins. Co., (Tex. Civ. App.), 81 S. W. 560 (1904). 133 Mass. 49; Hews v. Atlas Ins. Co., 3 Leventhal v. Home Ins. Co., 32 126 Mass. 389. But during the term of Misc. 685, 66 N. Y. Supp. 502. the contract the property insured may * Hannon v. HaHford Fire Ins. Co., be shifted within the insured premises, 41 App Div. (N. Y.) 226. Fair v. Manhattan Ins. Co., 112 Mass. 5 Mxkeesjxyrt Mach. Co. v. Ben 320. And see Fitchburg R. Co. v. Ins. Franklin Ins. Co., 173 Pa. St. 53, 34 Co., 7 Gray (Mass.), 64 (cars on track Atl. 16. Permit for removal is a belonging to another railroad). 294 MEANING AND LEGAL EFFECT OF FIRE POLICY custody or care of the insured. He may hold them as agent ^ or as bailee, or in any capacity.^ The word "tnist" is not to be given its strict technical, but rather its mercantile, significance.^ The clause is practically a privilege to the insured. Its important function is to supersede the warranties regarding sole and absolute ownership else- where contained in the policy, and thus to prevent forfeiture. Under such a policy the assured may collect the whole amount due,^ holding, as trustee for the owner or principal, any balance over and above his own interest in the property.^ The owner, though knowing nothing about the insurance and having given no authority for its procure- ment, may ratify and take the benefit of it after loss.* § 237. As Interest may Appear. — The policy not infrequently insures one or more persons "as interest may appear." It is some- times convenient to use this phrase where the interests are shifting or uncertain;^ for example, where owner and creditors or lienors desire protection by one policy,* or where the owner has died and the vesting of interests may be ill defined, or contingent and for a time, perhaps, unrepresented by any executor or administrator, or where owner and tenant require security under the same insurance, 1 Roberts V. Firemen's Ins. Co., 165 Pa. St. 55, 30 Atl. 450. 2 Burke v. Continental Ins. Co., 100 App. Biv. 108, 91 N. Y. Supp. 402. 3 California Ins. Co. v. Union Com- press Co., 133 U. S. 387, 10 S. Ct. 365; Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S. 527; Snow v. Carr, 61 Ala. 363; Hovgh v. People's Fire Ins. Co., 36 Md. 398; Lucas v. Ins. Co., 23 W. Va. 258, 48 Am. Rep. 383. * Ferguson v. Pekin Plow Co., 141 Mo. 161, 42 S. W. 711. 5 California Ins. Co. v. Union Com- press Co., 133 U. S. 387, 409, 10 S. Ct. 365; Roberts v. Firemen's Ins. Co., 165 Pa. 55, 30 Atl. 450; Waters v. Monarch Assur. Co., 5 El. & Bl. 870. His own interest may be that of owner or it may be represented by his commis- sions, De Forest v. Fulton Fire Ins. Co., 1 Hall (N. Y.), 94, 101; or charges, South. Cold Storage Co. v. Dechman (Tex. Civ. App.), 73 S. W. 545; or liens on the property, Pittsburg Storage Co. V. Scottish union & Nat. Ins. Co., 168 Pa. St. 522, 32 Atl. 58; or by an obliga- tion to insure for others, California Ins. Co. V. Union Compress Co., 133 U. S. 387, 10 S. Ct. 365; or by liability to the owners on contract, Johnson v. Camfbell, 120 Mass. 449; or in tort for the loss, Hough v. People's Fire Ins. Co., 36 Md. 398. Common carriers may insure against their liability for negli- gence, Phoenix Ins. Co. v. Erie Transp. Co., 117 U. S. 312, 6 S. Ct. 750, 1176. oLarsen v. Thuringia Am. Ins. Co., 208 111. 166, 70 N. E. 31; Marts v. Cumberland Mvt. F. Ins. Co., 15 Vroom (N. J.), 478; Waring v. In- demnity Ins. Co., 45 N. Y. 606; Fergu- son V. Pekin Plow. Co., 141 Mo. 161, 42 S. W. 711; South Cold Storage Co. v. Dechman (Tex. Civ. App.), 73 S. W. 545; Eng. Mar. Ins. Act (1906), ch. 41, I 86. But see as to mutuality of con- tract required, Reynolds v. Mut. F. Ins. Co., 34 Md. 280; Ins. Co. v. SchaU, 96 Md. 225, 53 S. W. 925. 7 DaHn v. L. & L. & G. Ins. Co., 77 N. Y. 600; Sullivan v. Spring Garden Ins. Co., 34 App. Div. 128, 54 N. Y. Supp. 629; De Wolfy. Capital City Ins Co., 16 Hun, 116; Watson v. Swann, 11 C. B. N. S. 755. 8 Dakin v. Ins. Co. , supra; Brown v. Commercial Fire Ins. Co., 21 App. D. C. 325; Kent v. JEtna Ins. Co., 84 App. Div. 428, 82 N. Y. Supp 817 FOR WHOM IT MAY CONCEHN 295 or where vendor and vendee wish to be covered during a pending contract of sale in part performed.^ In considering the application and effect of the phrase a clear dis- tinction must be observed- between the frequent use of the words "as interest may appear" in connection with the names of the as- sured, and the frequent use of the same words in connection with any third party named in the policy as a mere payee or appointee to re- ceive the insurance money .^ In the latter instance the payee takes only what the assured is entitled to receive, and if the assured has broken a warranty the payee gets nothing.* § 238. For Whom it may Concern. — These words, which are now seldom used in a fire, policy, but frequently in the marine policy, protect all those who have any insurable interest in the property, but are held, like other general descriptions of the insured, to include only such classes of persons as are intended by the assured, when he 1 Each party in such and similar instances naturally might not be will- ing to pay a separate premium for the fuU value of the property; even assum- ing that the separate interests could be properly and safely described in the respective policies and with due regard to its exacting warranties on the sub- ject of ownership. Theoretically, in- deed, a vendor and a vendee under contract of sale may each, xmder cer- tain circumstances, have an insurable interest to the full value of the prop- erty, Tiemann v. Citizens' Jns Co., 76 App. Div. 5, 78 N. Y. Supp. 620; Ryan v. AgricvUwol Ins. Co., 188 Mass. 11, 73 N. E. 849, where pur- chaser was obligated for full purchase price (1905); but see Tabbut v. Ant. Ins. Co., 185 Mass. 419, 70 N. E. 430, and contra, in England, CasteUain v. Prestm, L. R. 11 Q. B. D. 380. But underwriters will seldom, without a struggle, consent to pay in the aggre- gate more than the value of the prop- erty destroyed; and, moreover, the doctrine of subrogation is supposed to prevent an ultimate recovery of more than the insurable value of the prop- erty from the whole body of insurers, see De Hart & Simey, Ins. (1907), 19. In many instances, therefore, prudence dictates that the parties in interest adopt a form of insurance by which they may obtain their full indemnity for any loss without delay and without complications with the underwriters, arranging among themselves to divide up, at their convenience, the insurance moneys collected. The clause at the head of the section provides for this desirable result, and supersedes the warranties regarding sole and absolute ownership. The only safe practice is to join all the assured as parties, either plaintiff or defendant, Lewis v. Guar- dian Ins. Co., 181 N. Y. 392; Kent v. yEtna Ins. Co., 84 App. Div. 428, 82 N. Y. Supp. 817; Besant v. Glens Falls Ins. Co., 72 App. Div. 276, 76 N. Y. Supp. 35; Davis v. Fire Ins. Co., 70 Vt. 217, 30 Atl. 1095. 2 West Coast Lumber Co. v. Ins. Co., 98 Cal. 502, 33 Pac. 258; Graham v. Fire Ins. Co., 48 S. C. 195, 26 S. E. 323; Donaldson v. Ins. Co., 95 Tenn. 280, 32 S. W. 251. Such indorsement "as interest may appear" does not excuse a chattel mortgage without permit. Atlas Reduction Co. v. Ins. Co., 138 Fed. 497. 3Heyl V. ^tna Ins. Co., 144 Ala. 549, 38 So. 118; Grosvenor v. Atl. Ins. Co., 17 N. Y. 391; Wunderlich v. Palatine Ins. Co., 104 Wis. 382, 80 N. W. 471. But it has been held that an accord and satisfaction between owner and insurer does not bind payee if his interest is described in policy as that of mortgagee, Hathaway v. Ins. Co., 134 N. Y. 409, 32 N. E. 40. See § 290, infra. And the burden is on the payee to show what his interest is, Wilcox V. Mitt. Fire Ins. Co., 81 Minn. 478, 84 N. W. 334. 296 MEANING AND LEGAL EFFECT OF FIRE POLICY takes the policy, to be included.^ Who these are may be shown by parol.^ § 239. Measure of Damages. — Not liable beyond actual cash value of the property at the time of loss, with proper deduction for depreciation, however caused. This in express terms excludes remote damages, such as loss from interruption of business, prospective rent or profit, except as these are specifically insured; it also excludes any pretium affectionis. The actual cash, or market, value at the time of the fire rules,' and the purchase price is relevant, if at all, only as bearing upon that.^ If at the place of the fire there is no market price, the fair value must be ascertained; ^ the market value at the nearest place, with cost of transportation, may properly be taken as the criterion.* 1 Hooper v. Robinson, 98 U. S. 528; Duncan v. China Mvi. Ins. Co., 129 N. Y. 237, 29 N. E. 76; Boston Fruit Co. V. Brit., etc., Co. (1906), App. Cas. 336. ^ Newson v. Dovglass, 7 Har. & J. (Md.) 417; Pacific Ins. Co. v. Catlett, i Wend. (N. Y.) 76. But it is not neces- sary that the insured should have any specific individual in mind^to give effect to the clause, Hagan v. Scottish Ins. Co. , 186 U. S. 423, 429, 22 S. Ct. 862. The owners, or others, intended to be cov- ered by such a form may ratify the insurance and take the benefit of it, though ignorant of its existence at the time of the issuance of the policy. Waring v. Indemnity Ins. Co., 45 N. Y. 606. They may ratify even after loss. Hooper v. Robinson, 98 U. S. 528; Fire Ins. Asso. V. Merchants', etc.. Trans. Co., 66 Md. 339; Herkimer v. Rice, 27 N. Y. 163; Bobbitt v. Liverpool, etc., Ins. Co., 66 N. C. 70. If the insured collects the whole amount of the policy, he will hold as trustee the portion of the proceeds belonging to the others. Protection Ins. Co. v. Wilson, 6 Ohio St. 553; Hagedom v. Oliverson, 2 Maule & Selw. 485. "Legal representa- tives" construed in Alford v. Consoli- dated Fire & M. I. Co. , 88 Minn. 478, 93 N. W. 517. "Estate" construed in Phoenix Ins. Co. v. Hancock, 123 Cal. 222, 55 Pac. 905; Weed v. H. B. F. Ins. Co., 133 N. Y. 394, 31 N. E. 231. Extrinsic exidence is admissible to show who were intended, Clinton v. Hope Ins. Co., 4S N. Y. 454. 3 Stenzel v. Penn. Fire Ins. Co., 110 La. 1019, 35 So. 271 (actual value of a building); Mitchell v. Ins. Co., 92 Mich. 594, 52 N. W. 1017; Hickerson v. Ins. Cos., 96 Tenn. 193, 33 S. W. 1041; German Ins. Co. v. Everett (Tex. Civ. App.), 36 S. W. 125. * SneU v. Delaware Ins. Co., 4 Dallas, 430; Birmingham Fire Ins. Co. v. Ptd- ver, 126 111. 329; Brown v. Quincy Ins. Co., 105 Mass. 396; Hilton v. Phosnix Assur. Co., 92 Me. 272, 42 Atl. 412; Waynesboro Mvt. Fire Ins. Co. v. Creaton, 98 Pa. St. 451, 42 Am. Rep. 618. Market value rules more clearly in case of personal property. State Ins. Co. V. Taylor, 14 Colo. 499, 24 Pac. 333 (actual value of a building); Boyd v. Royal Ins. Co., Ill N. C. 372, 16 S. E. 389. ■ 5 Gere v. Council Bluffs Ins. Co., 67 Iowa, 272, 23 N. W. 137. 8 Western Assur. Co. v. Studebaker, 124 Ind. 176, 23 N. E. 1138. Values are largely a matter of opinion. After the property is destroyed it is often difficult to obtain precise proofs of value, Glaser v. Home Ins. Co., 47 Misc. 89, 93 N. Y. Supp. 524. They must be reasonably precise under the circumstances of the case, Goldberg v. Besdine, 76 App. Div. (N. Y.) 451, 78 N. Y. Supp. 776. And the courts have allowed very vague and indefinite Eroof of value when it seemed to be the est obtainable, Thomason v. Capital Ins. Co., 92 Iowa, 72; Tubbs v. Garri- son, 68 Iowa, 44, 25 N. W. 921; Tubbs V. Mechanics' Ins. Co. 131 la. 217, 108 N. W. 324 (cases cited). And see Ly- coming Ins. Co. V. Jackson, 83 111. 302, 25 Am. Rep. 386. But compare Metzger v. Manchester Assur. Co. 102 MEASURE OF DAMAGES 297 The piirchase price, in usual course of business, if not at too re- mote a period, may properiy be received and, though not at all con- clusive, generally furnishes some evidence of present value.* But the assured is entitled to the actual cash value of articles destroyed though they may have cost him nothing.^ Where a manufacturer insures machines of his own make, a usual test of value is what it would cost him to reconstruct them.* He is not entitled to his selling price, since that would include profit.'* The cost of replacing real ^ or personal property often furnishes a fair criterion for estimating the amount of loss; ® but this alone gives no true measure of present value or damage in the case of an old building.'' Neither is the original cost of articles which have been in use for a long time r^able, in itself, to establish present value, inasmuch as proper allowance for depreciation must always be made.* The selling price of damaged goods after the fire often furnishes evi- dence of the extent of damage.^ Mich. 334, 63 N. W. 650; Teerpenning V. Com. Ex. Ins. Co., 43 N. Y. 279. If company's agent inspects before issuing the policy, its amount furnishes some evidence, it is said, that property is worth as much, Maryland Home F. Ins. Co. V. KimmeU, 89 Md. 437, 43 Atl. 764. 1 Johnston v. Farmers' Ins. Co., 106 Mich. 96, 64 N. W. 5; Matter of Johns- ton, 144 N. Y. 563, 567, 39 N. E. 643; Hawver v. BeU, 141 N. Y. 140, 143, 36 N. E. 6; Cheever v. Scot. Union & Nat. Ins. Co., 86 App. Div. 328, 83 N. Y. Supp. 730. 2 Chapman v. Rockford Ins. Co., 89 Wis. 572, 62 N. W. 422, 28 L. R. A. 405. Actual cash value is not what the goods or articles would bring at a forced sale. Sun Fire Office v. Ayersl, 37 Neb. 184, 55 N. W. 635. ^Standard Sewing Machine Co. v. Rm/al Ins. Co., 201 Pa. St. 645, 51 Atl. 354; but see Mitchell v. St. Paid Fire Ins. Co., 92 Mich. 594, 52 N. W. 1017; and Hartford F. Ins. Co. v. Cannon, 19 Tex. CSv. App. 305, 46 S. W. 851. * Niagara Ins. Co. v. Heflin, 22 Ky. L. R. 1212, 60 S. W. 393. But ma- chinery might be out of fashion or well- nigh worthless. The actual value at time of fire is the legal measure, Hercules Ins. Co. v. Hunter, 15 S. S. C. 800, 1st series; Vance v. Foster, Ir. Circ. R. 47. Even a manufacturer may be able to establish a market value as the measure of his indemnity, Frick v. Ins. Co. (Pa.), 67 Atl. 743. In England the doctrine of indemnity was enforced against a landlord in favor of his in- surer where the tenant was obligated to make certain repairs, Yates v. Dunster. 11 Exch. 15, 24 L. J. Exch. 227. ^ ^tna Ins. Co. v. Johnson, 11 Bush (Ky.), 587, 21 Am. Rep. 223; HoUer L. Co. V. Firemen's Fund Ins. Co., 18 Mont. 282, 45 Pac. 207. « Cummins v. Genrw/n-Am. Ins. Co., 192 Pa. St. 359, 43 Atl. 1016; Chmre v. Greenwich Ins. Co., 101 N. Y. 277, 283, 4 N. E. 724; Post Printing Co. v. Ins. Co., 189 Pa. St. 300, 42 Atl. 192; Tex. Moline Plow Co. v. Niagara Ins. Co. (Tex. Civ. App.), 87 S. W. 192 (1905). As to how loss of merchandise is com- puted, see 1 aement, Ins. (1905), 101- 103. As to retail stock see Sherlock v. German^Am. Ins. Co., 21 App. Div. 18, 47 N. Y. Supp. 315, 81 N. Y. St. R. 315, aff'd 162 ISf. Y. 656, 57 N. E. 1124. Loss of manufacturers patterns, see Michels v. Western Underwriters' Assn., 129 Mich. 417, 89 N. W. 56 (1902). ''Scott V. Security Fire Ins. Co., 98 Iowa, 67, 71; Hilton v. Phoenix Assur. Co., 92 Me. 272, 281, 42 Atl. 412. 8 Germier v. Springfield F. & M. Ins. Co., 109 La. 341, 33 So. 361. » Clem'mt v. Brit.-Am. Assur. Co., 141 Mass. 298, 5 N. E. 847. But is not concliisive, Reading Ins. Co. v. Engel- hoff, 115 Fed. 393. As to growing crops insured against hail, see Condon v. Des Moines, etc., Assn., 120 Iowa, 80, 94 N. W. 477; Mcllrath v. Farmers' 298 MEANING AND LEGAL EFFECT OF FIRE POLICY And the difference between the actual cash value of the property just before the fire and its value after the fire, is the measure of in- demnity where the property has been injured and not destroyed.* The word "indemnity" indicates the general rule. Therefore, it has been held that in reinstating a building, damaged or destroyed, any increased cost of rebuilding necessitated by building laws must be taken into account,^ except where the terms of the contract, like those of the standard fire policy, provide otherwise.^ For the same reason the company is entitled to an allowance for any depreciation, since the prime purpose to be accomplished is not profit but reinstate- ment.^ If, during the pendency of the risk, there has been more than one loss under the policy, the recovery in the aggregate is Hmited to the face of the pohcy.^ As has been observed, a somewhat different doctrine is applied in marine insurance law. The word "cash" is omitted from the Massachusetts form. The omission is probably immaterial.® Where valued policy laws prevail, the amount named in the policy indicates the amount payable on a building in case of total loss,'' though such amount in fact exceed the cash value of the property.* MiU., etc., Assn., 114 Iowa, 244, 86 ^ Hevnns v. London Assur. Co., 184 N. W. SlOiBarry v. Same, 110 Iowa, Mass. 177, 68 N. E. 62; Penn. Co. v. 433, 81 N. W. 690. Experts who have Phila. Contributorship, 201 Pa. St. 497, seen the property or who are familiar 51 Atl. 351. with similar property may testify as to sThe provisions of the standard values. Home Ins. Co. v. Sylvester, 25 policy would seem to be quite as con- Ind. App. 207, 57 N. E. 991; Beed v. sistent with the doctrine of indemnity. Washington F. & M. Ins. Co., 138 If a man by letting his wooden house Mass. 572; Burnett v. Am. Cent. Ins. burn down could get a brick or stone Co., 68 Mo. App. 343; Clark v. Baird, 9 house in place of it, he would greatly N. Y. 183; Teerpenning v. Com. Exch. profit. Which new material should Ins. Co., 43 N. Y. 279. This is the furnish the criterion of value, brick or regular and usual method of furnishing stone? proof upon the trial. And if they have i Erb v. German^Am. Ins. Co., 98 not iBxamined the property, hypothet- Iowa, 606, 67 N. W. 583. ical questions may be put as in other 6 Mechanics' Ins. Co. v. Hodge, 149 classes of actions, Latimer v. Burrows, 111. 298, 37 N. E. 51. 163 N. Y. 7, 9, 57 N. E. 95; Chi. & Al. 6 As to measure of recovery see also R. R. V. Glenny, 175 111. 238, 51 N. E. ch. II, supra. 896. An owner. Union Pac. R. Co. v. 7 Westinghouse Electric Co. v West- Lucas, 136 Fed. 374; Tubbs v. Me- em Assur. Co., 42 La. Ann 28 7 So chanics' Ins. Co., 131 Iowa, 217, 108 73; Murphy v. NoHh Brit. & M. Co., N. W. 324 (citmg authorities); or 61 Mo. App. 323; Queen Ins. Co. v. housekeeper, though not strictly an Je^erson |ce Co., 64 Tex. 579 expert, may be allowed to testify to s Borden v. Hingham Mut F Ins values if suitable foundation of knowl- Co., 18 Pick. (Mass.) 623, 29 Am. Dec. edge or experience be first established, 614. Sometimes a deduction may be Rademacher v. Greenwich Ins. Co., 75 made for depreciation occurring since Hun, 83. date of the insurance, Caledonia Ins 1 Commercwl Ins. Co. v. Allen, 80 Co. v. Cooke, 101 Ky. 412, 41 S. W 279- Ala. 571; Burkett v. Georgia Home Ins. Marshall v. Ins. Co., 80 Mo App 18* Co., 105 Tenn. 548, 58 S. W. 848. Valued policy law held to be binding MEASURE OP DAMAGES — TOTAL LOSS OF BUILDING 299 By accepting a policy with a provision repugnant to the law the policyholder does not waive the benefit of the law.^ But the insurer is not bound by the valuation named in the policy, if it is the result of fraud on the part of the assured.^ Where under such a law, there are several policies on a building, their sum total indicates the whole insurable value.* § 240. The Same — ^Total Loss of Building. — ^A building becomes a "total loss," under the valued policy laws, when it is so far de- stroyed that it cannot properly be designated as a building, though some parts of it may remain standing after the fire.* though contract was made in another state, Seyk v. Ins. Co., 7A Wis. 67, 41 N. W. 443, 3 L. R. A. 523; Scottish V. & N. Ins. Co. V. Eustie, 78 Miss. 157, 28 So. 822. 1 Western Assur. Co. v. Phelps, 77 Miss. 625, 27 So. 745; Havens v. G^- mania F. Ins. Co., 123 Mo. 403, 27 S. W. 718, 26 L. R. A. 107, 45 Am. St. R. 570. ^ Haiiford F. Ins. Co. v. Redding (Fla.), 37 So. 62, 67 L. R. A. 518. 3 Wensel v. Property Mut. Ins. Ass., 129 Iowa, 295. * American Cent. Ins. Co. v. Noe, 75 Ark. 406, 88 S. W. 572 (only a glass door was left intact); Palatine Ins. Co. V. TFeiss, 109 Ky. 464, 59 S. W. 509; O'Keefe v. L. & L. & G. Ins. Co., 140 Mo. 568, 41 S. W. 922 (a total loss if to utilize standing walls would cost as much as to rebuild them); Corbett v. Spring Garden Ins. Co., 155 N. Y. 389, 50 N. E. 282, 40 App. Div. 628, 58 N. Y. Supp. 148, aff'd 167 N. Y. 596 Penn. F. Ins. Co. v. Drackett, 63 Ohio St. 57, 57 N. E. 962; Am. Cent. Ins. Co. V. Murphy (Tex. CSv. App.), 61 S. W. 956; Lindner v. St. Paul F. & M. Ins. Co., 93 Wis. 526, 67 N. W. 1125. The question is, has the building lost its identity and specific character as such, has it become so far disinte- grated that it can no longer be prop- erly designated as a building, though some parts may remain standing, Stevens v. Xorwich Union F. Ins. Soc, 120 Mo. App. 88, 96 S. W. 684 (citing cases, and held a question for the jury though the larger part of the house was left standing). "Phrase 'total loss' or 'wholly destroyed,' as used, when applied to the subject of insur- ance, does not contemplate the entire annihilation or extinction of the prop- erty insured. Neither does it require that any portion of the property re- maining after loss shall have no value for any purpose whatever but does mean only that the destruction of the property insured is to such extent as to deprive it of the character in which it was insured. Although some portion of the building may remain after the fire, yet if such portion cannot be reasonably used to advantage in the reconstruction of the building, or will not for some purpose bring more money than sufficient to remove the niins, such building is in contempla- tion of law a 'total loss,' or 'wholly destroyed,' " Liverpool & L. & G. I. Co. V. Heekman, 64 Kan. 388, 67 Pac. 879. See also Williams v. Hartford Ins. Co., 54 Cal. 442, 35 Am. Rep. 77; Northwestern Mut. L. I. Co. v. Rochester German Ins. Co., 85 Minn. 48, 88 N. W. 265 ("total loss" considered as ap- plied to one plant with several build- ings); Ins. Co. T. Bachler, 44 Neb. 549, 62 N. W. 911. So of words "wholly destroyed," Trustees, etc., v. North- western Nat. Ins. Co., 98 Wis. 257, 73 N. W. 767. There is no total loss if remnant standing is reasonably adapted to be used as a basis and part of restora- tion, Prov. Wash. Ins. Co. v. Board of Education, 49 W. Va. 360, 38 S. E. 679; Royal Ins. Co. v. Mclntyre, 90 Tex. 170, 37 S. W. 1068 (would a reason- ably prudent owner utilize the stand- ing portions in rebuilding, is the test). But there is a total loss if remnant standing is unsafe, Thuringia Ins. Co. V. MaUott, 111 Ky. 917, 64 S. W. 991; Murphy v. Am. Cent. Ins. Co., 25 Tex. Civ. App. 241, 54 S. W. 407 (founda- tion walls are not to be taken into account). Bunyon says: "A 'total loss' in the language of fire insurance, 300 MEANING AND LEGAL EFFECT OF FIRE POLICY Under the valued policy laws, if the loss is not total, the measure of damage is the actual loss.' Valued policy provisions relating to total loss of buildings have been introduced into several of the stand- ard fire policies.^ Under such a form of policy the Minnesota court has given careful attention to this subject and has established the following tests: A building is not a total loss unless it has been so far destroyed by the fire that no substantial part or portion of it above the foundation remains in place capable of being safely utilized in restoring the building to the condition in which it was before the fire. The words "total loss," when applied to a building, mean totally destroyed as a building; that is, that the walls, although some portion of them remain standing, are unsafe to use for the pur- pose of rebuilding, and would have to be torn down and a new build- ing erected throughout. There can be no total loss of a building so long as the remnant of the structure left standing above the founda- tion is reasonably and safely adapted for use (without being taken down) as a basis upon which to restore the building to the condition in which it was immediately before the fire; and whether it is so adapted depends upon the question whether a reasonably prudent owner of a building uninsured, desiring such a structure as the one in question was before the fire, v/ould, in proceeding to restore the building, utilize such standing remnant as such basis. If he would, then the loss is not total.* § 241. Measure of Damage — ^As Affected by Provision as to Re- pairing. — The provision that the liability of the underwriters shall in no event exceed what it would then cost the insured to repair or replace, with materials of Uke kind and quality, is not restricted to a does not then mean, as in marine in- And where a building insured is located surance, the total destruction of the within the fire limits and its repair property, but its destruction or injury after fire is prevented under the terms to such an extent as to render the in- of a city ordinance defining the char- surer liable to pay the total sum in- acter of authorized construction, the Bured," Bimyon, F. Ins. (5th ed.), 244. insured may recover as for a total loss, Question of total loss when for jury, deducting for any value of the remains see I 93. Statutes allowing counsel in excess of the cost of removal, Larkin fee to successful plaintiff in case of v. Glens Falls Ins. Co., 80 Minn. 527, total loss not imconstitutional, § 6. 83 N. W. 409. It is permissible for a 1 Lancashire Ins. Co. v. Bush, 60 plaintiff to allege a total loss and re- Neb. 116, 82 N. W. 313. Under a use cover a partial loss, Moore v. Ins. Co., and occupancy policy on a hotel the 100 Minn. 374, 111 N. W. 260. loss is total where, though the damage 2 For example, Minnesota, New by fire and water does not extend to Hampshire, and South Dakota, all the rooms, nevertheless, the build- ^Northwestern Mut. L. Ins. Co. v. ing is so far destroyed that the business Rochester German Ins. Co., 85 Minn. cannot be carried on until repairs are 48, 88 N. W. 265 (citing many authori- made, Chatfield v. .Stna Ins. Co., 71 ties); Northwestern Mvi. L. Ins. Co. v. A.pp. Div. 164, 75 N. Y. Supp. 620. Sun Ins. Office, 85 Minn. 65, 88 N. W. COINSURANCE AND OTHER SPECIAL CLAUSES, ETC. 301 case where the underwriter elects to rebuild, but fixes the extreme limit of liability in all cases.^ § 242. Coinsurance and Other Special Clauses Modifying Measure of Liability. — The extent of the insurer's hability is often modified by particular claiises; as, for example, one of the various forms of coinsurance clauses or average clauses of which specimens are given in the Appendix, or a special clause limiting liability to two-thirds or three-fourths of the value of the property. The object of the coinsurance clause is to compel the insured to take out insurance to the designated percentage of the value of his property, usually either eighty or one hundred per cent,^ or else be- come his own insurer to the amount of the deficiency; and the average clause applies where property is insured as an entirety, though located in several places or buildings in proportions perhaps unknown to the insurers, or in shifting proportions, and its object is to ratably dis- tribute the insurance over all the properties, so that in case of a loss in one place, the insured cannot call upon the total amount, but only the ratable amount of insurance, for contribution to such a localized In determining the measure of the underwriter's liability, full effect must be given to these restrictive clauses;* but not when they are inconsistent with statutory requirements.'' In the absence of a coinsurance clause, the assured collects his whole loss, if that does not exceed his insurance, and his whole insurance, if that does not exceed 272; PoppUz v. Oerman Ins. Co., 85 Millis v. Scot. Union & Nat. Ins. Co., Minn. 118, 88 N. W. 438. 95 Mo. App. 211 (three-fourths clause); 1 Heunns v. London Assur. Co., 184 . Catoosa S. Co. v. lAnch, 18 Misc. Mass. 177, 68 N. E. 62; McCready v. (N. Y.) 209, 41 N. Y. Supp. 377 (co- Hartford Fire Ins. Co., 61 App. Div. insurance clause); Penn. Fire Ins. Co. (N. Y.) 583, 70 N. Y. Supp. 778; v. Moore, 21 Tex. Civ. App. 528, 51 Stand. Sewing Mach. Co. v. Royal Ins. S. W. 878 (coinsurance clause). Co., 201 Pa. St. 645, 51 Atl. 354 (1902); * For example, valued policy laws, Ins. Co. v. Board, 49 W. Va. 360, Sachs v. L. & L. Fire Ins. Co., 113 Ky. 38 S. E. 679. 88, 67 S. W. 23; Hickerson v. Ins. Co., 2 Where assured has option to choose 96 Tenn. 193, 33 S. W. 1041. The either eighty per cent or full coin- Michigan court has decided that under surance clause, the latter usually its statutes the insurer cannot add a carries a lower rate of premium, Belt coinsurance clause. Attorney General V American Central Ins. Co., 148 N. Y. v. Commissioner of Ins. (Mich., 1907), 624, 43 N. E. 64, 29 App. Div. 546, 112 N. W. 132 (reasons for coinsur- 53 N. Y. Supp. 316, aff'd 163 N. Y. ance clauses explained). But see fol- 555, 57 N. E. 1104, resulting difference lowing cases in which it is held that in recovery is given. coinsurance clauses are not incon- 3 Blinn v. Ins. Co., 85 Me. 389, 27 sistent with statutes. Firemen's Fund Atl. 263 (two-thirds value clause); Ins. Co. v. Pekor, 106 Ga. 1, 31 S. E. Chesebrotiqh v. Home Ins. Co., 61 Mich. 779; Quinn v. Fire Assn., 180 Mass ?33, 28 N. W. 110 (four-fifths clause); 560, 62 N. E. 980. 302 MEANING AND LEGAL EFFECT OF FIRE POLICY his loss. With a coinsurance clause present, the foregoing rule of recovery is modified, and the recovery reduced, but only if the in- surance and the loss are both below the percentage of value, usually eighty, or one hundred per cent, as named in the clause. If either insurance or loss equals or exceeds the specified percentage of values, the clause is inoperative. Simple examples, prepared by Mr. Willis O. Robb, secretary of the loss committee of the New York Board of Fire Underwriters, showing in figures the operation of the coinsur- ance clauses, are given in the Appendix.^ Certain states have passed statutes prohibiting the insertion of a coinsurance clause in the policy, except as the insured may volun- tarily accede to it in consideration of a lower rate of premium.^ Such statutes are enforcible.^ § 243. Insurance Payable Sixty Days After Satisfactory Proofs. — Any insurance money due under the terms of the policy is not pay- able until after sixty days from receipt by the insurer of proofs of loss.* § 244. Reinstatement Clause. — Optional with company to take all or any part of the articles at ascertained or appraised value, or to re- build or replace property, lost or damaged, within reasonable time, on giving notice within thirty days after receipt of proofs, but there can be no abandonment to the company of the property. The company reserves these options to protect itself against extravagant claims, and to prevent disputes as to the amount of damage.® The right of giving notice of election to rebuild or replace expires 1 Ch. III. As to the effect of the garded under the circumstances of the coinsurance clause on apportionments case, not necessarily satisfactory to the see Mr. Robb's discussion, last note to insurer, Robinson v. Palatine Ins. Co., § 318, infra. As to measure of recov- 11 N. M. 162, 66 Pac. 535; Boyle v. ery when some of the policies contain, Hamburg-Bremen F. Ins. Co., 169 Pa. and some do not contain, a coinsurance St. 349; Georgia Home Ins. Co. v. clause, see § 317, injra. Goode,95 Va. 751, 30 S. E. 366; BiH- 2 Appendix, ch. I. myer v. Hamburg-Bremen F. Ins. Co., 3 Block V. American Ins. Co. (Wis., 57 W. Va. (1905) , 42, 49 S. E. 901 (sub- 1907), 112 N. W. 45. stantial compliance sufficient). Where ^Gillon V. Northern Assur. Co., 127 the insurer denies liability some cases Cal. 480, 59 Pac. 901; Putze v. Sagi- hold that the insured need not wait naw, etc., Ins. Co., 132 Mich. 670, 94 sixty days, but may sue at once, Frost N. W. 191. And see Kelly v. Supreme v. North Brit. & M. Ins. Co 77 Vt Council, 46 App. Div. 79, 61 N. Y. 407, 60 Atl. 803. Supp. 394. "Sixty days" held to run 5 Without such clause insurer would from receipt of regular proofs, not of have no such option, Branigan v. subsequently required duplicate bills, Jefferson, etc., Ins. Co., 102 Mo. App. Mna Ins. Co. v. McLead, 57 Kan. 70, 76 S. W. 643. In practice rem- 95, 46 Pac. 73. "Satisfactory proofs" statement is for the most part limited means proofs that ought to be so re- to buildings and machinery. REINSTATEMENT CLAUSE 303 thirty days after service of the proofs of loss and does not begin to run from any subsequent award or appraisal.^ But the right of the company to take the damaged goods at the appraised value certainly must survive until after the award.^ Therefore^ until after the award, if there be one, and in any event until after the expiration of thirty days succeeding service of proofs, it would be highly imprudent for the assured, except in case of necessity, or with notice to the company,* to sell or dispose of the damaged property, since thereby he may incur forfeiture of his insurance.'* If the company once elect to do so, they must reinstate, and cannot afterwards repudiate their election.^ And the converse is also true, for the selection of either alternative constitutes an abandonment of the other.® The election to restore or rebuild involves not only the rejection of the right to pay the amoxmt of damage estimated on a cash basis,'' 1 7ns. Co. V. Hope, 58 lU. 75, 11 Am. Rep. 48; McAUaster v. Niagara Fire Ins. Co., 156 N. Y. 80, 50 N. E. 502; Maryland Home 7ns. Co. v. Kimmel, 89 Md. 437, 43 Atl. 764- compare Kelly v. Sun Fire Office, 141 Pa. St. 10, 21 Atl. 447. But the court will readily infer a waiver of this right, Davis v. Am. Central Ins. Co., 7 App. Div. 488, aff'd 158 N. Y. 688. If proofs are waived period of option begins to run from waiver. Farmers,' etc., Ins. Co. v. Warner, 70 Neb. 803, 98 N. W. 48. The option may be exercised at any time within the thirty days, Lanca- shire Ins. Co. V. Barnard, 111 Fed. 702, 49 C. C. A. 569. Option may be shown without formal notice by sending workmen, starting work, etc., Fire Assn. V. Rosenthal, 108 Pa. St. 474, 1 Atl. 303. It is said that an offer to repair cannot be coupled with one of compromise, Bieger v. Mechanics' Ins. Co., 69 Mo. App. 674. 2 Hamilton v. L. & L. & G. Ins. Co., 136 U. S. 242, 10 S. Ct. 945. 3 Davis V. Grand Rapids Fire Ins. Co., 15 Misc. 263, 36 N. Y. Supp. 792, aff'd 157 N. Y. 685, 51 N. E. 1090; Palatine Ins. Co. v. Morton Scott Co., 106 Tenn. 558, 61 S. W. 787; NoHh German Ins. Co. v. Morton Scott Co., 108 Tenn. 384, 67 S. W. 816. * Hamilton v. L. & L. & G. Ins. Co., 136 U. S. 242; Astrich v. GermannAm. Ins. Co., 131 Fed. 13; KeUy v. Sun Fire Office, 141 Pa. St. 10, 21 Atl. 10. Valued policy laws are not necessarily inconsistent with the election to re- build or repair contained iu a standard policy established by legislative en- actment of the same state, Temple v. Niagara Fire Ins. Co., 109 Wis. 372, 85 N. W. 361. But as to effect of valued policy laws in rendering option to rebuild nugatory, see Mil. Mech. Ins. Co. v. Russell, 65 Ohio St. 230, 62 N. E. 338, 56 L. R. A. 159; Marshal V. 7ns. Co., 80 Mo. App. 18, 23; Comr- merciaZ Union Assur. Co. v. Meyer, 9 Tex. C!iv; App. 7, 29 S. W. 93; Royal Ins. Co. v. Mclntyre (Tex. Civ. App.), 34 S. W. 669. ^Henderson v. Crescent Ins. Co., 48 La. Ann. 1176, 20 So. 658; Fire Assn. V. Rosenthal, 108 Pa. St. 474, 1 Atl. 303. * Times Fire Assur. Co. v. Hawke, 1 Fost. & P. 406; Scottish, etc., Assn. v. Northern Assur. Co., 11 S. S. C. 4th series, 287. A positive refusal to re- build is an irrevocable election. Plait v. Mna Ins. Co., 153 111. 113, 38 N. E. 580. Reinstating' of machinery does not of necessity mean putting it back in the same building, if that is im- possible, Aiicferson v. Commercial Union Assur. Co., 55 L. J. Q. B. N. S. 146, 34 W. R. 189. But if after notice of elec- tion the insurer fails to rebuild or repair then the insured, at his option, may maintain action for the insurance money, Langan v. JEtna Ins. Co., 99 Fed. 374, aff'd 108 Fed. 985, 48 C. C. A. 174 (the company has no right to refuse to go on with rebuilding be- cause cost of construction has in- creased). ' Zaleshy v. Iowa State Ins. Co., 102 304 MEANING AND LEGAL EFFECT OF FIRE POLICY but also the waiving of all those provisions of the contract having reference to that method of performance. From the time of such election the contract between the parties becomes a new and inde- pendent undertaking on the part of the insurers to build or repair the subject insured, and to restore it to its former condition,* and the measure of damages for a breach of this substituted contract of re- placing does not necessarily depend on the amotmt of damage inflicted by the peril insured against,^ nor is it limited by the amount of insurance.^ But, if the insured refuses to permit the insurer to replace, the latter having seasonably elected to do so, the former can maintain no action upon the policy.^ If the insurers, in the at- tempt to restore the property, do more than their contract obligates them to do, they cannot claim allowance for the excess of value.* If, without fault of the insured, the company either neglects to com- plete the work or is prevented from doing so by the interference of the public authorities, the loss will fall upon the insurers.^ So, also, if during the rebuilding or repairing, the property is again burned; for here, too, through no fault of the insured, the insurers have failed to fulfill their contract. Whether the work of repairing or rebuilding is done properly and within a reasonable time, must generally be a question for the jury,^ and for any breach of their obligations the insurers will be held re- sponsible, according to the ordinary rules of damage.* Iowa, 512, 70 N. W. 187; Heilmann afforded, Northwestern Ins. Co. v. V. Westchester Ins. Co., 75 N. Y. 7. Woodward, 18 Tex. Civ. App. 496, 45 1 Hartford Ins. Co. v. Peeble's Hotel S. W. 185. Assured may meanwhile Co., 82 Fed. 546, 27 C. C. A. 223; make necessary repairs, Eliot Savings Zalesky v. Iovm State Ins. Co., 102 Bank v. Commercial Union Assur. Co., Iowa, 512, 70 N. W. 187; Heilmann v. 142 Mass. 145, 7 N. E. 550. Westchester F. Ins. Co., 75 N. Y. 7. ^ Brirdey v. National Ins. Co., 11 A building substantially the same as Mete. (Mass.) 195. to material, size, and form, Beals v. "Thus where during reinstatement Home Ins. Co., 36 N. Y. 522. the commissioner of sewers considered ^Wynkoop -v. Niagara Fire Ins. Co., the premises dangerous, and caused 91 N. Y. 478, 43 Am. Rep. 686; Morrell the buildings to be removed, Brown v. V. IrvingFire Ins. Co., 33 N. Y. 429, Royal Ins. Co., 1 El. & El. 853, 28 88 Am. Dec. 396. Election to rebuild L. J. Q. B. 275. The company must waives all known forfeitures, Bersche comply with city ordinances. Fire V. Globe Ins. Co., 31 Mo. 546. Assoc, v. Rosenthal, 108 Pa. St. 474; 3 Henderson v. Crescent Ins. Co., 48 Hewins v. London Assur Co 184 La. Ann. 1176, 20 So. 658. If con- Mass. 177, 68 N. E. 62. And if police construction costs less than amount of authorities prohibit rebuilding assured policy, it has been said the balance may recover as for a total loss, Monte- remains in force during term of policy, leone v. Royal Ins. Co., 47 La. Ann. Trull V. Roxbury Ins. Co., 3 Cush. 1563, 18 So. 472. (Mass.) 263. 7 Raskins v. Hamilton Mut. Ins. Co., < Daul V. Firemen's Ins. Co., 35 La. 5 Gray (Mass.), 432. Ann. 98 (there must be a clear refusal); « For defective construction, ffen- Beals v. Home Ins. Co., 36 N. Y. 522. derson v. Sun Mut. Ins. Co , 48 La. Not so if opportunity to repair was Ann. 1031, 20 So. 164. For delay, ilm. THIS ENTIRE POLICY SHALL BE VOID 305 The rebuilding clause has been Jheld to have no application to a mortgagee's policy, or to a standard mortgagee clause; ^ but where there is simply an indorsement "loss if any payable to mortgagee," the mortgagee is not a contracting party but a mere appointee to receive payment and the rebuilding clause is operative.^ The Massachusetts standard policy has a similar provision allow- ing the company to restore upon giving notice within fifteen days after the proofs of loss are submitted, and the company is declared not liable for more than the sum insured with interest.^ § 245. There Can be no Abandonment to Insurer. — The marine doctrine of constructive total loss is thus expressly excluded; it has been held in this country that an insurer, though covering full value by his poUey, does not, upon settling for a total loss, become entitled to take any damaged remains of the property, or salvage subsequently reaUzed from them."* § 246. This Entire Policy Shall be Void. — Before this phrase was inserted in the policy, the better opinion was that the contract of insurance was severable in those cases where it covered several classes of property which were insured in separate amounts, either at separate rates or for a gross premium, and provided the breach of warranty related only to a portion of the items.^ The phraseology of the New York standard policy was doubtless intended by its framers to prevent the application of this equitable rule of construction, and courts of many jurisdictions, in passing upon this important question, have held that such is its legal intend- ment.* Cent. Ins. Co. v. McLanathan, 11 Kan. ferson Iris. Co., 102 Mo. App. 70, 76 533. Must make property as service- S. W. 643. able and valuable as before, CoromerciaZ ^ Thuringia Ins. Co. v. Mallot, 111 F. Ins. Co. V. AUm, 80 Ala. 571, 1 So. Ky. 917, 64 S. W. 991; lAscmn v. 202, if several insurers have joined Boston, etc., F. Ins. Co., 50 Mass. 205; they must contribute towards the dam- St. Clara Academy v. Ins. Co., 98 age, HaHfm-d Ins. Co. v. Peeble's Hotel Wis. 257, 73 N. W. 767. Contra, Co. , 82 Fed. 546, 27 C. C. A. 223. German Ins. Co. v. Eddy, 36 Neb. 461 , 1 Hastings v. Westchester Fire Ins. 54 N. W. 856; Bunyon, Ins. (1906), 23, Co., 73 N. Y. 141. 236, 244. This author concludes that 2 HeiZmann v. Westchester Fire Ins. under English policy the insurer on Co., 75 N. Y. 7. A demand for ap- paying a total loss is entitled to salvage praisal is a waiver of option to rein- though it chance to exceed the amount state, Elliott v. Merchants', etc., Ins. of insurance, ifcid., 245. Co., 109 Iowa, 39, 79 N. W. 452; = See § 115, supra. AUiance, etc., Ins. Co. v. Arnold, 65 « Some of the following cases so hold Kan. 163, 69 Pac. 174. even without the aid of the phraseology 'Option to rebuild is denied by contained in the standard form, Dujnas statute in Missouri, Branigan v. JeJ- v. Northwestern Nat, Ins. Co., 12 App. 20 306 MEANING AND LEGAL EFFECT OF FIRE POLICY An example may be taken from the Washington reports. The policy of the insured issued for the gross premium of $42.75 was distributed, $125 on beds; $350 on furniture; and $300 on piano. A total loss by fire occurred. The company refused to make any payment, basing its refusal on the ground that the insured was not the owner of the piano. On the trial it appeared that the piano was held under a contract of conditional sale taken in the name of the daughter of the insured, title not to pass until the full pur- chase price of $325 was paid, insurance thereon meanwhile to be maintained for the benefit of the sellers. At the time of the fire only $120 had been paid on account. The court held that though the plaintiff had an insurable interest in the piano, nevertheless, the warranty respecting unconditional and sole ownership having been broken, the entire contract was avoided, and there could be no recovery, even for the loss of the other items of furniture.^ To similar effect is a Georgia case in which the court reviewed many authorities. Knight, the insured, paid a gross premium for his policy, covering in separate amounts his building, and stock of merchandise therein. The policy contained an iron safe clause re- quiring the insured to take and preserve an annual inventory of D. C. 245, 40 L. R. A. 358 (chattel mortgage on part of household effects avoids whole policy); Essex Savings Bk. V. Meriden Fire Ins. Co., 57 Conn. 335 (breach as to building avoids as to contents also); Southern F. Ins. Co. v. Knighi, 111 Ga. 622, 36 S. E. 821 (breach as to stock avoids as to building also); Geiss v. Franklin Ins. Co., 123 Ind. 172, 24 N. E. 99 (breach as to ownership of part avoids the whole); Kahler v. Iowa State Ins. Co., 106 Iowa, .380, 76 N. W. 734 (breach as to build- ing avoids as to machinery); Republic Co. Mut. F. Ins. Co. v. Johnson, 69 Kan. 146, 76 Pac. 419 (vacancy avoids entire contract); Germier v. Springfield F. & M. Ins. Co., 109 La. 341, 33 So. 361 (breach as to building avoids also as to contents); Thomas v. Commercial Union Assur. Co., 162 Mass. 29, 37 N. E. 672; Parsons v. Lane, 97 Minn. 98 (building on leased ground avoids also as to personalty); AgricvUwal Ins. Co. V. Hamilton, 82 Md. 88, 33 Atl. 429, 30 L. R. A. 633, 51 Am. St. R. 457 (unocoupancy avoids also as to con- tents); Baldwin v. Hartford F. Ins. Co., 60 N. H. 422, 49 Am. Rep. 324 (sale of one building avoids as to all); Martin v. Ins. Co. of N. A., 57 N. J. L. 623, 31 Atl. 213; Cuthbertson V, N. C. Home Ins. Co., 96 N. C. 480, 2 S. E. 258 (breach as to building avoids as to contents); Coggins v. mfna Ins. Co., 56 S. E. 506, 36 Ins. L. J. 354 (breach of iron safe clause avoids as to build- ing also); Gennania Fire Ins. Co. v. Schild, 69 Ohio St. 136, 68 N. E. 706, 100 Am. St. R. 663 (insurance was on contents of which one item was not owned absolutely; policy avoided); Elliott V. Teutonia Ins. Co., 20 Pa. Super. Ct. 359 (breach as to ownership of machinery avoids as to building and stock); Dow v. Nat. Assur. Co., 26 R. I. 379, 58 Atl. 999 (breach as to owner- ship of part of contents avoids entire policy); McWiUiams v. Cascade F. & M. Ins. Co., 7 Wash. 48, 34 Pac. 140 (misstatement as to piano; whole policy avoided); Carey v. Ger.-Am. Ins. Co. 84: Wis. 80, 54 N. W. 18, 36 Am. St. R. 907, 20 L. R. A. 267 (attachment of part of goods avoids as to all; but see Loomis v. Rockford Ins. Co., 77 Wis. 87). Following case holds that policy is entire as to all articles in- sured as a separate class, Home F. Ins. Co. v. Bemstem, 55 Neb. 260, 75 N. W. 839. 1 McWiUiams v. Cascade Fire, etc., Ins. Co., 7 Wash. 48, 34 Pac. 140. THE ENTIRE POLICY SHALL BE VOID 30? Stock, which he failed to do. The court held that the premium being entire, the breach of warranty was a bar to recovery not only for loss of stoak, but also for loss of building; and reversed the judg- ment rendered for the plaintiff below.^ So also in a late case the Federal Circuit Court, interpreting the New York standard policy, concludes that by weight of reason and authority, a chattel mort- gage on personalty will forfeit the poHcy also as to realty, though the insurance covers them by separate amounts.^ Several other courts, however, regarding it as incredible to suppose , that for some trifling mistake, relating perhaps only to one of many items of property insured, the parties should intend to abrogate the entire contract, have endeavored to give effect to the main purpose of the policy by practisally ignoring the words "this entire policy shall be void," and by applying the same rule of interpretation that formerly prevailed without them. This conclusion is sought to be justified by the New York Court of Appeals on the ground that un- like the policy construed in Smith v. The Agricultural Ins. Co.,^ the standard policy does not make breaches of warranty apply to "any part of the property," but only to the property generally.'* This lack of precise definition, it is thought, permits a narrowing of the effect of the breach to the portion or class of property actually affected by the breach. A poUcy of $2,000 issued to Knowles for a single premium, in- sured $1,200 on hops grown in 1889, and $800 on hops grown in 1890, separately stored in one hophouse. Without the required written permit from the company, the crop of 1889 was incum- bered by a chattel mortgage; the court decided, though "with 1 Soythem Fire Ins. Co. v. Knight, building); Knowles v. Am. Ins. Co., Ill Ga. 622, 36 S. E. 821. 66 Hun, 220, 21 N. Y. Supp. 50, aff'd i Fries-Breslin Co. v. Star Fire Ins. 142 N. Y. 641, 37 N. E. 567 (chattel Co., 154 Fed. 35, 36 Ins. L. J. 804. mortgage on one of two crops does not 3 118 N. Y. 522, 23 N. E. 883 (often avoid aa to other); King v. Tioga Co. cited without reference to particular Fire R. Asso., 35 App. Div. 58, 54 wording of the policy). N. Y. Supp. 1057; Kieman v. Agri- * Donley v. Glens Falls Ins. Co., 184 cultural Ins. Co., 81 Hun, 373, 30 N. Y. N. Y. 107, 76 N. E. 914. Thus in apite Supp. 892 (breach, either as to realty of word "entire" the policy is held or personalty, does not avoid as to the not to be avoided as to the whole by a other); Adl^ v. Germania F. Ins. Co., breach affecting only a part. Firemen's 17 Misc. 347 (chattel mortgage on Fund Ins. Co. v. Barker, 6 Colo. App. part of personalty does not avoid as to 535, 41 Pac. 513; Trabue v. DwelUng the whole); Miller v. Del. Ins. Co., 14 House Ins. Co., 121 Mo. 75, 25 S. W. Okla. 81, 75 Pac. 1121 (if different 848, 23 L. R. A. 719, 42 Am. St. R. classes of property are insured, con- 523 (change of title as to real estate tract is severable). See many cases does not avoid as to personalty); cited in § 115, supra, also in Parsons Kieman v. Dutchess Co. Mvi. Ins. Co., v. Lane, 97 Minn. 124, 106 N. W. 150 N. Y. 190, 194, 44 N. E. 698 485. (chattel mortgage does not avoid as to 308 MEANING AND LEGAL EFFECT OF FIRE POLICY hesitation," that the breach of warranty avoided the insurance only as to the crop of 1889.* Other courts hold that the contract being entire, the breach must affect the entire subject-matter before any forfeiture at all will result, a doctrine which certainly presents an ingenious, if not reasonable method of turning the tables upon the underwriters who framed the clause.^ Such a construction, however, is not only strained, but involves a wide departure from principles established at common law.* More satisfactory than the last rule, doubtless, is the following, that where the facts constituting an alleged breach affect the item of property in question, or where the risk itself must fairly be con- sidered indivisible, the contract should not be severed for the purpose of avoiding forfeiture as to part.'* Parsons, Rich & Co. took out a policy for $1,000 apportioned over building, machinery, stock, supplies, etc. Without permit of the insurer the building stood on leased ground and not on ground owned by the insured in fee simple. The court concluded that by reason of the breach the moral hazard was increased on the con- tents of the building as well as on the building itself, and therefore the entire contract wa§ avoided.^ If, however, there be not only a gross premium but also no separate apportionment of amounts of the insurance, then, by the clear weight of authority as deduced from numerous decisions cited in this section, a breach affecting part of the subject-matter avoids the whole con- tract.® I Knowles v. American Ins. Co., 66 Johnson, 69 Kan. 146, 76 Pae. 419 Hun, 220, 21 N. Y. Supp. SO, aff'd 142 (1904) (vacancy of house avoids as to N. Y. 641, 37 N. E. 567. In a later stable, comcrib and contents); Agri- case the court intimates a doubt as to cultural Ins. Co. v. Hamilton, 82 Md. the soundness of this rule on the merits, 88, 33 Atl. 429, 30 L. R. A. 633, 51 184 N. Y. 111. A chattel mortgage on Am. St. R. 457 (vacancy of house cattle does not avoid the policy as to avoids as to its contents); Parsons v. the house and furniture, Taylor v. Lane, 97 Minn. 98, 124, 106 N. W. 485 Anchor Mut. F. Ins. Co., 116 la. 625, (citing many recent cases. If building 88 N. W. 807, 57 L. R. A. 328, 93 is on leased ground a breach is in- Am. St. R. 261. curred as to contents also); Brehm iMcQueeny v. Phanix Ins. Co., 52 Lumber Co. v. Svea Ins Co 36 Wash Ark. 257, 12 S. W. 498, 5 L. R. A. 744, 520, 526, 79 Pac. 34 (shutting down 20 Am. St. R. 179 (vacancy in one of main factory thirty days avoids as to two houses held to be harmless even other structures and contents though as to the vacant house). And see the latter were somewhat in use); Central Montana Mines Co. v. Fire- Dohlaniry v. Blue Mounds F. & L. Ins. TOen's JJ'Mnd /ns. Co., 92 Minn. 223, 99 Co., 83 Wis 181 53 N W 448 N. W. 1120, 100 N. W. 3. 5 Parsons v. Lane, 97 Minn 9: sHoffecker v. New Castle, etc., Ins. N. W. 485 (elaborate citation of au- ^o., 4 Houst. (Del.) 306; Hoffecker v. thorities). ns. Co., 5 Houst. (Del.) 101. e Fitzgerald v. Allerton Home 7ns, * Republic Co. Mut. F. Ins. Co. v. Co., 61 App. Div. 350, 70 N. Y. Supp. TEMPORARY BREACH 309 Again in case of fraud of any kind,, and though directly affecting only a single item, whether committed to procure the policy, or during its life or in the proofs of loss, no indulgence is extended to the in- sured. By the plain terms, of the poUcy as well as at common law, fraud as to a part vitiates the whole.* The word "entire" is omitted from the similar clause of the Massa- chusetts form. Nevertheless, the Massachusetts court holds, that if the premium be an entire amount, though the insurance be appor- tioned, the contract is not severable, and forfeiture as to any one item defeats the whole claim of the insured.^ § 247. Temporary Breach. — Where, as in the case of the New York standard fire pglicy, it is expressly provided that the entire contract shall be avoided by breach of a condition or warranty, it is held by the weight of reason and by the better authority that a temporary breach avoids, and that the contract can thereafter be revived only by the insurer's consent, or by his misleading conduct from which, under the doctrine of estoppel, the court may infer his consent,' though in many courts the opposite view prevails. These 552, 72 App. Div. 629, 76 N. Y. Supp. 1013, aff'd 175 N. Y. 494, 67 N. E. 1082. 1 German Ins. Co. v. Reed, 9 Ky. Law R. 929; Hamberg v. St. Paul F. & M. Ins. Co., 68 Minn. 335, 71 N. W. 388; Ins. Co. v. Connelly, 104 Tenn. 03, 56 S. W. 828; Worachek v. New Denmark Ins. Co., 102 Wis. 88, 78 N. W. 411. 2 Thomas V. Commercial Union Assur. Co., 162 Mass. 29, 37 N. E. 672, 44 Am. St. R. 323 (house and stable); Lee V. Howard F. Ins. Co., 3 Gray (Mass.), 583; Brown v. People's Mvt. Ins. Co., 11 Gush. (Mass.) 280; Friesmuth v. Agawam Mvt. F. Ins. Co., 10 Cush. (Mass.) 587. But if a portion of the property is sold without the insurer's consent, that portion simply is re- moved from the operation of the policy, BuUman v. North Brit. & Mer. Ins. Co., 159 Mass. 118, 34 N. E. 169. 3 Imperial Fire Ins. Co. v. Coos County, 151 U. S. 452, 14 S. Ct. 379, 38 L. Ed. 231 (full Compliance with all warranties a condition precedent to recovery); Georgia Home Ins. Co. v. Rosenfield, 95 Fed. 358, 37 C. C. A. 96 (temporary other insurance); German- Am. Ins. Co. V. Humphrey, 62 Ark. 348, 35 S. W. 428, 64 Am. St. R. 297 (temporary incumbrance); Beplogle v. Am. Ins. Co., 132 Ind. 360, 31 N. E. 947 (temporary other insurance); Ger- man Ins. Co. V. Russell, 65 Kan. 373, 69 Pac. 345, 58 L. R. A. 234 (tem- porary vacancy) ; Concordia F. Ins. Co. V. Johnson, 4 Kan. App. 7, 45 Pac. 722 (illegal use); Kyte v. Connecticut Union Assur. Co., 149 Mass. 116, 21 N. E. 361, 3 L. R. A. 508 (temporary increase of risk); Home F. Ins. Co. v. Kuhlman, 58 Neb. 488, 78 N. W. 936, 76 Am. St. R. Ill (vacancy, but court thrust on company burden of actively taking advantage of known forfeiture); Moore v. Phoenix Ins. Co., 62 N. H. 240, 13 Am. St. R. 556 (vacancy); Wheeler v. Traders' Ins. Co., 62 N. H. 450 (use of prohibited articles); New- port Improvement Co. v. Home Ins. Co. , 163 N. Y. 237, 242, 57 N. E. 475 (building alterations); Mead v. North- western Ins. Co., 7 N. Y. 530 (tem- porary use of camphene); Couch v. Farmers' F. Ins. Co., 64 App. Div. 367, 72 N. Y. Supp. 95 (temporary va- cancy); Gray v. Guardian Assur. Co., 82 Hun, 380, 31 N. Y. Supp. 237 (temporary chattel mortgage); Eng. Mar. Ins. Act (1906), §34(2); De Hahn v. HaHley (1786), 1 T. R. 343 (1787), 2 T. R. 186 n. (ship warranted to sail with fifty hands made good the number before loss; policy void); Quebec Mar. Ins. Co v. CommerdM 310 MEANING AND LEGAL EFFECT OF FIRE POLICY courts, departing from the doctrine of the common law and ignoring the plain language of the contract, have seen fit to make a new con- tract for the parties which is deemed to be in fairer terms.* Certain statutes, however,^ and certain standard policies * provide that breach of certain warranties shall cause forfeiture only where the loss occurs during the breach or where the fact constituting the breach is a contributory cause of the loss. § 248. Concealment — Misrepresentation. — // the insured has con- cealed or misrepresented, in writing or otherwise, any material fact. As has been observed,'* in this country by the prevailing rule, conceal- ment of a material fact to avoid the fire policy must be shown to have been intentional if there be no express provision of the contract to the contrary. This clause, apparently, was intended to make obligatory here the rule on this subject obtaining in England with- out express provision, but the current of authority in this country construes the word " concealment," appearing in this clause, to mean as theretofore "an intentional withholding of a material fact." The Bk. (1870), L. R. 3 P. C. 234 (ship unseaworthy with defect in boiler repaired before loss; policy void). ^Sumter Tobacco Warehouse Co. v. Phamix Ins. Co. (S. C, 1907), 56 S. E. 654 (citing many cases pro and con); Adair v. Ins. Co., 107 Ga. 297, 33 S. E. 78, 73 Am. St. R. 122; Tompkins v. Hartford P. Ins. Co., 22 App. Div. 380, 49 N. Y. Supp. 184; Organ y. Hibemia F. Ins. Co., 3 Mo. App. 576 ("an in- terruption is not a forfeiture"). So as to temporary increase of hazard, Traders' Ins. Co. v. Catlin, 163 111. 256, 45 N. E. 255, 35 L. R. A. 595. Tem- porary other insurance. Phoenix Ins. Co. V. Johnston, 42 111. App. 66; Ins. Co. of N. A. V. McDowell, 50 111. 120; Royal Ins. Co. v. McCrea, 8 Lea (Tenn.), 531, 41 Am. Rep. 565. Tenxporary vacancy, Ins, Co. of N. A. V. Garland, 108 111. 220; Stephens v. Phoenix Assur. Co., 85 111. App. 671; President, etc., v. Pitts, 88 Miss. 587, 41 So. 5; East Tex. F. Ins. Co. V. Kempner, 87 Tex. 229, 27 S. W. 122, 47 Am. St. R. 99. Temporary incum- brance, Bomv. Home Ins. Co., 110 Iowa, 379, 81 N. W. 676, 80 Am. St. R. 300 (annotated with many cases pro and con); Home F. Ins. Co. v. Johansen, 59 Neb. 349, 80 N. W. 1047; Omaha Fire Ins. Co. v. Dierks, 43 Neb. 473, 61 N. W. 740. Excessive temporary in- cumbrance, McKibban v. Des Moines Ins. Co., 114 Iowa, 41, 86 N. W. 38. Chattel mortgage, Ins. Co. of N. A. v. Wicker, 93 Tex. 390, 55 S. W. 740. Conveyance and reconveyance of real estate, German Mid. F. Ins. Co. v. Fox (Neb.), 96 N. W. 652, 63 L. R. A. 334. Compare two English cases in which it was held that where the mas- ter of a ship omitted, though not fraudulently, to advise the shipowner of a mishap causing a particular aver- age loss, the non-disclosure did not avoid the policy but only precluded the assured from recovering for the loss in question, Gladstone v. King (1813), 1 M. & S. 35; StnbUy v. Im- perial Mar. Ins. Co. (1876), 1 Q. B. D. 507. These decisions, however, have since been criticised, Blackburn v. Vigors (1887), 12 App. Cas. 531, 536, 540; Arnould, Ins., §§584, 585; De Hart & Simey, Ins. (1907), 24. And they are not followed in the codificar tion, Eng;^ Mar. Ins. Act (1906), § 18(1). But the rule may well be more stringent in marine insurance. If a temporary breach contributes to the loss in fire or life insurance the company is apt to know it. ? See Appendix, ch. I. 3 Iowa, New Hampshire, and Michi- gan, for example; also, as to unoc- cupancy clause, Wiseonsm. * See § 96, supra. INTEREST OF INSURED '^OT TRULY STATED IN POLICY 311 term is held to signify something more than "non-disclosure," and to imply a conscious or willful non-disclosure.* This express war- ranty, therefore, has little if any effect.^ Either with or v/ithout an express warranty, a misrepresentation of a material fact, made through mistake or by design, avoids a policy of insurance underwritten on the faith thereof.* § 249. Interest of the Insured not Truly Stated in the Policy. — Except for this requirement the insured might describe his interest in the most general terms, and if he had any insurable interest at all it would avail to sustain the contract.^ He might describe the prop- erty as his or say that he was the owner, and if that were true in any substantial sense he could recover to the extent of his insurable interest.^ But under this clause, which is a condition precedent or warranty,* he is boimd to disclose the character of his insurable interest; whether, for example, he is owner, trustee, consignee, factor, agent, mortgagee, or lessee, and make sure that the description of his interest is truly noted in the policy.'' It is only right that the in- surers should know the nature and extent of his insurable interest, since the degree of care exercised in guarding the property from fire is likely to depend somewhat upon the character and extent of the 1 darh V. Union Mui. F. Ins. Co., that the false answer was made also 40 N. H. 333, 77 Am. Dec. 721 (ques- "with intent to deceive," Levie v. Met. tion of intent for jury); Arthur v. L. Ins. Co., ]63 Mass. 117, 39 N. E. Palatine Ins. Co., 36 Oreg. 27, 57 Pac. 792. 62 (as to incumbrances); Pelzer Mfg. * Farmers' Mutual Fire dfc L. I. Co. Co. V. Sun Fire Office, 36 S. C. 213, v. Lecroy, 91 111. App. 41; Buffum v. 268; Mascott v. Ins. Co., 69 Vt. 116, Bowditch Mut. Fire Ins. Co., 10 Cush. 37 Atl. 255; Sanford v. Royal Ins. Co., (Mass.) 540. 11 Wash. 653, 40 Pac. 609; Van Kirk s Wainer v. Milford Mut. Fire Ins. V. Citizens' Ins. Co., 79 Wis. 627, 48 Co., 153 Mass. 335; Trade Ins. Co. v. N. W. 798; Johnson v. Scottish Union Barracliff, 45 N. J. L. 543, 46 Am. Rep. & Nat. Ins. Co., 93 Wis. 223, 67 N. W. 792; Dacey v. Agricultural Ins. Co., 21 416. And see Parker v. Otsego County Him (N. Y.), 83. As, for example, Farmers' C. F. I. Co., 47 App. Div. where the insured called the property 204, 62 N. Y. Supp. 199, aff'd 168 N. Y. his but in reality had only a life estate, 655, 61 N. E. 1132; Baldwin v. German Allen v. Charlestoivn Mut. Fire Ins. Co., Ins. Co., 105 Iowa, 379, 75 N. W. 326; 5 Gray (Mass.), 384. Greenlee v. Hanover Ins. Co., 104 Iowa, * Mers v. Franklin Ins. Co., 68 Mo. 481, 73 N. W. 1050; McCaHy v. Im- 127; Weed v. L. & L. Fire Ins. Co., 116 penal Ins. Co., 126 N. C. 820, 36 S. E. N. Y. 106, 115, 22 N. E. 229; Matthie v. 284. Globe Fire Ins. Co., 68 App. Div. 239, 2 See § 97, supra. 74 N. Y. Supp. 177, aff'd 174 N. Y. 3 Stetson V. Mass. Mut. Fire Ins. Co., 489, 67 N. E. 57. 4 Mass. 330, 3 Am. Dec. 217. But if 'The provisions of the policy application is written, the company amount to an express and pointed has no right to rely on oral representa- inquiry upon these subjects and the tion by broker's clerk, Dolliver v. Ins. insured is conclusively bound to read Co., 131 Mass. 39. Under the Massa- and know its terms. Parsons v. Lane chusetts statute the insurer must show 97 Minn. 98, 113. 312 MEANING AND LEGAL EFFECT OF FIRE POLICY insurable interest.^ The warranty relates to the time of the incep- tion of the contract.^ This clause, however, does not require him, unless particularly interrogated on the subject, to state the circumstances which relate to the vq,lue or permanency of his interest. For example, if the char- acter of his title is a fee simple and the property is consequently described as his, he need not state that he is only a part owner; ^ or that there are mortgages, judgments or other incumbrances out- standing upon his property; ■* or that he has made an agreement to part with the title in the future; ^ or that his property has been seized on execution but not yet sold.* Any obligation which may rest upon him to make such disclosures does not come by virtue of this particu- lar clause. The word "interest" has been appropriately used ia the standard form in place of the words "title or possession," for the reason that there are some insurable rights, like those of mortgagee, or surety, or stockholder, to which the attributes of title and possession are not necessarily incident. But it is apprehended that the substitution of this broad word does not impose any obligation upon the insured to make any fuller or other disclosure in respect to his title or possession than is required by the other form of words, although the ruling in cases cited in the notes might lead to a different conclusion.'' 1 Thus if insured represents that he plications with detailed questions are is owner when in reality he is mort- not employed, the insurance com- gagee, Ordway v. Chace, 57 N. J. Eq. panies relying upon the express war- 478, 42 Atl. 149: or that he owns in ranties of the policy, fee when in fact he has only an execu- 2 CoUins v. Assur. Corp., 165 Pa. St. tory contract for purchase, the policy 398, 30 Atl. 924. will be avoided, Wooliver v. Boylston ^Peck v. New Land. Co. Mid. Ins. Ins. Co., 104 Mich. 132, 62 N. W. 149. Co., 22 Conn. 575; Turner v. Burrows, There are many decisions holding that 5 Wend. (N. Y.) 541. if the insurer makes no affirmative in- < DoUiver v. St. Joseph P. & M. Ins. quiries as to title or interest it must Co., 128 Mass. 315, 35 Am. Rep. 378; be presumed that he is content with Judge v. Conn. Fire Ins. Co., 132 Mass. any insurable interest, Manchester Pire 521 • Carson v. Jersey City Fire Ins. Co. , Assur. Co. V. Abrams, 89 Fed. 932, 32 43 N. J. L. 300, 39 Am. Rep. 584; C. C. A. 426, citing cases; Sharp v. Weedv. Hamburg-Bremen P.I. Co., IZZ Scottish U. & N. Ins. Co., 136 Cal. N. Y. 394,45 N.Y. St. R. 105, 31 N. E. 542, 69 Pac. 253, 615; Olens Palls Ins. 231; McClelland v. Greenwich Ins. Co., Co. v. Michael (Ind.), 74 N. E. 964; 107 La. 124, 31 So. 691. And see Glens FaUs Ins. Co. v. Michael (Ind.), PoHer v. Orient Ins. Co., 72 Conn. 519, 79 N. E. 905 (citing cases); Hartford 45 Atl. 7. F. Ins. Co. v. McClain (Ky.), 85 S. W. 6 Davis v. Quincy Mut. Fire Ins. 699 (1905); Miotke v. 7ns. Co., 113 Co., 10 Allen (Mass.), 113. But other-. Mich. 166, 71 N. W. 463 (Neb.), 100 wise if he holds under an executory N. W. 130; 16 Wash. 155. These de- contract of purchase, Brown v. Cmn- cisions are not in accord with the cur- merdal Fire Ins. Co., 86 Ala. 189. rentof authority, see § 141, supro, and « Strong v. Manuf'rs Ins. Co., 10 were probably rendered without ap- Pick. 40, 20 Am. Dec. 507. preciation of the method of doing t Lee v. Agricultural Ins. Co., 79 business in cities, where, as a rule, ap- Iowa, 379; Edmonds v. M%U. Safety FRAUD OR FALSE SWEARING 313 If the policy is made payable to one "as his interest may appear," the interest need not be stated. The written words override the re- quirement of the printed form.^ This clause does not appear in the Massachusetts form. Therefore, under that form of contract, an apphcant for insurance need not disclose the special nature of his title or interest, until it is asked for.^ Accordingly it has been held in that state that the apphcant, without fatal results, may in good faith describe the property as his, though in reality his only interest is that of a tenant by the curtesy initiate in his wife's property.* § 2S0. Fraud or False Swearing. — In case of any fraud or false swearing, etc., whether before or after loss. This provision makes clear the extension of the general rule of insurance law demanding good faith, to intentional misstatements made after loss. In fact, it is by the statements contained in the proofs of loss that the insured, if unscrupulous, is most tempted to deviate from strict honesty in order to swell the amount of his recovery. False swearing in the examination under oath,* or in the proofs of loss, to vitiate the policy, mtist be intentionally false, whether by a fraudulent overvaluation of the goods destroyed, or a statement of items which really have no existence,^ or by an undervaluation of what is saved, or as to ownership,* or incumbrances,^ or origin of the fire,* or other particulars.® An innocent mistake,^" or an innocent Fire Ins. Co., 1 Allen (Mass.), 311; 112 Wis. 138, 88 N. W. 57, holding Abbott V. Hampden MiU. Fire Ins. Co., also it is not enough that false swear- 30 Me. 414. ing occurs through mistake, careless- 1 Dakin v. lAverpool, L. & G. Ins. ness, or inadvertence or in unreason- Co., 77 N. Y. 600. able reliance on information derived 2 Wainer v. MUford Mvi. Fire Ins. from others. The assured had put Co., 153 Mass. 335, 26 N. E. 877, 11 into his schedules the original cost L. R. A. 598 (owner of undivided half price of second-hand articles. of the legal title). ' Fitzgerald v. Atlanta Home Ins. Co., 3Dcn/le V. American Fire Ins. Co., 61 App. Div. 350, 356, 70 N. Y. Supp. 181 Mass. 139, 63 N. E. 394. But an 552, aff'd 175 N. Y. 494, 67 N. E. 1082. application may call for a true disclos- ^ White v. Merchants' Ins. Co., 93 ure as to title, Wilbur v. Bowditch Mvt. Mo. App. 282. F. Ins. Co., 10 Cush. (Mass.) 446; « Republic Fire Ins. Co. v. Weide, 81 Allen V. Charlestovm Mvt. F. Ins. Co., U. S. 375, 20 L. Ed. 894; Hilton v. 5 Gray (Mass.), 384; Jenkins v. Quincy Phoenix Assur. Co., 92 Me. 272, 42 Mut. F. Ins. Co., 7 Gray (Mass.), 370. Atl. 412; Atherton v. Brit.-Am,. Assur. * Claflih V. Commonwealth Ins. Co., Co., 91 Me. 289, 39 Atl. 1006 (holding 110 U. S. 81, 3 S. Ct. 507, 28 L. Ed. 76. that an honest misstatement is not ^Rovinsky v. Northern Assur. Co., enough to SLVoid); DaUony. Milwaukee 100 Me. 112, 60 Atl. 1025 (1905). Mechanics' Ins. Co., 126 Iowa, 377, 1 Beyer V. St. Paul F. & M. Ins. Co., 102 N. W. 120; Gamer v. Mutual •0 Tubb V. L. &L.& G. Ins. Co., 106 Little v. Phoenix Ins. Co., 123 Mass. Ala. 651, 17 So. 615; Am. Cent. Ins. 380; Thierolf v. Universal Fire Ins. Co., Co. V. Ware, 65 Ark. 336, 46 S. W. 129; 110 Pa. St. 37, 20 Atl. 412. 314 MEANING AND LEGAL EFFECT OF FIRE POLICY though exaggerated estimate of value, will not avoid the policy.* An overvaluation, in order to work a forfeiture, must be so plain that it cannot be accounted for upon the principle that every man is naturally prone to put a favorable estimate upon the value of his own property.^ Thus in a Massachusetts case where goods, repre- sented by the plaintiff to be worth $2,802.04, were valued by the arbitrators at only $761.68, the court refused to find fraud as a matter of law.^ The fatal effect, however, of a willful misstatement of fact is not disturbed because of the failure of the company to prove that preju- dice was thereby occasioned,* or because it appears that the actual loss as truthfully stated exceeds the amount of insurance.^ Within the terms of the policy the company establishes its defense when it shows that the statements made were relevant and willfully false. By the better rule it need not go further and assume the burden of satisfying a jury that the motives of the assured, in making the untruthful statements, were bad, for that is presumed, or that an actual injury to the company ensued.* Fire Ins. Co., 86 N. W. 289; Home Ins. Co. V. Winn, 42 Neb. 331, 60 N. W. 575 (assured deliberately raised the amounts in invoices); Titus v. Glens Falls Ins. Co., 81 N. Y. 410; Cheever v. Scottish U. & Nat. Ins. Co., 86 App. Div. (N. Y.) 328 (schedule gave articles at cost price and not present value, held, no forfeiture); Medley v. German AUiance Ins. Co., 55 W. Va. 342, 47 S. E. 101; Rickeman V. Williamsburg City Fire Ins. Co., 120 Wis. 655, 98 N. W. 960, in which the company contended that the assured had no such amount of stock as claimed, and that he had removed debris after the fire with intent to destroy evi- dence. Held, that it was relevant to show his straightened circumstances as bearing on the charge of fraud. Compare Morley v. L. &L. & G. Ins. Co., 92 Mich. 590, 52 N. W. Q39- (field, not relevant to show that assured was engaged in a losing business). A Lord Chief Baron says: "If the plain- tiff deliberately introduced into his claim one article which he never possessed, or placed upon any one that he did possess a fraudulent and false value he was not in point of law en- titled to recover," Haigh v. De la Cour, 3 Camp. 319; Chapman v. Pole, 22 L. T. N. S. 306. "Fraud" means any trick or artifice perpetrated on the company in proofs of loss or otherwise. Maker v. Hibemia Ins. Co., 67 N. Y. 283; Dohmen v. Mfrs., etc., Ins. Co., 96 Wis. 38, 55, 71 N. W. 69. As to fraudu- lent removal of property after fire, see Schmidt v. Phua. Underwriters, 109 La. 884, 33 So. 907. 1 Towne v. Springfield Fire, etc., Ins. Co., 145 Mass. 582; Jersey City Ins. Co. v. Nichol, 35 N. J. Eq. 291, 40 Am. St. Rep. 625; Maker v. Hibemia Ins. Co., 67 N, Y. 283; Susquehanna Mut. Fire Ins. Co. V. Stoats, 102 Pa. St. 529; Norton v. Royal F. & L. Assn. Co., 2 Times L. R. 460 (claimant may "put it on" to get full settlement, without fraud). 2 Franklin Fire Ins. Co. v. Vaughari, 92 U. S. 516; Sturm v. Atlantic Mut. Ins. Co., 63 N. Y. 77. 3 Goldstein v. Franklin Mut. F. Ins. Co., 170 Mass. 243, 49 N. E. 115. As to representation regarding ownership, see Little v. Pkoenix Ins. Co., 123 Mass. 380, 25 Am. Rep. 96 (policy not avoided). * Bannon v. 7ns. Co. of N. A., 115 Wis. 290, 91 N. W. 666 (books of ac- count fraudulently altered and dis- played to the adjuster). ^DoUoff V. Pkoenix Ins. Co., 82 Me. 266, 19 Atl. 396; Capital F. Ins. Co. v. Beverly, 14 Ohio C. C. 468. Contra, for example, Home Ins. Co. v. Lowen- thal m\as.), 36 So. 1042 (1904). * Claflin v. Commonwealth Ins. Co., FRAUD OR FALSE SWEARING 315 There are decisions to the effect that false swearing in the proofs of loss by an agent will not avoid the policy, unless the assured himself is responsible for it, or has acquiesced in it, the theory being that authority from the insured to commit such a wrong should not be inferred.* 110 U. S. 81, 3 S. Ct. 507; Linscott v. "Orient Ins. Co., 88 Me. 497, 34 Atl. 405; Virginia F. & M. Ins. Co. v. Vaughan, 88 Va. 832, 14 S. E. 754 (in which in- voices were intentionally and ma- terially altered for presentation to the company). Contra, for example, Petty V. Mut. F. Ins. Co., Ill Iowa, 358, 82 N. W. 767. A dishonest claimant is apt to include in the schedules of his proofs of loss at least some articles which he knows have altogether es- caped the fire. If the underwriter can demonstrate this a defense is made good, Wunderlich v. Palatine Ins. Co., 104 Wis. 382, 80 N. W. 467. The question of fraud or false swearing is generally for the jury, Commercial Ins. Co. V. Friedlander, 156 111. 595, 41 N. E. 183, and the company does not receive much consideration at their hands unless a clear case of dishonesty is established. In Goidstone v. Royal Ins. Co., 1 F. & F. 276, claim for furni- ture was £260, estimate on schedule in insolvency was £50, jury found for defendant. Court directed jury to do so, "if the claim was willfully false in any substantial respect." But if it appears by the plaintiff's own show- ing, Carson v. Jersey City Fire Ins. Co., 14 Vroom. (N. J.) 300, 39 Am. Rep. 584, that his statement of value was knowingly and intentionally ex- aggerated, a forfeiture ought to be found by the court, American Ins. Co. V. GilbeH, 27 Mich. 429. Where the discrepancy between the representa- tion of the insured and the finding of the fact by the jury is very great, a limit will be reached where the court will intervene and decide as matter of law that the amount of the error is consistent only with bad faith. To illustrate, where a house was valued at $1,400, and the evidence showed its value to be about 81,000, it was held that this difference did not establish as matter of law that there had been a breach of warranty against over- valuation, Smith V. Home Ins. Co., 47 Hun (N. Y.), 30. Putting the value of $2,000 upon goods worth $1,200 was held not to prove a fraudulent intent, Goldstein v. St. Paid Fire & M. I. Co., 124 Iowa, 143, 99 N. W. 696- Behrens V. Germania Fire Ins. Co., 64 Iowa, 19. Claim more than double the award was held fraudulent, Larocque v. Royal Ins. Co., 23 Lr. Can. Jur. 217 (furniture, fixtures, liquor, etc.). Also, where a value of $5,000 was given to property worth $2,000, a finding of no fraudu- lent intent was not set aside. But there was also a finding that the actual value of the property destroyed ex- ceeded the amount of insurance, Dogge V. Northwestern Nat. Ins. Co., 49 Wis. 501. But in another case a rule nisi for a new trial was made absolute where the claim sworn to was £1,085, and the amount found by the jury was only £500, the court concluding that this finding of fact ought to be con- sidered in effect a verdict for the de- fendant. Levy V. Baillie, 7 Bing. 349. In Sibley v. St. Paul F. & M. Ins. Co., 22 Fed. Cas. 60, claim was for $957.87, A verdict for $567.50 was set aside by the court. And where the proofs made the loss three times as large as the amount found by the jury, no reason being disclosed for supposing that the misstatement arose inadvertently, the court was of opinion that fraud was shown as matter of law and that the policy should be held forfeited, not- withstanding the jury's verdict for the plaintiff, Stemfield v. Park Fire Ins. Co., 50 Hun (N. Y.), 262. And see Anibal v. Ins. Co. of N. A., 8i App. Div. 634, 82 N. Y. Supp. 600 (claim $6,780.30; a judgment at special term for $1,857 was set aside). In a Cali- fornia case, however, the assured in his proofs of loss claimed $1,875, and in his testimony $2,000. The verdict was for only $500, but the court held that this was not conclusive of fraud or false swearing, Obersteller v. Commercial Assur^o., 96 Cal. 645, 31 Pae. 587. 1 7ns. Co. V. Scales, 101 Tenn. 628, 49 S. W. 743; Metzger v. Manchester F. Ins. Co., 102 Mich. 334, 63 N. W. 650 (husband of insured); Evans v. Ins. Co. (Wis.), 109 N. W. 952 (wife of in- sured). But the insured must not willfully or recklessly adopt or take advantage of the fraudulent misstate- ments, Midlin V. Vt. Mut. F. Ins. Co., 316 MEANING AND LEGAL EFFECT OF FIRE POLICY It will be observed that a distinction must be made between ante- cedent statements which form the inducement for the contract, and, whether material or not, are generally incorporated in the contract as warranties,^ and those statements, on the other hand, which are made after the loss, in an attempt to give to the insurers such infor- mation as may be available respecting the origin, character, and ex- tent of the loss already accrued. The latter must be willfully untrue ' to avoid the policy, and where the statements in the verified proofs of loss, or in the examination under oath, are shown to be intentionally false, the crime of perjury, or other crime, may also be established by statute,^ in addition to forfeiture of the insurance.* Fraud as to one item forfeits the entire contract. There is no equity to induce the court to construe the contract as severable in such a case; * and this was also the result at common law, without special provision in the policy.^ Several of the standard fire policies have no express provision re- garding false swearing or fraud in proofs of loss; ® but even under such a policy a fraudulent or dishonest misstatement by the insured will avoid his policy.'' 58 Vt. 113, 4 Atl. 817. As to arson and fraud by assured and agents, see § 231, supra. 1 Northwestern lAfe Ins. Co. v. Mont- gomery, 116 Ga. 799. 2N. Y. Penal Code, §§96, 579; People V. Spiegel, 75 Hun (N. Y.), 161; People V. Vaiughan, 19 Misc. 298. And see People v. Martin, 175 N. Y. 315, Submitting a false affidavit to an in- surer, in proof of loss, is not perjury at common law, because it is eictra^ judicial, People v. Travis, 4 Park. 213. ^ Avery v. Ward, 150 Mass. 160. Negligent misstatement does not avoid. Phoenix Ins. Co. v. Swann (Tex. Civ. App.), 41 S. W. 519: Beyer v. Ins. Co., 112 Wis. 138, 88 N. W. 57. Fraud will vitiate a past claim already matured, F. Dohmen Co. v. Niagara F. Ins. Co., 96 Wis. 38, 71 N. W. 69. But the rights of the parties are determined by the status at time of commencement of action, Deitz v. Prov. Wash. Ins. Co., 33 W. Va. 526, 11 S. E. 50. * Hamberg v. Ins. Co., 68 Minn. 335, 71 N. W. 388; HaU v. Ins. Co., 106 Mo. App. 476, 81 S. W. 227; Fowler v. Ins. Co., 35 Oreg. 559, 57 Pac. 421; Home Ins. Co. v. Connelly, 104 Tenn. 93, 56 S. W. 828. Misstatement as to irrelevant matter, it is said, will not forfeit, Feibelman v. Manchester F. Assur. Co., 108 Ala. 180, 19 So. 540. Nor false statement in proofs as to matters not required, Runkle v. Hart- ford Ins. Co., 99 Iowa, 414, 68 N. W. 712. Therefore, it is said, that if under valued policy laws the amount of recovery is fixed, misstatements re- garding value will not forfeit, Oshkosh Co. V. Mercantile Ins. Co., 31 Fed. 200; SvlUvan v. Hartford F. Ins. Co., 89 Tex. 665, 36 S. W. 73; but see Walker V. Phoenix Ins. Co., 62 Mo. App. 209. A statement that damage was by fire when in fact it was by smoke and water is no fraud, Kahn v. Traders' Ins. Co., 4 Wyo. 419, 34 Pac. 1059. 5 See § 94, supra. The correspond- ing clause in the Massachusetts stand- ard policy is as follows: "This policy shall be void if any material fact or circumstance stated in writing has not been fairly represented by the insured." This does not refer to statements in the proofs of loss, but only to the inducing representations upon which the con- tract is based, and the wording of the clause makes the question of fairness one for the jvtry, Wainer v. Milford Mut. Fire Ins. Co., 153 Mass. 335, 26 N. E. 877, 11 L. R. A. 598. * Iowa, Maine, Massachusetts, Minne- sota, New Hampshire, South Dakota. 7 Town V. Springfield P. d: M. Ins. Co., 145 Mass. 582. CHAPTER XII The Standabd Fire Policy — Contintted § 251. Waivers Must be by Written Agreements. — This entire policy, unless otherwise provided by agreement, indorsed hereon, or added hereto, shall be void, if, etc. The evident purpose is to do away with alleged parol permits and waivers, and with the uncertainties of oral testimony.^ Modifica- tions may, however, b<. made in writing;^ but protective clauses of the standard form in favor of the assured must not be curtailed to his prejudice.* The question how far the doctrine of parol waiver and estoppel is enforced in spite of this clause of the policy has been considered in a preceding chapter.* The standard pohcies of certain states in providing for the com- pany's assent make no mention of a written agreement.' § 252. Other Insurance. — // the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy without agreement indorsed hereon or added hereto. Other or double insurance exists where there are two or more policies on the same interest and subject, and against the same risk.* No matter how much insurance exists, recovery, in theory, is lim- ited to actual loss, but evidence of the facts essential to define the loss is not always available to the company after the fire, and juries are often overliberal to the insured in the estimate of the amount and value of property. Therefore this clause of the policy is in- serted. Its main fimction is to prevent an excessive amount of in- 1 Moore v. Ins. Co., 141 N. Y. 219, Mitter, Opinion N. Y. Atty. Gen., 224, 36 N. E. 191. Dec. 18, 1902; Re Globe dk Rut. F. Ins. 2 Nelson v. Traders' Ins. Co., 181 Co., id, April 24, 1902. N. Y. 472, 474, 74 N. E. 421. And * Ch. VIII, supra. written permit obtained may be at- ^ gee § 253, infra. tached at any time, Bennett v. Western '' ^tna F. Ins. Co. v. Tyler, 16 Underwriters' Assn., 130 Mich. 216, Wend. (N. Y.) 385, 30 Am. Dec. 90; 89 N. W. 702. West Branch L. Exchange v. American 3 WHd Rice L. Co. v. Royal Ins. Co., Cent. Ins. Co., 183 Pa. St. 366, 385, 38 99 Minn. 190, 108 N. W. 871; In re Atl. 1081. [317] 318 MEANING AND LEGAL EFFECT OF FIRE POtlCY surance which furnishes temptation to bring about a destruction by fire or inducement to be careless in preventing it. The condition must be complied with.^ So far as it aims to prohibit overinsurance it is salutary and reasonable. In prohibiting all other insurance without special permit it is rigorous.^ Nevertheless, almost all fire insiirance policies contain such a printed provision.* 1 Northern Assur. Co. v. Grand View Bldg. Assoc, 183 U. S. 308, 22 S. Ct. 133; Independent S. Dist. v. Fidelity Ins. Co., 113 Iowa, 65, 84 N. W. 956. Bigelow v. Granite State F. Ins. Co., 94 Me. 39, 46 Atl. 808; Sanders v. Cooper, 115 N. Y. 279, 22 N. E. 212; Mc- Sparran v. Southern Ins. Co., 193 Pa. St. 184, 44 Atl. 317; Onent Ins. Co. v. Prather, 25 Tex. Civ. App. 446, 62 S. W. 89, but in some jurisdictions a temporary breach merely suspends lia- bility, Germania F. Ins. Co. v. Klewer, 129 III. 599, 22 N. E. 489; and see §114. 2 The underwriter often wants the insured to carry part of the risk as an incentive to care. Therefore a pro- hibition merely of insurance beyond property value would be unsatisfactory. Where the company has no suspicion of a moral hazard, indeed in the ma- jority of instances, it grants a written or printed permit for "other insurance without notice," indorsed on the face of the policy at the time of issuance, and without the charge of additional premium. Thus this privilege is al- most invariably to be found printed or written in "the forms" of descriptions prepared and presented to the com- pany by the brokers, whether of mer- cantile or dwelling-house risks, and in ordinary cases, such a form is accepted by the company as matter of course, the company remaining ignorant of the amount of other insurance until a fire loss occurs. Then it must have a dis- closure on this point to enable it to compute its pro rata share of liability. When the special permit is granted it supersedes the prohibition, Blake v. Exchange Mvi. Ins. Co., 12 Gray (Mass.), 265. But a permit does not warrant excess above the permitted amount, Unitin Nat. Bk. v. German Ins. Co., n Fed. 473, 18 C. C. A. 203; Allen V. German-Am. Ins. Co., 123 N. Y. 6, 25 N. E. 309; Benedict v. Ocean Ins. Co., 1 Daly (N. Y.), 8; Strauss v. Phosnix Ins. Co., 9 Colo. App. 386, 48 Pac. 822; Georgia Home Ins. Co. v. Campbell, 102 Ga. 106, 29 S. E. 148. Prior insurance alreadjr subsisting is to be included in the esti- mate. Palatine Ins. Co. v. Ewing, 92 Fed. Ill, 34 C. C. A. 236. Though the company knew and relied upon the amount of other contributing insur- ance subsisting at the time of the issu- ance of its policy, no obligation rests upon the assured by virtue of the per- mit, to maintain in force the original amount, but he may change the amount at will, Hoffman v. Mfg. Ins. Co., 38 Fed. 487; Indiana Ins. Co. v. Hoffman, 128 Ind. 250, 27 N. E. 561; Lattan v. Royal Ins. Co., 45 N. J. L. 453; Hand v. Williamsburg City Ins. Co., 57 N. Y. 41. In the absence of a stipulation to the contrary, an unac- cepted or rejected policy does not con- stitute other insurance, JV. J. Rubber Co. v. Commercial U. Assur. Co., 64 N. J. L. 580, 46 Atl. 777, 7ns. Co. v. Graham, 181 111. 158, 54 N. E. 914; Dalton V. Germania Fire Ins. Co., 126 Iowa, 377, 102 N. W. 127; Price v. Home Ins. Co., 54 Mo. App. 119. Nor an arrangement for insurance not definitely closed until after the fire, Taylor v. State Ins. Co., 107 Iowa, 275, 77 N. W. 1032. As where a policy had hot yet attached because the premium was not paid. Equitable F. & Ace. Office V. Ching (1907), App. Gas. 96. Insurance taken out by a third party in the name of the assured but without his authority is not other insurance within the meaning of this clause. Church of St. George v. Sun Fire Office, 54 Miim. 162, 55 N. W. 909; Nelson v. Atlanta Home Ins. Co., 120 N. C. 302, 27 S. E. 38. Unless it be subsequently ratified, GerMan Ins. Co. v. Emporia Mut. L. & A. Assoc, 9 Kan. App. 803, 59 Pac. 1092. Nor does the renewal of a permitted policy violate the terms of the policy, Pitney v. Glens Falls Ins. Co., 65 N. Y. 6; Stage v. Home Ins. Co., 76 App. Div. 509, 78 N. Y. Supp. 555. 3 Formerly Minnesota had a stand- ard policy prohibiting other insurance in excess of the insurable value of the OTHER INSUBANCB 319 To constitute "other insurance" the interests insured by the policies must be the same. An important application of this doctrine is furnished by the construction put upon the full mortgagee clause. The Syracuse Screw Company insured its building with the defend- ant. To the policy was attached the standard mortgagee clause in favor of Everson who held a mortgage upon the building. This clause made the insurance first payable to the mortgagee as his interest might appear, and provided that as to his interest the in- surance should not be invalidated by any act or neglect of the mortgagor. After the issuance of this poUcy, the insured took out another policy for its own exclusive benefit, without the de- fendant's consent and without a mortgagee clause. The court held that the mortgagee cluuse, attached to the first policy, created a distinct contract in favor of Everson. It further held that while the later pohcy was other insurance in relation to the mortgagor's interest it was not other insurance in relation to the mortgagee's interest, nor would it defeat or affect Everson's right of recovery under the prior poUcy.-' Hall, the plaintiff, procured a policy from the defendant for $1,000 on "stock of eggs in pickle," in which he had an undivided interest. Taylor, the owner of the remaining interest in the eggs, separately insured for his own benefit. It was held that the interests of the co-owners were not the same and that therefore Taylor's policy was not "other insurance." Judgment in favor of the plaintiff was affirmed.^ To constitute "other insurance," the subject-matter insured by the poUcies must be at least in part the same. The defendant issued a policy to Johnson on his "farm implements." This description was adequate to embrace certain mowing machines and binders which were subsequently bought by him and added to his "farm implements." After the purchase and without consent of the de- fendant Johnson insured his "mowing machines and binders" with another company. This was held to be "other insurance," which avoided the pohcy in suit.^ property insvired, CaT-penter-Glass L. divided interest in the same property Co. V. Germania F. Ins. Co., 86 Minn of another child procured by tne child, 371, 90 N. W. 766. FrankliTi M. & F. Ins. Co. v. Drake, 2 i'Eddy V. London Assur. Corp., 143 B. Mon. (Ky.) 47. Insurance by one N. Y. 311, 38 N. E. 307, 25 L. R. A. creditor on the goods of the debtor is 686. not "other insurance" with a policy on ^ HaU V. Concordia Fire Ins. Co., 90 the same goods in favor of another Mich. 403, 51 N. W. 524. A policy by creditor, Roos v. Merchants' Mvt. Ins. a mother as trustee for certain children Co. , 27 La. Ann. 409. on their interests in "three houses will ^ Johnson v Farmers' Ins. Co., not vitiate a prior policy on the un- Iowa (1905), 102 N. W. 502. The 320 MEANING AND LEGAL EFFECT OF FIRE POLICY To constitute "other insurance" the risk also must be the same.^ Thus in an English case, the plaintiff procured from the defendant a policy on wool in transit to Sydney by land or in warehouses or on wharf. Subsequently the plaintiff effected an insurance against marine perils, one of them being fire, and so worded that the marine policy might possibly cover the same risk of fire as the fire policy for some period of time during the transit, but not while the goods were in warehouses. The court held that the marine policy not being double insurance with the fire, the plaintiff was entitled to a recovery.^ It often happens that a policy in force is given to a broker or agent for cancellation with instructions to procure a policy from a different company in its place. Though the issuance of the new pol- icy may antedate the actual cancellation of the old, 'it has been held, with good reason, that there is no breach of this warranty.^ This warranty, like all enuring to his benefit, is to be construed strictly against the insurer,* and neither the policy of the law nor the con- tract of insurance forbids different policies on different interests, but, on the contrary, there may be as many insurances as there are separate interests,^ but where warehousemen, common carriers, agents, trustees, or bailees generally, take out insurance for the benefit of themselves and others on property, "their own or held policy in suit was on goods and fix- example, a policy to a mortgagor and tures. A subsequent policy on goods another to a mortgagee are not within only avoided the policy in suit, Kim^ the operation of this clause, because hall v. Howard F. Ins. Co., 8 Gray they do not constitute double insur- (Mass.), 33. ance, Cowart v. Capital City Ins. Co., 1 Harris V.Ohio Ins. Co., 5 0\do, 467. 114 Ala. 356, 22 So. 574; Home Ins. 2 Australian Agricultural Co. v. Co. v. Koob, 24 Ky. L. R. 223, 68 S. W. Saunders, L. R. (1875) 10 C. P. 668. 453, 58 L. R. A. 58; Cannon v. Home 3 Knowles v. American Ins. Co., 66 Ins. Co., 49 La. Ann. 1367, 22 So. 387. Hun, 220, 21 N. Y. Supp. 50, aff'd on So also the' interests of different mort- opinion below, 142 N. Y. 641, 37 N. E. gagees are distinct. Fox v. Phasnix Fire 567; Train v. Holland Purchase Ins. Ins. Co., 52 Me. 333, and the different Co., 68 N. Y. 208; but an unauthorized interests of joint-owners, Woodbury cancellation, Kooistra v. Rockford Ins. Sav. Bank v. Charter Oak F & M Co., 122 Mich. 626, 81 N. W. 568; 7ns. Co., 31 Conn. 518; PUney v. Glens Johnson v. North Brit. & M. Ins. Co., FaUs Ins. Co., 65 N. Y. 6. The same is 66 Ohio St. 6, 63 N. E. 610; or an in- also true of grantor and grantee, or complete cancellation, Gardner v. vendor and vendee. State Ins. Co. v. Standard Ins. Co., 58 Mo. App. 611; New Hampshire Tr. Co., 47 Neb. 62, East Tex. F. Ins. Co. v. Flippin, 4 66 N. W. 9, 1106; Sprague v. Holland Tex. Civ. App. 576, 23 S. W. 550, is Purchase Ins. Co., 69 N. Y. 128; land- unavailing to dispose of the subsisting lord and tenant, Clemson v. TrammeU, policy which then stands as "other 34 111. App. 414; bailor and bailee, insurance." West Branch L. Exchange v. American * Mead v. American Fire Ins. Co., 13 Cent. Ins. Co., 183 Pa. St. 366, 38 Atl App. Div. 476, 77 N. Y. St. R. 334, 1081; life tenant and remainderman, 43 N. Y. Supp. 334. Franklin M. & P. Ins. Co. v. Drake, 2 sDe Witt V. Agricultural Ins. Co., B. Mon. (Ky.) 47. 157 N. Y. 353, 51 N. E. 977. For OTHER INSURANCE 321 by them in trust," and the other parties in interest take out insur- ance for themselves upon the same subject and against the same risk, this constitutes double insurance.* Such other insurance for another person, however, would not avoid the owner's pohcy, unless it appeared that it was taken out by his authority or consent, or was subsequently ratified by him, since otherwise it would not con- stitute his contract, inasmuch as the element of mutual assent would then be wanting, and the courts are very reluctant to vitiate a policy unless the intent on the part of the insured to procure double insur- ance is estabhshed.^ If the insured is not aware of the existence of other insurance, the prime object of this clause is wanting. No temptation to commit arson can be inferred from a fact of which the insured is ignorant.* But the warranty in the policy being abso- lute, principle would seem to require, that, if the double insurance really exists by legal authority of the insured, the policy in suit must be held avoided, whether the existence of the double insurance is known to the insured or not.* Gwathmey & Co., warehousemen, for the benefit of themselves and their customers, procured insurance from the defendant on cotton and merchandise, their own or held in trust. The loss pay- able was not to exceed the sum insured nor the interest of the as- sured in the property. A condition of the policy provided: "Goods held on storage must be separately and specifically insured." The owners of the merchandise on storage took out specific insurance of their own to the full value of their property. Construing in its entirety the language of the policy in suit, the court concluded that the insurance in suit was not double or contributing with the other policies.^ 1 Home Ins. Co. v. Bolt. Warehouse * Phoenix Ins. Co. v. Copeland, 90 Co., 93 U. S. 527; Sturm v. Atlantic Ala. 386, 8 So. 48; Phoenix Ins. Co. v. Mvt. Ins. Co., 63 N. Y. 77; Mussey v. Lamar, 106 Ind. 513, 7 N. E. 241; Atlas Mut. Ins. Co., 4 Kem. (N. Y.) 79. London & L. Fire Ins. Co. v. TumbuU, ^Mead v. Am. F. Ins. Co., 13 App. 86 Ky. 230; Van Alstyne v. ^tna Ins. Div. 476, 43 N. Y. Supp. 334; Church Co., 14 Hun (N. Y.), 360; AmoU v. of St. George v. Sun F. Office, 54 Minn. Ins. Co., 106 Tenn. 529, 61 S. W. 1032. 162, 55 N. W. 909 (mortgagee took out Evidence that the insured believed insurance on mortgagor's interest with- there was no other insurance is not out knowledge of mortgagor). admissible, Zinck v. Phoenix Ins. Co., 3 London & L. Fire Ins. Co. v. Tum- 60 Iowa, 266. bull, 86 Ky. 230; Doran v. Franklin s Home Ins. Co. v. Gwathmey, 82 Va. Fire Ins. Co., 86 N. Y. 635. In one 923, 1 S. E. 209. Compare Home Ins. case it was held that where the con- Co. v. Railway Co., 71 Minn. 296, 74 signor effected an insurance with the N. W. 140 (policies held contributing, warranty "no other insurance," and though one policy covered only lia- unknown to him the consignees also bility of the carrier to the shippers insured the same goods, the first policy while the other policies covered grain, was not avoided, Williams v. Crescent its own or held in trust. If the case had MiU. Ins. Co., 15 La. Ann. 652. involved a question not of contribu- 21 322 MEANING AND LEGAL EFFECT OF FIKE POLICY In a Maryland case the plaintiff, a towing company, took out marine insurance on a cargo of corn "on account of whom it may concern." The owner of the corn also had it insured in another company against the same perils, and did nothing either before or after loss towards adopting or ratifying the insurance procured by the plaintiff. The court held that the policy in suit did not inure to the benefit of the owner so as to result in double insurance.'' The permit for other insurance must be in writing.^ It is not enough for the assured merely to give notice of other insurance,^ or of an intention to procure it,* nor is it enough under the New York standard pohcy, for the agent of the company to promise to indorse the permit in future.® The policy provides that the consent must be indorsed or at- tached; but if in writing, the assured can attach it at any time; and even a telegraphic consent is in practice considered binding upon the company. § 253. Effect of Words — Valid or Invalid. — Policies in which the ilause against other insurance does not contain the additional rords "valid or invalid," have given rise to much difficulty in cases rhere two or more policies constituting double insurance contain t \e same provision. Shall both poUcies be avoided, or only one, and ii only one, which one? There is in each a condition by which the pcUcy containing it ought to be avoided, and yet the moment that eit.W pohcy is held void, the reason for vitiating the other has cea.ied to exist. A,ad substantially the same difficulty arises where the other in- surance is voidable upon some other ground of forfeiture of which the ii.surers have elected to avail themselves. The opinions of the courts upon these questions are varied and irrecon?ilable; ^ but the sounder view, perhaps, is to hold the earlier tion betTveen underwriters, but of for- 3 Orient Ins. Co. v. Prather, 25 Tex. feiture foi other insurance the decision Civ. App, 446, 62 S. W. 89. would probably have been otherwise). *Gray v. Germania P. Ins. Co., 155 ^Westeni Assur. Co. v. Chesapeake N. Y. 180, 49 N. E 675 L. & Towitig Co. (Md., 1907), 65 Atl. ^ Perry v. Ins. Co., 103 App. Div. 637. Though such insurance is taken (N. Y.) 113, 93 N. Y. Supp. 50. out by a bxilee without authority of e Lackey v. Go. Home Ins. Co., 42 Ga. the owner, it has been held that the 456; Hubbard v. Hartford Fire Ins. Co., owner may ratify even after loss, 33 Iowa, 325, 11 Am. Rep. 125; Ferguson v. .Pekin Plow Co., 141 Mo. Thomas v. Builders Mvt. F Ins Co 161, 42 S. W. 711. 119 Mass. 121, 20 Am. Rep. 317; 'Pire- 2 But such natters of detail need not man's Ins. Co. v. HoU, 35 Ohio St. 189, be written on a binding slip, Dayton 35 Am. Rep. 601. See Mav. Ins , Trw. Co. V. Xe2 V» 24 Ohio St. 345. ch. 18. J> - EFFECT OF WORDS — ^VALID OR INVALID 323 policy undisturbed, on the ground that the later has had no valid inception, or, at the time, has ceased to exist.^ Much doubt would seem to be removed by the insertion, as in the New York standard form, of the words "valid or invalid," to which force must be given; and when the policy in suit contains them, it should be held vitiated by other insurance, whether regarded as void or voidable, provided no written consent to the other insurance has been obtained.^ In a suit on either policy with such a clause the insured is unable to establish his case by virtue of excuse that the other policy is invalid.^ And insurance taken out simultaneously with the policy in suit is equally in violation of the warranty.'* Where, however, the other policy is upon its face absolutely null and void, so as to be noi policy at all, but a piece of waste paper, or where the policy, though still existing as a document, has been canceled,* then, in either case, the conclusion seems to follow that there is within the meaning of this clause no other or double insur- ance.* And so also, in construing the effect of this warranty, prop- erty removed from the location described in a policy should be con- sidered as no longer within the operation of that policy, though still named in its description; and Ukewise new stock added subsequent to the issuance of the poUcy should be treated as coming within the reach of its terms.' The corresponding provision of the Massachusetts policy is as follows: "This policy shall be void if the insured now has or shall hereafter make any other insurance on the said property without the assent in writing or in print of the company." * It will be observed that this warranty does not contain the words "valid or invalid," and in construing it the Massachusetts court holds that other policies 1 Stoeeting v. Mtit. Ins. Co., 83 Md. * United Firemen's Ins. Co. v. 63, 34 Atl. 826, 32 L. R. A. 570; Gee v. Thomas, 92 Fed. 127, 34 C. C. A. Ins. Co., 55 N. H. 65; Jersey Ins. Co. v. 240. iVicAoZ, 35 N. J. Eq. 291. ^German Ins. Co. v. Hayden, 21 2 Hughes v. Ins. Co. of NoHh Am., Colo. 127, 40 Pac. 453. 40 Neb. 626, 59 N. W. 112; Gee v. «Phemix Ins. Co. v. Lamar, 106 Cheshire Co. Mvt: F. Ins. Co., 55 Ind. 513, 7 N. E. 241; Am. Ins. Co. v. N. H. 65, 20 Am. Rep. 171; AUen v. Rephgle, 114 Ind. 1, 15 N. E. 810, 132 Merchants' Mvt. Co., 30 La. Ann. Ind. 360, 31 N. E. 947; Landers v. 1386, 31 Am. Rep. 243; Donogh v. Watertown Ins. Co., 86 N. Y. 414, 40 Farmers' Ins. Co., 104 Mich. 503, 62 Am. Rep. 654. N. W. 721. , ' Washington Ins. Co. v. Hayes, 17 ^Phenix Ins. Co. v. Lamar, 106 Ohio St. 432; Stevens v. Citizens' Ins. Ind. 513, 7 N. E. 241; Reed v. Equitable Co., 69 Iowa, 658; Johnson v. Farmers' Ins. Co., 17 R. I. 785, 24 Atl. 833. Ins. Co., 126 Iowa, 565, 102 N. W. 502; But see Phoenix Ins. Co. v. Copeland, WhitweU v. Putnam Fire Ins. Co., 6 90 Ala. 386, 8 So. 48; Stevens v. Citir- Lans. (N. Y.) 166. zens' Ins. Co., 69 Iowa, 658, 29 N. W. « Hayes v. Mil. Mut. Fire Ins. Co., 769; WolpeH v. NoHhem Assur. Co., 170 Mase. 492, 49 N. E. 754; Wheeler 44 W. Va. 734, 29 S. E. 1024. v. Watertovm Ins. Co., 131 Mass. 1. 324 MEANING AND LEGAL EFFECT OF FIRE POLICY issued by other companies either before or after the one in suit, with- out assent of the defendant offer no defense, where such other policies contain the same condition.^ Other standard policies provide for the company's assent or agree- ment, but do not require that it shall be in writing or in print.^ Such more liberal form of policy, however, does not supersede the common- law rule of evidence, by virtue of which contemporaneous oral state- ments and understandings are merged in the written contract and cannot be shown by parol.* § 254. Effect of Coinsurance Clause and Other Limited Consent. — ^An eighty per cent or other coinsurance clause operates as a per- mit for other insurance, but only to an amoimt required to make good the stated percentage of value.* § 255. Factories. — Or if the subject of insurance be a rnanufacturing establishment, and it be operated in whole or in part at night later than ten o'clock, or if it cease to be operated for more than ten consecutive days. This condition, which is akin to the vacancy clause, is said to be not technical but substantial,^ and reasonable.® Its violation avoids the policy.'' 1 Hayes v. Milford Mitt. Fire Ins. Co., 170 Mass. 492, 49 N. E. 754. 2 For example, Iowa, Miimesota, and South Dakota. 3 Calmenson v. Equitable Mid. Fire Ins. Co., 92 Minn. 390, 100 N. W. 88. After the inception of the contract the local countersigning agent may give a binding oral permit, Cooper v. German- American Ins. Co. (Minn., 1905), 104 N. W. 687. < Cutler V. Royal Ins. Co., 70 Conn. 666, 40 Atl. 529, 41 L. R. A. 159; Nestler v. Germania Fire I. Co., 44 Misc. (N. Y.) 97, 89 N. Y. Supp. 782, aff'd 91 N. Y. Supp. 29; see Dolan v. Missouri Town M. F. I. Co., 88 Mo. App. 666; Pool v. Mil. Mech. Ins. Co., 91 Wis. 530, 65 N. W. 54. Permit was inferred where there was an average clause applicable to other insurance, Agricultural Ins. Co. v. Bemiller, 70 Md. 400, 17 Atl. 380. Permit is some- times worded "privilege for other con- current insurance." In the following case it is reasonably held that other insurance is concurrent though the properties insured by the different policies were only in part the same, Gough V. Davis, 24 Misc. 246, 52 N. Y. Supp. 947, aff'd 39 App. Div. 639. And see N. J. Rubber Co. v. Com- mercial Union Assur. Co., 64 N. J. L. 580, 46 Atl. 777; East Tex. F. Ins. Co. V. Blum., 76 Tex. 653, 13 S. W. 572, 676. "Concurrent" is not to be con- strued in this connection as "identi- cal," Washbum^Halligan Coffee Co. V. Merchants' Ins. Co., 110 Iowa, 423, 81 N. W. 707; and see L'Engle v. Scottish M.. & N. Ins. Co. (Fla.), 37 So. 462; Senor v. Western Millers' Ins. Co., 181 Mo. 104, 79 S. W. 687; Caraher v. Royai Ins. Co., 63 Hun (N. Y.), 82, 17 N. Y, Supp. 858, aff'd on opinion below, 136 N. Y. 645, 32 N. E. 1015; American Cent. Ins. Co. v. Heath, 29 Tex. Civ. App. 445, 69 S. W. 235. In following case a mere mistaie in calculating amount was held not to avoid, earlier insurance, otherwise valid, Phoenix Ins. Co., v. Boulden 96 Ala. 609, 11 So. 774. ^Alspavgh v. Brit.-Am. Ins. Co., 121 N. C. 290, 28 S. E. 415. « Cronin v. Fire Assoc, 119 Mich. 74, 77 N. W. 648. ' Cronin v. Fire Assoc, 123 Mich. 277, 82 N. W. 46, 119 Mich. 74, 77 N. W. 648; Strause v. Palatine Ins. Co., FACTORIES 325 Running the factory at night after the hour named in the policy is fatal,* but such continuation of the furnace fires, or even of the running of machinery, as cannot from the nature of the business be temporarily suspended, is not to be considered prohibited. Thus the mere running of the main shaft at night after the hour named, without any further operation, is permissible.^ Nor is it easy to define, by any general rule, what constitutes that condition of in- activity or cessation from the usual working of the mill or factory which the latter part of the warranty tolerates for a period of only ten days. Temporary and imavoidable cessation in the operations, without deliberate purpose to shut down, has been held to be no such cessation as is contemplated by this clause, though continued for more than ten days.^ If the premises are in the same condition at the time of loss as at the time when the risk is accepted and the policy issued, it has been held that the company has no just cause for complaint on the score of idleness or inactivity, and may not be permitted to invoke the aid of this clause to occasion forfeiture, unless it had reason to suppose that before the expiration of ten days, manufacturing operations were to be more actively resumed.* Any consent or special agreement will control.^ 128 N. C. 64, 38 S. E. 256 (an express permit was given). The clause, how- ever, is construed strictly against the insurer, Queen Ins. Co. v. Excelsior Milling Co., 69 Kan. 114, 76 Pac. 423. As to what is a manufacturing estab- lishment, see SUme v. Howard Ins. Co., 153 Mass. 475, 27 N. E. 6, 11 L. R. A. 771; Carlin v. Western Assur. Co., 57 Md. 515; Phoenix Ins. Co. v. Holcomhe, 57 Neb. 622, 78 N. W. 300; Halpin v. North Am. Ins. Co., 120 N. Y. 73, 23 N. E. 989 (machinery is not equivalent to a manufacturing establishment). ^ Reardon v. Faneuil Hall Ins. Co., 135 Mass. 121. 2 Whitehead v. Price, 2 Cr. M. & R. 447, 5 Tyrwb. 825. The insurers are presiimed to have some knowledge of the requirements of the business, Mo- Keesvort Machine Co. v. Ben Franklin Ins. Co., 173 Pa. St. 53, 34 Atl. 16. 3 Waukan Milling Co. v. Citizens' Mut. F. Ins. Co. (Wis., 1906), 109 N. W. 937 (agent knew mill was likely to cease operations) ; Ladd v. ^tna Ins. Co., 147 N. Y. 478, 42 N. E. 197, 70 N. Y. St. R. 69. But see Day v. Mill Owners' Mut. F. Ins. Co., 70 Iowa, 710. Stoppage as to only part of the factory operations is not within the ban of this provision. Am. Ins. Co. v. Brighton Cotton Mfg. Co., 125 111. 131, 17 N. E. 771; Cent. Montana Mines Co. v. Fire- men's Fund Ins. Co., 92 Minn. 223, 99 N. W. 1120, and stopping the ma- chinery altogether for more than the stated period, if other work is done on the premises and a man left in charge, has been held to be no cause for forfeiture, Bole v. New Hampshire Ins. Co., 159 Pa. St. 53, 28 Atl. 205; but see McKeneie v. Scottish Union & Nat. Ins. Co., 112 Cal. 548, 44 Pac. 922; Dover Glass Works v. Am. Ins. Co., 1 Marv. (Del.) 32, 29 Atl. 1039; Brehm Lumber Co. v. Svea Ins. Co., 36 Wash. 520, 79 Pac. 34. Where there is room for question, the prudent manu- facturer instructs his Droker to apply for a special permit, which probably can be arranged for without additional expense, if me underwriters are sat- isfied with the moral hazard. * Loux:k V. Orient Ins. Co., 176 Pa. St. 638, 35 Atl. 247, 33 L. R. A. 712; Lebanon Ins. Co. v. Erb, 112 Pa. St. 149, 4 Atl. 8; but see Stone v. Howard Ins. Co., 153 Mass. 475, 27 N. E. 6. 6 El Paso Reduction Co. v. Hartford 326 MEANING AND LEGAL EFFECT OF FIRE POLICY The Massachusetts policy contains a similar clause, naming nine o'clock p. M. instead of ten o'clock, and thirty days as the limit for cessation of operations.'' § 256. Watchman. — It is sometimes provided that a watchman shall be kept. The object of such a clause is to secure personal supervision over the property.^ The warranty must be observed.* But a reasonable compliance is sufficient. Accordingly, a mere temporary absence for a few minutes * or for a short time ® or for two hours ® is no violation, as matter of law.''^ § 257. Increase of Risk. — Or if the hazard be increased by any means within the control or knowledge of the insured. So far as the conduct of the insured himself is concerned, an obliga- tion is said to rest upon him by general principles of insurance law not to voluntarily enhance the risk.* This clause extends his re- sponsibility to acts of others within his control or knowledge.' It refers exclusively to future changes. A continuation of use or con- Fire Ins. Co., 121 Fed. 937; Edwards v. Planters' Fire Assoc, 111 Ga. 449, 36 S. E. 755; Barker v. Citizens' Mict. Fire Ins. Co., 136 Mich. 626, 99 N. W. 866. The doctrine of waiver and estoppel has been applied. Waiver allowed, Thackery Mining Co. v. Am. Ins. Co., 62 Mo. App. 293; Improved Match Co. V. Michigan Ins. Co., 122 Mich. 256, 80 N. W. 1088. Waiver not allowed, Carlin v. Western Assur. Co., 57 Md. 515; Stone v. Howard Ins. Co., 153 Mass. 475, 27 N. E. 6. 1 Reardon v. Faneuil Hall Ins. Co. , 135 Mass. 121. The South Dakota standard policy names twenty days as the limit; the Iowa, ten days. 2 Am Sable Lumber Co. v. Detroit Mfrs. M. F. I. Co., 89 Mich. 407, 50 N. W. 870. 3 Bank of Ballston Spa v. Ins. Co., 50 N. Y. 45. ^ McGannon v. Michigan Millers' M. F. I. Co., 127 Mich. 636, 87 N. W. 61, 54 L. R. A. 739. 6 Hanover Fire Ins. Co. v. Gustin, 40 Neb. 828, 59 N. W. 375. 8 McGannon v. Millers' Nat. Ins. Co., 171 Mo. 143, 71 S. W. 160; Kansas Mill Owners' Ins. Co. v. Metcalf, 59 Kan. 383, 53 Pac. 68; and see King Brick Mfg. Co. v. Phoenix Ins. Co., 164 Mass. 291, 41 N. E. 277. ' Waukau Milling Co. v. Citizens' Mvt. P. Ins. Co. (Wis., 1906), 109 N. W. 937; Spies v. Greenwich Ins. Co., 97 Mich. 310, 56 N. W. 560 (foreman of adjoining mill was the watchman). Nor is it material that the watchman happens to be asleep when the fire breaks out, McGannon v. MiUers' Nat. Ins. Co., 171 Mo. 143, 71 S. W. 160. But in another case it was decided that where the clause of the policy required that a watchman must be kept day and night, the policy was voided because only one watchman was employed in the building, the court concluding that the intent of the instrument was that a watchman must be awake, and if there were only one, there would be some portion of the time, presumably, when he would be asleep, Rankin v. Amazon Ins. Co., 89 Cal. 210, 26 Pac. 872. 8 Hoffecker v. Newcastle Co. Mnt. Ins. Co., 5 Houst. (Del.) 101 (held to be an implied promise). The word "risk" sometimes refers rather loosely to the adventure or subject-matter, sometimes to the hazard or chance of loss, Bradford v. Symondson (1881), 7 Q. B. D. 456, 464. » .Janvrin v. Rockingham Ins. Co., 70 N. H. 35, 46 Atl. 686; North Brit. & Am. Ins. Co. v. Union Stockyard Co. (Ky.), 87 S. W. 285. INCREASE OF RISK 327 dition existing when the poHcy issues is no increase of risk, however hazardous it may be.^ Before the insurers can successfully claim forfeiture on the ground of increase of hazard, they must show either that the situation was within the control, or the facts within the knowledge, of the assured; ^ but if the insured had knowledge, the standard policy seems to make him as responsible as though the increase of risk had been deliberately brought about by himself or his agent.^ This important warranty, however, must receive a reasonable construction, with due regard to the main purpose of insurance as well as to the special circumstances of every case/ Most fires, perhaps, result from acts of carelessness which temporarily increase the hazard, but a principal object to be gained by the policy is indemnity for the consequences of just such casual acts of negligence, if committed without evil design by the assured or his agents.^ Thus, though it may seem highly reckless to use kerosene to aid in lighting a fire, nevertheless, the use of it for that purpose has been 1 Hoffecher v. Ins. Co., 5 Houst. (Del.) 101; Whitney v. Black River Ins. Co., 72 N. Y. 117; Straker v. Phoenix Ins. Co., 101 Wis. 413, 77 N. W. 752. A future change which does not in- crease the risk is not forbidden by this clause, Parker v. Arctic Fire Ins. Co., 59 N. Y. 1. And see Phoenix Ins. Co. V. Coomes, 13 Ky. L. Rep. 238 (repairs increased value). Evi- dence showing decrease of risk is com- petent, Smith V. 7ns. Co., 32 N. Y. 399. 2 Waggonick v. Westchester F. Ins. Co., 34 111. App. 629; Northern Assur. Co. V. Crawlord,24 Tex. Civ. App. 574, 59 S. W. 916. As to whether the as- sured must also know that the known facts amount to an increase of hazard, compare Phamix Ins. Co. v. Parsons, 129 N. Y. 86, 29 N. E. 87, with Mc- GonigU v. Ins. Co., 168 Pa. St. 1, 13, 31 Atl. 868; McKee v. Ins. Co., 135 Pa. St. 544, 19 Atl. 1067; Rife v. 7ns. Co., 115 Pa. St. 530, 6 Atl. 65. Thus the underwriter cannot rely for defense, under this particular clause, upon the acts of a tenant of the insured, unless the insured knew of them, Merrill v. Ins. Co., 23 Fed. 245; Neb. & I. Ins. Co. v. Ckristiensen, 29 Neb. 572, 45 N. W. 924; East Tex. Ins. Co. v. Kempner, 12 Tex. Civ. App. 534, 34 S. W. 393 (tenant used gasoline stove without knowledge of assured). So, as to acts of landlord, where tenant was insvffed, Mechanics' Ins. Co. v. Hodge, 149 111. 298, 37 N. E. 51. 3 L. & L. & G. Ins. Co. v. GurUher, 116 U. S 113, 6 S. Ct. 306, 29 L.Ed. 575; id., 134 U. S. 110, 10 S. Ct. 448; Allen V. Home Ins. Co., 133 Cal. 29, 65 Pac. 138; Long v. Beeber, 106 Pa. St. 466. For the acts of his diily au- thorized agent the insured is responsi- ble, and so likeT\'ise the knowledge of his agent, acquired while acting within the scope of his authorized employ- ment, is to be imputed to him. Cole v. Germania Fire Ins. Co., 99 N. Y. 40, 1 N. E. 38. * Meyer v. Queen Ins. Co., 41 La. Ann. 1000, 6 So. 899. See many illus- trative cases, 2 Clement, Ins. (1905), 310-317. Changes required by the ordinary use of the property are im- pliedly allowed, so far as this clause is concerned, Washington F. Ins. Co. v. Davison, 30 Md. 91. Thus, repairs to make building tenantable. Jolly's v. BaUimore Eq. Soc., 1 Har. & G. (Md.) 295, 18 Am. Dec. 288; or removal of dangerous defect, James v. Lycoming Ins. Co., 13 Fed. Cas. 309. 5 McKenzie v. Scottish U. & N. Ins. Co., 112 Cal. 548, 44 Pac. 922; Adair v. Ins. Co., 107 Ga. 297, 33 S. E. 78; Des Moines Ice Co. v. Niagara Fire Ins. Co., 99 Iowa, 193, 68 N. W. 600; Karow v. 7ns. Co., 57 Wis. 56, 15 N. W. 27, 46 Am. Rep. 17 (assured burned his property when insane). 328 MEANING AND LEGAL EFFECT OF FIBE POLICY held to constitute no such increase of risk as that referred to in this clause of the policy.* Mere acts of negligence by the assured or his agents, though causing or contributing to the loss, are covered by the fire insurance policy, in the absence of fraud or bad faith on his part.^ Goodfriend owned a department store in Middleborough. He carried upon his stock of merchandise $18,100 of insurance, in- cluding a policy of $1,000 issued by the defendant. The store was lighted by a gasoline machine, which got out of order shortly before the fire and caused the loss. The defendant moved to amend its answer by alleging that the gasoline lighter was defective for many days prior to the fire which was known or by the exercise of ordi- nary care could have been known to the plaintiff before the fire. The court held that an insurer is responsible for a loss occasioned by a risk insured against, though caused by the negligence of the insured or his agent, and ruled that the amendment was immaterial.* The defendant, the Niagara Fire Insurance Company, insured an ice house belonging to the Des Moines Ice Company and situated on the shore of Lost Island Lake. The ice house was destroyed by fire. The loss was caused by the spread of fire from a bonfire made by the president of the plaintiff company not far away from the ice house, for the purpose of burning up some rubbish, and left burning without anyone to watch it at the noon hour. The court held that though the plaintiff's conduct might have been careless, neverthe- less the loss was covered by the policy, and that the temporary and incidental increase of risk amounted to no breach of warranty.* Furthermore, it must not be forgotten that the hazard is of neces- sity a variable quantity. It changes constantly from day to day, and sometimes imperceptibly, from the operation of the laws of nature and from various circumstances beyond the control of the insured. Such influences, and also transactions of third parties limited to adjoining premises ^ must in general, unless unusual or extraordinary, be considered as a necessary part or incident of the risk which the insurer has undertaken to bear.* It is not to be sup- ^Angier v. Western Assur. Co., 10 3 German Ins. Co. v. Goodfriend S. D. 82, 71 N. W. 761, 66 Am. St. R. (Ky., 1906), 97 S. W. 1098. 685. As to mere carelessness, the * Des Moines Ice Co. v. The Niagara United States Supreme Court says: Fire Ins. Co., 99 Iowa, 193, 68 N. W. "The insured, so long as he acts with 600. fidelity, is answerable neither for his s German Ins. Co. v. Wright, 6 Kan. servante nor for himself," Orient Ins. App. 611, 49 Pac. 704. Co. V. Adams, 123 N. S. 73. e State Ins. Co. v. Taylor. 14 Colo. ^German Ins. Co. v. Goodfriend 499, 24 Pac. 333 (acts of nsiehbors). (Ky., Dec, 1906), 36 Ins. L. J. 217. See § 49, supra. INCREASE OF RISK 329 posed that the insured has guaranteed that no improvements or changes shall be made anywhere in the vicinity of the insured prop- erty during the life of his insurance,^ but it is reasonable to exact an obligation from him that he shall not allow himself, or permit others in control of the insured property, with his consent, to change its structure, nature, or habitual use in such a way as to make the hazard materially different from that which the insurers have agreed to imdertake. Therefore trivial or temporary variations in the risk incident to the ordinary use of the insured property are presupposed by the contracting parties to be likely to occur; ^ but not so with more radical or permanent changes.* In a Georgia case the defendant insured "the estate of Mrs. Hudson" against fire loss to dwelling house and furniture. The husband of the decedent, in charge and occupancy of the premises, employed the owner of a movable threshing machine run by an engine to bring his machine to the premises temporarily, for the purpose of threshing some wheat. The engine, which had no spark arrester, was moved thither and located about eighty-five feet from the dwelling. The work of threshing all told required about two hours. When the job was half done a sudden and imexpected gust of wind came and carried sparks from the engine to the house, which was in consequence destroyed by fiire. The plaintiff was nonsuited below. On appeal, however, the court reversed, holding that the question whether a breach of the warranty had been com- mitted by such a temporary and incidental use of the machine was for the jury.* This clause binds the assured to make no alteration or change in the structure * or use * of the property which will substantially increase the risk,' and it prohibits him from introducing any \m- usual practice or mode of conducting his business which would have » Schaeffer v. Farmers' Mut. F. Ins. 107 Ga. 297, 33 S. E. 78, 45 L. R. A. Co., 80 Md. 563, 31 Atl. 317 (engine 204, 73 Am. St. R. 122. fifty feet away). ^ Hill v. Middlesex Mvt. Assur. Co., 2 Kircher v. Mil. Mech. Mid. Ins. 174 Mass. 542, 55 N. E. 319; CcUveH v. Co., 74 Wis. 470, 43 N. W. 487. Hamilton M. Ins. Co., 1 Allen (Mass.), 3 Adair v. So. Mut. Ins. Co., 107 Ga. 308, 79 Am. Dec. 744. 297, 33 S. E. 78, 45 L. R. A. 204, 73 » Planters' Mut. Ins. Co. v. Ro}oland, Am. St. R. 122 (mere incidental 66 Md. 236, 7 Atl. 257 (change in temporary acts are not prohibited); process of manufacture); Williams v. Eagi^ V. Firemen's Fund Ins. Co., 71 Peoples' Fire Ins. Co., 57 N. Y. 274 Hun, 352, 55 N. Y. St. R. 29, 25 N. Y. (kerosene); Collins v. London Assur. Supp. 35, afiF'd 148 N. Y. 726, 42 N. E. Co., 165 Pa. St. 305, 30 Atl. 924; Pool 722 (risk must not be increased beyond v. Milwaukee Mech. Ins. Co., 91 Wis. that existing or reasonably contem- 530, 65 N. W. 57. pl«it«d by the parties). t Janvrin v. Ins. Co., 70 N. H. 35, * Adair v. Southern Mvt. Ins. Co., 46 Atl. 686 (must be substantial change to avoid). 330 MEANING AND LEGAL EFFECT OF FIRE POLICY the same effect,^ and also from discontinuing any precaution repre- sented in his appUcation to have been adopted and practiced with a view to diminish the risk.^ During the term of the policy issued by the defendant to Horan upon his two-story frame dwelling, he caused an adjoining dwelling house to be erected which in fact increased the risk of fire in the building insured; but by another alteration, namely, by the removal of a carpenter shop standing at the date of the policy in suit, the risk was diminished. The trial judge charged the jury, "it is a question of fact, under all the evidence in this case, as to whether there was any increase of risk by fire; and whether it was counter- balanced by the removal of the carpenter shop." On appeal the court held that the charge was erroneous and that there had been a fatal increase of risk. A set-off of risks was not allowed.* Erection of new buildings upon the property insured,* or adjacent thereto,^ or any change in the structiure of the buildings which makes them more inflammable, or the introduction of new and more haz- ardous employment ® or machinery ' is likely to avoid the policy, unless a disclosure is made to the company, and its consent obtained by written permit.* Other insurance is not per se an increase of 1 Collins V. London Assur. Co., 165 Pa. St. 305, 30 Atl. 924. 2 Houghton v. Manufrs. Mvt. P. Ins. Co., 8 Mete. (Mass.) 114, 41 Am. Dee. 489; Diehl v. Adams Co. Mvt. Ins. Co., 58 Pa. St. 443, 98 Am. Dec. 302. New machinery may be substituted for old, James v. Lycoming Ins. Co., 13 Fed. Cas. 309. And a dwelling house, in the absence of a stipulation to the contrary, may be used for boarders, Planters' Ins. Co. v. Sorrels, 1 Baxt. (Tenn.) 352, 25 Am. Rep. 780; but not for a liquor store, Western Assur. Co. V. McPike, 62 Miss. 740. Nor may a blacksmith shop be added to a printing office, Robinson v. Ins. Co., 27 N. J. L. 134. By the rules of the New York Fire Exchange, oc- cupancy by more than two families converts a private dwelling into an apartpjent house, a more nazardous risk. 3Pottsville Mvt. Pire Ins. Co. v. Horan, 89 Pa. St. 438. * Roberts v. Chenango Ins. Co., 3 Hill (N. Y.), 501; Prands v. SomermUe M. Ins. Co., 25 N. J. L. 78 (an addi- tion for hazardous articles). 5 Pranhlin Brass Co. v. Phcenix Assur. Co., 65 Fed. 773, 13 C. C. A. 124; Cole v. Germania Pire Ins. Co., 99 N. Y. 36, 1 N. E. 38; Murdoch v. Chenango Co. Mut. Ins. Co., 2 Comst. (N. Y.) 210; YerUzer v. Parmers' Mut. Ins. Co., 200 Pa. St. 325, 49 Atl. 767 (erection of adjacent building for in- cubator). ' Mack v. Rochester German Ins. Co., 106 N. Y. 560, 13 N. E. 343. For ex- ample, changing from private dwelling to hotel, Guerin v. Manchester Assur. Co., 29 Can. S. C. 139; or to liquor saloon, Lappin v. Charter Oak Ins. Co., 58 Barb. 326. ' Orient Ins. Co. v. McKnight, 197 111. 190, 64 N. E. 339. 8 Stokes V. Cox, 1 H. & N. 320. And see as to erection of neighboring build- ings over which instired had no con- trol, Janvrin v. Ins. Co., 70 N. H. 35, 46 Atl. 686; Straker v. Phcenix Ins. Co., 101 Wis. 413, 77 N. W. 752. Black- smith shop ten or twelve feet away, held, an increase of risk, Gardiner v. Piscataquis M. P. Ins. Co., 38 Me. 439. So also a email frame building, North- western Nat. Ins. Co. v. Davis, 10 Ky. L. Rep. 818. So also a new building in a lot represented to be vacant, PottsviUe M. P. Ins. Co. v. Horan, 89 Pa. St. 438. The introduction of elec- tric lighting, pending the term of in- surance, should be disclosed to the INCREASE OP RISK 331 risk.^ Nor is vacancy per se an increase of risk.^ Indeed, some classes of buildings are much less hazardous when vacant than when oc- cupied.' Nor is change of occupants an increase of risk, as matter of law.'* In Iowa it has been held that giving a chattel mortgage amounted to an increase of risk as matter of law; ^ but this decision is very questionable, and in general the creation of incumbrances, whether voluntary, as in the case of mortgages, or involuntary, as in the case of tax liens, is not to be considered as increasing the risk within the meaning of this clause, although they might result in increasing the inducement to the insured to destroy his property.^ The conclusion is doubtless based in part upon the circumstance, that the fire policy deals specially with the matter of incumbrances, and expressly demands a disclosure of chattel mortgages only. It must be noticed that the requirements of this clause impose upon the insured an obligation which in terms covers all changes of which he has knowledge in the surrounding or adjoining premises, provided they enhance the hazard; but inasmuch as nothing is specifically said about the adjoining premises, and the word "knowl- edge" is connected with the word "control," it is doubtful how far the courts will hold the insured responsible for not disclosing changes company, Hahn v. Guardian Assur. Co., 74 N. Y. 295; Eureka F. & M. Ins. Co., 23 Oreg. 576, 581, 32 Pac. 683, Co. v. Baldwin, 62 Ohio St. 368, 57 but the making of ordinary and neces- N. E. 57; Boardman v. North Waterloo sary repairs does not fall within the Ins. Co., 31 Ont. 525; but see, under prohibition of this clause, Lyman v. statute, Jones v. Granite State F. Ins. State Mut. Fire Ins. Co., 14 Allen Co., 90 Me. 40, 37 Atl. 326; Hanscom (Mass.), 329; Tmonsend v. Northwestern v. Home Ins. Co., 90 Me. 333, 38 Atl. Ins. Co., 18 N. Y. 168; Smith v. German 324. Ins. Co., 107 Mich. 270, 65 N. W. 236, 3 Removal of part of goods from 30 L. R. A. 368 (temporary use of insured premises is no increase of gasoline to bum off old paint, held, not hazard, Runkle v. Hartford Ins. Co., 99 to avoid). And see Bentley v. Lumber- Iowa, 414, 68 N. W. 712. men's Fire Ins. Co., 191 Pa. St. 276, * Georgia Home Ins. Co. v. Kinnier, 43 Atl. 209, as to use of benzine, but 28 Gratt. (Va.) 88; Planters' Ins. Co. v. policy was not standard. Extraor- Sorrels, 1 Baxt. (Tenn.) 352. dinary alterations and repairs, with- ^ Lee v. Agricultural Ins. Co., 79 out special permit, will avoid, First Iowa, 379, 44 N. W. 683. Cong. Church v. Holyoke Fire Ins. Co., » Hosford v. Germania Fire Ins. Co., 158 Mass. 475, 32 N. E. 572, 19 L. R. A. 127 U. S. 399; Greenlee v. Ins. Co., 102 587, 35 Am. St. R. 508 Gong continued Iowa, 427, 71 N. W. 534; Judge v. use of naphtha torches in connection Conn. Fire Ins. Co., 132 Mass. 521; with repairs, issue for jury); Merriam Collins v. London Assur. Co., 165 Pa. V. Ins. Co., 21 Pick. (Mass.) 162, 32 St. 298, 30 Atl. 924; Continental Fire Am. Dec. 252. Ins. Co. v. Whitaker 112 Tenn. 151,79 ' lAndley v. Ins. Co., 65 Me. 368, 20 S. W. 119. The Wisconsin court, how- Am. Rep. 701. ever, decided that the existence of a 2 Becker v. Farmers' Mut. Ins. Co., mortgage was a fact material to the 48 Mich. 610, 12 N. W. 874; Luce v. risk, Vankirk v Citizens' Ins. Co. 79 Dorchester Mut. F. Ins. Co., 110 Mass. Wis. 627. 361; Cornish v. Farms Buildings Ins. 332 MEANING AND LEGAL EFFECT OF PIEE POLICY made by others upon adjacent premises ^ in the absence of a special warranty regarding "exposures." ^ In a Colorado case the policy provided that it should be void if the hazard was increased without written consent of the company. The court decided that such a clause was aimed only at premises of the insured and property within his control, and that consequently the language could not be extended to the acts of contiguous owners.^ But the phraseology of most of the statutory policies is broad enough to cover all such acts of neighbors done on their premises as increase the hazard of the insured property, with the knowledge of the in- sured, although the acts are not within the control of the insured. This ruling has been expressly made by the New Hampshire court under the standard policy of that state; * and a later provision in the New York standard form respecting proofs of loss, which requires the insured to describe "any changes in exposures since the issuing of the policy," not to be found in the Massachusetts and New Hamp- shire policies, may be mentioned as an added reason for giving the same construction to the New York policy. Therefore, whenever the insured learns that, by reason of some alteration in the surround- ing exposures, the risk of loss to the insured property has been sub- stantially enhanced, his safe method of procedure is to immediately notify the company by aid of his broker, who will secure prompt action by the company, and, if necessary as an additional precaution, obtain its "binder for survey" meanwhile.^ In a case in which the defense was that the risk was materially increased by .the erection of adjoining buildings with the knowledge and consent of the insured, the Minnesota court held that such an issue, unless the facts were undisputed and the inference obvious, raised a question for the jury, and that the burden of alleging and proving the defense rested upon the insurer.* If the change of risk is. such as to fall within the ban of this pro- vision of the contract, the question is immaterial whether or not it is the cause of the loss; since the risk becomes other than that which was contracted for, and the contract is void at the option of the estate Ins. Co. v. Taylor, 14 Colo. (the increase of risk must be sub- 499, 24 Pac. 333. stantial). 1 Siraker v. Phoenix Ins. Co., 101 ^Putnam v. Home Ins Co 123 Wis. 413, 77 N. W. 752 (where there Mass. 324, 26 Am. Rep. 93. But a was an express warranty of no ex- binding until acceptance or rejection posure within 100 feet). will not run after rejection, Goodhue v. 3 /State Ins. Co. v. Taylor, 14 Colo. HaHford Fire Ins. Co., 184 Masa 41 499, 24 Pac. 333. 67 N. E. 645. « Janvrin v. Rockingham F. Mitt. e Taylor v. Security Mut F Ins Co f ire /ns. Co., 70 N. H. 35, 46 Atl. 686 88 Mum. 231,92 N.W. 952. ' INCREASE OP RISK 333 insurers; ^ and according to the weight of authority a temporary increase of risk vitiates the policy, and does not simply suspend its operation; ^ but a contrary rule has been adopted in Illinois and elsewhere.* And, as already shown, statutes and statutory forms of policies in some states supersede these common-law doctrines. This clause has no application to conditions expressly provided for by other clauses of the poUcy.* Thus it is obvious that the insured is entitled to the full benefit of all the written permits that may be regularly obtained and attached to the policy, for hazardous use or occupation, for change of interest or location, for rebuilding or re- pairing, for vacancy, for chattel mortgages, for anything agreed to by the company in writing, regardless of the effect upon the risk; provided only the insured keeps within the terms of his permit.^ Whether the change amounts to a material alteration in the risk is essentially a question of fact; * and must generally be a question for the jury.' Thus the Minnesota court declares, " it is rare that the 1 Danieh v. Equitable Fire Ins. Co., 48 Conn. 105. See § 107, supra. ^Imperial Ins. Co. v. Coos Co., 151 U. S. 452, 14 S. Ct. 379; HiU v. Middle- sex AssuT. Co., 174 Mass. 542, 55 N. E. 319; Kyte v. Commercial Union Assur. Co., 149 Mass. 116, 21 N. E. 361; Jen^ ninffs V. Chenango Co. Mvt. Ins. Co. 2 Den. (N. Y.) 75. s For example, Traders' Ins. Co. v. Cailin, 163 lU. 256, 45 N. E. 255; Ohio Farmers' Ins. Co. v. Burget, 65 Ohio St. 119, 61 N. E. 712. See fuUer discus- sion of this subject, §§ 114, 247, supra. Burden is on the underwriter to prove increase of risk, Taylor v. Security Mut. F. I. Co., 88 Minn. 231, 92 N. W. 952. * Daniels v. Equitable Ins. Co. , 50 Conn. 551 ; Herrman v. Merchants' Ins. Co., 81 N. Y. 184. Thus if there be an express privilege to make alterations and repairs, it is not material to in- quire whether or not they increase the risk, Townsend v. Northwestern Ins. Co., 18 N. Y. 168. Such inquiry is likewise immaterial, on thex)ther hand, in the case of express prohibitions, for instance, against keeping gasoline or other explosive, Norwaysz v. Thuringia Ins. Co., 204 111. 334, 68 N. E. 551; Boyer v. Ins. Co., 124 Mich. 455, 83 N. W. 124, 83 Am. St. R. 338. Under sprinkler clause it is permissible to make repairs; therefore it is not a fatal increase of risk to discontinue for nec- pssaiy repairs the use of the sprinkler service. So held in Cummer Lumber Co. V. Associated Mfrs. M. P. I. Corp., 67 App. Div. 151, 73 N. Y. Supp. 668. ^Betcher v. Capital F. Ins. Co., 78 Minn. 240, 80 N. W. 971; Garrebrant v. Continental Ins. Co. (N. J., 1907), 67 Atl. 90. ' Firemen's Ins. Co. v. Appleton, etc., Co., 161 111. 9, 43 N. E. 713; Runkle v. Hartford Ins. Co., 99 Iowa, 414, 68 N. W. 712. ' For example, Taylor v. Security Ins. Co., 88 Minn. 231, 92 N. W. 952; Orient Ins. Co. v. McKnight, 197 111. 190, 64 N. E. 339; Greenwich Ins. Co. v. State, 74 Ark. 72, 84 S. W. 1025; WiUiams v. Peoples' Ins. Co., 57 N. Y. 274. The issue is not always for the jury, for example, Cassimus v. Scot. Union, & Nat. Ins.- Co., 135 Ala. 256, 33 So. 163; Betcher v. Capital Fire Ins. Co., 78 Minn. 240, 80 N. W. 971; Cole V. Germania Ins. Co., 99 N. Y. 36; School Dist. V. German Ins. Co., 7 S. D. 458, 64 N. W. 527. Experts in general cannot testify as to the ultimate fact to be determined by the jury, namely, whether a given situation amounts to an increase of risk. If it be a matter of common knowledge the issue is for the jury, Carroll v. Home Ins. Co., 51 App. Div. 149, 64 N. Y. Supp. 622; Jefferson Ins. Co. v. Cotheal, 7 Wend. (N. Y.) 72. But testimony regarding prevailing rates of premiimi is ad- missible as having some bearing, Southern Mut. Ins. Co. v. Hudson, 113 Ga. 434, 38 S. E. 964; Taylor v. Se- curity Ins. Co., 88 Minn. 231, 92 N. W 334 MEANING AND LE6AL EFFECT OF FIEE POLICY question is ever one of law to be determined by the court." ^ Never- theless sometimes the only permissible inference to be drawn from the facts is too clear to allow the issue to pass beyond the judge. Accordingly the same court felt compelled to take judicial notice of the fact that the storage of explosive fireworks in the insured build- ing increased the risk.^ The clause in the Massachusetts policy is of similar purport: ' or if, yrithout such assent [in writing or in print] the sitvMtion or circumstances affecting the risk shall, by or with the knowledge, advice, agency or consent of the insured, be so altered as to cause an increase of such risk. The Massachusetts court decided that on the erection by the as- sured of a factory on an adjoining lot, increasing the risk of the in- sured property, the policy at once became void, without any affirma- tive action or notice by the insurer.'* On the other hand, the same court held that the careless use of an unsafe stove on the premises for a single night, by a visiting crew of sailors, would not avoid the policy.* Under an Iowa statute whether the removal of the property in- sured to a new location, without the insurer's consent, increases the risk presents a question for the jury.* § 258. Mechanics. — Or if mechanics be employed in building, alter- ing, or repairing the within described premises for more than fifteen days at any one time. 952; Planters' Mut. Ins. Co. v. Row- agency of the insured. By the Iowa land, 80 Md. 236, 7 Atl. 257. The rat^ policy increase of hazard to be fatal ing by the companies is not conclusive must not only be known to the in- upon this issue, Monteleone v. Royal sured, but must also contribute to the 7ns. Co., 47 La. Ann. 1563, 18 So. 472; loss. By the New Hampshire policy it Carroll v. Home Ins. Co., 51 App. Div. must continue until the loss to avoid 149, 64 N. Y. Supp. 522. And when the poUcy. the issue involves a matter of expert * Allen v. Massasoit Ins. Co., 99 knowledge, experts may testify, Trad- Mass. 160. Material alterations in the ers' Ins. Co. v. Catlin, 163 111. 256, 45 insured premises increasing the risk N. E. 255; Cornish v. Farm Bldg. Ins. avoid the policy, though not connected Co., 74 N. Y. 295. mth the loss, Hill v. Middlesex Mut. '■Taylor v. Security Mut. F. Ins. i^iVeAssur. Co., 174 Mass. 542, 55 N E Co., 88 Minn. 231, 92 N. W. 952 (erec- 319; Kyte v- Commercial Union Assur. tion of adjoining buildings); Adams v. Co., 149 Mass. 116, 21 N. E. 361, 3 Altas Mut. Ins. Co. (Iowa, 1907), 112 L. R. A. 508. N. W. 651. sLoud V. Citizens' Mut. Ins. Co., 2 ^Betcher V. Capital Fire Ins. Co., 78 Gray (Mass.), 221. The policy was Minn. 240, 80 N. W. 971. The storage held suspended and not avoided where of dynamite is "material to the risk" the owner of a bowling alley and pool as matter of law under the statutes table was illegally conducting his busi- providing that only matters material ness for a short time without a license, to the risk will avoid the policy, Kene- Hinckley v. Germania Fire Ins. Co., 140 fick V. Norwich Union F. Ins. Co. (Mo., Mass. 38, 1 N. E. 737, 54 Am Rep 445 1907), 103 S. W. 957. e Adams v. Atlas Mut: Ins. Co. (la. 3 South Dakota limits to act or 1907), 112 N. W. 651. INTEREST OF INSURED 336 Such a provision is reasonable and binding on the insured.* The limit of time, wisely inserted in this clause, tends to make it more free from ambiguity than formerly, and if the insured allows any building or repairing operations to go on without permit for more than the specified time, he will vitiate his poUcy, although in fact the risk may not have been increased.^ The permission carries with it the right to do the work in a usual and proper manner, no matter what the effect on other clauses of the policy, for instance, those forbidding an increase of risk, or the shutting down of factory opera- tions." In the Massachusetts policy this subject is not specifically cov- ered, but repairs fall'within the operation of the general clause in regard to an alteratioll in the situation or circumstances affecting the risk. § 259. Interest of Insured. — Or if interest of the insured he other than unconditional and sole ownership. If each one of several persons having insurable interests in a property were allowed to take out a separate insurance to its full value, and had the right under his policy to a separate collection for the full loss, the moral hazard would be greatly enhanced. In- surance would at once be regarded as a matter of promising specula- 1 Imperial Fire I. Co. v. Coos Mfg. Co., 24 III. App. 149, aff'd 125 111. County, 151 U. S. 452, 38 L. Ed. 231, 131, 17 N. E. 771; Au Sable Lumber 14 S. Ct. 379. Co. V. Detroit Ins. Co., 89 Mich. 407, 2 Newport Imp. Co. v. Home Ins. Co. , 50 N. W. 870. And see Firemen's Ins. 163 N. Y. 237, 57 N. E. 475, a£f'g 21 Co. v. Appleton Paper Co., 161 111. 9, App. Div. 633, 47 N. Y. Supp. 1143; 43 N. E. 713 (in which sprinkler Mack V. Rochester German Ins. Co., 106 equipment was removed); Burnham v. N. Y. 560, 13 N. E. 343. It has been Royal Ins. Co., 75 Mo. App. 394; held that a privilege to alter and re- Tovmsend v. Northwestern Ins. Co., 18 pair does not extend to a material N. Y. 168. And the time limit con- enlargement of the building, Frost trols, although a continuation of the Detroit L. & W. Works v. Millers', etc., work may be needful for the preserva- Ins. Co., 37 Minn. 300, 34 N. W. 35. tion of the property, German Ins. Co. Often a special privilege without time v. Heame, 117 Fed. 289, 54 C. C. A. limit to make "additions, alterations, 527, 59 L. R. A. 492. A breach of the and repairs," is obtained from the com- clause by a tenant of the assured will pany. As to "additions," see §233, avoid, Diehl v. Adams Co. Mvt. Ins. supra. Sometimes the insurer, unless Co., 58 Pa. St. 443. The Michigan an extra premium is paid, will consent court has held that painters employed only to a more restricted form of to paint the outside of the building privilege which does not include re- insured are not "mechanics," but it constructing, or enlargement of build- would be unsafe to rely upon any such ings or new buildings. For a proper distinction in most jurisdictions, Smith premium a special clause known as a v. German Ins. Co., 107 Mich. 270, 65 builder's risk is given, Rann v. Home N. W. 236, 30 L. R. A. 368. Contra, Ins. Co., 59 N Y. 387; Smith v. German German Ins. Co. v. Heame, 117 Fed. Am. Ins. Co., 7 N. Y. Supp. 846. 289. 3 Am. Ins. Co. v. Brighton Cotton 336 MEANING AND LEGAL EFFECT OF FIRE POLICY tion, and any loss by fire, so far from being a misfortune, would be a source of gain to the assured. In the view of underwriters, there- fore, it becomes vital to the proper conduct of the business to know whether a loss will fall exclusively upon the assured, or partly upon him and partly upon others. This provision of the standard policy, inserted in the interest of the underwriters, is by high authority deemed reasonable and valid,^ and a fulfillment of its terms is declared to be a condition precedent to any right of recovery by the assured.^ It has reference, obviously, to the time when the contract is made; * and it means that his in- terest must at that time be of such a nature that the substantial burden of any fire loss will fall exclusively upon him, regardless of the technical character of his title.'* Thus a vendee under an execu- tory contract of purchase binding him absolutely to complete and to take the whole title, whether of real,^ or personal property,* is held to be sole and unconditional owner, though the formal instru- ment of transfer be not yet delivered; and, by parity of reasoning, the vendor ceases to be sole and unconditional owner though still holding the legal title.^ But where the agreement to purchase is I Barnard v. National Fire Ins. Co., 27 Mo. App. 26. In another connection the Ohio court says: "Considerations of public policy forbid that conflagra^ tions should be made profitable," Lake Erie & W. R. R. Co. v. Falk, 62 Ohio St. 297. ^Hunt V. Ins. Co., 196 U. S. 47, 25 S. Ct. 179; Matthie v. Ghhe Fire Ins. Co., 68 App. Div. 239, 74 N. Y. Supp. 177, aflf'd 174 N. Y. 489, 67 N. E. 57. 3 CoUins V. London Assur. Co., 165 Pa. St. 298, 30 Atl. 924. * Hartford Fire Ins. Co. v. Keating, 86 Md. 130, 38 Atl. 29, 63 Am. St. R. 499 ("to be unconditional and sole, the interest must be completely vested in the insured, not conditional or con- tingent, nor for years, or for life only, nor in common, but of such a nature that the insured must sustain the entire loss if the property be destroyed; and this is so whether the title is le- gal or equitable"). Yost v. DweUirvg House Ins. Co., 179 Pa. St. 381, 36 Atl. 317; Steinmeyer v. Steinmeyer, 64 S. C. 413, 42 S. E. 184 ("ownership of the assured is sole, when no one else has any interest in the property as owner; and is unconditional, when the quality of the estate is not limited or affected by any condition"). Several parties insured together may be the sole and unconditional owner, RanMn v. Andes Ins. Co., 47 Vt. 144. If the assured has only a conditional devise, his ownership does not meet the require- ment, Dwelling-house Ins. Co. v. DowdaU, 49 111. App. 33. Nor have stockholders such an interest in the corporate property. Syndicate Ins. Co. V. Bohn; 65 Fed. 165, 12 C. C. A. 531, 27 U. S. App. 564. ^ Loventkal v. Home Ins. Co., 112 Ala. 108, 20 So. 419, 33 L. R. A. 258, 57 Am. St. R. 17; Hough v. City Fire Ins. Co., 29 Conn. 10; Knop v. F. Ins. Co., 101 Mich. 359, 50 N. W. 653; HaU V. Niagara Ins. Co., 93 Mich. 184, 53 N. W. 727; Dupreau v. Hibemia Ins. Co., 76 Mich. 615, 43 N. W. 585, 5 L. R. A. 671; Pres., etc., of Ins. Co. v. Pitts, 88 Miss. 587, 41 So. 5; Grunauer V. Ins: Co. 72 N. J. L. 289, 62 Atl. 418; Stowell V. Clark, 47 App. Div. (N. Y.) 626, 62 N. Y. Supp. 165, aff'd 171 N. Y. 673, 64 N. E. 1125; Imperial F. Ins. Co. V. Dunham, 117 Pa. St. 460, 12 Atl. 668; Matthews v. Capital Fire I. Co., 115 Wis. 272, 91 N. W. 675; Evans V. Ins. Co., 109 N. W. 952 (1906). 6 Phoenix Ins. Co. v. Kerr, 129 Fed. 723, 64 C. C. A. 251; but see Scottish Union & Nat. Ins. Co. v. Strain, 24 Ky. L. R. 958, 70 S. W. 274. ''Hamilton v. Dwelling House I. Co., INTEREST OF INSURED 337 conditional or contingent, whether of real,i or of personal property .^ so that a fire loss will not fall upon the vendee, then his interest is not sufficient to satisfy the requirement of this warranty.' The beneficial owner of the entire property is the real owner.^ If the assured has possession and use under claim of right, the court is not disposed to pass upon the validity of his title, or to apply to it any nice rules of conveyancing.' 98 Mich. 535, 57 N. W. 735, 22 L. R. A. 527; Rosenstock v. Miss. Home Ins. Co., 82 Miss. 674, 35 So. 309; but see Erb V. Fidelity Ins. Co., 99 Iowa, 727, 69 N. W. 261. It does not foUow, however, that the vendor's insurance, if valid when procured, is avoided by such an executory contract of sale. See § 265, infra. 1 Liberty Ins. Co. v. Bovlden, 96 Ala. 508, 11 So. 771; Brooks v. Erie Fire Ins. Co., 76 App. Div. 275, 78 N. Y. Supp. 748, afif'd 177 N. Y. 572, 69 N. E. 1120. 2 Phoenix Ins. Co. v. PiAlic Park Amusement Co., 63 Ark. 187, 37 S. W. 959. 3 Thus the owner of a mere option to purchase property is not a sole and unconditional owner, Phcenix Ins. Co. V. Kerr, 129 Fed. 723, 64 C. C. A. 251; see Wunderlich v. Palatine Ins. Co., 104 Wis. 396, 80 N. W. 471. Or where Eurchaserj the assured, has made a inding agreement to resell to the vendor at a given price and time. Farmers' & Mech. Ins. Co. v. Hahn (Neb.), 96 N. W. 255. A person in possession of personal property, with a reservation of title in the seller until' pajmient of the notes given for the purchase price, is not sole and imcon- ditional owner, Geiss v. Franklin Ins. Co., 123 Ind. 172, 24 N. E. 99 (soda water foimtain). But if it be equitably and substantially true that the insured is the unconditional and sole owner, as regards the risk of fire loss, the clause will not be held to have been ^aolated, Milwaukee Mech. Ins. Co. v. Rhea, 129 Fed. 9, 60 C. C. A. 103, in which the jury was charged that it would be sufficient if vendee was in possession by a parol agreement to purchase and to pay. But held otherwise where there was no consideration for the parol promise to convey in Miller v. Amazon Ins. Co., 46 Mich. 463, 9 N. W. 493; Martin v. State Ins. Co., 44 N. J. L. 485, 43 Am. Rep. 397; Ldianon Mut. Ins. Co. v. Erb, 112 Pa. St. 149. But 22 see Westchester Fire Ins. Co. v. Weaver, 70 Md. 536, 17 Atl. 401, 5 L. R. A. 478 (policy held void as to piano taken under conditional purchase though assiired liable for fire loss). * Fire Assoc, v. Calhoun, 28 Tex. CSv. App. 409, 67 S. W. 153. So where two agree to cany on a cotton planta- tion, one to furnish stock, money, and supplies, the other to furnish the plantation and superintend the busi- ness, the former to be indemnified for his advances out of the proceeds of the cotton, and the stock and implements used to be equally divided at the end of the year, it was held, that, the cotton not being worth enough to pay the advances, the partner who had made them was the sole and unconditional owner of the cotton, but not of the stock and implements, Noyes v. Hart- ford Fire Ins. Co., 54 N. Y. 668. And a purchaser at a sheriff's sale who has not paid the purchase money, there being an outstanding right to claim the premises, has not such an owner- ship. Security Ins. Co. v. Bronger, 6 Bush (Ky.), 146. So where the use of real estate was contributed as a part- ner's share of the capital, there being no deed directly or in trust, the firm cannot truly describe the property as belonging to them by an entire, imcon- ditional, and sole ownership. Citizens' Fire Ins. S. & L. Co. v. DoU, 35 Md. 89, 6 Am. Rep. 360. 5 Thus it was held that the insurance company could not take advantage of the fact that the building encroached two feet upon the adjoining property, Haider v. St. Paul P. & M. Ins. Co., 67 Minn. 514, 70 N. W. 805; or that the title of the assured might be success- fully assailed by his creditors, German Ins. Co. V. Hyman, 34 Neb. 704, 52 N. W. 401; Burson v. Fire Assn., 136 Pa. St. 267, 20 Atl. 401; or by the interested corporation of which he was a trustee, Caraher v. Royal Ins. Co., 63 Hun (N. Y.),82, 44 N. Y. St. R. 141, 17 N. Y. Supp. 858; or that the as- 338 MEANING AND LEGAL EFFECT OF FIKE POLICY As a rule any incumbrances or liens, whether voluntary or in- voluntary, upon the property of the insured, need not be disclosed under this clause. The assured is none the less owner because of their existence.* sured held by deed of gift, which, a few days after issuance of policy and before the fire, had actually been ad- judged void as against creditors of the grantor, Steinmeyer v. Steinmeyer, 64 S. C. 413, 42 S. E. 184. The owner of an undivided part interest is not sole and unconditional owner, for this phrase calls for the fee simple. Palatine Ins. Co. V. Dickenson, 116 Ga. 794, 43 S. E. 52; Hebner v. Palatine Ins. Co., 167 111. 144, 41 N. E. 627; L. & L. & G. Ins. Co. V. Cochran, 77 Miss. 348, 26 So. 932, 78 Am. St. R. 524. Nor is one who holds jointly with others the sole and unconditional owner, Schroedel v. Humboldt Ins. Co., 158 Pa. St. 459, 27 Atl. 1077; as, for example, a partner in the firm property, McGrath v. Home Ins. Co., 88 App. Div. (N. Y.) 153, 84 N. Y. Supp. 374; McPetridge v. Phamix Ins. Co., 84 Wis. 200, 54 N. W. 326. But a transfer of his interest in the firm by one partner, before policy issues, has no effect on title of firm to firm real estate. Wood v. Am. Ins. Co., 149 N. Y. 382, 44 N. E. 80. Nor is a surviving partner, who is also ad- ministrator of the deceased partner, the sole and unconditional owner, Crescent Ins. Co. v. Camp, 71 Tex. 503, 9 S. W. 473. Nor is a tenant for life, Garner v. Hawkeye Ins. Co., 69 Iowa, 202; but see Security Ins. Co. v. Kuhn, 207111. 166, 69 N.E. 822. Nor a tenant for a term, Mt. Leonard Mills Co. v. L.&L.& G. Ins. Co., 25 Mo. App. 259, though tenant is responsible for fire loss. Nor is the trustee of a syndicate, holding the legal title for the benefit of himself and five others, such sole and unconditional owner, Bradley v. Ger- man-Amer. I. Co., 90 Mo. App. 369. Nor is the owner of a small part of the furniture described, Dow v. National Assur. Co., 26 R. I. 379, 58 Atl. 999 (1904). Nor is a husband when title is in him and his wife, Schroedel v. Humboldt Fire Ins. Co., 158 Pa. St. 459, 27 Atl. 1077. Nor is a mortgagee prior to sale in foreclosure, Ordway v. Chase, 57 N. J. Eq. 478, 42 Atl. 149. But otherwise as to mortgagee of per- sonal property in possession after debt is due, Carey v. L. & L. & G. Ins. Co., 92 Wis. 538, 66 N. W. 693. One who holds title from a second mortgagee is not sole and unconditional owner, Southwick -v. Atlantic F. & M. Ins. Co., 133 Mass. 457. But as before shown descriptive phrases are often employed which override this war- ranty, and indicate that the insurable interest of the insured, whatever it may be, is covered, Hagan v. Scottish Ins. Co., 186 U. S. 423, 22 S. Ct. 862 ("for whom it may concern"); Cross V. N. F. Ins. Co., 132 N. Y. 133, 30 N. E. 390 ("as trustee"); SuUivan v. Spring Garden Ins. Co., 34 App. Div. 128, 54 N. Y. Supp. 629. Thus a poUcy to "a receiver" shows upon its face other interests than that of owner, L. & L. & G. Ins. Co. v. McNeill, 89 Fed. 131, 59 U. S. App. 499. And it has been held that where one man does business under a partnership name, insurance in such partnership name is valid, Phoenix Ins. Co. v. Mc- Kernan, 20 Ky. L. R. 337, 46 S. W. 10 (in which another even loaned his name and credit without avoiding policy); Delaware Ins. Co. v. Bonnet, 20 Tex. Civ. App. 107, 48 S. W. 1104; Matter of Pelican Ins. Co., 47 La. Ann. 935, 17 So. 427. 1 Hartford Ins. Co. v. Enoch, 72 Ark. 47, 77 S. W. 899; McClelland v. Green- wich Ins. Co., 107 La. 124, 31 So. 691; Dolliver v. St. Joseph F. & M. Ins. Co., 128 Mass. 315, 35 Am. Rep. 378; Caplis V. Am. Ins. Co., 60 Minn. 376, 62 N. W. 440; Hare v. Headley, 54 N. J. Eq. 545, 35 Atl. 445; Huff v. JeweU, 20 Misc. 35, 44 N. Y. Supp. 311; Steinmeyer v. Steinmeyer, 64 S. C. 413, 42 S. E. 184; Union Assur. Soc. v. Nails, 101 Va. 613, 44 S. E. 896. A lease from the iasured need not be mentioned, Ins. Co. v. Haven, 95 TJ. S. 242. _ So a mortgagor is a sole and un- conditional owner prior to a fore- closure of the property. Wolf v. Theresa Village M. F. I. Co., 115 Wis. 402, 91 N. W. 1014. Inasmuch as the moral hazard is increased where the property is heavily incumbered, some- times the application or policy re- ■quires a disclosure of incumbrances, Essex Sav. Bk. v. Meriden Fire Ins. Co., 57 Conn. 335, 17 Atl. 930; Lock- Mood V. Middlesex Mvt. Assur. Co., 47 INTEREST OF INSURED 339 Though no extraneous representation be asked for by the insurer or be made by the assured regarding his interest, he must, neverthe- less, see to it that the express warranties of the poUey in regard to sole and unconditional ownership are fulfilled. This is beyond peradventure the sound rule.^ But, by an extraordinarily liberal construction, several courts have held that, if the company make no afiirmative inquiries, a legal presumption will be indulged in to the effect that the company is content with any insurable interest belonging to the insured; and some judges have applied this rule to the standard policy, though it contains the further warranty that the interest must be truly stated in the poHcy.^ This clause is not in the Massachusetts poUcy. Conn. 553; Martin v. Fidelity Ins. Co., 119 Iowa, 570, 93 N. W. 562; Filchburg Savings Bank v. Amazon Ins. Co., 125 Mass. 431. A deed intended as a mortgage does not avoid, Sun Fire Office v. Clark, 53 Ohio St. 414, 42 ^f. E. 248. 1 For example, Hunt v. Ins. Co., 196 U. S. 47, 25 S. Ct. 179; Syndicate Ins. Co. V. Bohn, 65 Fed. 165, 12 C. C. A. 531, 27 U. S. App. 564, 27 L. R. A. 614; Pelican Ins. Co. v. Smith, 107 Ala. 313, 18 So. 105, 92 Ala. 428; Orient Ins. Co. V. WiUiamson, 98 Ga. 464, 25 S. E. 560; Parsons v. Lane, 97 Minn. 98, 106 N. W. 485; Rosenstock v. Mississippi Home Ins. Co., 82 Miss. 674, 35 So. 309; Lasher v. St. Joseph F. & M. Ins. Co., 86 N. Y. 423. See § 141, supra. * For example, Manchester Assur. Co. V. Ahrams, 89 Fed. 932, 32 C. C. A. 426; Sharp V. Scottish U. & M. Ins. Co., 136 Cal. 542, 69 Pac. 253 (Beatty, C. J., dissents in able opinion); Glens Falls Ins. Co. V. Michael (l^d., 1905), 74 N. E. 964 (life interest; Gillett, J., dissents in convincing opinion); Ger- man Ins. Co. V. Davis, 6 Kan. App. 268, 51 Pac. 60 (but value of insurable interest exceeded insurance); Hartford Ins. Co. V. McClain (Ky.), 85 So. W. 699; Miotke v. Milwaukee, etc., Ins. Co., 113 Mich. 166, 71 N. W. 463 (standard policy; Ross,C. J., dissenting); Farmers' ck of hardware. During the term of the poUcy, without permit of the insurer, Verdier took in Brown as a copartner, giving him a three- tenths interest in the insured property of the concern, which was sub- sequently damaged by fire. The court held that the contract of in- surance in its nature is strictly personal, and that the transfer of the copartnership interest from Verdier to Brown altogether avoided the pohcy.^ A subsequent decision in the same court, although it gained the approval of all the judges in the highest court, as well as in the courts below, is not so easily explained. The insured, the Buffalo Elevating Co., owned and operated a large grain elevator in Buffalo. Besides its insurance on the building and its insurance on all the contents of the building, it took out a third class of insurance in 46 poUcies, aggregating $73,250, to wit, $232.93 a day, and known as "use and occupancy" insurance,^ the object of which, as already shown, is to indemnify an owner or occupier for the loss of commercial use during the period required for reconstructing a building destroyed or dam- aged by fire. Shortly after some of these policies were issued, and shortly before the rest of them were issued, the insured, without knowledge or consent of the insurers, joined for the whole active season a secret pool or trust composed of many elevators. This was done, as in former seasons, under a written pooling agreement pro- viding, in substance, among other things, that, after payment of certain operating expenses, the balance, to wit, eighty per cent of the gross earnings of the Buffalo Elevating Co., should be turned over by it absolutely to the pool, to be divided up among the many members together with their earnings, and that, in spite of a fire destroying the elevator in question, the Buffalo Elevating Co. should neverthe- less continue to receive its full percentage of the entire pool earnings from the pool. A fire destroyed the plaintiff's elevator, and the in- sured claimed from the insurers of use and occupancy $60,328.87, is broken by conveyance and receipt 158 111. 149, 41 N. E. 854; Northam v. back of purchase money mortgage, Dvtdtess Co. Mvi. Ins. Co., 166 N. Y. Savage v. Howard Ins. Co., 52 H. Y. 319, 59 N. E. 912; Ohio Farmers 502, 11 Am. Rep. 741. Also by ex- Ins. Co. v. Waters, 65 Ohio St. 157, 61 ecution and record of a deed to the N. E. 711; or by conveyance in par- son of the assured, though without tition between devisees where only one consideration or change of possession, was the assured, Robinson v. North where given for the purpose of avoid- BrU. & M. Ins. Co. (Ky.), 53 S. W. ing the enforcement of a judgment, 660. Rosenstein v. Traders Ins. Co., 79 App. i Germania F. Ins. Co. v. Home Ins. Div. 481, 79 N. Y. Supp. 736, 102 App. Co., 144 N. Y. 195, 39 N. E. 77, 26 Div. 147; or Iqr execution of a volun- L. R. A. 591, 43 Am. St. R. 749. taiy assignment for the benefit of 2 See § 20, supra, and Appendix of creditors, Onr v. Hmumer Ins. Co., ¥arwB, di. IL 346 MEANING AND LEGAL EFFECT OF FIBE POLICY to wit, for an arbitrated period of 259 working days required for rebuilding. The insurance companies of this class, by the same counsel, all set up substantially the same defense, namely, that where the policy, was issued before the transfer to the pool, the in- sured had violated the warranty against making any change of in- terest in the subject-matter insured, and that where the policy was issued after the transfer to the pool, the insured had violated the warranty of sole and unconditional ownership of the subject-matter. The case was submitted on an agreed statement of facts, and the plaintiff recovered in full. The court held that the insured under a use and occupancy policy is sole and unconditional owner, and has made no change of interest in the subject-matter insured thereby, although he transfer to another the total earnings. The court based its conclusion upon the proposition that "use and occupancy" and "earnings" or "profits" are not of necessity synonymous terms, a proposition which both sides admitted. ^ 1 Michael v. Prussian Nat. Ins. Co., 171 N. Y. 25, 63 N. E. 810. If the earning power and gross earnings of an elevator are no part of its commer- cial use, it is difficult to see what is. If an absolute transfer of the total earnings is no change of interest whatsoever in the subject-matter of "use and occupancy" insurance, it is difficult to conceive what can be. A sale of the building or contents would not avoid such a policy, since neither building nor contents is its subject- matter. The court inquires, why the insurer does not say so plainly, in- stead of using a vague phrase if he means to insure "earnings" or "prof- its." But the phrase "use and occu- pancy," while usually involving, to a considerable extent, the notion of earn- ings or profits is not intended to be and ought not to be synonymous with either. The policies are valued. If the insurance is taken in good faith, the insured expects to recover though it subsequently transpires that he is losing, and not making, money in his business. So also it is appropriate to -take out this same class of insurance to indemnify for a continuance of un- profitable expenses during the period required for reinstatenjent, regardless of whether the business is profitable or unprofitable. But all this is far from saying that a sale of the entire gross earnings is not a most substantial change of interest in the subject-mat- ter of this kind of insurance. If only an alienation of the whole interest were prohibited, as by some statutory policies, instead of any change in the interest, a transfer of the total profits or total gross earnings clearly would not avoid the policy, since, as the learned court argues, the insured con- ceivably might, even after such a transfer, make some other business use of the premises, while still holding the title to the land. He might at least "occupy his premises" and enjoy the, prospect. But surely the gross earnings represent a most practical, tangible and substantial part of the use of a commercial estabhshment. Indeed, at page 35, in the opinion of the court, Mr. Justice Gray says, "In- surance on use and occupancy evi- dently relates to the business use which the property is capable of in its ex- isting condition." To hold, then, that the total earnings are no part of this business use, it is respectfully sub- mitted, is not within the letter or the spirit of the contract evidenced by the New York standard policy. Compare CaskUain v. Preston, 11 Q. B. D. 308, 52 L. J. Q. B. 366; Chi., etc., R. Co. v. Pullman Car Co., 139 U. S. 79, 11 S. Ct. 490 (quoting and approving the English doctrine). The gross earnings of the Buffalo Elevating Company might have been insured by the pool, the legal and equitable owner of eighty per cent of them, by the same kind o/ ALIENATION CLAUSE 347 It is appropriate to employ in this clause the word "interest" in place of the words "title," or "ownership," for the assured often has an insurable interest where he has no title or ownership; but in the phrase "change of interest" two words of very broad significa- tion have been brought into conjunction.^ And although expressions of judges maybe foimd to the effect that the phrase embraces " every conceivable change of title or interest,"^ "any material change of interest,"* "such a change as would enable someone else having the right and the title, to take out a new policy," ^ nevertheless a rule of construction favorable to the assured must be preferred, and the main purpose of the contract must be kept in the foreground. Accordingly, it is rightly held that a policy will not be avoided by a mere paper transfer ^designated as a bill of sale, which is merely colorable, there being no consideration and no delivery of the posses- sion of the property; * nor by a sale or transfer which is invalid and ineffectual as between the parties; * nor by sales, purchases and policies, and the same amount collected a second time in its favor, and a third time by the next assignee, and so on ad infinitum all under the egis of an obsciu'e but appropriate phrase for a long time in use, which probably means very much the same thing to all parties in interest in such cases, namely, the money earnings, or some part thereof, expected to accrue from the commercial use. The effect of the insurance in litigation, in conjunction with the pooling agreement, in the Buffalo Elevating Co. case was patent. If the plaintiff's building and contents were fuUy insured, he was a gainer by the &e before he had collected a dollar of his use and occupancy insurance. The fire put a stop for a season to his operating expenses, or certainly les- sened them, while the pool continued to give him substanti^dly all his in- come. On top of that, he collected $60,000 more for an alleged loss of use, no part of which was really sustained. And this was precisely the result which, at the time when he took out his in- surance, he must have anticipated was likelv. to occur, if the elevator should be flestroyed by fire. There was such a transfer of the commercial use as would enable the assignee to insure it, and, according to a test established by the Appellate Division this comes within the ban of the alienation clause. Fuller V. Jameson, 98 App. Div. 53, 90 N. Y. Supp. 456. ^Stemel v. Penn. Fire Ins. Co., 110 La. 1019, 35 So. 271. A transfer of either legal or equitable interest avoids, Southern Cotton Oil Co. v. Prudential F. Asso., 78 Hun, 373, 60 N. Y. St. R. 127. 2 Lappin v. Charter Oak F. & M. Ins. Co., 58 Barb. (N. Y.) 325. 3 Excelsior Foundry Co. v. Western Assur. Co., 135 Mich. 467, 98 N. W. 9. * Fuller V. Jameson, 98 App. Div. 53, 90 N. Y. Supp. 456, aff'd 184 N. Y. 605, 77 N. E. 1187; and see Abbott v. Hampden Mut. Fire Ins. Co., 30 Maine, 414; Edmands v. Mutual Safety Fire Ins. Co., 1 Allen (Mass.), 311; Western Mass. Ins. Co. v. Riker, 10 Mich. 279. ^Forward v. Continental Ins. Co., 142 N. Y. 382, 37 N. E. 615, 59 N. Y.. St. R. 777. 8 Whitney v. American Ins. Co., 127 Cal. 464, 59 Pac. 897 (deed to avoid policy must be delivered and accepted as well as recorded); Phoenix Ins. Co. v. Asbury, 102 Ga. 565, 27 S. E. 667 (deed held void for usury); Westchester Ins. Co. v. Jennings, 70 111. App. 539 (deed ineffective without name of grantee); Kitterlin v. Mil- waukee Ins. Co., 134 111. 647, 25 N. E. 772 (deed void because wife did not join); Schaeffer v. Anchor Ins. Co., 113 Iowa, 652, 85 N. W. 985 (deed delivered after grantors' death will not avoid policy); Hartford Fire Ins. Co. v. Warbritton, 66 Kan. 93, 71 Pac. 278 (no delivery of deed and no avoidance of policy because deed was fraudulently taken from escrow); 348 MEANING AND LEGAL EFFECT OF FIRE POLICY fluctuations in a stock of goods, or materials and equipment, in a store or factory.' And it is held that a change which increases the interest of the assured will not be permitted to defeat the insurance.^ The wording of the New York standard policy makes it clear that a devolution of interest, by the death of the insured, to heirs, de- visees, executors or administrators effects no forfeiture.^ § 264. The Same — Incumbrances. — The standard policy expressly provides that written consent must be obtained for chattel mort- gages, and, if known to the assured, for proceedings in foreclosure. These provisions, by implication, make it clear that the giving of real estate mortgages and the incurring of other liens are not pro- hibited.* § 265. The Same — Executory Contracts of Sale. — Valuable build- ings are usually insured by many policies.' Conveyancing for the most part follows a well-established practice. A preliminary or executory contract of sale is exchanged, with part payment by the German Fire Ins. Co. v. York, 48 Kan. 488, 29 Pac. 586, 30 Am. St. R. 313 (deed to homestead held void be- cause signed by husband only); Pit- ney v. Glens Palls Ins. Co., 65 N. Y. 6 (transfer invalid under statute of fraud); Gerling v. Ins. Co., 39 W. Va. 689, 20 S. E. 691 (grantor mentally in- competent, policy not avoided). Com- pare Milwaukee Trust Co. v. Lan- cashire Ins. Co., 95 Wis. 192, 70 N. W. 81 (assignment for benefit of creditors, though void as to them, is good as between assignor and assignee and is therefore a change of title). ^ Wolfe v. Security Pire Ins. Co., 39 N. Y. 49; Hoffman v. ^trw, Fire Ins. Co., 32 N. Y. 405, 88 Am. Dec. 337; Coleman v. Phcenix Ins. Co., 3 App. Div. 65, 38 N. Y. Supp. 986; Lane v. Ins. Co., 12 Me. 44, 28 Am. Dec. 150. And descriptive phrases in the policy, for instance, "for ac- count of whom it may concern," may imply a permit for transfer, Hagan v. Ins. Co., 186 U. S. 423, 22 Sup. Ct. 862, 46 L. Ed. 1229. And a chanee of receivers is said to be allowed, Thompson v. Ins. Co., 136 U. S. 287, 10 Sup. Ct. 1019, 34 L. Ed. 408. 2 ContinerUal Ins. Co. v. Ward, 50 Kan. 346, 31 Pac. 1079. 3 Planters' MiU. Ins. Assn. v. Dew- berry, 69 Ark. 295, 62 S. W. 1047, 86 Am. St. R. 195; Forest City Ins. Co. v. Hardesty, 182 111. 39, 55 N. E. 139, 74 Am. St. R. 161; Richardson's Adm'r v. German Ins. Co., 89 Ky. 571, 13 S. W. 1, 8 L. R. A. 800; Georgia Home Ins. Co. V. Kinnier's Adm'x, 28 Grat. (Va.) 88. iWolf V. Theresa Village M. P. I. Co., 115 Wis. 402, 91 N. W. 1014; Germania Ins. Co. v. Stewart, 13 Ind. App. 627, 42 N. E. 286; BushneU v. Farmers Ins. Co., 110 Mo. App. 223, 85 S. W. 103; Sun Pire Office v. Clark, 53 Ohio St. 414, 42 N. E. 248, 38 L. R. A. 562; Lampasas Hotel Co. v. Phoenix Ins. Co. (Tex Civ. App.), 38 S. W. 361; Peck v. Ins. Co ,16 Utah, 121 51 Pac. 256, 67 Am. St. R. 600. Contra, Sossaman v. Pamlico Ins. Co., 78 N. C. 145. So whare the conveyance was absolute in form but intended as collateral, held not to avoid the policy, Henton v. Ins. Co. (Neb.), 95 N. W. 670; Gennan Ins. Co. V. Gibe, 162 111. 251, 44 N. E. 490; Barry v. Hamberg-Bremen Fire Ins. Co., HON. Y. 1,17 N.E. 405. 5 From one hundred to two hundred insurance companies may be liable on a single risk if it be a large factory or mercantile establishment. The bulk of insurance handled by brokers and insurance agents in large cities is upon business and mercantile properties. ALIENATION CLAXJSE — EXECUTORY CONTRACTS OP SALE 349 vendee, and an obligation on both sides to complete at a given date, but only provided, upon examination, the title is found as represented. Until that date the whole matter is purely tentative and uncertain. Where the contract is silent upon the subject, courts differ as to whether the executory vendee must complete despite the inter- mediate destruction of the building by fire.^ But, however that issue may be determined, it is obviously of great importance to the public to know at what precise stage of such a transaction numerous subsisting policies of the vendor ought in due course to be canceled, and new policies taken out, or indorsement made on the old, in favor of the vendee. Convenience seems to demand that whether or not the vendee takes out ins\u-ance to protect his interest, the sub- sisting policies of the ^vendor should continue in full force and effect until the deed of conveyance is delivered and the legal title trans- ferred. Such is the understood practice, and fortunately many courts in construing the standard policy have harmonized their decisions upon this point with the exigencies of trade.^ But where the executory vendee has deviated from the usual practice and has, in addition to his executory contract, and pending its fulfillment, taken actual possession and control of the property, by the better authority the policy is held avoided, despite the phrase of the policy allowing a mere change of occupants without increase of hazard.' Frequently furniture and other articles of personalty are sold by 1 See cases § 54, p. 68 n., supra. 59 Minn. 267; Srvank v. Farmers' 2 Jones V. Capital City Ins. Co., Ins. Co., 126 Iowa (1905), 547, 102 N. 122 Ala. 421, 25 So. 790; National W. 429 (a mere option to buy); Afojoun Fire Ins. Co. v. Three States Lumber Co., v. firemen's Fund I. Co., 86 Minn. 486, 217 111. 115, 75 N. E. 450; Phcenix 91 N. W. 5 (agreement to transfer to Ins. Co. V. Caldwell, 187 111. 73, 58 mortgagee is no change). N.E. 314; £r6v./ns. Co., 98 Iowa, 606, 3 Shinner Ship Building Co. v. 67 N. W. 583, 40 L. R. A. 845; Wyan- Houghton, 92 Md. 68, 48 Atl. 85; df>tte Breunng Co. v. HaHfard F. Ins. Gibh v. Phil. Ins. Co., 59 Minn. 267, Co., 144 Mich. 440 (1906) ("a condi- 61 N. W. 137, 50 Am. St. R. 405; tional sale in the law of fire insurance Davidson v. Hawkeye Ins. Co., 71 is not an alienation," real estate), Iowa, 532, 32 N. W. 514; CoKinsr^rra v. Brunswick, etc., Co. v. Northern Assur. Ins. Co., 90 Ky. 439, 14 S. W. 417, Co., 142 Mich. 29, 105 N. W. 76 (id. 9 L. R. A. 627; Grunauer v. West- Sersonalty); Wood v. Ins. Co., 149 Chester F. Ins. Co., 72 N. J. L. 289, \. Y. 382, 44 N. E. 80, 52 Am. St. 62 Atl. 418; Brighton Beach Racing R. 733; Tiemann v. Citizens Ins. Co., Assoc, v. Home Ins. Co., 113 App. Div. 76 App. Div. 5, 78 N. Y. Supp. 620 728, 93 N. Y. Supp. 654 (aff'd by the (overruling Gemumd v. Home Ins. Co., New York Court of Appeals). And 2 Hun, 540); Home Ins. Co. v. Tompkies, see Fuller v. Jameson, 98 App. Div. 53, 30 Tex. Civ. App. 404, 71 S. W. 812. 90 N. Y. Supp. 546, aff'd 184 N. Y. But see ExcelAor Foundry Co. v. 605, 77 N. E. 1187; and many cases, Western Assur. Co., 135 Mich. 467, §259, holding executory vendee in 98 N. W. 9; and compare HamiUon v. possession to be sole and unconditional Dwelling House Co., 98 Mich. 535, owner. 57 N. W. 735; Gibh v. Phil. Ins. Co., 350 MEANING AND LEGAL EFFECT OF FIRE POLICY the dealer on the installment plan, with immediate delivery to the purchaser, who, however, acquires title only after full payment of the purchase price. It should be observed that under the terms of the New York standard fire policy, in the absence of special permit, or of such description of interest and location as iihpliedly contemplates conditional sales and transfers, the dealer would forfeit his insurance upon property thus turned over to the possession of third parties.^ § 266. The Same — Joint Owners — Partners — Joint Insured. — Where the insured are joint owners of the property, or jointly in- terested in it, as, for example, in the case of partners or trustees, a transfer from one to another without the introduction of any new person, is held, by the weight of authority, to be no violation of the alienation clause. This conclusion rests upon the ground that, the company having exhibited its willingness to grant insurance to all those named in the policy, a mere shifting of interest among them should not be regarded as objectionable by the company.^ And the same indulgence also seems to be extended to those who are jointly insured, though not joint owners.^ 1 California Ins. Co. v. Union Com- press Co., 133 U. S. 387, 10 S. Ot. 365, 33 L. Ed. 730; Allemania F. Ins. Co. v. Peck, 133 111. 220, 24 N. E. 538, 23 Am. Rep. 610; Jones v. Phoenix Ins. Co., 97 la. 275, 66 N. W. 169; Northern Assur. Co. V. City Savings Bk., 18 Tex. Civ.App. 721, 45 S. W. 737. But see Brunswick-Balke CoUender Co. v. North- ern Assur. Co., 142 Mich. 29. As to whether the purchaser in possession, being obligated to pay the full purchase price would be an "unconditional and sole owner" under his own policy, see cases cited pro and con, § 259, supra. ^German Ins. Co. v. Fox (Neb.), 96 N. W. 652 (1903); Phoinix Ins. Co. v. Hokombe, 57 Neb. 622, 78 N. W. 300; Georgia Home Ins. Co. v. Hall, 94 Ga. 630, 21 S. E. 828; Loeb v. Firemen's Ins. Co., 38 Misc. 107, 77 N. Y. Supp. 106; Walradt v. Phcenix Ins. Co., 136 N. Y. 375, 32 N. E. 1063; Pierce v. Nashua Ins. Co., 50 N. H. 297; Bur- nett V. Eufaida-Home I. Co., 46 Ala. 11, 7 Am. Rep. 581; Allemania Fire Ins. Co. V. Peck, 133 111. 220; Der- mani v. Home Mutiuil I. Co., 26 La. Ann. 69, 21 Am. Rep. 544; Texas Bkg. & I. Co. V. Cohen, 47 Tex. 406, 26 Am. Rep. 298; Virginia F. & M. Ins. Co. V. Saunders, 84 Va. 969, 11 S. E. 794; Contra, Keith v. Royal Ins. Co., 117 Wis. 631, 94 N. W. 295; Shujggart v. Ins. Co., 55 Cal. 408; Oldham v. Anchor Ins. Co., 90 Iowa, 225, 57 N. W. 861; Jones v. Phoenix Ins. Co., 97 Iowa, 275, 66 N. W. 169; Finley v. Lycoming County M. I. Co., 30 Pa. St. 311, 72 Am. Dec. 705. Be- cause of the peculiar character of ownership in firm property, the assign- ment by one of several partners to an outsider of an undivided interest will not transfer the right to the title or possession of any part, but simply carries to the assignee the right to call upon the firm for an accovmting. Therefore such a transfer will not de- feat the firm insurance, Wood v. Ins. Co., 149 N. Y. 382, 44 N. E. 80, 52 Am. St. R. 7SZ- Hanover Fire Ins. Co. V. Lewis, 28 Fla. 209, 10 So. 297. But where the partner gives a chattel mortgage upon the firm property to a third party the policy is avoided, Olney v. German Ins. Co., 88 Mich. 94, 50 N. W. 100, 13 L. R. A. 684, 26 Am. St. R. 281. But not so if the chattel mortgage is given to a copartner, Moulton V. Mtria Fire Ins. Co., 25 App. Div. 275, 49 N. Y. Supp. 570. ^Germania Fire Ins. Co. v. Home Ins. Co., 144 N. Y. 195, 39 N. E. 77, 26 L. R. A. 591 ("It is only where a stranger is to be brought into con- tractual relations with the insurance company that the consent of the latter ALIENATION CLAUSE — LEGAL PROCESS OB JUDGMENT 351 Whatever may be the sound rule in the case of different part owners, jointly insured but not joint owners, there is no doubt that the introduction of a new interest or person without permit avoids the policy under this clause at the option of the insurer.* § 267. The Same — Legal Process or Judgment. — The institution of legal proceedings does not avoid the policy under this clause; nor does a judicial sale have that effect until expiration of any period allowed for redemption; ^ and until confirmation by the court where that is required.* And such sale must be consummated by delivery is essential," Court by E. Bartlett, J.), Hoffman v. ^tna Ins. Co., 32 N. Y. 405; Lockwood v. MidcU^ex Ins. Co., 47 Conn. 553; Royal Ins. Co. v. Sock- man, 15 Ohio C. C. 105; West v. Cit- izens Ins. Co., 27 Ohio St. 1, 22 Am. Rep. 294. But see CoUings v. Ameri- can Cent. Ins. Co., 70 Mo. App. 14; Walton V. AgricvMural Ins. Co., 116 N. Y. 317, 22 N. E. 443, 5 L. R. A. 677, 4 judges to 3 (in this case both husband and wife were insured, but the policy was held avoided, because husband transferred to wife the barn which with other property was insured. Unfortunately only the dissenting opinion discusses these close and in- teresting questions involved, to wit, whether a transfer without introduc- tion of a stranger is not permissible, and whether the employment of a third party as a mere conduit for passing title from husband to wife should have any effect in causing forfeiture). 1 Germania Fire Ins. Co. v. Home Ins. Co., 144 N. Y. 195, 39 N. E. 77, 63 N. Y. St. R. 91, 43 Am. St. R. 749, 26 L. R. A. 591; Malley v. Atlantic F. & M. Ins. Co., 51 Conn. 222; Biggs v. North Carolina Home Ins. Co., 88 N. C, 141. In the same way a transfer by the assm-ed to a firm in which he is a silent partner defeats the insurance, Royal Ins. Co. v. Martin, 192 U. S. 149, 24 S. Ct. 247. It is so common an occurrence for a large business con- cern to advance a valued clerk and give him an interest in the firm prop- erty and profits in place of a salary that it is manifestly of pressing im- portance that they should be advised in what form to take out insurance, in order to avoid forfeiture in the event of any addition to the personnel of the copartnership. To meet this point, the prudent broker always insists upon an insertion in the policy, after the name of the assured firm, of the words "as now or hereafter may be consti- tuted," or some such phrase, Loeb v. Firemen's Ins. Co., 78 App. Div. 113, 77 N. Y. Supp. 106 (insurance with such a phrase held good, though word "Co." was used contrary to statute). A mere dissolution of a partnership does not avoid insurance on firm prop- erty. Dresser v. United Firemen's I. Co., 45 Hun (N. Y.), 298, 12 N. Y. St. R. 434, aff'd 122 N. Y. 642, 25 N. E. 956. Nor giving a new partner an interest only in profits, Hanover Ins. Co. V. Leiois, 28 Fla. 209, 10 So. 297. Nor does an executory agreement to change firm into a corporation avoid the insurance, Drennen v. London Assur. Co., 113 U. S. 51, 5 S. Ct. 341, 116 U. S. 461, 6 S. Ct. 442. But changing partnership into limited liabiUty company without permit may avoid, Peuchen Co. v. City Ins. Co., 18 Ont. App. 446. So also a reorgan- ization of a corporation into a new cor- poration, Cremo lAght Co. v. Parker, 118 App. Div. (N. Y.) 845. 2 Greenlee v. North Brit. Mer. Ins. Co., 102 Iowa, 427, 71 N. W. 534, 63 Am. St. R. 455 in which mechanic's lien was foreclosed. Wood v. American Fire Ins. Co., 149 N. Y. 382, 44 N. E. 80, 52 Am. St. R. 733; Browne National Bank v. Southern Ins. Co., 22 Wash. 379, 60 Pac. 1123, judgment in forcible detainer, Hammel v. Queens Ins. Co. , 54 Wis. 72, 11 N. W. 349, 41 Am. Rep. 1. 3 Hanover Fire Ins. Co. v. Brown, 77 Md. 64, 25 Atl. 929; Slobodisky v. Phomix Ins. Co., 53 Neb. 816, 74 N. W. 270. When sale is complete it will avoid the standard policy, Hartford Fire Ins. Co. v. Ransom (Tex. Civ. App. 1901,61 S.W. 144). But if order of confirmation is set aside, a judicial sale will not avoid, Richland Co. Ins, 352 MEANING AND LEGAL EFFECT OF FIEE POLICY of the instrument of conveyance pursuant to the statute.^ Setting apart in partition to the widow for life, after the death of the assured, constitutes a change in interest and possession.^ A levy by the sheriff without actual taking possession does not avoid the policy; ' nor does it, so it has been held, though he take actual possession; such change of possession, whether of real of of personal property, being expressly permitted by virtue of the words "except change of occupants without increase of hazard."* The appointment of one of the partners as receiver of the firm property effects no change of interest or possession; ' and if a re- ceiver is insured as such a new appointment does not avoid.' An adjudication in bankruptcy effects no forfeiture until the estate of the bankrupt becomes vested in the trustee.'' But a transfer or assignment in bankruptcy or insolvency, whether voluntary or in- voluntary, is a change of interest, and unless consented to by the insurer will vitiate the policy-.* The Massachusetts policy is simpler. It forbids a sale of the property without assent of the company, in writing or in print.' Under such a provision so long as the insured retains any insurable interest, the policy will protect it.''" But a voluntary alienation is as much a breach of the condition as a sale for value received.^^ Co. V. Sompson, 38 Ohio St. 672. Nor ^ Keeney v. Home Ins. Co., 71 N.Y. will it, if purchaser fails to complete, 396. Lodge -v. Cfapital Ins. Co., 91 Iowa,, 103, * Thompson v. Phoenix Ins. Co., 58 N. W. 1089; MaHs v. Cumberland 136 U. S. 287, 10 Sup. Ct. 1019. Ins. Co., 44 N. J. L. 478. i FuUer v. New York Ins. Co., 184 1 Intemaiional Wood Co. v. iVa- Mass. 12, 67 N. E. 879; Puller v. Jome- tional Assur. Co., 99 Me. 415, 59 Atl. sy v. Phtenix Ins. Co., 5 So. Dak. sured owner and the mortgagee make 72, 58 N. W. 301. And see Ph/enix inconsistent claims, the company may Ins Co V Tru^ Co., 41 Xeb. 834, 60 interplead, Seiton v. Home Ins. Co.. N. W. 133. 35 App. Div. 170, 54 N. Y. Supp. 862. s Va/ Bk V Uni^m Ins. Co.. 88 * Attleborough Sav. Bk. v. Security Cal 497, 26 Pac. 509; Pioneer Sav. & Ins. Co., 168 Mass. 147, 46 N. E. 390, L. Co. V. 5^ Paid F. & M. Ins. Co., 68 60 Am. St. R. 373; Gordon v. Ware Sav. Minn. 170, 70 X. W. 979; Lancashire Bk., 115 Mass. 588. ins. Co. V. Boardman, 5S Kan. 339, * There is conflict in the decisions as 49 Pac. 92; Eddu v. Land. A. Corp., 143 to common law right, § 53, supra. N Y 311, 38 N. E. 307. s Appendix of Forms and Eddy v. ^Kase V HaHford Ins. Co., 58 Lomton Assw. Co., 143 N. Y. 311, 38 N. J. L. 34, 30 Atl. 1057. Contra, N. E. 307. 400 MEANING AND LEGAL EFFECT OF FIRE POLICY company, on paying to the mortgagee the amount of the mortgage debt, is entitled to an assignment of the mortgage securities, and to foreclose for its own benefit. The mortgagor cannot set up the claim in defense that the debt had been paid by the insurance com- pany.^ Despite the phraseology of this clause, however, the com- pany's right to realize under subrogation depends, not upon its claim that the policy is avoided as to the mortgagor, but upon proof that it is so.^ § 293. Mortgagee Party to Appraisal. — Under the standard mortgagee clause the mortgagee is entitled to notice of appraisal. If he receives none, he is not bound by the award.' § 294. Proofs of Loss — Form of Action. — Under the standard mortgagee clause the mortgagee, being one of the assured, may make and verify the proofs. At all events his right to do so can- not be questioned, after a refusal to act by the mortgagor.* But the mortgagee, being entitled to receive only as his interest may appear, and not of necessity the whole amount of insurance, should, by the better reason and authority make the insured also a party in an action upon the policy.^ 1 7ms. Co. of N. A. v. MaHin, 151 18 S. W. 122; Georgia Home Ins. Co. v. Ind. 209, 51 N. E. 361 (taking an Stein, 72 Miss. 943, 18 So. 414; HaU v. assignment shows eompany's denial of Fire Assn., 64 N. H. 405, 13 Atl. 648. liability to mortgagor); AUen v. Ins. And see Scania Ins. Co. v. John&on, 22 Co., 132 Mass. 480; Badger v. PVatts, Colo. 476, 45 Pac. 431. 68 N. H. 222, 44 Atl. 296; Ordvxiy v. i Southern, etc., Assn. v. Horre Ins. Chace, 57 N. J. Eq. 478, 42 Atl. 149; Co., 94 Ga. 167, 21 S. E. 375, id., 99 Sjmngfield F. & M. Ins. Co. v. AUm, Ga. 65, 24 S. E. 396; State Ins. Co. v. 43 N. Y. 389, Ketcham, 9 Kan. App. 552, 58 Pac. 2 Traders' Ins. Co. v. Race, 142 111. 229; Lombard Invest. Co. v. Duelling 338, 31 N. E. 392, 23 L. R. A. 101, House Ins. Co., 62 Mo. App. 315; 25 L. R. A. 681, note, 31 111. App. 626; Graham v. Firemen's Ins. Co., 8 Daly Wisconsin Nat. L. & B. Assoc, v. (N. Y.), 421. A Connecticut statute Webster, 119 Wis. 476, 97 N. W, 171. gives relief to the mortgagee. Gen. An insurance company must avail it- Stat. § 2839. And see Appendix, ch. I, self of its right to an assignment as to other states. within a reasonable time, Eliot, etc., ^ Lewis v. Guardian Ins. Co., 181 S. Bank \. Commercial Unrion Assur. N. Y. 392, 74 N. E. 224; i^ar?ners' fanfc Co., 142 Mass. 142, 7 N. E. 550. The v. Manchester Assur. Co., 106 Mo. App. coTipany must not by delay interfere 114, 80 S. W. 299; Minnock v. Eureka with settlements by the assured with F. & M. Ins. Co., 90 Mich. 236, 51 other companies. New Hampshire Ins. N. W. 367; WiUiamson v. Mich. P. & Co. V. Nat. L. Ins. Co., 112 Fed. 199, M. Ins. Co., 86 Wis. 393, 57 N. W. 46; 50 C. C. A. 188. but see last section. i Bergman v. Ins. Co., 92 Ky. 494, CHAPTER Xy Standahd Fire Pomct — Concluded § 295. Removal of Property for Safety. — If property covered by this policy is so endangered hy fire as to require removal to a place of safety, and is so removed, etc. A wise provision, making more definite an obligation of consider- able uncertainty; for the general principle obtains, that where a removal is reasonably necessary under the circumstances of the case on account of impending danger by fire, damages resulting from removal are recoverable against the insurer as proximate loss.* The principle finds analogy in the doctrine of marine insurance by virtue of which a cargo is still covered by the policy after unavoid- able transshipment in consequence of the disability of the vessel named in the policy.^ This provision is not inserted in the Massachusetts form. § 296. Notice and Proofs of Loss. — // fire occurs, the insured shaU give immediate notice of any loss thereby, in loriting, to this company, protect the property from further damage, forthvnOi separate, etc. This and the clauses * immediately following are the result of a careful revision of provisions previously existing in other forms of policies relating to proceedings after loss, by means of which the underwriter is to be afforded a prompt opportunity, first of pre- venting aggravation of damage, and second of ascertaining whether he is Uable imder the terms of his contract, and, if so, to what amount. This revision has been in the line of liberality towards the in- sured. Instead of being compelled to furnish a detailed statement of proofs "forthwith," or within ten, twenty, or thirty days as for- merly, he is given sixty days; but this latter period is rigidly limited by the New York standard policy, except as it may be extended in writing. Instead of being required to go to the trouble of obtaining 1 Balestracci v. Firemen's Ins. Co., ley v. Western Ins. Co., L. R. 3 Ex. 34 La. Ann. 844; White v. Republic 71. Fire Ins. Co., 57 Me. 91, 2 Am. Rep. 2 See § 193, eupra. 22; Whitehurst v. FayetteviOe Mvt. Ins. » For clause m full see Appendix, £7o., 6 Jones's (N. C.) Law, 352; Ston- oh. H. 26 [401] 402 MEANING AND LEGAL EFFECT OP FIHE POLICY certain additional proofs as matter of course, he is to procure these only in the exceptional instances where a special request is made by the company; but these provisions, in the main reasonable, covering the subject of proofs of loss, are probably of greater im- portance and value to the insurer than all the other express war- ranties of the policy combined; * and, by the current of authority in England ^ and in this country, a substantial performance of the same, or similar requirements no more exacting, is enforced as an obligatory condition precedent to any right of recovery under the policy.' When, however, it comes to matters of mere detail, for instance, the minute but useful particulars called for in the inventory and verified statement of loss, among other things the itemized lists of articles showing as to each item cost, cash value, and damage, two considerations should be given weight in determining the proper rule of construction; first, that the fire having probably carried off with it much of the evidence wanted, a reasonable or practicable comphance is all that the parties could have intended to provide for;* and, second, that the risk having been terminated by the capital event of fire, mere matters of form relating to an estimate of the amount of loss already sustained should not be too punctil- iously insisted upon by the courts.* 1 At common law, without express (proof of loss a condition); Hicks v. warranty, the insured is obliged to Brit.-Am. Assur. Co., 162 N. Y. 284, make fidl and truthful disclosure as to 56 N. E. 743 (proof of loss a condition the risk, to exercise the highest good even under a binder); Graham v. faith and to refrain from increasing German^Am. Ins. Co., 75 Ohio St. 374, the hazard. These common-law doc- 79 N. E. 930 (proofs and award); St. trines, coupled with the modern meth- Paul F. & M. Ins. Co. v. Hodge, 30 ode of surveying and mapping risks by Tex. CSv. App. 257, 70 S. W. 574 imderwriters, furnish them with a large (detailed schedule a condition prec- measure of protection without ex- edent). press warranties until the fire occurs. * Norton v. R. & S. Ins. Co., 7 Cow. After that they must depend upon the (N. Y.) 645. express provisions of the contract for s Solomon v. Continental Ins. Co., testing the character and estimating 160 N. Y. 595, 55 N. E. 279 (immedi- the amount of the loss. As to the ate notice of loss, means what?); effect of false swearing in the proofs of Matthews v. 7ns. Co., 154 N. Y. 449, loss, see § 250, supra; and Meyer v. 48 N. E. 751 (proofs irregularly veri- Home Ins. Co., 127 Wis. 293. fied); McNaUy v. Phoenix Ins. Co., 137 2 Bunyon, Ins. (5th ed.), 10; Boper TST. Y. 389, 398, 33 N. E. 475 (tardy V. Lendon, 1 Ell. & Ell. 826, 829. service of proofs); Paltrovitch v. 7ns. 3 ColumMa Ins. Co. v. Lawrence, 10 Co., 143 N. Y. 73, 37 N. E. 639 (magis- Pet. (U. S.) 507, 7 L. Ed. 335 (insured "trate's certificate); Porter v. Traders' must plead and prove service of the Ins. Co., 164 N. Y. 504, 509, 58 N. E. ordinary proofs); Hamilton v. Home €41 (examination of insured under 7ras. Co., 137 U. S. 370, 11 S. Ct. 133 .oath); Evans v. Crawford Co., etc., Ins. (award when required is a condition); Co. (Wis., 1906), 109 N. W. 952 (wife Boruszweski v. Middlesex, etc., Ass. of insured may verify proofs ex neces- Co., iSe Mass. 589, 72 N. E. 260 .sitate). And see Simmons v. Western NOTICE AND PEOOFS OF LOSS 403 An inspection of the New York standard fire policy, as given in full in the Appendix, Chapter II, discloses that in the event of the happening of a fire loss under the policy a duty is laid upon the in- sured to perform numerous acts. These acts fall into two classes: (1) those which must be done by the insured at his own instance, although the insurer keep silence and make no demand for their performance; (2) those which are to be done by the insured only in case the insurer by affirmative notice specially requires performance. The first class includes the following acts: a. giving the imme- diate written notice; b. protecting the property; c. forthwith separat- ing damaged and imdamaged personal property; d. inventorying; c. within sixty days serving formal proofs sworn to and containing many specified particulars. The second class embraces: a. furnishing verified plans; b. furnishing a magistrate's certificate; c. exhibiting remains of property; d. submitting to personal examination under oath; e. producing books, bills, and papers or certified copies; /. sub- mitting differences to appraisal. The corresponding clause of the Massachusetts policy and those patterned after it is simpler: In case of any loss or damage under this policy, a statement in writing, signed and sworn to by the insured, shall be forthwith rendered to the company, setting forth the value of the prop- erty insured, the interest of the insured therein, all other insurance thereon, in detail, the purposes for which and the persons by whom the building insured, or containing the property insured, was used, and the time at which and manner in which the fire originated, so far as known to the insured. The company may also examine the books of account and vouchers of the insured, and make extracts from the same. Further on comes a provision for a reference in case of differences.* The insured mortgagor, and not a mortgagee protected by. the usual full mortgagee clause, is the proper party to make the proofs. If the mortgagor neglects to do this, the Massachusetts court con- cludes that the mortgagee may perform the duty, furnishing "to the company in writing, within a reasonable time, proper informa- Trav. Ace. Assn. (Neb., 1907), 112 Glazer v. Home Ins. Co. (N. Y., 1907), N. W. 365 (need not fulfill literally); 82 N. E. 727. When proofs of loss Manufacturers' <& Merchants' M. I. have been waived, interest is held to Co. V. Zeitinger, 168 111. 286, 48 N. E. run from date of fire, Jensen v. Pala- 179, 61 Am. St. R. 105 (must construe tine Ins. Co. (Neb., 1908), 116 N. W. strictly against insurer). As to the 286. more liberal rule of construction said i Other standard policies have pro- to apply to the formal requisites of visions differing both from the New the policy to be complied with after York and Massachusetts forms, for loss, see § 144, supra. The courts example, those of Iowa and South Da- are often astute to infer waivers, kota see Appendix ch. II. 404 MEANING AND LEGAL EFFECT OF FIRE POLICY tion in regard to the loss, as to such matters as a mortgagee reason- ably may be expected to know." ^ § 297. The Same — Immediate Written Notice of Loss. — ^This provision, altogether appropriate in all cases, is, however, in most insta^ces, largely a formality in the cities and larger towns. There the underwriters are not so dependent upon the action of the as- sured, as in- a sparsely settled region, for means of gaining prompt knowledge of fires, especially of fires extensive enough to demand the services of the fire department; and it often happens that the insurance companies will have their adjusters at the scene of the loss brfore the assured has given a thought to a perusal of his policies or to the preparation of any notice thereunder. Nevertheless, this condition must be complied with, unless waived.^ But if the com- pany has prompt actual notice of the event from any source, the court will be eager to infer a waiver of a provision which has thus become a mere technicality; and if the company act upon any in- formation, as, for example, by negotiating with the assured, or by proceeding to an adjustment, or by accepting proofs of loss, the formal written notice will be considered as dispensed with or waived.* Indeed, it has been held, that, if the company has actual informa- tion, no further notice will be deemed essential.* The phrase "immediate notice" means with due diligence under the circumstances of the case,^ of which the jury will ordinarily be the judge,* unless the delay seem to the court so great as to be clearly inexcusable as matter of law.'' 1 Union Inst, far Savings v. PJuemix L. R. A. 682, 73 Am. St. R. 707 (in Ins. Co. (Mass., 1907), 81 N. E. 994 which a general assignee not knowing (citing cases from other states). of policy found it fifty days after fire 2 Niagara Ins. Co. v. Scammon, 100 and gave notice three days thereafter. 111. 644; Patrick v. Farmers' Ins. Co., Hdd, no forfeiture); Fletcher v. Ins. 43 N. H. 621. Co., 79 Minn. 337, 82 N. W. 647; Ins. ■ 3 Partridge v. Milwaukee Mechanics' Co. of N. A. v. Brim, 111 Ind 281 7ns. Co., 13 App. Div. 519, 43 N. Y. 12 N. E. 315. The terms "forth^th" Supp. 632, aff'd 162 N. Y. 597, 57 N. E. and "as soon as possible" are similarly 1119; Thompson v. Traders' Ins. Co., construed, Mason v. Ins. Co., 82 Minn. 169 Mo. 12, 68 S. W. 889; McCleUan 336, 85 N. W. 13, 83 Am. St. R. 433; V. Greenwich Ins. Co., 107 La. 124, 30 Central City Ins. Co. v. Oates, 86 Ala. So. 691; Welsh v. Land. Assur. Corp., 558, 6 So. 83, 11 Am. St. R. 67; Harrir- 151 Pa. St. 607, 25 Atl. 142 (sending den v. Ins. Co., 164 Mass. 382, 41 N. E. an adjuster is conclusive evidence of 658, 49 Am. St. R. 467. receipt of notice of loss). 6 Solomon v. Ins. Co., 160 N. Y. 595, * Savage v. Phoenix Ins. Co., 12 55 N. E. 279; O'Brien v. Phoenix Ins Mont. 458, 31 Pac. 66. And see Co., 76 N. Y. 459. Phcenixins. Co. V.Perry, 131 Ind. 572, ^ Ermentroiit v. Ins. Co., 63 Minn 30 N. E. 637. 305, 65 N. W. 635, 30 L. R. A. 346, 56 i Solomon v. CorUimental Fire Ins. Am. St. R. 481; Bokes v. Amazon Ins. Co., 160 N. Y. 595, 55 N. E. 279, 46 Co., 56 Md. 512, 34 Am. Rep. 323; IMMEDIATE WRITTEN NOTICE OF LOSS 405 The notice should be sent in the name of the assured; * and to some agent having authority to receive it on behalf of the insurer, preferably to the head office of the company, or to some general agency.^ Moreover, the notice must be actually received to be operative; * but mailing in due course raises a presumption of re- ceipt imtil rebutted.* The immediate notice preliminary to the statement or proofs of loss is not required by the Massachusetts poUcy; which, however, re- quires the sworn statement of loss to be furnished "forthwith." This means within a reasonable time.^ The Iowa standard policy Weed V. Hanibiirg-Bremen Ins. Co., 133 N. Y. 394, 31 N. E. 231; Bennett v. Lgcommg Co. Mul. Ins. Co., 67 N. Y. 274. In the foUowingcases the delay was held to be taXal, Railway Ins. Co. V. BvTweU, 44 Ind. 460 (6 days); Trask v. State F. & M. Ins. Co., 29 Pa. St 198, 72 Am. Dec. 622 (11 days); Cook V. North BrU. & M. Ins. Co., 181 Mass. 101, 62 N. E. 1049; Bwmham v. Royal Ins. Co., 75 Mo. App. 394 (16 day^); Roumage v. Ins. Co., 13 N. J. L. 110 (5 days); Edwards v. Ins. Co., 75 Pa. St. 378 (18 days); Weed v. Ham- burg-Brvmen Ins. Co., 133 N. Y. 394, 31 N. E. 231 (19 days); Inman v. Ins. Co., 12 Wend. (N. Y.) 452 (38 d^); Broicn v. London Asstcr. Co., 40 Hun (N. Y.), 101 (48 days); Ermentrovt v. Girard Ins. Co., 63 Bfimi. 305, 65 N. W. 635 (60 da3rs); McEvers v. LatBrence, 1 Hoff. Ch. 171 (4 months); Sherwood V. Agricidtural Ins. Co., 10 Hun, 593. On llie other hand, a dday of 8 days, where the insured did not know of the fire for 3 days was thought to be in time, -V. Y. Cent. Ins. Co. v. N. P. Ins. Co., 20 Barb. 468. In anotiier case, where policy required immediate proof and notice of loss, delay of 35 days in sending inventory was con- sidered excusable, Knickerbocker Ins. Co. V. McGinnis, 87 111. 70; Taber v. Royal Ins. Co., 124 Ala. 681, 26 So. 252 (2 days); St. Louis Ins. Co. v. Kyle, 11 Mo. 278, 49 Am. Dec. 74 (4 days); West Branch Ins. Co. v. HtAfdOein, 40 Pa. St. 289, 80 Am. Dec. 573 (5 days); Donahue v. Wind- sor, etc., Ins. Co., 56 Vt. 374 (22 days; question for jury). The great fire at Chicago was deemed good excuse for delay of over 30 days, Knickerbocker Ins. Co. V. McGinnis, 87 111. 70. Sick- ness may affect the question, Niagara F. Int. Co. V. Scammon, 100 III. 644; Partridge v. Ins. Co., 13 App. Div. 519, 43 N. Y. Supp. 632; Parker v. Ins. Co., 179 Mass. 528, 61 N. E. 215. As to effect of incapacity of insured, see Comstock v. Asso., 116 Wis. 382, 93 N. W. 22. It has been held by one court that a clause requiring immedi- ate notice does not apply to a loss under lightning and tornado rider unless fire ensues, Epiphany Roman Cath. Church v. German Ins. Co., 16 S. D. 17, 91 N. W. 332. ^O'Brien v. Phoenix Ins. Co., 76 N. Y. 459. His death does not dis- pense with the requirement, Matthews V. Am. Central Ins. Co., 9 App. Div. 339, aff'd 154 N. Y. 449, 48 N. E. 751. 2 Ermentrout v. Girard Ins. Co. , 63 Minn. 305, 65 N. W. 635; Bush v. We^chester Ins. Co., 63 N. Y. 531; Snyder v. Dwelling House Ins. Co., 59 N. J. L. 544, 37 Ati. 1022; Lohnes v. Ins. Co., 121 Mass. 439. A company acting upon a notice, is bound by it, Welsh V. London Assw. Co., 151 Pa. St. 607, 25 Ati. 142; Davis v. Grand Rapids Ins. Co., 15 Misc. 263, aff'd 157 N. Y. 685, 51 N. E. 1090; Burlington Ins. Co. v. Lowery, 61 Ark. 108, 32 S MT 383 ' 3 Central Ciiy Ins. Co. v. Gates, 86 Ala. 558. * Munson v. Germarir-Am. Ins. Co., 55 W. Va. 423, 47 S. E. 160; Penny- padcer v. Capital Ins. Co., 80 Iowa, 56, 45 N. W. 408, 8 L. R. A. 236, 20 Am. St. R. 395; Dade v. ^tna Ins. Co., 54 Minn. 336, 56 N. W. 48; Susque- hanna Mut. Fire Ins. Co. v. Tunk- hannock Toy Co., 97 Pa. St. 424, 39 Am. Rep. 816. 5 Coot V. North Brit. & Mer. Ins. Co., 181 Mass. 101, 62 N. E. 1049, 183 Mass. 50, 66 N. E. 597 (two months too late without proof of reasonable cause for dday); Parker v. Farmers' Fire Ins. 406 MEANING AND LEGAL EFFECT OF FIRE POLICY provides that the written notice of loss shall be given "as soon as practicable after he ascertains the fact." Under the South Dakota policy, "the insured shall promptly give notice of such loss." By the body of the New Hampshire policy the verified statement or proof of loss is to be rendered "forthwith;" but a later enactment, chapter 170 of the Public Statutes, is printed on the back of the policy and made a part thereof, and this governs the contract in many particulars. In other states, also, statutory provisions control the terms of the policy.^ It is obvious, therefore, that the body of statu- tory law applicable to each case must be carefully scrutinized. § 298. The Same — Duty to Protect from Further Damage. — The insurer is expressly relieved from loss occasioned by the neg- lect of the insured to protect the property from further damage.^ The Massachusetts policy provides: // the insured property shall be exposed to loss or damage by fire, the insured shall make all reasonable exertions to save and protect the same. Under both wordings of this clause it is manifest that ordinarily any question of neglect on the part of the insured in this regard must go to the jury.^ § 299. Forthwith Separate Damaged and Undamaged — Put in Best Possible Order — Make Complete Inventory, Stating Quantity and Cost of Each Article and Amount Claimed Thereon — Exhibit Remains. — These provisions must be complied with by the as- sured; ^ and, it is said, the work miist be done at his own ex- Co., 179 Mass. 528, 61 N. E. 215 (delay Super. Ct. 87; Hoffman v. Mna Ins from Oct. 3d to Bee. 8th held fatal, Co., 1 Robt. 501, aff'd 32 N. Y. 405 though death of grandchild and other (no duty to restore, but only to pre- illness in the family intervened); vent further deterioration); Hebner v. Fhtcher v. German^Am. Ins. Co., 79 Patoine /ns. Co., 157 111. 144, 41 N. E. Minn. 337, 82 N. W. 647 (question is 627 (expense for raising vessel was for jury); Rirws v. German Ins. Co., laid upon insured. Compare sue and 78 Minn. 46, 80 N. W. 839 (18 days, labor clause of marine policy); Sisk v. held in time). In some jurisdictions Citizens' Ins. Co., 16 Ind. App. 565 delay does not forfeit but is held sim- 45 N. E. 804 (assured neglected to dry ply to postpone payment of the insur- the property after water had been ance money, Mason v. St. Paid F. <& played upon it from fire engines) M. Ins. Co., 82 Minn. 336, 85 N. W. Obligation of good faith exists with- 13; Rattier v. German Ins. Co., 84 Minn, out special clause, Devlin v. Queen Ins 116, 86 N. W. 888. Co., 46 Up. Can. Q. B. 611. The duty » For example, Missouri and Wash- applies to walls in danger of falling in ington, in which must be added to consequence of the fire, Alter v. Home every fire policy a clause indicating Ins. Co., 50 La. Ann. 1316, 24 So. 180. that the policy is subject to the laws a Boak Fish Co. v. Manchester F of the state. This clause obviates the Assur. Co., 84 Minn. 419, 87 N. W. necessity of adopting a new form of 932. policy- „. , „ ^ * Thornton v. Security In*. Co., 117 2 FranMin Ins. Co. v. Cobb, 2 Cine. Fed. 773. STATEMENT OE PROOF OF LOSS 407 pense.^ The principal object of these provisions is to enable the company to estimate the loss; ^ and a reasonable and substantial compliance with them is sufficient.* But under the Massachusetts standard policy and the similar policies of other states, the insured is not called upon to separate the damaged and undamaged goods, or to make out a detailed statement of the amount of damage claimed upon each item.'* § 300. Same Subject — Statement or Proof of Loss. — Within sixty days after the fire unless siich time is extended in writing . . . shaU, render a statement to this company signed and sworn to by the insured stating the hnowledge and belief, etc. This document, to 'which the inventory already mentioned is usually attached, furnishes the first authoritative notice of the character of the claim of the assured, and gives the information necessary to enable the insurer in a general way to proceed to an investigation of its validity and accuracy. The company can seldom if ever afford to do without this statement, imless the assured is ready to abandon all claim and surrender his poUcy for cancellation.^ Its service, and within the period specified, is of moment to the company; and, by the weight of authority and of reason, the ren- dering of the verified statement of particulars * within the specified period is by the terms of the New York standard policy and those resembling it made a condition precedent to any right of recovery.^ 1 Hebner v. Palatine Ins. Co., 157 remove damaged property-, see Astrich HI. 144, 41 N. E. 627. v. GermannAm. Ins. Co., 131 Fed. 13; 2 Oshkosh Match Works v. Man- Chairdess Cyde Co. v. Security Ins. Co., diester Assur. Co., 92 Wis. 510, 66 52 App. Div. 104, 64 N. Y. Supp. 1060, N. W. 525. aff'd 169 N. Y. 304, 62 N. E. 392. s Boyle V. Hamburg-Bremen Ins. Co., * Clement v. BrU.-Am. Assur. Co., 169 Pa. St. 349, 32 Atl. 553; Peoples' 141 Mass. 298, 5 N. E. 847. Fire Ins. Co. v. Pulver, 127 111. 246, * Until it receives the particulars the 20 N. E. 18 (the inventory need not insurer need make no examination of necessarily give the cost of every item). the loss unless it choose, Borusziieski The insured need only do what is v. Middlesex M. Ins. Co., 186 Mass. feasible as to property totally de- 589, 72 N. E. 250. Statements by the stroyed, or greatly damaged, see insured in his proofs may be used as Johnston v. Farmers' Ins. Co., 106 admissions against him but cannot be Mich. 96, 64 N. W. 5; Power Dry used as e\ndence in his favor except to Goods Co. V. Imperial Ins. Co., 48 show that the clause of the policy re- Minn. 380, 51 N. W. 123; Davis v. quiring proofs has been complied with, Grand Rapids Ins. Co., 15 Misc. 263, Lundvickv. Westchester F. Ins. Co., 12S 36 N. Y. Supp. 792, aff'd 157 N. Y. • Iowa, 376, 104 N. W. 429, and § 152, 685, 51 N. E. 1090. The insured is not supra. obliged to use the company's blanks • But a sworn notice without particu- for proofs, Cushing v. Ins. Co., 4 lars was held sufficient in case of total Wash. 538, 30 Pac. 736. Nor address loss on a building, Pearce Mfg. Co. v. the proofs to the company, Wieking v. Lebanon Mut. Ins. Co., 216 Pa. St. 265, Ins. Co., 118 Mich. 640, 77 N. W. 275. 65 Atl. 663 (substantial compliance). As to right of assured to dispose of and ' National Wall Paper Co. v. A. M. 408 MEANING AND LEGAL EFFECT OF FIRE POLICY A considerable minority of tribunals, however, have announced the opposite rule, and by an unsatisfactory and strained construction have allowed to the assured, under the New York standard policy, twelve months less sixty days within which to serve his first state- ment or proofs of claim, basing this conclusion on the ground that, while service of proofs sixty days before action is unmistakably made a condition precedent, the policy nowhere expressly states that forfeiture will be incurred as a result of a failure to render the proof within the period named. ^ It should also be observed that M. Fire Ins. Co., 175 N. Y. 226, 67 N. E. 440; Peabody v. Satterlee, 166 N. Y. 174, 59 N. E. 818, 52 L. R. A. 956; Quirdan v. Prov. Wash. Ins. Co., 133 N. Y. 356, 362, 31 N. E. 31, 28 Am. St. R. 645, 45 N. Y. St. R. 200; Blossom V. L/ycoming Ins. Co., 64 N. Y. 162; Perry v. Caledonia Ins. Co., 103 App. Div. 113, 93 N. Y. Supp. 50; Lake Geneva Ice Co. v. Selvage, 36 Misc. 212, 73 N. Y. Supp. 193. And numerous other cases in New York where the clause was framed, Teutonia Ins. Co. V. Johnson, 72 Ark. 484, 82 S. W. 840 (deliberately disapproving the cases which have reached the op- posite conclusion); White v. Home Ins. Co., 128 Cal. 131, 60 Pac. 666 ("the great weight of authority" sustains this rule); Phoenix Ins. Co. v. Mech., etc., S. L. & Bldg. Assoc, 51 111. App. 479; Hanover Ins. Co. v. Johnson, 26 Ind. App. 122, 125, 57 N. E. 277; Westchester Ins. Co. v. Coverdale, 9 Kan. App. 651, 58 Pac. 1029; Eastern R. B. Co. v. Relief Fire Ins. Co., 98 Mass. 420; Leftwich v. Royal Ins. Co., 91 Md. 597, 612, 46 Atl. 1010; GouU V. Dwelling House Ins. Co., 90 Mich. 302, 51 N. W. 455, 52 N. W. 754 (but see, infra, the untenable distinction made by Michigan court in later case, 93 Mich. 81, between the words "un- less" and "until"); Shapiro v. West- em Home Ins. Co., 51 Minn. 239, 53 N. W. 463; Bowlin v. Heckla Fire Ins. Co., 36 M;inn. 433, 434; Maddox v. Dwelling House Ins. Co., 56 Mo. App. 343; Farmers' Ins. Co. v. Frick, 29 Ohio St. 466; Continental Ins. Co. v. Chase, 89 Tex. 212, 34 S. W. 93 (de- fendant must plead the breach); Davis v. Pioneer Mvi. Ins. Assn. (Wash., 1906), 87 Pac. 829; Cornell v. Mil. Mut. Fire Ins. Co., 18 Wis. 387, 391 (notice not given within the specified period of 20 days held, insufficient). The rule is the same in England, Roper v. Lendon, 1 Ell. & Ell. 826, 829 (Lord Campbell, Chief Justice, says: "Where, therefore, it is conceded that a de- livery of such particulars before action is essential, it follows from the word- ing of the condition that the delivery must be within fifteen days after the loss. And the condition so construed is a very reasonable one; it being ob- viously of great importance to the de- fendants' company to know, as soon as possible after a loss, the amount claimed by the assured"). Similarly where a policy required service of the paper "forthwith" a dissenting judge contended that time was not of the essence of the contract, inasmuch as there was no express provision that failure would defeat the policy, but the court held compliance within the time to be a condition precedent, Scammon v. Germania Ins. Co., 101 111. 621. So also the Massachusetts court, in referring to the sworn state- ment of loss as required in that com- monwealth without express provision for forfeiture, says, "a failure to give the notice within the time required stands upon different ground from a failure to give the notice in due form. The latter defect may be remedied, but tVie former, if insisted upon, is fatal to the assured," Cook v. North Brit. & Mer. Ins. Co., 181 Mass. 101, 104, 62 N. E. 1049, 183 Mass. 50, 66 N. E. 597. 1 Hartford Ins. Co. v. Redding (Fla., 1904), 37 So. 62; India River State Bank v. HaHford Ins. Co: (Fla., 1903), 35 So. 228; Southern Ins. Co. v. Knight, 111 Ga. 622, 624, 36 S. E. 821, 78 Am. St. R. 216, 52 L. R. A. 70; St. Paul F. & M. Ins. Co. v. Owens, 69 Ean. 602, 77 Pac. 544; Orient Ins. Co. V. Clark, 22 Ky. L. Rep. 1066, 59 S. W. 863; Allen v. Mil. Meeh. Ins. Co., 106 Mich. 204, 64 N. W. 15; Steele V. German Ins. Co., 93 Mich. 81, 53 N. W. 514, 18 L. R. A. 85 (making STATEMENT OB PBOOF OF LOSS 409 from an eariy date the Massachusetts and New York courts have stood for the proposition that a Umited period specified for service of proofs is of the very essence of the contract, and the standard pohcies of both classes, now in general though not universal use throughout this country, were originally framed in those states, and were worded in the light of the decisions of their courts. The New York policy provides for numerous acts which must be done after loss; some without and some with affirmative request by the company, but in no instance is there necessarily a precise time Umit which could be known in advance for the orderly per- formance of the act; since even with reference to the period specified for service of the verified statement, it is provided that the time may be extended by writing. The law was well settled in England and in this country that a compliance with these various provisions, including even the furnishing of a magistrate's or notary's certificate when required, was a condition precedent, although the provisions were not connected with any specific declaration of forfeiture; * but it seemed hardly appropriate to sum up this long Hst of require- ments, some absolute and some conditional, with the statement that the policy would be avoided upon their nonfulfillment at various indefinable times. Instead of adopting phraseology so awkward the committee followed up all these clauses with the seemingly unambiguous provision "no suit or action on this pohcy . . . shall be sustainable in any court . . . until after full compliance by the insured with all the foregoing requirements." The question of law involved, therefore, is this, whether the insured has fully complied with the foregoing requirement relating to service of verified proofs within sixty days or within the time extended by writing when, untenable distinction between words states are in harmony with the pre- "until and "unless"); Northern Assur. vailing rule, cases supra. The South Co. V. Hanna, 60 Neb. 29, 82 N. W. Dakota standard policy provides, 97; Gerringer v. North Car. Home Ins. "should proof of loss not be furnished Co., 133 N. C. 407, 45 S. E. 773; within six months from the date of Continental Ins. Co. v. WhUtaker, 112 loss this policy shall be void, unless Tenn. 151, 79 S. W. 119, 64 L. R. A. such proof of loss shall have been 451; Munson v. German-Am. Ins. Co., waived." 55 W. Va. 423, 47 S. E. 160. And see i Worsley v. Ward, 6 T. R. 710, 722; Cm-entry Ins. Assoc, v. Evans, 102 Pa. Johnson v. Phoenix Ins. Co., 112 Mass. St. 281 ; Sun Ins. Co. v. Mattingly, 77 49; ^tna Ins. Co. v. Tyler, 16 Wend. Tex. 162, 13 S. W. 1016. The authority 385. At common law the doctrine of some of these cases is considerably originally was_ that any statement of weakened by the circumstance that fact or promise of performance ap- they are based in part upon decisions pearing on the face of the policy was in Wisconsin, Mimiesota, or New York a warranty or condition precedent, construing policies essentially different Jeflerson Ins. Co. v. Cotheal, 7 Wend, from the New York standard. As (N. Y.) 72, 80, and English cases cited, matter of fact the courts of those three And see § 104, supra. 410 MEANING AND LEGAL EFFECT OF FIRE POLICY without any extension of time at all in writing or otherwise, he neglects to render any statement of his claims until the expiration of nearly ten months succeeding the fire. The company need make no investigation until it receives these statements of the claim.* After ten months there would probably be no visible evidences of the fire loss left on the premises to investigate. Where as in the case of some of the standard forms the policy contains no such clause making compliance a condition precedent there is possibly better excuse for postponing by imphcation the time for serving the proofs, at least so it has seemed to several courts.^ The period within which proofs must be served begins to run from the time when the fire has so far abated that the damaged property may be inspected.* As to whether the proofs must be received within the sixty days, or whether mailing within that period is a sufficient "rendering," under the terms of the requirement, is mat- ter of conflict in the decisions.'* § 301. Excusable Failure in Strict Compliance. — So also there is difference of opinion as to what will avail to excuse delay in the service of a notice or statement of loss. In such matters the parties cannot be presumed to have expected impossibilities.* 1 Boruszweshi v. Middlesex, etc., Ass. 86 N. Y. Supp. 24; Lake Geneva Ice Co. Co., 186 Mass. 589, 72 N. E. 250. v. Selvage, 36 Misc. R. 212, 73 N. Y. ^ Kahnweiler v. Phmnix Ins. Co., 57 Supp. 193. See Pennypacker v. Capital Fed. 562; Taber v. Royal Ins. Co., 124 Ins. Co., 80 Iowa, 56, 45 N. W. 408, Ala. 681, 26 So. 252; MasoTOv. Si. PouJ 8 L. R. A. 236, 2 Am. St. R. 395. F. & M. Ins. Co., 82 Minn. 336, 85 Contra, Manufacturers' & Merchants' N. W. 13, 83 Am. St. R. 433; Burling- M. I. Co. v. Zeitinger, 168 111. 286, 48 ton Ins. Co. v. Toby, 10 Tex. Civ. App. N. E. 179, Gl Am. St. R. 105, and see 425, 30 S. W. 1111; Welch v. Fire cases supra. Mailing creates a pre- Assoc, 120 Wis. 456, 98 N. W. 227. sumption of delivery, Dade v. Mna 3 National Wall Paper Co. v. Asso- Ins. Co., 54 Minn. 336, 56 N. W. 48. dated Mfrs. M. F. I. Co., 175 N. Y. Receipt in time by Post Office where 226, 67 N. E. 440. Though the Insur- company is located is said to be suffi- ance rests simply in a binder, the terms cient, Caldwell v. Dwelling House Ins. of the usual poUcy are implied and Co., 61 Mo. App. 4. If time expires proof must be served in compliance Sunday, Monday will answer, Mc- therewith. Hicks v. Brit. Am. Ins. Co., Kibban v. Des Moines Ins Co 114 162 N. Y. 284, 56 N. E. 743. Unless Iowa, 41, 86 N. W. 38. As to the proofs are waived by a denial of lia^ method of computing the period of bility or otherwise, Farmers' Ins. Co. sixty days under the New York Con- v. Baker, 94 Md. 545, 51 Atl. 184; struction Act see Benoit v. R. R. Co., Baile v. St. Jo. Ins. Co., 73 Mo. 371. 94 App. Div. 24; Ryer v. Prudential * Some courts hold that proofs must Ins. Co., 185 N. Y. 6. be received within the period, Peabody s Insanity held a good excuse in v. SaUerlee, 166 N. Y. 174, 59 N. E. Insurance Cos. v. Boykin, 12 Wall. 818, 52 L. R. A. 956; Perry v. Cale- (U. S.) 433, 20 L. Ed. 442; McGraw donia Ins. Co., 103 App. Div. 113, 93 v. Germania Ins. Co., 54 Mich. 145, N. Y. Supp. 50; Huse & Loomis Ice & 19 N. W. 927; Wheeler v. Conn. Mut. T. Co. V. Wielar (N. Y. App. Term), Life Ins. Co., 82 N. Y. 543, 37 Am. KXCUSABLE FAILURE IN STRICT COMPLIANCE 411 Whenever it is possible the insured himself must sign and verify the statement of loss. The company has a right, not only to the information, but also to the personal oath of a party to the con- tract, whose swearing, if false, will vitiate it, and who is presumed to be best acquainted with the facts; * but if there are several in- sured any one may act. It is not necessary to join all.^ And if there is one assured with more than one • policy in the same com- pany covering the same property, one proof will be sufficient.* As to the many particulars called for, in the statement, a rea- sonable compliance, according to the circimastances of each case, is all that is required; but the itemized statement of cash or sound value and damage should be given, if practicable.'* Rep. 594. But see Conn. Gen. Stat. § 2839. So sickness or physical dis- ability has been thought to avail when no definite period is prescribed, Parker v. Middlesex Assur. Co., 179 Mass. 528, 61 N. E. 215; American Ins. Co. v. Hazen, 110 Pa. St. 530. And under the New York standard form, where the assured has died and his estate is for a time without representation, delay reasonably necessary may be allowed, Matthews v. Am. Central Ins. Co., 154 N. Y. 449, 48 N. E. 751. But the only safe practice for the assured to follow is, in spite of accident or sickness, to comply, if possible, with the condition, Sherwood v. Agricultural Ins. Co., 10 Hun, 595, aff'd 73 N. Y. 447; Scammon v. Germania Ins. Co., 101 HI. 621. Furnishing proofs being a condition precedent, loss of policy or ignorance of its requirements is no excuse for not performing, Munson v. German-Am. F. Ins. Co., 55 W. Va. 423, 47 S. E. 160; Blakeley v. Phcenix Ins. Co., 20 Wis. 205, 91 Am. Dec. 388. See Thornton v. Security Ins. Co., 117 Fed. 773, aff'd 123 Fed. 664; Quiilan V. Prtmdence Wash. I. Co., 133 N. Y. 356, 31 N. E. 31, 45 N. Y. St. R. 200. 1 Execution by a substitute held good in the following cases: Lumber- men's Mvt. Ins. Co. v. BeU, 166 111. 400, 45 N. E. 130 (agent, when it was impossible for assured to do it); Ger- man Ins. Co. v. Grunert, 112 HI. 68, 1 N. E. 113 (agent in absence of as- sured); Bums V. Mich. Manuf. Ins. Co., 130 Mich. 561, 90 N. W. 411 (agent when the assured was critically ill); Svxin v. L. & L. & G. Ins. Co., 52 Miss. 704 (agent in sole charge of property and insurance, best ac- quainted with, the facte); Burge -v. Greenwich Ins. Co., 106 Mo. App. 244, 80 S. W. 342 (employee in absence of partners); Sims v. State Ins. Co., 47 Mo. 54 (agent who alone knew the facts); Pearlstine v. West. Ins. Co., 70 S. C. 75, 49 S. E. 4 (agent who knew the facts, in the absence of the as- sured); Findeisen v. Metropole Ins. Co., 57 Vt. 520 (husband who was in full charge of the insurance); Evans v. Crawford, etc., Ins. Co. (Wis., 1906), 109 N. W. 952 (wife ex necessitcUe); O'Connor v. HaHfard Ins. Co., 31 Wis. 160 (wife, the assured being absent for three years); Roberts v. Northwest- em Nat. Ins. Co., 90 Wis. 210, 62 N. W. 1048 (husband, the assured having disappeared). If the assured is dead any one of his legal representatives executors, administrators, heirs, next of kin, legatees, or devisees, may make the proofs, Matthews v. American Cent. I. Co., 154 N. Y. 449, 48 N. E. 751, 39 L. R. A. 433, 61 Am. St. R. 627. But a mere payee or appointee is not the insured. State Ins. Co. v. Maackens, 38 N. J. L. 565. As to attaching creditor ' see Northwestern Ins. Co. v. Atkins, 66 Ky. 328; receiver, Sims v. Union Assur. Soc. , 129 Fed. 804. As to mort- gagee, see § 294, supra. ^ Myers v. Council Bluffs Ins. Co., 72 Iowa, 176, 33 N. W. 453 (one of a partnership); Walsh v. Washington Ins. Co., 32 N. Y. 427. 3 DaHn v. L. & L. & G. Ins. Co., 13 Hun, 122, aff'd 77 N. Y. 600. State- ments in theproofs refer to the date of the fire, Wicking v. Citizens' Mut. Ins. Co., 118 Mich. 640, 77 N. W. 275; Jones V. Hofward Ins. Co., 117 N. Y. 103, 22 N. E. 578. < Gauche v. L. & L. Ins. Co., 10 Fed. 347; Brock v. Des Moines Ins. Co., 96 412 MEANING AND LEGAL EFFECT OF FIRE POLICY The policy is, by another clause, made payable sixty days after due notice, ascertainment, estimate, and satisfactory proof of the loss have been received. "Satisfactory proof" means proof which ought to be considered satisfactory.* Whether the written proofs constitute a compliance with the warranty of the policy, is properly a question for the court.,^ § 302. Where Served. — The proofs should be served at the home office of the company, or at a general agency, or upon a local agent designated by statute to receive papers.^ And where a local counter- Iowa, 39, 64 N. W. 685 (cash values); Scottish Un. & N. Ins. Co. v. Keene, 85 Md. 263, 37 Atl. 33 (allowing method of starting with past inventory of stock and giving subsequent pur- chases and sales less profits — often the only method of estimating loss); Davis V. Grand Rapids Ins. Co., 15 Misc. 263, 36 N. Y. Supp. 792, aff'dl57 N. Y. 685, 51 N. E. 1090 (holding the as- sured only to what is practicable); Riker v. Ins. Co., 90 App. Div. 391, 85 N. Y. Supp. 546; Gottlieb v. Dutchess Co. Ins. Co., 89 Hun, 36, 35 N. Y. Supp. 71; /Etna Ins. Co. v. Peoples' Bank, 62 Fed. 222, 106 C. C. A. 342. As to interest of the insured, Wicking v. Ins. Co., 118 Mich. 640, 77 N. W. 275. Need not disclose an interest acquired after loss, Mauck v. /ns. Co., 4 Penney- will (Del.), 325, 54 Atl. 952. As to disclosing cause of fire see White v. Royal Ins. Co., 149 N. Y. 485, 44 N. E. 77; McNally v. Ins. Co., 137 N. Y. 389, 33 N. E. 475; Howard Ins. Co. v. Hocking, 115 Pa. St. 415, 8 Atl. 592; Warshawky v. Anchor Ins. Co., 98 Iowa, 221. But the cost prices need not be given in the statement of loss, only sound values and damage, Mc- Manus v. West. Assw. Co., 22 Misc. (N. Y.) 269. As to stating other insurance and various particulars, see Jones V. Howard Ins. Co., 117 N. Y. 103, 22 N. E. 578; Fuller' v. Detroit Ins. Co., 36 Fed. 469 (it is not neces- sary for the assured to apportion the loss among the companies); Partridge V. Milwaukee Mechanics' Ins. Co., 13 App. Div. 519, 43 N. Y. Supp. 632, aff'd 162 N. Y. 597, 67 N. K 1119. Where goods are totally destroyed the insured may do the best he can for a schedule, Schilansky v. Ins. Co., 4 Penneywill (Del), 293, 55 Atl. 1014. Ab to carrier's insurance on property, his own or belonging to others. Force v. St. Paul Fire & M. I. Co., 81 App. Div. 633, 80 N. Y. Supp. 708. If company claims defect in proofs it must allege it with definiteness, Phoenix Ins. Co. v. Hedrick, 178 111. 212, 52 N. E. 1034. • Walsh V. Washington M. Ins. Co., 32 N. Y. 427; London Guarantee & Ace. Co. V. Feamley, 43 L. T. N. S. 390; see § 243, supra. The assured need five no particulars except those speci- ed in the policy, De Raiche v. L. & L. & G. Ins. Co., 83 Minn. 398, 86 N. W. 425; McManus v. Western Assur. Co., 43 App. Div. 550, 60 N. Y. Supp. 1143, aff'd 167 N. Y. 602, 60 N. E. 1115. 2 Travellers' Ins. Co. v. Sheppard, 85 Ga. 802. A carpenter's statement of the cost of rebuilding is no com- pliance with the clause, Heusinkveld V. St. Paul F. & M. Ins. Co., 96 Iowa, 224, 64 N. W. 769; Citizens' Ins. Co. V. DoU, 35 Md. 89. As to rule in Penn- sylvania when building is a total loss, see German^Am. Ins. Co. v. Hocking, 115 Pa. St. 398; McGonigle v. Ins. Co., 168 Pa. St. 1, 31 Atl. 868. As to waiver of formal defects, see Sutton v. Am. Ins. Co., 188 Pa. St. 380, 41 Atl. 537; Schmurr v. State Ins. Co., 30 Oreg^ 29, 46 Pac. 363; and § 144, supra. ^Edgerly v. Farmers' Ins. Co., 48 Iowa, 644 (office of company); Min- nock V. Ins. Co., 90 Mich. 236, 51 N. W. 367 (president); Minn., etc., R. Co. v. Home Ins. Co., 64 Minn. 61, 66 N. W. 132 (adjuster); Greenlee v. Hanover Ins. Co., 104 Iowa, 481, 73 N. W. 1050 (local agent); Trustees v. Brooklyn Ins. Co., 18 Barb. 69; Ins. Co. of N. A. v. McIAmans, 28 Neb. 653, 44 N. W. 991 (general agent); Walker v. Beecher, 15 Misc. 149, 36 N. Y. Supp. 470 (attor- neys in fact for Lloyds); Hamden v. Mil. Mech. Ins. Co., 164 Mass. 382, 41 WHERE SERVED — PLANS — MAGISTRATE'S CERTIFICATE 413 signing agent, by custom or otherwise, has apparent authority to receive proofs of loss, service upon him is effective.^ § 303. Same Subject — ^Plans— Magistrate's Certificate.— Verified ^ plans and specifications of any building, fixtures, or machinery, destroyed or damaged, must be furnished; but only if affirmatively required.^ This may be either for the purpose of aiding the com- pany in estimating damage, or in determining whether it will exer- cise its option to rebuild.^ There is no such clause in the Massachusetts policy. So also, but only if affirmatively required,* the assured must furnish a certificate of the magistrate or notary public (not inter- ested in the claim as a creditor or otherwise, nor related to the in- sured) Uving nearest the place of fire, stating that he has examined the circumstances and beUeves the insured has honestly sustained loss to an amount certified.' The sixty-day limit after the fire does not apply to the extra or additional proofs provided for by the policy. These must be called for and furnished within reasonable time; * and the demand by the company must be explicit and unequivocal. It is not enough to N. E. 658; Welsh v. London Assur. Co., 151 Pa. St. 607, 25 Atl. 142 Gocal countersigning agent). May serve on a company which is absorbing the original company, Whitney v. Am. Ins. Co., 127 Cal. 464, 59 Pac. 897. As to authority of countersigning agent and adjusters to waive proofs alto- gether see §§ 178, 180, supra. 1 Walker v. Lancashire Ins. Co., 188 Mass. 560, 75 N. E. 66; Hamden v. Mil. Mech. Ins. Co., 164 Mass. 382, 41 N. E. 658, 49 Am. St. R. 467. 2 Fawcett v. Liverpool, London & Globe Ins. Co., 27 TJ. C. Q. B. 225. 3 Lcmcashire Ins. Co. v. Barnard, 111 Fed. 702, 49 C. C. A. 559 (holding also that assured had waived right to de- mand plans after an award). As to waiver of right to plans, see Ligon v. Equitable Ins. Co., 87 Tenn. 341, 10 S. W. 768. Objections to papers fur- nished under the demand must be promptly made, Breckinridge v. Am. Cent. Ins. Co., 87 Mo. 62. Demand for plans and specifications held, no waiver of other defenses, Boyd v. Vanderbilt Ins. Co., 90 Tenn. 212, 16 S. W. 470, approved in Armstrong v. Agricultural Ins. Co., 130 N. Y. 560. Such should be the rule imder the New York stand- ard form, § 148, supra. It has been held that under valued policy laws, making the amount written the meas- ure of damage in case of total loss, plans cannot be demanded, Mil. Mech. Ins. Co. v. Russell, 65 Ohio St. 230, 62 N. E. 338, 56 L. R. A. 159; West. Assur. Co. V. Brovm (Tex. Civ. App., 1895), 33 S. W. 994. And see German- Am. Ins. Co. V. Hocking, 115 Pa. St. 398, 8 Atl. 586; Roe v. Dwelling House Ins. Co., 149 Pa. St. 94, 23 Atl. 718. * Jones V. Howard Ins. Co., 117 N. Y. 103, 22 N. E. 578. ^McNaUy v. Phoenix Ins. Co., 137 N. Y. 389, 33 N. E. 475; Suttivan v. Germania Ins. Co., 89 Mo. App. 106; Lane v. St. Paul Ins. Co., 50 Minn, 227, 52 N. W. 649, 17 L. R. A. 197 Keliy V. Sun Fire Office, 141 Pa. St 10, 21 Atl. 447, 23 Am. St. R. 254 But see, contra, Home Ins. Co. v. Hammang, 44 Neb. 567, 62 N. W. 883 German^Am. Ins. Co. v. Norris, 100 Ky. 29, 37 S. W. 267. oMcNally v. Phosnix Ins. Co., 137 N. Y. 389, 33 N. E. 475; Gottlieb v. Dutchess Co. Mut. Ins. Co., 89 Hun, 36, 35 N. Y. Supp. 71; Merchants' Ins. Co. v. Gibbs, 56 N. J. L. 679, 29 Atl. 485, 44 Am. St. R. 4:13; Badger v. Glens Falls Ins. Co., 49 Wis. 389, S N. W. 845. 414 MEANING AND LEGAL EFFECT OF FIRE POLICY inform the insured generally that he will be required to conform strictly to the conditions in the policy.' As to the residence of the notary or magistrate the court will not go into a very nice calculation to determine whether one magis- trate is a little nearer to the place of the fire than another.^ If the assured has acted in good faith, it seems that he may procure the certificate from the nearest magistrate who will consent to act.' A notary who had married a first cousin of the assured was held to be so "related" as to be disqualified.* A creditor of the insured, it is said, will not be debarred from acting as notary unless he has some interest in the property insured, or in the proceeds of the insurance.^ If after the exercise of reasonable diligence the assured, through no fault of his own, is unable to get a certificate, he should be ex- cused for the failure, since the certificate is a mere matter of evi- dence to be obtained, if practicable, from a third party; but on this point there is conflict.® 1 Moyer v. Sun Ins. Co., 176 Pa. St. 579, 35 Atl. 221; Swearingen v. Pacific Ins. Co., 66 Mo. App. 90; JStna Ins. Co. V. Shacklett (Tex. Civ. App.), 57 S. W. 583. But if the insured volun- tarily furnishes a certificate, the valid- ity of objections made to it will be determined as though due demand had been made, ^tna Ins. Co. v. Peoples' Bank, 62 Fed. 222, 10 C. C. A. 342; Williams v. Queen Ins. Co., 39 Fed. 167. ' 2 Daniels v. Equitable Fire Ins. Co., 50 Conn. 551; Amer. Cent. Ins. Co. v. RothchUd, 82 111. 166; Williams v. Niagara Fire Ins. Co., 50 Iowa, 561; DoUiver v. St. Joseph Fire & Marine Ins. Co., 128 Mass. 315, 35 Am. Rep. 378; Oswalt v. Hartford Ins. Co., 175 Pa. St. 427, 34 Atl. 735; Turley v. North Am. Fire Ins. Co., 25 Wend. (N. Y.) 374; Smith v. Home Ins. Co., 47 Hun (N. Y.), 30. If the company objects on the ground that there is a nearer notary, it should give his name and address, Paltrovitch v. Phoenix Ins. Co., 143 N. Y. 73, 37 N. E. 639; Agri- cultural Ins. Co. V. Bemiller, 70 Md. 400, 17 Atl. 380. If the company ob- jects, and calls attention to a nearer notary, the insured may forfeit his policy by ignoring the requirement, GiUigan v. Commercial Ins. Co., 20 Hun, 93, aff'd 87 N. Y. 626. 3 N cone v. Ins. Co., 88 Cal. 152, 26 Pac. 103; Walker v. Phoenix Ins. Co., 62 Mo. App. 209; Lang v. Eagle Fire Ins. Co., 12 App. Div. 39, 42 N. Y. Supp. 539. If the company employs the nearest magistrate to prevent the assured from doing so, it cannot en- force the clause, DeLand v. ^tna Ins. Co., 68 Mo. App. 277. ^Peoples' Bank v. ^tna Ins. Co., 74 Fed. 507, 20 C. C. A. 630, 42 U. S. App. 81. The insured cannot qualify him- self to act as notary by assigning all his interest in the claim, Stevens v. Phcenix Ins. Co., 32 N. B. 394. ^DoUiver v. St. Joseph Ins. Co., 131 Mass. 39. As to magistrate, and when disqualified, see Margeson v. Commer- cial Union Assur. Co., 31 N. S. 337; ^tna Ins. Co. v. Miers, 5 Sneed (Tenn.), 139; Wright v. HaHford Ins. Co., 36 Wis. 522 (holding that an im- partial arbiter is arrived at not merely one having no pecuniary interest in the insurance, but not under standard form of policy). ^McNally v. Phomix Ins. Co., 137 N. Y. 389, 33 N. E. 475; German-Am. Ins. Co. V. Norris, 100 Ky. 29, 37 S. W. 267, 66 Am. St. R. 324; AgricuUural Ins. Co. V. Bemiller, 70 Md. 400, 17 Atl. 380; DeLand v. Mna Ins. Co., 68 Mo. App. 277. Contra, Leadbetter v. Mtna Ins. Co., 13 Me: 265, 29 Am. Dec. 505; Johnson v. Phoenix Ins. Co., 112 Mass. 49, 17 Am. Rep. 65; Lane v. St. Paul F. & M. Ins. Co., 50 Minn. 227, 52 N. W. 649, 17 L. R. A. 197; Roumage EXHIBIT REMAINS — SUBMIT TO EXAMINATION 415 As to the contents of the certificate a substantial compliance with the requirements of the policy will suffice.* Nor is the insured con- cluded by the estimate of loss or other statements contained in the certificate.^ This requirement is omitted from the Massachusetts policy. § 304. Exhibit Remains — Submit to Examination. — The insured, as often as required, shaU exk^rit to any person designated by this company aU that remains of any property herein described, and submit to examinations under oath by any person named by this company and subscribe the same. These proAdsions, and the next following, connected with it, relat- ing to the production* of books and bills on demand, confer great privileges upon the insurers, and ought to be enforced by the latter only within boimds of reason and propriety. They are, however, binding upon the insured so far as it lies within his power to comply with them,' and a fulfillment, at least to that extent, is a condition precedent to a right of recovery under the standard pohcy.* There- fore, before opportunity for an examination of the property by the adjuster,* or with knowledge that a further examination is re- quired,* the assured must not remove or dispose of the property so as to deprive the company of its rights. The demand for a personal examination of the insured under oath must be clear and distinct, and not ambiguous or inferential.' The aotice also must designate a reasonable time, a reasonable place, and the person by whom it is to be conducted; * and the notice must V. Mech. Fin Ins. Co., 13 N. J. L. 110; Fund I. Co. v. Sims, 115 Ga. 939, 42 KeOy V. Sun Fire Office, 141 Pa. St. S. E. 269; O'Brien v. Commercial Fire 10. 21 Ati. 447. Ins. Co.. 63 N. Y. 108; Tiius v. Glens 1 .£tna Fire Ins. Co. v. Tyler, 16 Falls Ins. Co., 81 N. Y. 410. Wend. 385, 30 Am. Dec. 90; National * Harris v. Pheenix Ins. Co., 35 Ins. Co. V. Strong, 25 Ohio C. C. 101; Conn. 310; Firemen's Fund I. Co. v. Brown x. Hartford Fire Ins. Co., 52 Sims, 115 Ga. 939, 42 S. E. 269. Hun. 260, 5 iJ. Y. Supp. 230, aff'd 132 Contra, Scottish Union & Xat. Ins. Co. N. Y. 539, 30 X. E. 68. Objecticms v. Strain, 24 Ky. L. R. 958, 70 S. W. will be held waived unless prompuy 274. pointed oMt, SchmroT v. State Ins. €o., ^Oshkosh Match Works v. Man- 30 Or^. 29, 46 Pac. 363; Bailey v. Chester J?. A. Co., 92 Wis. 510, 66 N. W. Hope Ins. Co., 56 Me. 474: DeWitt v. 525. Assn., 157 N. Y. 353, 51 N. E. 977. •AstnV* v; German-Am. Ins. Co., But see Gilligan v. Commercial Ins. 131 Fed. 13, 65 C. C. A. 251. Co., 20 Hun, 93, aff'd 87 N. Y. 626. ' Dougherty v. German-Am. Ins. Co., 3 Birmingham Ins. Co. v. Pulver, 126 67 Mo. App. 526; Slate Ins. Co. v lU. 329, 18 N. E. 804, 9 Am. St. R. 598. Maackens, 38 N. J. L. 565. As to statutes governing requirements * jStna Ins. Co. v. Simmons, 49 Neb. after loss, see Appendix, ch. I. 811, 69 N. W. 125 (place out of county 3 Clafiin V. CommonxoealOi Ins. Co., where assured resides may not be rea' 110 U. S. 81, 3 S. Ct. 507; Firemen's sonable); American Cent. Ins. Co. v. 416 MEANING AND LEGAL EFFECT OP FIHE POLICY itself be made within a reasonable time.* Hence the company may not postpone the exercise of its option until an action has been brought against it under the policy.^ The company is entitled to the personal oath of the assured, unless he is incompetent or absent, through no fault of his own. He can- not substitute an agent,* or his receiver in bankruptcy,^ in his stead. Therefore if the assured voluntarily absents himself, so that he cannot with due diligence be found, this amounts to a refusal to be examined on oath; ^ and after an examination clearly incomplete, a refusal to continue will have the same effect.* But if the com- pany concludes its examination it cannot give a fresh notice, and open up a new hearing.'' It is held that before entering upon the examination the insured may insist upon the presence of his attorney; * but, since the policy expressly provides that the examination shall be made by the representative of the company, the attorney for the assured would Simpson, 43 111. App. 98 (foreign com- pany cannot compel assured to leave state where he resides and where prop- erty is located); Fleisch v. Ins. Co. of N. A., 58 Mo. App. 596 (the place of contnact and of fire held, the proper place for examination of the assured and his books of account, though he resided out of the state). 1 Fleisch v. Ins. Co. of N. A., 58 Mo. App. 596. 2 Aurora Fire Ins. Co. v. Johnson, 46 Ind. 315. ^ Pearlstine v. Westchester Ins. Co., 70 S. C. 75, 49 S. E. 4 (where assured had fled the country to avoid arrest and could not be notified at all). * Sims V. Union Assur. Soc., 129 Fed. 804. Mortgagee is no substitute, Fire Ins. Co. v. Felralh, 77 Ala. 194, 54 Am. Rep. 58. 6 Firemen's Fund Ins. Co. v. Sims, 115 Ga. 939, 42 S. E. 269; Harris v. Phoenix Ins. Co., 35 Conn. 310. ' Bonner v. Home Ins. Co., 13 Wis. 677. ' Moore v. Protection Ins. Co., 29 Maine, 97, 48 Am. Dec. 514. The company, because of the trouble and expense to itself, seldom requires the in- sured to submit to a personal examina- tion, except in those cases where fraud is suspected. "The purpose is to af- ford a method of detecting imposition and fraud," PeaHstein v. Westchester Ins. Co., 70 S. C. 75, 49 S. E. 4, 6. But in such cases this provision of the policy sometimes proves of great value to it. If the insured gives false testi- mony in detail upon his examination had under the terms of the policy, it is generally a sotn-ce of embarrassment to him upon the subsequent trial of his lawsuit. Upon this preliminary examination the representative of the company finds it particularly desirable to interrogate him in regard to the precise location of the various items of property said to be in the building at the time of the fire, and also to compel him to state in detail when and where he purchased them. These inquiries are material and proper, Clafiin v. Commonwealth Ins. Co., 110 U. S. 81, 3 S. Ct. 507. If the property is fictitious, it is difficult for the witness to tell a plausible story, and he soon finds him- self obliged to have recourse to the suspicious response, that he cannot remember. If he attempts to locate the fictitious property in detail, and does not have a copy of his testimony at the subsequent trial months or perhaps years afterwards, he will be apt before the jury to tell an entirely different story. If he states the times and places of purchases from mer- chants, the books of the latter will furnish a valuable check upon his accuracy and good faith. 8 American Cent. Ins. Co. v. Simp- son, 43 HI. App. 98; Thomas v. Burling- ton Ins. Co., 47 Mo. App. 169. WHEN REQUIRED, PRODUCTION OF BOOKS OF ACCOUNTS 417 seem to have no right to share in its active conduct. As to the proper scope of the inquiry, the insured is only bound to answer such questions as have a material bearing upon the origin of the fire, the insurance, and the loss; ^ and after he has finished the ex- amination, he must receive a specific notice to sign it, before he can be adjudged in default for not so doing.^ The Massachusetts policy has no such clause. § 305. When Required, Production of Books of Accounts, Vouch- ers, etc. — Books of account, vouchers or, if lost, certified copies, are almost invariably called for as an incident to any personal examina- tion of the insured, and, often, when no personal examination is demanded. The notice must be made within a reasonable time, and appoint a reasonable time and place.^ On his part, the insiu^d must make a reasonable effort to comply with the demand, called 1 7n«. Co. V. Weides, 14 Wall. (U. S.) 375 (cannot be' compelled to state on what terms he settled with other com- panies); Tittis V. Glens Falls Ins. Co., 81 N. Y. 410; Enos v. St. Paid Itis. Co., 4 S. D. 639, 57 N. W. 919. Whether the conduct of the insured, upon the examination, amoimts to a disobedi- ence of the injunction of this clause, may be a question of fact for a jury, Phillips V. Protection Ins. Co., 14 Mo. 220; for, while logically, the sufficiency of the examination, and the relevancy of the questions asked, would seem to § resent issues of law for the court to etermine, Fleischner v. Beaver, 21 Wash. 6, 56 Pac. 840; and see North Am. lAfe & Ace. Ins. Co. v. Borrovghs, 69 Pa. St. 43, 8 Am. Rep. 212, yet, in practice, covuis are very reluctant to dismiss the complaint on such grounds, and generally leave the question of rea- sonable compliance to the jury, pro- vided the insured has- in good faith submitted to any sort of an examina- tion, which he believes to be a fulfill- ment of his duty, Porter v. Traders' Ins. Co., 164 N. Y. 504, 58 N. E. 641 (holding that clause must be con- strued liberally in favor of the as- sured, and that the relevancy of the interrogatories there put raised a mixed question of law and fact). 'Scottish Union & Nat. Ins. Co. v. Keene, 85 Md. 263, 37 Atl. 33; O'Brien v. Ohio Ins. Co., 52 Mich. 131. The insured is not concluded by misstate- 27 ments innocently made in his examina- tion, Huston V. State Ins. Co., 100 Iowa, 402, 69 N. W. 674; Knop v. National Ins. Co., 107 Mich. 323, 65 N. W. 228. But if the jury finds that a willfully false statement of fact was made though with reference to only one item the entire policy is vitiated, DoUoif V. Ph€enix Ins. Co., 82 Me. 266 (fraud as to part vitiates the whole); Bamberg v. St. Paid F. & M. Ins. Co., 68 Minn. 335, 71 N. W. 388; Worachek V. New Denmark Home F. Ins. Co., 102 Wis. 88 (false swearing as to part forfeits the whole). After demanding an examination of the insured the company may waive it, Wicking v. Citizens' Mid. Ins. Co., 118 Mich. 640, 77 N. W. 275; or by examining his representative instead of the assured himself, Western Assur. Co. v. Mc- Glathery, 115 Ala. 213, 22 So. 104. By the better authority, requiring examination and production of books and bills does not waive forfeitures, § 148, supra. 3 Jones v. Hovxird Ins. Co., 117 N. Y. 103, 22 N. E. 578 (place of fire, a properplace when books are kept there); FUisch v. Ins. Co. of N. A., 58 Mo. App. 596; Murphy v. North Brit. St M.Ins. Co., 61 Mo. App^ 323; Tucker v. Colonial Ins. Co., 58 W. Va. 30, 51 S. E. 86. It is too late to make demand after action is begun, Wella Whip Co. V. Farmers' Mid. Fire Int. Co., 209 Pa. St. 488, 58 Atl. 894. De- 418 MEANING AND LEGAL EFFECT OF FIRE POLICY for under this clause of the policy; ^ and, if he cannot comply in full, he must do so as far as circumstances render a compUance practica- ble.^ Under this clause the courts do not require the production of proofs which cannot be produced by reason of their destruction by the fire, or because for any reason they are beyond the control of the insured.^ And so also if, by diligent effort, duplicate bills, invoices, or vouchers cannot be obtained, their production will be excused.'* But, otherwise, they must be produced.^ A call for certified copies of bills or vouchers must be specific. A call for bills is not enough, though the originals are in fact lost.® The Massachusetts form provides, "the company may also ex- amine the books of account and vouchers of the Insured and make extracts from the same." § 306. Appraisal. — In the event of disagreement as to the amount of loss, the same shall, as above provided, be ascertained by two com- petent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately sound value and damage, and, failing to agree, shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of su£h loss; the parties thereto shall pay the appraisers respectively selected by them, and shall bear equally the expenses of the appraisal and umpire. This is called the appraisal or arbitration clause. It offers a prompt and inexpensive method ^ of adjusting the most prolific cause of dispute between the parties, namely, divergent opinions mand is ineffectual if no place is Ins. Co., 73 Miss. 279, 18 So. 928; named, Seibel v. Firemen's Ins. Co., Brookshier v. Ins. Co., 91 Mo. App. 599 212 Pa. St. 604, 62 Atl. 101. * Miller v. HaHford Fire Ins. Co., 70 i Seihel V. Lebanon Ins. Co., 197 Pa.. Iowa, 704, 29 N. W. 411- Jones v. St. 106, 46 Atl. 851; Langan v. Royal Mechanics' F. Ins. Co., 36 N. J. L. 29, Ins. Co., 162 Pa. St. 357, 29 Atl. 710; 13 Am. Rep. 405; Ward v. Nat. P. Ins. American Cevi. Ins. Co. v. Ware, 65 Co., 10 Wash. 361, 38 Pac. 1127 Ark. 336, 46 S. W. 129. ^ Mispelhom v. Farmers' Ins. Co., i Farmers' Ins. Co. v. Mispelhorn, 5SMd. 473;0'Brienv. Commercial Fire 50 Md. 180, 53 Atl. 473; Stephens v. Ins. Co., 63 N. Y. 108; Langan v. Royal Union Assur. Soc, 16 Utah, 22, 50 Ins. Co., 162 Pa. St. 357, 29 Atl. 710. Pac. 626; Ward v. Nat. Ins. Co., 10 Where without explanation or excuse Wash. 361, 38 Pac. 1127. Inventory it was shown that insured had altered called for, Manchester F. Ins. Co. v. his invoices, held, that he could not Simmons, 12 Tex. Civ. App. 607, 35 recover, Virginia F. & M. Ins Co v S. W. 722; Fire Assn. v. Masterson, 25 Saunders (June, 1890), 86 Va. 969 Tex. Civ. App. 518, 61 S. W. 962. e Whip Co. v. Farmers' Ins. Co., 209 3L. & L. & G. Ins. Co. v. Kearney, Pa. St. 488, 58 Atl. 894; Johnson v. 180 U. S. 132, 45 L. Ed. 460, 21 S. Ct. Phoenix Ins. Co., 69 Mo. App. 226. 326; Eggleston v. Council Bluffs Ins. i Fleming v. Phoenix Assur. Co 75 Co., 65 Iowa, 308; Sneed v. Brit.-Am. Hun (N. Y.), 530. APPRAISAL 419 regarding values and extent of damage, and is very important to the companies in many instances to relieve them from extravagant or fraudulent claims. The option to take advantage of this proced- ure to fix the amount of loss is extended to both parties ahke, but must be exercised by affirmative demand made within a reason- able time, otherwise the clause becomes inoperative.^ Another essential factor is a preexisting disagreement between the parties as to the amount of loss, without which any stipulation to ap- praise would not fall imder the terms of the policy, but would be revocable as at common law.* i Hamilton v. Phanix Ins. Co., 61 Fed. 379, 9 C. C. A. 530 (reasonable time). Thus after disagr^ment If the company wants to avsul itself of this clause it must take the initiative. Nerger v. Eq. F. Assn. (So. Dak., April, 1906), 107 N. W. 531. It is not a condition precedent unless demand is made, Lesure, etc., Co. v. Mut. F. Ins. Co., 101 Iowa, 514, 70 N. W. 761; BaiUie V. Western Assut. Co., 49 La. Ann. 658, 21 So. 736; Davis v. Alias Ins. Co., 16 Wash. 232, 47 Pac. 436; National, etc., Assn. v. Ins. Co., 106 Mich. 236, 64 N. W. 21; Grand Rapids F. Ins. Co. V. Finn, 60 Ohio St. 513, 54 N. E. 546 (reasonable time); Ran- daU V. Ins. Co., 10 Mont. 362, 25 Pac. 960; Chainless Cycle Mfg. Co. v. Security Ins. Co., 169 N. Y. 304, 62 N. E. 392 (reasonable time); Dams v. Am. Cent. Ins. Co., 7 App. Div. 488, 40 N. Y. Supp. 248, aff'd 158 N. Y. 688; Garretson v. Mer. & Bankers' Fire Ins. Co., 114 Iowa, 17, 86 N. W. 32; Capitol Ins. Co. v. Wallace, 48 Kan. 400, 29 Pac. 755. But see contra, that compliance is a condition prece- dent without demand if there is a dis- agreement, Adams v. Ins. Co., 70 Cal. 198, 11 Pac. 627; Phcenix Ins. Co. v. Lorton, 109 111. App. 63; Hutchinson v. Ins. Co., 153 Mass. 143, 26 N. E. 439; Mosness v. German-Am. Ins. Co., 50 Minn. 341; Murphy v. Ins. Co., 61 Mo. App. 323; Graham v. Ins. Co., 75 Ohio St. 374, 79 N. E. 930. A demand by registered letter which assured refuses to receive is operative, American Cent. Ins. Co. V. Simpson, 43 lU. App. 98. And the demand must be for the ap- praisal described in the policy, Walker v. German Ins. Co., 51 Kan. 725, 33 Pac. 597; Staearinger v. Ins. Co., 66 Mo. App. 90. A joint demand by eeveral companies for one appraisM will not be effective. Conn. F. Ins. Co. V. Hamilton, 59 Fed. 258, 8 C. C. A. 114; Palatine Ins. Co. v. Morton, etc., Co., 106 Tenn. 558, 61 S. W. 787; Hartford F. Ins. Co. v. Asher (Ky., 1907), 100 S. W. 233. The party that more frequently calls for appraisal is the insurance company. If company elects to replace or rebuild it cannot demand appraisal, Wynkoop v. Niagara Ins. Co., 91 N. Y. 478. 2 BrUish-Am. Assur. Co. v. Darragh, 128 Fed. 890; Continental Ins. Co. v. VaUandingham, 25 Ky. Law Rep. 468, 76 S. W. 22; Hogadone v. Grange Mut. Ins. Co., 133 Mich. 339, 94 N. W. 1045; KeUy V. L. & L. & G. Ins. Co., 94 Minn. 141, 102 N. W. 380. But it has been held that the disagreement may be assumed when both parties have signed the appraisal agreement. Kersey v. Phcenix Ins. Co., 135 Mich. 10, 97 N. W. 57; Fowble v. Phoenix Ins. Co., 106 Mo. App. 527, 530, 81 S. W. 485. In case of total loss of a building a valued policy law prevails over an appraisal clause, Hartford F. Ins. Co. V. Bourbon Co. Ct., 115 Ky. 109, 72 S. W. 739; Caledonia Ins. Co. v. Cooke, 101 Ky. 412, 41 S. W. 279; O'Keefe v. Ins. Co., 140 Mo. 558, 41 S. W. 922. The award determines simply the amount of loss, therefore the action of the assured is not on the award but on the policy. Smith v. Herd, 110 Ky. 56, 65, 60 S. W. 841; Soars v. Home Ins. Co., 140 Mass. 345, 5 N. E. 149. By the prevailing rule to take ad- vantage of the appraisal clause is no waiver of known forfeitures under the New York standard policy. Western AssuT. Co. V. Haa, 120 Ala. 547, 24 So. 936; WiOoughby v. St. Paul Ger- man Ins. Co., 68 Minn. 373; London & L. Ins. Co. V. Honey, 2 Vict. L. R. (Law) 7. Standard policy expressly 420 MEANING AND LEGAL EFFECT OF FIRE POLICY The Massachusetts standard policy provides: In case of loss under this policy, and a failure of the parties to agree as to the amount of loss, it is mutually agreed that the amsuni of su^h loss shall he referred to three disinterested men, the company and the insured each choosing one out of three persons to be named by the other, and the third being selected by the two so chosen; the award in writing by a majority of the referees shall be conclusive and final upon, the parties as to the amount of loss or damage, and such reference unless waived by the parties shall be a condition precedent to any right of action in law or equity to recover for such loss; but no person shall be chosen or act as referee, against the objection of either party, who has acted in a like capacity within four months. Under the Michigan standard pohcy the award is only "prima facie evidence of the amount of such loss." By the terms of the New Hampshire policy, if the parties fail to agree upon referees within fifteen days after notice of loss, either party, upon giving written notice, "may apply to a justice of the Supreme Court, who shall appoint three referees, one of whom shall be thoroughly acquainted with the kind of property to be considered." ^ The Iowa standard policy contains no provision for appraisal. Certain of the standard policies except from the scope of the appraisal a total loss on build- ings.^ Under the Massachusetts general insurance law, detailing the procedure upon arbitration,* if the insurer fail to apply for arbitra- tion within the time specified in the law, he waives his right to an arbitration.* So also if he ignore the request of the insured for arbitration.® § 307. Standard Clause a Valid Condition,— Courts are the legally appointed tribunals for determining controversies, and are jealous of interference with their prerogatives. Any agreement, therefore, to refer to arbitration the general question of the liability of the insurers under the policy, or all matters of dispute under the policy, would be void; since it is held to be against pubUc pohcy to oust provides that waiver shall not result, Hampshire, and South Dakota. In § 314. Minnesota if total insurance on build- 1 Similarly by the N. J. General In- ing, exclusive of foundation, is less aurance Act, § 79, application may be than insurable value specified in policy, made to court for the appointment of insured need not submit to arbitration, appraisers. In Uke maimer by Massa- Ohage v. Union Ins. Co., 82 Minn 426 chusetts General Ins. Act (1907), § 60, 85 N. W. 212. on failure, to appoint the third referee, s Gen. Ins. Act (1907), § 60. application may be made to the insur- < Hayes v. MUford Mut. F. Ins. Co. ance commissioner to appoint him. 170 Mass. 492, 49 N. E. 754. ' ' ' »For example, Minnesota, New ^McDowell v. /Etna Ins. Co., 164 APPRAISERS COMPETENT, DISINTERESTED 421 the courts altc^ther of their jurisdiction.* But the provision of the New York standard policy, which simply refers to appraisal the question of the amount of loss, leaving any dispute in regard to the company's liability to be determined by the courts, is valid, and an award thereunder whenever the appraisal has been de- manded by the company is expressly made a prerequisite to any right of recovery upon the policy.^ Nor are the provisions of this clause unconstitutional.' § 308. Appraisers Competent, Disinterested. — The appraisers and Mass. 444, 41 N. E. 665. A question of waiver is often for the iuiy, Lamson Cons. S. S. Co. V. Prudential F. Ins. Co., 171 Mass. 433. 1 Sanford v. Conn. Trav. Mvt. Aec. Assoc., 147 N. Y. 326, 41 N. E. 694; Ddaware f a written agreement of appraisal is executed, its terms cannot be varied by ante- cedent or contemporaneous conversa- tions, Rvtter V. Ins. Co., 138 Ala. 202, 33 So. 33. If there have been two fire losses unadjusted, any appraisal must cover both. Mechanics' Ins. Co. v. Hodge, 149 111. 298, 37 N. E. 51. 1 Vincent v. German Ins. Co., 120 Iowa, 272, 94 N. W. 458. 2 Stout V. Phoenix Ins. Co., 65 N. J. Eq. 566, 670. s Farrell v. German Ins. Co., 175 Mass. 340, 347, 56 N. E. 572. * Kaiser v. Hanibwrg-Brem. Fire Ins, Co., 59 App. Div. 525, 69 N. Y. Supp. 344, aff'd 172 N. Y. 663, 65 N. E. 1118. Parties themselves must also act in good faith. Silver v. Western Assur. Co., 164 N. Y. 381, 58 N. E. 284; Uhrig v. WiUiamshurgh City Fire Ins. Co., 101 N. Y. 362, 4 N. E. 745 (hold- ing it to be a question of fact for the jury whether they do so act). If the company is in fault, lack of award is no defense, Hall v. Western Assur. Co., 133 Ala. 637, 32 So. 257. 5 Strome v. London Assur. Corp., 20 App. Div. 571 , 47 N. Y. Supp. 481. ■ 8HaH V. Norwalk Fire Ins. Co., 57 Conn. 105, 17 Atl. 356; Vincent v. German Ins. Co., 120 Iowa, 272, 94 N. W. 458; Ins. Co. v. Payne, 57 Kan. 291, 46 Pac. 315. The umpire need not examine except on points of dif- ference between the appraisers, Hart- ford Fire Ins. Co. v. Bonner Mfg. Co., 56 Fed. 378, 15 U. S. App. 134. 5 C. C. A. 524. CONDUCT OF APPRAISAL 425 them; * but if either party to the policy aflBnnatively offers testi- mony he should have reasonable opportunity to appear before the appraisers and present it.^ And the umpire, in arriving at his con- clusions, must not ignore either appraiser or his estimates, or the facts and considerations which he is prepared to present for the umpire's edification.* In a Kentucky case in which the appraisers made a hasty and incomplete schedule of the personal property, the assured was not allowed to be present with his books of account at their meeting, and the award was set aside.* So also it is clear that, where the property to be appraised has been totally destroyed by the fire, the insured must receive notice of the meeting of the appraisers, and be allowed an opportunity to put before them such pertinent evidence as he may possess.^ In a Massachusetts case it was held that, without fatal irregularity, an arbitrator might converse with a third party about the fire, might privately examine the books of another arbitrator to get at the prices of goods similar to those destroyed, might privately experiment as to the effect of intense heat on certain goods, where the results of his investigations were communicated to the other arbitrators.* It must be observed, however, that certain directions as to the conduct of the appraisal may be gathered from the express terms of the policy. Thus sound value, as well as damage, must be ascer- tained and separately stated, or else the award is void.'' So also proper deduction must be made for depreciation in values, caused by age and use; * and in no event may the damage allowed exceed 1 Bangor Bank v. Niagara Ins. Co., 481, aff'd 162 N. Y. 627, 57 N. E. 1125; 85 Me. 68, 26 Atl. 991. New York Mvt. & L. A. v. Manchester 2 Redner v. N. Y. Fire Iv^. Co., 92 Fire Assur. Co., 94 App. Div. 104, 87 Minn. 306, 99 N. W. 886; Phcenix Ins. N. Y. Supp. 1075; Schmitt v. Boston Co. V. Moore (Tex. Civ. App.), 46 Ins. Co., 82 App. Diy. 234, 81 N. Y. S. W. 1131; Van Winkle v. Continental Supp. 767. As to what acts will in- F. Ins. Co., 55 W. Va. 286, 47 S. E. validate an award, and as to practice 82 (testimony not offered is not "re- where one party refuses to abide by jected"). Formal notice to the as- award, see Christianson v. Norwich sured of meetings may not be neces- Union F. Ins. Co., 84 Minn. 526, 88 sary in all cases, Schmitt v. Boston Ins. N. W. 16. Co , 82 App. Div. 234, 81 N. Y. Supp. * Harth Bros. Grain Co. v. Conti- 767; Remington Co. v. Ins. Co., 12 nental Ins. Co. (Ky.), 102 S. W. 242. App. Div. 218, 43 N. Y. Supp. 431. = Carlston v. St. Paul F. & Mar. But each party should have full op- Ins. Co. (Mont., 1908), 94 Pac. 756; portunity to present his facts, Conti- Continental Ins. Co. v. Garrett, 125 nental Ins. Co. v. Garrett, 125 Fed. 589; Fed. 589, 60 C. C. A. 395. Stout V. Phoenix Assur. Co., 65 N. J. * Farrell v. German^American Ins. Eq. 566, 56 Atl. 691; Coons v. Coons, Co., 175 Ma^. 340, 56 N. E. 572. 95 Va. 434, 28 S. E. 885, 64 Am. St. R. ' Continental Ins. Co. v. GarriU, 125 804. Fed. 589, 60 C. C. A. 395. ^ Strome v. London Assur. Corp., 20 « Michels v. Western Underwriters' App. Div. (N Y.) 571, 47 N. Y. Supp. .Assoc, 129 Mich. 417, 89 N. W. 56. 426 MEANING AND LEGAL EFFECT OF FIBB POLICY what it would cost to replace at the time of the fire.* The scope of the appraisal also is expressly limited to two points, sound value and loss. Beyond these two matters the appraisers must not go. Therefore they have nothing to do with the question as to whether the company is Uable to the insured; ^ nor with any issue of fraud or breach of warranty on the part of the assured; ^ and if, as is customary, a schedule of articles is given to them as part of the submission, they must follow its items, and not add or subtract because of their construction of what the scope and meaning of the policy ought to be.* The policy also expressly provides that, after first selecting an umpire, "the appraisers together shall then esti- mate and appraise the loss." This phraseology gives special point to the important proposition that neither appraiser ought to act secretly or independently of the other in taking testimony, or in examining the premises with outside experts, or in submitting their results to the umpire. The two judges, or, if the umpire is called upon to act, all three, should, in company and cooperation, enjoy the full benefit of all Ifegitimate information and influences and should be afforded the opportunity of knowing what the experts look at, and of calling their attention to pertinent facts.^ Where the two appraisers are unable to agree, the umpire and one of them may make a valid award in the absence of the other.* § 311. Unfinished Appraisals. — If an appraiser or umpire de- 1 Ptov. Wash. Ins. Co. v. Board of 49 Atl. 738. In one case the court con- Education, 49 W. Va. 360, 38 S. E. 679. eluded that an umpire had sufficiently 2 Smiih V. Herd, 110 Ky. 56, 60 S. performed his duty, though he neg- W. 841; Townsend v. Greenwich Ins. lected to visit the premises and simply Co., 86 App. Div. 323, 83 N. Y. Supp. shut himself up in his room with 909, aff'd 178 N. Y. 634, 71 N. E. 1140. clerks, and split the difference be- 3 Kearney v. Washtenaw Mvt. P. I. tween the estimates of the appraisers, Co., 126 Mich. 246, 85 N. W. 733. HaHford Pire Ins. Co. v. Bonner Mer. * Adams v. A''. Y. Bowery Ins. Co., Co., 56 Fed. 378, 381. But see Brit.- 85 Iowa, 6, 51 N. W. 1149; American Am. Ins. Co. v. Darragh, 128 Fed. 890, Ins. Co. V. Bell (Tex. Civ. App., 1903), 63 C. C.'A. 426. One appraiser may 75 S. W. 319. And see Chandos v. obtain information and lay it before Am. Ins. Co., 84 Wis. 184 (holding the the other, ParreU, v. Ins. Co., 175 Mass. presumption to be that they have 340, 56 N. E. 572. If the two ap- passed upon the right property). praisers agree, they sign the award 5 Citizens' Ins. Co. v. Hamilton, 48 without calling upon the umpire, 111. App. 593; Christianson v. Norwich Vincent v. German Ins. Co., 120 Iowa, Union Ins. Soc, 84 Minn. 526, 88 272,94 N.W. 458; Broaiiioo?//ns. Co. v. N. W, 16; StroTue v. London Assur. Doying, 55 N. J. L. 569, 27 Atl. 927- Corp., 20 App. Div. 571, 47 N. Y. Supp. Enright v. Montauk Fire Ins. Co , 61 481, aff'd 162 N. Y. 627, 57 N. E. 1125; Hun, 625, 15 N. Y. Supp. 893, aff'd Caledonia Ins. Co. v. Traub, 83 Md. 142 N. Y. 667, 37 N. E. 570. Each 524, 35 Atl. 13 (holding, also, that if appraiser is entitled to a reasonable one appraiser withdrew befbj-e his work compensation, Alden v. Christianson^ is complete no valid award can be made 83 Minn. 21, 85 N. W. 824. by the other). But see Am. Central <^ German Ins. Co. v. Hazard Bank Ins. Co. v. Landau, 62 N. J. Eq. 73, (Ky., 1907), 104 S. W. 725. tmFINISHED -APPRAISALS 427 clines to act or to proceed, a new appointment should promptly be made; ^ but if, through the connivance or fault of the company, no award is reached, its absence furnishes no defense to it,^ and in such a case the assured need not make an attempt at a second appraisal. The rule also, in most jurisdictions, seems to be substantially the same as just stated, where the award fails solely because of the fault of the company's appraiser, to some extent an appraiser being thus regarded as the representative of the party appointing him.* Where the appraisal drops through no fault or misconduct of either party, the question is not uniformly decided whether the in- sured must do anything more, though it is not easy to see how a mere attempt to comply with an important condition of the con- tract can be taken as an equivalent for performance. Some courts accordingly enforce the condition more rigorously, holding in effect that the assured must pursue his efforts, including if need be a fresh appointment, until it appears that through no fault or omis- sion of his own it is impracticable to furnish an award.* Other 1 Westenhaver v. Gemunir-Am. Ith. Co., 113 Iowa, 726, 84 N. W. 717; Caledonia Ins. Co. v. Travb, 83 Md. 524, 35 Atl. 13. If before the with- drawal of an appraiser a disagreement has relegated the task of deciding to the umpire and other appraiser, the withdrawal will not prevent an award by the two, Caledonia F. Ins. Co. v. Traub, 86 Md. 86, 37 Atl. 782; Broad- way Ins. Co. v. Doying, 55 N. J. L. 569, 27 Atl. 927. But see Franklin v. N. H. Fire Ins. Co., 70 N. H. 251,47 Atl. 91. 2 Uhrig v. Williamsburgh City Fire Ins. Co., 101 N. Y. 362, 4 N. E. 745 (for the jury; Western Assur. Co. v. Hall, 120 Ala. 547, 24 So. 936; Michel v. Ameri- can Cent. Ins. Co., 17 App. Div. 87, 44 N. Y. Supp. 832. It is recently held that if both appraisers are partial, the company cannot set up an appraisal clause in defense, Hartford F. Ins. Co. V. Asher (Ky., 1907), 100 S. W. 233. 3 Bishop v. Agricultural Ins. Co., 130 N Y. 488, 59 N. E. 844; Bradshaw v. AgricuUural Ins. Co., 137 N. Y. 137, 32 N. E. 1055; Austen v. Niagara Ins. Co., 16 App. Div. 86, 45 N. Y. Supp. 106; Niagara Ins. Co. v. Bishop, 49 111. App. 388; Fowble v. Phcenix Ins. Co., 106 Mo. App. 527, 81 S. W. 485; Carp v. Queen Ins. Co., 104 Mo. App. 502, 79 S. W. 757; Braddy v. N. Y. Bowery Ins. Co., 115 N. C. 354, 20 S. E. 477; Chapman v. Rockford Ins. Co., 89 Wis. 572, 62 N. W. 422, 28 L. R. A 40? * Davenport v. Ins. Co., 10 Daly, 535; Vernon Ins. Co. v. Maitlen, 158 Ind. 393, 63 N. E. 755 (appraisers could not agree on imipire, held, no excuse for breach of condition); Westenhaver v. German^Am. Ins. Co., 113 Iowa, 726, 84 N. W. 717 (failure to agree on um- pire no excuse for lack of award); Fisher v. Merchants' Ins. Co., 95 Me. 486, 50 Atl. 282 (must arbitrate or give good legal excuse); Kersey v. Phcenix Ins. Co., 135 Mich. 10, 97 N. W. 57 (difficulty in agreeing on umpire is no excuse); Carp. v. Queen Ins. Co., 104 Mo. App. 502. But see Hamilton v. L. & L. & G. Ins. Co., 136 U. S. 242, 10 S. Ct. 945, 34 L. Ed. 419; Carroll v. Ins. Co., 72 Cal. 297, 13 Pac. 863; Silver v. Western Assur. Co., 164 N. Y. 381, 58 N. E. 284; Williams v. German Ins. Co., 90 App. Div. 413; Spurrier v. La Cloche (1902), App. Cas. 446. But held, that the company should demand a fresh appraisal if it wants one, Levine v. Lancashire Ins. Co. , 66 Minn. 138, 68 N. W. 855. If the company's appraiser acts unfairly or refuses to proceed the company should not de- cline to appoint another, O'Rourke v. German Ins. Co. (Minn., 1905), 104 N. W. 900. If it does so decline it waives its right to an appraisal, Niag- ara Ins. Co. V. Bishop, 154 111. 9, 39 N. E. 1102, 45 Am. St. R. 105; Brock v Ins. Co., 102 Mich. 583, 61 N. W. 67, 26 t a. A. 623, 47 Am. St. R. 562; 428 MEANING AND LEGAL EFFECT OF FIKE POLICY courts construe the condition more liberally towards the assured. Regarding the provision as incidental and collateral to the main contract, they are more disposed to consider that, in once selecting a suitable appraiser, and in standing ready to furnish in aid of an appraisal all pertinent testimony within his control, the assured has performed the full measure of his obligation under this clause of the policy.^ The Michigan court declares: "It is the established rule in this state that no right of action on the part of an insured exists until an appraisal provided for in the policy has been made." And the court held that if an appraiser failed to act another should be chosen.^ If the appraisal extends beyond the limit of time for beginning action such period is by impUcation extended until sixty days after award.* § 312. Scope of Award. — The scope of the submission determines the valid scope of the award.* Thus if the parties expressly include in a written submission only property partially damaged, the in- sured in his action on the policy may subsequently show in addi- tion to the award, the value of property totally lost.* Inasmuch as the award does not determine the Uability of the insurer, but only the amount of the loss, it is in the nature of evi- dence, and the action of the insured to recover the amount must be on the policy, not on the award.* McCuUough v. Ins. Co., 113 Mo. 606, 3 Williams v. German Ins. Co. and 21 S. W. 207. Fritz v. Brit.-Am. Assur. Co., 208 Pa. » Western Assur. Co. v. Decker, 98 St. 268, 57 Atl. 573. Fed. 381, 39 C. C. A. 383, Sanborn, J., « Rvtter v. Hanover F. Ins. Co., 138 dissenting; Western Assur. Co. v. Hall, Ala. 202, 35 So. 33; Kearney v Ins 120 Ala. 547, 24 So. 936; Bemhard v. Co., 126 Mich. 246, 85 N. W. 733. Rochester German Ins. Co. (Conn.), 65 ^ Rutter v. Ins. Co., 138 Ala. 202, Atl. 134; Conn. Fire Ins. Co. v. Cohen, 35 So. 33; Lang v. Eagle F Co 12 97 Md. 294, 55 Atl. 675 (no umpire App. Div. 39, 42 N. Y. Supp. 539; ever selected); Pretzf elder v. Mer- Fire Assn. v. Colquin (Tex. Civ App ) chants' Ins. Co., 116 N. C. 491, 21 S. E. 33 S. W. 1004. If agreement of the 302, id., 123 N. C. 164, 31 S. E. 470; parties and the submission depart from Fire Assn. v. Appel (Ohio St.), 80 terms of policy the scope of the award N. E. 952- Fritz v. Brit.-Am. Assur. is controlled by the submission, Brit - Co., 208 Pa. St. 268, 57 Atl. 573, Am. Assur. Co. v. Darragh, 128 Fed. Mitchell, C. J., and Brown, J., dissent- 890, 63 C. C. A. 426; London & L. Ins. ing. If the assured demand an ap- Co. v. Storrs, 71 Fed. 120, 17 C. C. A. praisal and nominate his appraiser, 645; Hall v. Norwalk F. Ins. Co., 57 and the company refuse to nominate Conn. 105, 17 Atl. 356; Springfield F. one, no binding award can be made, & M. Ins. Co. v. Payne, 57 Kan. 291, Penn. Plate Glass Co. v. 7ns. Co., 189 46 Pac. 315. The award was pre^ Pa. St. 255, 42 Atl. 138. sumed to cover also a question of ap- 2 Baurrigarth v. Firemen's Fund Ins. portionment in Cassidy v. Royal ExSi Co. (Mich., 1908), 116 N. W. 449; Fer- Assn., 99 Me. 399, 59 Atl. 549. rum Trust Co. v. MaiUen, 158 Ind. « Soars v. Home Ins. Co., 140 Maea 393. 343, 5 N. E. 149. SETTING ASIDE AWASD 429 Where several insurance companies interested in the one loss unite in signing one appraisal agreement, the submission is not void, but will be regarded as separate submissions, one for each insurer.' § 313. Setting Aside Award. — Where the arbitrators are gov- erned by proper methods and act in good faith, much discretion is vested in them. Their award will not be vacated merely because it is in fact either excessive,^ or inadequate.* In general, an award is conclusive as to the amount of loss; * but, where the error is so great as to be indicative of gross partiality, undue influence, or cor- ruption, then there exists ground for setting aside the award.^ The same is true, if the award " is obviously and extremely unjust," ® though there be no evil intent or improper motive on the part of any person concerned.^ Where the methods of arbitrators, acting as judicial officers, are shown to be unjust or unlawfxil, the award will be the more readily annulled. Thus the refusal to take pertinent and material testimony; * or an estimate of the damage on an im- proper basis; ® or a neglect to allow one of the appraisers a fair participation in the proceedings; '" or an omission to afford proper opportunity to one of the parties to present his case; ** or the fraud- 1 GUes V. Royal Ins. Co., 179 Mass. 261, 60 N. E. 786. 2 Hartford Ins. Co. v. Bonner Mer. Co., 56 Fed. 378, 15 U. S. App. 134, 5 C. C. A. 524. 3 Michels v. Assoc, 129 Mich. 417, 89 N. W. 56; Kearney v. Washtenaw Ins. Co., 126 Mich. 246, 85 N. W. 733; Stemmer v. Scottish Ins. Co., 33 Oreg. 65, 53 Pac. 498; Strome v. London Assur. Corp., 20 App. Div. 571, 47 N. Y. Supp. 481, aff'd 162 N. Y. 627, 57 N. E. 1125. The court said: "If in every case it might be shown that the arbitrators omitted to consider some elements of damage, the arbitration would rarely be final," Remington Paper Co. v. London Assur. Corp., 12 App. Div. 218, 225, 43 N. Y. Supp. 431. * BiUmver v. Ins. Co., 57 W. Va. 42,49S. E. 901. 5 Kaiser v. Ins. Co., 59 App. Div. 525, 69 N. Y. Supp. 344, aff'd 172 N. Y. 663, 65 N. E. 1118 (loss $3,930; award $3,031); Strome v. London Assur. Co., supra; N. Y. Mut. S. & L. A. \. Manchester Fire Assur. Co., 94 App. Div. 104, 87 N. Y. Supp. 1075 floss $1,300; award $1,032); Ins. Co. ofN.A. v. Hegevxdd, 161 Ind. 631, 66 N. E. 902 (award less than one-half the loss); Vincent v. Gorman Ins. Co., 120 Iowa, 272, 94 N. W. 458; Produce R. Co. v. Ins. Soc., 91 Minn. 210, 97 N. W. 875; Royal Ins. Co. v. Parlin Co., 12 Tex. Civ. App. 572, 34 S. W. 401; Glover v. Rochester German Ins. Co., 11 Wash. 143, 39 Pac. 380. ''Perry v. Greenioich Ins. Co., 137 N. C. 402, 49 S. E. 889 (award $73.50; loss $750). T Prov. Wash. Ins. Co. v. Board of Education, 49 W. Va. 360, 38 S. E. 679. 8 Mosness v. German-Am. Ins. Co., 50 Minn. 341, 52 N. W. 932; Stemmer v. Scottish U. Ins. Co., 33 Oreg. 65, 53 Pac. 498; Con/ieW v. Watertovm Ins. Co., 55 Wis. 419; and see Hart v. Kenney, 47 N. J. Eq. 51, 20 Atl. 29. oProv. Wash. Ins. Co. v. Board of Education, 49 W. Va. 360, 38 S. E. 679; Clover v. Greenwich Ins. Co., 101 N. Y. 277, 4 N. E. 724. io Hills v. Hcmie Ins. Co., 129 Mass. 345 fln which two out of three pre- judged the case on ex parte testimony); Springfield F. & M. Ins. Co. v. Payne, 57 Kan. 291, 46 Pac. 315. 11 Redner v. N. Y. Fire Ins. Co., 92 Minn. 306, 99 N. W. 886; Schreiher v. Germart-Am. Ins. Co., 43 Minn. 367; and see § 310, supra. 430 MEANING AND LEGAL EFFECT OF FIBE POLICY ulent concealment of books and inventory or other evidence; * or the failure to include in the estimate a part of the property sub- mitted,^ will be good ground for upsetting the award and defeating the plainti£f altogether/ or for relegating the parties to the verdict of a jury to determine the actual amount of loss, as the case may be. But the legal presumptions are in favor of the validity of the award. Consequently, in the absence of fraud, misconduct or gross mistake it is a final adjustment of the amount of loss.* In New York and other states where legal and equitable relief may be obtained in the same action, either party may assail the award in an action on the policy, the plaintiff, as part of his cause of action, the defendant, by way of defense.^ But in other juris- dictions a suit in equity must be brought for the express purpose- of setting aside the award with stay meanwhile of trial of the action on the policy; since, at common law, in an action on the policy the award is conclusive.* In an action brought for the express purpose of setting aside the award and recovering on the policies the New York Supreme Court allowed a joinder of all the companies as defendants that had united in the appraisal.'' § 314. Enforcing Contract is no Waiver. — This company shall not be held to have waived any provision or condition of this policy, or any forfeiture thereof, by any requirement, etc., relating to the appraisal or examination; and the loss shall not become payable until sixty days ^Stockton, etc., Works v. Glens Falls ^Sullivan v. Traders' Ins. Co., 169 Ins. Co., 98 Cal. 557, 33 Pac. 633. N. Y. 213, 62 N. E. 146; Maker v. Home ^ Adams v. N. Y. Bowery Ins. Co., Ins. Co., 75 App. Div. 226, 78 N. W. 85 Iowa, 6, 51 N. W. 1149; Am. F. Ins. Supp. 44; Bellinger v. German Ins. Co., Co. V. BeU, 33 Tex. Civ. App. 319, 75 95 App. Div. 262, 88 N. Y. Supp. 1022; S. W. 319; Phoenix Ins. Co. v. Moore Davis v. Atlas Assur. Co., 16 Wash (Tex. Civ. App.), 46 S. W. 1131; Hong 232, 47 Pac. 436; Canfieldv. WateHown Sling V. Ins. Co., 7 Utah, 441, 27 Pac. Ins. Co., 55 Wis. 419, 13 N. W. 252. 170. 8 Continental Ins. Co. v. Garrett, 125 3 See § 310. Fed. 589, 60 C. C. A. 395; Robertson v. i Hammer F. Ins. Co. v. Lewis, 28 Ins. Co., 68 Fed. 173; Ga. Home Ins Fla. 209, 10 So. 297; Boies v. Brit.-Am. Co. v. Kline, 114 Ala. 366, 21 So 958- Ins. Co., 100 Ga. 249, 28 S. E. 155; Fire Assoc, v. AUesina, 45 Oreg 154', Townsend v. Greenwich Ins. Co., 86 77 Pac. 123; BiUmyer v Hamburq- App. Div. 323, 83 N. Y. Supp. 909, Brem. Ins. Co., 57 W. Va 42 49 S E aff'd 178 N. Y. 634, 71 N. E. 1140; 901; Garrehrarii w . Continental Ins.' Co. Am. Cent. Ins. Co. v. Bass, 90 Tex. (N. J., 1907), 67 Atl. 90. Minnesota 380, 38 S. W. 1119. Subsequent allows an equity suit against all the denial of liability is no waiver of companies interested as defendants award, Montgomery v. Am. Cent. Ins. and recoveries on the policies in the Co., 108 Wis. 146, 84 N. W. 175. same suit, Redner v. N. Y. Fire Ins. Parties may set aside the award by Co., 92 Minn. 306, 99 N. W. 886. mutual consent, Goodwin v. Ins. Co., ''Mayer v. Phcmix Ins Co 124 118 Iowa, 601, 92 N. W. 894. App. Div. 241. PRO RATA CLAUSE — OTHER INSURANCE 431 after the notice of ascertainment, estimate, and satisfactory proofs have been received, including an award by appraisers when appraisal has been required. As has been observed, in the absence of this provision certain courts have been disposed to hold that a demand by the company for an appraisal or an examination under oath amounts to a waiver of a known cause of forfeiture; ^ but this clause of the policy allows the company to pursue the contract methods for ascertaining the character and extent of the loss, before exercising its option to de- cide whether or not it will contest the claim of the insured.^ And the provision that the loss is not payable until after the award by the appraisers makes it clear that a compliance with the appraisal clause when demanded is intended to be a condition precedent to any right of action under the policy. Unless, then, the requirement is waived, the assured must await the expiration of the sixty days before instituting his action on the policy.* The Massachusetts form does not contain this clause, but makes the loss payable within sixty days after the submission of the sworn statement of particulars. By the Iowa form the loss is payable forty days after receipt of proofs of loss, and the policy provides, "that this company shall not be held to have waived any of the provisions or conditions of this policy or any forfeiture thereof by any examination or investigation herein provided for." § 315. Pro Rata Clatise — Other Insurance. — Shall not be liable for a greater proportion of any loss on the described property or for loss by and expense of removal from premises endangered by fire than the amount hereby insured shall bear to the whole insurance, whether valid or not, or by solvent or insolvent insurers, covering sv£h property; and the extent of the application of the insurance under this policy, or of the contribviion to be made by this company in case of loss, may be pro- vided for by agreement or condition written hereon or attached or ap- pended hereto. This is known as the pro rata or contribution clause. To admit of its application there must be more than one policy to contribute, and the total concurrent insurance must exceed the general loss.* 1 See § 147. days have expired, Clemens v. Ameri- 2 See § 148, supra. can Fire Ins. Co., 70 App. Div. 435; 3 Bellinger v. German Ins. Co., 95 75 N. Y. Supp. 484. As to whether App. Div. 262, 88 N. Y. Supp. 1020; denial of liability operates as a waiver, Boruszewski v. Middlesex Mid. Assur. see § 145, supra. Co., 186 Mass. 589, 72 N. E. 250. * Lesure Lumber Co. v. Mutual Ins. Ctomplaint should show that sixty Co., 101 Iowa, 514, 70 N. W. 761 432 "MEANING AND LEGAL EFFECT OF FIRE POLICr The provision is calculated to benefit the insurers, since it places upon the insured the burden of establishing what share of the loss is collectible from each company imder the terms of its own policy, and limits him in his recovery against each to its ratable proportion of the loss.* Whereas without this provision he was at liberty to bring his proceedings against the companies of his selection, leaving it to them to obtain equitable contribution from the others/ It is commonly said that this clause was designed to avoid cir- cuity of action,* and this in a sense is true. It must be observed, however, that when the only dispute relates to the proper method of apportioning an award or admitted amount of loss among the various insurers, to compel the assured to try out with each an issue in which all are interested, not only tends to multiply actions, but may involve embarrassment, since the results in later actions may prove that the recovery in earlier actions is too small or too large.* Influenced by such considerations certain courts have ruled that where the main dispute relates to apportionment of the loss among several companies,^ or where several companies on the risk are sub- stantially united in their attitvide of defense, they may all be joined (where insurance on the portion of the property lost was less than loss, though the whole insurance exceeded the value of the property); Pencil v. Home Ins. Co., 3 Wash. 485, 28 Pac. 1031 (if loss exceed the whole insur- ance each policy pays in full, and no qiiestion of apportionment arises). i Fireman's Fund Ins. Co. v. Paki- tine (Cal., 1907), 88 Pac. 907 (each policy independent): Hanover F. Ins. Co. V. Broim, 77 Md. 64, 72, 25 Atl. 989, 27 Atl. 314; Cassity v. New Or- leans Ins. Assoc, 65 Miss. 49; North BrU. & M. Ins. Co. v. L. & L. & G. Ins. Co. (1877), 5 Ch. D. 569, 581; West of Ena. F. Ine. Co. v. Isaacs (1896), 2 Q. B. 377, aff'd 66 L. J. N. S. Q. B. 36. But a valued policy law may override this clause, Home P. Ins. Co. v. Weed, 55 Neb. 146, 151, 75 N. W. 539 (cases cited); TFesJ. Assur. Co. v. Phelps, 77 Miss. 625, 27 So. 745. ^Cfodin V. Assurance Co., 1 Burr. 489, 1 W. Black. 103; Thurston v. Koch, 4 Dall. (U. S.) 348. The terms of the clause bring into the apportion- ment invalid or uncollectible insur- ance, Bateman v. Lumbermen's Ins. Co., 189 Pa. St. 465, 42 Atl. 184; Gandif v. Orient Ins. Co., 52 S. C. 224, 29 S. E. 655. This it has been claimed is inequitable. Premiums are not based upon the existence of other in- surance nor is a disclosure of other in- surance required until the fire. On the other hand, the underwriters contend that they are not responsible for the selection of other insurers, and ought not to be called upon to guarantee their solvency. 3 Firemen's Fund Ins. Co. v. Pekor, 106 Ga. 1, 11, 31 S. E. 779. ^ Thus after judgments were ob- tained and settlements made with various companies by authority of Arlington Co. v. Colonial Assur. Co., 180 N. Y. 337, 73 N. E. 34, and upon the supposition that all the companies were to pro rate on the loss at the Arlington plant the Appellate Divi- sfon subsequently decided that the policy of one company, though in the same terms, did not cover the build- ing burned, Arlington Co. v. Empire City Ins. Co., 116 App. Div. 458, 101 N. Y. Supp. 772. 5 Schmaehle v. London & Lan. Ins. Co., 75 Conn. 397, 53 Atl. 863; Under- vjrUers' Ins. Co. v. Powett, 94 Ga. 359, 21 S. E. 565; Am. Cent. Ins Co. v. Landan, 56 N. 3. Eq. 613, 39 AtL 400. "WHAT IS OTHER CONTRIBUTING INSURANCE 433 in one omnibus suit in equity, with stay of separate actions at law.* Other tribunals have extended this rule, and, solely by virtue of the pro rata clause, have sustained such a joint action in equity, though the companies have tendered different sets of defenses.^ The cases last cited are not easily harmonized with those decisions which hold that under the standard apportionment clause, the Uability of each company is separate, not joint, and is by the terms of its own con- tract limited to a fixed share of the loss.' Similarly it is held that it is no defense for the company in suit imder such a policy to allege and prove that the entire loss has been paid by the other com- panies.* The New York Supreme Court holds that the liability of each underwriter, under the Lloyd's policy, is separate and distinct.' And the federal court allowed an exception to the joinder of two companies under policies of marine insurance.* § 316. What is Other Contributing Insurance. — PoUcies of fire insurance, to come into the apportionment or contribution, must insure the same interest, and be upon the same property or some part thereof.' They must also be subsisting, unexpired, or imcan- 1 VxTninia Chemical Co. v. 7ns. Co., 113 Fed. 1, 51 C. C. A. 21; Tisdale v. Ins. Co. of X. A., 84: Miss. 709, 36 So. 568 (1904); and see City of AlbeH Lea V. Nidsen, 83 Minn. 246, 86 N. W. 83. ^ Fegelson v. NiagaTa Fire Ins. Co., 94 Minn. 486, 103 N. W. 495 (six com- panies, but Minn^ota standard clause does not cont^n the words "valid or invalid")- Pnefz/eWer v. Merchants' Ins. Co., 116 N. C. 491, 21 S. E. 302; FvOer V. DeiroU F. & M. Ins. Co., 36 Fed. 469, 1 L. R. A. 801 (nine companies). 3 Hartford F. Ins. Co. v. Post, 25 Tex. Ov. App. 428 (two companies im- properly joined); BardweU v. Conway Ins. Co., 118 Mass. 465 ("the liability of each is determined by the terms of its own contract and is not modified by anything in the contract of the otiier which may enable the insured to claim or recover for a larger valuation or amount of loss"). * Fireman's Fund Ins. Co. v. Palatine (Gal., 1907), 88 Pac. 907; Lucas v. Jefferson Ins. Co., 6 Cow. (N. Y.) 635; Goodwin v. Merchants' Ins. Co., 118 Iowa, 601, 92 N. W. 894 funma- terial that others have paid the whole loss)- /ns. Co. V. TumbuU, 86 Ky. 236, £ S. W. 542; Hanover Ins. Co. v. Brown, 28 77 Md. 64, 25 Atl. 989, 27 Atl. 314 (each contract entirely separate and independent, giving the companies no right of contribution); Good v. Buckeye Mut. F. Ins. Co., 43 Ohio St. 394. 2 N. E. 420; Am. Cent. Ins. Co. v. Heath, 29 Tex. Civ. App. 445, 69 S. W. 235; FOzsimmons v. City Fire Ins. Co., 18 Wis. 234, 86 Am. Dec. 761; and see Palmer v. Great Western Ins. Co., 10 Misc. 167, 173, aff'd 153 N. Y. 660, 48 N. E. 1106; Ogden v. East River Iris. Co., 50 N. Y. 388, 390. It is the duty of the assured after loss to disclose all other insurance, Tevtonia Ins. Co. v. BusseU (Tenn.), 48 S. W. 703. Before loss there is no implied warranty or agreement that he will keep up other insurance which, if it had been men- tioned, would contribute, Indiana Ins. Co. V. Hoffman, 128 Ind. 250, 27 N. E. 561; Lattan v. Royal Ins. Co., 45 N. J. L. 453; Hand v. Williamsburg City Ins. Co., 57 N. Y. 41; Quarrier v. Peabody /ns. Co.,10W. Va. 507. i Straus v. Hoadley, 23 App. Div. 360. See § 11, supra. Rogers v. jStna Ins. Co., 76 Fed. 569. 7 See discussion of other insurance, §§252, 253, supra; Niagara F. Ina. 434 MEANING AND LEGAL EFFECT OF FIRE POLICY celed at the time of the loss.* Thus, if a mortgagor insures his interest, and a mortgagee, either by a separate pohey or by a mort- gagee clause attached to the mortgagor's policy, insures his interest on the same property, there is no double or other insurance.^ But if the mortgagor's policy is simply made payable to the mortgagee without a mortgagee clause, and the mortgagor should take out another policy upon the same property and against the same risk, it would constitute a case of double insurance.^ If a common carrier or other bailee insure his own interest and liability only, with respect to the goods of the owners in his custody, the insurance is not con- tributing insurance with the policies of the owners, because the in- terests are not the same. But to constitute other or contributing insurance it is not neces- sary that the persons insured under the different policies should be named by the same description. For example, if a common carrier, warehouseman, or commission merchant, takes out insurance upon goods "his own or held by him in trust," or "on account of whom it may concern," or by any designation for the benefit of himself and others interested in the same property, provided such other persons have either given original authority for the procuring of the insurance or have subsequently ratified it, the policy covers their interest as well as the interest of the party named as insured; * and in that case a policy by the owners or the other persons in interest will constitute other or double insurance, and both sets of policies will come into any apportionment.* Nor is it essential that Co. V. Scammon, 144 111. 490, 28 N. E. ^Home Ins. Co. v. Kooh, 113 Ky. 919; LoweU Mfg. Co. v. Safeguard Ins. 360, 68 S. W. 453; Eddy v. London Co., 88 N. Y. 592, 597 (parol evidence Assur. Co., 143 N. Y. 311, 38 N. E. is admissible to explain the intent in 307, 62 N. Y. St. R. 316, 25 L. R. A. the case of general descriptions like 686; Hardy v. Lancashire Ins. Co., 166 "their own or held in trust"). Thus Mass. 210, 44 N. B. 209. Policy of an excess floater cannot be called upon second mortgagee does not contribute to contribute with the other insur- with policy of first mortgagee. Fox v. ance, Klotz Tailoring Co. v. Eastern F. Phcenix Ins. Co., 52 Me. 333; Scottish, Ins. Co., 116 App. Div. 723, 102 N. Y. etc., Assn. v. NoHhem Assur. Co., 11 Supp. 82. For definition of excess S. S. C. 287, 4th series, 21 Sc. L. R. 189; floater, see § 20, supra. Westminster F. Office v. Glasgow, etc., 1 Farmers' Feed Co. v. Scottish U. & Soc. (1888), 13 App. Cas. 699 N. Ins. Co., 65 App. Div. 70, 72 N. Y. 3 ffine v. WoolwoHh, 93 N. Y. 75; Supp. 732, reversed on another point, Hastings v. Westchester Fire Ins. Co., 173 N. Y. 241, 65 N. E. 1105, and 73 N. Y. 141. As to whether a marine cases last section, notes. But insur- policy is other insurance with fire, see ance taken out without authority of Australian, etc., Co. v. Saunders (1875), insured is no insurance at all, London 10 C. P. 668.