cl- THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW A TREATISE ON THX LAW OF IXSl I^\NCE IN ALL ITS BKA.NTHRS. ESPKCLXLLY FIRE, LIFE. ACriDENT. MAKLNi:. TITLE. FIDELITY. CREDIT, AND EMPLOYERS' LIABILITY AN APPENDIX OK STATrTF>^ AFFECTING THE INSUR- ANCE CONTRACT AND A COLLECTION OF FORMS ■T GEORGi: RICHARDS, M.A. or mm xrv turk uxu, roRMcnLv lkcttrer on ivfli-R.vNCE LAW Uf TMB •CMCWL of LAW Of COLUMBIA UNIVER8ITT AXD tmc xcw tork Law (KTHOOL Third Edition, Enlarged and Rewritten THE BANES LAW PUBLISHING CO. NEW YORK 191^ Copyright, 1892, By GEORGE RICHARDS Copyright, 1892, By GEORGE RICHARDS Copyright, 1909, By GEORGE RICHARDS <_. -i- 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 ireneral 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 tlccisions, 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 tlealing 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 memor>', 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 735883 iv PREFACE TO THIRD 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 acknow^ledgments 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. Pi'of. 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 eouit is always furnished, as in the case- book, less opportunity is afforded 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. PREFACK TO THIHI) KDITlON 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 Xortli British ct Mercantile Insurance Company, Cecil F. Shallcross, 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 I\Ir. 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 Ije 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; Donlev v. Glens Falls Ins. Co., 184 N. Y. 107; Tisdell v. Neiv 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 famili- arity with avol.nne of leading cases will enable one safely to forecast the further rulings of the coui ts in matters relating to insurance is a delusion. This cannot be done either by the tyro or by the experien-- ed lawyer. Doubtless most of the defeated parties in 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 vii 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 litigations 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 less 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 careful!}' 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, this may be called a modern 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. viii PKEFACK To rniui) edition stitute, strictly speaking, any part of tlie 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 ami 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 policies 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. Grube, C 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, namel}^, 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 sa}- 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 case 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 i Carter v. Boehm, 3 Burr. 100.5. 2 CasteUain V. Prei^ton, n Q.B.B. 381. 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. .Tohn Wurts, 17 id. 8G; the Hon. Simeon E. Baldwin, 14 Harvard Law Rev. 258; Dean Chas. F. Carusi, 2 Am. Law School Rev. 213. X PREFACE TO THIRD 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 enumerated 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 thirty-five years ago, actually discourage their pupils from consult- ing them and substitute in place of them volumes 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. Obviously 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 onl}' 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. » But it must be remembered that the official report is only an abridgment, made from the record at the discretion of the reporter, who may not be an expert in a particular branch of law. Xii 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 liave been concisely and admirably stated in the lano-uage 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 clients. 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 sug- 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 Xlll 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 any 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 illustrative 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 case-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,^ more than one hundred on assessments valid and invalid, more than one hundred on the employers' liabilit}' policy, more than forty on credit insurance, more than a dozen on title insurance, and more than forty on the sue and labor clause of the marine policy.^ 1 One of the recent questions for admission to the New York bar was based on this point. 2 In only one case-book is there a case on the sue and labor clause, Atchison v. Lohre, 4 App. Cas. 755, holding, for England, that salvage charges and general average are not recoverable under that clause, but as to general average the law in this country is otherwise. CONTENTS PART I GENERAL PRINCIPLES OF INSURANCE LAW CHAPTER I Introductory Nature, Origin, and Description of Insurance and Insurance Companies 1. Nature of Insurance. § 11. American Lloyd's. 2. Conditions Necessary. 12. Fire Insurance. 3. Insurance Companies. 13. Life Insurance. 4. What Are Insurance Companies. 14. Accident Insurance. 5. Corporations Classified. 15. Classification of Risks. 6. Statutory Safeguards. 16. Mortuary Tables. 7. Contracts with Unlicensed Com- 17. Reserve. panies. 18. Different Kinds of Policies. 8. License to Procure from Non- 19. Same Subject — Marine. admitted Companies. 20. Same Subject — Fire. 9. Origin of Insurance and Insur- 21. Same Subject — Life. ance Law. 22. Mixed Risks, Sea and Land. 10. Lloyd's and Lloyd's Usages. 23. Reinsurance. Pages 1-25 CHAPTER II General Principles of Insurance Law Nature and Characteristics of the Contract i 24. Indemnity the Object — Pure § Wagers Void. 25. Insurable Interest — Fire. 26. Same Subject — Legal Title. 27. Same Subject— Equitable Title. 28. Illegal or Defective Title. 29. Same Subject — Representative Capacity. 30. S&me Subject—Liens. [XV] 31. Same Subject— Possession. 32. Same Subject — Contract Rights. 33. Same Subject— Liability. 34. Insurable Interest — Life. 35. Ties of Affection, Blood, or Mar- riage. 36. Creditor in Life of Debtor. 37. Same — To What Amount. 38. Other Business Relations. XVI CONTENTS 5 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 Indemnity. 49. Insurance Grants Indemnity for Results 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 III General 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 Ovei* Gen- eral Form. CONTENTS xvu § 88. Parol to Explain Ambiguity. 89. Trade Custom. 90. Construction Liberal to Insured. 91. Forfeitures Not Favored. § 92. What Law Governs Construc- tion of Contract. 93. Who Construes the Contract, Court or Jury, Pages 93-116 CHAPTER IV General Principles — Continued Representations and Concealments 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 Sufficient 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 Representatiors. 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 XVIU CONTENTS § 122. Whether New Consideration Required. 123. Action Usually upon Contract: Not for Rescission or Refor- mation. 124. Disturbance of Contract by Parol. 125. Effect of Doctrine on Common- Law Rules of Evidence. § 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 VII General Principles Waiver and Estoppel — Continued § 130. What Cannot Be Waived. 131. What Can Be Waived— Stock Companies. 132. New Subject Not to Be Intro- duced by Waiver. 133. Waiver — Mutual Companies. 134. What Amounts to Waiver or Estoppel — Doctrine Ampli- fied. 135. The Same — Acceptance of Pre- mium. 136. The Same — Receipt of Overdue Premiums. 137. The Same — Consent to Assign- ment of Policy. 138. The Same — Renewal of Policy. 139. Effect of Prior Course of Deal- ing. 140. Subsequent Parol Permits. 141. Knowledge of Breach — When a Waiver. 142. Rule in Federal Courts — Massa- chusetts — New Jersey, 143. Silence Not a Waiver. 144. Proofs of Loss — Technicali- ties. 145. Denial of All LiabiHty. 146. Demanding Proofs of Loss. 147. Demanding Additional Proofs of Loss. 148. Where Policy Provides That Such Acts Shall Not Be a Waiver. 149. Non-waiver Agreement. 150. Taking Part in Adjustment. 151. Company May Defend on Other Grounds Than Those First Named. 152. Claimant Not Concluded by Statements in Proofs of Loss. 153. Retention of Proofs Waives Defects That Might Have Been Remedied. 154. Waiver or Estoppel Must Be Pleaded. Pages 168-188 CHAPTER VIII General Principles — Continued Waiver and Estoppel by Agents § 155. Introductory. 156. Ostensible Authority. § 157. Undisclosed Instructions Not Binding upor\ the Insured. CONTENTS XIX 158. Agency Determined by Facts of Each Case. 159. Effect of Stipulations in the Contract Itself as to Who Are, or Are Not, Agents of the Company. 160. Effect of Stipulations as to the Manner of Waiving. 161. The Same — Restrictions on Agents' Authority in Stand- ard Fire Policy and Other Policies. 162. Policy Restrictions, When Op- erative. 163. Authority of Officers of the Company. 164. Authority of Managers. 165. Limited 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 Provisions Relating to Proceedings After Loss. 179. Special Soliciting Agents — Fire. 180. Adjusters — Other Special Agents. Pages 189-220 CHAPTER IX General Principles — Continued Marine Insurance S 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. 195. 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 § 204. Partial Loss of Freight. § 208, 205. Partiul Loss of Goods. 206. Apportionment of Valuation. 207. General Average Contribution 209. and Salvage Charges. Liability for Successive Losses May Exceed Amount of Policy. One-third Off New for Old. Pages 221-259 CHAPTER X General Average — Marine § 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 CHAFrER XI The Standard Fire Policy 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. 235. Location. § 236. Held in Trust, 237. As Interest May Appear. 238. For Whom It May Concern. Measure of Damages. The Same— Total Loss of Build- ing. Measure of Damage — As Af- fected by Provision as to Re- pairing. Coinsurance and Other Special Clauses Modifying Measure of Liability. 239. 240. 241. 242. CONTENTS XXI 9 243. 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. Temporary 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 Fire Policy — Continued § 251. Waivers Must Be by Written Agreements. 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 XIII The Standard Fire Policy — Continued 263. Alienation Clause. 264. The Same— Incumbrances. 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 Policy 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 XrV The Standard Fire Policy — Continued 282. Survey, etc., AVhen 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 by 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 Policy — Concluded 295. Removal of Property for § 306. Safety. 307. 296. Notice and Proofs of Loss. 297. The Same — Immediate Written Notice of Loss. 308. 298. The Same— Duty to Protect from Further Damage. 309. 299. Forthwith Separate Damaged 310. and Undamaged — Put in 311. Best Possible Order — Make 312. Complete Inventory, Stat- 313. ing Quantity and Cost of 314. Each Article and Amount Claimed Thereon — Exhibit 315. Remains. 300. Same Subject — Statement or Proof of Loss. 316. 301. Excusable Failure in Strict Compliance. .317. 302. Where Served. 318. 303. Same Subject — Plans — Magis- trate's Certificate. 319. 304. Exhibit Remains — Submit to 320. Examination. 321. 305. When Required, Production of Books of Accounts, Vouch- 322. ers, etc. 323. Appraisal. Standard Clause a Valid Con- dition. Appraisers Competent, Disin- terested. Scope of Appraisal, Entire Loss. Conduct of Appraisal. Unfinished Appraisals. Scope of Award. Setting Aside Award. Enforcing Contract Is no Waiver. Pro Rata Clause — Other In- surance. What Is Other Contributing Insurance. Policies with Nonconcurrent Terms. Partially Concurrent Appor- tionments. Reinsurance. The Usual Reinsurance Rider, Special Contracts of Reinsur* ance. Subrogation. Subrogation — Tortious Fires. CONTENTS XXlll 324. Subrogation — Negligence of Water Company. 325. Subrogation — Order of Civil 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 Policy 335. Life Insurance Policy — Intro- § 348. ductory. 336. Designation of Beneficiary. 349. 337. Other Beneficiaries. 338. Insurance Payable to Heirs or 350. Legal Representatives. 339. Insurance Payable to Wife. 351. 340. Insurance Payable to Children. 341. Insurance Payable to Family, 352. Dependents, Survivors, etc. 342. Beneficiaries May Sue. 353. 343. Anticipatory Breach. 354. 344. Anticipatory Breach — Reme- dies Available. 355. 345. Application Incorporated and 356. Warranted. 357. 346. Statutory Provisions. 347. Statements as to Health or 358. Freedom from Disease. Statements as to Medical At- tendance. What Constitutes Medical At- tendance or Consultation. Family Physician or Usual Medical Attendant. History of Family and Rela- tives. Statements as to Other Insur- ance. Statements as to Age. Statements as to Family Rela- tionship. Statements as to Habits. Statements as to Occupation. Statements or Requirements as to Residence and Travel. Statements About Bodily In- juries or Infirmities. Pages 461-494 CHAPTER XVII Life Policy — Concluded I 359. Payment of Premiums. 360. Statutory Notice of Premiums Due. 361. Extended or Paid-up Insur- ance. § 362. When Premium Is a Debt Col- lectible by Company. 363. Assessments. 364. Assessments Must Be Lawfully and Properly Levied. XXIV CONTENTS 5 M\5. 367. 368. 369. 370. 371. 372. 373. Power to Change Rate of As- sessments. Notice of Assessment to In- sured. Suicide Excepted. Degree of Insanity Required to Save the Insurance. Suicide and Self-destruction, Sane or Insane, Excepted. 13urden of Proof — Suicide, In- sanity. Exception of Death by the Hands of Justice or in Vio- lation of Law. In Violation of Law. Suicide Not a Crime. § 374. Death Must Be Caused by Un- lawful Act. 37.5. Authority of Agents. 376. Ericrs in Age to Be Adjusted. 377. Assignments. 378. Incontestable Clause. 379. Same Subject — Policy Puo- 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 XVIII The Accident Policy Introductory. § 397. Accident Defined— What Con- 398. stitutes. 399. Injuries Effected Through Ex- 400. ternal, Violent, and Acci- 401. dental Means. 402. Sole and Proximate Cause. 403. Same Subject— "Immediately 404. and Wholly Disable." Same Subject — Loss of Bodily 405. Member. 390. Exception of Hazardous Em- 406. ployment. 391. Notice and Proof of Accident and Injury. 392. Right to Examination or Au- 407. topsy. 393. Disappearances. 408, 394. Suicide — Sane or Insane. 395. Visible Mark of Injury Re- 409 quired. 396. Accidents Caused by Disease, etc., Excepted. 384. 385. 386. 387. 388. 389. Intoxication or Narcotics. Poison, etc. Inhaling of Gas or Vapor. Duelling or Fighting. Intentional Injuries. Voluntary Overexertion. In Violation of Law. Voluntary Exposure to Unnec- essary Danger. Boarding or Leaving Cars in Motion. Riding in or on Any Such Con- veyance Not Provided for Transportation of Passen- gers. Walking or Being on Railway Bridge or Roadbed. Due Diligence for Personal Safety and Protection Insurance Against Injuries Re- ceived While Traveling. Pages 537-581 CONTENTS XXV CHAPTER XIX The Marine 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 — Freight. 419. Commencement of the Risk — Cargo. 420. Same Subject — Indorsements — Declarations. 421. The Voyage. 422. Duration and Termination of Risk. 423. Touch and Stay. 424. Prohibited Waters. Pages 582-599 CHAPTER XX Marine Policy — Concluded § 444 445 446 447, 448 449 425. Perils of the Sea. 426. Foundering at Sea. 427. Grounding. 428. CoUision. 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 453 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. Wear and Tear. Original Defect. Inherent Vice. Application of Principles to Particular Average. The Sue and Labor Clause. Exemption of Loss under Five Per Cent. 450. Other Assurance Clause. 451. Warranted Uninsured. 452. Warranted Uninsured beyond a Specified Amount. Warranted Free of Capture, etc. Want of Ordinary Care and Skill. Other Perils Sometimes Ex- cepted. 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. Unless Ship Be Stranded. 454. 455. 456. 4.57. 458 459 460. What Constitutes Stranding. xxn CONTENTS S 461. Cargo on Deck— Cargo on Deck Not Covered. 462. Blockade— Warranted Not to Abandon. 463. Warranty of Neutrality. 464. Ridera. 465. Adjustment. Pages 600-651 CHAPTER XXI Title, Guarantee, and Liability Insurance 466. Introductory. 467. Title Insurance. 468. Fidelity and Guarantee Insur- ance. 469. Contract One of Insurance Rather Than Suretyship. 470. A Contract of Highest Good Faith. 471. Period of Risk. 472. Stipulation to Give Immediate Notice of Misconduct. 473. Knowledge of What Agents Is Imputed to the Employer. 474. Credit Insurance. 475. Employers' Liability Insur- ance. 476. The Employer, Not the Injured Person, Is Insured. 477. Period of Risk. 478. 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 XXVli APPENDIX CHAPTER I Statutes Statutes of American Legislatvres Affecting the Insurance Contract Arranged in Groups with 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. Pages 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 NaturCj Origin^ 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- abiHty, to which exposure is very common among mankind, but which actuall}' 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 1 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 Claflin 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 in.surance, see 1 Duer, Ins., p. 54. "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 equivalent, or to do some act of of 1892, c. 690, as amended L. 1906, value to the assured upon the destruc- c. 326 and L. 1907, c. 206. 1 [1] 2 THE LAW OF INSURANCE civilized peoples of modern 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 emploj^ees 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 facility for rais- iThe recent spread of industrial in- well-nigh lo an equality with the nuin- surance among the working classes may l>er 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 or 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, Hoadley v. Pimfoy, 107 Ala. 276, 18 So. 220, 30 L. R. A. 351; Banies 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 Slaughter 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. Hart, 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. Gund- Ung y. Chicago. 177 U. S. 183, 188, 20 S. Ct. 633; Knoxville 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 Mul. Life Assn. v. Mettler, 185 U. S. 308, 46 L. Ed. 922, 22 S. Ct. 662; Modern Woodmen v. Tevis, 117 Fed. 369, 54 C. C. A. 293; Treadway v. Hamilton Mut. Ins. Co., 29 Conn. 68; People V. Gra7id 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. . . . They 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 such companies," Modern 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, 4" 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 tlie 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' Mid. 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 Mid. Relief Assn., 21 R. I. 476, 44 Atl. 690. United Moderns v. Colli /an, 34 Tex. Civ. 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; Sulz V. Mid. Res. Fund Life Assn., 14.5 N. Y. 563, 568, 40 N. E. 242, 28 L. R. A. 379; United Moderns v. Colligan, 34 Tex. Civ. App. 173, 77 S. W. 1032. The association in its contract 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; Gilmore 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 Cirde, 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. Modern Brotherhood, 120 Iowa, 692 (1903), 95 N. Y. 207 (definition of "broken leg" reason- able); Starling v. Supreme Council, 108 Mich. 440, 66 N. W. 340, 62 Am. St. R. 709 (definition of total disability); Ayers 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; Wiedgnska v. Pulaski, etc., Soc, 110 App. Div. 732, 97 N. Y. Supp. 413; Williams v. Supreme Coun- cil, 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. A". 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 McAlarney 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. T utile (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 the 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 guaranteeing 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 i Donald v. Chi., 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. Penn. 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 railway from common-law liability and to allow abatement of part of his salary. Such agreement is binding, Chi., B. & Q. R. Co. V. CuHis, 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 X. 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, Claflin v. U. S. Credit Si!ste77i 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, 174 111. 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 Instate (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 Com. 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. Modern Woodmen, 115 Iowa, 450, 88 N. W. 965; Catholic Knights v. Board of Review, 198 111. 441, 64 iSr. E. 1104; State 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. £29; Kern v. Supreme Council, 167 Mo. 471; 67 S. W. 252, as to foreign com- panies; Modern 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 applicable in each case.^ § 5. Corporations Classified. — In this country insurance cor- porations are usually organized under general laws instead of special charters and are divided 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 th9mselves 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. I/. R. A. 546, where the benefit accru- 427; State ex rel. Royal Arcanum v. ing upon the death or disabihty of a Benton, 35 Neb. 463, 53 N. W. 567. member -vvas conditioned upon the And see N. Y. In.s. L. § 57. collection of assessments. Supreme 2 Commercial Fire Ins. Co. v. Board Council V. Lurmour, 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- ^Carlton v. Southern Mid. Ins. Co., eylvania, where beneficiary associations 72 Ga. 371. are classed as philanthropic societies, •* Trendwaij v. Hamilton Mid. 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. iNeutony. S.W.Mid. L. Assn.,U(j 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. Modern insurance is not yet a member, Rus- Woodmen, 103 Mo. App. 356, 77 S. W. sell v. Detroit Mut. Fire Ins. Co., 80 84, Rev. Stat. (Mo.) 1899, §§ 1408-1410. Mich. 407, 45 N. W. 356; Eiknberger 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' cfc M. Ins. laws, the state regarding them as so Co., 9 Colo. 73, 10 Pac. 285; Taylor v. far philanthropic that they ought to Xorth Star M id. Ins. Co., i6 ^Ihm. 19S, be specially encouraged, Mur.shuU \. 48 N. W. 772. INTRODUCTORY 7 Cooperative assessment companies and fraternal beneficiary asso- ciations are organized upon the mutual plan and for the 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 of 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 ^McDonald v.' Bankers' Life A.ssn. , 154 Mo. 618, 55 S. W. 999; Modern Woodmen v. Colman, 68 Neb. 660, 94 N. W. 814, 96 N. W. 154; State v. Matthews, 58 Ohio St. 1, 49 X. E. 1034, 40 L. R. A. 418; State v. Xational Ace. Soc. 103 Wis. 208, 79 X. W. 220. The company is bound to le\y such assess- ment, Laivler 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. Robinson, 147 111. 138, 35 N. E. 168; Fitzgerald v. Eq. 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. Grossman 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 Kv. 175, 24 Ky. L. R. 984, 70 S. W. 405; brotherhood Ace. Co. v. Linehan, 71 N. H. 7, 51 Atl. 266. And see N. Y, Ins. L. § y. - 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 Schuarzualder v. Tegen, 58 N. J. Eij. 319, 43 Atl. 587. Some companies issue what is kno\^•n 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; Xew- bold Friendly Soc. v. Barlow (1893), 2 Q. B. 128. And see N. Y. Ins. L. §§ 91,92, 101. In some countries, notabl}"^ Germany, the government conducts a system of industrial insurance. ■^ N .Y. Ins. L. % 70. m:u:, 09 \. V. Supp. 614, 34 138, 139, 162. INTRODUCTORY 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 dates 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 centur3\ 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 made 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 countr}'. During the years w^iich 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 countr}' 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 Mass. 115. s Conspicuously the three great New 2 Tontine and similar forms, see York companies, the Mutual, the Equit- 5 21. able, and the New York Life. 2 18 THE LAW OF INSURANCE and surpluses which were not set aside for proposed betterments, or appropriated for present dividends, Hke 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 surplus to policyholders 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- panies prohibited.— The New York court surance companies. 1. Policyholders had decided substantially that upon given a more effective A'oice in the maturity of his pohcy m a mutual government of the companies. 2. Full company the policyholder could get publicity secured to policyholders in for his share of the surplus only what regard to management of companies' the directors saw fit to divide, Greeff affairs. 3. PoHcies limited to four v. Society, 160 N. Y. 19, 54 N. E. standard forms. 4. Policies 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 III. 52, 54 N. E. 1041, "substandard dividend policies prohibited. 6. Com- risks." 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 verv 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 exceptional instances. 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 ma}^ 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 the number of those dying each subsequent year among a given number of persons taken at various given ages respectively.^ The tables 1 A considerable number of such structed by Dr. Thomas Price from the tables have been prepared at different registers kept in the parish of All times, the earhest 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 reliable tables which have been in use used by insurance companies v.as 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 INSURANCE which thus give the average duration of hves indicate the average amount wliich must he 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 ))er cent, sa}' three and a half or four per cent annually in addition to receipts from premiums. The lower the specihed 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 itg 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 life." 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 Heysham. much more carefully collected statis- These materials comprised two enn- tics and giving more accurate results, merations from the population of the Conspicuous among these are the parishes oi Saint Mary and Saint Cuth- American Experience Table and the bert Carlisle in 1780 and 1787, and the Actuaries' or Combined Experience abridged bills of mortality of those two Table. The mathematics of the busi- parishes for the nine years 1779 to ness, of great practical consequence 1787. Since then many mortuary are managed by actuaries, tables have been prepared in England i N. Y. Law, 1892, c. 690, §§ 205, 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 mortalitj' and rate of interest, may occur. The liabilities of a company consist of its actual unpaid losses, its expenses and contingent obligations, for the payment of which 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 insured; 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. Policies 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. his. 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 Ass7i., 131 N. Y. 354, 30 N. E. Haskell v. Society, 181 Ma.ss. 341, 63 114. N. E. 899. 3 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 S5,000 on a factory plant in its entirety, including buildings, machinery, and stock. While a policy of S5,000 on one of the buildings alone is called specific. A rent policy is an insurance 1 Coriijoot V. Royal Exch. Assn. are left to be defined by subsequent Corp. (1903), 2 K. B. 363. For de- declaration, Snowden v. Guion, 101 scription of "disbursement" marine N. Y. 458, 5 N. E. 322. policJ^ si'f International NaiK Co. v. ^ Golde v. Whrpplr, 7 App. Div. Atlantic Mut. Ins. Co., 100 Fed. 304. (N. Y.) 48, 39 N. Y. 8upp. 964; Macon Launch and trial trip policy, Jaclson Fire Ins. Co. v. Powell, 116 Ga. 703, V. Mumjord (1904), 9 Com. Cas. 114. 43 S. E. 73. 2 Imperial Shale Brick Co. v. Jeweti, ^ An excess floater, United L'nder- 169 N. Y. 143, 02 N. E. 107; Conti- writers Ins. Co. v. Poivell. 94 Ga 359, nental Ins. Co. v. Mna Ins. Co., 138 21 S. E. 565; Peabody v. L. & L. & G. N. Y. 16, 33 N. E. 724. Ins. Co., 171 Mass. 114 (1898), 50 3 So also in marine insurance the N. E. 526; Fairchild v. his. Co., 51 term "open policy" or "floating N. Y. 65, 69. As to blanket or corn- policy" is often used to indicate one pound polifies and specific policies, see in which the ships or other particulars Page v. Sun Ins. Ofjtce, 64 Fed. 194. 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 paying rent if premises ment of the money paid.'' Miller v. are rendered untenable by fire. Campbell, 140 N. Y. 457, 463, 35 N. E. 2 See Appendix of 1 orms. 651. 3 Michael v. Prusman National his. « These four are now the statutory Co., 171 N. Y. 25. O;^ N. E. 810. forms for New York thou,s;h the super- 4 The aim is sometimes to cover intendent of insurance upon apphca- expenses which continue in spite of tion is allowed to sanction other forms, fire. General Ins. Law as amended 1906, § ^Walker v. Giddirujs, 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 tlie 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 compan}'^ 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 ever}' prudent insurance company must limit its liability upon any one risk.^ The company issuing the original policy, called the straight or direct insurance, must liV. Y. Life Ins. Co. v. Miller, 22 K. B. 665 (goods); Jacob v. Gaviller Ky. L. Rep. 230, 56 S. W. 97.5; Cohmi- (1902), 7 Com. Cas. 116 (prizo fox bia Bank v. Equitable L. Assn. Soc, 79 terrier from London to Bombay thence App. Div. (N. Y.) 601, SO N. Y. Supp. by rail to Lahore); Hyderabad D. Co. v. 428; Ellison v. Straic, 119 Wis. 502, Willoughby (1899), 2 Q. B. 5.30 (gold 97 N. W. 168. from mines in India to London); Yuill 2 Everson v. Eq. Life Assnr. Co., 68 v. Rohson (1907) 1 K. B. 695. 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, riyer, or guarantee a stated annuity running for canal, Quebec Nav. Ins. Co. v. Bank, the life of the annuitant, or other (1870), L. R. 3 P. C. 234; Shclbourne v. period, payable annually or at stated Ins. Co. (1898), 8 Asp. Mar. Cas. 445. mtervals. * Limits are also jjrescribed by ■^ Schloss Bros. v. Stevens (1906), 2 statute. INTRODUCTORY 25 therefore assume the burden of dividing up the excess of liabiUty, if hirge, 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 HabiHty.^ 1 For form of reinsurance rider 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 applied 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 indenmity allowed must be 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," CasteUain v. Pres- for the indemnity of the assured. ton, 11 Q. B. D. 3S0, 407, by Bowen, J. That is the purpose and object which And the Minnesota court says, "The makes it a lawful contract," Miller v. very essence of any definition of in- Eagle Life & H. Co., 2 E. D. Smith surance 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 PHINCIPLKS OF INSUKANCE 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- tliough 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 permitted 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 policy a strict contract of indenmity, 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 life insured, or of the amount of other insurance. Moreover, premium rates are estimated upon the hypothesis that upon the death of the insured or other event named the life 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 valid when issued, the assured, as for instance a creditor of the life insured, may lose all insurable interest, through payment of the debt, without invalidating his policy. See § 46. These considera- tions' have induced some of the judges to declare that life insurance is not to be classified as a contract of indemnity, Dalby v. 7ns. Co., 15 C. B. 365 (creditor insurance in question, "in no way resembles a contract of indemnity"); Emerick v. Coakley, 35 Md. 188 ("in no way resembles a contract of in- demnity"); Mtd. 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 applied it to uphold such contradictory decisions that it is doubtful if there is any real ground for the distinction attempted to be made between life 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- demnify 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 Civil 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. Civil Code, § 2551; Mon- tana Civil Code (1895), §3405; No. Dak. Civil Code (1905), §5904; So Dak. Civil Code (1903), § 1807. 1 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; Eaqer v. Atlas Ins. Co., 14 Pick. (Mass.) 141, 146, 25 Am. Dec. 363; Cummings v. 7ns. Co., 55 N. H. 458; Castellain v. Preston, 11 Q. B. Div. 380. The contracts of fire and marine insurance are much more rigidly governed by the doctrme of indemnity than is the contract of life insurance, Holmes v. Oilman, 138 N. Y. 369, 381, 34 N. E. 205, 20 L. R. A. 566, 34 Am. St. R. 463; Crosswell v. Conn. Indem. Assn., 51 S. C. 112, 28 S. E. 200. INDEMNITY THE OBJECT — PURE 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 branches of the law of insurance.^ It must be observed, however, that in life insurance ^ a sufficient insurable interest and f( r a policy to any amount is, under ordinary circumstances, 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 i.nd 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. ^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- demnity," court by Fuller, C. J.; Life his. Co. V. O'Neill, 106 Fed. 800, 803. 45 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, pecuniary;" Lewis v. Phcenix Mid. 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; Continental 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. ISO, 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- nitv; Rov)hach v. In^. 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. Allen, 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;" Morell v. Ins. Co., 64 Mass. 282, 57 Am. Dec. 92, note by Judge Field, annotator, showing that a pe- cuniary interest is really the te.st; Wfiit- viore 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. Continental Life Ins. Co., 57 Vt. 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 insur- ance for a creditor a contract of in- demnity); Healey V. Mut. Ace. Assn., 133 111. 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. Oilman, 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; Geoff roy v. Gilbert, 5 pendente or other pecuniary value is App. Div. 98, 100, aff'd 154 N. Y. 741. generally to be found in the case of the 2 Life 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; Warnock v. Davis, 104 U. S. at best is an uncertain and variable 755, 26 L. Ed. 924, parent in child or factor. It may also be remarked that child in parent; Conn. Mut. Ins. Co. v. where the rule of insurable interest as Schaefer, 94 U. S. 457, 24 L. Ed. 251. between those thus closely aUied by But see Currier v. 7ns. Co., 57 Vt. 496, mai-riage or blood is established, the 52 Am. Rep. 134, as to invalid, help- discussion of reasons for it is largely less \^-ife; People's Mut. Ben. Soc. v. academic. Templeton, 16 Ind. App. 126, 44 N. E. ^ 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 » That even the fire contract is not between husbands 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, pecuniarv value of the life insured to 46 N. E. 318: Michael v. Prussian Nat. the beneficiary and have laid all the Ins. Co., 171N. Y. 25, 63 N. E. 810. stress upon the ties of natural affection. ^ Michael v. Prussian N^at. Ins. Co. , Nothing seems to be gained by such a 171 N. Y. 25, 63 N. E. 810; Living v. narrow course of reasoning. Many a Manning, 6 C. B. 391, 1 H. L. Cas. 287, friend has more love for a friend and 307 (like liquidated 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. Cas. 755, 761. INDEMNITY THE OBJECT — PURE WAGERS VOID 3] 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.^ 1 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 imless fraudulent, Patapsco Ins. Co. v. Biscoe, 7 Gill. & J. 293, 28 Am. Dec. 219; Sturm v. Atlantic Mvt. Ins. Co., 63 N. Y. 77; Voisin 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; Reillif v. Frank- lin his. 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 would liave been profits, Canada Sugar Ref. Co. V. Ins. Co., 175 U. S. 609, 621, 20 S. Ct. 239; Patapsco v. Coxdtcr, 6 .':'st.. 222, 7 L. Ed. 659. Compare Eyre v. Glover, 3 Camp. 276, 1;; Ecst, 218; Hodgson v. Glover, G East, 31G (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 A-alue, and the estimate of the adjuster often differs widely from that of the insured. Accord- ingly, 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- ing 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 commend(^d, because they impose too arbitrarj'^ 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, Ampleman v. Citizens' Ins. Co., 35 Mo. App. 308. Some courts say that if the companies exercise care which it is for the public interest 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 difficulty 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 polic • law is not unconstitu- tional as impairing right of contract, or depriving of life, liberty, or property A\ithout due process of law, etc. J^tna 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 policy. See also Dagger 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. Mid. 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; Miller v. Eagle L. it- 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. 2 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 amount 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 pecuniary 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. 7ns. Co., 35 La. Ann. 233, 48 Am. Rep. 239; Lord v. Ball, 12 Mass. 115, 7 Am. Dec. 38; Rittler v. Smith, 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. Mid. Ben. L. Ins. Co., 23 N. Y. 516. Contra as to life insurance in some states, Vivar v. Supreme Lodge, 52 N. J. L. 455, 20 Atl. 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 Juhel v. Church, 2 Johns. Cas. 333. New Jersey statute against wagers is not applied to insurance, Flagg v. Baldwin, 38 N. J. Eq. 219, 48 Am. Rep. 308. 2 Trinity College v. Travelers' bis. 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 iheir impairment or de- struction, Ruse V. Mut. Ben. Life Ins. Co., 23 N. Y. 516; and see § 34. Wager contracts of insurance, Fuller v. Met- ropolitan L. Ins. Co., 70 Conn. 647, 675, 41 Atl. 4; Gambs v. Covenant M ut. L. Ins. Co., 50 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 tlie 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- destine trades." etc. In most of the states of the Union there are statutes against ivagering 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 tiling 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. 7.5. 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 enougii 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," Berrtf 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 modern 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." - 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 lis. Co., 55 N. Y. 343, 14 Am. Rep. 271. Owner of buildings imder 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 McCutchen v. Ingraham, 32 W. Va. 378, 9 S. E. 260; Stirling v. Vaughan, 11 East, 619, 629. 4 Fenn v. New Orleans Mut. Ins. Co., 53 Ga. 578. For example, reinsurance. ^ 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 Imlis V. Stock (1885), 10 App. Cas. 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. 7 See leading case of Lucena v. Craufurd, 3 B. & P. 75, 2 B. & P. N. S. 269, 1 Taunt. 325; Moran v. Uzielli (1935), 2 K. B. 555; Riggs v. Commer- cial Mut. Ins. Co., 125 N. Y. 7, 25 N. E. 1058, 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 GENERAL PHINCIPLES 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 valid, although the prop- erty of the assured was not immediately exposed to the peril.^ This conclusion finds analogy in a South Carolina case 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 pecuniary interest to him.^ § 26. Same Subject — Legal Title. — That legal title affords a valid insurable interest in property is indisputable.^ 1 Farmers' Mut. 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 ^ Cohn V. Virginia F. & M. Ins. Co., period. See authorities cited, §25, 3 Hughes, 272; Fed. Cas. No. 2,970; note \, ante, p. 33. Graham v. Fire his. Co., 48 S. C. 195, * I^if/gs v. Commercial Mut. Ins. Co., 26 S. E. 323, .59 Am. St. R. 707. The 125 N. Y. 7, 25 S. E. 10.58, 10 L. R. A. United States Supreme Court says: "It 684; Warren v. Davenport Fire Ins. is well settled that any person has an Co., 31 la. 464, 7 Am. Rep. 160. insurable interest in property, by the Contra, dictum, Phillips v. Knox, etc., existence of which he will gain an ad- 7ns. Co., 20 Ohio St. 174. vantage or by the destruction of which s Curtesy or dower consummate, he will suffer a loss whether he has or Kyte v. Commercial Union Assur. Co., has not any title in, or hen upon or 144 Mass. 43, 10 N. E. 518; Louden v. Sossession of the property itself," Waddle, 98 Pa. St. 242; or other life Harrison v. Fortlage, 161 U. S. 57, 65, tenancy, Beekman v. Fulton As.'in , 66 16 S. Ct. 488, 40 L. Ed. 616; .so also App. Div. 72, 73 N. Y. Supp. 110. Luceim v. Craujurd, 2 Bos. & P. N. R. Tenants for years, Phila. Tool Co. v. 269, 302, by Lawrence, J. British Am. Ins. Co., 132 Pa. St 236 3 Graham v. Fire Ins. Co., 48 S. C. 19 Atl. 77, 19 Am. St. Rep. 596. Sub- 195, 26 S. E. 323, 59 Am. St. R. 707. tenant for years, Fowler v. Insurance Similarly a railroad engineer, mechanic, Co., 122 Mass. 191. A tenant at will, or chauffeur should be allowed to take Schaeffer v. Ins. Co., 113 Iowa, 652, 85 out a valued policy upon the use of N. W. 985. Trustees, Howard Fire another's machine if it appear that a 7ns. Co. v. Chose. 5 Wall. (N. S.) .509; continuance of his occupation is de- Stevens \. Melcher. \o2 ^.Y . Hbl, 51^. pendent upon its preservation, for 46 N. E. 965. Assignees for the iaenefil INSURABLE INTEREST — EQUITABLE TITLE 35 § 27. Same Subject— Equitable Title.— An equitable title to property constitutes a good insurable interest therein.^ Thus, a vendee in possession, or conditionally obligated to pay the purchase price, has such an interest from the date of an executory contract of purchase,^ or from the receipt of a bond for title. ^ In a New York case a bank made an executory contract of sale to the plaintiff, who took out insurance. The title to the property, however, was standing in the name of the president individually, owing to a statute which forbade the holding of real estate by the bank itself. Nevertheless, the bank having been the intended bene- ficiary, it was held that an insurable interest in the property could be transferred by it to the plaintiff."* of creditors, Sibley v. Prescott Ins. Co., 57 Mich. 14, 23 N. W. 473. Executors and administrators, Sheppard v. Pea- body Ins. Co., 21 W. Va. 368. Admin- istrators of insolvent estate, Herkimer V. Rice, 27 N. Y. 163. Executor in property devised for trust purposes, Savage v. Insurance Co., 52 N. Y. 502, 11 Am. Rep. 741. Tenancy by the entirety, in the whole premises, Claw- son V. Citizens Mid. Ins. Co., 121 Mich. 591, 80 N. W. 573, 80 Am. St. Rep. 538. Vendors and grantors under executory contract of sale, Continental Ins. Co. V. Brooks, 131 Ala. 614, 30 South. 876; Merchants' Ins. Co. v. Nowlin (Tex. Civ. App.), 56 S. W. 198. Curtesy initiate gives such an interest, Doyle V. American Fire Ins. Co., 181 Ma.ss. 139, 63 N. E. 394; Trade Ins. Co. v. Barracliff, 45 N. J. L. 543, 46 Am. Rep. 792; Harris v. York Ins. Co., 50 Pa. St. 341. But see, contra, Traders' Ins. Co. V. Newman, 120 Ind. 554, 22 N. E. 428; Clark v. Dwelling House Ins. Co., 81 Me. 373, 17 Atl. 303, which also seem to hold that dower inchoate does not give an insurable interest. And see Fhmn v. Flynn, 171 Mass. 312, 50 N. E. 650, 42 L. R. A. 98, 68 Am. St. R. 427. A bankrupt or insolvent, though estate is vested in trustee, has insurable interest, Marks v. Hamilton, 7 Exch. 323. Mortgagor's interest ceases after time for redemption ex- pires, Essex Sav. Bank v. Meriden F. Ins. Co., 57 Conn. 335, 17 Atl. 930, 4 L. R. A. 759. So as to owner's interest in goods sold under execution, Cone v. Niagara F. Ins. Co., 60 N. Y. 619. 1 Gerringer v. North Carolina Home Ins. Co., 133 N. C. 407, 45 S. E. 773. 3 Franklin F. Ins. Co. v. Martin, 40 N. J. L. 568, 29 Am. Rep. 271; Brooks V. Erie Fire Ins. Co., 76 App. Div. 275, 78 N. Y. Supp. 748, aff'd 177 N. Y. 572; Davis v. Phoenix Ins. Co., Ill Cal. 409, 43 Pac. 1115; Dunn v. Yakish, 10 Okla. 388, 61 Pac. 926; Gettelman v. Commercial Union Assur. Co., 97 Wis. 237, 72 N. W. 327; Gilman v. Dwelling House Ins. Co., 81 Me. 488, 17 Atl. 544. 3 Clapp V. Farmers' Mut. Fire Ins. Co., 126 N. C. 388, 35 S. E. 617. 4 Carpenter et al. v. Ger. Am. Ins. Co., 135 N. Y. 298, 31 N. E. 1015. Purchasers of goods, title to pass at future time, Tabbid v. American Ins. Co., 185 Mass. 419, 70 N. E. 430; Bohn Mfg. Co. V. Saivyer, 169 Mass. 477, 48 N. E. 620; Sheridan v. Peninsular Sav. Bank, 116 Mich. 545, 74 N. W. 874. Vendee under option, to extent of advances, Wunderlich v. Palatine Fire Ins. Co., 104 Wis. 395, 80 N. W. 471. Trust company under contract to buy a deed of trust and notes secured thereby, International Trust Co. v. Norwich Fire Ins. Soc, 71 Fed. 81, 17 C. C. A. 608. Beneficiary under a trust deed, Harvey v. Cherry, 76 N. Y. 436; Southern Bldg. and Loan Assn. v. Miller, 110 Fed. 35, 49 C. C. A. 21; Tilley v. Conn. Fire Ins. Co., 86 Va. 813, 11 S. E. 120. So in Cone v. Ni- agara Ins. Co., 60 N. Y. 619, it was held that one whose premises had been sold on execution had an insurable interest therein after his own right to redeem had lapsed, while a right remained in judgment creditors. For, while that right continued, he could have pro- cured a loan, confessed judgment as security therefor, and thereby created a right to redeem. 36 GENERAL PRINCIPLES OF INSURANCE LAW J 28. Illegal or Defective Title.— One in possession under an illegal or (lefoctive title has in general an insurable interest.^ But it has also ])eon held that a conveyance absolutely illegal and void ab initio will not confer a suflicient interest. - § 29. Same Subject— Representative Capacity.— Where the in- sured is intrusted with tiic goods of otluM' persons as in the case of a common carrier,^ warehouseman,^ commission merchant,^ wharfinger,*^ agent,'' or factor,* he may either insure his own in- terest or his own liability in respect to the property, or he may insure the property to its full value for the benefit of all concerned, pro- vided the policy properly describes the interests intended to be covered.'* § 30. Same Subject — Liens. — A lien upon property carries with it an insurable interest in that property.^" The lien need not be specific. The general lien of a judgment creditor before levy or attachment upon his debtor's property has been held sufficient/^ 1 Travis v. Continental Ins. Co., 32 Mo. App. 198. Deed of gift adjudged void as to creditors, Steintneyer v. Steinmeyer, 64 S. C. 413, 42 S. E. 184, 59 L. R. A. 319, 92 Am. St. R. 809. Deed good as between the parties, Home Ins. Co. v. Allen, 93 Ky. 270, 19 S. W. 743. Deed in fraud of grantor, Phoenix Ins. Co. v. Mitchell, 67 111. 43. Deed from executor without power, Home Ins. Co. v. Oilman, 112 Ind. 7, 13 N. E. 118. Transfer void because between husband and wife, Wolfe v. Security Fire Ins. Co., 39 X. Y. 49. Deed improperly acknowledged, San- ford V. Ins. Co., 174 Mass. 416, 54 N. E. 883, 75 Am. St. R. 358. 2 Perry v. Mechanics' Mut. Ins. Co. , 11 Fed. 478 (parol agreement to convey land, husband not joining); and see Sweeny v. Franklin Ins. Co., 20 Pa. St. 337; Stockdale v. Dunlap, 6 M. & W. 224. 3 California Ins. Co. v. Union Com- press Co., 133 U. S. 387, 10 S. Ct. 365, 33 L. Ed. 730; Lancaster Mills v. Merchants', etc., Co., 89 Tenn. 1, 14 S. W. 317, 24 Am. St. R. 586. * Home Ins. Co. v. Baltimore Ware- house Co., ^ZV. S. 527. 5 Wagner v. Westchester F. Ins. Co., 92 Tex. 549, 50 S. W. 569. 6 Waters v. Monarch Fire Office, 5 EU. & B. 870. ^ Hartford F. Ins. Co. v. Keating, 86 Md. 130, 148, 38 Atl. 29, 63 Am. St. R. 499; Ferguson v. Pekin Plow Co., 141 Mo. 161, 42 S. W. 711; Roberts v. Fire- man's Ins. Co., 165 Pa. St. 55, 30 Atl. 450, 44 Am. St. R. 642. 8 Phoenix Ins. Co. v. Hamilton, 14 Wall. (U. S.) 504, 20 L. Ed. 721. Carpenter v. Ins. Co., 16 Pet. (U. S.) 495. Consignees or persons holding properly in trust or on com- mission, Ebs\vorth v. Alliance Mar. Ins. Co., L. R. 8 C. P. 596, 42 L. J. C. P. 305, 29 L. T. N. S. 479 (and elaborate examination of authorities as to amount of interest); Providence Wash- ington Ins. Co. V. The Sidney (D. C), 23 Fed. 88; Hamburg- Bremen Ins. Co. V. Lewis, 4 App. D. C. 66. Bailees in general, Home Ins. Co. v. Peoria, etc., R. Co., 178 111. 64, 52 N. E. 862; Fire Assn. of Eng. v. Merchants' and Marine Trans. Co., 66 Md. 339, 59 Am. Rep. 162, 7 Atl. 905. Hirers of chattels, Oliver v. Greene, 3 Mass. 133, 3 Am. Dec. 96; Bartlet v. Walter, 13 Mass. 267, 7 Am. Dec. 143. Receivers, McLaugh- lin V. Park City Bank, 22 Utah, 473, 63 Pac. 589; In re Hamilton, 102 Fed. 683. 10 Ins. Co. V. Stinson, 103 U. S. 25, 26, L. Ed. 473; Donnell v. Donnell, 86 Me. 518, 30 Atl. 67; McLaughlin v. Park City Bank, 22 Utah, 473, 63 Pac. 589 11 Rohrbach v. Germania Fire Ins Co 62 N. Y. 47, 20 Am. Rep. 451; Spare v. Home Mutual Ins. Co., 15 Fed. 707. ILLEGAL OR. DEFECTIVE TITLE — POSSESSION 37 but one having no lien, as a simple contract creditor, has no such interest.^ § 31. Same Subject — Possession. — Possession of property coupled with a claim of title gives an insurable interest,^ which con- tinues, it is said, until the title has been judicially declared to be invalid,'"' and where possession is coupled with a beneficial use there is likewise a sufficient interest.^ But a mere trespasser or intruder, or one who has no color of title to property, has no insurable interest in it.^ Illustrative of the efficacy of mere use or possession in this 708; but see, contra, Grevemeuer v. Southern Mut. Fire Ins. Co., 62 Pa. St. 340, 1 Am. Rep. 420; Light v. Ins. Co., 169 Pa. St. 310, 32 Atl. 439, 47 Am. St. R. 904. 1 Foster v. Van Reed, 5 Hun (N. Y.), 321; Creed v. Sun Fire 0]Jice, 101 Ala. 522, 14 South. 323, 23 L. R. A. 177, 46 Am. St. R. 134; Grcvemeyer v. Soidh- ern Mut. Fire Ins. Co., supra; Bishop V. Clay Fire & Marine Ins. Co., 49 Conn. 167. But see where debtor died and insurable interest resulted, Creed V. Sun Fire Office. 101 Ala. 522, 46 Am. St. R. 134, 23 L. R. A. 177, 14 South. 323. Holder of mortgage to extent of his claim, Sussex Co. Mut. Ins. Co. V. Woodruff, 26 N. J. L. 541. Mortgagor after foreclosure, with any title or equitable right remaining, Strong v. Mjgrs. Ins. Co., 27 Mass. 40, 20 Am. Dec. 507; Essc.v Savings Bank V. Meriden Fire Ins. Co., 57 Conn. 335, 17 Atl. 930, 18 Atl. 324, 4 L. R. A. 759; Pope V. Glen Falls Ins. Co., 136 Ala. 670, 34 South. 29; Slobodis'y v. Phoenix Ins. Co., 53 Neb. 816, 74 N. W. 270. Other lienors with insurable in- terest include, for example, agents Shaw V. Ins. Co., 49 Mo. 578, 8 Am. Rep. 150. Carriers, Savagre v. Ins. Co., 36 N. Y. 655; Hough v. Ins. Co., 36 Md. 398. Mechanics, Harvey v. Cherry, 76 N. Y. 436; Stout v. Ins. Co., 12 la. 371, 79 Am. Dec. 539; Edwards v. Arquette, 88 Wis. 450. 60 N. W. 782. Landlord witli statutory lien for rent, Mut. Fire I U.S. Co. v. Ward, 95 Va. 231. 28 S. E. 209. Storage company with lien for charges on merchandise, Pitts- burgh Storage Co. v. Scottish Union & Nat. Ins. Co., 168 Pa. St. 522, 32 Atl. 58. 2 City of X. Y. V. Brooklyn Fire Ins. Co., 41 Barb. (N. Y.) 231, aff'd 3 Abb. Dec. 251, 4 Keye3, 465. Even though obtained by trespass, Franklin Fire Ins. Co. V. Chicago Ice Co., 36 Md. 102, 11 Am. Rep. 409. ^Helvetia v. Swiss Fire Ins. Co., 11 Colo. App. 264, 53 Pac. 242. In Wainer V. MilfordMut. Ins. Co., 153 Mass. 335, 26 N. E. 877, 11 L. R. A. 598, the owner of an undivided half of a dwell- ing house bought the other half from his brother by an oral contract and paid him full price therefor under promise of a deed, and thereupon en- tered into exclusive possession of the whole claiming title. Five years later in an application for insurance he de- scribed himself as owner thereof and upon a subsequent loss under the policy the insurance company refused payment on the ground that he had no insurable interest in the entire house. A week after the fire his brother, who had never disputed his title or refused to give him a deed, gave him one in pursuance of his promise; Judge Allen, holding that he did have an insurable interest admits that he had no means either at law or in equity of compelling the execution of a deed, but says: "It is not necessary to show an insurable interest which may be called owner- ship. Insurance against loss by fire is a personal contract of indemnity. If a person has such an interest in property that he will suffer pecuniary loss by its destruction he has an insurable in- terest." 4 Holbrook v. St. Paul Fire and Marine Ins. Co., 25 Minn. 229; Schaefer v. Anchor Mut. Ins. Co., 100 N. W. (la.) 857; Jacobs v. Mutual Ins. Co., 52 S. C. 110, 29 S. E. 533. One in posses- sion with reasonable expectation of becoming owner in fee. Home Ins. Co. v. Mendenhall, 164 111. 458, 45 N. E. 1078, 36 L. R. A. 374. 5 Sweeny v. Franllin Ins. Co., 20 Pa. St. 337. Whether a tenant at suffer- ance enjoying possession and usufruct 38 GENERAL I'RINCIPLES OF INSURANCE LAW regard, is a recent decision in Nebraska, establishing, for that state at least, the important and practical proposition that a husband and a wife, either tseparately or jointly, have an insurable interest in the furniture and household effects in use in the maintenance of the domestic relation, regardless of whose money paid for the articles, or from what sources or by what means they were obtained, or to whom thev mav belong.' § 32. Same Subject — Contract Rights.— a contract ngnt tne value of which is dci)eiKleni upon the preservation of property be- longing to another gives an insurable interest in that property .- A contract right the insurable interest in that property .- § 33. Same Subject — Liability. — Mere responsibility or liability to another will confer an insurable interest.^ Therefore a mort- has an insurable interest is not very definitely settled, Binningbum v. 7n.s. Co., 42 Barb. (N. Y.) Abl; Bunyon, Ins. (5th ed.), p. 56. I'nless policy were valued it would be difficult to establish value of his interest. It has been held under married women's acts that husband has no insurable interest in wife's separate property if having no legal right of control or possession, Planters' Mvt. Ins. Co. v. Loijd, 71 Ark. 292, 75 S. W. 725; Traders' Ins. Co. V. Xewinan, 120 Ind. 554, 22 N. E. 428; German Ins. Co. v. Paul, 2 Ind. Ter. 625. 53 S. W. 442; Trolt v. Wool- wich Mid. F. Ins. Co.. S3 Me. 362, 22 Atl. 245; Acpicidturullns. Co. v. Monta- gue, 38 Mich. 548, 31 Am. Rep. 320. Although residing with her in the house insured, Tyree v. Virginia F. & M. 7n,s. Co., .55 W. V- -iS, 46 S. E. 706, 66 L. R. A. 657. On liie contrary, it has been held that a husband occupy- ing a homestead belonging to his wife has an insurable interest in it, Carey V. Home his. Co., 97 Iowa, 619, 66 N. W. 920; Reynold v. Iowa, etc.. Ins. Co., 80 Iowa, 563, 46 N. W. 659. Especially if he has inchoate right of curtesy, Traders' Ins. Co. v. BarracUj'f. 45 N. J. L. 543, 46 Am. Rep. 792 (per- .sonal property); Continental F. Assoc. v. Wing field, 7 Tex. Ct. Rep. 53, 73 S. W. 847; and see American Cent. Ins. Co. v. McLanathan, 11 Kan. 533; Horsch V. Dwelling House Ins. Co., 77 Wis. 4, 45 N. W. 945, 8 L. R. A. 806. But under standard fire policy any limited interest must be set forth. ^ Lenagh v. Commercial Union Ass. Co. (Neb., 1906), 110 N. W. 740. • Thus, patentee with contract for royalties in property used in connec- tion with patents, Nat. Filtering Oil Co. V. Citizens' Ins. Co., 106 N. Y. 535, 13 N. E. 337, 60 Am. Rep. 473. Con- tractor in house he is moving. Planters' (fc Merchants' Ins. Co. v. Thurston, 93 Ala. 255, 9 South. 268. Building con- tractor in building in course of erec- tion, Sullivan v. Spring Garden Ins. Co., 34 App. Div. 128, 58 N. Y. Supp. 629; Gushing v. Williamsburg City Fire Ins. Co., 4 Wash. 538, 30 Pac. 736. Superintendent in goods of another's establishment, Graham v. Fire Ins. Co., 48 S. C. 195, 26 S. E. 323, 59 Am. St. R. 707. One entitled to share of net profits of an insurance company may insvu-e the property insiu-ed by it, Hayes v. Milford Mut. Ins. Co., 170 Mass. 492, 49 N. E. 754. But it has been said that a person can have no in- surable interest in property under a contract whicli cannot be enforced <'ither in law or eciuity, Pope v. Glen Falls Ins. Co., 136 Ala. 670, 34 South. 29; Perry v. Mechanics' Mut. Ins. Co., 11 Fed. 478. ■* As to common carriers, warehouse- men, and bailees generally, see § 29. Bern/ v. Am. Cent. Ins. Co., 132 N. Y. 49, .30 X. E. 2.54, 28 Am. St. R. 548; Statutory liability of railroads for in- jury to property by their engines. Railroad Co. v. Relief Fire Ins. Co., 98 Mass. 420, 105 Mass. 570; Lumberman's Mut. Ins. Co. V. Kansas City R. R. Co., 149 Mo. 165, 50 S. W. 281. One agree- ing for consideration to care for prop- erty and keep insured. Cross v. A' at. Fire Ins. Co., 132 N. Y. 133, 30 N. E 390. INSUHAHIJ; IN TKHKST - LIFE 39 gagor retains an insurable interest, even though he has conveyed away the mortgaged premises to a vendee who also assumes pay- ment of the mortgage debt, since the mortgagor also is still liable on his bond.^ Upon the same principle, an insurance company may reinsure with another company the whole or any part of its liability as an insurer, whether existing under one or all of its policies.- § 34. Insurable Interest — Life. — While, as before shown, pure speculation in human life is not to be tolerated,^ provident arrange- ments by means of life insurance in favor of dependents are of ad- vantage to the lieneficiaries and of benefit to the state and, there- fore, to be encouraged.'* Few persons, however, would invest in life insurance if they knew in advance that the person insured was destined to fill out the average span of life. Such an investment must be considered pecuniarily unprofitable. The insurance company out of its re- ceipts must meet its heavv expenses, also its obligations arising from the early deaths among its patrons. The conclusion cannot be escaped that the primary purpose of the insured, as well as the main utility of the contract, is to cover loss occasioned by premature rather than by normal death. But all insurance and notably life insurance is in some respects in the nature of an investment.^ In 1 Hanover Fire Ins. Co. v. Bohn, 48 C. C. A. 580 (contrary to public policy Neb. 743, 67 N. W. 774, 58 Am. St. that policyholders should be interested R. 719; Waring v. Loder, 53 N. Y. to shorten human life); Union Frater- 581. Sureties, Ins. Co. v. Thompson, nal League v. Walton, 109 Ga. 1, 34 95 U. S. 547, 24 L. Ed. 487. Indorsers, S. E. 317, 77 Am. St. R. 350,46 L. R. A. Williams v. Roger Willia>ns Ins. Co., 424; Bloomington Mut. Ben. Assn. v. 107 Mass. 377, 7 Am. Rep. 41. Sheriff Blue, 120 111. 121, 60 Am. Rep. 558, 11 in goods seized on execution, IT7)//(' N. E. 331; Met. Life Ins. Co. v. Brown, V. Madison, 26 N. Y. 117, 26 How. Pr. 159 Ind. 644, 65 N. E. 908; Burbage v. 487; Smith v. Huddleston, 103 Ala. 223; Windlejf, 108 N. C. 357, 12 S. E. 839, 15 South. 521. Vendee under contract 12 L. R. A. 409 (demoralizing, contra of conditional sale if liable for loss by bonos mores). Other illustrations of fire has insurable interest to full value, wager policies, Fuller v. Metro. Life and not simply to amount of his ad- Ins. Co., 70 Conn. 647, 41 Atl. 4; vancements, Ryayi v. Agricultural Ins. Golden Ride v. People, 118 111. 492, 9 Co., 188 Mass. 11, 73 N. E. 849. N. E. 342; People v. Golden Rule, 114 2/ns. Co. of N. A. V. Ilibernia his. 111. 34, 28 N. E. 383; Gilbert v. Moose, Co., 140 U. S. 565, 11 S. Ct. 909, 35 104 Pa. St. 74, 80, 49 Am. Rep. 570 L.Ed. 517; Pha:nix Ins. Co. v. Erie ("life insvu-ance gambling fraught with Transp. Co., 117 U. S. 312, 323, 6 S. dishonesty and disaster"); Wilton v. Ct. 750; Barnes v. Heckla F. Ins. Co., N. Y. Life Ins. Co., 34 Tex. Civ. App. 56 Minn. 38, 57 N. W. 314, 45 Am. St. 156, 78 S. W. 403. R. 438, note; Hunt v. New Hanip., etc., * Ulrich v. Reinoehl, 143 Pa. St. 238, As-wc, 68 N. H. 305, 38 Atl. 145, 38 252, 22 Atl. 862, 13 L. R. A. 433, 24 L. R. A. 514, 73 Am. St. R. 602. Am. St. R. 534. ^Crotty V. Ins. Co., 144 U. S. 621, '^Mutual Life his. Co. v. Allen, 138 12 S. Ct. 749, 36 L. Ed. 566; Gordon v. Mass. 24, 52 Am. Rep. 245. An en- Ware Nat. Bank, 132 Fed. 444, 65 dowment policy is said to have more 40 GENEJKAL I'UJXnin.KS Manhattan Life Ins. Co. v. Hen- nessy, 99 Fed. 64, 39 C. C. A. 625. 5 First Nat. Bk. v. Terni, 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, 65 C. C. A. 580. Com- pare Equitable L. Ins. Co. v. Hazleivood, 75 Tex. 338, 16 Am. St. R. 893, 12 S. W. 621, 7 L. R, A. 217. ^ Rivers v. Gregg, 5 Rich. Eq. (S. C.) 274. 7 Rawls V. Amer. Mut. Life 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. Civ. 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 minority of the debtor is sufficient to give an insurable interest, because the infant alone can avoid the note, Dwyer v. Eais, 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 Mid. L. and F. Ins. Co., 10 Cush. (Mass.) 282, 57 Am. Dec. 92; Kennedy v. N. Y. Life Ins. Co., 10 La. Ann. 809. Ml GENERAL PHlNCHMvES UF JNSUHAXCE 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 l)remiums 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 amount 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 courts have expressed the opinion that the creditor should be allowed to provide for an amount of insurance sufficient when collected to cover his debt, together with such expense as may be required to keep the policy in force and interest also.^ But the practical embarrass- ment in applying this plausible test is twofold; first, the validity of 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 - Crotty v. Union Mut. Life 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 poUcy, was 237, 44 W. N. C. 386, 73 Am. St. R. regarded as trustee for wife of insured, 803, 43 Atl. 946; Ulrich v. Reinoehl, A. L. & H. Ins. Co. v. RoheHshaw, 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 Life Ins. Co. v. Hazehmod, 75 ise by the insured to repay the pre- Tex. 338, 12 S. W. 621, 7 L. R. A. 217, miums to the person who took out the 16 Am. St. R. 893; First Nat. Bank v. insurance anrincipal, though no breach of tlie bond occur, Scott v. Dickson, 108 Pa. St. 6, 56 Am. Rep. 192; Embry v. Harris, 107 Ky. 01, 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- surable interest in his life 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 in the life of its manager and promoter. Mechanics' Nat. Bk. v. Comi7is, 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 Ufe 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 valid 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. Gas. 604; § 2590, Civ. Code Lower Can. An ae- INSURABLE INTEREST — AIARINE 40 § 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 w-ho 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 McKinncy, 15 Fed. 535, or under an assignment for creditors, Barbour's Adm. v. Larue's Assiq7}ee, 106 Ky. 54G, 51 S. W. 5, has no insurable interest in the life of the insolvent. 1 Hobbs V. Hannarn , 3 Camp. 93. And though vessel is not enrolled in his own name, McColdin v. Greenwich 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 generall}% but the holder of the bond must insure his in- terest eo nomine. International Marine Im. 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. Cas. (N. Y.) 499; Read v. Mat. Safety Ins. Co., 5 N. Y. Super. Ct. 54; Smith V. Williams, 2 Caine's Cas. (N. Y.) 110. 2 The Gulnare, 42 Fed. 861. And a charterer agreeing to keep vessel in- sured, Bartlett v. Walter, 13 Mass. 267, 7 Am. Dec. 143. ^Wiggin v. Mercantile Ins. Co., 7 Pick. (Mass.) 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; Gordon v. Am. Ins. Co., 4 Denio (N. Y.), 360 (though goods not yet laden aboard). Williams v. Ins. Co., 1 Hilt. (N. Y.) 345; Riley y. Delaficld, 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; Adayns 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. Xorth Am. his. Co., 13 Ma.ss. 61 (different in- terests may be insured and sometimes each to full value of property) ; and see Xorth Brit. & M. Ins. Co. \\ L. & L. & G. Ins. Co. (1877), 5 Ch. D. 569. Mortgagor may insure, Wilkes v. People's Fire his. Co., 19 N. Y. 184 (though mortgage cover full value) Higginson v. Dall, 13 Mass. 96 (vessel) Schultz V. Pacific Ins. Co., 14 Fla. 73 (freight pledged). ^Mortgagees may insure Clark v. Wa.skington 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. Clarkson, 1 Johns. (N. Y.) 385, 3 Am. Dec. 336. And though contract is oral or voida- ble, Amsinck v. Am. Ins. Co., 129 Mass. 185. Similarly vendees of goods who will get title to them, only on their delivery have an insurable interest in them, though contract be "no arrival no sale," Harrison v. Fortlage, 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' Mid. Mar. Ins. Co. v. Baring, 20 Wall. (U. S.) 159, 22 L. Ed. 250; PhoFnix 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. Powell, 13 B. Mon. (Ky.) 311. But advances voluntarily made without authority may give no insurable in- terest, China Mid. 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 commisr.ion on cargo, Holbrook 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 Serg. & 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. a 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. Mayheiv, 51 Me. 398. 4 Van Natta v. Mut. Sec. Ins. Co., 2 Sandf. (N. Y.) 490; Cunard S. Co. v. Marten (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. Thus, 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. Marten (1903), 2 K. B. 511, have each a separate in- surable interest in the cargo. 5 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 policy 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 A,9sur. 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). Jitna 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. Mid. Ace. Assn. V. Hodgskin, 4 App. D. C. 516; Merchants' 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; Bloomington Mut. Ben. Assn. v. Blue, 120111. 121,60Am. St. R. 558, 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 like 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 sou who paid first premium). Albert v. Mut. L. Ins. Co., 122 N. C. 92, 30 S. E. 327, 65 Am. St. R. 693; Hill 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 vahd). Cross- well V. Connecticut Indem. Assn., 51 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. 650 (unlawful pre- existing agreement). Ashley v. Ashletj, 3 Sim. 149; Vezina v. 7ns. Co., 6 Can. Sup. Ct. 30. 1 Fidelity Mut. 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 provision for children of insured). Ancient Order V. Brown, 112 Ga. 545 (1901), 37 S. E. 890; Heinlein v. Imperial L. Ins. Co., 101 Mich. 250, 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.V. Y. Life Ins. Co. v. Broum. 23 Ky. L. R. 2070, 66 S. W. 613; Gilbert 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. Hazleuood, 75 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 Crottij v. Union Mut. Ins. Co., 144 U. S. 621, 623, 12 S. Ct. 749, 36 L. Ed. 566, citing also Warnock 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. 580, and cases cited. * M'ut. 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, 35 N. E. 651. 55 N. Y. St. R. 787; Groff v. Mut. Life Ins. Co., 92 111. App. 207); Fitzgerald v. Ins. Co., 56 Conn. 116, 13 Atl. 673, 17 Atl. 411, 52 GENERAL PRINCIPLES 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 lias the world for a market). Union Fra- ternal Lcanite v. Walton, 109 Ga. 1, 3-i S. E. 317, 77 Am. St. R. 350, 46 L. R. A. 424; Rrlander v. Allen, 125 Ga. 206, 53 S. E. 1032, giving long list of author- ities; Martin v. Stuhbings, 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. John- 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; Ritller v. Smith, 70 Md. 261, 16 Atl. 890, 2 L. R. A. 844; King v. Crarn, 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; Mut. L. Ins. Co. V. Allen, 138 Mass. 24, 52 Am. Rep. 245; Prudential Ins. Co. v. Liersch, 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; Steinback v. Diepen- brock, 158 N. Y. 24, 52 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- ment policy). Eckel v. Renner, 41 Ohio, 232; Clark v. Allen, 11 R. I. 439, 23 Am. Rep. 496; Crossioell v. Conn. Ind. Assn., 51 S. C. 103, 28 S. E. 200; Clement v. .Y. Y. Life Ins. Co., 101 Tenn. 22, 46 S. W. 501, 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. 7ns. Co., 95 Wis. 583, 70 N. W. 819. Contra, that assignee must have in- surable interest, Warnock v. Davis, 104 U. S. 775, 26 L. Ed. 924; Alahnmn 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 Kan. 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. Berner, 21 Ky. L. R. 324, 51 S. W. 312; McDonald V. Birss, 99 Mich. 329, 58 N. W. 359; Heusner v. Mut. Life Ins. Co., 47 Mo. App. 336; Mutual Life Ins. Co. v. Richards, 99 Mo. App. 88, 72 S. W. 487 (valid only to extent of premiums paid by assignee). Powell v. Dewey, 123 N. C. 103, 31 S. E. 381, 68 Am. St. R. 818; Carpenter v. U. S. Life Ins. Co., 161 Pa. St. 9, 15, 28 Atl. 943, 41 Am. St. R. 880, 23 L. R. A. 571; Gilbert v. Moose, 104 Pa. St. 74, 49 Am. Rep. 570; Downey v. Hojfer, 110 Pa. St. 109, 20 Atl. 655; Ridh 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. Hazlewood, 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; Roller V. Moore, 86 Va. 512, 10 S. E. 241, 6 L. R. A. 136; Tate v. Commercial Bldg. 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 Iowa, 282, 91 N. W. 1074; 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). Stein- 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 U. B. Mid. Aid Soc. v. McDonald, APPOINTEES — ASSIGNEES — UNITED STATES SUPREME 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. H offer, 110 Pa. St. 109, 20 Atl. 655. ^ Croity v. Union Mid. L. Ins. Co., 144 U. S. 621, 623, 12 S. Ct. 749, 36 L. Ed. 566, dictum; Warnock v. Davis, 104 U. S. 775, 26 L. Ed. 924, dictum; Alabama G. L. Ins. Co. v. Mobile Mid. bis. Co., 81 Ala. 329, 1 So. 561; Missouri Valley L. Ins. Co. v. McCrum, 36 Kan. 146, 12 Pac. 517, 59 Am. Rep. 537; Gilbert v. Moose, 104 Pa. St. 74, 78, 49 Am. Rep. 570; Holler v. Moore, 86 Va. 512, 10 S. E. 241, 6 L. R. A. 136; and see Mid. 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; Prudential Ins. Co. v. Liersch, 122 Mich. 436, 81 N. W. 258; Supreme Conclave v. Dailei/, 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. Burnstine, 102 U. S. 664, 25 L. Ed. 268. But company may waive the clause. Bank V. Comins, 72 N. H. 12, 55 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," Croity v. Union Mid. Ins. Co., 144 U. S. 621, 623, 12 S. Ct. 749, 36 L. Ed. 566. 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," Warnock v. Davis, 104 U. S. 775, 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, 65 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 FRINCirLES 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 any 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 insurable interest the transaction can only be interpreted as an evasion or violation of the law, a mere cover for a wager.^ The question perhaps turns very much upon what is understood b}' 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 the 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. survivors," Conn. Mut. Life Ins. Co. v. Contra, that assignee must have in- Schaefer, 94 U. S. 457, 460, 24 L. Ed. surable interest. Sivick v. Home Ins. 251. Again, the same court held that Co., 23 Fed. Cas. 550; Langdon v. the relationship between a party and Vnion Mut. L. Ins. Co., 14 Fed. 272, another for whose benefit he effects an i Foster v. Preferred Ace. Ins. Co., insurance upon hi.s 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- or grant, furnishes no ground for the ably well decided on the facts, imputation that the transaction was by ^Mvt. L. Ins. Co. v. Lane, 151 Fed. way of cover for a wager policy, JStna 276; KoUer 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 liis sister). And again: "A policy of Fed. 276. life insurance, without restrictive * Boston Ins. Co. v. Globe 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- Ins. 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 tlms evade the an early English case it was held that law against wager policies, A'. Y. Mut. an averment of insurable interest at Life 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 insure 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 Arnould, 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. his. Co., 174 Mass. 229, 54 N. E. 543, 75 Am. St. R. 303 (marine fire risks, reinsur- ance). Sawyer v. Dodge Co. Mid. 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. ^ Among these see, for example, Sadler's Co. v. Babcock,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 Mid. 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; Loclhart 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. Iris. Co.. 21 W. Va. 368, 379 (stated only "as a general rule"). As a summing up of many authoiities collected by 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 fii-e 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 lo.ss 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 companj^ by the adoption of the safe and convenient method of pro- cedure since imtil 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 valid 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; Wol'ie \. Security Fire Ins. Co., 56 GENERAL I'HlNCirLEtt OF IX.SUKAiNCE 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 maturity 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 § 4 7. 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. Neiv England F. Ins. Co., 70 Vt. 217, 39 Atl. 1095; and see Mills V. Farmers' Ins. Co., 37 Iowa, 400; Sawyer v. Dodge Co. Mut. 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, 03 Ohio St. 77, 57 N. E. 965 (policy sur^•ives divorce). Appeal of Corson, 113 Pa. St. 438, 6 Atl. 213, 57 Am. Rep. 479. Contra. Cheeves V. Anders, S7 Tex. 287, 28 S. AV. 274, 47 Am. St. R. 107. < Dalbji V. India & London & Life Assur. Co., 15 C. B. 365 (a leading case overruling Godsall v. Bolder o, 9 East. 12),Amick v. Butler, 111 Ind. 578, 12 N. E. 518, 60 Am. St. R. 722; Ferguson V. Mass. Mid. Life Ins. Co., 32 Hun, 306, afi'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 Penn.sylvama rule see § 37. If policy is taken out by debtor and a.ssigned absolutely to creditor, the creditor in some jurisdictions may col- lect the whole, Mut. Life Ins. Co. v. Allen, 138 Mass. 24, 52 Am. Rep. 245; Wright v. Mut. 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 u-ill belong to the debtor. Central Nat. Bk. V. Hume, 128 U. S. 195, 9 S. Ct. 41, 32 L. Ed. 370; Exchange Ban': 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 Mid. Life Ins. Co., 144 U. S. 621, 12 S. Ct. 749, 36 L. Ed. 566. INSURANCE DOES N 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 donor. 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 Brauton, 177 Mass. 533, 542, 59 N. E. unequivocal 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. 1 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 - Harleij v. Heist, 86 Ind. 196, 45 cited which hold that where the inter- Am. Rep. 285. est of the beneficiary is defeated by his ^ Pha;nix Mut. Life Ins. Co. v. Dun- own fraudulent conduct the right to ham, 46 Conn. 79, 33 Am. Rep. 14, recover on the pohcy 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 fa'ils to establish an irrevocable ■« Geojfroy v. Gilbert, 5 App. Uiv. 98, trust, provided the depositor has fur- .38 N. Y. Supp. 643, aff'd 154 N. Y. nished evidence of original purpose by 741, 49 N. E. 1097, and cases supra ; subsequently withdrawing or dealing Robinson v. Duvall, 79 Ky. 83, 42 Am, with the fund as though it were his Rep. 208. own. For example, Matter of Totten, 5 Raskins v. Kendall, 158 Mjiss. 224, 179 N. Y. 112, 125, 71 N. E. 748 (a 227, 33 N. E. 495; Bradshaw v. Mut. tentative trust' merely, revocable at L. Ins. Co., 187 N. Y. 347, 80 N, E. will until the depositor dies or com- 203. BENEFICIARIES 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 alive 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 pavable to "the wife of the insured, if living, otherwise to their children." 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; Bell 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. Iiis. 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 Amherg 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. Sugg, 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; Conv. 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 Chapin v. Felloives, 36 Conn. 132, 4 Am. Rep. 49. The wife's interest also is contingent and wholly depend- ent upon her survivorship, Bradshaw V. Mid. L. Ins. Co., 187 N. Y. 347, 80 N. E. 203; Herr v. Reinoehl, 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. V. Easier, 140 Mich. 233, 103 N. W. 596, citing cases pro and con; Smith v. yEt7ia Life Ins. Co., 68 N. H. 405, 44 Atl. 531, citing Walsh case below; Bradshaiv v. Mid. L. Ins. Co., 187 N. Y. 347, 80 N. E. 203; Fidelity Trust Co. v. Marshall, 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 Life Ins. Co. v. Webb, 54 Ala. 688. Both husband and wife cannot join in defeating the children's contingent right, Erdwistle 86 GENERAL FKIXK.S < >! INSLKANCE 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 ccsfui 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 N. Y. 146, 66 N. E. 670, 95 Am. St. R. 554 (insured ('ould 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. Liihrs, 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, Kem- per V. Modern Woodmen, 70 Kan. 119, 78 Pac. 452. Thougfi 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. O. U. W. v. McGrath, 133 .Alich. 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. Frtnd, 134 Cal. 50, 66 Pac. 36. Amendment to laws not retroactive unless contract provides for it, Roberts V. Cohe7i, 60 App. Div. 259, 70 N. Y. Supp. 57, aff'd 173 N. Y. 580, 65 N. E 1112. "^ Smith V. National Ben. Soc, 123 N. Y. 85, 33 N. Y. St. R. 67, 25 N. E. 197. 3 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. Eg. L. Ass. Soc, 160 N. Y. 19, 30, 54 N. E. 712, 46 L. R. A. 288, 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. Grnrul 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. Harneif, 173 N. Y. 352, 66 N. E. 202. 1 Atlantic Mut. L. Ins. Co. v. Gannon, 179 Mass. 231, 60 N. E. 9.33 (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. 318, 88 N. W. 874; Allgemeiner Arbester Bund v. Adam- son, 132 Mich. 86, 92 N. W. 786; Schoe- nau V. Grand Lod/je, 85 Minn. 349, 88 N. W. 999; Webster v. Wilco.r, ol 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- man, 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. Xoll, 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 (in.sured died before new certificate was actually issued). Marsh v. Am. Legion of Honor, 149 Mass. 512, 21 N. E. 1070 (first beneficiary acted in collusion with officer of societj'^). Laheij v. Laheij, 174 4 People V. Security Life Ins. etc, Co., 78 N. Y. 114. CONTRACT IS A I'HOl'KinV KICHT — 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 of 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 sliare of such por- tion of the surplus as the directors saw fit to distribute, and construing N. Y. Law, 1892, c. 690, § 56, which hmited to attorney general the right to bring proceedings for accounting or injunc- tion; but see Pierce v. Eq. Assrir. Soc, 145 Mass. 56, 12 N. E. 858, 1 Am. St. R. 433. Same law applied to co-operative or assessment life insurance associa- tions, Suan V. Mid. Res. Fund L. As.m., 155 N. Y. 9, 49 N. E. 258. This law was repealed in the interest of policyholders by L. 1906, c. 326, pro- viding poHcyholders may have right to attach a special fund, Babcock P. P. Mjg. Co. X. Ranovs, 164 N. Y. 440, 58 N. E. 529. 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, Bogardiis 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, -V. Y. Life Ins. Co. v. Miller, 22 Ky. L. Rep. 230, 56 S. W. 975; Romer v. Eq. Life Assvr. Co.. 102 111. App. 621; Averii v. Eq. Life .4.s-.s»r. Soc, 117 N. Y. 459, 23 N. E. 3; Columbia Bk. v. Eq. Life Assur. Soc. 79 Aop. Div. 601, 80 N. Y. Supp. 428; Elli.son 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. - 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; McCvtcheon's Appeal, 99 Pa. St. 133, 137; Thilaney v. Walsh (Tex. Civ. App.), 37 S. W. 615, aff'd 90 Tex. 329, 38 S. W. 748 (cannot de- prive creditors by liis 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. 937, 49 N. E. 1105. Where policy is not matured it represents onlj' a contingent obligation and cannot be reached by 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 creuitors, Central Bk. v. Htime, 128 U. S. 195, 9 S. Ct. 41, 32 L. Ed. 370; Hendrie Mfg. Co. v. Piatt, 13 Colo. App. 15, 56 Pac. 20^; Schae- jer'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, Re Tyler (1907), 1 K. B. 865. JO (^KNKKAL IMil.NCll'l.lvS OK INSUHAXCK LAW l)y ])r()i)er proceedings in equity, unless it is by statute exempted tiom fhc claims of creditors.^ After the insurance money is paid lo a l)eneficiary it l^ecomes liable to levy and attachment for his (If'bis like liis other money. - s^ 72. Rights of Creditors to Life Insurance Premiums Paid by In- solvent Debtors.— Some of tl>e courts hold that in the absence of actual frau is subject to levy for wife's debt. Amherg v. Man. Life Ins. Co., 171 N. Y. 314, 63 N. E. 1111. And where tontine accumula- tions have become payable to the in- sured 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 policy he will select there is no debt from the company and nothing for creditor to attach, Colum- bia Bk. v. Eq. L. Assvr. 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 IT. S. 195, 9 S. Ct. 41, 32 L. Ed. 370; Masonic Mut. Life As.sn. v. Paisley, 111 Fed. 32; Hendrie, etc., Mfg. Co. v. 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. 379.5, note), restricting annual premiums to $500. N. Y. Domestic Relations Law, 1896, e. 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 4urvives such period or term she is entitled to receive the insurance Tuoney, payable by the terms of the RIGHTS OF CRKDITOUS T(J 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; Fcar7i v. Ward, SO Ala. 555, 2 So. 114; Kind V. Domeycr, 175 N. Y. 205, 67 N. E. 433 (administrator must hold fund until it is ascertained whether other assets will pay creditors). Stokes V. Amermtm., 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 3. 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 Brown, 123 Cal. 399, 55 Pac. 1055, 69 Am. St. R. 74. Mississippi statute construed, Cozine v. Grimes, 76 Miss. 294, 24 So. 197 (hmit $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. Hoffmci/er, 119 Iowa, 444, 93 N. W. 497; Murdy v. S.:yles, 101 Iowa, 549, 70 N. W. 714, 63 Am. St. R. 411; Larrabee v. Palmer, 101 Iowa, 132, 70 N. W. 100; Cooper v. Wright, 110 Tenn. 214, 75 S. W. 1049: Roberts v. Winton, 100 Tenn. 484, 45 S. W. 673, 41 L. R. A. 275; Rose v. Worthnn, 95 Tenn. 505, 32 S. W. 45S, 30 L. R. A. 609; Ilarvei/ v. Harrison, 89 Tenn. 470, 14 S. W. 108P. Right to' exemption rmder 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 Sulz v. Mutual Res. Fund L. Ass7i., 145 N. Y. 563, 575, 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- eluded 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. HopJdns, 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; Stoices v. Coffey, 8 Bush. (Ky.) 533; Kicly 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, 11 Va. 163. But if wife pays premiums out of her separate es- state creditors of insui'ed 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. ^ Fearn v. Ward, 80 Ala. 555, 2 So. 114; Pullis V. Robison, 73 Mo. 201, 39 Am. Rep. 437; Merchants', etc.. Trans. Co. V. Borl:L..d, 53 N. J. Eq. 282, 31 Atl. 272, and Enjlish cases cited. The application of the last rule to the case where th 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. 309, 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 m the pol'cy, Hiscock v. Mcrtc7is, 205 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. .V. Y. Life Ins. Co., 132 Fed. 927. So also a contingent interest passes ^ - the trustee. In re Coleman, V3'6 Vezl 818. But to give the trustee any ^-at, the surrender value must be by *he contract, not by mere act of gras or indulgence on the company's part, Pulsifer v. Hussey, 97 Me. 434, 54 Atl. 92 GENERAL J'Hl.XC'I I'l.KS oV IXSURANCE LAAV § 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 complied 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 limitations. =* 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.'* .518, 60 Am. Rep. 722; Ferguson v. Ins. Co., 32 Hun, 305, aff'd 102 N. Y. 647; Shaffer v. Spangler, 144 Pa. St. 223, 22 Atl. 865. 3 Townsend v. Tyndale, 165 Mass. 293, 43 N. E. 107, .52 Am. St. R. 513; Rawls V. /n.s. Co., 27 N. Y. 282, 84 Am. Dec. 280; Conn. Mid. Life Ins. Co. V. Dunscomb, 108 Tenn. 724, 69 S. W. 345, 58 L. R. A. 694, 91 Am. St. R. 769. ■i Goldbaum v. Blion, 79 Tex. 638, 15 S. W. 564, there was an assignment of the pohcy to creditor. E.rch. Bank V. Loh. 104 Ga. 146, 31 S. E. 459, 44 L. R. A. 372, there was an as.signment • of the policy to the creditor. Tate v. Commercial Bldg. Assn., 97 Va. 74, 33 S. E. 382, 45 L. R. A. 243, 75 Am. St. R. 770, here also there was an assign- ment. And see dictum in W a mock 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 all the authorities the creditor can only retain enough of the proceeds to indemnify himsel'. Amick V. Butler, 111 Ind. 578. 12 N. E. 518; Met. L. Ins. Co. v. O'Brien, 92 Mich. .584, .52 N. W. 1012; Coon v. Swan, 30 Vt. 6. And if assigned for existing debts it will not cover sub- sequent debts, Levy v. Taylor, 66 Tex. 652, 1 S. W. 900. 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 Wellim/, 113 Fed. 189 (semi-tontine held to have no surren- der vahie); In re Buelow, 98 Fed. 86. Hence trustee must allege in his com- plaint a cash surrender value, Haskell v. Equitable Life 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 if 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. .V. Y. Fire Ins. Co., 184 Mass. 12; Fidler v. Jameson, 184 N. Y. 605, 186 N. Y. 60. 1 § 37, and cases cited. ' Dalbij V. Assurance Co., 15 C. B. 365; Central Nat. Bk. v. Ihme, 128 U. S. 195, 9 S. Ct. 41, 32 L. Ed. 370; Amick V. Butler, 111 Ind. 578, 12 N. E. CHAPTER III Genera > Principles — Continued Closing of Cont act — General Rules of Construction § 74. Introductory. — The course of business in closing insurance contracts is in a measure sui generis. Many important classes of contracts have no valid ty 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 pre .umed that the contents of the formal docu- ment correctly and coi elusively record the final results of their negotiations, and that tts execution and delivery precisely define the time when the agreiiment 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 laAv 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 Beirne, 80 App. Div. 272, 80 N. Y. broker. For breach of the latter en- Supp. 238, aff'd 178 N. Y. 551, 70 gagement an action for damages will N. E. 1101; Miner v. Tagert, 3 Bin. lie, Jacksonville, etc., Nav. Co. v. (Pa.) 204; Wunderlich v. Palatine F. Hooper, 160 U. S. 514, 16 S. Ct. 379, 7ns. Co., 104 Wis. 395, 80 N. W. 471; 40 L. Ed. 515; Brant v. Gallup, 111 111. Mc Alpine v. Trustees, 101 Wis. 468, 487, 53 Am. Rep. 638; Bacius 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. Cron- have opportunity to effect insurance sillat, 7 Fed. Cas. 542, 2 Wash. C. C. himself); Threshing Mach. Co. v. Dar- 132; Soide v. Union Bk., 45 Barb. nail, 13 S. D. 279, 83 N. W. 266. As to (N. Y.) 111. So also party refusing to 93 94 GENERAL I'KlXCirLES Ol" INSURANCE LAW § 75. Fire Insurance Contract — How Closed. — Important fire risks, whether on mercantile or other properties, and whether h)- cated in city or country, are apt to be put in charge of city brokers.^ take the insuranrc is liable in dam- ages, Tancnbaum v. Grecnwald, G7 App. Div. 473, 73 N. Y. Siipp. 873, See also SI N. Y. Supp. 292, 82 N. Y. Supp. IIIG; Tancnbaum v. Federal Match Co., ISO N. Y. 75. 1 An insurance broker as such is agent for the insured, Sellers v. Ins. Co., 105 Ala. 282, 16 So. 798; Parhh V. Rosebvd M. & M. Co., 140 Cal. 635, 74 Pac. 312; Commonwealth Mid. Fire Ins. Co. V. Knabc, 171 Mass. 265, 50 N. E. 516; Am. Fire Ins. Co., v Brooks. 83 Md. 22, 34 Atl. 373; Northrop v. Piza, 43 App. Div. 284, 60 N. Y. Supp. 363, aff'd 167 N. Y. 578, 60 N. E. 1117; Allen v. German Am. Ins. Co., 123 N. Y. 6, 25 N. E. 309; Crown Point Iron Co. v. jEtna Ins. Co., 127 N. Y. 608, 28 N. E. 653, 14 L. R. A. 147; Fire Assn. v. Hog wood, 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 Firemen'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 Muf. Fire Ins. Co. V. Improvement 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 cjuestion, for example, see Welch v. Fire Assn. of Phila., 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 premium, Dcvens v. Mechanics' & Traders' Ins. Co., 83 N. Y. 171; McGrath v. Home his. 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. 7ns. 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 payment to broker. Tlie broker may l)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 hll 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; Greeyi 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 his expiration sheets w-hich 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. Gas. 542, 2 W^ash. 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, 45 Atl. 796, and must furnish insurance in authorized and solvent companies, Landnsky v. Beirne, 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 Iris. 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 lie accepts Empire State Ins. Co. v. Am. Cent. Ins. Co., 138 N. Y. 446, 34 N. E. 200; A'. Y. Cent. Ins. Co. v. Xat. Protection Ins. Co., 14 N. Y. 85; Utica Ins. Co. v. Toledo Ins. Co., 17 Barb. (N. Y.) 132, except with their consent, Xo. Brit. & M. hhs. Co. V. Lambert, 26 Ore. 199, 37 Pac: 909, or by ratification, Huygins, 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. Ins. Co., 67 N. H. 457, 36 Atl. 367; Xorthrup v. Germania Ins. Co., 48 Wis. 420, 4 N. ^V. 350, 33 Am. Rep. 815, 19 Am. L. Reg. N. S. 291, note. And see FisUe v. Royal Exch. Assur. Co., 100 Mo. App. 545, 75 S. W. 382; East Texas Fire Ins. Co. v. Blum, 76 Tex. 653, 13 S. W. 572; East Tccas Fire Ins. Co. v. Brawn, 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 \. Prussian Xat. 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 courts would doubtless be reluctant u) hold the insurance void because the agent in good faith represented both parties in the same transaction, unless it appeared that lie could not be loyal to both. See Schuesslcr v. Ins. Co. of the Co. of Phila., 103 App. Div. 12, 15, 92 N. Y. Supp. 649, atf'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 lield 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, Xo. 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, Avatching 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. 1 See Appendix, ch. II, Forms. -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 by the broker to be pasted on the policy, are delivered at the same time. Appendi.x, 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 slip."* 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 ofHces 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 Ohio 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 ^Concordia Fire Ins. Co. y. Heffron, premium even though the insured 84 III. App. 610. fail to pay, Touro v. Cassin, 1 Nott. 3 See § 79. If he accepts only tern- & McC. (S. C.) 173, 9 Am. Dec. 680, porarily or conditionally, he stamps unless there is a trade usage or statute or wTites the qualification upon the to the contrary as in marine insurance binder; for example, "subject to sur- in England, Mar. Ins. Act (1906), § 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 his. Co. v. Hollander, 112 Fed. 549. risks run for the term of a year. Where the broker is liable for the pre- 4 By aid of the slip and the "forms" mium as principal he may svie 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 ATOte only (1878), 4 App."^ Cas. 1; Westwood v. a limited line on one risk, but a less valu- Bell. 4 Camp. 349; McKenzie v. Nevins, able property, whether mercantile or 22 Me. 138, 38 Am. Dec. 291. In Eng- dwelling, is often covered by one policy, land fire insurance is done more on a 6 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 « Called a daily report, Clemments v. customary indulgence, Karelsen v. German Ins. Co. (U. S. Cir. Ct.), 36 Sun Fire Office, 122 N. Y. 545, 25 N. E. Ins. L. J. 114. 921; Lipman v. Ins. Co., 121 N. Y. " Thompson v. Adams, L. R. 23 MARINE — HOW CLOSED 97 and closed when the appHcation 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 policy; - (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 arc usualh' 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, temporcixily the sole written evidence of the contract, is confidingly left with the underwriter, who has signed or initialed it, and with its aid the Q. B. D. 361; Xenos v. Wickhctm, L. K. 2 H. L. 296. 1 Vati 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; Lipman v. Ins. Co., 121 N. Y. 454, 24 N. E. 699,8 L. R. A. 719, and § 81. ^ Smith, etc., Co. v. Prussian A^at. 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. Hefjron, 84 111. App. 610 (one-year term understood). And see Brit. -Am. Ins. Co. v. Wilson, 77 Conn. 559 (rate not fixed). ^ In England insiit-ed is liable to the Ijroker for the premium and the broker to the company, Mar. 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 (1906). §§21, 22, 89, lonides v. Pac. Mar. Iris. Co. (1872), L. R. 7 Q. B. 517. Said Act, § 21, provides, "a contract of marine insurance is deemed to be concluded Avhen 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, Bhugwa-ndass v. 7ns. Co. (1888), 14 App. Cas. 83. 98 GENERAL PRINCIPLES OF INSURANCE LAW policy is subsequently written up and delivered 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 com- 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 opportunity 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- mium from th'e applicant i^rovisionally, 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 Hable, 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 policy.'^ § 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, N. Y. cover until decision of main office. Life Itis. Co. v. Mcintosh, 86 Miss. 236, 3 See Appendix, ch. I and N. Y. Ins. 38 So. 775, but subsequently suc- L. § 58. ceeded, on the ground that the com- * Eq. Life Assur. Soc. v. Pettus, 140 pany, by a letter sent to tlie insured, U. S. 226, lis. Ct. 822; Busher v. was estopped to deny the insurance of N. Y. Life Ins. Co., 72 N. H. 551, 58 the policy, N. Y. Life Ins. Co. v. Atl. 41. But see § 78. Mcintosh (1906), 41 So. 381. ^ N. Y. Life Ins. Co. v. Babcock, 104 ^ Waters v. Security L. & Ann. Co. Ga. 67, 30 S. E. 273; but compare (N. C, 1907), 57 S. E. 437 (citing Starr v. Mut. L. Ins. Co., 41 Wash. 228, many cases). 83 Pac. 116. 8Eng. Mar. Ins. Act (1906), §23, 8 Starr v. Mut. L. Ins. Co., 41 Wash, omits rate as an essential; "reasonable 228, S3 Pac. 116. Compare the cxtraor- 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 impUed, 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 Fames 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. Div. 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 Oil Co. v. Norwich Ins. Co., 34 Ore. 228, 55 Pac. 435. It is also essential that there should be mutu- ality of obligation, Reynolds v. Mut. F. Ins. Co., 34 Md. 280, 6 Am. Rep. 337. Closing of contract or delivery of policy and liability for premiums are concurrent, Hardwick 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. Co.v, 63 Ark. 204, 37 S. W. 877; Jones v. A". Y. Life Ins. Co., 168 Mass. 245, 47 N. E. 92; Pac. Mid. Ins. Co. V. Shaffer, 30 Tex. Civ. App. 313, 70 S. W. 566. Court refused specific performance where insured would not have been bound for premium except for ratification after loss of his agent's unauthorized act in taking insurance, Ins. Co. V. Sclwll, 96 Md. 225, 53 Atl. 925, 61 L. R. A. 300. As to general rule that the person for whose benefit the insurance is taken may adopt and ratify it even after loss, see Waring v. Ind. F. Ins. Co.. 45 N, G. 606, 6 Am. Rep. 146; Herkimer v. Rice, 27 N. Y. 163, 179, but in these and other similar cases 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 Keighley v. Duraid (1901), App. Cas. 240. 2 Michigan Pipe Co. v. Mich. F. & M. Ins. Co., 92 Mich. 482, 52 N. W. 1070, 20 L. R. A. 277. 3 Clark V. 7ns. 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; Bell v. Peabody Ins. Co., 49 W. Va. 437, 38 S. E. 541; Sheldon v. Hechla Fire Ins. Co., 65 Wis. 436, 27 N. W. 315 (the companies not agreed upon). Thus, the court says: "An un- evinced mental determination to accept a proposition to enter into a contract is not sufficient to establish tlie 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. Kederland Life Ins. Co., 104 Fed. 486, 43 C. C. A. 653; Stephens v. Capital Ins. Co., 87 Iowa, 283, 54 N. W. 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; Busherv. New York Life Ins. Co., 72 N. H. 551, 58 Atl. 41; Hartford Steam B. Insp. Co. v. Lasher Stocking 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 Grier v. Mut. Life Ins. Co., 132 N. C. 542, 44 S. E. 28. So also when such a policy is duly deposited in post office, postage prepaid, Triple 100 GENERAL PRINCIPLES 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 his. Co. v. Wilson, 187 U. S. 467, 23 S. CJt. 189, 47 L. Ed. 261; Harnic: ell v. A'. 1'. 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. iV. Y. Life Ins. Co., 124 N. C. 395, 32 S. E. 733; Ro"al Ins. Co. v. Beatt'i, 119 Pa. St. 6, 12 Atl. 607, 4 Am. St. R. 622. Nor does unreasonable delay, Ala. Gold. L. Ins. Co. v. Ma^es, 61 Ala. 163; Winchell v. lo-a State Ins. Co., 103 Iowa, 189, 72 N. W. 503; Brink v. Merchants' & F. Mid. Ins. Co., 17 S. D. 235, 95 N. W. 929; Conn. Mut. L. Ins. Co. V. Rudolph, 45 Tex. 454; but see Phcenix Ins. Co. v. Hale, 67 Ark. 433, 55 S. W. 486; Pic' ett v. German F. Ins. Co., 39 Kan. 697, 18 Pac. 903; Mallette v. Brit.-Am. Assiir. Co., 91 Md. 471, 46 Atl. 1005; Robinson V. U. S. Ben. Soc, 132 Mich. 695, C4 N. W. 211. Retention of premium by insurance company is some evidence that contract was closed, TucLer v. Dairy Mut. Ins. Co., 116 Iowa, 37, 89 N. W. 37; Moulton v. Masonic Mid. Ben. Assn., 64 Kan. 56, 67 Pac. 533, and see Keen v. Mut. L. Ins. Co., 131 Fed. 559. If 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 Life Ins. Co., 128 Cal. 531, 58 Pac. 180; .V. 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. Co. 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. Wiclham (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 Court v. Davis, 129 Mich. 318, 88 N. W. 874; but com- pare Heiman v. Phoenix 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 presinned to express the intent of the parties. See § 8.5. 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; Wester7i Home Ins. Co. v. Hague, 41 Kan. 524, 21 Pac. 641, au- thority, Miller v. Northuestern Li;e Ins. Co., Ill Fed. 465, 49 C. C. A. 3LJ; 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 Falls 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. Emplogers' 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; Brown 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 PARTK'UI-AKS 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 understood, 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 rate "* of premium is to apply,^ or the same rate ^ or the same terms as before.^ (N. Y.) 18, and Hahn v. Guardian Assur. Co., 23 Ore. 576, 32 Pac. 683, 37 Am. St. R. 709, with Inf>. Co. v. Thornton, 130 Ala. 222, 30 So. 614, 5.5 L. R. A. 547, 89 Am. St. R. 30. A mere solicitor, or agent, employed to receive and forward applications can- not conclude a contract, Greenicich Ins. Co. V. Waterman, 54 Fed. 839, 4 C. C. A. 600, 6 U. S. App. 549; O'Brien v. Neiv 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); Montross v. Rojer Williams Ins. Co., 49 Mich. 477, 13 N. W. 823 (agency revoked); Kroeger v. Pitcairn, 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, reciuiring certifi- cate. Such statutes are constitutional, Noble V. Mitchell, 164 U. S. 367, 11 S. Ct. 110, 41 L. Ed. 472. Agent held liable where company was insolvent, Morton v. Hart, 88 Tenn. 427, 12 S. W. 1026. Agent of insurance company with 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. 60S, 36 U. S. App. 277. Payment of premium is some- times expressly made essential to the completion of the contract. Ea. Life Assur. Soc. V. Pettus, 140 U. S. 226, 11 S. Ct. 822, 35 L. Ed. 497; Russell v. Prudential Ins. Co., 176 N. Y. 178, 68 N. E. 252, 98 Am. St. R. 656; Roberts V. mna 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; >S7. Paul Fire & M. his. Co. v. Kelley (Neb. Apl. 1902), 89 N. W. 997; Pickett V. German Fire /?i.s\ Co., 39 Kan. 697, 18 Pac. 903. So also de- livery of policy sometimes made es- sential, Ray y. Security T. & L. Ins. Co., 126 N. C. 166, 35 S. E. 246; especially in life insurance, Paine v. Pac. Mut. Life Iiis. 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 Lis. Co., 50 Ohio St. 549, 35 N. E. 1060, 22 L. R. A. 708. 2 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. 4 Brit.-Am. Ins. Co. v. Wilson, 77 Conn. 559; Newark Mach. Co. v. Ken- ton Ins. Co., 50 Ohio St. 549, supra; Smith & Wallace Co. v. Prussian N^at. Ins. Co., 68 N. J. L. 674, 54 Atl. 4.58. 5 Cooke V. Ins. Co., 7 Daly (N. Y.), 555; Audubon y. Ins. Co., 27 N. Y. 216. ^Baldwin \. Phoenix Ins. Co., 107 Ky. 356, 54 S. W. 13, 92 Am. St. R. 362; Post v. .^tna Ins. Co., 43 Barb. 351; but compare where company had various forms of policies at different rates. Cotton v. Soidhtiestern Mut. L. Ins. Co., 115 Iowa, 729, 87 N. W. 075. ^Ames-Brooks Co. v. ..Etna 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, Scammell v. China Mid. 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 policy 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 ])e 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.^ 1 Ruggles 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. Mut. Ins. Co., 30 Minn. 464, 16 N. W. 363; Angell v. Hartford 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. Han- 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. Walsh, 54 111. 164; MaUettc v. Brit.-Am. Assur. Co., 91 Md. 471, 46 Atl. 1005. a Relief Fire his. Co. v. Shaw, 94 U. S. 574, 24 L. Ed. 291; Ins. Co. v. Colt, 20 Wall. (U. S.) 560, 22 L. Ed. 423; Hovmrd Ins. Co. v. Oiren's Admx., 94 Ky. 197, 21 S. W. 1037; Mallette v. Brit.-Am. Assur. Co., 91 Md. 471, 46 Atl. 1005; Hicks v. Brit.-Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424; Fish v. Cottenet, 44 N. Y. 538; 4 Am. Rep. 715; Ellis v. Albany City Fire Ins. Co., 50 N. Y. 402, 10 Am. Rep. 495; Van Loan v. Farmers' Mut. Fire Ins. Co., 90 N. Y. 280; Lenox v. Greenwich 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 all terms must be expressly or impliedly agreed upon, § 78. The oral contract becomes merged in the policy when the latter is accepted, Merchants' Mut. 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- Culhi V. Plmnix Mut. Life Ins. Co., 18 W. Va. 782. i None of the clauses of the statute applies, Springfield F. & M. Ins. Co. V. De Jarnett, 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 i.s not applicable even tc reinsuiance, Merchants' Ins. Co. v. CONTRACT GOVKHM^U BY IKliMS 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 policy is delivered.^ ^^ 82. Contract Governed by Terms of Usual Policy. — Whether the contract of insvu'ance 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. App. 611; Se- curity F. Ins. Co. V. Keritvcky, 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, Fideliti/ & Cas. Co. V. Ballard, 20 Kv. L. R. 1169, 48 S. W. 1074. The usi'ial 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. 90S. jNIoreover, 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; Phoenix Ins. Co. V. Ireland, 9 Kan. App. 644, 58 Pac. 1024; Parish v. Wheeler, 22 N. Y. 494; Lloyd v. West Branch Batik, 15 Pa. St. 172; and see Goodhue v. Hartford Fire his. Co., 175 Mass. 187, 55 N. E. 1039. A preliminary oral contract is valid, San ford v. Orient his. Co., 174 Mass. 416, 75 Am. St. R. 358, 54 N. E. 883. Same rule applies to mutuals, Brown v. Franklin Mid. 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 of 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 instired, at all events after notice of them is received. Ins. Co. v. A'orton, 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. 674,54 Atl. 458.^ ^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 his. Co. v. Fritz, 61 N. J. L. 211, 39 Atl. 910; Neirark Machine Co. v. Kenton Ins. Co. . 50 Ohio St. 549. 556, 35 N. E. 1060, 22 L. R. A. 768 Same rule in marine insurance, Ruger v. Firemen's Fund Ins. Co., 90 Fed. 310. Ill I t;h.\hi;.\i. ii;i\( iri.i.s oi' iNsi itANc i; law moment of closinj; the contract, although the poHcy may not be received until after the loss, and althou^'h, through ignorance of its conditions, he may have forfeited his rights thereunder.' For exani[)le. the insured, tliough suing on the hinder f)r i)rermiinary oral contract, must oh.serve the provisions of the fire insurance policy re- lating to i)roofs of loss and limitation of time h.r bringing action.' And in like manner the terms of the usual policy are binding upon the company. Thus, it can cancel the binder during its life only by complying with the provisions of the standard hve-day cancellation clause. •"* §83. Same Subject- Form of Action.— Where the agreement is for i^rescnt insurance and loss occurs l)efore the policy is issued, the action may be brought as at connnon law upon the binder or oral contract, including in it i)y inference the terms of the standard or usual policy.^ I /)(■ Grorc v. Mctrop, Ins. Co., 61 N. Y. 602, 19 Am. Hep. 30"); Lipmnn v. Xiaqara Fire In.s. Co.. 121 \. ^'. 454, 24 N. K. 69'.); Sonhorti v. Firemrin's Inn. Co., 16 Gray (Mas.s.), 44S. - IIic':.<( V. Brit.-Am. AsNur. Co., 162 N. Y. 284, .'J6 N. E. 743, 48 L. R. A. 824. Cojilra, for example, Xcbraska Ins. Co. V. Seivcrs, 27 Neb 541, 43 N. W. 351; Hanhcick v. State Ins. Co., 23 Orcg. 290, 31 Pac. 6.")6. I?ut if llie company repudiate brtbilify and re- fuse to issue a policy, no proofs of loss need be served, Campbell v. Ins. Co., 73 Wis. 100, 40 N. W. 661. 3 Van Tassel v. Greenn-ich Ins. Co., 151 N. Y. 130, 45 N. K. 365, finally after many trials and appeals alfirmud, 184 N. Y. 607; but the fifteen-day binder expires at the end of the period specified, Undenrood v. Greenwich Ins. Co., 161 N. Y. 413, 55 N. E. 936. (the adoption of the N. Y. city fifteen- day binder followed this litigation). After de-liverj^ of policy the insured is conclusively presumed to be ac- quainted with its terms and is boinid by them, whether he has read the policy or not, Fletcher case, 117 I'. S. 519, 6 S. Ct. 837, 29 L. Ld. 934; Monitor Mut. Fire Ins. Co. v. Ihifjnm, 115 Mass. 343; Allen v. German-Am. Ins. Co., 123 N. V. 6, 25 N E. 309. ^ Van Tassel v. Greenuich Ins. Co., 151 N. Y. 1.30, 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 X. Y. .5.55. 57 N. E. 1104; Kerr v. Union Mar. Ins. Co., 124 P^ed. 835; but see Xebraska Ins. Co. v. Seivers, 27 Neb. 541. 43 N. W. 351; Hardwick V. Slate 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' Mut. Ins. Co. v. Lipnan, 15 Wall. 664. 21 L. Ed. 246; ^ Kleis v. Xiaqara Fire Ins. Co., 117 Mich. 469, 76 N. W. 155; Roberts v. Security Co., (1897), 1 Q. B. HI. A present con- tract of insurance must be distin- guished from a promise to grant or renew insurance in future, M isselhorn 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. Phoenix 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, Ellis v. Albany City Fire Ins. Co., .50 N. Y". 402, 10 Am. Rep. 495; McCabe v. ,Ftna his. Co., 9 N. D. 19, 81 N. W. 426, 47 L. R. A. 641; Baldwin v. Phcenix Ins. Co., 107 Ky 356, 54 S. W. 13, 92 Am. St. R. .362; 1 y 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 J3EST KV11>E.\CE 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. § 85. 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, Sproul v. Western Assur. Co., 33 Ore. 98, 54 Pac. 180. If no policy has been deHvered before loss suit may be upon the agreement, Fire Ins. Co. V. Sinsabaugh, 101 111. App. .55; Preferred Ace. Ins. Co. v. Stone, 61 Kan. 48, 58 Pac. 986; Sanford v. Orient Ins. Co., 174 Mass. 416, 54 N. E. 884, 75 Am. St. R. 358; Campbell v. Am. Fire Ins. Co., 73 Wi.s. 100, 40 N. \V. 661. As to Avhether in action for breach of promise to issue policy, the provisions and limitations contained in policy are applicable, compare Hicks v, Brit.-Am. As.'^ur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424. with Hardwick v. State 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; Campbell v. Ins. Co., 73 Wis. 100, 40 N. W. 661. So also the assured may maintain action in equity to com- jiel 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 policy already issued, Langan v. Supreme Council, 'l74 N. Y. 266, 66 N. E. 932. 1 Liverpool & London & Globe Ins. Co. v. Kearnei/, 180 V. S. 132, 21 S. Ct. 326, 45 L. Ed. 460; Hart v. StajuJard his. Co., L. R. 22 Q. B. D. 499. 2 Ins. Co. V. Mown/, 96 U. S. 544, 24 L. Ed. 674; Ins. Co. v. Lymaji, 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 his. Co. V. Roost, 55 Ohio St. 581, 45 N. E. 1097, 36 L. R. A. 2.36. 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. Ct. 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, Northwesteryi Life 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, z5 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. Farmers' Mid. Ins. Co., 91 Mo. App. 523. The binding slip, if there be one, has been held admissible to explain ambiguity in policy, Saun- ders v. Agricultural Ins. Co., 167 N. Y. 261, 60 N. E. 635; Phanix F. Ins. Co. V. Gurnee, 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, Fran.Ain. 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, Robe.'ison v. 106 ttENKKM. IMtIM II'M S <)K ISSI!RANCK LAW It is to be ohscrvrd that tl.o h.n^ua^'o ..f the l^olicy is not in all cases conclusivclv l.nulinji and ciTcrtivc: for f^n.unds may sometimes exist for relief in e<,uity. Tl.us. i.. a dear rase of mutual mistake of fact '-that is. where it plainly api-ais - l.y evidence outside the contract that the real ajireement of the parties is other than that Pvidenre • /n.s. Co. V. Thomas, '.i Jolins. ('as. 1. In interpreting the meaning and legal clTect 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, So 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 surrounding cir- cumstances, Phetlcplace v. Brit. & For. Ins. Co., 23 R. I. 26. 31, 49 Atl. 33, citing many cases. A conditional de- livery maybe proved by parol. Under- wood V. Grcemvich Ins. Co., 161 N. Y. 413 5.5 N. E. 936; Hartford Ins. Co., Wilson. 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 Vieu' Bldg. Ass7i.. 183 U. S. 308, 22 S. Ct. 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 U. S. 467, 478, 23 S. Ct. 189. 47 L. Ed. 261. 1 Dougherty v. Greenwich Ins. Co., (N. J.) 33 Atl. 295. - The evidence must be " clear, un- equivocal and convincing," United Stntes 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 sufficient, Trustees V. Delaware his. 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. Curie]/, 134 N. Y. 148, with Boyertown Xat. Bank v. Hartman, 147 Pa. St. 558; Highlands v. R. R. Co., 209 Pa. St. 286 3 Dalton v. Mil. Much. Ins. Co., 126 Iowa, 377, 102 N. W. 120; Slobodisky v. French. ■{ Ka.st . 130. or that the char- acter of occupancy of nroperty wa.s intended to be other than that de- scribed in policv. .Irnnini/s wChttunigo .Mut. /h.s. r<(.. 2 Denio (N. Y.), 75. And a pamphlet. (•irn the same principle, it is held that the special clauses or riders stamped on the policy, 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; Favst V. Ins. Co., 91 Wis. 158, 64 N. \V. 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- dum clause of the fire insurance policj- 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 manufacture, and the making of them for that purpose, if such be the ordi- nary course of the business, although the use of such articles be prohibited as extra hazardous by the printed terms of the policy, Bri;ant v. Poughheepsie Mut. Ins. Co., 17 N. Y. 200. And see Haley v. Dorchester Fire Ins. Co., 12 Gray (Mass.), 545. So as to general printed clauses applicable to a voyage policy left in an English Lloyd's policy filled up and intended as a time policy, Dudgeon v. Pembroke, 2 App. Cas. 284. Similarly as to controlling effect of words written in the margin or at the foot of policies, and especially marine policies, Chadsejj v. Guion, 97 N. Y. 333; Swinnerton v. Im. Co., 37 N. Y. 174, 93 Am. Dec. 560; Bruce v. Ins. 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 onlj-," written upon the margin, prevail over any incon- sistent 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 lo.ss by lightning" prevails over printed clause exempting company from lia- bility, Haws V. Ins. Co., 130 Pa. St. 113, 15 Atl. 915, 2 L. R. A. 52. 1 St. Paid F. & M. Ins. Co. v. Kidd, 55 Fed. 238, 5 C. C. A. 88, 14 U. S. App. 201; Gunther v. L. & L. & Globe Ins. Co., 34 Fed. 501; Jackson v. Brit.- A7n. Assur. Co., 106 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. his. Co. V. Hazeleft, 105 Ind. 212, 4 N. E. 582, 55 Am. Rep. 192. A rider pasted or attached 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; Hardii 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. 560, 62 N. E. 980; Shakman 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). ^Orient Mut. Ins. Co. v. Wright, 1 Wall. 456, 17 L. Ed. 505; Richerson 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 was, RickersQii v. German-Am. Ins. Co., 6 App. Div. 550, 39 N. Y. Supp. 517; Daniels v. Hudson River Fire Ins. Co., 12 Gush. (Mass.) 416, 59 Am. Dec. 192. So circumstances in connec- tion with the execution of the policy may be considered in determining the intention of the parties, Pietri v. Segue- not, 96 Mo. App. 258, 69 S. W. 1055. In case of doubt may show the cir- cumstances surrounding the parties at time of execution, Borigui v. Spring- field F. & M. Ins. Co., 34 Minn. 352, 25 N. W. 796; Boyd v. Mississippi Homt Ins. Co., 75 Miss. 47, 21 So. 70S; Bole v. .V. //. Ins.^ Co., 159 Pa. St. 53, 28 Atl. 205; McKeesport Mach. Co. v. Ben Franklin Ins. Co., 173 Pa. St. 53, 34 no GENERAL PUIN'CIPLES UF INSURANCE LAW uncertain, clear up what is doubtful, or annex incidents, but not to varv or contradict its terms.' Trade usa^e may be shown to explain the meaning of technical words or phrases. - All. 1(1; Ciirr v. Montefiorc, X\ L. J. (I H. ■_'")(■). Thi.s i.s not to disniitt' the \vrit(fii contract hut to put tlic court 94, 99, G2 N. E. lOGG. The actual in- tent of only one party is not to be .shown by extrinsic testimony nor are . I he position of the parties in inter- customs known only to underwriters preiuii; Its probable meaniuK. Only rircuniKtances known or presumed to be known by both parties are relevant fur such a pin|io.s(>, Rickcrson v. Ihivtjord F. Itis. Co., 149 N. Y. 307, 4;? N. K. S.")(); lliid'inug S. Co. v. Ind. .MhI . clc. Co. llS{)r-,), 1 Q. H. 500. competent against the assured, Rick- rr.so« V. Ilnrtjord F. Ins. Co., 149 N. Y. 307, 43 N. E. 85G. Custom admissible as to time of attaching of the risk, Chvdmul Oil Co. v. Norwich Inn. Co., 34 Ore. 22S, 55 Par. 435. It is not competent to show custom to accept in ca.se of doubt the interpretation applications from persons who have .subsequently put upon the con'.ract attempted suicide, Louts v. Conn bv the parties in its performance may Miit. L. I. Co., 5S App. Div. 137, 68 be evidence of their intent. Manhattan N. Y. Supp. GS3, alY'd 172 N. \. G59, Life Ins. Co. V. Wriifht, 12G Fed. 82, 01 C C. A. 138; lirookli/n In.f. Co. v. Dutcher, 95 V. S. 2G9, 273, 24 I.. 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 G5 N. E. 1119. Nor to show that a life company has .sometimes accepted past- due premiums, Easier/ v. Ins. Co., 91 Va. IGl, 21 S. E. 235. Nor to show the universal understanding and prac- tice of the trade in respect to the pro rata phra.se of the reinsurance rider, construction put upon a contract by Home In.H. Co. v. Continental Ins. Co., the parties to it is sometimes almost 180 N. Y. 389, 73 N. E. 65. And where conclusive as to the meaning," Nicoll term of reinsurance is definitely de- V. Satuls, 131 N. Y. 24, 29 N. E. 818. scribed, custom to i.ssue for same term And see Woolscy v. Funke, 121 N. Y. as direct insurance cannot be shown, 9'' 24 N E 191 ; Phetleplace v. Brit. & Milwaukee Mechanics' Irus. Co. v. For. Ins. Co., 23 R. I. 26, 49 Atl. 33. Palatine Ins. Co., 128 Cal. 71, 60 Pac. An admission by the insured as to what 518. Opinion cannot be received as property was intended to be covered proof of usage, Greenwich Ins. Co. v. was received against him in Leftwich Waterman, 54 Fed. 839, 4 C. C. A. 600. V. Roi/al Ins. Co., 91 Md. .596, 46 Atl. 1010.' '» Moore v. United States, 196 l'. S. 157, 166, 25 S. Ct. 202; Lillard v. Kentucky, etc., Co., 134 Fed. 168; Grace v. Ins. Co., 109 V. S. 283, 3 S. Ct. 207, 27 L. Ed. 932; Connelly v. Assn., 58 Conn. 552, 20 Atl. G71, 9 L. R. A. 428, 18 Am. St. R. 296; Glendale Woolen Co. v. Ins. Co., 21 Conn. 19, 54 Am. Dec. 309; Bornzewski V. Middlesex .Usnr. Co., 186 Mass. 589, 72 N. E. 2.50; Mooney v. Howard Ins. Co., 138 Ma.ss. 375, .52 Am. Rep. 277. The New York court says: "Custom or I'njust 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; his. 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- toivn Ins. Co., 131 Mass. 300; Phcenix Ins. Co. V. Ryland, 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 asage is presumed to enter into the in- York customs, German Am. Ins. Co. v tention when it is found as a fact, not only that it existed, Init was uniform, rea.sonable 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 ii in mind at the time," London Assur. Corp. v. Thompson, 170 N. Y. Commercial Ins. Co., 95 Ala. 469, 11 So, 117, 16 L. R. A. 291. Every under- WTiter is presumed to know the usages of the trade he insures. If he does not he' ought to inform himself, Hearne v. Mar. Ins. Co., 20 Wall. 488, 492, 22 L. Ed. 395; Parsons v. Mass., etc., Co., 6 Mass. *197, *204; McCall 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, wall be construed in favor of the insured.^ Mut. Ins. Co., 66 N. Y. 505, 513; Mer- chants & Mfrs. his. Co. V. ShiU'ito, 15 Ohio St. 559, 566, Mey v. South Car. Ins. Co., 3 Brev. (S. C.) *329, *331; Noble V. Kennoicaif, 2 Dougl. 513, Mansfield, J.; Da Costa v. Edmunds, 4 Camp. 143, Ellenborough, J.; whether such practice is recently established or not, Macy v. Ins. Co., 9 Mete. (Mass.) 354. Usage of trade is equiva- lent to notice to underwriter, Mount V. Larkins, 8 Bing. 108, 122. "He took the risk on the supposition that what was usual and necessary should be done," Eyre v. Mar. his. Co., 5 Watts. & S. (Pa.) 116. "It is absurd to suppose that when the end is in- sured the usual means of attaining , it are to be excluded," McCall v. Sun Mut. Ins. Co., 66 N. Y. 505, 513. 1 Mason v. Skurray, 1 Marsh. 226, Lord Mansfield; Preston v. Greenwood, 4 Dougl. 28, Lord Mansfield; Long v. Allan, 4 Dougl. 276, Buller, J. Lord Mansfield says: "What is usually done by such a ship, or such a cargo, in such a voyage is understood to be referred to in every policy and to make a part of it as much as if it was expressed," Pelly X. Royal Exch. Ass. Co., 1 Burr. 341. This does not vary the terms of the policy; it "introduces matter upon which the policy is silent," Blackett v. Rowl Exch. Ass. Co., 2 Cr. & Jer. 249; Hull V. Janson, 4 E. & B. 504, 24 L. J. Q. B. 101. The marine policy was largely founded upon usage, Ocean S. Co. V. .Etna Ins. Co., 121 Fed. 882. And see § 10. General and known usages of trade determined by a course of judicial decision form part of the law merchant and as such are thence- forward judicially noticed by the courts, Barnett v. Brandao, 6 M. & Gr. 630; but a particular or local cus- tom must be affirmatively established by evidence and shown to have been known to both parties, Walls v. Bailey, 49 N. Y. 464; Pelly v. Royal Exch. Ass. Co., 1 Burr. 341; Gabay v. Lloyd, 3 B. & Cr. 793; Bartlett v. Pent- land, 10 B. & Cr. 760. 2 Liverpool cfc London & G. Ins. Co. V. Kearney, 180 U. S. 132, 45 L. Ed. 460; American Surety Co. v. Pauly, 170 U. S. 133, 144, 18 S. Ct. 552; Thompson V. Ins. Co., 136 U. S. 287, 10 S. Ct. 1019; American S. S. Co. v. Indemnity Mut. Mar. Ins. Co., 108 Fed. 42f; Forest City Ins. Co. v. Hardesty, 182 111. 39. 74 Am. St. R. 161, 55 N. E. 139; Janneck v. Met. Life Ins. Co., 162 N. Y. 574, 57 N. E. 182; Kratzen- stein V. Western Assurance Co., 116 N. Y. 54, 22 N. E. 221; Foot v. Mna Fire Ins. Co., 61 N. Y. 571; Hoffman V. .Etna Fire Ins. Co., 32 N. Y. 405, 88 Am. Dec. 339; but see Kirk v. Home Ins. Co., 92 N. Y. App. Div. 26, 86 N. Y. Supp. 980. And where the assured furnishes the description of the property, as to that the rule may be modified, London Assur. Corp. v. Thompson, 170 N. Y. 94, 62 N. E. 1066; but the description of the property which is often compara- tively Drief and general should be held to be inclusive rather than ex- clusive, no matter who prepares it, Rickerson v. Hartford F. Ins. Co., 149 N. Y. 307, 43 N. E. 856. And compare, for general rule, Nostrand v. Knight, 123 N. Y. 614. As to location of movable property in a business plant, see McKeesport Machine Co. v. Ben Franklin Ins. Co., 173 Pa. St. 53, 34 Atl. 16. In Lite v. Firemen's Ins. Co., 104 N. Y. Supp. 434, landlord's policy on profits was construed as open and not valued on partial loss. Compare construction of valued policy on freight in N. Y., etc., S. Co. v. Royal Exch. Assur., 145 Fed. 713. Conditions are construed strictly against the insurer, Robinson v. Ji!tna Ins. Co., 128 Ala. 477, 30 So. 665. The New York court says: "The words of the policy should not be taken in any technical or nar- 112 GENERAL I'lnXCIPLKS OF INSURANCE LAW §91. Forfeitures not Favored.— The same principle is para- phrased in tlic niaxim ihat forfeitures are not favored,' and, there- fore, eq\iiv()cal wcrds, or provisions repugnant to one another, will he so corjstrued as to give effect to the instrument rather than to avoid it.= liut the fair and reasonable intendment of a condition, though technical, must not be frustrated by such rules of interpreta- tion. Thus, a deed of trust was held to be in effect a chattel mort- gage and to forfeit a fire ])olicy prohibiting stich incumbrance with- out written permit/' Tlie atloption of a standard form of Hre policy has not changed the rules of construction previously ))revailin.u- in this regard.^ row souse. 'I'lioy need not be Uiken in tiie sense in which they may have been understood by underwriters, l)Ut they must be takeii in their orihnary sen.se as commonly u.sed and understood. We must endeavor to ascertain how tlie insured understood and could properly understand them," Hcrnnan v. Me- chanics' I Hi:. Co., 81 N. Y. 184; //o//- man v. .Etna Fire Ins. Co., 32 X. \. 405. And the rule applies to mutual companies though members are charged with a knowledge of by-laws, Brock v. Brotherhood Ace. Co. (Vt., 1903), 54 ' Atl. 17(). So also beneficiary associa- tion. .Matthc.'i v. Imperial Ace. Assn., 110 Iowa. 222, 81 N. W. 484. 1 The court says: "Courts have ahvay.s set their faces against an in- surance company, which, having re- ceived its premiums, has sought by a technical aefense to avoid payment," Mut. L. Ins. Co. V. /////. 193 V. S. 551. .559. 24 S. Ct. 538. ' McMaster v. Xew 'i'ork Life Ins. Co., 183 U. S. 25, 46L. Kd. 64; Hart- ford F. Ins. Co. V. Unsell, 144 U. S. 439, 12 S. Ct. 671; Sni/der v. Ins. Co., 59 N. J. L. 544, 37 Atl. I(r22; Phoenix Ins. Co. V. Tomlinson. 125 Ind. 84, 21 Am. St. R. 203; Woodmen's Acci- detil Assn. v. Byers, 62 Neb. 673, 87 N. \V. 546. 55 L. R. A. 291; Baleif V. Homestead Fire Ins. Co., 80 N. Y. 21, 36 Am. Rep. 570. In Rickerson v. Hartford Fire Ins. Co., 149 N. Y. 307, 313, 43 X. E. 856, the court adopts Mr. May's rule and says: "No rule in the interpretation of a policy is more fully established or more imperative and controlling than that which de- clares that in all cases it must be liber- ally construed in favor of the insured, so as not to defeat without a plain necessity his claim to tlie indenmity, which in making the insurance it wls his object to secure. When the words are susceptible of two interpretations that which will sustain his claim and cover the loss, must in preference be adopted." So no intendment in favor of forfeiture should be indulged in, Xorthwestern Mid. Life Assn. v. Schulz, 94 111. App. 156. Nevertheless the United States Supreme Court said: "Forfeitures are necessary and should be fairly enforced," Xederland L. Ins. Co. V. Meinert,199 U.S. 1m. 3 Hunt v. Springfield F. & M. Ins. Co., 196 U. S. 47, 25 S. Ct. 179, 49 L. Ed. 381. A conspicuous illustration of the principal rule and far distant from the last case stands, Michael v. Prussian Nat. Ins. Co., 171 N. Y. 25, 63 N. E. 810, in which it was held that transfer of gross earnings to a pool was no change of interest whatsoever under use and occupancy insurance, though pool agreement provided that despite fire assured should continue to receive full percentage of pool earn- ings. "Loss payable as their interest may appear," held, not equivalent to permit for chattel mortgage in Atlas Reduct. Co. V. New Zealand Ins. Co., 138 Fed. 497. To avoid forfeiture vio- lence must not be done to the lan- guage of the instrument, Behling v. Northwestern Nat. L. I. Co., 117 Wis. 24, 93 N. W. 800; Peabodij v. Satterlee, 166 N. Y. 174, 179, 59 N. E. 818, 52 L. R. A. 956. * Matthews v. Am. Cent. Ins. Co., 154 N. Y. 449, 456, 48 N. E. 751. The object of the New Y'ork statute is de- clared to be to provide a uniform con- tract or policy of fire insur;... :e — not to prescribe terms which s'lculd seem to the legislature reasonable, Walradt V. Phf£ni.t Ins. Co., 136 N. Y. 382, 3? WHAT LAW GOVERNS CONSTRUCTION OF CONTRACT 113 § 92. What Law Governs Construction of Contract. — Ordinarily the laws and usages of the place where the contract of insurance is made are to be applied in its interpretation and construction.^ This rule is peculiarly appropriate to this branch of the law be- cause in insurance there may be several places where the contract is operative — one place for the payment of premiums, another for the payment of loss, and a third for the location of the subject of insur- ance. But if the policy provides that the premiums and loss are to be paj'able at the home office, the latter place would seem to be the place of performance, and there w^ould in that case be cogent reason for holding, in analogy to the general rule,^ that its law is to prevail in the construction of the policy.^ It is often important to determine by what law the validity and N. E. 1063. When the original act was passed, the form of poHey had not yet been adopted. Its preparation was left to insurance men, and by sec- tion 3 of the act it was pro^■ided that any pohcy made in terms inconsistent with the provisions of the act should nevertheless be binding upon the com- pany, L. 1886, c. 488; L. 1892, c. 690, § 121. 1 Mut^ Life Ins. Co. v. Hill, 193 U. S. 551, 24 S. Ct. 538; Mut. Life Lis. Co. v. Cohen, 179 U. S. 262, 21 S. Ct. 106, 45 L. Ed. 181; Equitable Life Asstir. Society v. Clements, 140 U. S. 226, 11 S. Ct. 822, 35 L. Ed. 497. The Federal Supreme Court says: "Contracts are to be governed as to their nature, their validity and their interpreta- tion, by the law of the place where they were made unless the contract- ing parties clearly appear to have had some other law in view," Liver- pool, etc., S. Co. V. Phoenix Ins. Co., 129 IT. S. 397; Washington Life Ins. Co. v. Glover, 78 S. W. 146 (Ky., 1904); Su- preme Conncil of American Legion of Honor v. Getz, 112 Fed. 119, 50 C. C. A. 153; Carrollton Furniture Mfg. Co. v. Am. Credit Indemnity Co:, 124 Fed. 25, 27, 59 C. C. A. 545. The place of the contract is usually where the policy is delivered and the first pre- mium paid, City of Lale Charles v. Ins. Co., 114 La. 836, 38 So. 578; but if possible the intent of the parties as to what law governs is to be ascer- tained, Bottomley v. Met. Life Ins. Co., 170 Mass. 274, 49 N. E. 438; Union Cent. Life Ins. Co. v. Pollard, 94 Va. 146, 26 S. E. 421, 36 L. R. A. 272, 64 Am. St. R. 715, but see Dolan v. Mut. 8 Res. Fund L. Assn., 173 Mass. 197, 53 N. E. 398. Considerations based on justice and public policy may deter- mine what law shall applv, N. Y. Life Ins. Co. v. Cravens, 178 U. S. 389, 20 S. Ct. 962, 44 L. Ed. 1116; Sei/k V. Millers' Nat. Ins. Co., 74 Wis. 67, 41 N. W. 443, 3 L. R. A. 523. When the contract is completed by mailing the policy to the assured in another state, the place of mailing is the place of the contract and its law prevails, Hartford S. B. I. & Ins. Co. v. Lasher Stocking Co., 66 Vt. 439, 29 Atl. 629. In the absence of evidence to the contrary the presumption is that the laws of the other state are the same as those of the forum, Stewart V. Union Mut. L. Ins. Co., 155 N. Y. 257, 264. 2 London Assur. Co. v. Companhia de Moagens, 167 U. S. 149, 17 S. Ct. 785, 42 L. Ed. 113. 3 Mid. Life Ins. Co. v. Phinney, 178 U. S. 327, 338, 20 S. Ct. 903; Summit V. U. S. Life Ins. Co., 123 Iowa, 681, 99 N. W. 563; Mut. Life Ins. Co. v. Bradley (Tex. Civ. App.), 79 S. W. 367; but where the contract was closed and the first premium paid in Massachu- setts the court concluded that the law of that state must apply though the policy provided that premiums and loss should be paid in New York. Millard v. Brayton, 177 Mass. 533, 537, 59 N. E. 436. See recent case in which Wisconsin court refused to enforce contract, though made in Philadelphia, because it violated a Wisconsin stat- ute, Presbyterian M . Fund v. Thomas, 123 Wis. 281, 105 N. W. 801. 114 GENERAL PRINCIPLES OF INSURANCE LAW effect of the policy are to be governed, because the statutory pro- visions, as well as usages and decisions,' relating to the insurance contract vary greatly in different states, and such statutes generally have no extraterritorial effect.^ If the policy provides that it will not be binding until counter- signed at a certain agency, the agency is ordinarily the place of contract;^ so if the policy is sent to the agent for delivery on receipt of the premium;*' but if the application is accepted at the home office, and the policy mailed from there to the applicant in another state, the home office will be the place of contract.^ As a general thing the contract is considered made where the last act necessary to complete it is done.^ § 93. Who Construes the Contract, Court or Jury.— The question whether judge or jury is to pass upon the validity and effect of the contract is intensely practical, because a court tries to construe the agreement according to its legal meaning and intent, whereas a jury 1 Thwing v. Gt. West. Ins. Co., Ill Mass. 93. 2 Prov. Sav. Life Ass. Soc. v. Bailei/, 118 Ky. 36, 80 S. W. 452; Mut. Life Ins. Co. V. Hill, 193 U. S. 551, 24 S. Ct. 538, 48 L. Ld. 788, which also holds that parties contracting outside of a state may incorporate into the con- tract the law of that state and make its provisions controlling. The same court lield that where the policy provided "claims to be adjusted according to the usages of Lloyds" it was to be interpreted according to English law, London Assur. v. Companhia de Moa- gens, 167 U. S. 149; but parties mak- ing a contract in a certain state nmst not by that method be allowed to evade a statutory rule of public policy; for example, the Massachusetts stat- ute requiring attachment of correct copy of application to life insurance policy, Albro v. Man. Life Ins. Co., 119 Ked. 629. See ch. VI, infra. 3 Continental Life Ins. Co. v. Webb, 54 Ala. 6S8; Antes v. Slate Ins. Co.. 61 Neb. 55, 84 X. W. 412. i Thwing v. Great Western Ins. Co., Ill Mass. 93. ^Commonwealth, etc., Ins. Co. v. Knahe Co., 171 Mass. 265, 50 N. E. 516; Daniels v. his. Co., 12 Cush. (Mass.) 416; 59 Am. Dec. 192; Cook V. Johnson, 3 Dutch. (N. J.) 645, 72 Am. Dec. 379. » Xorthampton Live Stock Co. v. Tuttle, 40 N. J. L. 476; or where the acquiescence of the minds of the parties is completed. Fidelity Mut. Assn. v. Harris, 94 Tex. 25, 57 S. W. 635, 86 Am. St. R. 813. The act of final assent fixes the place of the contract, Meyer V. Supreme Lodge, 178 N. Y. 63, 70 N. E. Ill, 64 L. R. A. 839; Coverdale v. Royal Arcanum, 193 111. 91, 61 N. E. 915; Born v. Home Ins. Co., 120 Iowa, 299, 94 N. W. 849. The court, how- ever, must always endeavor to give effect to the intention of the parties as disclosed by the terms of the contract or by other competent evidence, and in one case though the contract was made in New Hampshire the court concluded that the parties intended the law of another state to apply largely because the New Hampshire standard statutory form of policy had not been employed, Davis v. ^tna Mid. F. Ins. Co., 67 N. H. 218, 34 Atl. 464, 67 N. H. 335, 39 Atl. 902. And in another case the court went so far as to conclude that the parties in- tended that the laws of Missouri should apply though the contract declared that it should be construed according to the laws of New York, Pietri v. Leguenot, 96 Mo. App. 268, 69 S. W. 1055. The last act done to complete contract is significant. Supreme Lodge V. Meyer (U. S.), 25 S. Ct. 754; Equi- table L. Assur. Soc. v. Perkins (Ind. App.), 80 N. E. 682. WHO CONSTRUES THE CONTRACT, COURT OR JURY 115 is too apt to consider an insurance an absolute contract of indemnity regardless of warranties, and is prone to find for the insured unless his claim is characterized by some element of dishonesty or bad faith. The general rule is that the interpretation of the meaning of the policy falls within the province of the court. It is, therefore, for the court to determine whether a given statement or stipulation amounts to a warranty.^ And if a warranty, as hereinafter shown, a state- ment must be exactly true, and a stipulation must be strictly fulfilled regardless of its materiality; ' but when the language employed to describe the thing warranted is not free from ambiguity, or when it is equivocal and its interpretation depends upon the sense in which the words are used in view of the subject to which they relate, the relation of the parties, and the surrounding circumstances properly applicable to it, the intent of the parties becomes a matter of inquiry, and the interpretation of the language used by them is a mixed question of law and fact. Such a question is to be submitted to the jury under appropriate instructions.'"* Whether the statement or stipulation warranted has or has not been comphed with is in its essence a question of fact. Such an issue if really amounting to a controversy belongs exclusively to the jury."* But if the testimony 1 But in most of our state courts the Orient Ins. Co. v. McKnight, 197 111. meaning and effect of the policy are 190, 64 N. E. 339; Long v. Beeher, 106 largely turned over to the determina- Pa. St. 466, 51 Am. Rep. 532; or under tion of the jury by application of the the standard fire policy whether it has doctrine of waiver and estoppel. Not been increased by any means within so in the federal and English courts, the knowledge or control of the in- Ch. VI-VIII. sured, Alston v. Greenwich Ins. Co., 100 2 Dwight V. Germania Life Ins. Co., Ga. 282, 29 S. E. 268; or whether the 103 N. Y. 341, 8 N. E. 654, 57 Am. applicant for a life policy was in sound Rep. 729, Held, error to leave it to health, Packard v. Metropolitan Ins. jury to say whether insured was en- Co., 72 N. H. 1, 54 Atl. 287; Plumb v. gaged in sale of liquor. Penn. Mut. Life Ins. Co., 108 Mich. 94, '■^Kenyan v. Knight Templars, 122 65 N. W. 611; or whether a vessel was N. Y. 247, 25 N. E. 299 (warranty re- seaworthy, iStorbwcA; v. Phoenix Ins. Co., garding occupation as liquor dealer). 47 App. Div. (N. Y.) 621, aff'd 166 And see Northwestern Life Ins. Co. v. N. Y. 593, 59 N. E. 1130. Indeed an Muskegon Bank, 122 \j. S. 501,7 S. Ct. issue of fact must not be withdraw7i 1221, 30 L. Ed. 1100 (warranty as to from the jury by the court if there be temperate habits). any rational doubt as to the falsity of < Thus, the court says: "AVhether a the statements, Henn v. Met. L. Ins. given state of admitted or proved Co., 67 N. J. L. 310, 51 Atl. 689; //^oWe^t facts works a forfeiture or lapse of a v. Met. Life Ins. Co., 165 N. Y. 13, 58 policy is a question of law for the de- N. E. 771 (warranty that no brother cision of the court. When there is an had died of consumption). If the facts issue about the facts, the matter should or inferences deducible from them are be submitted to the jury under proper in dispute the issue is for the jury, Mc- instructions," Mass. Ben. L. Assn. v. Farland v. U. S. Mut. Ace. Assn., 124 Robinson, 104 Ga. 256, 30 S. E. 918, Mo. 204, 27 S. W. 436; Foster v. Fidel. 42 L. R. A. 261. Thus, whether in fact ct Cas. Co., 99 Wis. 447, 75 N. W. 69, the risk of fire has been increased, 40 L. R, A, 833. "If reasonable minds 110 CJENKRAL I'KlNCirLKS (»K INSlUANri': LAW bearing upon sucli :in issue is without dispute, there remains no controvert 0(1 (luestion of fact.' in general it may be stated that if the facts are such that to the average mind only one inference is (leducible from them, tlie court nmst make a decision as matter of law.-' riiiglit rciich diffpront ronclusioiis as to tho ultiinalo fsict the (|Ucslion was one for tlic jurj',"' I'aunf v. FrnU-rnnl Ace. .•l.s.fMr. r«.', 119 lowii, 842. 345, 93 N. W. 3(11. I riiiled (I'.stiinony showed a.s- Hured kepi proliil)ited artielcs, carbon oil in bulk, dunther v. L. & L. & G. Ins. Co., 134 r. S. 110, 10 8. Ct. 448, 33 L. Ed. 857. So also alcohol, etc., Appleby V. Astor Fire /n.v. Co., 54 N. Y. 253. So also under standard fire policy it appearing that insured knew tliat risk was beint; increased, Alston V. (irccnn-ich Ins. Co., 100 (ia. 2S2, 29 S. E. 208. So where facts re- lating to physical condition were un- disputed, court directed judgment for company under life policy, Folei/ v. Roi/al Arcanum, 151 N. Y. 196, 45 N.E. 456. 56 Am. St. R. 621. And where statements relating to catarrh and sound health were palpably un- true, Lippincntt v. Supreme Council, 64 N. J. L. 309, 45 Atl. 774. So also if a portion of goods insured by a marine policy reach destination un- injured the jury maj'' not be permitted to find an actual total less, Washburn & M. Mfg. Co. V. Reliance Mar. Ins. Co., 179 r. S. 1, 21 S. Ct. 1,45 L. Ed. 49. And see as to similar issue under fire policy, Corbett v. Sprin/f Garden Ins. Co., 155 N. Y. 389. 50 N. E. 282, 41 L. R. A. 318 (new trial), 40 App. Div. 628, 58 N. Y. Supp. 148, aff'd 167 N. Y. 596. Compare cases where issue of total or partial loss is sent to jury, Liverpool & L. & G. Ins. Co. v. Heck- man, 64 Kan. 388, 67 Pac. 879; Thuriivjia Ins. Co. v. Malolt, 111 Kv. 917, 64 S. W. 991, 55 L. R. A. 277; Poppitz V. German Ins. Co., 85 Minn. 118,88N. W. 438. ^Donahue v. Ins. Co., 56 Vt. 380. And see Taylor v. Security Mat. F. Im. Co., 88 Minn. 231, 92 N. W. 952. The Connecticut court says: "Extreme cases either way may be easily deter- mined. Hetween them tiiere is a wide belt of deljatable ground, and ca.ses falling witiiin it are governed so mucli by the peculiar circumstances of each case that it is much better to deter- mine the matter as a question of fact,'" Lock wood V. Ins. Co., 47 Conn. 553. It is often difficult to determine whether the meaning and scope of the description of the property insured is for court or jury, thus two recent cases before the same court involved the question whether the building de- stroyed, a separate building in each case, could be included under the writ- ten description "additions." In Rick- erson v. Hartford F. Ins. Co., 149 N. Y. 307, 43 N. E. 856, the court held that the question should have been left to the jury. In Arlimjton Co. v. Colonial Assn. Co., ISO N. Y. 337, the court held as matter of law that the building was covered. The federal circuit court, however, in applying the same form of policy to the same facts had arrived at an opposite conclusion and had held as matter of law that the building was not covered, Arlinrjlon Mfg. Co. v. Ins. Co., 107 Fed. 602, 46 C. C. A. 542. In all these cases the facts were with- out dispute. It was the inferences only that differed. In another recent decision the court below held that a separate boiler house was not an " addi- tion," but supreme court reversed and held that it was, Guthrie Laundry Co. V. Northern Assur. Co., 87 Pac. 649, citing many cases. If there is doubt as to whether certain buildings or property are covered by the language of the policy the issue is for jury, Wolverine Lumber Co. v. Phoenix Ins. Co., 145 Mich. 558, 108 N. W. 1088. CHAPTER IV General Principles — Continued Representations and Concealments § 94. Introductory. — The peculiar character and conduct of the transaction have given rise to appropriately exceptional rules of law, applicable to the contract of insurance. Many of these rules became formulated in connection with marine insurance, the earliest branch, at a time when modern means of rapid transmission of news were unknown, and befors underwriters had attained to their present thorough methods of obtaining, and conveniently recording, mainly through the services of their own expert suiweyors, general descrip- tions of insurable properties of all kinds. ^ Nevertheless the essential nature, and also the conventional mode of consummating contracts of insurance upon propert}', especially when closed in the larger cities,^ are much the same as they were of old, and are commonly affected by much the same sort of environment. At the present day, with the enormous increase and concentration of values both in ships and in buildings, perhaps more than ever before, the public demand, and in response should receive, immediate protection against the con- tingency of future disaster from the operation of multiplied perils, some of them of intensified gravity.^ Now, as heretofore, the under- 1 As to fire insurance see § 15. The following cases refer to Lloyd's Lloyd's Lists are now amalgamated Lists and discuss the question, how far with the Shipping Gazette, De Hart & underwriters are presumed to kiiow Simey, Ins. (1907), p. 25. They con- their contents, Morrison v. Universal tain reports of departures of ships from Mar. Ins. Co. (1873), L. R. 8 Exch. 40, and their arrivals at ports, also casual- 197; Xicholson v. Power (1869), L. T. ties and other useful shipping news, N. S. 580; MacKintosh v. Marshall, 11 which is classified and posted for the M. & W. 116; Fri'ere v. Wooahouse, benefit of members and subscribers, Holt N. P. 572; and see 2 Duer, Mar. and afterwards recorded. Lloyd's Ins. 555. Register of British and Foreign Ship- 2 gee §§74-76. ping gives full details as to ships. ^ The enormous influx into this "A 1" is the symbol for the highest country of degraded foreigners greatly class of wooden vessels; "100 A 1" for increases the moral hazard of fire, the highest class of iron vessels. The wiring of buildings for various Lloyd's Captains' Register is a biograph- purposes, the multiplication of lofty ical dictionary of the certified mas- structures, the multiplied keeping of ters of the British mercantile marine, automobiles and gasolene, ana other [117] 118 GENERAL FRlNCirLES OF INSURANCE LAW writer is asked to assume the ])urden of an unknown risk or specula- tion, and, as sho\vn in the last chapter, he is asked to assume it forthwith! and in return for a premium comparatively trifling in amount. Nor is an applicant for insurance willing now, any more than formerly, to brook the delay involved in awaiting a present and special examination of his risk when proffered by him to his insurers. Nor, in most instances, is he willing to pay the increased cost neces- sitated by revising to date earlier reports or surveys of his property on file with the companies. And what is the subject of this engagement between the parties, proposed in the manner just described? In the answer to this ques- tion lies a crucial point, too often ignored or misunderstood. It is not the visible and tangible property at risk that directly constitutes the subject-matter of the underwriter's promise to grant indemnity for a possible loss. He is not asked to take over, or to give up, a property or any right in it, or to use or improve, or even to guard the property itself. The real subject of the contract is a mere risk of injury. It is a chance, and a chance only, that the underwriter is requested to carry, and in return for which he is to be paid a cor- responding price. Material facts unknown to the proposer and to his agents, however influential they may be, are part of this hazard or chance of which he is to be relieved, and therefore what he does not know he need not ascertain and disclose to his underwriters; ^ but, by parity of reasoning, facts at present known to a party, as to him, form no legitimate part of the contemplated chance. And if, at the time of closing the contract, the one party has knowledge of facts material to the risk which, with or without design, he fails to disclose to the other party, then the parties are not contracting with reference to the same chance. There is no meeting of the minds upon the same essential subject-matter of their contract. It is as though the one party were undertaking with reference to one ship or one stock of goods, and the other party with reference to a different ship or a different stock of goods. Speaking generally, under such cir- cumstances there can be no valid contract. - causes, increase the physical risk, llie elusive even of the stupendous con- growing efficiency of fire departments flagration in San Francisco, the total and insurance patrols, the adoption of fire loss in this country for 1906 was fire-proof materials and methods of much above normal, construction for ships and buildings, ^ Aho-p v. Commercial Ins. Co., 1 and the installation of automatic Fed. Cas. 564. sprinkler equipment, hand extinguish- 2 See § 78. Long ago, in a leading ITS, and other useful contrivances, in case, Lord Mansfield, with sure pre- business establishments, mills and science, announced the general doc- factories, tend to diminish it Ex- trine for all time to come in these INTRODUCTORY 119 Nor is the agreement of insurance fair and equitable, if entered into without a frank and free disclosure by each party of all material facts within his knowledge and unknown to the other prior to the adjustment of the amount of premium. With reference to present knowledge of the risk, at the time the engagement is concluded, the parties must stand upon the same plane; they must, as some au- thorities express it, contract pari passu, since, as shown in chapter first, the rate of premium is carefully proportioned to the character and extent of the hazard contemplated. The owner of a ship, or cargo, or stock of merchandise, or even of a building, usually has a more precise knowledge of the present condition of his property than has an insurance company. His material concealment and material misrepresentation, when he applies for insurance, alike go to the very essence of the proposed contract, and alike amount to a false description of its subject-matter. Of necessity, either results in a wrong classification or estimate of the risk, and the assignment of a mistaken rate of premium by the underwriter,^ and this in- equitable result follows inevitably and with equal force, although subsequently it may be shown that the material fact concealed or misrepresented in no wise contributed to the loss.^ It cannot be denied that, if the underwriter has received private advices of the safe termination of a distant voyage, it would be a fraud for him to accept pay for insuring the same voyage as a future contingency.^ He is aware that no such contingency exists, and that consequently no subject-matter for the contract remains. In like manner, if the owner knows that his ship is already unsea- words: "The special facts upon which tracts of insurance are generally mat- the contingent chance is to be com- ters of speculation, where the person puted lie most commonly in the knowl- desiring to be insured has means of edge of the insured only. The under- knowledge as to the risk, and the in- MTiter trusts. to his representation, and surer has not the means or not the proceeds upon confidence that he does same means. The insured generally not keep back any circumstance in his puts the risk before the insurer as a knowledge to mislead the underwriter business transaction, and the insurer, into a belief that the circumstance does on the risk stated, fixes a proper price not exist, and to induce him to estimate to remunerate him for the risk to be the risk as if it did not exist. The keep- undertaken," Seaton v. Heath (1899), ing back such circumstance is a fraud, 1 Q. B. 782, 793, Romer, L. J. In ma- and therefore the policy is void. Al- rine insurance especially, means of in- though the suppression should happen formation are peculiarly, and some- through mistake, v.ithout any fraudu- times exclusively, within the reach of lent intention, yet still the underwriter the applicant, Clarkson v. Western is deceived and the policy is void, be- Assur. Co., 33 App. Div. 23, 53 N. Y. cause the risk rnn is really different Supp. 508. from the risk understood and intended ^ Daniels v. Hudson R. F. Ins. Co., to be run at the time of the agree- 12 Cush. (Mass.) 416, 59 Am. Dec. 192. ment," Carter v. Boehm, 3 Burr. 1905. s Carter v. B(rhm (1765), 3 Burr. 1909. 1905; Chalmers & Owen, Ins. (1907). 1 Thus the English court says, "con- 25. IJO GKNEUAL I'UIXCU'LKS UK IXaUUANCK LAW worthy, or that in any respect, whether of condition, or location, or surroundings, it falls below the assumed standard of a ship safe and sound, he cannot honestly ask anyone to guarantee its immunity from harm. Xo such risk is longer possible. The mischief, in whole or in part, has already ha|)pened, or is more seriously impending than is represented. In legal tlicory, only unknown misfortunes, storcil up by fate, can l)C made tiie subject of legitimate insurance. From such promises and course of reasoning have been deduced the common-law rules relating to concealment, misrepresentation, and warranty, set forth in this and the next chapter, as well as the more general rule that the contract of insurance in all its branches is one requiring good faith between the parties.^ It is a contract iiberrinia' fidei;- and if the utmost good faith be not observed by either party the contract may be avoided by the other party. ^ § 95. Concealment : Marine Insurance. — In marine insurance a concealment of a material circumstance by a party or his authorized agent, whether intentional or unintentional, innocent or fraudulent, avoids the contract."* Thus, if the insured when applying for a policy has information inducing him to believe that his ship is in distress or in special peril, and does not disclose it, the contract is vitiated.'"' Every circumstance is material which would influence the judg- ment of a prudent insurer in fixing the premium or determining t Seatonv. Heath (1899), \ Q.B. 782 Lloyd, 10 Exch. 523; Blackburn v. (rule is not confined to life, fire, and Haslam, L. R. 21 Q. B. D. 144 (1888). marine, but applies to all kinds of in- ^ Vale v. Pha;nix Ins. Co., 28 Fed. surance). Cas. 867, 1 Wash. C. C. 283; Hoyt v. 2 Sun Mut. Ins. Co. V. Ocean Ins. Co., Oilman, 8 Ma.ss. 336; Biays v. Union 107 U. S. 485, 509, 510, 1 S. Ct. 582. Ins. Co., 3 Fed. Cas. 329, lAVash. C. C. 3Eng. Mar. Ins. Act, 1906, §17; 506; Bulkley v. Protection his. Co., 4 Reliance Mar. his. Co. v. Herbert, 3 Fed. Cas. 614, and elaborate note re- App. Div. (N. Y.) 593, 38 N. Y. Supp. viewing many cases; Kohne v. 7ns. Co. 373. In construing the contract the of N. A., d Bin, (Pa.) 219; Lynch v. doctrine that the contract is one Hamilton, 3 Taunt. 37 (fatal omission uberrima fidei may also be applied in to disclose the name of the vessel, favor of the insured, Schoneman v. Ins. which had been reported at Lloyd's, Co., 16 Neb. 404, 406, 20 N. W. 284; though erroneously, as leaky. Held, Merchants' Ins. Co. v. Edmond, 17 that news though really untrue should Cirat. (Va.) 138, 144; Wolff v. Horn- have been reported); and see Smith v. castle, 1 Bos. & P. 316. Ins. Co., 60 Vt. 682, 15 Atl. 353, 1 * Sun Mut. Ins. Co. v. Ocean Ins. Co., L. R. A. 216, 6 Am. St. R. 144. As to 107 U. S. 485, 510, 1 S. Ct. .582, 27 duty even after loss to disclose sliip's L.Ed. 337; Livii{f.^tonv. Maryland Ins. papers see Boulton v. Houlder Bros. Co., 6 Cranch (F. S.\ 274, 3 L. Ed. 222; (1904), 1 K. B. 784; Harding v. BusseU Howe Machine Co. v. Farrinqton, 82 (1905), 2 K. B. 83. Under no obliga- N. Y. 126; The Bedouin, (1894) Prob. tion to disclose facts of which he is 1, 12; Proudfoot v. Montefiore, L. R. 2 ignorant, Alsop v. Commercial Ins. Co Q. B. 511; North British Ins. Co. v. 1 Fed. Cas. 564. CONCEALMENT : .MAUl.NK INSURANCE 12i whether he will take the risk.^ All such facts, so far as known to the applicant for insurance, must be frankly and fully disclosed before the negotiations are concluded. The principle of caveat emptor does not apply. There must be no silence or evasion or equivocation. It is not enough even that the underwTiter be furnished with ma- terials from which he might by a course of reasoning or an effort of memory succeed in ferreting out the extent of the risk.^ No matter whether the omission to disclose the rnaterial fact is the result of intention, indifference or mistake, the validity of the marine policy impliedly is conditioned upon the completeness and accuracy of the description of the character of the risk as put forth by the ap- plicant.^ A good illustration of the rule is furnished by an early American case where the insured had neglected to disclose the imperfect con- dition of the hull of a boat converted into a steamboat, used for river transit, and his policy, though against fire only, was held avoided.^ So also in an English case, the policy covered goods including "risk of craft" or lighterage. The insured omitted to disclose that in consideration of lower rates of lighterage the common-law lia- bility of the lighterman as a carrier had been limited. This circum- stance might affect the insurer's right of subrogation and the policy was held avoided.''' 1 Columbian Ins. Co. v. Lawrence, 10 lieved to be unsuccessful, was not Pet. (U. S.) 507, 9 L. Ed. 512; iSeaton V. material and need not be disclosed, Burnand (1900), App. Cas. 135, 149; Cutler v. Roi/al Ins. Co., 70 Conn. 566, lonides V. Pender, L. R. 9 Q. B. 531 40 Atl. R. .529, 41 L. R. A. 159. The (gross over-valuation not disclosed); E^nglish court held that the fact of Clarkson v. West. Assttr. Co., 33 App. over- valuation of the property was Div. 23, 28. 53 N. Y. Supp. 508. Thus material, lonides v. Pender, L. R. 9 even a doubtful rumor of capture. Da Q. B. 531; but non-disclosure of edict Costa V. Scandret, 2 P. Wms. 170; or of Persian Government against im- sliipwreck, Nicholson v. Power (1869), port at ion of arms believed to be a dead 20 L. T. N. S. 580; or rumor of prox- letter was held not to avoid though imity of hostile privateer, Durrell v. confiscation followed, Francis v. Sea Bederley (1816), Holt N. P. 283; must Ins. Co., 79 L. T. (N. S.) 28, 8 Asp. 418. be disclosed though the insured does l^nless he can prove fraud it is not not believe the information, Morrison enough for insurer to show that fact V. Universal Mar. Ins. Co., L. R. 8 concealed would have influenced him. Exch. 40 (entry of stranding on He must show that it would have in- Lloyd's List not disclosed because fluenced an ordinarily prudent under- thought to apply to another ship of writer, Rivaz v. Gerussi (1880), 6 Q. B. same name), and though the informa- D. 222. tion eventually prove to be untrue, 2 Kerr, Fraud (1902), 89. Seaman v. Fonn^reau, 2 Strange, 1183. 3 gun Mid. Ins. Co. v. Ocean Ins. Co., Insured bound to disclose that his yes- 107 V. S. 485, 1 S. Ct. 582. sel was a notorious Confederate cruiser, * Lexington, etc., Ins. Co. v. Paver, Bates v. Heuritl, L. R. 2 Q. B. .59.S. 16 Ohio, 324. The Connecticut court lield that in 5 Tate v. Hyslop (1885), 15 Q. B. D application for other insurance, be- 368. The materiality of the non- i22 (iKNKKAI. I'KINCII'LKS OK IN'SIHANCH LAW This extreme doctrine in the law of marine insurance, it may be (.hsorvcd, is in contrast with the rule applicable to the ordinary con- tract made at arm's length, by virtue of which a concealment or a misrepresentation of :i mntorial fact must be fraudulent to support. Mil acti(m for deceit.' In the absence of in(|uiry by the underwriter, however, the follow- ing need not l)e disclosed: Any circumstances diminishing the risk; - any circumstance known or presumed to be known to the insurer, for instance, matters of common notoriety or knowledge,-"* and mat- ters which in the ordinary course of business he ought to know.'* To render the agent's concealment fatal, he must be one who is so connected with the business at the time of closing the contract that his concealment can fairly be said to be the act of the principal, Avithin the scope of the employment, and before the agency is termi- nated.^ The doctrine is that if an agent, whose duty it is to keep his em- j)loyer informed of matters affecting the subject-matter insured, has withheld from his principal information of a material fact which he disclosure to a fire insurance company of the provision in a lease depriving him of the right of subrogation, raises a question for the jury, Pelzer Mfg. Co. V. St. Paxil F. & M. Ins. Co., 41 Fed. 271; Pelzer Mfg. Co. v. Sxin Fire Office, 3G S. C. 213, 15 S. E. 562. Where a policy is on chartered freight, if the charter contains a canceling clause, the fact must be disclosed, Mercantile S. Co. V. Tyser (1881), 7 Q. B. D. 73. 1 Laidlaw v. Organ, 2 Wheat. (U. S.) 178, 4 L. Ed. 214 (a sale; intelligence need not be volunteered). Lord Black- burn said: "There can be no doubt that the plea is bad. There is no alle- gation of fraud, and short of that, the mere concealment of a material fact, except in cases of policies of insurance, does not avoid a contract," Fletcher v. Krell, 42 L. J. Q. B. 55; North Brit. Im. Co. V. Lloi/d, 10 Exch. 523; Moens V. Heyirorth, 10 M. & W. 147 (a sale; held, that misrepresentation, to avoid, must be fraudulent). Even the con- tract of individual suretyship "is one in which there is no universal obliga- tion to make disclosure," Railton v. Matthews (1844), 10 CI. & F. 934. 2 Carter v. Boehm, 3 Burr. 1909. - Buck v. Chesapeake Ins. Co. , 1 Pet. (U. S.) 151, 160, 7 L. Ed. 90; Tennant V. Henderson (1813), 1 Dow. 324. It is not necessary to disclose any fact of which information is waived by the insurer, Asfar v. Blundell (1895), 2 Q. B. D. 196, 202. Nor, according to English codification, any circumstance which it is superfluous to disclose be- cause of any express or implied war- ranty, Mar. Ins. Act (1906), § 18; Haywood v. Eodgers (1804), 4 East, 590. Past knowledge, not present to the mind of the insurer at the time, will not excuse a concealment by the in- sured. Bates V. Hewitt (1867), L. R. 2 Q. B. 595. * Carter v. Boehm, 3 Burr. 1909; Ruggles v. General Int. Ins. Co., 4 Mason, 81; Green v. Merchants' Ins. Co., 10 Pick. (Mass.) 402. But the in- surer is not presumed to know the contents of Lloyd's Lists, Morrison v. Universal Marine Ins. Co., L. R. S Exch. 40. As to general information published in newspapers, see Folsom v. Mercantile Ins. Co., 9 Fed. Cas. 349. aff'd 18 Wall. 237, 21 L. Ed. 827; Green V. Merchants' Ins. Co., 10 Pick. (Mass.) 402. If the knowledge of the insured is more complete than the under- writers' the former is bound to make disclosure. Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U. S. 485, 1 S. Ct. 582. ^Ruggles v. General Ins. Co., 12 Wheat. (U. S.) 408; Blackburn v Vigors, L. R. 12 App. Cas. 531. concealment: makine insurance 123 might in the ordinary course have communicated to the latter at the time when the insurance was effected, the contract can be avoided by the underwriter on account of the non-disclosure of this matter which, if the agent had done his duty, the principal would have been able to disclose.^ The master of a ship and a general agent for shipping business are such agents of a ship-owner.^ A factor employed to ship a cargo and the general agent of a cargo- owner at a foi'eign port are such agents of the cargo-owner.^ But Lloyd's agents in foreign ports are not the agents of the individual underwriters, who consequently are not affected with their knowl- edge of casualties abroad."* An agent effecting marine insurance must disclose every material circumstance known to him; ^ also every material circumstance which the assured is bound to disclose, unless it come to the knowl- edge of the principal too late to communicate it to the agent in the exercise of reasonable diligence.^ An English case, often cited, illustrates the necessity, laid upon the insured and upon his agents acting for him, of promptly and frankly posting the underwriters as to the situation, if it is reason- ably practicable to do so, before taking out insurance. An agent of the insured, located at Smyrna, learned of the stranding of the vessel which contained the goods of his principal. Instead of tele- graphing his principal the news of the casualty according to his custom, he advised him by slower course of mail in order to allow him opportunity to insure the goods. Before receipt of the letter, the principal took out a policy upon the goods "lost or not lost." The court held that it was avoided because of concealment by the agent, although no inkling of the loss had as yet reached the principal.'^ iDe Hart & Simey, Ins. (1907), 23; ^Blackburn v. Haslam (18S8), 21 Blackburn v. Vigors (1887), 12 App. Q. B. D. 144; Blackburn v. Vigors, 12 Cas. 531. App. Cas. 531 (broker omitted to dis- 2 De Hart & Simey, Ins. (1907), 23; close that ship was being repaired). Gladstone v. King (1813), 1 M. & S. 35. ^ Maclanahan v. Universal Ins. Co., 1 3 De Hart & Simey, Ins. (1907), 23; Pet. (U. S.) 170, 7 L. Ed. 98; Snow v. Fitzherbert v. Mather (1785), 1 T. R. 12. Ins. Co., 61 N. Y. 164; Andrews v. Ins. It is not necessarily the duty of an Co., 9 Johns. (N. Y.) 32; Proudjoot v. insurance broker to communicate all Montefiore, L. R. 2 Q. B. 511. his information to his employer. 7 Proudfoot v. Montefiore, L. R. 2 Therefore, if A employs a broker, B, Q. B. 511; criticising Ruggles v. Gen- to effect an insurance, but the insur- eral Ins. Co., 12 Wheat. (U. S.) 408, ance is afterwards effected independ- in which the court sustained the policy, ently by another broker, C, B's knowl- holding that the casualty terminated edge is not relevant to the validity of the agency, and hence ended the ob- the policy, De Hart & Simey, Ins. ligation to send report "Where the (1907) 23. insurance is effected through a broker * De Hart & Simey, Ins. (1907), 24; the underwriter is entitled to the Wilson V. Salamandra Ins. Co. (1903), knowledge not only of the principal, 8 Com. Cas. 129. but also of that broker and his sub- 124 GENERAL I'ltlNCll'l-KS ni IXSUKAN'CE LAW §96. Concealment: Fire and Life.— In regard to contracts of life and fire iiisiiraiu-e it is general]}' laid down as the law in this country that the coucoalment of a material fact, when not made the subject of express inquiry by the insurers, must be intentional to avoid the policy; and this is partly on the ground that insurers have for a long time l)een in the habit of propounding questions upon all points except those in respect to which they are content to rely upon their own independent means of information, and partly be- cause fire policies and often life policies make a multitude of particu- lars material by virtue of express warranties.^ By way of explanation for this distinction between the law of marine insurance and that of fire in this country, it is often stated that inasmuch as buildings and their contents are for the most part near at hand and accessible to examination, it is the fault of the underwriter if he does not make himself familiar with their character.^ agents. But he is not entitled to the knowledfje of anotlicr broker, who, though originally in.strueted to effect an insurance, did nol svicceed in doing so. Nor is he entitled to the knowl- edge of the principal luiless the latter received the information in sutiicient time, before the conclusion of the con- tract, for the principal to have com- municated it to the broker," De Hart &Simey, Ins. (1907), 2G. 1 German American Mut. L. Assn. v. Farley, 102 Ga. 720, 29 S. E. Glfj; Washiwjton Mills Mfg. Co. v. Weij- mouth Ins. Co., 135 Ma-ss. 50.3; Malloru V. Travellers Ins. Co., 47 N. Y. 52; Hartford Protection Ins. Co. v. Harmer, 2 Ohio St. 452. 59 Am. Dec. 684. Con- cealment is said to be the designed withholding of any fact material to the risk, which the insured in honesty and good faith ought to communicate, Clark V. Union Mut. Ins. Co., 40 N. H. 333, 77 Am. Dec. 721; Daniels v. Hud- son River F. Ins. Co., 12 Cush. (Mass.) 416, 59 Am. Dec. 192; Mascott v. Nat. F. Ins. Co., 69 Vt. 116, 37 Atl. 255. But by most of the State Civil Codes it is provided that a concealment, whether intentional or unintentional, gives to the other party a right of rescission, Cal. Civ. Code (1906), §2562; Montana Civ. Code (1895), §3421; North Dak. Civ. Code (1905), §5914; South Dak. Civ. Code (1903), § 1816. The same codes also provide, however, "an intentional and fraudu- lent omission to commvmicate in- formation of matters proving or tend- ing to pro\'e the falsity of a warranty entitles the instu-er to rescind." 2 Thus the Ohio court says: "The reason of the nile, and the policy on A\hich it was fotuided, in its applica- tion to marine risks, entirely fail when applied to fire policies. In the former the subject of insurance is generally beyond the reach, and not open to the inspection, of the undei'writers, often in distant parts or upon the high seas, and the peculiar perils to which it may- be exposed, too nimieroas to be antici- pated or inquired about, known only to the owners and those in their em- ploy; while in the latter it is, or may be, seen and inspected before the risk is assumed, and its construction, situa- tion, and ordinary hazards as well appreciated by the underwriter as by the owner. In marine insurance the underwriter, from the very necessities of his undertaking, 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 incjuire, 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. Dec. 684. The New York court concluded that the rule in fire is the same as that in marine concealment: fihe and life 126 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 ship is insured at home, and many a distant building with its contents, located sometimes in a foreign land, is insured against fire.^ Irdeed 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; Harroiver v. located at a distance, Clarkson v. Hutchinson (1870), L. R. 5 Q. B. 590; Western Ins. Co., 33 App. Div. 23, 53 Laing v. Union Ins. Co. (1895), 11 N. Y. Supp. 508. Times L. R. 359. Each party is bound 1 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 properties, have been insured from inquiry equally with that of the other, New York City or Chicago, though now C-arter v. Bochm, 3 Burr. 1905; Bnlkley resident agency laws frequently in- v. Protection Ins. Co., 4 Fed. Cas. 614; tervene to localize the business. De Longnemere v. A'. Y. Fire Ins. Co., 3 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. 155; Carter v. Boehm, 1 stated and only good faith is required W. Bl. 593; s. c, Smith's Lead. Cas. with respect to them. Chalaron v. Neither party is bound to volunteer 7ns. 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. 253, 55 Am. Dec. nary care the other ought to know, 546. 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. [2(\ GENERAL I'lilNCll'LKS OK 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 uniformity 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 unfavorably affect his policy the insured must know the fact to be material, and must also intentionally neglect to communicate 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 Court 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 1 Thus in a life insurance case, Mr. the information thought it material," Justice Bayley said: "I think that in Lindenau v. Deshorough, 8 Barn. & 0. all cases of insurance, whether on ships, 586. houses, or lives, the underwriter should ^ Danieh v. Hudson R. F. Ins. Co., be informed of every material circum- 12 Cush. (Mass.) 416, 59 Am. Dec. 192 stance within the knowledge of the (silence as to matter the insured docs assured; and that the proper question not consider important is not fatal). is whether any particular circumstance 3 American Artistic Gold S. Co. v. was in fact material, and not whether Glens Falls Ins. Co., 1 Misc. 114, 118. the party belieA'ed it to be so. The * Boggs v. American Ins. Co., 30 contrary doctrine would lead to fre- Mo. 63. quent suppression of information, and 6 Pelzer Mfg. Co. v. St. Paul 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 court 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 the 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 Peher Mfg. Co. v. Sun Fire Office, 629, 13 S. E. 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 Mid. his. Co. "i Dennison v. Thomaston 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 ^ Schu'arzback v. Ohio Val., etc., offers no excuse for a violation of the Union, 25 W. Va. 655. express conditions of the policy. Cases ■i Clark V. Ins. Co., 8 How. (U. S.) to the contrary like Dooly v. Hanover 235, 240, 12 L. Ed. 1061; Cross v. i^. /n.s. 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 his. sound. Co., 71 N. Y. 508; Gates v. Madison, ^ Parsojis v. Lane, 97 Minn. 98, 106 etc., Ins. Co., 5 N. Y. 469, 55 Am. Dec. X. 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 Assnr. Soc. v. Nails, 101 Va. 613, 44 mortgage need not be disclosed imless S. E. 896, 99 Am. St. R. 923. inquiry be made. Van Kirk v. Citizens' ^McClelland v. Greenwich his. 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. Walden v. Ins. Co., 12 La. 134, 32 Am, Estes, 106 Tenn. 472, 62 S. W. 149, 52 Dec. 116; Currn v. Commonwealth Ins L. R. A. 915, 82 Am. St. R. 892 (liens); Co., 10 Pick. (Mass.) 535; North Am WytheviUc Ins. Co. v. StvUz, 87 Vir. Ins. Co. v. Throop, 22 Mich. 146; 128 GENERAL PRINCIPLES OF INSURANCE LAW In failing to fill out a statement in the application as to the amount of incuml;r;inces on the property, the court held that the applicant was not guilty of a fatal concealnieut 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 (luestion, or in which the answers are imperfect or incomplete and not necessarily false, in the absence of had faith the company cannot claim forfeiture on the ground of concealment. - In fire insurance, questions of concealment and misrepresentation are now governed by the express warranty on that subject con- tained 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 Campbell v. Victoria Mut. Ins. Co., 4.5 '^Phoenix Mut. Life Ins. Co. v. U. C. (Q. B.) 412. Contra, German Raddin, 120 U. S. 183, 7 S. Ct. 500, 30 Am. Ins. Co. v. Norris, 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 Citt/ F. Ins. 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. Phoenix 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. Mil. Mech. Ins. Co., 113 was a woman does not show fatal con- Mich. 166, 71 N. W. 463. cealment, Mechanics' & Traders' Ins. . ^ Clark v. Ins. Co., 8 How. (U. S) Co. V. Flo- id, 20 Ky. Law Rep. 1538, 235, 12 L. Ed. 1061. 49 S. W. 543. Antecedent threats of ^ Campbell 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 607. warranties. These again by statute in ^ Parker \. Otsego Co. F. Ins. Co., 47 many states are made analogous to App. Div. 204, 62 N. Y. Supp. 199, mere representations, see Appendix, aff'd 168 N. Y. 655, 61 N. E. 1132. ch. 1. ly > 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 is 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 t.wenty 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 policy was avoided for misrepresentation.^ 1 Armour v. Transatlantic F. Ins. it is usually the insurance company Co., 90 N. Y. 450; Blaci burn v. Vigors, that seeks to have the policy adjudged L. R. 17 Q. B. Div. 553, 561, 12 App. void for misrepresentation. Cas. 539. Must be both material and 2 Barnett v. Barnett, 83 Va. 504, 2 untrue to avoid, if not made a war- S. E. 733. ranty. Fidelity & C. Co. v. Alpert, 67 ^ Clark v. 7ns. 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- ^Ftna his. 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- resentat ions of the insured on the faith stantially so); Siiclley 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. CoPEClAL Fars, opinions or conjectures. It would be prudent, therefore, for the applicant for life insurance, wiien signing the voluminous form of {)rinted proposals usually required, to add the phrase "to the best of my belief," or similar qualifying words. ^ An important application of the rule has frequently l)een made in the common instance of an erroneous answer to the inquiry of the life insurance company respecting the existence of latent diseases in the insured or his ancestors in the indefinite i)ast. Such responses from a layman obviously can embody little more than opinion or belief.' The Court of Errors and Appeals of New Jersey has repeatedly approved this doctrine, and once recently. Owen, the insured, died about a month after procuring a life policy from the Metropolitan Life Insurance Co. Defense was made on the ground that, in his application, he had warranted that he had never had heart disease. The case was devoid of evidence to show that any knowledge of the existence of this obscure disease had ever been brought home to the applicant, although there was evidence indicating that in fact his heart was seriously affected prior to his proposals. The court con- cluded that only good faith was required of Owen, and that the jury were at liberty to find that his answer in the defendant's application paper was given according to his bona fide belief and opinion. ■'' § 112. Statement of Present Use. — A statement of the present use of property, if it does not go to the essential nature of the subject of insurance, is not generally considered a warranty of continuance For example, the United States Supreme Court were of opinion that a warranty in a contract of fire insurance, that smoking was not allowed, if true when the representation was made, would not be broken though the assured or otliers smoked afterwards on the prem- ises.^ So also where the policy of insurance described the property insured as being a two-story frame building used for winding and coloring yarn and for the storage of spun yarn, it did not warrant that such building was to continue to be thus used.^ But a war- 1 Moulor V. American Ldfe /ns. Co. , 3 Owen v. Metropolitan L. Inx Co 111 U. S. 335; Clapp v. Mass. Ben. (N. J. L. 1907) 36 Ins. L. J. 760 Asso., 146 Mass. 519, 16 N. E. 433; * Hosjord v. Germania Fire Im Co Wheelton v. Hardisty, 8 E. & B. 231. 127 U. S. 399, 8 S. Ct. 1199, 32 L. Ed.' - Henn v. Met. Life Ins. Co., 67 196. N. J. L. 310,51 Atl. 689; Endoioment ^ Smith v. Mechanics' and Traders' Rank Knights v. Cogbill, 99 Tenn. 28, Fire Ins. Co., 32 N. Y. 399. The Penn- 41 S. W. 340. sylvania court held that words "clerk sleeps in the store" imported no war- WHETHER TEMPORARY BREACH AVOIDS OR SUSPENDS CONTRACT 151 ranty that a house was of stone when in reaUty it was partly stone and partly wood,^ or that the building insured was a dwelling house, or occupied as a dwelling, when in fact it was not, would avoid the policy.' If the warranty were simply that the house was a dwell- ing, that would not necessarily mean that it was occupied as a dwell- ing at that time.'"* § 113. Questions Unanswered or Partially Answered. — If a ques- tion in the application is not answered at all, or if the answer is not false in any respect, but upon its face is only incomplete, there is no breach of warranty, provided the insurer accepts the application without objection; since, if not satisfied, the company should demand fuller information. So, also, to avoid forfeiture, equivocal answers are construed most strongly against the company, but notwithstand- ing this, the applicant must answer in good faith and not attempt to evade, conceal, or mislead.^ § 114. Whether Temporary Breach Avoids or Only Suspends Contract. — Does the contract revive when the situation constitut- ing a breach of warranty terminates before loss? For example, if a vessel though unseaworthy at commencement of the voyage is made seaworthy shortly thereafter and before encountering any storm, or if a dwelling house during the term of the insurance happens to be without a tenant for more than the permitted period of ten days, but becomes occupied before the fire, is the policy forfeited? ^ It must be observed that in any event the insurer, though retaining the full premium if the policy has once attached, is relieved from all ranty for the future, Fnsbie V. /ris. Co., Compare cases §96. An answer so 27 Pa. St. 325; so of words, "kiln for irresponsive as to leave the question drying corn in use," Shaw v. Roberts, 6 unanswered will not avoid the policy Ad. & El. 75; so of words "occupied unless fraudulently untrue, Ferine v. by tenants," Catlin v. Spririgfield Ins. Grand Lodge, 51 Minn. 224, 53 N. W. Co., 1 Sumn. 434; Boardman v. N. H. 367; Hale v. Life, etc., Co., 65 Minn. Mut. F. Ins. Co., 20 N. H. 551. 548, 68 N. W. 182. ^ Chase v. Hamilton Ins. Co., 20 5 "Where a warranty is broken, the N. Y. 52. assured cannot avail himself of the 2 Alexander v. Germania Fire Ins. defense that the breach has been reme- Co., 66 N. Y. 464, 23 Am. Rep. 76. died, and the warranty complied with, ^Browning v. Home Ins. Co., 71 before loss," Eng. Mar. Ins. Act (1906), N. Y. 508. ' § 34 (2); De Hahn v. Hartley (1786), * London Ass. Co. v. Mansel, L. R. 1 T. R. 343 (express warranty); Quebec 11 Ch. D. 363: Phwni.r Life Ins. Co. v. Mar. Ins. Co. v. Bank (1870), L. R. 3 Raddin. 120 V . S. 183; Carson v. P. C. 234 (implied warranty). Same Jersey Citii Fire Ins. Co., 43 N. J. L. rule applied under New York standard 306; Higgins v. Phoenix Mut. Ins. Co., fire policy, Coitch v. Farmers' F. Ins. 74 N. Y. 6; Dilleber v. Home Ins. Life Co., 64 App. Div. (N. Y.) 367 (un- Co., 69 N. Y. 256, 25 Am. Rep. 182. occupancy more than 10 days). lo2 (iKNKHAl. 1'H1N« ll-I.KS (.K INSUUANCE LAW res,,„nsil,ilitv, m, lon^ as a l.ivach „f condition subsequent continues Induced bv'tl.is an.l other considerations many courts have held that if the lan.M.au-e of the i.olicv does not expressly impose absolute forfeiture as a penalty for noncompliance with a warranty, the con- tract will revive ujmn termination of the situation prohibited, es- pecially in those instances in which the violated warranty is a con- dition subsecpient t<. (he attachment of the risk." § 115. To Avoid Forfeiture, Contract made Severable.— Where two or more items of property are insured in a policy for separate amounts, either at separate rates or for a single premium, and the breach of warranty relates to a portion of the items only, courts are prone to divide the contract by construction into separate insurances so as to limit the operation of the forfeiture to the items really affected by the prohibited condition,^' but the practical application of this principle has led to varying results.^ 1 Adair v. South. Mid. Ins. Co., 107 Ga. 297, 303, 33 S. E. 78, 45 L. R. A. 204, 73 Am. St. R. 122 (change of use); HiJidJey V. Gcrmania F. In.s. Co., 140 Mass. 38, 45, 1 N. E. 737, 54 Am. Rop. 445 (''it has the benefit of the tem- porary suspension of the ri.sk without any rebate of the premium," tem- porary illegal use held to suspend); Wheeler v. Phcenix Ins. Co., 53 Mo. App. 44G (loss during vacancy, no recovery). 2 Temporary unseaworthiness though existing at outset held by some courts to suspend and not avoid, Lapene v. Sun Mut. Ins. Co., 8 La. Ann. 1, 58 Am. Dec. 668; Hinckley v. Germanin F. Ins. Co., 140 Mass. 38, 46, 1 N. E. 737, 54 Am. Rep. 445; Worthinqton v. Bearse, 12 Allen (Mass.), 382, 386; Deblois v. Ocean Ins. Co., 16 Pick. (Mass.) 303; but see prevailing rule, ch. IX, infra. Temporary overinsur- ance. Obermei/er v. Globe .\Iitt. Ins. Co., 43 Mo. 573; temporary hicreasc of risk, James v. Lt/coming Ins. Co., 13 Fed. Cas. 309; Mul. F. Ins. Co. v. Coates- riUe Shoe Factory, 80 Pa. St. 407. Failure to keep fire buckets, Cady v. Imperial Im. Co., 4 Fed. Cas. 984; Phxnix .4,s,s?/r. Co. v. Munqer, etc., Co., (Tex. Civ. App.), 49 S. W. 271. But temporary deviation, from its date ab- solutely avoids ocean marine insur- ance, Burgess v. Equitable, etc., Ins. Co., 126 Mass. 70, 30 Am. Rep. 654; Cogswell v. Chubb, 1 App. Div. 93, aff'd 157 N. Y. 709; Fernandez v. Great West. Ins. Co., 48 N. Y. 571. As to conditions subsequent generally see Ohio F. Ins. Co. v. Burget, 65 Ohio St. 119. 61 N. E. 712, 87 Am. St. R. 596, 55 L. R. A. 825. :t New York court says, citing many cases, "Where by the same policy dif- ferent cla.sses of property, each sepa- rately valued, are insured for distinct amounts, even if the premium for the aggregate amount is paid in gross, the contract is severable, and a breach of warranty as to one subject of insurance only does not affect the policy as to the others, unless it clearly appears that .such was the intention," Donley v. Glens Falls Ins. Co., 184 N. Y. 107, 76 N. E. 914; Woodside v. Canton Ins. Co., 84 Fed. 283 (purpose of court must be to ascertain probable intent of the parties); Loom is v. Rockjord Ins. Co., 77 Wis. 87, 45 N. W. 813, 8 L. R. A. 834, 20 Am. St. R. 96 (sale of one of several buildings does not avoid as to others. Entirety of premium as con- sideration should not govern); but compare McQueeny v. Phoenix Ins. Co., 52 Ark. 257, 12 S. W. 498, 5 L. R. A. 744, 20 Am. St. R. 179, and many cases cited; jEtna Ins. Co. v. Resh, 44 Mich. 55, 6 N. W. 114, 38 Am. Rep. 228. ■» Pha:nix Ins. Co. v. Pickel, 119 Ind. 155, 21 N. E. 546, 12 Am. St. R. 393 (many cases cited pro and con. Risk on house and risk on barn held dis- tinguishable and divisible). TO AVOID FORFEITURE, CONTRACT MADE SEVERABLE 153 Thus, a prohibited mortgage on pool tables was held not to avoid as to the other contents of the building.^ And if a policy covers both building and contents the insurance on building is held to be undisturbed by a chattel mortgage on contents ^ or by sale of con- tents,^ and the insurance on contents is held undisturbed by a fatal but innocent misstatement regarding the title to the real estate,"* or b}' a prohibited mortgage on the real estate,"' or even by aliena- tion of the real estate,® but on this last point, as on others, the de- cisions lack uniformity^ A sale of one of several buildings will defeat the insurance only as to the one sold; ^ and vacancy of one house does not avoid as to another unless the risk in the latter is affected /■* But if the breach as to one item or class increases the risk on the rest, or if the breach affects the risk in its entirety, this liberal rule of construction will not apply and the policy will be altogether avoided.^'' ^Manchester F. Assur. Co. v. Feibel- nian, 118 Ala. 308, 23 So. 759. And violation of iron safe clause held for- feiture only as to goods, not as to furniture or fixtures, Mitchell v. his. Co., 72 Miss. 53, 18 So. 86, 48 Am. St. R. 535; or building, Hanover Fire Ins. Co. V. Crawford, 121 Ala. 258, 25 So. 912, 77 Am. St. R. 55; Roberts v. Sun Mut. Ins. Co., 13 Tex. Civ. App. 64, 35 S. W. 955. 2 Wright v. Fire Ins. Co., 12 Mont. 474, 31 Pac. 87, 19 L. R. A. 211; Home F. his. Co. V. Bernstein, 55 Neb. 260, 75 N. W. 839. 3 Royal Ins. Co. v. Martin, 192 U. S. 149, 24 S. Ct. 247, 48 L. Ed. 385. ^ Schuster v. Dutchess Co. Ins. Co., 102 N. Y. 260, 6 N. E. 406; Merrill v. Agricultural Ins. Co., 73 N. Y. 459, 29 Am. Rep. 184. 5 Kansas F. Ins. Co. v. Saindon, 53 Kan. 623, 36 Pac. 983; State Ins. Co. v. Schreck, 27 Neb. 527, 43 N. W. 340, 6 L. R. A. 524, 20 Am. St. R. 696. Contra, McGowan v. Peoples M. F. Ins. Co., 54 Vt. 211; Stevens v. Queen Ins. Co., 81 Wis. 335, 51 N. W. 555, 29 Am. St. R. 905. 6 Phoenix Ins. Co. v. Grimes, 33 Neb. 340, 50 N. W. 168. 7 E.^sex Savings Bk. v. Meriden F. Ins. Co., 57 Conn. 335, 17 Atl. 930, 18 Atl. 324, 4 L. R. A. 759 (citing many cases and holding that the risk on the whole might be increased by sale); Barnes v. Union Mul. F. Ins. Co.. 51 Me. 110, 81 Am. Dec. 562. 8 Clark V. New England M. F. Ins. Co., 6 Cush. (Mass.) 342, 53 Am. Dec. 44; Loomis v. Rockford Ins. Co., 77 Wis. 87, 45 N. W. 813. 9 Hartford F. Ins. Co. v. Walsh, 54 111. 164, 5 Am. Rep. 115; Speagle v. Dwelling House Ins. Co., 97 Ky. 646, 31 S. W. 282; Connecticut F. Ins. Co. v. Tilleij, 88 Va. 1024, 14 S. E. 851, 29 Am. St. R. 770. Vacancy as to house will not avoid as to barn, Worley v. Des Moines, etc., Ins. Co., 91 Iowa, 150, 59 N. W. 16, 51 Am. St. R. 334; contra, Herman v. Adriatic F. Ins. Co., 85 N. Y. 162, 39 Am. Rep. 644; and see Dohlantry v. Ins. Co., 83 Wis. 181, 53 N. W. 448 (vacancy in one was thought to affect the risk in another). 10 Southern F. Ins. Co. v. Knight, 111 Ga. 622, 36 S. E. 821, 52 L. R. A. 70, 78 Am. St. R. 216 (breach as to stock avoided as to building); Geiss v. Ins. Co., 123 Ind. 172, 24 N. E. 99, 18 Am. St. R. 324; Taijlor v. Atichor Mut. F. Ins. Co., 116 Iowa, 625, 88 N. W. 807, 93 Am. St. R. 261. 57 L. R. A. 328 (chattel mortgage on cattle does not avoid as to house and furniture); Baldwin v. Hartford F. his. Co., 60 N. H. 422, 49 Am. Rep. 324 (alienation of one parcel avoids as to all unless court can rule that there has been no increase of risk); Fire Asso. v. Williams son, 26 Pa. St. 196 (gunpowder in one of three buildings endangered all); Loomis v. Ins. Co., 77 Wis. 87, 45 N. W. 813, 8 L. R. A. 834, 20 Am. St. R. 96. If premium is indivisible it has been i;, I (Jt;SKIt.\l. I'KlNCll'LKS OF INSlKANCK LAW An excellent illust r:it i(»ii <>f these distinctions is furnished by a recent New York case in wliicli it was held that misstatements re- <;anlinK title, lions and incuinl)ranccs avoided onl}' as to the real estat(>, l)Ut a tuisstatenient tliat insured had no reason to fear in- cendiarism was a breach of warranty alTectino; the entire contract.^ 50 also a prohibited vacancy of the building is held to avoid the insurance as to its contents also.- And where the insurance company had a lien on the real estate for the entire premium the court con- cluded that a prohibited mortgage on the building avoided the in- } 116. Void Means Voidable. — Though the contract is said to be avoided l\v the violation on the part of the insured of any of the conditions or warranties inserted for the benefit of the insurer, this means that the contract is voidable at the option of the insurer.*" The insurer, therefore, may waive the forfeiture and revive the con- tract or he may estop himself from taking advantage of the breach." Jj 117. Burden on Insurer in Pleading and Proof. — Rules relat- ing to pleading and burden of proof are so far local and peculiar to held that contract is not severable, as to all the personal property, Burr v. Knhlcr V. Imrn State Inn. Co., 106 Iowa, German Ins. Co., 84 Wis. 76, 54 N W :i8(), 76 X. W. 7^4. 22, 36 Am. St. R. 905. 1 Donley v. Glem Falls Ins. Co., 184 •« Coggins v. .'Etna Ins. Co (N C \. Y. 107. 76 N. E. 914. 1907), 56 S. E. 506 (insurance both on 2 Agricultural Ins. Co. v. Hamilton, storehouse and stock avoided Cases 82 Md. 88, 3.3 Atl. 429, 30 L. R. A. 6.33, cited pro and con.). 51 Am. St. R. 457; Ilartshome v. Agri- s See § 94. cultural Itis. Co., 50 N. J. L. 427, 14 e .y. Y. Life Ins. Co. v. Baker, 83 Atl. 615; also as to barn and out- Fed. 647; Shearman v. The Niagara buildings, Herman v. Adriatic F. Ins. Fire Ins. Co., 46 'N.Y. 526 7 Am Ren Co., 85 N. Y. 162, 39 Am. Rep. 380; Quebec Mar. Ins. Co v ' Banlc 6-14- n 1 , ,r z. , IJ^"^^) ' ^ ^- ^ P- C- 244 ; Provincial Ins. ^McGowan v. Peoples' Mut. F. Ins. Co. v. Leduc (1874), L R 6 P C '>43- Co., .54 Vt. 211, 41 Am. Rep. 843. Eng. Mar. Ins. Act (1906), §.34 m ' Seizure by attachment of part avoids 7 See following chapters BURDEN ON INSURER IN PLEADING AND PROOF 155 the jurisdiction that no attempt will be made to deal with this sub- ject exhaustively. It may be stated, however, that fire and life policies, and to some extent marine, relate to such a multitude of minute particulars, many of them often having no bearing upon the case in hand, and many of the warranties being conditions subsequent, that the majority of courts place upon the insurance company the burden of specially pleading and proving any breach of warrant}^ upon which it may rely in defense.^ This practice prevails very generally where the breach is founded upon the violation of a condition subsequent; or upon an exception to the insurer's liability,' or upon a misstate- ment in the application/'* But in some jurisdictions the assured must 1 Triple Link, etc., Assn. v. Williams, 121 Ala. 138, 26 So. 19 (1899); hidian River, etc., Bk. v. Hartford F. Ins. Co. (Fla.), 35 So. 228; Phoenix Ins. Co. v. Stocks, 149 111. 319, 36 N. E. 408; Benjamin v. Conn. Ind. Ass., 44 La. Ann. 1017, 11 So. 628, 32 Am. St. R. 362; Hale v. Life Ind. & I. Co., 65 Minn. 548, 68 N. W. 182 (burden on company to prove invalidity of con- tract); Dimick v. Met. Life his. Co., 67 N. J. L. 367, 51 Atl. 692 (special plea required) ; Slocovich v. Orient Mut. Ins. Co., 108 N. Y. 56, 66, 14 N. E. 802 (after proof of loss by the peril named, burden is on defendant to show in- validity of contract); Union Ins. Co. v. McGookey, 33 Ohio St. 555. Contra, as to marine policy, McLoon v. 7ns. Co., 100 Mass. 472, 97 Am. Dec. 116. 2 Blasingame v. Ins. Co.. 75 Cal. 633, 17 Pac. 925 (fall of building); (contra, Phoenix Ins. Co. v. Boren, 83 Tex. 97, 18 S. W. 484); Phenix Ins. Co. v. Pickel, 119 Ind. 155, 21 N. E. 546, 12 Am. St. R. 393; Russell v. Fideliti/ F. Ins. Co., 84 Iowa. 93. 50 N. W. 546; Transatlantic F. Ins. Co. v. Bamberger (Ky.), 11 S. W. .595 (fallen building); Coburn v. Travellers' Ins. Co., 145 Mass. 226, 229, 13 N. E. 604 (holding that stipulation by way of defeasance added to principal contract must be pleaded and proved. General denial not sufficient); Freedman v. Atlas Assur. Co., 133 Mich. 212, 94 N. W. 757 (burden on company to prove fallen building); Malicki v. Chi. Guar, etc., Soc, 119 Mich. 151, 156, 77 N. W. 690; Murray v. X. Y. Life Ins. Co., 85 N. Y. 236, 239; Van Valkenhurgh v. Am. Pop. L. Ins. Co., 70 N. Y." 605; Ins. Co. v. Crunk, 91 Tenn. 376, 23 S. W. 140 (exception of fallen build- ing); Johnston v. North W. Live Stock Ins. Co., 94 Wis. 117, 68 N. W. 868. The plaintiff need not allege perform- ance of promissory warranties, that is of conditions subsequent, Tillis v. L. & L. & G. Ins. Co., 46 Fla. 268. 3 Piedmont & A. L. Ins. Co. v. Ewing, 92 U. S. 377, 23 L. Ed. 610 (next to im- possible to prove negatives. Burden on company to prove affirmative if it re- lies on any misstatement); American Cred. Ind. Co. v. Wood, 73 Fed. 81, 84, 19 C. C. A. 264, 38 U. S. App. 583; Continental Life Ins. Co. v. Rogers, 119 111. 474; Supreme Council v. Brashears, 89 Md. 624, 43 Atl. 866, 73 Am. St. R. 244; Chambers v. Ins. Co., 64 Minn. 495, 67 N. W. 367, 58 Am. St. R. 549. Breese v. Met. Life Ins. Co., 37 App; Div. 152, 55 N. Y. Supp. 775. Contra, Vincent v. Mut. Res. Fund, etc., 77 Conn. 281, 58 Atl. 963; .Johnson v. Maryland Cas. Co., 73 N. H. 259; Babbitt V. L. & L. & G. Ins. Co., 66 N. C. 70, 8 Am. Rep. 494; Leonard v. State Mut. L. Assu. Co., 24 R. I. 7, 51 Atl. 1049 (general denial enough); Sweeney v. Met. L. Ins. Co., 19 R. I. 171, 36 Atl. 9, 38 L. R. A. 297, 61 Am. St. R. 751. As to what plaintiff must allege and prove see A77ierican Credit, etc., Co. V. Wood, 73 Fed. 81, 19 C. C. A. 264; Cowan v. Phoenix Ins. Co., 78 Cal. 181, 20 Pac. 408; Vincent v. Mut. Res. Fund, etc., 77 Conn. 281, 58 Atl. 963; O'Connell v. Supreme Conclave, 102 Ga. 143, 28 S. E. 282, 66 Am. St. R. 159; Phoenix Ins. Co. v. Stocks, 149 111. 319, 36 N. E. 408 (fire insurance); Conti- nental Life Ins. Co. v. Rogers, 119 111. 474 (life insurance); Phcenix Ins. Co. v. Pickel. 119 Ind. 155, 21 N. E. 546, 12 lAO UENliUAI. I'1{1.\( II'I.KS «»l INSUUANCK LAW allege and prove a coinpliaiict' with all conditions that are precedent to a valid inception of llic contract.' s< 118. Statutes Making Warranties Representations.— In spite, hnwevor. (if tlio liheral rules of construe;! ion described in the last eight sections, tho strict doctrine of warranty has often worked in- justice especially in instances where the insured by reason of some inadvertent niisstatement in his api)lication for life or fire insurance has incurred a technical forfeiture of his policy, frequently possess- ing no knowledge or appreciation of the situation in good season to permit a correction of the fatal error.^ To mitigate the severity of this rigid conunon-law rule, many states have passed statutes, vary- ing somewhat in application and phraseology, but the dominant provision in most of which is that in the absence of fraud no statement by the insured shall effect forfeiture of his policy unless it relate to a mailer material to the risk."'' Some of the statutes go Am. St. H. '.VXi (fire iii-siirunce); Mc- Loon V. ('ammvninl Ins. Co., 100 Ma.s.s. 472, 1 Am. Hep. 129; Johnson v. Marij- land Cns. Co., 73 N. H. 259; Bogardus V. N. y. Life Ins. Co., 101 N. Y. 328, 4 N. E. .522; ^fr^fnnns v. Western Assur. Co., 43 App. Div. 550, GO N. Y. Supp. 1143, aff'd 167 X. Y. 602; S^tUivan v. Sprin{) Garden Iiis. Co., 34 App. Div. 128, 54 N. Y. Supp, 629; Hcrsetf v. Xorthem Assur. Co., 75 Vt. 441, 56 Atl. 95. But the burden rests upon plaintitY to bring hiinself within the terms of the main promise of the in- .surer, Whitlitcli v. Fldelitit & Cas. Co., 149 N. Y. 45, 43 N. E. 405 (death from external, violent and accidental means). 1 Phoenix Ins. Co. v. Pickel, 119 Ind. 155. 21 N. E. .546; Jones v. Ace. Assn., 92 Iowa, 6.52, 61 N. W. 485; Johnston V. Xorthu-cstern, etc., Co., 94 Wis. 117, 68 N. W. 868. Other courts while theoretically adhering to this rule practically omit to enforce it against the assured by holding that far less will establish a prima facie case, Vin- cent V. Mut. Res. F., etc., 77 Conn. 281, 58 Atl. 963; Allen v. Phoenix Assur. Co. adaho, Nov., 1906), 88 Pac. 245. 2 Continental Fire Ins. Co. v. Whit- aker, 112 Tenn. 151, 79 S. W. 119, 64 L. R. A. 451; Hartford Life Ins. Co. v. Stallings, 110 Tenn. 1, 72, S. W. 960; Metropolitan L. Ins. Co. v. Ihdherford, 98 Va. 195, 35 S. E. 361. As to stat- utes providing that the policy must contain the entire contract, etc., see Appendix, ch. I. =' Appendix, ch. 1. Thus Kenton Ins. Co. V. Wiqginton, 89 Ky. 330, 12 S. W. 668, 7 L. R. A. 81 (misstatement as to ownership). Question of materi- ality is thus by statute relegated to the iury, Keller v. Home Life Ins. Co, 198 Mo. 440 (1906), 95 S. W. 903 (health consumption); Albert v. Mut. L. Ins: Co., 122 N. C. 92, 30 S. E. 327, 65 Am. St. R. 693; Price v. Standard L. & A. Ins. Co., 90 Minn. 264, 95 N. W. 1118; unless the facts allow of only one in- ference. Smith V. Mut. L. Ins. Co., 196 Pa. St. 314, 46 Atl. 426; March v. Life Ins. Co., 186 Pa. St. 629, 40 Atl. 1100, 65 Am. St. R. 887. And in the face of the statutory provision the parties cannot withdraw the issue from the jury by agreeing in the policy that the matter is material, Fidelity Mut. L. Assn. v. Miller, 92 Fed. 63, 34 C. C. A. 211; Germania Ins. Co. v. Rudwig, 80 Ky. 223; Hcrmany v. Assoc, 151 Pa. St. 17, 24 Atl. 1064. So also if the contract is really made in one state the parties must not, to evade such statutes of that state, agree in the policy that some different body of law shall apply, for instance, the statutes of another state, McClain v. Provident Sav. L. Ass. Sac, 110 Fed. 80, 49 C. C. A. 31; Franklin L. Ins. Co. v. Galliqan, 71 Ark. 295, 73 S. W. 102, 100 Am St. R. 73; Dolan v. Mut. R. Fund L. Ass., 173 Mass. 197, 53 N. E. 398; Fidelity SUCH ENACTMENTS VALID AND CONTKOLLING 157 further and provide in substance that a breach of any condition in the poHcy itself shall not avoid unless loss occur during or by reason of it, or unless the risk be thereby materially increased.^ § 119. Such Enactments Valid and Controlling.— Such statutory provisions are constitutional and obligatory;- and no matter what may be the language of the contract, they enter into and control all policies issued after the act goes into effect.'^ The Missouri statute excluding suicide as a defense to the com- pany in life insurance offers an impressive illustration of the rule. Although such a statute should be regarded by the highest federal court as inconsistent with public policy, or even with sound morality, nevertheless that court will give to it a controlling effect, and will not for that reason alon? disregard its provisions.'* Mut. L. Assn. v. Fickiin, 74 Md. 172, 127 Mich. 639, 87 N. W. 62, 54 L. R. A. 21 Atl. 680, 23 Atl. 197; Kmtlci/ v. 739. Thus a statutory provision that Travelers' Ins. Co., 187 Pa. St. 197, 40 a breach shall not avoid unless con- Atl. 808; Sieders v. Mcrchinti<' Life tributing to the risk is not unconstitu- Assn.. 93 Tex. 194, 54 S. W. 753. tional. Northwestern Nat. L. Ins. 1 For instance Maine R. S. (1883), To. v. i?%s, 27 S. Ct. 126 (Dec, 1906). c. 49, §20; Mich. Comp. 1.. (1897), '■i Christian \. Conn. Mut. L. Ins. Co., §5180; Mo., 2 R. S. (1899), §7974; 143 Mo. 460, 45 S. W. 268; Kloster- N. H. Pub. St. (1901), c. 170, §2; mann v. Germania L. Ins. Co., 6 Mo. N. C. Acts (1893), c. 299, §9; Ohio App. 582. The word "representa- R. S., §3643; Okla., 1 R. S. (1903), tions" as used in statutes includes also § 3202; So. Dak. R. Code (1903), statements warranted. White v. Provi- § 1951. dent Sav. L., etc., Soc, 163 Mass. 108, 2 John Hancock M. L. Ins. Co. v. 39 N. E. 771. Warren, 181 U. S. 73, 21 S. Ct. 535, * Whitfield v. /Etna L. his. Co. 45 L. Ed. 955; McGannon v. Ins. Co., (U. S., 1907), 27 S. Ct. 578. CHAPTER VI General Principles — Continued Waiver and Estoppel § 120. Nature of Waiver and Estoppel in General. — Waiver is the voluntary relinquishment of a known right. ^ Estoppel in pais is the bar w hich equity raises, in the interest of fair dealing, to pre- vent the one party from enforcing, to the detriment of the other party, certain rights which it possesses under the letter of the contract, where, by its declarations, agreement, or conduct, it has induced the other party to rest secure in the belief that such rights have been relinquished.- While waiver, properly speaking, is the voluntary abandonment of a right, estoppel includes those cases where an abandonment is inferred or imposed by the court from the nature of the conduct of the party who would otherwise be entitled to the right. Waiver rests upon knowledge^ of the right, and an intention to abandon it,"* by the party waiving. Estoppel rests upon mislead- ing conduct by one party to the prejudice of the other, and is forced upon the wrongdoer by the court, but only to prevent fraud, either actual or constructive.''' The words waiver and estoppel, however, are often used interchangeably by the courts.^ 1 Dale V. Cmtinental Ins. Co., 95 Ins. Co. v. Loyd, 67 Ark. 584, 56 S. W, Tenn. 38, .50, 31 S. W. 266; Findehen 44 77 Am. St. R. 136. V. Metropole Fire Ins. Co., 57 Vt. 520. -^ Bemiecke v. Conn. Mid. L I Co , 2 Union Ins. Co. v. McGookeij, 33 105 U. S. 355, 359, 26 L. Ed. 990; Ohio St. 555. The United States Su- Northicestern Mut. L. I. Co. v. Mont- preme Court says: "Any agreement, gomery, 116 Ga. 799, 43 S. E. 79; declaration, or coin-se of action on the Stringham v. Mut. Life Ins. Co., 44 part of an insurance company which Ore. 447, 75 Pac. 822. leads a party insured honestly to be- * Sullivan v. Prudential Ins. Co., 172 lieve that by conforming thereto a N. Y. 482, 485, 65 N. E. 268. forfeiture of his policy will not be in- 5 Thebaud v. Great Western Ins. Co., curred, followed by due conformity on 50 N. E. 284, 155 N. Y. 516, 522. his part, will and ought to estop the « Waiver and estoppel disting"ished company from insisting upon the for- Metcalf v. Phoenix Ins. Co., 21 R l' feiture, though it might be claimed 307, 43 Atl. 541. Implied wai\er de- under the express letter of the con- fined, Astrich v. German- A jn Ins Co tr_act," Ins. Co. v. Eggleston, 96 U. S. 131 Fed. 13, 65 C. C. A. 251 ' The 572; Georgia Home In.s. Co. v. Allen, terms "implied waiver" and "es- 128Ala. 451, 30 So. 537; P/an/ers'i¥w(. toppel" are used interchan<^eably [158J WHETHER NEW CONSIDERATION REQUIRED 159 The doctrine of implied waiver and estoppel, adopted with the design of evading unconscionable forfeitures,^ moderates the rigor of the technical common-law rules relating to concealment, mis- representation, and warranty, as set forth in the last two chapters, and, doubtless, in many individual cases, has accompHshed an equi- table result. - The party that generally waives or is estopped in insurance law is the insurer, but the same doctrine may be applied in favor of the insurer,^ and against the insured. Thus, where a policy provided that it should cease until a premium note was paid, the court held that, in an action by the insured upon the policy, he was estopped from setting up the claim that the note was unauthorized by the charter and ultra vires.^ § 121. Election once Made is Final. — If wdth knowledge of the forfeiture the insurer elects to revive the contract, and evinces his election by an unequivocal and positive act of confirmation, or by conduct amounting to an estoppel, he cannot thereafter insist upon the past breach.'^ § 122. Whether New Consideration Required. — To support a waiver or an estoppel the insured need pa}^ no fresh consideration for the indulgence granted, provided he can show that in reliance upon the statement or conduct of the insurers he has been misled to his detriment.^ Mutual promises afford evidence of a sufficient con- Bernhard v. Rochester German In^. signee for creditors will enure to Co. (Conn.), 65 Atl. 134. benefit of assured, Mut. R. F. Life 1 Russell V. Prudential Ins. Co., 176 Assn. v. Cleveland Co. Mills, 82 Fed. N. Y. 178, 68 N. E. 252; Kiernan v. 508, 27 C. C. A. 212. Didchess, etc., Co., 150 N. Y. 190, 44 iHale v. Mich. F. Mut. F. Ins. Co. N. E. 698. (Mich., 1907), 111 N. W. 1068. ^ Welch y. Fire Association, 120 Wis. ^Masonic Mutual Benefit Asso. v. 4.56, 468, 98 N. W. 227 (though ad- Beck, 77 Ind. 203, 40 Am. Rep. 295; mitting that the doctrine of estoppel Brink v. Hanover Fire Ins. Co., 80 by parol testimony is exceptionally N. Y. 108. This is based upon the peculiar to insurance contracts, the plainest principles of law, good faith, court does not feel warranted, "in and fair dealing, Grant v. Eliot & seriously questioning the wisdom of Kittery M. F. I. Co., 75 Me. 196, 203. it "). But a waiver as to one breach does not 3 Mut. Life I. Co. v. Hill, 193 U. S. of necessity imply a similar indulgence .551, 24 S. Ct. 538. Waiver or estoppel in future, Thompson v. Ins. Co., 104 operates also in favor of privies in U. S. 252, 26 L. Ed. 765. blood or estate, for example, an as- '^ Kiernan v. Didchess Co. Mut. Ins. signee oi a Viie policy, Meederv. Provi- Co., 150 N. Y. 190, 44 N. E. 698; de7d Sav. L. A. Soc, 171 N. Y. 432, approved in Germania Fire Ins. Co. v. 64 N. E. 167; also in favor of the bene- Pitcher, 160 Ind. 392, 64 N. E. 921: ficiary, Frank v. Mid. Life Ins. Co., Walker v. Ins. Co., 156 N. Y. 628, 51 102 N. Y. 266, 6 N. E. 667, 55 Am. N. E. 392; Dobson v. Hartford Ins. Co.. Rep. 807; and waiver in favor of as- 86 App. Uiv. 115, ajff'd 179 N. Y. 557, 160 GENERAL FKINCIPLES OF INSURANCE LAW sidenition; so also loss to a promisee is as effective in establishing consideration as advantage to a promisor.^ And, if the act of waiver or estoppel occur l)efore loss, it may be presumed that except for reliance up(m it the insured might have protected himself by taking out other insurance.^ So also if it have to do with formalities relat- ing to the proofs of loss, or time for instituting action, it maybe pre- sumed that except for misleading conduct of the insurer the insured would have governed himself by the strict technicalities of the con- tract.^ In case, however, (here is no element of estoppel or of new consideration, then, by the weight both of reason and authority, the act of waiver, unless it be evidenced by an executed written statement or agreement,"* is not binding upon the insurer.'"* Other- 1 De Frece v. Xatiorial Life Ins. Co., 136 N. Y. 144, 151, 32 N. E. 556, citing many cases. - Manchester v. Guardian Assur. Co., 151 N. Y. 88, 92. 45 N. E. 381, 56 Am. St. R. 600 (citing cases); Wing v. Harvest, 5 De G., M. & G. 265, 268. ^ Dobson V. Hartford F. Ins. Co., 86 App. Div. 115, 83 N. Y. Supp. 456, aff'd 179 N. Y. 557; Georgia Home his. Co. V. Kinnicr, 28 Grat. (Va.) 88. 4 Gibson El. Co. v. L. & L. & G. Ins. Co., 159 N. Y. 418, 426, 54 N. E. 23 (there must be either express waiver or estoppel); Viele v. Germania Ins. Co., 26 Iowa, 9, 57, 96 Am. Dec. 83. Writ- ten waiver is effective if, like the standard, the policy so provides, Nel- son V. Traders' Ins. Co., 181 N. Y. 472, 476; since then the original considera- tion supports it. And a modification of a contract consisting of a present aban- donment of a right by a party, if duly executed in writing, should' be held binding though unsupported by fresh consideration, Rice v. Fidel. & Dep. Co., 103 Fed. 427, 434, 43 C. C. A. 270; Quebec Mar. Ins. Co. v. Bank, L. R. 3 P. C. 234, 244; Weir v. Aberdeen, 2 B. & Aid. 320. The insurance com- pany has an absolute right to abandon any of the many clauses inserted by it and framed solely for its benefit, loua Life Ins. Co. v. Lewis, 187 U. S 335, 338, 23 S. Ct. 126, 47 L. Ed. 204. No better or more orthodox evidence of the exercise of this option can be suggested than a WTitten permit, exe- cuted and delivered to the insured; compare. Lariin v. Hardenbrook, 90 N. Y. 333; Simons v. Supreme Council 178 N. Y. 263. In analogy to the law of gifts, a ^\Titten permit should be held irrevocable from time of delivery, if granted without misapprehension of the facts, though without fresh consideration and without change of position on the part of the insured, Opitz v. Karel, 118 Wis. 527, 95 N. W. 948; Rice v. Fidelity & Dep. Co., 103 Fed. 427, 43 C. C. A. 270. Thus, under the marine policy, though a vessel has not yet sailed, a permit to touch and stay should be held binding upon the underwriter, and irrevocable from delivery. So also, under the fire pol- icy, the same rule should apply to a permit extending the time to" begin action, though the limited period of twelve months has already expired before the permit is granted, see Pren- tice V. Knickerbocker Life Ins. Co., 77 N. Y. 483, 33 Am. Rep. 651. But compare Knickerbocker Life Ins. Co V. Norton, 96 U. S. 399. The permit, if delivered, may be actually attached to the policy at any time, Bennett v. Western Underwriters' Assn., 130 Mich. 216. 5 Ins. Co. Y.Wolff, 95 U. S. 326, 333, 24 L. Ed. 387; United Firemen's Ins. Co. V. Thomas, 82 Fed. 406, 27 C. C. A 42, 47 L. R. A. 4.50 (cited with ap- proval, 183 U. S. 340); Morris v. Orient Ins. Co., 106 Ga. 472, 475, 33 S. E. 430; Northwestern Mut. L. 7?i.s. Co. v Amerman, 119 III. 329, 10 N. E 225 59 Am. Rep. 799; .V. Y. Cent. Ins. Co. y. Watson, 23 Mich. 486; Burdick v. Life Assn., 77 Mo. App. 629, 636; Armstromj v. Agricultural Ins. Co., 130 N. Y. 560, 568, 29 N. E. 991; Under- wood V. Farmers' Joint Stock Ins Co 57 N. Y. .500, 506; Murrin v. Universal L. Ins. Co., 16 Hun, 49J, aff'd, with- out deciding this point, 85 N. Y. 278 DISTURBANCE OF CONTRACT BY PAROL 161 wise the sanction of the written contract is virtually destroyed by parol ;^ but, especially in matters of mere formality, like serving proofs of loss, there are, in some cases, dicta to the effect that even after breach and without any new consideration or estoppel the company may waive forfeiture, and that such waiver may be shown by parol; but, in most if not in all, elements of estoppel in fact existed.^ § 123. Action Usually upon Contract: Not for Rescission or Reformation. — It will be observed that, as the question ordinarily arises in practice, the insured, when he claims a waiver or an es- toppel, is not aiming at reformation of the policy in equity, nor at rescission for fraud or mistake. Rescission wdth restitution of pre- miums is in most instances an inadequate or unsatisfactory form of relief, and rather than apply to a judge for reformation of the con- tract the assured is apt to entertain a preference for a jury trial. Accordingly, he ordinarily brings his action upon the policy, and under the doctrine of waiver and estoppel, as applied by most courts, may be allowed to recover, although under the terms of the written contract, in conjunction, it may be, with the testimony of his own witnesses, no cause of action is established against the insurers.* § 124. Disturbance of Contract by Parol. — In most instances waiver or estoppel must be established by oral testimony. For exam- ple, the written application for the life policy is made part of the contract and its statements are warranted to be true. It declares that the age of the insured is thirty-five, or that he never had typhoid fever, or that he has taken out no other insurance; but, on the trial of the action brought by his representatives on the policy, the testi- 284; Ri-pley v. ^tna Ins. Co., 30 N. Y. Iowa, 9, 96 Am. Dec. 83; Kingman 136, 8Q Am. Dec. 362; Lantzv. Vermont v. Lancashire Ins. Co., 54 S. C. 599, L. Ins. Co., 139 Pa. St. 546, 21 Atl. 80, 32 S. E. 762; and see Pratt v. Ins. Co., 23 Am. St. R. 202, 10 L. R. A. 577; 130 N. Y. 206, 29 N. E. 117; Roby v. Dale V. Continental Ins. Co., 95 Tenn. Ins. Co., 120 N. Y. 510, 24 N. E. 808; 38, 50, 31 S. W. 266; Merchants' Mid. Titus v. Ins. Co., 81 N. Y. 410 (in Ins. Co. V. Lacroix, 45 Tex. 158; Mc- which it is declared that there need be Farland v. Peabody Ins. Co., 6 W. Va. no estoppel and no new agreement). 425. Contra, other cases with dicta in i Northern Assur. Co. v. Grand View substance that the company may Bldg. Asso., 183 U. S. 308, 361, 22 voluntarily dispense with the condi- S. Ct. 133, 46 L. Ed. 213; Conn. F. Ins. tion, whether there is a new considera- Co. v. Buchanan, 141 Fed. 877, 889 tion or an e«toppel or not and that its (citing many cases), election may be shown by parol, 2 gee Prentice v. Kniclerbocker Life Alabama State Mut. Assur. Co. v. Lonj, Ins. Co., 77 N. Y. 483, 33 Am. Rep. etc., Co., 123 Ala. 667, 26 So. 655; 651. Home Fire Ins. Co. v. Kuhlman, 58 ^ Rowley v. Empire Ins. Co., 36 "N.Y. Neb. 488, 78 N. W. 936, 76 Am. St. R. 550; Van Schoick v. Niagara Fire Ins. Ill; Viele v. Germania Im. Co., 26 Co., 68 N. Y. 434. 11 l()2 GKNEUAL I'HINCII'LES OK INSURANCE LAW mony shows that iiis age was forty, or that he had been afflicted with typhoid fever, or tliat he had taken out other insurance. Under the doctrine of parol waivers, however, the plaintiff is permitted to show by oral testimony that the agent of the company had knowledge of the truth of the circumstances misstated in the application, and closed the contract and received the premium or delivered the policy in full possession of such knowledge. The agent denies any such knowledge; the issue so raised goes to the jury, and if decided for the plaint ilT, as it usually is, without much regard to weight of evidence, the plaintiff recovers.^ In like manner, the fire policy provides that it shall be void if the insured is not unconditional and sole owner,- or has other insurance,^ or uses certain hazardous articles,'' or if the insured building stands on leased ground,^ or if the insured personal property is covered by a chattel mortgage,*' without, in each case, written permit indorsed on the policy. There is no such permit, but on the trial the plain- tiff is allowed to show that when he applied for the insurance he mentioned to the agent the circumstances constituting the breach. The agent denies this. The issue goes to the jury. The plaintiff recovers. The leading case of Plumb v. Cattaraugus Ins. Co7 is said to have changed the law for New York.* And this was conceded by the New York Court of Appeals in a later case.^ But the doctrine of parol waivers in general as adopted by New York subsequently met with approval in most of the states. § 125. Effect of Doctrine on Common-Law Rules of Evidence. — It is often said that the doctrine of waiver and estoppel does not subvert the terms of the policy, and is not repugnant to the ordi- nary rules of evidence.^" This maybe true where the plaintiff brings his action to annul or to reform the contract, but where, as is usual, the action is brought to recover upon the policy, it would seem to be more sensible and accurate to concede, that, so far as this doctrine tolerates parol evidence of knowledge by the insurers, prior to the ^ Sternaman v. Met. Life Ins. Co., '^Bergeron v. Pamlico Ins., etc., Co., 170 N. Y. 13, 62 N. E. 763, 57 L. R. A. Ill N. C. 45, 15 S. E. 883. 318, 88 Am. St. R. 625. 6 Robbins v. Springfield F. Ins. Co., 2 Virginia F. & M. Ins. Co. v. Rich- 149 N. Y. 477, 44 N. E 159 mond Mica Co., 102 Va. 429, 46 S. E. ^ 18 N. Y. 392, 72 Am. Dec. 526. 463, 102 Am. St. R. 846. « Dewees v. Manhattan Ins. Co., 6 3 Sumn V. Macon Fire Ins. Co., 102 Vroom. (N. J.) 374. Ga. 96, 29 S. E. 147. 9 Rowley v. Empire Ins. Co., 36 N. Y * Hartley v. Prnn. Fire Ins. Co., 91 550. Minn. 382, 98 N. W. 198, 103 Am. St. ^o Queen Ins. Co. v. Kline 17 Ky ^- *12. L. R. 619, 32 S. W. 214 (1895); Pitney V. Glens Falls Ins. Co., 65 N. Y. 25. " CONSIDERATION FAVORING DOCTRINE OF PAROL WAIVERS 163 Closing of the contract, of facts at variance with its stipulations, and permits the insured to give his oral version of antecedent and con- temporaneous negotiations and transactions, it does constitute a substantial departure from the ordinary rule of evidence; since a doctrine which denies all force and effect to an unambiguous clause of a written contract, to all intents and purposes, expunges the clause from the contract altogether.^ § 126. Considerations Favoring Doctrine of Parol Waivers. — The policy is prepared in the interest of the insurers. The applicant must take it or nothing. It is a general form framed for all in- stances and not for the particular instance. Its conditions are numerous a ^d complex, and often the insured does not receive it until after the contract is closed. He may have no opportunity to. compare it with the application, though the latter may constitute a part of the contract. It would not be consonant with fair dealing, indeed it would work actual fraud, to permit an insurer in return for the premium to deliver a pretended contract of insurance, while knowing all the time, from the very threshold of the transaction, that a forfeiture is already incurred, and that therefore the policy will be of no more avail to the insured than a piece of waste paper.^ With respect to another class of forfeitures, the contention is made that it would not be just to hold the insured responsible for erroneous answers in the application or policy, where the insertion or omission complained of is the act of the company or its representa- tive, without connivance on the part of the insured, since in such a case the alleged breach of contract is not the act of the insured at all, or not mainly his act.^ Again, where the policy during its life, whether before or after loss, becomes voidable at the option and to the knowledge of the insurers, words or acts of the insurers, confirmatory of the continued validity of the contract, ought to be taken as good evidence of the exercise of this option to condone the default, if otherwise their effect would be to mislead the insured to his prejudice.' To this last propo- sition substantially all the authorities agree, provided the represen- tative of the insurer, acting on its behalf, has sufficient power to waive. 1 See the important case of Northern 2 Van, Schoick v. 7ns. Co., 68 N. Y. Assur. Co. V. Grand View Building 434. Assn., 183 U. S. 308, 22 S. Ct. 133, 46 3 Wilkinson v. Jna. Co., 13 Wall. L. Ed. 213; Franklin Fire Ins. Co. v. (U. S.) 222. Martin, 40 N. J. L. 568. 164 GENERAL PRINCIPLES OV INSURANCE LAW § 127. Considerations Opposed to the Doctrine.— The contract of insurance should not be put outside the pale of common-law rules.' By its own terms it provides an exclusive, reasonable, and business- like method for making modifications in the contract by the em- l)loyment of written consents called permits.' The instrument as written is the most reliable evidence of the agreement.^ To go outside of it is to encourage falsehood and fraud to the certain injury of one or other of the parties and to the detriment of the public. The inevitable tendency will be toward a multiplication of fires and an increase of premium rates. Claimants, through lack of memorv (n- by evil design, will, too often, fit oral testimony to the exigencies of their case. A material witness on one side or the other may die before trial. Since the written contract alone is reported to the company,'' the applicant should know that the statements in the application and policy, whether right or wrong, must, in most in- stances, constitute all^that the home office has before it in estimat- ing risks and fixing rates of premium. He should know that the insurers have never wittingly given authority to their agents to distort or secrete from them any facts bearing upon these vital subjects. Under the doctrine of waiver and estoppel it sometimes happens that the insured is allowed to recover upon a policy in spite of forfeiture where, if the facts disclosed for the first time at the trial had been made known to the company in advance, it would have declined the risk altogether, and very frequently the undis- closed facts would aftect the rate of premium. Thus, there is often thrust upon the insurers, by an anomalous doctrine of law, a con- tract which they neither have m.ade, nor, if the facts had been lis- closed to them, would have made.^ § 128. Practical Operation of Doctrine.— The doctrine of parol waivers as applied to excuse breaches of warranties contained in policies is largely a development of recent years,^ and may fairly be 1 Northern Assur. Co. v. Grand View The United States Circuit Court savs- Bldg. Assn., 183 U. S..308, 22 S. Ct. "There is too much tendency on the 133, 46 L. Ed 213. part of judges to construe away valid ^ .\orthern Assur. Co. V. Grand View provisions in contracts of insurance Bldg. Ass7i., 183 U. S. 308, supra; Nel- and indemnity and thus reach some son Y. Traders Ins. Co., 181 N. Y. 472. more equitable conclusion. The result V T T 'o ^'- *" ^^^^ ^^'''- ^"■' ^^ ^^ ^^^^ 'hard case' law, which is N.J^ L. 384, 55 Atl. 291. mostly bad law, and always variable t fee § / 5, supra law," Jackson v. Fidelity & Cas. Co. , 75 5 If the general form of the contract Fed. 359, 21 C. C A 394 IS unfair it is the function of legis- « Doctrine of allowing parol evi- lature, not of court or jury, to change dence that agent of company knew It {pPf^« f • /ns- (l'i-''£^osCo 151 facts at variance with policy was for U. b. 452, 14 fe. Ct. 379, 38 L. Rd. 231. many years repudiated by substan- PRACTICAL OPERATION OF DOCTRINE 165 called an American innovation in the law of insurance.' Its ap- plication has often fostered dishonest claims and encouraged per- jury in sustaining them. The tendency of this has been to drive the companies into an illiberal policy in modifying their contracts and in adjusting their losses. Such action of the companies, in turn, has stimulated the courts to adopt a more and more rigorous application of the doctrine against the insurers, and has called forth frequent and varied interference by the legislatures of all the states; ^ thus this whole branch of the law in the United States has been thrown into confusion and uncertainty.^ The cases upon this sub- ject in this country constitute a considerable portion of the law of insurance,'* and many of the opinions of our courts of last resort, as reported in them, are hopelessly at variance with one another. Nevertheless, all the courts recognize that there exists in the law of insurance an equitable doctrine of waiver and estoppel,^ but when and how to apply it is the perplexing problem. Estoppel is a rule of law avowedly subverting and overriding the terms of the contract, but adopted for the purpose of preventing fraud. ^ The tially all courts in actions on the con- tract, Weston V. Ernes, 1 Taunt. 115, (Lord Mansfield with unerring judg- ment discriminates between matter of inducement and matter of contract). Carpenter v. Providence Wash. Ins. Co., 16 Pet. (U. S.) 495; Atherton v. Brown, 14 Mass. 152; Hartford F. Ins. Co. v. Davenport, 37 Mich. 609; Dewees v. Manhattan Ins. Co., 35 N. J. L. 366; Jennings v. Chenango Co. Mut. Ins. Co., 2 Denio (N. Y.), 75. 1 In the index to the last edition of Arnould, Mar. Ins. (1901), we look in vain for the subject "parol waiver or estoppel." According to last edition Bunyon, F. Ins. (1906), the following two cases furnish the only instances cited from English and Irish reports involving a variation in the terms of the policy by virtue of the doctrine of waiver and estoppel, Winx^ v. Harvey, 5 De G., M. & G. 265; Armstrong v. Turquand, 9 Ir. C. L. R. 32, in both of which renewal pi-emiums were ac- cepted with knowledge of facts con- stituting breach. A modification by agreement with fresh consideration to each party is, of course, allowed, Supple v. Cain, 9 Ir. C. L. R. 1, and credit for first premium inferred where the policy recites its prepayment, Roberts v. Security Co. (1897), 1 Q. B. Ill, but in the last two cases there is no subverting of the written terms by parol. Nor is there in a marine case where the English court held that the underwriter might elect to waive for- feiture for an inducing misrepresenta- tion made prior to the contract, Morri- son V. Universal Mar. Ins. Co., L. R. 8 Exch. 40, id. 197. The English court does not find waiver or estoppel, even where true answers are given to the company's solicitor and erroneous an- swers are written into the application by him, Biqgar v. Rock Life Assur. Co. (1902), 1 K. B. 516. In striking con- trast stand many thousands of Ameri- can cases, reported and unreported, in which, on contradictory oral evidence extrinsic to the policy, the jury has been allowed to ignore an admittedly violated warranty. 2 Appendix, ch. I. 3 An experienced jurist says: "The insurance company is the sport of legislatures and its contract the foot- ball of the courts," Prof. Finch in Re- ports Am. Bar Assn., vol. 20, p. 496. * Waiver and estoppel confront the insurance lawyer in court perhaps more frequently than any other issue. 5 Even in England, see Mar. Ins. Act (1906), § 34 (3). 6 Security Ins. Co. v. Fay, 22 Mich. 467, 473, 7 Am. Rep. 670, per Camp- bell, Ch. J. The statement, often made, that "waiver is a technical doctrine introduced and applied by courts for 166 GENERAL PRINCIPLES OF INSURANCE LAW meaning of the written contract may be plain. The effects of es- toppel lire ;is varied and multifarious as are the estimates among \\\o. various tribunals of what constitutes fraud. .^ 129. Difficulty in Applying Doctrine.— In attempting to make practical api)li('at ion of tlie doctrine of waiver and estoppel, in actions on the contract, we are apt to find that certain fundamental princi- ples of law are brought into collision. Of these the following may be mentioned: first, it is the prerogative of a court, not of a jury, to construe an unambiguous written contract; second, the court must enforce the agreement, if at all, as it is made by the parties; ^ third, when its terms are plain, the agreement must not be varied by parol evidence; - fourth, either party may voluntarily abandon a clause of the contract inserted for his benefit,'^ or, by misleading conduct amounting to fraud, may estop himself from taking advantage of it;'* but the testimony establishing a waiver or an estoppel in subversion of the written contract is almost always necessarily parol,^ and whether such testimony is true presents a question for the jury.^ Besides the embarrassment arising from any effort to harmonize propositions so irreconcilable, a further and most serious difficulty presents itself in many instances of this class. Insurance com.- panies can act only by personal representatives or agents, there- fore they can accomplish waivers and estoppels only through the medium of agents," and an agent to bind his principal nmst possess sufficient authority, either real or apparent.* The policy usually declares in substance that agents have no authority to waive any provisions of the policy except by written agreement indorsed thereon or attached thereto, and probably agents rarely receive the purpose of defeatino; forfeitures," Agricultural his. Co., 130 N. Y. 560, Alabama State Mut. As.'^ur. Co. v. 29 N. E. 991. Lon<7, f4 supra L. Ins. Co. V. .Amerman, 119 111. 329, 6 See §93 supra Ru.ssell\'. Prudential Ins. Co., 176N.Y. Mich 514 32 Am St R 519 is T R 't\Y^I^- !?■ If' ^? ^H- ^'- ^- *556; A. 481 53 N V\^818. ' ^ ^^ ^• lm%2\o-7f-i^l^A-''^f^-^- "^'^'"-'^ '■ Prudential Ins. Co., 0I6, o22, 50 N. E. 284; Arm.>^troiuj v. 'jy .Mi,,,,. 17(), 108 N. W. 861. DIFFICULTY JX Al'i'L\lXG DOCTRINE l67 affirmative instructions to waive in any other way. Under such circumstances, what is the apparent power of the agent to bind the company, in matters of waiver and estoppel? Shall the limit of authority, as defined by instructions and as described in the policy to which the assured is a party, be regarded as the true measure,^ or shall the court gauge the extent of authority by the rule that the power of the agent is coextensive with the reasonable requirements and natural incidents of the transaction which he is employed to conduct in the interest of the company? - Is the insured justified in assuming that the contract terms as written may be thus ignored or evaded? Is such an irregular disturbance of the contract to be considered a reasonable or natural incident of the transaction? To these questions different answers have been given, according as one or another of these considerations has been uppermost and controlling in the mind of the court., and the different answers have ramified into very divergent results in multitudes of cases decided in the many independent jurisdictions of this country.^ A maze of conflicting rulings, which do not all fall within concise and logical formulae, must engage our strict and patient attention in the two chapters next succeeding. ^Northern Ass. Co. v. Grand View ^ Ins. Co. \. Wilkinson, 13 Wall. Building Assn., 183 U. S. 308, 22 S. Ct. (U. S.) 222. 133, 46 L. Ed. 213. a See ch. VIII, infra, and Cooley Ins. (1905), pp. 2455-2787. CHAPTER VII General Principles Waiver and Estoppel — Continued § 130. What Cannot be Waived. — Parties to a contract of insur- ance made within a state cannot avoid the provisions of a general statute of that state, adopted as matter of pubHc poUcy, unless the statute authorizes it.^ The rule requiring an insurable interest, whether prescribed by statute or not, being adopted out of regard to the welfare of the state, may not be altogether waived by the par- ties.2 A corporation cannot in general do an act idtra. vires or beyond its corporate powers as defined by its charter, and every one deal- ing with the corporation is presumed to be cognizant of the nature and extent of such power." Thus if a fire insurance company organized in New York should 1 St. Paul F. & M. Ins. Co. v. Sharer, 76 Iowa, 282; Emery v. Piscataqua F. & iM. his. Co., 52 Me. 322; Chamber- lain V. N. H. Fire Ins. Co., 55 N. H. 249. Thus, that there shall be no forfeiture of a life policy for non- payment of premiums, etc., without a notice of at least fifteen days, duly mailed, N. Y. Ins. L., § 92; Mid. Life Ins. Co. V. Cohen, 179 U. S. 262; Baxter V. Brooklyn Life Ins. Co., 119 N. Y. 450, 23 N. E. 1048 (statute governs rights and obligations). Nor can the parties waive other remedial provi- sions regarding forfeiture, N. Y. Life Ins. Co. v. Cravens, 178 U. S. 389. And rule applies to foreign company making contract in the state. Equitable Life Assur. Sac. v. Clements, 140 U S 226, 11 S. Ct. 822; Knights Templars, etc., Co. V. Jarman, 187 U. S. 204 (Missouri statute making life company liable despite suicide of insured). So also as to provisions of standard policy prescribed by statute, Wild-Rice L. Co. v. Royal Ins. Co., 99 Minn. 190, 108 N. W. 871; or of statutes in substance transforming w^arranties into mere representations, Hancock Mut. Life Ins. Co. v. Warren, 181 U. S. 76; or declaring a policy valued as to build- ings. Orient Ins. Co. v. Daggs, 172 U. S. 557; Reilly v. Franklin Ins. Co., 43 Wis. 449; or making a solicitor the agent of the insurance company, McMaster v. N. Y. Life Ins. Co., 183 U. S. 25; Con- tinental Life Ins. Co. v. Chamberlain, 132 U. S. 304, 10 S. Ct. 87, 33 L. Ed. 341; or providing that license shall be revoked if company removes a case to federal court, Security Mut. L. Ins. Co. V. Prewitt, 202 U. S. 246; Cable v. U. S. Life Ins. Co., 191 U. S. 288. A cor- poration cannot abrogate such laws by attempted contract stipulations. Na- tional, etc., Assoc. V. Brahan, 193 U. S. 635, 650, 24 S. Ct. 532. ^ Auctil V. Mfrs. L. Ins. Co. (1899), App. Cas. 604; and see Gedqe v. Royal Exch. (1900), 2 K. B. 214. 3 Jemison v. Citizens' Savings Bank, 122 N. Y. 140; Gibbs v, Richmond Co. Mut. Ins. Co., 9 Daly (N Y.). 203. [168] WHAT CANN(yr BK WAIVED 169 attempt to make a contract of life or ocean-marine insurance, the contract would be void.^ So also a policy of a mutual company is void as to a class of property not included within the privileges of its charter; ^ or if issued to one not a member of the company; ^ or if upon property located outside the territory of its operations as de- fined by statute. "^ Especially in the federal courts the'doctrine of ultra vires is strictly enforced;^ but in the interest of justice premiums will be returned to an innocent party upon disaffirmance of the contract; or other equitable reinstatement will, if practicable, be allowed.'^ Many of the state courts, however, have adopted the rule that after a contract ultra vires has become executed by the one party, the other party is estopped from asserting its own wrong, and cannot be excused from performance upon the plea that the contract was beyond its powerJ With the aid of this doctrine, apparently, con- tracting parties may largely ignore the limits which are imposed by statutes and charters for the security of the stockholders, and also, it may be, for the benefit of the public generally. 1 Re Arthur Average Assoc, 32 L. T. N. S. 525. But any directions of the charter as to the internal manage- ment of the affairs of the corporation are not in general binding upon out- siders, hi re Athenceum Life Assur. Co., 27 L. J. Ch. 829. Nor are charter provisions binding upon third persons which extend to the directors' dis- cretionary powers to do a certain act, Ernest v. Nicholls, 6 H. L. Cas. 401; as, for example, where, by the regula- tions of the company, insurance is to be made only to three-fourths of the value of property, but the officers of the company are to decide what is the value, Jones v. Bangor Mut. S. Ins. So., 61 L. T. N. S. 7i27. And, in gen- eral, for a deviation from the pre- scribed method of doing a valid cor- porate act, the corporation will not be discharged from liability to an inno- cent person, and therefore in such matters of informality or of inaccuracy, directions whether of the charter or by-laws may be waived. Relief Ins. Co. V. Shair, 94 U. S. 574; First Bapt. Church v. Brooklyn Fire Ins. Co., 19 N. Y. 305; In re County Life Assur. Co., L. R. 5 Cli. App. 288. Thus a by-law barring applications from persons en- gaged in certain occupations. Cover- dale v. Royal Arcanum, 193 111. 91, 61 N. E. 915; or a by-law limiting mem- bership to persons below a certain age, Wiberg v. Minn., etc., Assoc, 73 Minn. 297, 76 N. W. 37. 2 Geraghty v. Washtenaw Mut. F. Ins. Co. (Mich., 1906), 108 N. W. 1102 (citing many cases pro and con). 3 In re Mutual Guaranty F. Ins. Co. (la., 1899), 77 N. W. 868; Corey v. Sherman (la.), 60 N. W. 232. Com- pare Coulson V. Flynn, 181 N. Y. 62, 73 N. E. 507. 4 Eddy V. Ins. Co., 72 Mich. 651. 5 California Bank v. Kennedy, 167 U. S. 362 (citing many cases, English and American); Central Transp. Co. v. Pullman's P. C. Co., 139 U. S. 24, 59; First Nat. Bank v. Converse, 200 U. S. 425; Ashhury Railu-ay C. dk Iron Co. v. Riche,L. R., 7 H. L. 653. 6 Pullman's Car Co. v. Transp. Co., 171 U. S. 138. 7 V ought v. Eastern Bldg. & L. Assn., 172 N. Y. 508, 518; Boners v. Ocean Ace. & Guaranty Corp., 110 App. Div. 691, aff'd 187 N. Y. 561; Brisay v. Star Co., 13 Misc. (N. Y.), 349; Denver F. Ins. Co. V. McClellajid, 9 Colo. 11, 9 Pac. 771; Matt v. Society, 70 Iowa, 455, 30 N. W. 799; and see many cases cited in dissenting opinion, Garaghty v. Washtenaio Mut. F. Ins. Co. (Mich.), 108 N. W. 1102. But on the other hand the New York Supreme ('ourt has recently followed the federal rule, Appleton v. Cit. Cent. Nat. Bk., 116 App. Div. 404. 1,(1 (;i:m;i;ai. rifi.\( itlks oi INSIHANCE LAW § 131. What can be Waived Stock Companies. — An}- condition or provision of the policy inserted for the benefit of the insurers, even those stipulations wiiich j^rovide that there shall be no waiver, or that no waiver shall be made except in a certain manner as by writ- ing, or that certain classes of persons shall be deemed to have no authority to waive, may be waived by the insurers through such representatives as in fact have tlie requisite authority.' This is put upon the ground that parties having power to make a contract have power by mutual consent to abrogate or alter it to any extent at their pleasure, unless restrained by statute.^ § 132. New Subject not to be Introduced by Waiver. — The doctrine of waiver and estoppel, it is said, is not to be extended so far as to introduce into the contract an entirely new subject-matter. Thus if by the terms of the poUcy a designated house is the sub- ject of insurance, the insured will not be permitted to show by parol that in consequence of the representations or conduct of the insurers another house ought to be substituted.^ Neither can a new peril or cause of loss be added to the contract by application of this doctrine.'* § 133. Waiver — Mutual Companies. — By some courts, especially those of i\Iassachusetts, it has been held that the officers and agents of a mutual insurance company have no authority to waive such of its charter regulations or by-laws as relate to the essential terms of the contract.^ 1 Phoenix Ins. Co. v. Hart, 149 111. .V. Y. Cent. Ins. Co., 22 N. Y. 402, 411; 513, 36 N. E. 990; Glasscock v. Des Morrison v. Universal Mar. Ins. Co., Moines Ins. Co., 125 Iowa, 170, 100 L. R. 8 Exch. 40, id. 197. N. W. 503. s Sanders v. Cooper, 115 N. Y. 279, 2 Thus in a late case, /oira Li/e /ns. 22 N. E. 212; Birnstein v. Stui/ve- Co. V. Lewis, 187 U. S. 335, 348, the sant Ins. Co., 83 App. Div. (N. Y.) 436, Federal Supreme Court says: "A for- 82 N. Y. Supp. 140; Xorthrup v. Por- feiture, of course, may be waived, for ter, 17 App. Div. 80, 44 N. Y. Supp. the obvious reason expressed in 7ns. 814. Remedy, if any, in such a case is Co. V. Norton, 96 U. S. 235, a party by reformation, Le Gendre v. Scottish always has the option to waive a con- Union & Nat. Ins. Co., 95 App. Div. dition or stipulation made in his own (N. Y.) 562, 565, 88 N. Y. Supp. 1012. favor, and an agent can be given such i McCoy v. NoHhwestern, etc., Assoc power, and whether it has been given 92 Wis. 577, 66 N. W. 697, 47 L. R a' or not may be proved by parol." 681. Phoenix Ins. Co. v. Caldwell, 187 111. 5 McCoy v. Metrop. Life Ins. Co 133 73, 58 N. E. 314; Hunt v. State Ins. Co., Mass. 85; Brewer v. Chelsea Mut 'Pire 66 Neb. 121, 92 N. W. 921. Waivers 7ns. Co., 14 Gray (Mass.), 203; Mulrey of specific conditions enumerated in v. Shawmut Mut. Fire Ins. Co 4 Allen Cooley Ins., pp. 2464-2465. Inducing (Mass.), 116, 81 Am. Dec. 689- Belle- fraud or misrepresentations prior to ville Mut. Ins. Co. v. Van Winkle 1 contract may also be waived, Bigler v. Beasley, 333. ' WHAT AMOUNTS ro WAIVEK OR ESTOPPEL 171 This distinction is put upon the ground that pohcyholders in a mutual company are members of the company, and that the by-laws are binding upon all, and that the officers and other representatives of the company are special agents appointed to enforce the by-laws and mutual arrangements, and not to disregard them in favor of one of the members as against his associates. Even in Massachusetts the limitation extends only to provisions that are of the essence of the contract. Technical requirements in regard to the form and the contents of the proofs of loss, or limita- tion of time to sue, may be waived.^ And the tendency among the courts seems to be to deny the dis- tinction between mutual and stock companies altogether, in respect to the power of the officers and agents to waive conditions and estop the company from insisting upon forfeitures.^ § 134. What Amounts to Waiver or Estoppel — Doctrine Ampli- fied. — Any unequivocal and positive act by the insurers recognizing the policy as valid and inconsistent with the notion that the com- pany proposes to avail itself of a breach — as, for example, the ac- ceptance of a premium or assessment, the delivery of the policy or a renewal receipt, or the levying of an assessment, or the indorse- ment of any permit on the policy — constitutes a waiver of all known grounds of forfeiture, and the company is said to be estopped from setting them up in defense, provided the insured can show that by such act he has been misled to his injury.'' Thus though the assured made a transfer of the property so that he no longer had any in- surable interest as owner, nevertheless as the company continued 1 Priest V. Citizens' Mut. Fire Ins. member to pay his assessments at cer- Co., 3 Allen (Mass.), 602; Jenjiings v. tain stipulated times, a waiver of such Metropolitan Life Ins. Co., 148 Mass. provision may be shown by a course of 61, 18 N. E. 601. conduct inducing the members to be- 2 Relief Ins. Co. v. Shaw, 94 U. S. lieve that the assessment would be 574; Railway, etc., AssJi. v. Tucker, 157 received thereafter, Foresters of Amer- 111. 194, 42 N. E. 398; Nat. Mid. Ben. ica v. Hollis, 70 Kan. 70, 78 Pac. 160. Asso. V. Jones, 84 Ky. 110; Gxmther v. Doctrine of waiver is applicable to New Orleans, etc., Asso., 40 La. Ann. each underwriter to a Lloyd's policy, 776, 5 So. 65, 2 L. R. A. 118, 8 Am. Ralli v. White, 21 Misc. 285. 47 N. Y. St. R. 554; Orm.sby v. Laclede Farmers', Supp. 197. e. v. Dayiiel, 25 Kv. Law. Rep. 1501, ,'8 S. W. 866; Pru- dential Ins. Co. V. Devoe, 98 Md. 584, 56 Atl. 809; Gern\iger v. North Caro- lina Home Ins. Co. 133 N. C. 407, 45 S. E. 773; Scottish Union & Nat. Ins. Co. V. Moore (Tt <. Civ. App.), 81 S. W. 573; Cooper \, Ins. Co., 96 Wis. 362, 71 N. W. 606. ^ lona Life Ins. .o. v. Lewis, 187 (J. S. 335; Knickerbyicker Life Ins. Co. v. Pendleton, 112 U. S 696, 5 S. Ct. 314. * Virginia F. & Mar. Ins. Co. v. Goode. 95 Va. 762, 30 S. E. 370, 371. •» Phcenix 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. A.ss., 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; Smjder v. Ins. Co.. 59 N. J. L. 544, 37 Atl. 1022, 59 Am. St. R. 625. 6 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 insured 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 gb;neral principles of insurance law § 146. Demanding Proofs of Loss.— Demanding the usual verifiec proofs of loss in itself effects no waiver or estoppel. No matter Hoaa many grounds of forfeiture- the company may suspect or believe tc 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 Mut. 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- juster or other agent of the company has 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 without 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, oA 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; Boulton 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 brought 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 Mut. Ins. Co., 186 Mass. 589. 2 Boulton V. Houlder (1904), 1 K. B. 784; Harding v. Bussell (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). ^Peabody v. Satterle, 166 N. Y. 174, DEMANDING PROOFS 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. Headley. 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 subsecjuently setting up a prior known forfeiture have invoked the rule of the New York court as stated in the Titus case, Titus V. Glens Falls bis. 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. Agricidtural Ins. Co., 130 N. Y. 560, 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 plaintifT 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 liabilitj^ by the company, but the policies to which the assured themselves are parties con- tain a clearer reservation of rights than does an e.v 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 unreHable.^ A ohiinuuit 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 incvu- any expense which she would not have been obliged to incur Imd he remained silent," and the court held that no waiver or estoppel had been made out, Freedman v. Ins. Co., 175 Pa. St. 3,50, 34 Atl. 730. So also McCormick v. Ins. Co., 86 Cal. 260, 24 Pac. 1003, in whicli the court says: "It is an essential ele- ment of estoppel by conduct that the party claiming the estoppel should have 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 Fir.^t Nut. 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. Vanderbilt, 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 his part," Runddl 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 I 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 llic fact that it never had a valid contract at all," Boyd v. Ins. Co., 90 Tenn. 212, 219. ^ See, for example, Georqia Home Ins. Co. V. Goodc, 95 Va. 75i, 30 S. E. 366, 369, where copies of invoices were demanded; Planters' Mat. Ins. Co. v. Loyd, 67 Ark. 584, 56 S. W. 44, 77 Am. St. R. 136; German Fire I. Co. v. Grunert, 112 III. 68; Phoenix Assur. Co. V. Munyer, etc., Mfg. Co. (Tex. Civ App.), 49 S. W. 271; Reiner v. Dwelling House Ins. Co., 74 Wis. 89, 42 N. W 208. WHERE POLICY PROVIDES THAT Sl'CH ACTS BE NOT WAlVt:K ]H'A 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 under 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. 136; Smith v. St. Paul F. & M. down in Tittis 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- Pha:nix 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; Hoine bis. Co. v. as follows: "When an insurance com- Phelps, 51 Neb. 623, 71 N. W. 303. pany, with knowledge of all the facts 2 Phcenix Ins. Co. 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. 7ns. 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. Loyd, 67 Ark. 584, 56 S. W. 44, 77 Am. * Phoenix Ins. Co. v. Flemming, 65 184 GENERAL PKlM'll'LLS OK 1X«1 KANCE LAW § 149. Non-waiver Agreement.— In order to prevent the accept unco 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 freque;itly 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); Phrnix Itts. Co. v. Searles, 100 Ga. 97, 27 8. E. 779; Boyd v. Ins. Co., 90 Tenn. 212 (estimates of loss and value); Citi/ Drug Store v. Scottish Union & Nat. Ins. Co. (Tex. Civ. App. , 1898), 44 S. W. 21 (examination of insured); Oshkosh Match Works v. Manchester Fire Ass. Co., 92 Wis. 510, 66 N. W. 525 (examination of insured) ; Walker v. Phceni.v Ins. Co., 89 Hun (N. Y.), 333, 35 N. Y. Supp. 374, re- versed on another point, 1.56 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, 54 N. E. 23); Johnson V. American Ins. Co., 41 Minn. 396, 43 N. W. .59 (arbitration); Queen Ins. Co. V. Young, 86 Ala. 424, 5 So. 116, 11 Am. St. R. 51 n. (appraisal); Briggs v. Fire- men's Fund, 65 Mich. .52, 31 N. W. 616 (arbitration); Holbrook v. Baloise Fire Ins. Co., 117 Cal. .561, 49 Pac. .5.55 (appraisal); London & L. Ins. Co. v. Honey, 2 Vict. L. R. 7 (arbitration of loss). As to what tacts do not con- stitute waiver of failure to serve proofs of loss see Ri'er v. President, etc., F. Ins. Co., 90 App. Div. (N. Y.) 391, 83 N. Y. Supp. 546; Fournier v. German- Am. Ins. Co -^3 P 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. 1.52, 83 N. W. 29; Keei-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 Mid. 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. 459. The policy imposes upon the parties no obligation to enter into such an agreement. " Matthie v. Globe Fire Ins. Co., 174 N. Y. 489, 67 N. E. 57; Young v. St. Paid 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. 5.30. 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. & G. I. Co. (Fla., 1904), 35 So. 171; Wagner v. COMPANY MAY DEFEND ()\ OTHEK GROUNDS, ETC. 1 S,") § 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 dut}^, 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 an>- adequate basis of estoppel has been established. This rule in favor of the insurance company, however, must not Dwelling House Ins. Co., 143 Pa. St. Home Life Ins. Co. v. Pierce, 75 III. 338, 22 Atl. 885; Levy v. Peabody Ins. 426. Co., 10 W. Va. 560, 27 Am. Rep. 598, "^ Armstrong v. Agricultural his. 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 clumics' & T. Ins. Co., 83 N. Y. 168, breach, it being its duty when claim is 173; Cassimus v. Scottish Union & Not. made to ascertain the facts as to any 7ns. Co., 135 Ala. 256, 269, 33 So. 163; breach, Smith v. Gkns Falls Ins. Co., Lackmann v. Kearney, 142 Cal. 112, 62N. 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. Farmers' Mvt. 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. '^Devens v. Mechanics' & Traders' 219, 51 N.W. 987; Castncrv. Farmer.r Ins. Co., 83 N. Y. 168, 173 ("They Mut. 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"). IS() GENEKAI. I'KINCII'LES OF INSt'llANCJE 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 tlie 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. - i:^ 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 tliousand 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 proof s.** § 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 ■i Pennsylvania Fire Ins. Co. v. Royallns. Co., U9 N Y 485 44 N E ^J^^H'^r'.}?^ ^^d- t?^' ^^^' '^'^ C- C- A. 77; Bentley v. Standard Ins. Co.,' 40 459; \] ildey Cas. Co. v. Sheppard, 61 W. Va. 729, 23 S. E. 584; Names v Kan. 351,59 Pac. 651, 47 L. R. A. 650; Union Ins. Co, 104 Iowa ei"? 74 Hutton V. Patrons' Mut. F. I. Co., 191 N W 14 - -- Pa. St. 369 43 Atl. 219; Nat. Ins. Co. 5 Underivood, a.s Ex'r, v Greenwich y^Broini, 128 Pa. tet 386, 18 Atl. 389; 7ns. Co., 28 App. Div. (N. Y.) 163. 151 Phemx Ins. Co. v. Caldwell, 85 111. App. N. Y. 1.30, 45 N. E. 365. ^^tr n A' 4 oown/TTc, s ^L^^ndv^ck^r/Ins.Co.',\2^lo^^'a,^^(i •JO of ^f )'■ ^^^^''^^' 22 Wall. (U. S.) 104 N. W. 429; Scottish Union & Nat 32, 35; Antes V IFesf. 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 ^ 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 PLEADKf) 187 sonably misleading. The affirmative act of keesping 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 controvers3^ 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 facie 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 Kiernan 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. ^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- wan, 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, Hennesseif v. Met. Life Ins. Co., 74 Conn. 699, 52 Atl. 490; McCo'i v. loira 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. N^at. 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 Ins. Co., 85 App. Div. 7, 9, 82 N. Y. Supp. 971; Todd v. Union Cas. & Surety Co., 70 App. Div. 52, 55, 74 N. Y. Supp. 1062; Meeder v. Prov. Sav. Life A.'isur. Soc, 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. Wctmore, 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 Mut. 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. .V. Y. Life Ins. Co., 101 N. Y. 328, 334 (dic- tu7n); Johnston v. Northwestern Live Stock I. Co., 94 Wis. 117, 68 N. W. 868; and see 169 N. Y. 310. 188 GENERAL PKl.NCll'I.ES ol' INSURANCE LAAV recover,^ but the warranties of the life and fire poUcies 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.^ i Leonard v. Slate Mid. 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; Hennesftei/ v. Ins. Co., 74 * Bernhard v. Rochester German Ins. Conn. 699, supra. ' Co. (Conn.), 6.5 Atl. 134. 2 See § 117, supra. ^Shawnee F. Ins. Co. v. Knerr, 72 Ka.i. 385, S3 Pac. 611. CHAPTER VIII GENERii iu Principles — Continued Waiver and Estoppel by Agents § 155. Introductory. — A corporation or association, though a legal entity, can transact business onl}^ by personal representatives. Therefore it is only through the medium of agents that an insur- ance company can mak«; 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 vusted Avith 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.^ 1 Sternaman v. Met. Life Ins. Co. , 3 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. * Kilborn v. Prudential Ins. Co 2 Union Mut. L. Ins. Co. v. Wilkin- (Minn., 1906), 108 N. W. 861 (contain- son, 13 Wall. 222, 20 L. Ed. 617; Fire ing excellent discussion). Assn. V. Masterson (Tex. Civ. App.), ^ Ins. Co. v. Wilkinson, 13 Wall. 83 S. W. 49. (U. S.) 222, 20 L. Ed. 617; Indian [189] 190 (;enekal i'HJNt;ii'LE« of 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 soliciting 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 settling 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 misrepresentations 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; Hahn v. L. R. A. 637. Guardian A.s.si/r. Co., 23 Ore. 576, 32 -i Rugglesv. Am. Central Ins. Co., 114 Pac. 683, 37 Am. St. R. 709; Medley v. N. Y. 415, 11 Am. St. R. 674; Wahh German Alhnnce Ins. Co., 55 W. Va. v. Hartford Fire Ins. Co., 73 N. Y. 5, 9; 342, 47 S. E. 101; Alexander v. Con- Sanford v. Orient Ins. Co., 174 Mass' tinental his. Co., 67 Wis. 422, 30 N. W. 416, 54 N. E. 883, 75 Am St R 358 727, 58 Am. Rep. 869. ^ McArthur v. Home Life Ass , 73 1 Ins. Co. V. Edwards, 122 U. 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- -lorra Life Ins. Co. v. Lewis, 187 ing answers 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 ' '2- El J /-, ^^ ^* ^^^^ ^^^ answers are correct under 3 J'orward v. Continental 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 pohcy 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 compan}^ 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 Unioyi Mutual Insurance Company v. WilkinsonJ are not fulfilled, Biggar v. Rock Life Assur. Co. (1902), 1 K. B. 516. 1 Knights of Piithias v. Withers, 111 U. S. 260,20 8. Ct. 611. 2 Frost V. Xorth. Brit. & Mer. Ins. Co.,77Vt. 407, 60Atl. 803. 3 Ins. Co. V. Wilkinson, 13 Wall. (U. S.) 222, 20 L. Ed. 617; Commercial Ins. Co. V. Ives, 56 111. 402; Kausal v. Minn. Farmers' Mid. Fire Ins. Co., 31 Minn. 17, 47 Am. Rep. 776; Sternaman V. Met. Life Ins. Co., 170 N. Y. 13, 19, 62 N. E. 763, 88 Am. St. R. 625, 57 L. R. A. 318. Often a question is presented for the jury, Milwaulee Mechanics' Ins. Co. v. Schalbnan, 188 111. 213, 59 N. E. 12; Lewis v. Guardian Fire & L. A., 181 N. Y. 392, 74 N. E. 224; Fto.s< v. Xorth. Brit. & Mer. Ins. Co., 11 Vt. 407, 60 Atl. 803. But, if the facts are undisputed, the relation- ship of agency may become a question. of law, Allen v. German-Am. Ins. Co., 123 N. Y. 6. 25 N. E. 309. ' Knights of Pi/thias v. Withers, 177 V. S. 260, 20 S. Ct. 611; Sternaman 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 Brovm. v. Order of Forest- ers, 176 N. Y. 132, 68 N. E. 145. estate Ins. Co. v. Taylor, 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. 557 (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. 7 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 such cases as this that 192 GENERAL PRINCIPLES OF INSURANCE LAW § 159. Efifect 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 by 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 wislied, 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 policy, 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- sidered 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 w^ould be his agent, and he alone would be responsible. On the other hand, it is well knovni — so well that no court would be justi- 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 office, 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 assured. The agents are stimu- lated by letters and instructions to activity in procuring contracts, and the party Avho is in this manner in- duced to take out a policy rarely sees or knows anything 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 filled 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 agent, he is tlie 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 Avaited 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 agents, 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 tlic p.'ulies supposing EFFECT OF STIPULATIONS IN THE CONTRACT AS TO AGENTS 193 person, other than the assured, who maj^ 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 an3^thing 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 available.^ themselves insured are the victims. The tendency of the modern decisions in this country is steadily in the op- posite direction. The powers of the agent are, prima facie, coextensive with tiie 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- ployment, as if they proceeded from the principal." This opinion has been quoted with approval by many state courts. See also Follette 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. Norton, 96 U. S. 234; Conway v. Phoenix Mut. Life Ins. Co., 140 N. Y. 79, 35 N. E. 420; Allen 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. Life 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 insured 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," Sterna man v. Met. Life Ins. Co., 170 N. Y. 13, 19, 62 N. E. 763; Matter of Broum 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; Quinlan 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 GENERAL 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 soHcitor of the insurer, in his work of filling up llio application, may by stipulation in the poHcy, 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 U. S. 234; Wilber v. Williamsburgh City Fire Ins. Co., 122 N. Y. 443; Fmsi v. North Brit. & Mer. Ins. Co., 77 Vt. 407, 60 AM. 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 poHcy itself declare that he has no such authority, Wyman v. Phoenix Mnt. 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 employment, 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, Messelbach 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 Mut. L. Ins. Co. V. Schlink, 175 111. 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. Robbing, 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. Phoinix Ins. Co., 123 Wis. 313, 101 N. W. 703; Speiser v. Pha;nix Life Ins. Co., 119 Wis. 530, 97 N. W. 207. 2 Sternaman v. Mut. Life Ins. Co. , 170 N. Y. 13, 62" N. E. 763, 88 Am. St. R. 625; Wilber 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 Am. 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. ^ Appendix, ch. I and N. Y. Ins. T.. § 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 application 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 officer, 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, svpra. 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 affirm 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 Hart, 149 111. 513, 36 N. E. 990; his. assented to be bound," Kyte v. Com- Co. v. Sheffij, 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, Wahh v. Hartford 196 GENERAL PRINCIPLES OP^ INSURANCE LAW In some jurisdictions this clause also, when invoked by the insurers, amounts to nothing.' In many it amounts to httle or noth- ing as api^Hcd 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 E revision 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. Humphreij, 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 Alliance 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 State 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., 110 N. C. 193, 14 S. E. 783, 28 Am. St. R. 678. See recent case of Bernhard v. Rochester German Ins. Co. (Conn.), 65 Atl. 134. 4 For example, see these notable de- cisions from six influential courts in the United States and England, North- ern Assur. Co. v. Grand View Bldg. A.S.SOC., 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); Russell 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. Brit.-Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424 (countersigning 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. Life 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; Ho77ie Ins. Co. V. Gibson, 72 Miss. 58, 17 So. 13; Burdick v. Security Life Assn., 11 Mo. App. 629; James v. Mut. Res., etc., Ass., 148 Mo. 1, 49 S. W. 978; ^tna Life Ins. Co. v. Fallow, 110 Tenn. 720, 77 S. W. 937; Home Ins. Co. v. Nichols (Tex. Civ. App.), 72 S. W. 440; Kahn v. Traders' Ins. Co., 4 Wyo. 419, 34 Pac. 1059, 62 Am. St. R. 47. «Mei. Life Ins. Co. v. Sullivan, 112 ill. App. 500. 1 AUTHORITY OF OFFICERS OF THE COMPANY 197 § 162. Policy Restrictions, when Operative. — Provisions in the policy as to who shall or shall not he 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 b}' 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 Officers of the Company. — Unless restricted by legislature, charter, or actien 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 ^Mutual Ben. Life 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; Wood v. 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 2 ICawsa^ V. /ns. Co., 31 Minn. 17, 16 an agent for the assured, Knights N. W. 430, 47 Am. Rep. 776 (see cases Pvthias v. Withers, 177 U. S. 260; cited in Shotlifj v. Modern Woodmen, Wilder v. Continental Cas. Co., 150 100 Mo. App. 138); Kister v. Lebanon Fed. 92. Mut. Ins. Co., 128 Pa. St. 553, 18 Atl. ^ Hicls v. Brit.-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. South 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 pMc&tion, Kent/on V. Knights Templars, waivers after policy goes into effect, 122 N. Y. 247, 25 N. E. 299. And in Dulaney v. Fidelity & Cas. Co. (ISId.), some cases it has been held that an 66 Atl. 614. agreement in the policy that the 4 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 City 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., 1.38 N. Y. 473, 34 N. E. 289. 198 GENERAL PRINriPLES OF INSURANCE LAW writing. T\\o clause is reasonable and calculated to protect and hencfit l)()tli parties. Its recital would seem to be prima facie true and bindinj!; even as to acts of oflicers.antl, 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 conipaiiics and of doniostic fii-e or marine companies, with regard to the doctrine of wai\er and estoppel, in the absence of ex- press restrictions upon tlieir authority made know^n to the insured, stand sul)staiilially 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 sul)stance 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 ^ Xortlurn A. Co. v. Grand View Ark. 328, 8S S. W. 9.50- McGurk v B A., 18.3 U. S. 308, 301, 22 S Ct. 133; Metropolitan Life, 56 Conn 528 1 L rT^io^J "^i^f 'oo i'- n. IJ- P"',^.^^ ^ '^- '^6311.; Van Werden v. Equitable I b. 423, 4.33 22 S. Ct. 862, ni which Life A. Soc, 99 Iowa, 621, 68 N W the court declared that "a general S92; Eatstern R. R. Co. v. Relief Ins' Co' agent ha.s no power to waive by parol 105 Mass. 570; Stuart v. Reliance Ins under .standard fire policy. Farmers' Co., 179 Mass. 434. 60 N E 929- Frost Mut.In^ Asso.y. Price, 112 Ga. 264, v. North British Mercantile I. Co., 77 Co. 193 Pa. St 184, 19o, 44 Atl. 317. Co. v. Bowdre, 67 Miss. 620, 7 So 596 Contra, Lamberton v. Connecticut Fire 19 Am St R 326 f" R^a' ??9^^';?"- ^f' ^r^- ^/,?' ^ ' Coiton States Life Ins. Co. v. Scurry, L. R. A. 222; Home Ins. Co. v. Gibson, 50 Ga 48 ^^ui,y, ERRONEOUS ANS\VER.S WRITTEN INTO A IM'LICATIOX 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 lieen 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 Mut. 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. his. 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. 2.52, 98 Am. St. R. 656. * For example, State Ins. Co. v. Hale (Iowa, 1901), 95 N. W. 473. 5 Hoffman v. John Hancock Mid. I. Co., 92 U. S. 161, 23 L. Ed. 539. 8 Carter v. Cotton States L. I. Co. , 56 Ga. 237; but see Willcuts v. North- ivestern Mut. M. L. I. Co., 81 Ind. 300. 7 Ins. Co. V. Wilkinson, 13 Wall. 222, 20 L. Ed. 617 (age of mother); Sovthern Ins. Co. V. Hastings, 64 Ark. 253, 41 S. W. 1093 (mortgage); Parno v. Iowa M. M. Ins. Co., 114 Iowa, 132, 86 N. W. 210 (incmnbrance) ; 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); i\ute et al. v. Hartford Fire Ins. Co. 109 Mo. App. 585, 83 S. W. 83 (title); Jacobs V. Northicestern Life Assurance Company, 30 App. Div. 285, 51 N. Y. Supp. 967, aft'd 164 N. Y. 582, 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. Phoeni.v Mutual Life Insurance Co., 107 N. Y. 292, 14 N. E. 271 (age); Prudential Ins. Co. v. Haley, 91 III. 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 miiy have no copy or any op- portunity to compare it with the policy itself, which usually 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 GENEIIAL ridXCirLLS UF IN.SUKAN'CE LAW Thus, where (he 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 heUl, that the agent was the representative of the company and not of the applicant in transcribing the answers, and that tlie 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 hy 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, 8.5 N. W. 985; Smith v. § 77. There can be no question as to People's Mvtual 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 Mid. L. I. Co., 119 Wis. 530, knowledge. Then the document though 97 N. W. 207. labeled an application is not the appli- i Union Mut. Ins. Co. v. Wilkinson, cant's proposal, but the agent's. This 13 Wall. 222, 20 L. Ed. 617 (opinion is true both of fire insurance and of life, of the court given in note § 158, supra). Beymimjhoff v. Agricultural Ins. Co., 93 2 T\Jew York Life Ins. Co. v. Fletcher, N. Y. 495; Moury 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, aflf'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 Stale Ins 70 Mich. 199, 38 N. W. 216, 14 Am. Co., 61 Mo. App. 597; Virginia F. & m'. St. R. 485; Ian Harden v. Metropolitan Ins. Co. v. Morgan, 90 Va 290 18 S E L. his. 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 dis- ^E.'^^^•o'R^\^^^' ^^ ^- ^- ^^PP- ^^' t'nction that if the applicant is de- alt d 163 N. V. 572; Leonard v. New terred from reading the application by ^ngland Mut. L Ins. Co., 22 R. I. 519, representations or misleading conduct 48 Atl. 808. \\ hether the false answer of the agent the company will be es- is to be attributed to the fault of the topped. Van Hovten v. Met. Life I Co agent is usually a question for the jury, 110 Mich. 682, 68 N. W. 982 '' Schaeffer v. Anchor Mut. F. I. Co., 113 agent's INTEIIPKETATION 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 Neiv York Life 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 Life 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. Chambcr- St. R. 150 (cases cited); Follette v. lain, 132 U. S. 304, 10 S. Ct. 87 (what Mut. Ace. Asso., 110 N. C. 377, 14 constitutes "other insurance"); Ilotch- 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 3 McMaster 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, i Ketcham v. Am. Mut. Ace. 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 A^. J. Mutual Life his. Co. v. Bal er, QA Grove Mut. Ins. Co. v. McAnerney, 102 U. S. 610; Am. Life Ins. Co. v. Mahone, Pa. St. 335, 48 Am. Rep. 209; and see 21 Wall. (U. S.) 152; Malleable Iron Lewis V. Phoenix Mut. Life Ins. Co., 39 Works v. Phoenix Ins. Co., 25 Conn. Conn. 100. 465; Heiuey v. Met. Life Ins. Co., 100 5 McMaster v. New York Life Ins. Me. 523, 62 Atl. 600; O'Brien v 202 GENIJKAI- l'i;iN(llM,i;s t»l- INSUKANCE LAW § 169. Mere Knowledge of Solicitor Works no Estoppel.— A solic- itor or canvasser ha.s.iii 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- Home Benefit Society, 117 N. Y. .310, N. W. 5. Contra, Boetcher v. Hawkeye 22 N. E. 9.54 (health); /n.s. Co. v. /ns. Co., 47 Iowa, 2.53. The acquisition Hancock, 100 Tenn. .51.3, .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 Li]e 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 ground of forfeitvire 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 7ns. 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. 46.5, 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 ^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 Mid 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 courts, 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 application 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.^ I Biggar v. Rock Ins. Co., 1 K. B. 301; Ryan v. World Mut. L. Ins. Co., 516 (1902); North. A.sswr. Co. v. Grand 41 Conn. 168, 171, 172, 19 Am. Rep. Vieiv Build. As.m., 183 U. S. 308, 363, 490; Rinker v. ^na 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); A'. }'. Life read application inadmissible). But Ins. Co. V. Fletcher, 117 U. S. 519, 6 if in fact the agent has general powers, 8. Ct. 837; Ins. Co. v. Norton, 96 U. S. his acts will estop the company, Ger- 240; Ins. 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. Riissellv. Prudential Ins. Co., 17GN.Y. "^Lynchburg Fire Ins. Co. v. West, 178, 68 N. E. 2,52, 98 Am. St. R. 656; 76 Va. 575, 44 Am. Rep. 177; Stone v. Steicnrtv. Union Mut. L. Ins. Co., 155 Hawkeyc his. 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. his. Co., 55 Ins. Co. v. Wingfield, 22 Ky. Law R. Hun, 103, 8 N. Y. Supp. 249, aff'd 124 4,55, 57 S. W. 4.56; Improved Match N. Y. 642, 27 N. E. 412; Kemjon v. Co. v. Mich. Mut. Fire Ins. Co., 122 K. T. & M. M. A. As.soc., 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 .1/;//. Ins. Co., 27 App. Div. 480, 50 N. W. 227; Globe Mut. Life Ins. Assoc. X. Y. Supp. 526; Bernard v. United v. Ahem, 191 111. 167, 60 N. E. 806. Life Assoc, 14 App. Div. (N. Y.) 142, ^Capital F. Ins. Co. v. Montgomery 43 \. Y. Supp. .527; Allen v. Mass. (Ark., Jan., 1907), 100 S. W. 749; Mut. Ace. Asso., 167 Mass. 18, 44 LaMarche v. New York Life I. Co., 12Q N. E. 1053; Batchelder v. Queen Ins. Ca.1. 498, 58 Pac. 1053; Dryer v. Security Co., 135 Mass. 449; McCoy v. Met. L. Fire Ins. Co. (Iowa), 82 N. W. 494; Ins. 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; State Ins. Co. v. 201 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 affirmed by the New York Court of Appeals. 2 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 polic}'^ 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 calling 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 Grai/, 44 Kan. 731, 2,5 Pac. 197; Mvllen 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 '^O'Brien v. Home Benefit Societi/, App. Div 287, 80 N. Y. Supp. 888, 117 N. Y. 310, 22 N. E. 954. And af?'d 179 N. Y. 535; O'Brien v. Howe see Clemans v. Supreme As.'iembly, Benefit Soc, 117 N. Y. 310, 22 N. E. 131 N. Y. 485, 30 N. E. 496, 16 L. R. 954. A. 33; Sternaman v. 7ns. Co., 170 N. Y. 1 Industrial policies very largely 13, 62 N. E. 763, 57 L. R. A. 318, 8S Am. St. R. 625, AUTHORITY OF COMMiySlONED AGENTS — FIRE 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 responsibility. 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 ^■La Marche v. A'. Y. Life Ins. Co., filled up as occasion required," Car- 126 Cal. 498, 58 Pac. 1053. penter v. German-Am. Ins. Co., 135 ^Silverberg v. Phoenix Ins. Co., 67 N. Y. 298, 302,31 N. E. 1015; Pit- Cal. 36, 7 Pac. 38; Walsh v. Hartford ney v. Glens Falls, 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 poHcy 186 U. S. 423, 433, 22 S. Ct. 862, is presumed to be agent of tlie com- though not strictly such in that or in pany with authority, Walker v. Lvon 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' Mut. F. proposals for insurance [in a certain Ins. Assoc, 125 N. C. 389, 397, 34 S. E. locality], to fix the rates of premiums, 503. to receive moneys, and to countersign, * Kollitz v. Equitable Mut. 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, Doyle v. Hill "It appears that Mandeville was a (S. C, Oct., 1906), 55 S. E. 446; general agent of the defendant, clothed Kimbro v. A''. 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. Life Co., 12 Wall. (U. S.) furnished with printed forms which he 286, 20 L. Ed. 398. •JOCi 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 application or policy does not give nolico that he has no such power.- s< 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 olhcer (^r 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 notal)le 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.® i Bodine v. Exchange Fire Ins. Co., .51 N. Y. 117, 10 Am. Rep. 566; Boehen V. W illiainsbur(jh City Ins. Co., 35 N. Y. 131, 90 Am. Dec. 787; Walsh v. Hartford Fire Ins. Co., 73 N. Y. 5. '-Russell V. Prudential Ins. Co., 176 N. Y. 178, 68 N. E. 252, 98 Am. St. R. 6.56. 3 .\11, probably, at date of writing in 1907, except Maine, New Hampsliire, 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 a^ent of the company shall be knowl- edge of the company, Welch v. Fire .■isso., 120 Wis. 4.56. See appendix of statutes, ch. I. •• The reasons are .set forth in many cases, for example, in Forward v. Con- tinental his. Co., 142 N. Y. 382, 37 X. 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 cou'-ts "are anchored to the proposition," Wisotzley 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. ^Y. 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 W^is. 456, 98 N. W. 227 (title). 5 183 U. S. 308, 22 S. Ct. 862, 46 L. Ed. 213, and approved or followed in Haqan 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); Parso7is v. Lane, 97 Minn. 98 (Minnesota standard policy nowresembles 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. A^ew Hampshire F. Ins. Co., 71 N. H. 441, 52 Atl. 858 (other insurance); Benjamin v. Palatine Ins. Co., 80 'App. Div. 260, SO Supp. 256, aff'd, on opinion below, 177 N. Y. 589, 70 N. E. 1095 (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. 7ns. Co., 55 West. Va. 342, 47 S. E; 101, 105 (title); Welch v. Fire Asso. of Phila., 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 difhcult 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 conver.sa- 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 Mid. his. Co., 2 Ont. App. 396 (other insurance). Massachusetts : Har- ris V. North Am. Ins. Co., 190 Mass. 361 (unoccupancy); Thomas v. Com- mercial Union Ass. Co., 162 Mass. 29, 37 N. E. 672; and see Allen v. Mo.ss. Mid. Ace. Assoc, 167 Mass. 18; Batchelder v. Queen Ins. Co., 135 Mass. 449. New Jersey: Deirees v. Man- hattan Ins. Co., 35 N. J. L. 366 (char- acter of occupancy); Martin v. Ins. Co. of North Am., 57 N. J. L. 623 (leased ground) ; Frankliyi F. Ins. Co. v. Mar- tin, 40 N. J. L. 568, 29 Am. Rep. 271 (misdescription); and see Dimick v. Met. 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 Connecticut: Sheldon v. Hartford Fire Ins. Co., 22 Conn. 235, 58 Am. Dec. 420 (but see McGurk v. /«.s-. Co., 56 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, Mauj)in v. Ins. Co., 53 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 o^\Tle^ship). 208 GENERAL PRINCIPLES OF INSURANCE LAW verdict for the plaintifT was afTirmed by the circuit court of appeal:, on the ground of waiver, Judge Sanborn writing a powerful dissent- ing opinion; but tiie 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 policy, was inad- niissi))le 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 tlie vital question satis- factorily met and answered, whether the desirable result, sought to be accomplished by the doctrine (jf 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 Xorthern Assur. Co. v. Grand View Bldg. Asso., 183 U. S. 308, 22 S. Ct. 133, 46 L. p:d. 213, in which the court by Justice tihiras 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 5is to contracts on other subjects; that provisions contained in fire in- surance policies, tliat 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; that 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 authority to alter or contra- dict the express terms of the policies as executed and delivered; that where fire insurance policies contain pro- visions whereby 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 observa- 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 conaitions of the kind contained in this policy, So to hold would, as wo have seen. RESTRICTIONS UPON AUTHORITY OF AGENTS, ETC. 209 >liis 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 ana 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 unscrupu- 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 this 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 11 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 Avould 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 bv words." 1 Medletj v. 7ns. Co., 55 W. Va. 342. 47 8. 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 Jis nuittcr 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 i-equirements of the American statutory policies which are laid upon the insured for the protection of the underwriter 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 reiison 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 Avidely from the Iowa court and con- clusively presumes that the insured is acquainted wdth the policy 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 office have no knowledge of the ground of forfeiture; such forfeitures, if found by the jury to have been known to the agent, the company is held to have w^aived by the issuance of its policy 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 hiR Co' ^Straker v. Phoenix Ins. Co., 101 149 N. Y. 382, 44 N E 80 52 Am' Wis. 413, 419. St. R. 733; Bobbins v. Sprimijield F. & ^ Lewis V. Guardian F. & L. his. 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 ' * Forward v. Contimninl Ins. Co.. 112 App. Div. .599, 98 N. Y. Svipp. 760.' RESTRICTIONS UPON AUTHORITY OF AGENTS, ETC. 211 \rarianties of the statutory policy, upon which the insurers had rehed, 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 public, 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 constructivel}', 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 understand how a court can find an extension of his power as matter of law, or simply by virtue of his position. The New Hampshire 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 accomplish 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. cfe M. Ins. Co. v. 2 Thompson v. Traders' Ins. Co., Richmond Mica Co., 102 Va. 429, 46 109 Mo. 12, 68 S. W. 889. S. E. 463, 102 Am. St. R. 846. ^ Spalding v. Neio Hampshire F. Ins. Co., 71 N. H. 441, 52 Atl. 858. 212 GENERAL riU-NCll'LES OF LN.SLHAiNCE LAW 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- forniity 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 solicitor 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 communicated to the agent signing the policy.^ 1 In a recent case, Maupin v. Scot- * For example, Forward v. Conti- tish U. & N. Ins. Co., 53 W. Va. 557, ne7ital 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 w German- Am. Ins. Co., 135 N. Y. 29S, agents to waive conditions imposing 31 N. E. 1015; Arff v. .Star Fire In.s. on the party insured duties proper 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 wihlerness of conflicting Pollock v. German F. Ins. Co., 127 cases." Mich. 460; Steele v. Ins. Co., 93 Mich ^ McCoUum \. Mut. Life his. Co., 84, .53 N. W. 514. But see the more 55 Hun (N. Y.), 103, 8 N. Y. Supp. recent decision as to a Hfe insurance so- 249, aff'd 124 N. Y. 642, 27 N. E. 412; licitor in Butler v. Mich. Mut L Ins Kenyonv. K T. &M. M. A. As.soc, Co., 184 N. Y. .337, reversing 93 App. 122 N. ^.24/, 25 N. E. 299; Bernard Div. 619. The difficulty of recon- ''■^jy'f^'^ Life A.'<.^n.,U App. Div.U2, ciUng the New York cases in this i, r\- ^"PP- ^'^"'' f^cf^^'lton V. F. regard is alluded to by the New Mut. Life ■2t\pp.Dh: 480, 50 N.Y. York Supreme Court in Blass v. bupp 526; Hcntt v. Am. Union Life Aqricultural Ins. Co, 18 App Div « • ^ooo^^ "^PP- ■^'''- -^^' ^^ ^- ^'- '*^^' ^""^ by the Federal Supreme Covirt &upp. Z62. in Northern Assur. Co. v. Grand Vieic NT V '^o^':7?x?'"i'''o/- ^'''- ^''■' 1^1 ^^^- ^««^-' 183 U. S. 308 at p. 329 XM. I. S'dz, 74 IN. 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 difficult 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 speed}' 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 wi^h 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 Suoreme Court, 203 U. S. 2 See § 85. 106, 27 S. Ct. 27. The plaintiff might ■ ^ Fitchner v. Fidelity Mut. F. Asfieh. 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 2is (;k.\kilard, 197 111' 330, 64 N. E. 355; Fcr- is. Co. v. Munger, 49 Kan. 178, Sv. Pac. 120; Nickell V. Phmnix Ins. Co., 144 Mo 420, 46 S. W. 435; Snyder v. Dwelling Hou.'ie Ins. Co.. 59 N. J. L. 544, 37 Atl 1022, 59 Am. St. R. 625. AD.JXJSTEKS — 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 power.^ And if the policy expressly denies his power he cannot waive service of proof of loss.^ By virtue of his 1 Schloss 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. Hartford Ins. Co., 46 Fla. La Tourette. 71 Ark. 242, 74 S. W 283, 35 So. 228 (1903); Pheni.v Ins. Co. 300, Bunn, C. J., dissenting; Citizens' V. Munger, 49 Kan. 178, 30 Pac. 120, Ins. Co. v. Crist, 22 Ky. L. R. 47, 56 33 Am. St. R. 360; Walker v. Lan- S. W. 658. cashire Ins. Co., 188 Mass. 560, 75 4 See §§165-171. N. E. 66; Harnden v. Mill. & Mech. 5 Bodine v. Excliange Fire Ins. Co., 7ns. 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. Willinmsburgh City his. Co., Co. V. Baker, 94 Md. 545, 51 Atl. 184; 35 N. Y. 131, 90 Am. Dec. 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. 7 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; M^eed 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. 7. Co., 135 Ala. 256, 33 So. 163; Lo/mes 278, 39 Am. Rep. 657. But see V. 7ns. 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 7ns. 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; Tahor v. Rockingham Farm- Co. (Del.), 65 Atl. 569. 220 GENERAL ]'1!1\( II'I.KS oi IXSURANX'E 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.'* 1 Serqent v. />. it L. & G. Ins. Co.. his knowledge would postpone suit 155 N. Y. ;^49. ."ioo, 49 N. E. 935. until after the lapse of the year's lim- 2 Georgia Home Ins. Co. v. Allen, 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, Dibbrell v. N. E. 921, 66 N. E. 1003; Dobson v. Georgia Home Ins. Co., 110 N. C. 193, Hartford Fire Ins. Co.. 86 App. Di^•. 14 S. E. 783. 28 Am. 8t. R. 678, Merri- 115, 121, 83 N. Y. Supp. 4.56, aff'd 179 man, C. J., dissenting. N. Y. 557, 71 N. E. 1130; Smaldose v. 3 Bernhard v. Rochester German Ins. Ins. Co. of Xorth 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. tinued to make demands for dupHcate 7ns. Co., 91 Ala. 170, 24 Am. St. R. vouchers a comphance with which to 883. CHAPTER IX Gexer/ X Principles — Continued ' Marine Insurance § 181. Wliat is Marine Insurance. — The law of marine insurance is in so many particulai-s 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 !in 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 warrant}' 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 Insurable interest, concealment, liability of shipo^^•ner 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. 3 There is no implied warranty as ^ Scelbcrq 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 Pellu V. Roval Exch. Assur. Co. (1757), Q. B. 414 (British ship transferred to 1 Burr. 341. Or on quay, Ide v. Russian o\^Tiers. Policy on gold.). Chalmers (1900), 5 Com. Cas. 212. Or * Richelieu <{• O. Xav. Co. v. Boston on voyage partly by water and partly M. Ins. Co., 136 V. S. 408. 10 S. Ct. by land, see §22.' Liabihty confers 93-1. 34 L.Ed. 398; Long Dock Mills & insurable interest, see §33. Thus. EL Co. v. Mannheim Ins. Co., 116 Fed. [221] 222 GENERAL I'lilXClFI.ES OK IXSU'RANCE 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; Walsh v. Washington Ins. Co., 32 X. Y. 427; Greenock S. S. Co. v. Marit. Ins. Co. (1903), 2 K. B. 6.57; Dixon v. 'Sadler, 5 M. & W. 405. 1 But .see § 114. 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 reasonal)ly fit to encounter the ordinary perils of the port, Haughton 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 CUfford: "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 disciualification," Propeller Xiagara 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 Line S.S. Co., 3 App. Cas. 72. And see § 18.5. 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. '•> 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, U. 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. his. Co. , 32 N. Y. 427. See many cases on bur- den of proof in this section infra. The underwriter may waive the breach of the impUed 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. Ledvc (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 Maori King (1895), 2 Q. B. 550, 558 (frozen meat). EngHsh and other courts hold that the burden is on the underwriter to establish unsea- worthiness, Ajinn, Goolam & Co. v. Union Mar. Ins. Co. (1901), App. Cas. 362; Pickup v. Thames, etc., Ins. Co., 3 Q. B. D. 594; Earnmoor v. Cal. Ins. Co., 40 Fed. 847; Guy 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 nuist furni.sh, in the first in.stance, at least, .some general proof of seaworthiness, T id marsh v. Washim/to7i F. & M. Ins. Co., 4 Mason (I*. S.y, 439, Fed. Cas. No. 14,024; Lnnt V. Boston Mar. Ins. Co., 6 Fed. 562, 567; Xome Beach Co. v. Munich Assiir. 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 Sonthwark, 191 U. S. 1, 24 S. Ct. 1; The Edwin L. Morrison, 153 V. 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, Lnnt 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 w'here 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 (7tli 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. TTV/.s/i.. Ins. Co., 51 App. Div. 553, 557, 65 N. Y. Supp. 333; AStar- huck v. Phieni.v Ins. Co., 47 App. Div. 621 , 62 N. Y. Supp. 264, 34 App. Div. 293, 54 N. Y. Supp. 293; Singleton v. Phu-nix 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 Harter Act see The Irrawaddy, 171 IT. S. 187, 18 S. Ct. 831; Nord-Deutscher Lloyd v. Prrsident, etc., of Ins. Co., 110 Fed. 420, 424-428, 49 C. C. A. 1. 224 GENERAL I'KINCIPLES 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 liable 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 be made.^ 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 from bad i Sleigh v. Tyser (1900), 2 Q. B. 333, C. L. Rep. 171; Gibson v. S7nall, 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 4 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 • Ca- 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. (Mass.) 517. Hopper, 34 Eng. Law and Eq. 266, 27 6 Merchants' his. Co. v. Morrison L. J. Q. B. 441,6E. &B. 173, 88Eng. 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 Hability for any loss which is the consequence of such bad faith or want of prudence or diligence, but does not affect the contract of insurance as to any other risk or loss covered by the policy 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, Blatchford, 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 at the inception of the risk. But in time policies there is implied a warranty that the vessel will be 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," Benvind 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 bv 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 held 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; Trinder v. Thatnes & M. Mar. Ins. Co. (1898), 2 Q. B. 114. 3 Capen v. Washington Ins. Co., 12 Cush. (Mass.) 517. i The Southwark, 191 U. S. 1, 8, 24 S. Ct. 1; Thebaud v. Great West. Ins. Co., 155 N. Y. 516, 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 (;enkkal fhinx'iples 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 lights, 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 engL'ged 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. 505. As to quantity wards she proceeded on her voyage and of water required see Warren v. Manu- was lost in bad weather, i/e/rf, that she facturers' 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 '^ M'LanaImn v. 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. Wanf 3f a licensed pilot (under insurer is not liable, Tnrnbull v. Jan- par. 4463, Rev. Stat. U. S., 1869) is no son (1877), 3 Asp. Mar. Cas. 433. defense unless averred and proved. Otherwise if all reasonable means had Old Dominion Ins. Co. v. Frank, 2 been used, Clapham v. Langton, n 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. 475, per Morrell, J., case is re- «Driscoll V. Bovil, 1 Bos. & P. 313. versed 48 N. Y. 571, 8 Am. Rep ,571. T Turner v. Protection Ins. Co., 25 ^'^ Whitney v. Haven, 13 Mass 172 Me. 515, 43 Am. Dec. 294; Hall v. 7ns. u Po.'^t v. Phcenix Ins. Co., 10 .Johns Co., 9 Pick. (Mass.) 466; Sillo^'av v. (N.Y.) 78; Go-on v. Plea.mnts, 3 Wash Neptune Ins. Co., 12 Gray (Mass.), 73. (U. S. C. C.) 241, Fed. Cas. No 5 647* 8 Thomas v. Royal Exchange Assiir- Illustration from Chalmers & Owen ance, 1 Price, 195. In this case the Ins. (1907): Ship insured from Lyons DEVIATION, M'HEN 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 Ohjmpias 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 4 Ross v. Hunter, 4 T. R. 33. July 24, properly equipped for the river ^ The Iroquois, 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. & Big. 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, § 2G95, 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. JacI son, 1 Spr. pilot is not a deviation, Pouverin v. (U. S.) 141, Fed. Cas. No. 3,398; Louisiana State Mar. & F. Ins. Co., 4 Scaramaaga v. Stamp, 5 C. P. Div. Rob. (La.) 234. 295. 3 See Lee v. Gra^i, 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. Civ. Code, § 2695, volved). subd. 2. 23S GENERAL 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 implied 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 lEng. 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, Thebaud v. Great Western Ins. Co., 155 N. Y. 516, 50 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; WiV.ins V. Ins. Co., 30 Ohio St. 317. Question of deviation often turns upon the phraseology or stipulation of the policy. 3 Cogswell v. Chuhh, 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. Mid. Fire Ins. Co., 4 Mass. 330, 3 Am. Dec. 217. See § 114. •iArnould, §§376, 377. 5 Mar. Ins. Act (1906). § 46 (1). 6 Redmorul v. Smith, 7 M. & G. 457. As to illicit voyages: (1) Where the sovereign of a country 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 voyage illegal, so as to avoid insurance, War- ren v. Mfrs. Ins. Co., 13 Pick. (Mass.) 518, 25 Am. Dec. 341. 7 Clark V. Protection his. 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 (1S03), 4 East, 402, 403; Gamba v. Le Mesurier, 4 East, 407. Illustrations of illegality from Chalmers & Owoii, 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 1 A. & E. 1. And see Parker v. Jones, 13 Mass. 173; Siadmore v. Destoitj/, 2 Johns. Cas. 77 (insurance sustained upon goods contraband of war, though captiu-ed 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, Suydum v. Mar. Ins. Co., 1 John. 181; Schmidt v. Ins. Co., 1 John. 249; Craig v. Ins. Co., 6 John. 226. 3 Fracis v. Sea Ins. Co., 8 Asp. Mar. Cas. 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, Parler V. Jones, 13 Mass. 173. Insurance against loss by a breach of foreign trade laws is legal, Parler v. Jones, 13 Mass. 173; Richardson v. Maine F. & M. Im. Co., 6 Mass. 102, 4 Am. Dec. 92. ^'Hughes, Admiralty, 66. master with the connivance 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 Mcsurier (1803), 4 East, 396. 1 Likewise Mr. Justice Washington held tliat sailing under a British license during war between this country and England was illegal, Craig v. United States Ins. Co., 1 Pet. C. C. 410, Fed. Cas. No. 3,340. But see Hayicard v. Bla'e, 12 Mass. 176. 2De Hart & Simey, 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 regard blockade running or the car- riage of contraband of war as illegal," citing Ex parte Abavasse (1865), 34 L. J. Bk. 17; The Helen (1865), L. R. 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 countries, 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, :in 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 ^Wanghv. 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, Dud > such carriage was the unauthorized ^ Clark v. Protection Ins Co 1 act of the master alone, without' the Story, 109, Fed. Cas. No. 2 SSiz ' 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- i Scelberg v. Western Ass2ir. Co., 119 Fed. 23, 55 C. C. A. 601 (ship was not lost in specie). See also The Blairmore (1898), A. C. 593, 87 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, WalLer v. Protection 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, Grossman 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 shin, Nova Scotia Mar. Ins. Co. V. Churchill, 26 Can. S. C. 65, 73, cit- ing Barler v. J arisen, L. R. 3 C. P. 303; and see Burt v. Brewers, etc., Ins. Co., 78 N. Y. 400. ^Ogden 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, Sewall V. U. S. Ins. Co., U Pick. (Mass.) 90. 16 '^ Rhinelander v. 7ns. 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; Sawyer v. Maine F. & 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. Marrland 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 underwriters 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," Bullard v. Roger Williams Ins. Co., 1 Curt. (U. S.) 148. 4 Boudrett v. Heutigg, 1 Holt (N. P.). 149. 5 Irving v. Manning, 1 H. L. Cas. 287; Murray v. Great Western Ins. Co., 72 Hun, 282, aff'd on opinion below 147 N. Y. 711, 42 N. E. 724; Graves v. Washington M. Ins. Co., 12 Allen (Mass.), 391. ^ 6 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. Anderton, 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 i Aslar & Co. v. Blunddl (1S9G), 1 Q. B. 123, 65 L. J. Q. B. N. S. 138, 73 L T Rep. 64S; but see Williams v. Canton his. Co. (1901), App. Cas. 462. So where the remnants of a machine though about one-half in weight of the whole were of no vahie as a machine. Great Western Ins. Co. v. Foqarty, 19 Wall. 640, 22 L. Ed. 216. So where hides and skins became putrid in mass, De Pe-jster v. Ins. Co., 19 N. Y. 272, 75 Am. Dec. 331. So of rotten fruit, thrown overboard, Djson v. Ro'.ccroft, 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- burn Moen Mj'j. Co. v. Reliance Mar. Ins. Co., 179 IJ. S. 1, 11, 21 S. Ct. 1, 45 L. Ed. 43 (cargo of wire); Morean V. Ins. Co., 1 Wheat. (U. S.) 219, 4 L. Ed. 75 (cargo of corn) ; Bia>/s v. Ins. Co. , 7 Cranch ([]. S.), 415, 3 L. Ed. 389. Wallerstein 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 valvie is not "an actual total loss," Hujq V. Ins. 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. Boidton (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 caxgo of cattle does not create an absolute total loss, whether they were jettisoned for tlie 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 Sillou-ay 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. PhcBnix 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. Southgate, 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. Cro!:att, 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 Taunt. 755; Gordon v. Mass. F. & M. Ins. Co., 2 Pick. (Mass.) 249. But where the master having no funds for repairing the vessel, sold her, it was held that there was not a total loss, Murray v. Hatch, 6 Mass. 465. Compare Ain. 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. ^ Kaltenbach v. Mackenzie (1878), 3 C. P. D. 471. Assured though suing for total may recover for partial loss if policy permit. King v. Walker, 2 H. & C. 384. i Ogden V. N. Y. Mut. Im. 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 unavoidable, 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; Saelherg v. Western sion, in favor of insurer, by operation Assur. Co., 119 Fed. 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 though there was no right of loss, Chalmers & Owen, Ins. (1907), 90. abandonment, but this was based 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 /ic?e 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- loss, Af^ams v. Mackenzie (1863), 13 land, is not a total loss, Gardner v. C. B. (N. S.) 446; Sailimi Ship Blair- Salvador, 1 Moo. & R. 116; Rodo- wore V. Macredie (1898), App. Gas. 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. 389 241 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. 2S2. Expense of future salvage is to be included, Sewall v. U. S. Ins. Co., 11 Pick. (Mass.) 90; Kemp V. Halliday (1SG6), L. R. 1 Q. B. 520. Constructive total loss as computed in England, An^d 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, 07 L. J. P. C. N. S. 9G, 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 incurred 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. 603, 20 S. Ct. 239. 2 Bradlie v. Maryland Ins. Co., 12 Pet. (U. S.) 378, per Story, J., 9 L. Ed. 1123; Scelherg v. West. Assur. Co., 119 Fed. 23, 31; Devitt v. Providence Wa&h. Ins. Co., 173 N. Y. 17, 21, 65 N. E. 777, per CuUen, J.; McConochie v. Sim Mut. Ins. Co., 26 N. Y. 477; Louisville Underwriters v. Monarch, 99 Ky. 578, 36 S. W. 563; Fulton Ins. Co. v. Good- 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 amount, Taber v. China Mut. Ins. Co., 131 Mass. 239. s 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. 4 Judge Story says: "The right of abandonment has been admitted to exist, where there is a forcible dispos- session or ouster of the oAvner 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 case of ship- wTeck, so that the ship cannot be re- CONSTRUCTIVE TOTAL LOSS — UNITED STATES 245 of an embargo or capture,^ or impossibility of forwarding cargo b}- 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 case, the ship, for all the useful pur- poses of a ship 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," Peele v. Merchants' Ins. Co., 3 Mason, 27, 65, 19 Fed. 98. 1 Ruys V. Roijal Exch. Assur. Corp. (1897), 2 Q. B. 135 (though ship was ultimately released and returned). 2 Canada Sugar Ref. Co. v. Insur- ance Co., 87 Fed. 491, 493, reversed on another point, 175 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 Mut. Ins. Co., 131 Mass. 239. s 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 countrv, Hxirtin v. Phcenix Ins. Co., 12 Fed. Cas. 1047; Fuller 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.) S3, 23 Am. Dec. 507. 4 Gordon v. Mass. F. & M. Ins. Co., 2 Pick. (Mass.) 249; Hall v. Franllin Ins. Co. ,9 Pick. (Mass.) 4G6, Peirce v. Ocean his. Co., 18 Pick. (Mass.) 83, 29 Am. Dec. 567; Taber v. China Mut. Ins. Co., 131 Mass. 239. ^ II art V. Delaware Ins. Co., 11 Fed. Cas. 683; Lord v. Neptune Ins. Co., 10 Gray (Mass.), 109; Thwing v. Wash. Ins. Co., 10 Gray (Mass.), 443; Ilub- bcll V. Great West. Ins. Co., 74 N. Y. 246. As to constructiv^e total loss of freight in England see Ranlin v. Potter (1873), L. R. 6 H. L. 83, 102; Popham V. Ins. Co. (1904), 10 Com. Cas. 31; Hughes v. Sun Mid. 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 under a valued policy, Boardman v. Boston Mar. Ins. Co., 146 Mass. 442, 453, 16 N. E. 20. As to constructive total loss of profits, see Canada Sugar R. Co. v. 7ns. Co. 175 U. S. 609, 20 S. Ct. 239, 44 L. Ed! 292. 246 GENKHAL I'H1N( I I'LKS OF INSURANCE LAW surc-1 iiKainst, it is, in Koiiornl, (lio 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 jiistiliablc t raiissliipnicnt , tlie HabiUty of tiie in- surer continues noiwithst.nHliiiir the landing or transshipment. § 194. Notice of Abandonment.— Where there is a constructive total loss, the assured mny either treat it as a partial loss, or abandon the subject-matter insured to the insvuer, and treat the loss as if it were an actual total loss.-'' There is no compulsion upon the assured to abandon.'' l)ut upon exercising an election to avail himself of this privilege, he nmst, 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 a.ssured 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 Bnant v. Cnmmonu-cnilli /«,le for the cargo law but according to the universal which is of necessity carried overland, practice of merchants and under- bccause of the damage to the ship. Bry- writers is a neccssarj' preliminary to a 077/ v. Commonn-calth Ins. Co., 13 Pick. claim for a constructive total loss. It (Mass.) 543. is in effect an offer by the assured to the 3 Western Assur. Co. v. Poole (1903), imderwriter to \('st the property in the 1 K. B. 376, 384; Delaware his. Co. v. underwriter so that he may thereafter Winter, 38 Pa. St. 176. deal with it as his own, West. Assiir * Ma.'^on v. Marine Ins. Co., 110 Co. v. Poole (1903) 1KB 376 Fed. 4.52, 460, 49 C. C. A. 106. 383. ' ' ' 5 Roux v. Salvador, 3 Bing. N. C. 286; ^ Canada Sugar Ref. Co. v Ins Co Gemon v. Ro^'al E.rch. A.ss?/r. Co., 2 175 U. S. 609, 618, 20 S. Ct 239 Marsh. 88; Taker v. China Mnt. Ins. » De Hart & Simey, Ins. (1907), 73 Co., 131 Mass. 239; Reunolds v. Ocean citing Kaltenbach v ^Mackenzie (1878")' Ins. Co., 22 Pick. (Ma.ss.) 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 Arnould, § 1045. But as to the situation where there are several in- surers, or where the subject-matter is not fully covered, see Arnould, §§ 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 insurance, by the under ^Titers 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; Provincial Ins. Co. V. Leduc, L. R. 6 P. C. 224, 43 L. J. P. C. 49, 31 L. T. 142, 2 Asp. M. C. 338, 22 W. R. 929. See Canada Sugar Ref. Co. v. Insurance Co., 175 U. S. 609, 618, 20 S. Ct. 239. 2 Copelin V. 7ns. 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 acceptanre of an abandonment, Schw ler v. Phcenix 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. 3 Richelieu & O. A'av. 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). 4 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. s 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." ^ Farnworth v. Hyde, 2 Mar. L. R. 187, 429. 248 OENEUAL PRINCIPLES OK INSURANCE LAW rivc.J at under similar circumstances in an action upon a p>^licy of insurance on cargo.* ii^„,„j u„ The notice of abamlonment to be ciTcctive must also be followed by actual abandonment, and there must be no retention of control by the assureil.' . If the loss is the result of a peril not insured agamst there exists no ri-ht 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 probal)ilitics 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 Roux V. Salvador, 3 Bing. N. C. 266. 2 Louisville Underwriters v. Pence, 93 Ky. 96, 19 3. W. 10. 3 Richelieu & O. Nov. Co. v. Boston M Ins. Co., 136 U. S. 408, 10 S. Ct. 931,34 L. Ed. 398. * Sufficient if expense of recovery and repairs would probably exceed one-half value, Orient Mut. Ins. Co. v. Adams, 123 IT. S. 67, 7.5, 31 L. Ed. 63, 8 S. Ct. 68 (subsequent result though evidence is not decisive); Peele 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 Un- 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 that 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. Franlin In.^. Co.. 9 Pick. (Mass.) 466; Mcrmand v. Melledge, 123 Mass. 173. Or by the ultimate result, Mclves V. Henderson, 4 M. tfe S. 576. As where ship was captured but re- stored before action brought, Boin- bridge v. .\eilson (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' his. 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 aban- donment, 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.) 406. 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. Mut. 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. 5De Hart & Simey, Ins. (1907), 73, citing Arnould, §§ 1095-1102; Ruvs v. Roval Exch. Ass. Corp. (1897), 2 Q. B. 135, 66 L. J. Q. B. 534; Sailing Ship Blairmore v. Macredie (1898), App. Cas. 593, 67 L. J. P. C. 96. For example, in case of capture, Bain- bridge V. Neilson (1808), 10 East, 329. 6 Orient Mut. Ins. Co. v. Adams, 123 U. S. 67, 75, 8 S. Ct. 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 cf 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 assured to abandon to the insurer unconditionally his insured interest in the subject- matter.2 § 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.'* ^ 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; 7ns. Co. of N. A. V. Johnson, 70 Fed. 794, 37 U. S. App. 413, 17 C. C. A. 416; Boslcy V. Chesapeake Ins. Co., 8 Gill & J. (Md.) 4.50, 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 sullicient, Currie v. Bombay Na- tive Ins. Co., 6 Moore P. C. N. S. 302, 39 L. J. P. C. 1, 22 L. T. 317. If a writing is required by the policy such stipula- tion must be compliea with, North- u-estern Transp. Co. v. Thames & M. Ins. Co., 59 Mich. 214, 26 N. W. 330. 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. ^ Mason v. Mar. Ins. Co., 110 Fed. 452, 49 C. C. A. 106, 54 L. R. A. 700; Patavsco Ins. Co. v. Sonthqate, 5 Pet. (U. S.) 604, 8 L. Ed. 243; Northwest Trans. Co. v. Thames & M. his. Co.. 59 Mich. 244, 26 N. W. 336; Civcinnati Ins. Co. V. Duffield, 6 Ohio St. 200. 67 Am. Dec. 339; Steicort v. Greenock- Inf. Co. (1848), 2 H. L. Ca.s. 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; Ranhin v. Potter, L. R. 6 H. L. 119; and, on the other hand, all the incidents of ownership pass as fully as though a deed of c ession had been executed. The underwriters, 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, 248; 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 ana not as an incident to the property in the ship, Simpson V. Thompson (1877), 3 App. Cas. 2D2. An abandonment rightfully made relates back to the time of the loss, Snovo V. Ins. Co., 119 Mass. 592, 20 Am. Rep. 349. * Gilchrist v. Chi. Ins. Co., 104 Fed. •_>."»:) OENKUAl. I'UINCII'LKS OK INSURANCE LAW A II. I where the assured is insured for an amount, less than the insur- able value, or in the case of a valued policy, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of ihe uninsured bahinco. :ind therefore is entitled to his share of sal- vaf^e.' After abandonment, any acts subsequent to the casualty, per- formed by tiie 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 matured by the underwriter, to him and to the owner of the vessel pro 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 assured 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; StenaH v. Greenock Mar. his. Co., No. 12,342, case tiff'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 \. Merchants' Mar. Ins. Co., lo2 29 Am. Dec. 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 his. Co. v. not to property previously delivered or Ashhy, 4 Pet. (1^1. S.) 137. disposed of. 3 See Ins. Co. v. Hodden (1884), 13 1 Sntchez, etc., Co. v. Louisville Un- Q. B. D. 706. derirriters, 44 La. Ann. 714; Tlie Welsh * The Red Sea. 73 Law T. Rep 462 Girl (I90G), 22 T. L. R. 475. (1896), P. 20; Miller v. Woodfall (1857) 2Ron in V. Potter (IS7S), h. 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* ..'S3: Mordecai & Co. v. /7i.s. Co., 12 ^Mobile, etc., R. Co. v Jurev 111 Rich. L. (3. C.) 512; The Sarah Ann, 2 U. S. 584, 594. ' Sumn. (U. S. C. C.) 206, Fed. Cas. 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. A 1 Ships, etc., Assoc, 22 De Hart & Simey, Ins. (1907), 7G. Q. B. D. 580, 590. A shipowner's liability to pny life sal- 4 "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 Assvr. Co. v. claim together with the salvage charges Poole (1903), 1 K. B. 376, 72 L. J. exceed the 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 I-. R. 1 C. P. 535; MacArthur, Ins. not apply where the salvage services (2d ed.), 261. have been 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 GENERA J. J'HINCII'LLS UK INSURANCE LAW The technical rules relating to adjustments of losses with marine untlerwriters 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 Parliament in 1906. § 198. Salvage Charges Recoverable.— Subject to any express provisit)U 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 incurrad a gsneral average expenditure,- he may recover from the insurer in respect of the proportion of the loss which falls upon him; and, in tlie 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,^ 1 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, 93: (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 whicli 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, tlie 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, c/. Mont- gomeru v. Indemnit'i Mut. Mar. his. Co. (1900), 6 Com. Cas. 23. (2) Time policy on shio, 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, Ballanlyne v. McKinnon (1896), 2 Q. B. 455. 2 General average defined § 212. 3Eng. Mar. Ins. Act (1906), c. 41, § 06(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 e.x- penditure and recovery for sacrifice is thus 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. Indemnit', 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 liable to pay, a general average contribution ^ in re- spect of the subject insured he may recover therefor from the insurer,^ provided the general a\erage 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 k ss on a policy by which he is insured, in the case of an unvalued poll ;y, to the full extent of the insurable value, or, in the case of a value 1 policy, to the full extent of the value fixed by the policy, is called t le measure of indemnity.^ Where there is a loss recoverable under a marine policy, the in- surer, or each insurer il 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 val ue 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- iRalli V. Troop, 157 U. S. 386, 393, s Eng. 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- 3 Eng. Mar. Ins. Act (1906), c. 41, fers in fire insurance, see § 50. §66(5); The Brigella (1893), p. 198, 7 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 far as or four-fifths of the whole loss, remains the amount of the insurance permits, with the insured. Western Assur. Co. v. Ralli 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- Chalmers & 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- o^\-ner 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 M. Ins. Co. (1901), 1 K. B. 147, aff'd real value of the ship be £4,500 or a902) 1 K. B. 734. £5,500. 254 GENERAL I'UINCIPLES OF 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 indenmity is the insurable value of the suljjcct-mattcr insured.^ § 203. Partial Loss of Ship.— In case of partial loss of the ship, subject to an}- 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.^ » Sail in/} Ship Blainnore \. M acred ie (1838), App. Cas. GIO. 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 tlie subject is exposed to risk the Valuation applies only in pro- portion to such part, Dnv/ v. Ilallett, 3 (^aines (N. Y.), H5, 2 Am. Dec. 241. Wiiere profits are valued and insured, 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, Patnpsco Ins. Co. V. Coulter, 3 Pet. (Q. S.) 222. Where hull and macliinery are sepa- rately valued, the parts thus separated are to be treated as distinct insurances. Am. S. S. Co. V. hidemnit-i Mvl. Mar. Ins. Co., 108 Fed. 421, atf'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 & Simcy, Ins. (1907), 07. "^ Irviwj V. Manninq (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 commencenent 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, Cannon v. Mar. Ins. Co., 5 Fed. Cas. 178; Lenvemrorth v. Delajicld, 1 Gaines (N. Y.), 573, 2 Am. Dec. 201; Moran Calln"av v. Uzidli (lOO.j), 2 K. R. .558 (disburse- ments); Bro^h V. Whit^^ore (1791), 4 T. R. 203 (stores and pro' isions for ere v); Stevens v. Columbian Ins. Co., 3 Gaines (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- gaged in a special trade, the ordinary fittings requisite for that trade, Ho- garth V. Wal er (1900), 2 Q. B. 2S3 (fittings), but a policy on "hull and machinery," instead of "ship," may not cover coals and stores, Roddir.r. v Ins. Co. (1895), 2 Q. B. 386. In in- surance on freight, w^hether 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, U. S. Shipping 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, Ush-er 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. Mar"'- land Ins. Co., 8 Cranch, .55, 3 L. Ed. 486; S7iell v. Dela-are his. Co., 22 Fed. Cas. 713, 4 Dall. 430; Warren v. Franklin Ins. Co., 104 Mass. 518. Loss in raising money for the purcliase is not to be added, Minturn v. Cnlvm- 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 tlie cluarges of insurance, McArthur, Ins. (2d ed.), p. 69. 3 Hevderso'" v. Shan' In vd (1830"), 1 O. B. 525; Pitman v. Urivcr H A^rr. Ins. Co. (1882), 9 0. B. D. 192, 215; Aitchison v. Lohre (1879), 4 App. Cas. 762. The measure of indemnity is thue 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 unrepaired 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 cf Freight. — Subject to anj'- express provision in the policy, 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 polic3^^ (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, Vh. Ill; also 51 L. J. Q. B. 561. Chalmers & Owens, Ins. (1907), 154. ^ U. S. Shipping Co. \. Empress, etc., As to "reasonable cost of repairs," see Corp. (1907), 1 K. B. 259; The Main Rvahon S.S. Co. v. London ylss. Co. (1894), P. 320. See Arnould, §§878, (1900), Apu. Cas. 6, 69 L. J. Q. B. 86; 1041. Aqenoria S.S. Co. v. Merchavts\ etc., * Ursula- Bright S.S. Co. v. Amsincl', Ins. Co. (1903), 8 Com. Cas. 212. 115 Fed. 242, 245, and cases cited; i StevaH V. Steele (1852), 5 Scott Lamar his. Co. v. McGIashen, 54 111. N. R. 948. 513, 5 Am. Rep. 162, and see more in 2 Ste^'-aH V. Steele (18.52), 5 Scott detail § 236; /mngr v. Manmn^r (1847), N. R. 927. Where the shio 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 (:]) Where llic whole or any part of llie goods or merchandise in- sured has been deUvercd at its destination, the measure of indemnity is such i^roportion 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 tiio i)lace 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. i;?t, 130; Lewis v. Ruckcr (1701), 2 Burr. 11G7. A particular average on goods coiLsists cither in damage to or total loss of part of the subject in- sured by operation of the perils in- sured against, Kiddon v. Empire Mar. Ins. Co., L. R. 1 C. P. 53.5. 1 Johnson v. Sheddon (1802), 2 East, 5S0. "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 beforeliand; provided that in the case of go^ds 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. (1933), § 71(4). Thus it ap- pears that, in case of damaged cargo at destination, a loss percentage is ob- tained which is applied to tlie agreed valuation, if the policy is valued, other- wise to the original market or insur- able value, Laurence v. vV. Y. Ins. Co., 3 Johns. Gas. 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, Lanar Ins. Co. v. McGlashen, 54 111. 513, 5 Am. Rep. 162; Lawrence V. N. Y. Ins. Co., 3 Johns. Gas. 216; Evans v. Commercial Ins. Co., 6 R. I. 47. If property is reconditioned the underwriter is liable for the reasonable expense, Francis v. Boidton (1895), 65 L. J. Q. B. N. S. 153, 73 L. T. R. 578. Illustrations fron Chalmers & Owen, Ins. (1907), 107, 108: (1) Unvalued policy on co^ee 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 amount 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. Noble (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 bj'- the sale of the whole, Spence v. Uiiion Mar. Ins. Co. (1868), L. R. 3 G. 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 Gom. Gas. 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 incurr'^d in examining and re- packing the packages which were not damaged, Lysayht v. Coleman (1895). 1 Q. B. 49. GENERAL AVERAGE 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 liable 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 en 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 average, 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, 3 London Ass7ir. v. Companhia cle, 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 arri\ed 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 und^r 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 iMcArthur, 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. Marten (1932), App. Cas. 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. »SVa Ins. Co., 63 C. C. A. 663, 123 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, wiiereas the insurable value is the value at the commencement of the voyage. 2 Wood V. Ins. Co., 6 Mass. 479, 4 Am. Dec. 163; Broods 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. Buc!:e;/e, 5 Fed. Cas. 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 Barl.er v. Phoenix Ins. Co., 8 Johns. (N. Y.) 307, 5 Am. Dec. 339; Saltus v. Commercial Ins. Co., 10 Johns. (N. Y.) 487. This doc- 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, Livie 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 mav be, De Hart & Simey, Ins. (1907), 87, citing Lidgett 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.^ 1 Eager v. Atlas Ins. Co., 14 Pick. ing, see Prince v. Equitable Safety Ins. (Mass.) 141; Byrnes v. Nat. Ins. Co., 1 Co., 12 Gray (Mass.), 527; chain Cow. (N. Y.) 265, 276 (where the court cables, etc., Orrok v. Commonwealth says: "The true rule seems to be this, Ins. Co., 21 Pick. 456, 32 Am. Dec. to apply the old materials towards 277; Dunham v. Com. Ins. Co., 11 payment for the new and to allow the Johns. (N. Y.) 315, 6 Am. Dec. 374. deduction of the one-third new for old, For deductions, see Appendix, ch. III. upon the balance")- But certain ex- As to new ship on first voyage see captions to this rule are allowed, see Pirie v. Steele, 2 Mood. & R. 49. The Chalmers & Owen, Ins. (1907), 154, charter party may be so worded as to for example, in the case of iron ships. make the outward and homeward Anchors, Brooks v. Oriental Ins. Co., passage only one voyage, Fenwick v. 7 Pick. (Mass.) 259, 269; metal sheath- Robinson, 3 C. «fe 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 the 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 amount 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 ownei-s 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 policy 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 poUcy. § 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 incurred 1 See §§ 199, 207. Included inEng. * Steamship Balmoral Co. v. Marten Ml-. Ins. Act (1906), § 66. (19 j2), a. c. 511. 2 McArthur, 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 Mtd. Co., of insurance was known," Price v. 100 Fed. 304, 316. Noble, 4 Taunt. 123, 126, by Heath, J. [2R0] 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, A'oluntarily 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, to 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 mile Underwriters 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 Mut. 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. Fitzhugh, 4 B. Mon. (Ky.) 160, 164 Cas. No. 3,908. et seq. 2 Ralli v. Troop, 157 U. S. 386, 400, s price & Co. v. Al Ships Ins. Assoc, 403, 404, 15 S. Ct. 657; Hobson v. 22 Q. B. D. 580, 590; Peters v. Warren Lord, 92 U. S. 397; Star of Hope, 9 7ns. Co., 1 Story (U. S. C. C), 463, Wall. (U. S.) 203, 228; The Strathdon, 469, Fed. Cas. No. 11,034. For in- 94 Fed. 206, 208; Van Den Toorn 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. Cas. 519; Svensden v. Wallace, 13 Q. B. D. 573; Ruabon S. Co. v. London Assur. 69, 84. Compare Compania La Flecha (1900), App. Cas. 6. Obviously it is V. Brauer, 168 U. S. i04, 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 ^Svensden v. Wallace (1885), 10 distributed among all, Dent v. Smith, App. Cas. 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 dam.'3,ge or writors. The liability to contribute, 262 GENERAL PRINCIPLES OF INSURANCE LAW Thus, in an old case, the EngUsh ship Brothers was captured by a French 'privateer. The EngUsh 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' (juantity 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 contriluition to the jettison. Lord Mansfield, 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.'' § 215. 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- charges and expenses, Burton v. Eng- ance, and therefore the liabiUty of the lish, L. R. 12 Q. B. D. 218, 220, cited insurer under the pohcy may not be and rehed on in Marwick v. Rogers, 163 commensurate with that of the as- Mass. 50, 52, 47 Am. St. R. 436, 39 sured under the contract of affreight- N. E. 780. ment, The Brigella (1893), P. 195. * The Brujella (1893), F. 195, 7 Asp. For example, if goods are insured Mar. Cas. 404. warranted free from capture, general s The 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 writer. the sake of all shall be made good by 1 Price V. Noble, 4 Taunt. 123. the contribution of all," Columbian Ins. 2 Butler v. Wildman, 2 B. & Aid. 398. Co. v. Af;hbv, 13 Pet. (U. S.) 331, 338, s Ralli v. Troop, 157 U. S. 386, 400, 10 L. Ed. 186- LowTides, Gen. Av., 1; 15 S. Ct. 657; Ruabon S. Co. v. London Anderson v. Ocean SS. Co., 10 App. Assur. (1900), App. Cas. 6. Dock Cas. 107, 114. REQUISITES OF GENERAL AVERAGE ACT 263 Statos 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 avejige 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 benofit.'* (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 a^''erage act was justifiable when performed and was presently succesi'ful.^ (5) The act must be directed b}^ the master of the ship, or by s:)meone in his stead authorized to represent the owners of all interestr? 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 (U. S.) 331, 338, 10 L. Ed. 186; Sctidder v. Bradford, 14 Pick. (Mass.) 13, 15, 2,5 Am. Dec. 355; Nimick v. Holmes, 25 Pa. St. 266, 64 Am. Dec. 710. As to how far success is an es- sential element by the English and continental practice see Arnould, Mar. Ins. (7th ed.). §§ 912, 979, 980. It has been stated that the operation of the rule turns more in England upon the immediate and not the ultimate suc- cess than it does in the United States and on the continent, 1 Ency. Laws, Eng. (ed. 1897), 428. « Columbian Ins. Co. v. Ashby, 13 Pet. (U. S.) 331; Patten v. Darling, 1 Cliff. (U. S. C. C.) 254, 266; Lee v. Grinnell, 5 Duer (N. Y.), 400, 421, Hoffman, J. But see Caze v. Reilbi, 3 Wash. (U. S. C. C.) 298, Fed. Cas. No. 2,538 (jettison unsuccessful); and Marshall v. Garner, 6 Barb. (N. Y.) 394 (no sacrifice, since stranding was involuntary). 7 Ralli V. Troop, 157 U. S. 386, 15 S. Ct. 657. If master is disabled who- ever is in active command may act for him, Lawrence v. Minturn, 17 How. (U. S.) 110; Price v. Noble, 4 Taunt. 123. Barges in tow of a steam tug are not under control of the master of a 1 Ralli v. Troop, 157 U. S. 386, 393, 15 S. Ct. 657. See Nimick v. Holmes, 25 Pa. St. 3r)6, 371, 64 Am. Dec. 710. 2 Hobson V. Lord, 92 U. S. 397, 400; Ralli V. Tro.*r, 157 U. S. 386, 400, 15 S. Ct. 657. 3 Barnard v Adams, 10 How. (U. S.) 270, 303, 13 L Ed. 417. 4 J. P. Domldson, 167 U. S. 599, 602; Ralli v. Troop, 157 U. S. 386, 403; Hobson V. Lord. 92 U. S. 397, 400; Van Den Toorn v. Leeming, 79 Fed. 107; Iredale v. (.'hina Traders Ins. Co. (1900), 2 Q. B. 515, 519. Thus where masts, spars, rigfiing, and sails, were first carried away by the elements anci left hanging over tl'e vessel's side, and afterwards were cut loose for the com- mon safety, the o^-ner of the cargo saved by being taken out of the ship and brought into po^t, was held not liable for contribution, Nickerson v. Tvson, 8 Mass. 467. 5 Ralli V. Troop, 157 U. S. 386, 403, 15 S. Ct. 657; Hobson ^ Lord, 92 U. S. 397, 403; Star of Hope, 1 Wall. (U. S.) 203, 229, 2.30, 19 L. Ed. 638 ("if noth- ing is saved there cannot be any such contribution"); Barnard ". Adamv, 10 How. (U. S.) 303, 13 L. ^d, '17; Columbian Ins. Co. v. AshY * ' ' \'et. 201 (iENEUAL rillNClPLES OF INSURANCE LAW tvater 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 tlie master casts otf and abandons the barges with the intention and effect of saving the tug no contribution can be had against the tug. There is no sucli community of interest between the owners of the tug and the owners of the barges and no such single maritime adventure as are contemphited 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 liis 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 have 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 country the tendency of the courts is to extend the community of interest between the ship and the cargo if both are still sub- ject to the master, though there may be physical seoaration. Pacific Mail S.S. Co. V. California Vintage Co., 74 Fed. 564, 570; Nelson v. Belmont, 21 N. Y. 36; Bevan 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 judgment 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, RalH 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 OAvner 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; Nirnick v. Holmes, 25 Pa. St. 366, 372, 64 Am. Dec. 710, per Lo^vrie, J. Although such consultation may be highly proper there is no weight in the objection that it is nec- essary, Columbian Ins. Co. v. Ashhy, 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," Shevherd v. Kottqen, L. R. 2 C. P. D. 578, 583, per Grove, J. 3 Ralli V. Troop, 157 U. S. 386, 403, 15 S. Ct. 657; Portsmouth, 9 Wall. (U. S.) 682; Tnnidad 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; Robinson 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. Cas. 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 shipo^vner 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 Irrawaddij, 171 U. S. 187, 18 S. Ct. 831. But the shipowner in such a case may himself be 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. 2 A chard v. Ring, 31 L. T. 647, 2 Asp. Mar. Cas. 422. 3 Tackle, Bir/Jeyv. Presgrave, 1 East, 220; masts, spars, rigging. The Mary Gibhs, 22 Fed. 463; Patten v. Darling, 1 Cliff (U. S.), 254; Potter v. Prov. Wash. Ins. Co., 4 Mason (U. S.), 298; sails, Mamarethe Blanca, 14 Fed. 59. 4 To save her from foundering or to flont her when stranded, or facilitate escape from enemy, Ralli v. Troop, 157 U. S 386, 393; Laurence v. Minturn, 17 How. (II. S.) 100; .Johnson v. Chavman, 19 C. 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 general average, Gregory v. Orrall, 8 Fed. 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. Fitzhngh, 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 Caines (N.Y.),19Q;Saltusv. 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. Savill, 51 L. J. Q. B. 426, 4 Asp. M. C. 531, 8 Q. B. D. 653. See Nimick v. Holmes, 25 Pa. St. 306, 64 Am. Dec. 710, and compare English rule, Steuart 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, He^2 N. Y. 59S; \V\ithcville Ins. ct B. Co. V. Teiqcr, 90 Va.'277, IS S. E. 195; and see Mechanics' & T. /7?.s. Co. v. Mut., etc., Hldq. Assn., 98 (Ja. 202, 25 S. E. 457. And if agent pays the company, latter cannot forfeit the policy, though it orovi(.les that company will not be liable, "until the premium be actually paid," Home Ins. Co. v. Gilman, 112 Ind. 7, 13 N. E. 118. Compare Her- ring V. Am. his. Co., 123 Iowa, 533, 99 N. W. 130; Dunham v. Mor.se, 158 Mass. 132, 32 N. E. 111(5. Credit was given to the broker in White v. Conn. F. 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 caimot be defeated on the ground of non-payment of premium, Healy v. Insurance Co., 50 App. Div. 327, 63 N. Y. t^upp. 1055; sec § 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, Knicler- hoc'er L. Ins. Co. v. Pendleton, 112 IT. S. 696; Stokes v. Mac':ay, 147 N. Y. 223, 41 N. E. 496; Howe Ins. Co. v. Adlcr, 71 Ala. 516, the premium, if impaid, should be duly tendered by the insured before the commencement of action on the policy, Farnum v. Phoenix 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. State 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); Par.!)() MEANING AND LEGAL EFFECT OF FIRE POLICY frequently used both in the description of the property, if one or more buildings, and also in a special privilege, commonly attached, per- mitting "additions, alterations, and repairs." This word is held to have a more restricted meaning when the subject of insurance is a single building, or a building insured by separate amount; ^ though sometimes, even in that event, the circumstances may warrant a broad construction including an independent and additional structure.^ But where the insurance is upon a factory or mill, and particularly if the policies are in blanket form, as is frequently the case, that is, each m one lump amount upon the entire group of buildings or upon the es- tablishment in its entirety, including buildings and contents, then the word "additions" may reasonably signify "an addition to the plant," and may include an entirely separate and independent build- ing added to the property described.^ For instance, the Arlington Manufacturing Company had over forty policies, each a blanket, on the buildings and their contents together constituting their manufacturing establishment at Arlington, N. J., two buildings alone out of sixteen being excepted for special reasons, and the contents of only one of them being excepted. Many com- panies were on the risk, and the description of the property and also special clauses were contained in a printed rider, a copy of which was attached to each policy. The description in the rider enumerated the buildings which were standing when the rider was prepared and alluded to a map on file with the broker which also portrayed the buildings enumerated in the rider. Every policy also contained a one hundred per cent coinsurance clause. One of the special clauses in the rider was a privilege to make " additions, alterations and re- pairs, the policy to cover thereon and therein." For several years new and independent structures had been added to the plant at the ^Peoria Sugar Ref. Co. v. Peoples' lot mentioned); Carpenter v. A ZZemama Fire Ins. Co., 24 Fed. 773; Franhlin Ins. Co., 156 Pa. St. 37, 26 Atl. 718; Ins. Co. V. Hellerick (Ky.), 49 S. W. Cummins v. German-Am. Ins. Co., 197 1066; Forbes v. Am. Ins. Co., 164 Mass. Pa. St. 62, 46 Atl. 902; Home Ins. Co. 402, 41 N. E. 656; Hannan v. Williams- v. Roe, 71 Wis. 33, 36 N. W. 594. burgh Cit'i F. Ins. Co., 81 Mich. 556, 45 3 Arlington Mfg. Co. v. Colonial Ins. N. W. 1120; Evanston Golf Club v. Co., 180 N. Y. 337, 73 N. E. 34. Home Ins. Co., 119 Mo. App. 175, 95 Contra, Arlington Mfg. Co. v. Norwich S. W. 980. Union F. Ins. Co., 107 Fed. 662, 46 ^ Cargill V. Millers' Ins. Co., 33 Minn. C. C. A. 542 (facts the same as in the 90, 22 N. W. 6; Phenix Ins. Co. v. later case cited first). And see South- Martin (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; Grifjing Iron Co. v. L. & L. & G. Fire Assn. 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 Mut. Ins. Co. v. Roe, 71 Wis. depth of only about two inches on the 33, 36 N. W. 594. FLuCtUA'lriNG STOCK, Etc. 20 1 rate of more than one a 3'ear, new maps aftd riders being prepared at much longer intervals. After this rider, before the court for con- struction, was prepared for the poUcies 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 iipon merchandise in a store applies 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. Mtna Ins. Co., 32 N. Y. 405; Hooper Co., 180 N. Y. 337, 73 N. E. 34. v. Hudson River Fire Ins. Co., 17 N.Y. Contra, Arlington Mfg. Co. v. Norwich 424. The same rule 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 Guthrie Lanndrjf 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 cases); Gross v. Mil. Tomkins v. Hartford Ins. Co., 22 App. Mech. his. Co., 92 Wis. 656, 63 N. W. Div. 380, 49 N. Y. Supp. 184; grain, 712 (three feet away). And see Fergu- Coleman v. Phoenix Ins. Co., 3 App. Div. son V. Lumbermen's Ins. Co. (AVash., 65, 38 N. Y. Supp. 985; Johnston v. 1907), 88 Pac. 128 (eighteen inches 7ns. 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 ^ Pheenix Ins. Co. v. Martin (Miss., generaWy, Johnson v. Farmers' Ins. Co., 1894), 16 So. 417 Qaundry covered 126 Iowa, 565, 102 N. W. 502; contents thovgh independent. " Two-story brick of barn. Farmers' Mut. F., etc., Assn. building and additions thereto.''). v. Kryder, 5 Ind. App. 430, 31 N. E. * Manchester F. A. Co. v. Feibelman, 851. 118 Ala. 308, 23 So. 759; Am. Cent. Ins. s Hoffman v. /Etna Ins. Co., 32 N. Y. Co. V. Rothchild, 82 111. 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 1 Brce V. Lorillard Fire his. 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. Elliott, 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; Enjlish v. Franklin Fire Ins. only in the event that the horse was Co., 55 Mich. 273, 54 Am. Rep. 377; kept in the barn all the time waiting Wall V. East River Mut. Ins. Co., 7 N. for a fire or a stroke of lightning, Y. 370; Londoyi and Lancashire Ins. Co. Haws v. Fire Asso., 114 Pa. St. 431; V. Lvcoming 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- * Goodhue v. Ins. Co., 184 Mass. 41, psiny washeld, Western, etc., Pipe Lines 67 N. E. 645. v. Hom^ 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- 793. side the counties in which defendant 6 Kunzze v. Amer. Exch. Fire Ins. was authorized to do business, there Co., 41 N. Y. 412; Sharpless v. Ins. being no restriction in the policy, iJc^tfy Co., 140 Pa. St. 437. Standard policy v. Farmers' Mut. Ins. Co., 20 App. Div. has special clause regarding removal of 109, 46 N. Y. Supp. 695. property endangered by fire. s Green v. Ins. Co., 91 Iowa, 615, 60 9 English v, Ins. Co., 55 Mich. 273, 21 N. W. 340, 54 Am. Rep. 377. HELD IN TRUST 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 but 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 trust " 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. Hartford F. Ins. Co., 140 Pa. St. Ambiguity of description was con- 437, 21 Atl. 451. strued against the plaintiff preparing 6 Westfield Cigar Co. v. 7ns. Co. of it \n 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. 465; ferent street number, was sent to Bahr v. Nat. Fire Ins. Co., SO Hun, jury). 309, 62 N. Y. St. R. 341, 29 N. Y. t Westfield Cigar Co. v. Ins. Co. of Supp. 1031; Brit.-Am. Assur. Co. v. N. 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. Phosnix Ins. Co., 158 Mass. 124, 32 ^ .^tna Fire Ins. Co. v. Brannon 'N.E. 945; Sampson v. Security Ins. Co., (Tex. Civ. App.), 81 S. W. 560 (1904). 133 Mass. 49; Hews v. Atlas Ins. Co.. ^ 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. Hartford Fire Ins. Co., be shifted within the insured premises, 41 App. Div. (N. Y.) 226. Fair v. Manhattan Ins. Co., 112 Mass. 5 McKeesport 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 "trust" 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 Bnr'.e v. Continental Ins. Co., 100 App. Div. lOS, 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. Baltiynore Warehouse Co., 93 U. S. 527; Snow v. Carr, 61 Ala. 363; Hough v. People's Fire Ins. Co., 36 Md. 398; Lucas v. 7ns. Co., 23 W. Va. 258, 48 Am. Rep. 383. * Ferguson v. Pe\in 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 renresented by his commis- sions, De Forest v. FiiUon Fire Ins. Co., 1 Hall (N. Y.), 94, 101; or charges, South. Cold Sloraqe 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. Campbell, 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. ^ Larsen v. Thuringia Am. Ins. Co., 208 111. 166, 70 N. E. 31; Maiis v. Cumberland Mut. F. Ins. Co., 15 Vroom (N. J.), 478; Waring v. In- dermiity Ins. Co., 45 N. Y. 600; Fergu- son V. Pel.in Plow. Co., 141 Mo. 161, 42 S. W. 711; South Cold Storaje Co. v. Dechman (Tex. Civ. App.), 73 S. W. 545; Eng. Mar. Ins. Act (1906), ch. 41, § 86. But see as to mutuality of con- tract required, Retinoids v. Mut. F. Ins. Co., 34 Md. 280; Ins. Co. v. Schall, 96 Md. 225, 53 S. W. 925. 7 Da\in 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 Wolf v. Capital City Ins Co., 16 Hun, 116; Watson v. Swann, 11 C. B. N. S. 755. 8 Da^in v. Ins. Co., supra; Brown v. Commercial Fire Ins. Co., 21 App. D. C. 325; Kent v. Mna Ins. Co., 84 App. Div. 428, 82 N. Y. Supp 817 FOR WHOM IT MAY CONCERN 295 or where vendor and vendee wish to be covered during a pending contract of sale in part performed.^ In considering the apphcation 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 an}'- 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 frequentl}^ 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 full 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 o^\^lership. Theoretically, in- deed, a vendor and a vendee under contract of sale may each, under cer- tain circumstances, have an insurable interest to the full value of the prop- erty, Tiemann v. Citizens' Ins Co., 76 App. Div. 5, 78 N. Y. Supp. 620; R'jan V. Agricultural Ins. Co., 188 Mass. 11, 73 N. E. 849, where pur- chaser was obligated for full purchase price (1905); but see Tahhut v. Am. Ins. Co., 185 Mass. 419, 70 N. E. 430, and contra, in England, Castellain v. Preston, L. R. 11 Q. B. D. 380. But imderwTiters 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, Leicis v. Guar- dian Ins. Co., 181 N. Y. 392; Kent v. Mna Ins. Co., 84 App. Div. 428, 82 N. Y. Supp. 817; Bezant 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. sllei/l 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 o^^T>er and insurer does not bind payee if his interest is described in policy as that of mortgagee, Hathaicay 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. Mut. Fire Ins. Co., 81 Minn. 478, 84 N. W. 334. 290 MEANING AND LEGAL EFFECT OF FIRE POLICY takes the policy, to be included.^ parol. - Who these are may be shown by § 239. Measure of Damages.— iVoi liable beyond actual cash value of the properti/ 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.^ 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.),36S. W. 125. 4 Snell V. Delaware Ins. Co., 4 Dallas, 430; Birmingham Fire Ins. Co. v. Pul- ver, 126 111. 329; Brown v. Quincy Ins. Co., 105 Mass. 396; Hilton v. Phosnix Assur. Co., 92 Me. 272, 42 All. 412; Waynesboro Mut. 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. Ro^al Ins. Co., Ill N. C. 372, 16 S. E. 389. ^ Gere v. Council Bluffs Ins. Co., 67 Iowa, 272, 23 N. W. 137. 6 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, Glascr 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 proof of value when it seemed to be the best 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. 3.'4 (cases cited). And see Lv- coming Ins. Co. v. Jackson, 83 111. 302, 25 Am. Rep. 386. But compare Metzger v. Manchester Assur. Co. 102 1 Hooper v. Robinson, 98 U. S. 528; Duncan v. China Mut. Ins. Co., 129 N Y. 237, 23 N. E. 76; Boston Fruit Co. v. Brit., etc., Co. (1906), App. Cas. 336. „ ^ ^ 2 Mewson v. Douglass, 7 Har. & J. (Md.) 417; Pacific Ins. Co. v. Catlett, 4 Wend. (N. Y.) 76. But it is not neces- sarj' that the insured should have any specific individual in mind to give effect to the clause, Ilaqan v. Scottish Ins. Co., 186 U. S. 423, 423, 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. Indemniti his. Co., 45 N. Y. 606. They may ratifv even after loss. Hooper v. Robinson, 98 U. S. 528; Fire Ins. Asso. V. Merchants', etc.. Trans. Co., 66 Md. 333; Herkimer v. Rice, 27 N. Y. 163; Babbitt 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; Hagedorn v. Oliverson, 2 Maule & Selw. 485. "Legal representa- tives" construed in Aljord 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. //. B. F. his. Co., 133 N. Y. 394, 31 N. E. 231. Extrinsic cxidence is admissible to show who were intended, Clinton v. Hope Ins. Co., 45 N. Y. 454. ^Stenzel v. Penn. Fire Ins. Co., 110 La. 1019, 35 So. 271 (actual value of a MEASURE OF DAMAGES 297 The purchase price, in usual course of business, if not at too re- mote a period, may properly 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 reliable, 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. Corn. 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, Mandand Home F. In.^. Co. V. Kimmell, 89 Md. 437, 43 Atl. 764. ^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. Bell, 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. Rod ford 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. 3 Standard Sewinj Machine Co. v. Ro'.allns. Co., 201 Pa. St. 645, 51 Atl. 354; but see Mitchell v. S*. Paul Fire Ins. Co., 92 Mich. 594, 52 N. W. 1017; and Hartford F. Ins. Co. v. Cannon, 19 Tex. Civ. App. 305, 46 S. W. 851. * Niagara Ins. Co. v. Hcflin, 22 Ky. L. R. 1212, 60 S. W. 393. But ma- cliinery 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. Fofter, It. 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. ^ Mtna Ins. Co. v. Johnson, 11 Bush (Ky.), 587, 21 Am. Rep. 223; Holter L. Co. v. Firemen's Fund Ins. Co., 18 Mont. 282, 45 Pac. 207. 6 Cummins v. German- Ain. Ins. Co., 192 Pa. St. 359, 43 Atl. 1016; Clovre 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, S3e 1 Clement, 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, afT'd 162 N. Y. 656, 57 N. E. 1124. Loss of manufacturers patterns, see Michelsv. Western Underwriters' Assn., 129 Mich. 417, 89 N. W. 56 (1902). 7 Scott V. Security Fire his. 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., 103 La. 341, 33 So. 301. ^ Clewnt V. Brit.-Am. Assur. Co., 141 Mass. 298, 5 N. E. 847. But is not conclusive, Reading Ins. Co. v. Engel- hoff, 115 Fed. 333. 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 destroy ed.^ 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 limited to the face of the policy.^ 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.* Mvt., etc., Assn., 114 Iowa, 244, 86 N. W. 310; Barry v. Same, 110 Iowa, 433, 81 N. W. 690. Experts who have seen the property or who are familiar with similar property may testify as to values, Home Ins. Co. v. Sylvester, 25 Ind. App. 207, 57 N. E. 991; Reed v. Washington F. d- M. Ins. Co., 138 Mass. 572; Burnett v. Am. Cent. Ins. Co., 68 Mo. App. 343; Clark v. Baird, 9 N. Y. 183; Teerpenninq v. Com. Exch. Ins. Co., 43 N. Y. 279. This is the regular and usual method of furnishing proof upon the trial. And if they have not examined the property, hypothet- ical questions may be put as in other classes of actions, Latimer v. Burrows, 163 N. Y. 7, 9, 57 N. E. 95; Chi. & Al. R. R. v. Glen7vi, 175 111. 238, 51 N. E. 896. An owner, Union Pac. R. Co. v. Lucas, 136 Fed. 374; Tvbbs v. Me- chanics' Ins. Co.. 131 Iowa, 217, 108 N. W. 324 (citing authorities); or housekeeper, though not strictly an expert, may b(! allowed to testify to values if suitable foundation of knowl- edge or experience be first established, Rademacher v. Greenwich Ins. Co., 75 Hun, 83. 1 Commercial Ins. Co. v. Allen, 80 Ala. 571; Burkett v. Georgia Home Ins. Co., 105 Teim. 548, 58 S. W. 848. ^ Hewins v. London Assur. Co , 184 Mass. 177, 68 N. E. 62; Penn. Co. v. Phila. Contribvtorship, 201 Pa. St. 497, 51 Atl. 351. 3 The provisions of the standard policy would seem to be quite as con- sistent with the doctrine of indemnity. If a man by letting his wooden house burn down could get a brick or stone house in place of it, he would greatly profit. Which new material should furnish the criterion of value, brick or stone? ■» Erb v. German-Ayn. Ins. Co., 98 Iowa, 606, 67 N. W. .583. 5 Mechanics' Ins. Co. v. Hodge, 149 111. 298, 37 N. E. 51. 8 As to measure of recovery see also ch. II, supra. "> W eslinqhouse Electric Co. v. West- ern Assxtr'. Co., 42 La. Ann. 28, 7 So. 73; Murphy v. North Brit. & M. Co., 61 Mo. App. 323; Queen Ins. Co. v. .lefferson Ice Co. , 64 Tex. 579. 8 Borden v. Hingham Mut. F. Ins. Co., 18 Pick. (Mass.) 523, 29 Am. Dec. 614. Sometimes a deduction may be made for depreciation occurring since date of the insurance, Caledonia Ins Co. V. Coo'e. 101 Ky. 412, 41 S. \V. 279; Marshall v. Ins. Co., SO Mo. App. 18. Valued policy law held to be binding MEASURE OF DAMAGE§-=TOTAL L0S9 0? 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., 74 Wis. 67, 41 N. W. 443, 3 L. R. A. 523; Scottish U. & 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. Ger- mania F. Ins. Co., 123 Mo. 403, 27 S. W. 718, 26 L. R. A. 107, 45 Am. St. R. 570. 2 Hartford F. Ins. Co. v. Redding (Fla.), 37 So. 62, 67 L. R. A. 518. 3 Wensel v. Property Mut. Ins. Ass., 129 Iowa, 295. "i American Cent. Ins. Co. v. Noe, 75 Ark. 406, 88 S. W. 572 (only a glass door was left intact); Palatine Ins. Co. V. Weiss, 109 Ky. 464, 59 S. W. 509; O'Keefe v. L. & L. & G. his. Co., 140 Mo. 558, 41 S. W. 922 (a total loss if to utilize standing walls would cost as much as to rebuild them); Corhett 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. Drachett, 63 Ohio St. 57, 57 N. E. 962; Am. Cent. Ins. Co. V. Murph'/ (Tex. Civ. 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. Normch Union F. his. 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 ruins, such building is in contempla- tion of law a ' total loss, ' or ' wholly destroyed,' " Liverpool & L. & G. I. Co. V. Ilcckman, 64 Kan. 388, 67 Pac. 879. See also Williams v. Hartford Ins. Co., 54 Cal. 442, 35 Am. Rep. 77; Northwestern Mid. L. I. Co. v. Rochester German Ins. Co., 85 Minn. 48, 88 N. W. 205 ("total loss" considered as ap- plied to one plant with several build- ings); Ins. Co. v. 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, Thnringia Ins. Co. V. Mallott, 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 lire 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, vrould, 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 like 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 totil 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 sured," Bunyon, 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 § 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 unconstitutional, § 6. 83 N. W. 409. It is permissible for a 1 Lancashire Ins. Co. v. Biish, 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- 3 Northwestern Mut. L. Ins. Co. v. ing is so far destroyed that the business Rochef^ter German Ins. Co., 85 Minn, cannot be carried on until repairs are 48. 88 N. W. 265 (citing many authori- made, Chatfield v. JEtna Ins. Co., 71 ties); Northwestern Mut. L. Ins. Co. v. App. 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 hmit of liability in all cases.' § 242. Coinsurance and Other Special Clauses Modifying Measure of Liability. — The extent of the insurer's liability is often modified by particular clauses; 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 tne 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 loss. 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; Poppitz v. German Ins. Co., 85 Millis v. Scot. Union & Nat. Ins. Co., Minn. 118, 88 N. W. 438. 95 Mo. App. 211 (three-fourths clause); ^ Hevxins v. London Assur. Co., 184 Catoosa S. Co. v. Linch, 18 Misc. Mass. 177, 68 N. E. 62; McCready v Hartford Fire Ins. Co., 61 App. Div (N. Y.) 583, 70 N. Y. Supp. 778 Stand. Sewing Mach. Co. v. Royal Ins Co., 201 Pa. St. 645, 51 Atl. 354 (1902) (N. Y.) 209, 41 N. Y. Supp. 377 (co- insurance clause); Penn. Fire Ins. Co. V. Moore, 21 Tex. Civ. App. 528, 51 S. W. 878 (coinsurance clause). * 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; Hid er son 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. G'' , 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- ^ Blinn v. Ins. Co., 85 Me. 389, 27 sistent with statutes, Firemen's Fund Atl. 263 (two-thirds value clause); Ins. Co. v. Pelor, 106 Ga. 1. 31 S. E. Owsehrouqhv. HomeIns.Co.,Q)lM.\ch.. 11^; Quinn v. Fire Assn., 180 Mass 833. 28 N. W. 110 (four-fifths clause); 560, 62 N. E. 980. 302 MPANING AND LEGAL EFFECT OF FIRE POLIQY 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 paj''- able until after sixty days from receipt by the insurer of proofs of loss.^ § 244. Reinstatement ClaMse.— 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 710 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; Boijle 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, infra. Goode, 95 Va. 751, 30 S. E. 366; Bill- 2 Appendix, ch. I. nfier 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 As.swr. Co., 127 the insurer denies liability some cases Cal. 480, 59 Pac. 901; Pxdze v. Sagi- hold that the insured need not wait naii\ etc., Ins. Co., 1.32 Mich. 670, 94 sixty days, but may sue at once. Frost N. W. 191. And see KeWi v. Supreme v. North Brit. & M. Ins. Co 77 Vt Council, 46 Apo. Div. 79, 61 N. Y. 407, 63 Atl. 803. Supp. 394. "Sixty days" held to run & 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 rein- 95, 45 Pac. 73. ''Satisfactory proofs" statement is for the most part limited means proofs that ought to be so re- to buildings and machinery. JlElNSTATEMfiNt CLAUSE m 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 j'"* 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 onl}^ the rejection of the right to pay the amount of damage estimated on a cash basis,'' 1 Ins. Co. V. Hope, 58 111. 75, 11 Am. Rep. 48; McAllaster v. Niagara Fire Ins. Co., 156 N. Y. 80, 50 N. E. 502; Maryland Home Ins. Co. v. Kimmel, 89 Md. 437, 43 Atl. 764; compare Kelly v. Sun Fire Office, 141 Pa. St. 10, 21 All. 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 b' exercised at any time within the thirty days, Lanca- shire Ins. Co. V. Barnard, 111 Fed. 702, 43 C. C. A. 559. Option may be shown without formal notice by sending workmen, starting work, etc., Fire Assn. V. Rosenthal, lOS Pa. St. 474, 1 Atl. 303. It is said that an offer to repair cannot be coupled with one of compromise, Rieger v. Mechanics' Ins. Co.. 69 Mo. App. 674. 2 Hamilton v. L. & L. & G. Ins. Co., 130 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; North German Ins. Co. v. Morton Scott Co., 108 Tenn. 384, 67 S. W. 816. 4 Hamilton v. L. & L. & G. Ins. Co., 136 U. S. 242; Astrich v. German-Am. Ins. Co., 131 Fed. 13; Kelly 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 in 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 Alil. Mcch. Ins. Co. V. Russell, 65 Ohio St. 230, 62 N. E. 338, 56 L. R. A. 159; Marshal V. Ins. Co., 80 Mo. App. 18, 23; Com- mercial Union Assur. Co. v. Meyer, 9 Tex. Civ. App. 7, 29 S. W. 93; Royal Ins. Co. V. Mclntyre (Tex. Civ. App.), 34 S. W. 669. 5 Henderson v. Crescent Ins. Co. , 48 La. Ann. 1176, 20 So. 658; Fire Assn. V. Rosenthal, 108 Pa. St. 474, 1 Atl. 303. 6 Times Fire Assur. Co. v. Hawle, 1 Fost. & F. 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, Piatt V. ^tna 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, Anc?erso» 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. ^tna 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). 7 Zalesky 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 amount 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 Zaleshj v. Iowa 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. ^ Brinley 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 2 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. Irving Fire Ins. Co., 33 N. Y. 429, Royal his. 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; '^Henderson v. Crescent Ins. Co., 48 Heivins 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- remams in force during term of policy, leone v. Royal Ins. Co., 47 La Ann Trull V. Roxhury Ins. Co., 3 Cush. 1563. 18 So. 472. (Mass.) 263. 7 Haskins v. Hamilton Mut. Ins. Co., * Danl V. Firemen's Ins. Co., 35 La. 5 Gray (Mass.), 432. Ann. 98 (there must be a clear refusal); s For defective construction Hen- 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, 4m THIS ENTIRE POLICY SHALL BE VOID 305 The rebuilding clause has been held to have no applicatioi. 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 policy, does not, upon settling for a total loss, become entitled to take any damaged remains of the property, or salvage subsequently realized from them.'' § 246. This Entire Policy Shall be Void. — Before this phrase was inserted in the polic}^, 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 onl}' 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 man}' jurisdictions, in passing upon this important question, have held that such is its legal intend- ment.® Ceni. Ins. Co. v. McLanathan, 11 Kan. jerson Ins. Co., 102 Mo. App. 70, 76 533. Must make property as service- S. W. 643. able and valuable as before, Co??im€maZ ^ Thuringia Ins. Co. v. Mallot, 111 F. /ns. Co. V. A /Zen, 80 Ala. 571, 1 So. Ky. 917, 64 S. W. 991; Liscom 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, Hartford 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 , i 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 Heilmann 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, ifezrf., 245. Co., 109 Iowa, 39, 79 N. W. 452; s See § 115, supra. Alliance, 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 3 Option to rebuild is denied by contained in the standard form, Dumas statute in Missouri, Branigan v. Jef- 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 hot 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 onl}^ $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. Knight, 111 Ga. 622, 36 S. E. 821 (breach as to stock avoids as to building also); Geiss v. FranLlin Ins. Co., 123 Ind. 172, 24 N. E. 99 (breach as to ownership of part avoids the whole); Kahler v. lo va 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. Spring-field F. & M. Ins. Co., 103 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) ; Agricidtural Ins. Co. V. Hamilton, 82 Md. 88, 33 Atl. 423, 30 L. R. A. 633, 51 Am. St. R. 457 (unoccupancy avoids also as to con- tents); Bald'vin v. Hartford F. Ins. Co., 60 N. H. 422, 49 Am. Rep. 324 (sale of one building avoids as to all); Martin v. 7ns. Co. of N. A., 57 N. J. L. 623, 31 Atl. 213; CuthheHson v. N. C. Home Ins. Co., 96 N. C. 480, 2 S. E. 258 (breach as to building avoids as to contents); Coggins v. Jitna Ins. Co., 56 S. E. 506, 36 Ins. L. J. 354 (breach of iron safe clause avoids as to build- ing also); Germania 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); McWilliams v. Cascade F. & M. Ins. Co., 7 Wash. 48, 34 Pac. 140 (misstatement as to piano; whole policy avoided); Corev 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. Bemstern, 55 Neb. 260, 75 N. W. 839. 1 McWilliams v. Cascade Fire, etc., Ins. Co., 7 Wash. 48, 34 Pac. 140. THE ENTIRE POLICY SHALL BE VOID 307 Stock, which he failed to do. The court held that the premium Deing entire, the breach of warranty was a bar to recovery not only for loss of stock, 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 policy 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 practically 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 policy 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 ^Southern 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 ^ 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 as 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; Kiernan v. Agri- i 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 spite 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); Adler 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. Dwelling 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 Kiernan v. Dutchess Co. Mut. 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 SI, 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 was 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. ** ^Knowles v. American Ins. Co., 66 Johnson, 69 Kan. 146, 76 Pac. 419 Hun, 220, 21 N. Y. Supp. 50, aff'd 142 (1904) (vacancy of house avoids as to N. Y. 641, 37 N. E. 567. In a later stable, corncrib and contents); Agri- case the court intimates a doubt as to cultural Ins. Co. v. Hamilton, 82 Sid. the soundness of this rule on the merits, 88, 33 Atl. 429, 30 L. R. A. 633, 51 184 N. Y. HI. 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 2 McQueeny v. PhoenLt 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- Dohlantrv v. Bine Mounds F. & L. Ins. men's Fund Ins. 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. 98, 106 ^ Hoffec er v. New Castle, etc., Ins. N. W. 485 (elaborate citation of au- Co., 4 Houst. (Del.) 306; Hoffecker v. thorities). /ns. Co., 5 Houst. (Del.) 101. ^Fitzgerald v. Allerton Home his. * 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 policy 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 policy, 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 Mut. Ins. Co., 11 Gush. (Mass.) 280; Friesmxdh v. Aqawam Mid. F. Ins. Co., 10 Gush. (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, Bidlman 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 G. C. A. 96 (temporary other insurance) ; German- Am. Ins. Co. V. Humphrey, 62 Ark. 348, 35 S. W. 428, 54 Am. St. R. 297 (temporary incumbrance); Replogle 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. 5C8 (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 knov/n 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 (temporarj'- chattel mortgage); Eng. Mar. Ins. Act (1906), § 34(2); De Hahn v. Hartley (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, his. Co v Commercial 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 whieli 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 othermise, 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 countrj'^ 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 iinseaworthy with defect in boiler repaired before loss; policy void). 1 Sumter Tobacco Warehouse Co. v. Phoenix Ins. Co. (3. 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 F. Ins. Co., 22 App. Div. 380, 49 N. Y. Supp. 184; Organ v. Hibernia F. Ins. Co., 3 Mo. App. 576 ("an in- terruption is not a forfeiture"). So as to temporary increase of hazard. Traders' his. Co. v. Catlin, 163 111. 256, 45 N. E. 255, 35 L. R. A. ,595. Tem- porary otlier insurance, Pha;n'ix his. Co. V. Johnston, 42 111. App. 66; Ins. Co. of N. A. V. McDo'vell, 50 III. 120; Ro'iat Ins. Co. v. McCrea, 8 Lea (Tenn.), 531, 41 Am. Rep. 565. Temporary vacancy, Ins. Co. of A''. 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, Bornv. 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, McKihban 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 Mut. 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 w-nere 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; Stribley 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 & Siniey, Ins. (1907), 24. And they are not followed in the codifica- 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. 2 See Appendix, ch. I. 3 Iowa, New Hampshire, and Michi- gan, for example; also, as to unoC' cupancy clause, Wisconsin. * See § 96, supra. INTEREST OF INSURED NOT TRULY STATED IN 1^0LiC\ 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 without an express warranty, a misrepresentation of a material fact, made through mistake or by design, avoids a polic}' 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 pa*op- 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 bound 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 ^ Clark V. Union Mut. 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., 163 Mass. 117, 39 N. E. Palatine Ins. Co., 35 Oreg. 27, 57 Pac. 792. 62 (as to incumbrances); Pelzer Mfg. * Farmers' Mutual Fire & 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 5 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. his. Co., 93 Wis. 223, 67 N. W. 792; Daceij v. Aqricultural Ins. Co., 21 416. And see Parker v. Otsego Co^inty Hmi (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. Charlestown Mut. Fire Ins. Co., Ins. Co., 105 Iowa, 379, 75 N. W. 326; 5 Gray (Mass.), 384. Greenlee v. Hanover Ins. Co., 104 Iowa, « il/ers v. Franklin Ins. Co., 68 Mo. 481, 73 N. W. 1050; McCarty v. Im- 127; Weed v. L. & L. Fire Ins. Co., 116 perial 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. ^Stetson V. Mass. Mut. Fire Ins. Co., 489, 67 N. E. 57. 4 Mass. 3.30, 3 Am. Dec. 217. But if 7 The provisions of the policy application is written, the company amount to an express and pointed his r o ris;ht to rely on oral representa- inquiry upon these subjects and the tion bv broker's clerk, Dollircr v. 7ns. insured is conclusively bound to read Co., 131 Mass. 39. Under the Massa- and know its terms, Par.'ions 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 value 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 in 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 pUcations with detailed questions are is owner when in reahtv 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 owtis in ranties of the policy, fee when in fact he has only an execu- 2 Collins v. Assur. Corp., 165 Pa. St. tory contract for purchase^ the policy .398, 30 Atl. 924. will be avoided, Wooliver v. Boylston ^ Peck v. Xew Lond. Co. Mut. Ins. Ins. Co., 104 Mich. 132, 62 N. W. 149. Co., 22 Conn. .575; Turner v. Burron's, There are many decisions holding that 5 Wend. (N. Y.) .541. if the insurer makes no affirmative in- * Dolliver v. St. Joseph F. & 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 Fire 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. Weedy. Hamburg-Breynen F. I. Co.,lS3 Scottish U. & N. Ins. Co., 1.36 Cal. N. Y. 394, 45 N.Y. St. R. 105, 31 N. E. 542, 69 Pac. 253, 615; Glens Falls Ins. 231; McClelland v. Greenwich Ins. Co., Co. v. Michael (Ind.), 74 N. E. 964; 107 La. 124, 31 So. 691. And see. Glens Falls Ins. Co. v. Michael (Ind.), Porter v. Orient Ins. Co., 72 Conn. 519, 79 N. E. 905 (citing cases); Hartford 45 Atl. 7. F. Ins. Co. \\ McClain (Ky.),^oS.'W. ^ Davis v. Quincy Mut. Fire 7n.s, 693 (1905); Miote 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, Bro"n v. Com- cisions are not in accord with the cur- niercial Fire Ins. Co., 86 Ala. 189. rent of authority, see § 141, s//pra, and ^Strong v. Manuf'rs Ins. Co., 10 were probably rendered without ap- Pick. 40, 20 Am. Dec. 507. preciation of the method cf doing '^ Lee v. Agricultural Ins. Co., 79 business in cities, where, as a rule, ap- Iowa, 379; Edmonds v. Mut. 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 appUcant 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 applicant, 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.^ § 250. 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, must be intentionally false, whether by a fraudulent overvaluation of the goods destroyed, or a statement of items which really have no existence,^ or b}^ 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 Mut. Fire Ins. Co., also it is not enough that false swear- 30 Me. 414. ing occurs through mistake, careless- 1 Dakin v. Liver-pool, L. & G. Ins. ness, or inadvertence or in unreason- Co., 77 N. Y. 600. able reliance on information derived 2 Wainer v. Milford Mut. 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., 3 Dorle 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- 8 White v. Merchants' Ins. Co., 93 ure as to title, Wilbur v. Boicditch Mut. Mo. App. 282. F. Ins. Co., 10 Cush. (Mass.) 446; 9 Republic Fire Ins. Co. v. Weide, 81 Allen v. Charlestown Mut. F. Ins. Co., U. S. 375, 20 L. Ed. 894; Hilton v. 5 Gray (Mass.), 384; JenAins v. Qmnci/ Phoenix Assur. Co., 92 Me. 272, 42 Mut. F. Ins. Co., 7 Gray (Mass.), 370. Atl. 412; Atherton v. Brit.-Am. Assur. i Claflin V. Commonvealth Ins. Co., Co., 91 Me. 289, 39 Atl. 1006 (holding llOU. S. 81,3 S. Ct. 507, 28 L. Ed. 76. that an honest misstatement is not ^ Rovins^v V. Northern As.s?/r. Co., enough to avoid); Daltoji v. Miluau' ee 100 Me. 112, 60 Atl. 1025 (1905). Mechanics' Ins. Co., 126 Iowa, 377, Bever V.St. Paul F. i& M. Ins. Co., 102 N. W. 120; Garner v. Mutual 10 Tubb V. L. & L. (kG. 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. :n4 MEANING AND LEGAL EFFECT OF FIKE i'OLLCY 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 naturall}'^ prone to put a favorable estimate upon tlie value of his own property.- Thus in a Massachusetts case where goods, repre- sented by the plaintiff to be worth S2,802.04, 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 his. 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 Alliance Ins. Co., 55 W. Va. 342, 47 S. E. 101; Rickeman V. Williamsburg City Fire his. 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. 939 (held, 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 Covr, 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, Maher v. Hibernia 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. Phila. Underwriters, 109 La. 884, 33 So. 907. 1 Towne v. Springfield Fire, etc., Ins. Co., 145 Mass. 582; Jersey City his. Co. V. Nichol, 35 N. J. Eq. 291, 40 Am. St. Rep. 625; Maher v. Hibernia Ins. Co., 67 N. Y. 283; Susquehanna Mid. 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. Vaughan, 92 U. S. 516; Sturm v. Atlantic Mut. Ins. Co., 63 N. Y. 77. ^Goldstein v. FranUin Mut. F. Ins. Co., 170 Mass. 243, 49 N. E. 115. As to representation regarding o\vnership, .see Little v. Phoenix Ins. Co., 123 Mass. 380, 25 Am. Rep. 96 (policy not avoided). * Bannon v. Ins. 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. Phwnix 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 (Mi.ss.), 36 So. 1042 (1904). 8 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. his. 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). Conlrn, for example, Pett'i 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 Goulstone v. Roi/ol Ins. Co., 1 F. & F. 276, claim for furni- ture was £260, estimate on schedule in insolvency was £50, jury fovmd 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 Citii 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. Gilbert, 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 $1,000, 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. Paul 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, Larocqve v. Roial 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, Lemi 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, Sternfield v. Park Fire Ins. Co., 50 Hun (N. Y.), 262. And see Anibal v. Ins. Co. of N. A., 84 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. Co., 96 Cal. 645, 31 Pac. 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, Mullin V. Vt. Mut. F. Ins. Co., 316 MEANING AM. UMW. l-lFbCT OF FIRE POLICY It will be ubscrvcl that a .listinction must be made between ante- cedent statements wl.ich form the in.lucement 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 mfor- 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 ix.licy. 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 atldition 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 Life his. Co. v. Mont- gomerxj, 116 Ga. 799. 2N. Y. Penal Code, §§ 9G, 579; Peovle V. Spieqcl, 75 Hun (N. Y.), 161; People V. Vanghnn. 19 Misc. 298. And see People v. Martin, 175 N. Y. 315, Submitting a false affidavit to an in- surer, in proof of lo.ss, is not perjury at common law, because it is extra- judicial, People V. Travis, 4 Park. 213 ^Avery v. Ward, 150 Mass. 160. Negligent misstatement does not avoid, Phcenix Ins. Co. v. Suann (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., 33W. Va. 526, 11 S. E. 50. * Hamberg v. Ins. Co., 68 Minn. 335, 71 N. W. 388; Hall v. /«. Xorthem Assur. Co. v. Grand View Bliiq .Usoc, 183 U. S. 308, 22 S. Ct. 133- Indcwmient. S. Did. v. Fidehti/ Ins. Co., 113 Iowa, 65, 84 N. W. 956. Bigclow V. Granite Slate F. his. Co., 91 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; Orient Ins. Co. v. Pralher, 25 Tex. Civ. App. 446, 62 S. W. 89, but in some jurisdiction.s a tenii)orar>' breach merely suspends lia- bility, Germania F. Ins. Co. v. Klewer, 12.1 'ill. 599, 22 N. E. 489; and .see §111- 2 The underwriter often wants the ins\u-ed 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 su.spicion of a moral hazard, indeed in the ina- 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, anil 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 ca.ses, 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. E.Tchange Mid. Ins. Co.. 12 Gray (Mass.), 265. But a permit does not warrant excess above the permitted amount. Union Nat. B'-. v. German Ins. Co., n Fed. 473, 18 C. C. A. 203; Allen V. Gemtan-Am. Ins. Co., 123 N Y. 6, 25 N. E. 309; Benedict v. Ocean Ins. Co., 1 Daly (N. Y.), 8; Strauss V. Fhcenix Ins. Co., 9 Colo. k-pp. 386, 48 Pac. 822; Georgia Home Ins. Co. V. Campbell, 102 Ga. 106, 29 S. E. 148. Prior insurance already 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, N. J. Rubber Co. V. Commercial U. Assur. Co., 64 N. J. L. 580, 46 Atl. 777, Ins. 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 definitelj' closed until after the fire, Tavlor v. Slate Ins. Co., 107 Iowa, 275, 77 N. W. 1032. As where a policy had not yet attached because the premium was not paid, Equitable F. & Ace. Office v. Ching (1907), App. Cas. 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. Siin Fire Office, 54 Minn. 162, 55 N. W. 909; Xelson v. Atlanta Home his. 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. Glevs Falls Ins. Co., 65 N. Y. 6; Stane 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 INSURANCE 319 To constitute "other insurance" the interests insured by the policies must be the same. An important appUcation 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 policy, 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 clause, attached to the first policy, created a distinct contract in favor of Everson. It further held that while the later policy 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 policy.^ 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 policies 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 implem.ents." 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 policy in suit.^ property insured, Carpenter-Glass L. divided interest in the same property Co. V. Germania F. his. Co., 86 Minn. of another child procured by the child, 371, 90 N. W. 766. Frani.lin M. & F. Ins. Co. v. Dral.e, 2 ^ 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 pohcy on 2 Hall V. Concordia Fire Ins. Co., 90 the same goods in favor of another Mich. 403, 51 N. W. 524. A poHcy by creditor, Roos v. Merchants' Mut. Ins. a mother as trustee for certain children Co., 27 La. Ann. 409. on their interests in three houses will 3 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 UF 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 doul^le 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 av'oided the policy in suit, Kim- the operation of this clause, because ball V. Howard F. Ins. Co., 8 Gray they do not constitute double insur- (Mass.), 33. ance, Cowart v. Capital City Ins. Co., iHarrisv.Ohio Ins. Co. ,5 Ohio, 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 sKnotdes v. American Ins. Co., 66 Ins. Co., 49 La. Ann. 1.367, 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. Phceni.r 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. Roc'. ford Ins. Sav. Ban': v. Charter Oak F. & M. Co., 122 Mich. 626, 81 N. W. 568; Ins. Co., 31 Conn. 518; Pitney v. Glens Johnson v. iWorth Brit. & M. Ins. Co., Falls 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; Spra/jue 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. Trammell, policy whieh 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. Fran'lin M. & F. Ins. Co. v. Drake, 2 5Dc 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 policy, 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 established.- 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 insui'ed 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. Bait. Warehouse, * Phoenix Ins. Co. v. Copeland, 90 Co., 93 U. S. 527; SUirm v. Atlantic Ala. 386, 8 So. 48; Phoenix Ins. Co. v. Mut. Ins. Co., 63 N. Y. 77; Miisse^i v. Lamar, 106 Ind. 513, 7 N. E. 241; Atlas Mut. Ins. Co., 4 Kern. (N. Y.) 79. London & L. Fire his. Co. v. Turnbull, ^Mead v. Ayn. F. Ins. Co., 13 App. 80 Ky. 230; Van Aht'ine v. .^tna Ins. Div. 476, 43 N. Y. Supp. 334; Church Co., 14 Hun (N. Y.), 360; Arnold v. of St. George v. Sun F. Offlce, 54 Minn. Ins. Co., 106 Tenn. 529, 61 S. W. 1032. 162, 55 N. W. 909 (mortgajz;ee 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. Turn- 60 Iowa, 266. bull, 86 Ky. 230; Doran v. Fran' lin ^ Home Ins. Co. v. Gwathmey, 82 Ya,. Fire his. 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. Railvau 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 Mut. Ins. Co., 15 La. Ann. 652. involved a question not of contribu- 21 322 MEANING AND LEGAL EFFECT OF FIRE 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 m 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 smt 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 policy, 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 Dven 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 irords "valid or invalid," have given rise to much difficulty in cases ihere tw-o or more policies constituting double insurance contain t ^e same provision. Shall both policies be avoided, or only one, and ii only one, which one? There is in each a condition by which the pclicy containing it ought to be avoided, and yet the moment that eit ler policy is held void, the reason for vitiating the other has cea.ied to exist. Aid 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 irreconcilable; ^ but the sounder view, perhaps, is to hold the earlier tion bet'w een underwriters, but of for- ^ 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 F. Ins. Co., 155 1 Western Assur. Co. v. Chesapeake N. Y. 180, 49 N. E. 675. L. & Towiiq Co. (Md., 1907), 65 Atl. ^ Perm v. Ins. Co., 103 App. Div. 637. Though such insurance is taken (N. Y.) 113, 93 N. Y. Supp. .50. out by a biilee without authority of '^ Lad ey v. Ga. Home Ins. Co., 42 Ga. the owner, ,t 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. ^e' in Plow Co., 141 Mo. Thomas v. Builders Mut. F. Ins. Co., 161,42 3. W. 711. 119 Mass. 121,20 Am. Rep. 317; Fire- 2 But such I latters of detail need not man's Ins. Co. v. Holt, 35 Ohio St. 189, be written on a binding slip, Dayton 35 Am. Rep. 601. See May, Ins., Ins. Co. V. Kel y, 24 Ohio St. 345. ch. 18. 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 unabte to establish his case by virtue of excuse that the other polic}^ 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 no policy at all, but a piece of waste paper, or where the poHcy, 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 likewise new stock added subsequent to the issuance of the policy 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 Sweeting v. Mut. 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. 7ns. Co., 55 N. H. 65; Jersey Ins. Co. v. 240. A^zc/ioZ, 35 N. J. Eq. 291. ^German Ins. Co. v. Hayden, 21 2 Hughes v. Ins. Co. of North Am., Colo. 127, 40 Pac. 453. 40 Neb. 626, 59 N. W. 112; Gee v. ^ Phenix Ins. Co. v. Lamar, 106 Cheshire Co. Mid. F. Ins. Co., 55 Ind. 513, 7 N. E. 241; Am. /ns. Co. v. N. H. 65, 20 Am. Rep. 171; Allen v. Replogle, 114 Ind. 1, 15 N. E. 810, 132 Merchants' Mut. 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. 554. N. W. 721. 7 Washington Ins. Co. v. Hayes, 17 3 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. /ns. Co., 126 Iowa, 565, 102 N. W. 502; But see Phoenix Ins. Co. v. Copeland, Whitwell v. Putnam Fire Ins. Co., 6 90 Ala. 386, 8 So. 48; Stevens v. Citi- Lans. (N. Y.) 166. zens' Ins. Co., 69 Iowa, 658, 29 N. W. » Hayes v. Mil. Mut. Fire Ins. Co., 769; WolpeH v. Northern Assur. Co., 170 Mass. 492, 49 N. E. 754; Wheeler 44 W. Va. 734, 29 S. E. 1024. v. WateHovm In^. Co., 131 Mass. 1. 324 MEANING AND LEGAL EFFECT OF FIRE POLICY issuGil by other companies cither before or after the one in suit, with- out assent of (lie 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 amount required to make good the stated percentage of value.'' § 255. Factories. — Or if the subject of insurance be a manufacturing 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 Hai/es V. Milford Mut. Fire Ins. Co., 170 Mass. 492, 49 N. E. 754. 2 For example, Iowa, Minnesota, and South Dakota. 3 Calmenson v. Equitable Mut. 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. 4 Cutler V. Ro'/al Ins. Co., 70 Conn. 566, 40 Aa. 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. 245, 52 N. Y. Supp. 947, aff'd 39 App. Div. 639. And see A^ J . Rubber Co. v. Com- mercial Union Assur. Co., 64 N. J. L, 580, 46 Atl. 777; Ea.'st Tex. F. Ins. Co. v. Blum, 76 Tex. 653, 13 S. W. 572, 576. "Concurrent" is not to be con- strued in this connection as "identi- cal," Washburn- Halligan Coffee Co. v. Merchants' bis. 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. Royal Ins. Co., 63 Hun (N. Y.), 82, 17' N. Y, Supp. 858, aff'd on opinion below, 1,36 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 mistake in calculating amount was held not to avoid earlier insurance, otherwise valid, Phoenix Ins. Co., v. Boulden 96 Ala. 609,11 So. 774. ^ Alspaugh v. Brit.^Am. Ins. Co., 121 N. C. 290, 28 S. E. 415. 8 Cronin v. Fire Assoc, 119 Mich. 74, 77 N. W. 648. T Cronin v. Fire Assoc, 123 Mich. 277, 82 N. W. 45, 119 Mich. 74, 77 N. W. 648; Straiise v Palatine Ins. Co., FACTORIES 325 Running the factory at night after the hour named in the pohcy 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 unavoidable 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. Excehior Milling Co., 69 Kan. 114, 76 Pac. 423. As to what is a manufacturing estab- lishment, see Stone v. Howard Ins. Co., 153 Mass. 475, 27 N. E. 6, 11 L. R. A. 771; Carlin v. Western Assur. Co., 51 Md. 515; Phoenix his. Co. v. Holcombe, 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). 1 Reardon v. Faneuil Hall Ins. Co., 135 Mass 121 2 Whitehead v. Price, 2 Cr. M. & R. 447, 5 Tyrwh. 825. The insurers are presumed to have some knowledge of the requirements of the business, Mc- Keesport 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. /Etna 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. Montaria 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 McKenzie v. Scottish Union & Nat. Ins. Co., 112 Cal. 548, 44 Pac. 922; Dover Glass Works v. A7n. Ins. Co., 1 Marv. (Del.) 32, 29 Atl. 1039; Breh77) Lumber Co. v. Svea Ins. Co., 36 Wash. 520, 79 Pac. 34. Where there is room for question, the prudent manu- facturer instructs his broker to apply for a special permit, which probably can be arranged for without additional expense, if the underwriters are sat- isfied with the moral hazard. < Louck 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. 5 El Paso Reduction Co. v. Hartford 326 MEANING AND LEGAL EFFECT OF FIRE POLICY The Massachusetts policy contains a similar clause, naming nint 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.^ Jj 257, Increase of Risk. — Or- if the hazard te increased by any means icilhin tJic conlrol or knowledge of the insured. So far as the conduct of the insured himself is concerned, an obliga- tion is said to rest ui)on him by general principles of insurance law not to voluntarily enhance the risk.* This clause extends his re- sponsibiUty 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; BarI.er v. Citizen.s' Mut. Fire Ins. Co., 136 Mich. 626, 99 N. W. 866. The doctrine of waiver and estoppel has been applied. Waiver allowed, Thac':ery Mining Co. v. Am. Ins. Co., 62 .AIo. App. 293; hn proved Match Co. V. Michigan Ins. Co., 122 Mich. 256, 80 N. \V. 1088. Waiver not allowed, Carlin v. Western As.su?-. Co., 57 Md. 515; Stone v. Hoaard In.s. Co., 153 Mass. 475, 27 N. E. 6. 1 Reardon v. Faneuil Hall 7n.s-. Co., 135 Mass. 121. The South Dakota standard policy names twenty days as the limit; the Iowa, ten days. ^ An Sable Lumber Co. v. Detroit Mfrs. M. F. I. Co., 89 Mich. 407, 50 N. W. 870. ^ 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. 3 Hanover Fire his. Co. v. Guslin, 40 Neb. 828, 59 N. W. 375. 9 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. 7 Wauknv MiJn'v/j Cn. v. CHizena' Mut. F. 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 watclaman happens to be asleep when the fire breaks out, McGannon v. Millers' 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. ^ Hoffecker v. Newcastle Co. Mut. 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. 9 .lanvrin v. Rockingham Ins. Co. , 70 N. H. 35, 46 Atl. 686; North Brit. & Am. Ins. Co. v. Union Stockyard Co. (Ky.),87S. W. 285. INCREASE OF RISK 327 dition existing when the policy 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 i Hoffecker 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 Phosyiix Ins. Co. V. Coomes, 13 Ky. L. Rep. 238 (repairs increased value). Evi- dence showing decrease of risk is com- petent, Smith V. Ins. Co., 32 N. Y. 399. 2 Waggonick v. Westchester F. Ins. Co., 34 111. App. 629; Northern Assur. Co. v. Crawford, 24: Tex. Civ. App. 574, 59 S. W. 916. As to whether the as- sured must also knoAV that the knowli facts amount to an increase of hazard, compare Phcenix Ins. Co. v. Parsons, 129 N. Y. 86, 29 N. E. 87, with Mc- Gonigle v. Ins. Co., 168 Pa. St. 1, 13, 31 Atl. 868; McKee v. Ins. Co.. 135 Pa. St. 544, 19 Atl. 1067; Rife v. Ins. 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. Christiensen, 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 insured. Mechanics' Ins. Co. v. Hodge, 149 111. 298, 37 N. E. 51. 3 L. & L. & G. Ins. Co. v. Gunther, 116 U. S 113, 6 S. Ct. 306, 29 L. Ed. 575; id., 134 U. S. 110. 10 S. Ct. 448; Allen V. Ho7ne his. Co., 133 Cal. 29, 65 Pac. 138; Long v. Beeber, 106 Pa. St. 466. For the acts of his duly au- thorized agent the insured is responsi- ble, and so likewise 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 his. Co., 99 N. Y. 40, 1 N. E. 38. •1 Meiier 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. Baltimore Eq. Sac, 1 Har. & G. (Md.) 295, 18 Am. Dec. 288; or removal of dangerous defect, James v. Lycoming /?is. 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; De,s- Moines Ice Co. v. Niagara. Fire Ins. Co., 99 Iowa, 193, 68 N. W. 600; Karow v. Ins. Co., 57 Wis. 56, 15 N. W. 27, 46 Am. Rep. 17 (assured burned his property when insane). ;{2h MEANING AM) LLGAL El-bECr OF FIRE POLICY lield 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 (ire insiu-ance policy, in the absence of fraud or bad faith on his part.- Goodfriond 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 responsil)le 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 companj'- 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- ^ Anqier v. Western Assur. Co., 10 ^German Ins. Co. v. Goodjriend 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 ^ German Ins. Co. v. Wright, 6 Kan. servants 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. Goodjriend 499, 24 Pac. 333 (acts of neighbors), (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 othei"s 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 undertake. 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 eight3'-five feet from the dwelling. The work of threshing all told required about two hours. When the job was half done a sudden and unexpected gust of wind came and carried sparks from the engine to the house, which was in consequence destroyed by fire. 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 un- usual practice or mode of conducting his business which would have 1 Schaejfer v. Farmers' Mid. 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 Mut. Assur. Co., 3 Kircher v. Mil. Mech. Mut. Ins. 174 Mass. 542, 55 N. E. 319; Calvert 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 e Planter.'^' Mut. Ins. Co. v. Rowland, Am. St. R. 122 (mere incidental 66 Md. 236, 7 Atl. 257 (change in temporary acts are not prohibited); process of manufacture); Williams v. Eager 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. (l^erosene); Collins v. London Assur. Supp. 35, aff'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. Miluau ee Mech. Ins. Co., 91 Wis. that existing or reasonably contem- 530, 65 N. W. 57. pkt^d by the parties). t Janvrin v. 7ns. Co., 70 N. H. 35, ''Adair v. Southern Mut. 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 structure of the buildings which makes them more inflammable, or the introduction of new and more haz- ardous employment ^ or machinery ^ is hkely 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. Mut. F. Ins. Co., 8 Mete. (Mass.) 114, 41 Am. Dec. 489; Diehl v. Adams Co. Mut. 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, G2 Miss. 740. Nor may a blacksmith shop be added to a printing office, Robinson v. 7ns. 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 apartment house, a more hazardous risk. 3 Pottsville Mut. Fire Ins. Co. v. Horan, 89 Pa. St. 438. 4 Roberts v. Chenango Ins. Co. , 3 Hill (N. Y.), 501; Francis v. Somerville M. Ins. Co., 25 N. J. L. 78 (an addi- tion for hazardous articles). 5 Franklin Brass Co. v. Phoenix Assur. Co., 65 Fed. 773, 13 C. C. A. 124; Cole V. Germania Fire Ins. Co., 99 N. Y. 36, 1 N. E. 38; Murdoch v. Chenango Co. Mut. Ins. Co., 2 Comst. (N. Y.) 210; Yentzer v. Farmers' 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. 325. 7 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 insured had no con- trol, Janvrin v. Ins. Co., 70 N. H. 35, 46 Atl. 686; Straker v. Phoenix 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. F. Ins. Co., 38 Me. 439. So also a small 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, Pottsville M. F. 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 OF 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; Eurel a 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 7ns. 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; Toivnsend v. N orthu-estern v. Home Ins. Co., 90 Me. 333, 38 Atl. Ins. Co., 18 N. Y. 168; Smith v. German 324. /ns. 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 burn off old paint, held, not hazard, RunJle v. Hartford Ins. Co., 99 to avoid). And see Bentley v. Lurnber- 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, I Baxt. (Tenn.) 352. dinary alterations and repairs, with- ^ Lee v. Agricidtural Ins. Co., 79 out special permit, will avoid. First Iowa, 379, 44 N. W. 683. Cong. Church v. Hoh'oke 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 (long 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. Whita er 112 Tenn. 151,79 ' Lindley v. Ins. Co., 65 Me. 368, 20 S. W. 119. The Wisconsirx 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. XV2 Mi;.\NiN(; and legal effect of fire policy in:ule by otlicrs upon adjacent premises ^ in the absence of a special warranty rrj^anling "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 phra.scology 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, wdth 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 " anj^ 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 defens3 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 ^ State Ins. Co. v. Taylor, 14 Colo. (the increase of risk must be sub- 499, 24 Pac. 333. stantial). 3 Stra'-er v. Phoenix Ins. Co., 101 ^Putnam v. Home Ins Co 123 Wis. 413, 77 N. W. 752 (where there Mass. 324, 25 Am. Rep. 93 But a was an express warranty of no ex- binding until acceptance or rejection posvire withm 100 feet). will not run after rejection, Gooahue v s State his. Co. v. Taylor, 14 Colo. Hartford Fire Ins. Co 184 Mass 41 499, 24 Pac. 333. 67 N. E. 645. * Janvrin v. Rockingham F. Mut. 6 Taylor v. Security Mut F Ins Co Fire Ins. Co., 70 N. H. 35, 46 Atl. 686 88 Minn. 231, 92 N. W. 952. ' ' '' INCREASE OF RISK 333 insurers; * and according to the weight of authority a temporary increase of risk vitiates the pohcy, and does not simply suspend its operation; 2 but a contrary rule has been adopted in Illinois and elsewhere.' And, as alread}^ 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 policy.'* 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 Daniels v. Equitable Fire Ins. Co. , 48 Conn. 105. See § 107, supra. 2 Imperial Ins. Co. v. Coos Co., 151 U. S. 452, 14 S. Ct. 379; Hill v. Middle- sex Ass2ir. Co., 174 Mass. 542, 55 N. E. 319; Kijte v. Commercial Union Assur. Co., 149 Mass. 116, 21 N. E. 361; Jen- nings V. Chenango Co. Mut. Ins. Co. 2 Den. (N. Y.) 75. 3 For example. Traders' Ins. Co. v. Catlin, 163 111. 256, 45 N. E. 255; Ohio Farmers' Ins. Co. v. Burget, 65 Ohio St. 119, 61 N. E. 712. See fuller 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, Toumseiid v. Northwestern Ins. Co., 18 N. Y. 168. Such inquiry is likewise immaterial, on the other 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- essary repairs the use of the sprinkler service. So held in Cummer Lumber Co. V. Associated Mfrs. M. F. 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. 6 Firemen's Ins. Co. v. Appleton, etc., Co., 161 111. 9, 43 N. E. 713; Runkle v. Hartford his. Co., 99 Iowa, 414, 68 N. W. 712. 7 For example, Taulor 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; Williams 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. 522; Jefferson Ins. Co. v. Cotheal, 7 Wend. (N. Y.) 72. But testimony regarding prevailing rates of premium is ad- missible as having some bearing, Southern Mid. Ins. Co. v. Hudson, 113 Ga. 434, 38 S. E. 964; Taylor v. Se- curity Ins. Co., 88 Minn. 231, 92 N. W J34 MEANING AND LKGAL EFFECT OF FIRE POLICY question is ever one of law to be determined by the court." ^ Never- theless soinctiincs the only permissible inference to be drawn from the faets is too elear to allow the issue to pass beyond the judge. .Vceordin.i^ly the same court felt compelled to take judicial notice of the fact that the storage of explosive fireworks in the insured build- ing increascMl the risk.^ The clause in the Massachusetts policy is of similar purport-: ^ or if, wiUwut fiuch asacnt [in writing or in print] the situation or circumstances affecting the risk shall, by or with the knowledge, advice, agency or consent of the insured, he so altered as to cause an increase of such risk. The Massachu-setts 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' Mid. Ins. Co. v. Roiv- agency of the insured. By the Iowa land, SO 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. Rotial sured, but must also contribute to the Ins. Co., 47 La. Ann. 1563, 18 So. 472; loss. By the New Hampshire policy it Carroll v. Home his. Co., 51 App. Div. must continue until the loss to avoid 149, 64 N. Y. Supp. 522. And when the policy. 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. his. avoid the policy, though not connected Co., 74 N. Y. 295. with the loss. Hill v. Middlesex Mnt. iTa;lor v. Securitii Mut. F. Ins. /^fre Asswr. Co., 174 Mass. 542, 55 N. E. Co., 88 Minn. 231, 92 N. W. 952 (erec- 319; Kvte v. Coynmercial Union Assur. tion of adjoining buildings); Adams v. Co., 149 Mass. 116, 21 N. E. 361, 3 Altns Mut. Ins. Co. (Iowa, 1907), 112 L. R. A. 508. N. W. 651. ^Loud v. Citizens' Mut. Ins. Co., 2 ^ Betcher V. Capital Fire Ins. Co., 7S 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 imdor 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- Hinc' ley v. Germania Fire Ins. Co., 140 fide v. NoriHch Union F. Ins. Co. (Mo., Mass. 38, 1 N. E. 737, 54 Am. Rep 445 1907), 103 S. W. 957. 6 Adams v. Atlas Mut. Ins. Co. (la., 3 South Dakota limits to act or 1907), 112 N. W. 651. INTEREST OF INSURED 335 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 policy, 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 polic}' this subject is not specifically cov- ered, but repairs fall within the operation of the general clause in regard to an alteration in the situation or circumstances affecting the risk. § 259. Interest of Insured. — Or if interest of the insured be 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-. i Imperial Fire I. Co. v. Coos M/9. Co., 24 111. 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, aff'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 Roijal Ins. Co., 75 Mo. App. 394; held that a privilege to alter and re- Townsend 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. Hearne, 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. Mut. 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. Gerynan 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.ZS7; Smith V.German German Ins. Co. v. Hearne, 117 Fed. Am. Ins. Co., 7 N. Y. Supp. 846. 289. ^ An). Tn,i. Co. V. Bri/jhtort 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 jjropcr 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 wiien 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 1 Barnard v. National Fire his. Co., 27 Mo. App. 26. In another connection the Ohio court says: "Considerations of public policy forbid that conflagra- tions should be made profitable," Lae Erie & W. R. R. Co. v. Folk, 62 Ohio St. 297. 2 Hunt V. Ins. Co., 196 U. S. 47, 25 S. Ct. 179; Matthie v. Globe Fire h}s. Co., 68 App. Div. 239, 74 N. Y. Supp. 177, aff'd 174 N. Y. 489, 67 N. E. 57. ^Collins 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 y. Dwelling House Ins. Co., 179 Pa. St. 381, 36 Atl. 317; Steinmey.r 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 owmer; 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, Rankin 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. Dowdall, 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. ^ Loventhal v. Home Ins. Co., 112 Ala. 108, 20 So. 419, 33 L. R. A. 258, 57 Am. St. R. 17; Howjh v. Citr/ Fire Ins. Co., 29 Conn. 10; Knap v. F. Ins. Co., 101 Mich. 359, 50 N. W. 653; Hall V. Niagara Ins. Co., 93 Mich. 184, 53 N. W. 727; Dupreau v. Hibernia 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. 155, 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 Scotti. indefinitely multiplied. Applying these princi- ples to this clause of the standard policy, the conclusion is easily reached that if any prohil)ited change of interest takes place, with- out written consent of the insurers, whether by voluntary act of the insured or otherwise, the party to whom an interest may be trans- ferred acquires no rights in the insurance money, and the assured loses whatever rights he had. This requirement, though rigorous, is held to be reasonable,^ material, and enforceable.-* It is a condition subsequent, applying only to circumstances which occur after the inception of the con- tract; ^ but it embraces within its scope real and personal property alike.*^ avoid, Haight v. Continental Ins. Co., 92 N. Y. 51. Some policies provided for forfeiture in case ttie property be- came encumbered in any way without the written consent of tlie insurer. This was held to bo confined to such encumbrances as the insured volun- tarily put upon his property, and not to tax liens or judgments, Jlosford v. Hartford Fire Ins. Co., 127 U. S. 404, 8 S. Ct. 1199; Balcij v. Homestead Fire Ins. Co., 80 N. Y. 21, 36 Am. Rep. 570. 1 Cummins v. National Fire Ins. Co., 81 Mo. App. 291. 2 Rosenstcin v. Traders Ins. Co., 79 App. Div. 481, 487, 79 N. Y. Supp. 736. The interest to guard the prop- erty would be diminished, German Ins. Co. V. Gibe, 59 111. Apj). 614; Cottingham v. Ins. Co.. 90 Ky. 439, 14 S. W. 417, 9 L. R. A. G27. 3 Farmers & Merc. Ins. Co. v. Jensen, 56 Neb. 284, 76 N. W. 577, 44 L. R. A. 861. * Northam v. Dutchess Co. Mid. Ins. Co., 166 N. Y. 319, 59 N. E. 912; JasJcids!:i v. Citizens Mid. F. I. Co., 131 Mich. 603, 92 N. W. 98 (no new party insured allowed, without con- sent of insurer). ^ Coivart v. Capital Ins. Co., 114 Ala. 356, 22 So. 574. oWahadt v. Phoenix Ins. Co., 136 N. Y. 375, 381, 32 N. E. 1063. Thus the condition is broken by a convey- ance to a third person, if absolute upon its face, though the property be sub- sequently reconveyed, Bemis v. Har- bor Creek M. F. I. Co., 200 Pa. St. 340, 49 Atl. 769, and though at the time there be an agreement for reconveyance, Tatham \. Commerce Ins. Co., 4 Hun, 136. Policy is forfeited by bill of sale delivered to a third party to be delivered by him to the proper party upon the payment of the balance of the consideration. Excelsior Foundry Co. V. Western Assnr. Co., 135 Mich. 467, 98 N. W. 9; or by conveyance by assured to his wife, Melcher v. 7ns. Co. of Pa., 97 Me. 512. 55 Atl. 411. And see Walton v. Agricidtural Ins. Co., 116 N. Y. 326, 22 N. E. 443, in which though both husband and wife were insured a transfer of the barn from former to latter through a mere con- duit was held to avoid. The condition ALIENATION CLAUSE 345 The Home Insurance Co. had issued a poUcy to Verdier on his stock of hardware. During the term of the policy, 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 policy.^ 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 policies, 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, Dutchess Co. Mut. Ins. Co. 166 N. Y. Savage v. Howard Ins. Co., 52 N. Y. 319, 59 N. E. 912; Ohio Farmers 502, 11 Am. Rep. 741. Also by ex- his. 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. A^orth where given for the purpose of avoid- Brit. & M. Ins. Co. (Ky.), 53 S. W. ing the enforcement of a judgment, 660. Rosenstein v. Traders Ins. Co. , 79 App. i Germania F. his. Co. v. Home Ins. Div. 481, 79 N. Y. Supp. 7.36, 102 App. Co., 144 N. Y. 195, 39 N. E. 77, 26 Div. 147; or by execution of a vohm- L. R. A. 591, 43 Am. St. R. 749. tary assignment for the benefit of 2 gee § 20, supra, and Appendix of creditors, Orr v. Hanover Ins. Co., Forms, ch. II. :m MEANlN'Ci AN'i; l.KGAI. EFFECT OF FIRE POLICY to wii, for ail arbitrated period of 259 working days required for rebulKling. 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.^ ^Michael v. Prussian Nat. Ins. Co., 171 N. Y. 25, G3 N. E. 810. If the earning power and gross earnings of an elevator are no part of its commer- cial use, it is (iiflicult to see what is. If an absohite transfer of the total earnings is no change of interest whatsoever in the subject-matter of "use and occupancy" insurance, it is dillicult 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 contirmance of un- profitable expenses during the period required for reinstatement, 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 establishment. 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 Castellain 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 hr.ve been insured by tlie 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 found 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 infmihan all under the egis of an obscure 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 Elevatiyvj Co. case was patent. If the plaintiff's building and contents were fully insured, he was a gainer by the fire 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 substantially 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 likely to occur, if the elevator should be destroyed 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. ^ Stenzel 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; Edmunds v. Mutual Safety Fire Ins. Co., 1 Allen (Mass.), 311; Wei tern Mass. Ins. Co. v. Piker, 10 Mich. 279. ^Forward v. Continental Ins. Co., 142 N. Y. 382, 37 N. E. 615, 59 N. Y. St. R. 777. 6 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 UaiAl. KKFlaT OF FlHK POLICY fluctuations in a stock of p;ooils, or materials and equipment, in a store or factory.' And it is hold that a change which increases the interest of tiie assured will nut 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 Pae. 586, 30 Am. St. R. 313 (deed to homestead held void be- cause signed by husband only); Pit- ney V. 07e«.s Falls Ins. Co., 6.5 N. Y. 6 (transfer invalid under statute of fraud); Gerlinq v. Ins. Co., 39 W. Va. 689, 20 S. E. 691 (grantor mentally in- competent, policy not avoided). Com- pare Mihcauhee 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). 1 Wolfe v. Securit)/ Fire Ins. Co., 39 N. Y. 49; Hoffman v. /Etna Fire Ins. Co., .32 N. Y. 405, 88 Am. Dec. 337; Coleman v. Phoenix 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. 7ns. Co., 186 U. S. 423. 22 Sup. Ct. 862, 46 L. Ed. 1229. And a change of receivers is said to be allowed, Thompson v. Ins. Co., 136 U. S. 287, 10 Sup. Ct. 1019, 34 L. Ed. 408. 2 Continental Ins. Co. v. Ward, 50 Kan. 346. 31 Pac. 1079. 3 Planters' Mut. Ins. Assn. v. Dew- berry, 69 Ark. 295, 62 S. W. 1047, 86 Am. St. R. 195; Fore.^t 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 * Wolf V. Theresa Village M. F. I. Co., 115 Wis. 402, 91 N. W. 1014; Germania Ins. Co. v. Stewart, 13 Ind. App. 627, 42 N. E. 286; Bushnell v. Farmers Ins. Co., 110 Mo. App. 223, 85 S. W. 103; Sun Fire 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. 255, 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. his. Co. (Neb.), 95 N. W. 670; German Ins. Co. V. Gibe, 162 111. 251, 44 N. E. 490; Barry v. Hamberg- Bremen Fire Ins. Co.. 110 N.Y. 1,17N. 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 CLAUSE — EXECUTORY CONTRACTS OF 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 U 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 pohcies 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. Convergence seems to demand that whether or not the vendee takes out insurance to protect his interest, the sub- sisting policies of the veidor 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 tie standard policy have harmonized their decisions upon this poinc 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; Swank v. Farmers' 2 Jones V. Capital City Ins. Co., /ns. Co., 126 Iowa (1905), 547, 102 N. 122 Ala. 421, 25 So. 790; National W. 429 (a mere option to buy); iV/a^oun Fire Ins. Co. v. Three States Lumber Co. , v. Firemen's Fund I. Co. , 86 Minn. 486, 217 III. 115, 75 N. E. 450; Phmnix 91 N. W. 5 (agreement to transfer to Ins. Co. V. Caldwell, 187 111. 73, 58 mortgagee is no change). N.E. 314; ^rfev./ns. Co., 98 Iowa, 606, s Skinner Ship Building Co. v. 67 N. W. 583, 40 L. R. A. 845; Wyan- Houghton, 92 Md. 68, 48 Atl. 85; dotte Brewing Co. v. Hartford F. Ins. Gibb 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; Co^ing/jam 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- personaltv); Wood v. Ins. Co., 149 Chester F. Ins. Co., 72 N. J. L. 289, N. 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 Germond v. Home Ins. Co., New York Court of Appeals). And 2 Hun, 540); Home Ins. Co. v. Tomplies, see Fidler 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 Excelsior 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 Hamilton 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 impliedly 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. Ct. 3G5, 33 L. Ed. 730; AUemania F. Ins. Co. v. Pec':, 133 111. 220, 24 N. E. 538, 23 Am. Rep. GIO; Jo)ies v. Phoenix Ins. Co., 97 la. 275, 66 N. W. 169; Northern Assxir. Co. V. CiUi Savings Bl:., 18 Tex. Civ. App. 721, 45 S. W. 737. But see Brunstcic\-Bal .e Collender Co. v. North- ern Assur. Co., 142 Mich. 29. As to A\hether 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. 2 German Ins. Co. v. Fox (Neb.), 96 N. W. 652 (1903); Phaetiix his. Co. v. Holconbe, 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. Phoenix his. Co., 136 N. Y. 375, 32 N. E. 1063; Pierce v. Nashua Ins. Co., 50 N. H. 297; Bur- nett V. Eufaula Home I. Co., 46 Ala. 11, 7 Am. Rep. 581; AUemania Fire Ins. Co. V. Peck, 133 111. 220; Der- maJii V. Home Mutual I. Co., 26 La. Ann. 69, 21 Am. Rep. 544; Texas B g. & I. Co. V. Cohen, 47 Tex. 406, 26 Am. Rep. 298; Virqinia F. & M. Ins. Co. V. Saunders, 84 Va. 969, 11 S. E. 794; Contra, Keith v. Royal Ins. Co., 117 Wis. 531, 94 N. W. 295; Shuggart v. 7ns. 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. Lvcoming 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 accounting. 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. 733; Hanover Fire Ins. Co. V. Leu-is, 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. Atna Fire Ins. Co., 25 App. Div. 275, 49 N. Y. Supp. 570. 3 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 PBOCESS OR 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 net 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. JEtna Ins. Co., 32 N. Y. 405; Lockirood v. Middlesex 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. 204. But see Collings v. Ameri- can Cent. Ins. Co., 70 Mo. App. 14; Walton V. Agricultural 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 v/ife 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 assured to a firm in which he is a silent partner defeats the insurance, Ro^al his. 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 contrarj'- 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. Lewis, 28 I la. 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 liability company without permit may avoid, Penchen Co. v. City Ins. Co., 18 Ont. App. 446. So also a reorgan- ization of a corporation into a new cor- poration, Cremo Light 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. Ainerican Fire Ins. Co., 149 N. Y. 382, 44 N. E. 80, 52 Am. St. R. 733; Broune 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. Broun, 77 Md. 64, 25 Atl. 929; Slohodisky v. Phoenix 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 FIRE POLICY of the instrument of conveyance pursuant to the statute.^ Setting apart in purtilion 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 or 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 adju lication 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. Sarnps^on, 38 Ohio St. 672. Nor 5 Keeney v. Home Ins. Co., 71 N. Y. will it, if purcliaser fails to complete, 396. Lodqev. Capital Ins. Co., 91 Iowa, 105, ^Thompson v. Phoenix Ins. Co., 58 N. W. 1089; Marts v. Cumberland 136 U. S. 287, 10 Sup. Ct. 1019. Ins Co 44 N. J. L. 478. t Fuller v. New York Ins. Co., 184 I International Wood Co. v. Na- Mass. 12, 67 N. E. 879; Fuller v. Jame- tional Assur. Co., 99 Me. 415, 59 Atl. son, 98 App. Div. 53,90 N. Y. Supp. 4.56. 544 8 Birdseye v. City Fire Ins. Co., 26 ^Trabue v. Dwelling House Ins. Co., Conn. 165; Young v. Eagle Fire Ins. 121 Mo. 75, 25 S. W. 848. Co., 14 Gray (Mass.), 150; Hine v. 3 McClelland v. Greenwich Ins. Co., Woolicorth, 93 N. Y. 75. So in Massa- 107 La. 124, 31 So. 691; Caraher v. chusetts it is decided that a convey- Royal Ins. Co., 63 Hun, 82, 17 N. Y. ance by a wife, of the property in- Supp. 858. sured, to a trustee in insolvency for 4 Walradt v. Phoenix Ins. Co., 136 her husband is a violation of the con- N. Y. 375, 32 N. E. 1063, 32 Am. St. dition as to alienation, Brown v. R 752 (Court stood 4 to 3); Herman v. Cotton 6c W. M. M. I. Co., 156 Mass. Katz, 101 Tenn. 118, 47 S. W. 86, and 587, 31 N. E. 691. see Collins v. Lojidon Assur. Corp., ^Stuart v. Reliance Ins. Co., 179 165 Pa. St. 298, 30 Atl. 924; Contra, Mass. 434, 60 N. E. 929; Clinton v. Care?/ V. German- Am. /ns. Co., 84 Wis. Norfolk Ins. Co., 176 Mass. 486, 57 80, 54 N. W. 18 (writ of attachment). N. E. 998; Bryan v. Traders Ins. Co., This and the Walradt case were both 145 Mass. 389, 14 N. E. 454; Foote v. decided in January, 1893, and neither Hartford Ins. Co., 119 Mass. 259; court had the benefit of the views of International Wood Co. v. Nat. Assur. the other, St. Paid F. & M. Ins. Co. v. Co., 99 Me. 415, 59 Atl. 544. Archibald (Tex.), 16 Ins. L. J. 153. lo Clinton v. Norfolk Mut. F. Ins. Co.. ii Brownv. Cotton, etc., Mut. Ins. Co., Stuart v. Reliance Ins. Co., 179 Mass. 156 Mass. 587, 31 N. E. 691. So also 434, 60 N. E. 929. a temporary alienation will avoid, ASSIGNMENT OF POLICY 353 § 268. Assignment of Policy. — Or if this policy be assigned before loss. Even without express prohibition in the poUcy, it has been held that a fire pohcy is not assignable except with the consent of the insurer, since it is peculiarly a personal contract, and no new party assured can be introduced into it without consent of the insurer.^ This warranty must not be disregarded, on pain of forfeiture,^ and the consent of the company must be obtained in writing; ^ but there is no necessit}' that the assignment itself be evidenced by written instrument."* The company's indorsement consenting to the assignment of the policy carries with it an implied consent to the transfer of interest in the property.^ A pledge or deposit of the policy as collateral security is not prohibited by this clause.^ 176 Mass. 486, .57 N. E. 998, 50 L. R. A. 833, 79 Am. St. R. 325; Brran v. Traders' Ins. Co., 145 Mass. 389, 14 N. E. 454; Hitchcock v. Northuestern Ins. Co., 26 N. Y. 68. Similarly the South Dakota policy provides that the policy shall be void " if without such assent [oral or written] the insured shall sell and dispose of all insurable interests in the insured property." An alienation of one of several estates insured by one policy avoids the policy only as to that estate, Clark v. Ins. Co., 6 Cush. (Mass.) 342, 53 Am. Rep. 44. Sale by one partner of his share to an- other partner and taking a mortgage are no breach of the condition, Pouers V. 7ns. Co., 136 Mass. 108, 49 Am. Rep. 20. 1 New England Loan & Tr. Co. v. Kennealhj, 38 Neb. 895, 57 N. W. 759; Lett v. Guardian Fire Ins. Co., 125 N. Y. 82, 25 N. E. 1088; Rai7ier v. Preston, 18 Ch. Div. 1. In a dissenting opinion in the last case, James, L. J., was of opinion that the contract should be held to run w-ith the title to the land to the extent of inuring to the benefit of the vendee under an execu- tory contract of sale. Marine policies at common law were considered as- signable without express consent of the insurers, because of custom and commercial convenience, which made it important that interests in vessels and cargoes should pass freely without consultation with distant insurance companies, Pellas v. Neptune Marine Ins. Co., 5 C. P. D. 34. See cases §§60, 63, supra. 23 ^ Hall V. Continental Ins. Co. (Ky., 1905), 84 S. W. 519; Lyford v. Con- necticut Fire Ins. Co., 99 (Me., 273), 58 Atl. 916; Miles Lamp Chiryiney Co. v. Erie Fire Ins. Co., 164 Ind. 181, 73 N. E. 107 (the property and a standard policy were transferred without con- sent of insurer to new corporation with same stockholders). ^ New V. German Ins. Co., 5 Ind. App. 82, 31 N. E. 475 (1892). * Western Assur. Co. v. McCarty, 18 Ind. App. 449, 48 N. E. 265; Can- non V. Farmers' Mut. Ins. Co., 58 N. J. Eq. 102, 43 Atl. 281. If statute requires it, assignment also must be written, St. Paul F. & M. Ins. Co. v. Brunsinck Grocery Co., 113 Ga. 786, 39 S. E. 483. No particular form of words either by the assured, Pierce v. Nashua Fire Ins. Co., 50 N. H. 297; Bentley v. Ins. Co., 40 W. Va. 729, 23 S. E. 584; or by the company. Queen Ins. Co. V. Block (Ky., 1900), 58 S. W. 471 ; is requisite to constitute an assign- ment. 5 Benninghoff v. Agricultural Ins. Co., 93 N. Y. 495; Gould v. Duelling House Ins. Co., 134 Pa. St. 570, 590, 19 Atl. 793. ^Griffey v. N. Y. Central Ins. Co., 100 N. Y. 417, 3 N. E. 309, 53 Am. Rep. 202; Kei/ v. Continental Ins. Co., 101 Mo. App.' 344, 74 S. AV. 162. An assignment by the mortgagee of his mortgage and interest in a policy, if payable to him "as his interest may appear," does not fall within the ban, Whiting v. Burkhardt, 178 Mass. 535, 60 N. E. 1, 86 Am. St. R. 503, 52 351 MEANING ANU LEGAL EFFECT OF FIRE POLICY Where the policy has been transferred as collateral security either with or without the consent of the insurer, the assignee may be merely an appointee or payee to receive any insurance money to the extent of the debt. In such a case it is not necessary that he should .show any title or insurable interest in the property itself. An equitable assignee of the proceeds of insurance, if any, need have no interest in the property itself.^ The assured does not violate the terms of the standard policy by accepting from a common carrier a bill of lading containing as one of its provisions that the carrier is to have full benefit of any insur- ance upon the property.^ Where the property or subject of the fire insurance, as well as the policy, are transferred to the assignee with the assent of the com- pany, a new contract is thus formed between the company and the assignee which will not be disturbed by any subsequent breach of condition by the assignor; •'' or by any agreement between him and the company."* As to whether the insurers can avail themselves of prior breaches of contract unknown to them at the time of the assign- ment, or whether the contract, though evidenced by the same policy and without further consideration, is to be regarded as a wholly independent contract, there is lack of harmony in the de- cisions. By the weight of authority the assignee seems to be given a fresh start, precisely as though a new policy were issued to him; and he is held to be relieved from the consequences of past forfeitures incurred by the assignor.^ L. R. A. 788; Breeyear v. Rockingham 139 Mass. 508, 2 N. E. 103, 52 Am. Farmers' Mut. F. I. Co., 71 N. H. 445, Rep. 728. But compare under the 52Atl.860. An assignment of a policy, doctrine of concealment the following though on its face absolute, may be cases, Pelzer Mfg. Co. v. St. Paul F. & shown to have been intended as col- M. Ins. Co., 41 Fed. 271; Pelzar v. Sun lateral security only, Matthews v. Fire Office, 36 S. C. 213, 15 S. E. 562 Capital Ins. Co., 115 Wis. 272, 91 (non-disclosure of provision in lease N. W. 675, and, on the other hand, if depriving insurer of right of subroga- the policy is delivered with the intent tion presents issue for jury, policy not that it shall serve as collateral security, avoided); Tate v. Hyslop (1885), 15 the character of the transaction may Q. B. D. 368 (non-disclosure of release be shown by parol, though there be no of common-law liability of lighterman written assignment. Die' ey v. Poco- avoided policy). And see Mercantile mo'e City Bank, 89 Md. 280, 43 Atl. 33. S. Co. v. Tyser (1881), 7 Q. B. D. 73 ^Merrill v. Colonial Fire Ins. Co., (non-disclosure of canceling clause). 169 Mass. 10, 47 N. E. 439; Baughman 3 Pollard v. Somerset Miit. Fire Ins V. Camden Mfg. Co., 65 N. J. Eq. 546, Co., 42 Me. 221; Fogg v. Middlesex Mut 56 Atl. 376; Bibend v. L. & L. & G. Fire Ins. Co., 10 Cush. (Mass.) 337. Ins. Co., 30 Cal. 78. He has simply an * Georgia Co-operative Fire Assoc, v. equitable lien on any proceeds of the Borchardt, 123 Ga. 181, 51 S. E. 429; policy to the amount of the indebted- Am. Cent. Ins. Co. v. Sweetser, 116 Ind! ness due him, Key v. Continental Ins. 370, 19 N. E. 159. Co., 101 Mo. App. 344, 74 S. W. 162. s For example, Virginia-Carolina ^Jackson v. Boylston Mut. Ins. Co., Chem. Co. v. Ins. Co., 108 I''cd. 451; ASSIGNMENT OF POLICY 355 This conclusion is defended by the argument that the compeny vvould presumably, if requested, cancel the old and issue a new policy, but only at greater inconvenience to itself and that, therefore, the method adopted is for the benefit of the company exclusively. The weakness in this line of reasoning comes from the fact that the as- sured can cancel only at short rates, which means that the insurer in that event retains more than the proportionate amount of premium. Accordingly, other decisions enforce the more logical but harsher rule that the assignee will take only such rights as belong to the assignor at the time of the assignment.^ If, however, with the knowledge of past forfeiture, the company gives written consent to change of interest or to assignment, then a clear ground of estoppel is estab- lished in favor of the assignee.^ No one except the company can make objection to the assign- ment from the original insured to the assignee, on the ground that the company's consent was not obtained.^ After a loss by fire has occurred, the claim of the assured for dam- ages is a chose in action, which he has a right to assign, in spite of this clause, without asking permission of the company,^ and the assignee then takes, subject to all defenses available to the insurer as against the assignor.^ But any excess of insurance over and above the fire loss still belongs to the assured assignor, and he can no more assign the policy as to that without consent than he could do so before the fire. Continental Ins. Co. v. Munns, 120 Ind. Shearman v. Niagara his. Co., 46 N. Y. 30, 22 N. E. 78; Ellis v. Council Bluffs 526. 7ns. Co., 64 Iowa, 507; Bullman v. ^ Leinkauf v. Caiman, 110 N. Y. 50, North Brit. Mer. Ins. fo., 159 Mass. 17 N. E. 389. 118, 34 N. E. 169; Rines v. German Ins. * Frels v. Little Black Farmers' Ins. Co., 78 Minn. 46, 80 N. W. 839; Hall v. Co., 120 Wis. 590, 98 N. W. 522; West- Niaqara Ins. Co., 93 Mich. 184, 53 Chester Fire Ins. Co. v. Blackford, 2 N. W. 727; Steen v. Niagara Ins. Co., Indian Terr. 370, 51 S. W. 978; Hall 89 N. Y. 315, 327; Batjess v. Mer- v. Dorchester Mut. Fire Ins. Co., Ill chants' Ins. Co., 106 Mo. App. 684, 80 Mass. 53 (company with notice of S. W. 289; Home Ins. Co. v. Nichols assignment is liable to assignee); Mel- (Tex. Civ. App.), 72 S. W. 440 (1903). len v. Hamilton Fire Ins. Co., 17 N. Y. 1 Wilson V. Hakes, 36 III. App. 539; 609; Imperial F. Ins. Co. v. Dunham, McCluskey v. Prov. Wash. Ins. Co., 117 Pa. St. 460, 12 Atl. 668. Insurers 126 Mass. 306; Commonwealth v. cannot by their contract restrain this National Ins. Co., 113 Mass. 514; right to dispose of this chose in action, Citizens' Ins. Co. v. Doll, 35 Md. 89; Aikan v. New Hampshire Ins. Co., 53 Waters v. Allen, 5 Hill (N. Y.), 421; Wis. 136, 10 N. W. 91; Carroll v. Wilson V. Mutual Ins. Co., 174 Pa. St. Charter Oak Ins. Co., 38 Barb. 402, 554, 34 Atl. 122; Reed v. Windsor Mut. 40 Barb. 292; Greene v. Republic Ins. Zns. Co., 54 Vt. 413. And see Sun Ins. Co., 84 N. Y. 572. Co. V. Greenville Bldg. & L. Assoc, 58 ^Johnston v. Phoenix Ins. Co., 39 N. J. L. 367, 33 Atl. 962. Md. 233. Also takes all rights, for in- ^ Haves v. Saratoga Ins. Co., 81 stance, right of reformation, 5enes/i v. App. Div. 287, 80 N. Y. Supp. 888, Mill Owners' Ins.Co,, 103 Iowa, 465, aff'd 179 N. Y, 535, 71 N. E, 1131; 72 N, W. 674. 3")() MEANINCJ AND LEGAL EFFECT OF FIRE POLICY The Massachusetts policy forbids an assignment without assent of the company in writing or in print. § 269. Memorandum Clause.— Or if illuminating gas or vapor be gnuratcd in the described building (or adjacent thereto) for use therein; o)\ if (any usage or custom of trade or manufacture to the contrary notwithstanding) there be kept, used, or allowed benzine, benzole, dyna- mite, ether, jireicorks, gasoline, etc. This clause contains memorandum articles, that is, a list of in- flammable substances,' peculiarly liable to destruction by fire, and of a nature likely to cause a spread of the fire. The restrictions are proper and must not be infringed, except as provided in the contract, by written agreement indorsed upon the policy. It is immaterial that the breach may not increase the risk or contribute to the loss.^ The word "premises" as used in this clause is to be construed to mean the buildings mentioned. It does not include an adjoining lot.^ It will be applied to so much of a building designated as is used and controlled by the insured.^ But the warranty is absolute, hence if the insured, though un- wittingly, allow his tenants, or other persons lawfully in possession of the premises, to violate the provisions of the memorandum clause, the policy will be avoided.^ Where, however, it comes to any question of interpretation, such sweeping provisions must receive reasonable construction. It is not to be readily presumed that the underwriters intended by the phraseology of the standard policy to interfere with the orderly and natural use of the property insured. If a grocery man or artisan should pass through the kitchen of the insured building with pro- 1 See policy, in Appendix, ch. II, for Soc. (Pa.), 11 Atl. 572; but see case full list and description. cited p. 141, supra. ^ Bastian v. Brit.-Am. Assur. Co., * Kohlmann v. Selvage, 34 App. Div. 143 Cal. 287, 77 Pac. 63, 66 L. R. A. 380, 54 N. Y. Supp. 230. See Boyer v. 255 (dynamite was kept); Ins. Co. v. Grand Rapids F. I. Co., 124 Mich. 455, Commissioners, 54 Kan. 732 (gasoline 83 N. W. 124. was used for several days) ; Htdton v. & Gunther v. Liverpool & L & G I Patrons' Mid. Ins. Co., 191 Pa. St. 369, Co., 134 U. S. 110, 10 S. Ct. 448, "SS 43 Atl. 219 (gasoline was kept and L. Ed. 857, 116 U. S. 113, 29 L. Ed. sold); Williams v. People's Fire Ins. 575 (kerosene); Norwayss v. Thurinnia Co., 57 N. Y. 274 (petroleum used in Ins. Co., 204 111. 334.' 08 N. E. 551- small quantities); Gunther v. L. & L. & Badger v. Platts, 68 N H 222 44 Atl' G. In^. Co., 134 U. S. 110, 10 S. Ct. 448 296, 73 Am. St. R. 572 (naphtha used (kerosene used contrary to special by tenant); Kohhnann v. Selvage 34 provisions of policy). App. Div. 380, 54 N. Y. Supp 230- ^Rau V. Westchester F. I. Co., 36 Westchester F. Ins. Co v Ocean View App. Div. 179, 55 N. Y. Supp. 459, Pleasure Pier Co., 106 Va 633 56 50 App. Div. 428, 64 N. Y. Supp. 290. S. E. 584 (fireworks for the Fourth aff'd 168 N. Y. 665, 61 N. E. 1134; of July, unknown to insured; policy Allemania In^. Co. v. Pittsburg Exp. void). MEMORANDUM CLAUSE— AS AFFECTED BY SUBJECT 357 hibited articles in his pocket, or if a physician in case of necessity should administer ether on the floor above, it is hardly supposable that the insurance on house or contents is to be held forfeited in consequence. As matter of interpretation certain important modifications are read into this clause with general approval.^ Thus, its prohibition does not extend to such insignificant quantities of the articles enumerated as one would use for medicine or for cleaning clothes or machinery,^ or for any similar use which must be presumed to be allowed by the contract of insurance in view of the character of the property insured.^ And it is said that the word "used" means something more than an isolated occasion; '' but it was held other- wise where fireworks were brought into the house the day before the Fourth of July, causing a conflagration the same night. ^ Another modification of great practical consequence read into the clause by interpretation will be considered in the next section. § 270. The Same— As Affected by the Subject and the Written Description. — It has been remarked that the written description controls the general printed clauses of the policy if there is any in- consistency between them.^ With the aid of this rule many courts have held that wherever the prohibited article naturally or usually belongs to the stock of goods or other subject-matter insured, the written description of the subject will by implication be regarded as a permit to use the article, in spite of the repugnant provision of the printed clause.^ 1 The prudent broker, however, gets L. R. A. 714, 93 Am. St. R. 870. And special permit to use benzine, gasoline, see Hinckley v. Ins. Co., 140 Mass. 38. etc., in small quantities, for cleaning Even the word "having" has been or similar purposes, for which there construed to mean an habitual use should be no charge. as applied to benzine, Bentley v. Lum- ^Mears v. Ins. Co., 92 Pa. St. 15. berme-n's Ins. Co., 191 Pa. St. 276, 43 3 Norwaysz v. Thuringia Ins. Co., 204 Atl. 209. 111. 334,68 N. E. 551; Car/wv. TFes^em ^ Heron v. Phoenix Mut. Fire Ins. Assur. Co., 57 Md. 515, 40 Am. Rep. Co., 180 Pa. St. 257, 36 Atl. 740. So 440; First Cong. Church v. Holyoke also Westcliester F. Ins. Co. v. Ocean Ins. Co., 158 Mass. 475, 32 N. E. 572; View Pleasure Pier Co. (Va., 1907), 56 Smith V. German Ins. Co., 107 Mich. S. E. 584. The word " allowed " in this 270, 65 N. W. 236, 30 L. R. A. 368; clause means allowed to be kept or Wood V. Northwestern Ins. Co., 46 used. So there is held to be no viola- N. Y. 421; Williams v. People's Fire tion of the provision where gasoline is Ins. Co., 57 N. Y. 274; Fraim v. taken from a shed in the rear and car- National Fire Ins. Co., 170 Pa. St. 151, ried through the store for immediate 32 Atl. 613 (gasoline kept outside but delivery to a customer, London & L. brought into the factory, held, no F. I. Co. v. Fischer, 92 Fed. 500, 34 breach because a necessary incident C. C. A. 503. of the business). * See § 87, supra. * Springfield F. & M. Ins. Co. v. 7 Tubb v. L. & L. & G. Ins. Co., 106 Wndr, 95 Tex. .598, 68 S. W. 077, .58 Ala. 651, 17 So. 615 ("stock usually 35S MEANING AND LEGAL EFFECT OF FIRE POLICY Thus where a stock of fancy goods was insured with privilege to iceep firecrackers on sale, it was held by the New York court that keeping fireworks would not avoid the policy, although by the jirintcd memorandum clause fireworks were prohibited.^ But the Federal Supreme Court came to the opposite conclusion on the same facts.- And where privilege was given to use the property for a printing office, the keeping of camphene was held to appertain naturally to the permitted l)usiness, although camphene appeared in the printed memorandum of prohibited articles/"' Hence there was no forfeiture. Despite the attempt in the standard form to limit this rule of con- struction, the rule still prevails,^ and the only effect of the clause, "any usage or custom of trade to the contrary," is, perhaps, to im- pose upon the insured the burden of showing with greater clearness that the written description fairly covers the prohibited articles in question. A group of cases will give sharper definition to the views of the courts upon this important subject. A policy in the Michigan standard form was procured on the Eaton county courthouse. Like the New York policy it provided against increase of hazard, also against the keeping, using, or allowing of gasoline or other explosives on the premises; but permitted repairing by mechanics for fifteen days at any one time. A committee appointed by the board of supervisors took charge of the repainting of the building; and, in connection with the work, a five-gallon can of gasoline was kept in the building by the painters for at least twenty-four days. From kept in a country store " permits use of ^ Harper v. A'. Y. City Ins. Co., 22 benzine and fireworks); Yoch v. Ijis. N. Y. 444. Insurance upon stock Co., ill Cal. 503, 44 Pac. 189, 34 "such as is usually kept for sale in a L. R. A. 857; Phoenix Ins. Co. v. Wal- drug store" will not be avoided, where ters, 24 Ind. App. 87 ("retail hardware benzine is kept in a manner customary store" covers dynamite); AcMey v. with druggists, Phoenix Ins. Co. v. Ins. Co., 25 Mont. 272, 64 Pac. 665 Flemming, 65 Ark. 54, 44 S. W. 464, (description in a policy amounts to a 67 Am. St. R. 900, 39 L. R. A. 789. ^v^itten permit, and "stock of drugs," It is permissible to show by parol evi- etc, covers gasoline, benzine, and dence what articles naturally apper- ether); Hall v. Ins. Co., 58 N. Y. 292, tain to the property which is the sub- 17 Am. Rep. 255 (all stock and ma- ject of insurance, Pindar v. Kings Co. terials ordinarily used in photogra- Fire Ins. Co., 36 N. Y. 648, 93 Am. pher's business are protected and the Dec. 544; Northern Assur. Co. v. insurer is presumed to know what be- Crawford, 24 Tex. Civ. App. 574, 59 longs to the business insured); Mascott S. W. 916; Carrigan v. Lycoming Fire V. Granite State Fire Ins. Co., 68 Vt. Ins. Co., 53 Vt. 418, 38 Am. Rep. 253, 35 Atl. 75. 687. 1 Steinbach v. Lafayette Fire Ins. Co. , * Phoenix Ins. Co. v. Walters, 24 54 N. Y. 90. Ind. App. 87, 56 N. E. 257, 79 Am 2 Steinbach v. R, F. Ins. Co., 13 St. R. 257; Mascott v. Granite State Wall. a". S.) 183. Fire his. Co., 68 Vt. 253, 35 Atl. 75. MEMORANDUM CLAUSE— AS AFFECTED BY SUBJECT 359 this can torches were filled with gasoline and were then used to burn off or blister the old paint on the outside of the building. The court allowed the verdict of the jury in favor of the insured to stand, Justice Grant, writing a strong dissenting opinion. The majority of the court decided that painters are not "mechanics," that "keep- ing, using, or allowing" explosives refers onl}- to an habitual keeping or storage, and that repairs by painters, deemed b}^ the jury to be a reasonable and necessarj^ incident to the use of the property, though continued for more than fifteen days, would not avoid the policy.^ The New Jersey Court of Errors and Appeals, with the Michigan case before it, was unable to construe the same clause of the stand- ard policy with like liberality to the insured; but left a verdict for the plaintiff undisturbed, based on a different state of facts. The court, in an opinion by Justice Swa3^ze, concludes that painters are "mechanics", within the meaning of the policy; but holds that mechanics are impliedly allowed b}' the express privilege for repairs to make repairs in "a reasonable, proper, and usual way," although the hazard may thereby be temporarily increased, and although the use of the generally prohibited article, gasoline, may be necessitated, but all within the limits of the specified period of fifteen days.^ The case last cited is more in harmony with an earlier Massachu- setts case, involving a policy which prohibited the "keeping" of naphtha and the increasing of the risk, but contained no express provision regarding repairs. The right to make ordinar}'' repairs, the court concluded, must be implied as an incident to the use of the property. Though naphtha was used by workmen for nearly four weeks in burning off the outside paint, preparatory to repainting the church insured, it was for the jury to say, under that policy, whether the repairs were reasonable and reasonably conducted.^ A manufacturing concern in Pennsylvania was engaged in the business of gold, silver and nickel plating. A policy covered their tools, machinery, and fixtures. Gasoline, though prohibited by the general printed clause of the policy, and though not specifically permitted, was used in their plating process and for cleaning pur- poses. It was thus allowed and used in the building described in the policy, but was stored elsewhere. The jury having found that the use of gasoline was a necessary incident to the conduct of their busi- ness, the judgment for the plaintiffs was affirmed.'* 1 Smith V. German Ins. Co. , 107 3 Pirst Cong. Church v. Holyoke Ins Mich. 270, 65 N. W. 236, 30 L. R. A. Co., 158 Mass. 475, 32 N. E. 572. 368. ** Fraim v. National Fire Ins. Co., 2 Garrebrant v. Continental Ins. Co. 170 Pa. St. 151, 32 Atl. 613. (N. J., 1907), 67 Atl. 90. ;jC(l MEANING AND LEGAL El-FECT Uk' FIKE POLICY The North Carolina court, on the other hand, in construing the later nicinorandum clause of the New York standard policy, con- cludetl that there was no necessary inconsistency between the lan- guage of the printed exception and the language of the written de- scription of the plaintiff's policy. The written description covered- "stock of cloth, cassimeres, clothing, trimmings, and all other articles usual in a merchant tailor's establishment." "Patterns" are named in the jmnted memorandum clause, and excepted, unless lialjility is specifically assumed thereon. A witness for the plaintiff testified, " all tailors usually keep patterns; can't well get along without them." The court, however, held that effect might be given both to the written and printed parts of the policy, and excluded from the plain- tiff's recovery the value of the patterns.^ The constant aim of the courts is to carry out the apparent intent of the parties. Beyond this no indulgence can be extended to the assured. Thus an implied permit to sell flashlight powder as a part of photographers' supplies does not warrant its manufacture.^ The memorandum clause of the Massachusetts policy is as follows: or if gunpowder or other articles subject to legal restriction shall be kept in quantities or manner different from those allowed or prescribed by law — or if camphene, benzine, naphtha, or other chemical oils or burn- ing fluids shall be kept or used by the insured on the premises insured, except that what is known as refined petroleum, kerosene, or coal oil, may be used for lighting, and in dwelling houses kerosene oil stoves may be used for doynestic purposes — to be filled when cold, by daylight, and with oil of lawful fire test only. ^ § 271. Vacancy Clause. — Or if a building herein described, whether intended for occupancy by owner or tenant, be or become vacant or un- occupied and so remain for ten days. 1 Johnston v. Niagara Fire Ins. Co., Fire Ins. Co., 124 Mich. 455, 83 N. W. 118 N. C. 643, 24 S. E. 424. Compare 124 (use of gasoline in a stove avoided Lovewell v. Westchester Fire Ins. Co., tlie policy); Vandervolgen v. Man- 124 Mass. 418, 2G Am. Rep. 671 ("pat- Chester F. Assur. Co., 123 Mich. 291, terns," though excepted by the printed 82 N. W. 46 (improper use of kero- memorandum clause, were held covered sene). But compare following two under the word "tools" in the descrip- cases, in which policy was not of tion). standard form, Snyder v. Dwellinq - Lutz V. Roml Ins. Co., 205 Pa. St. House Ins. Co., 59 N. J. L. 544, 34 Atl. 159, 54 Atl. 721; Kennc fie' -Hammond 931; Bentley v. Lvmbermen's Ins. Co., Co. v. Norwich Union F. Ins. Co. (Mo. 191 Pa. St. 276, 43 Atl. 209 (benzine). App.), 80 S. W. 694 (stock of railroad The elaborate classification of risks contractors was not construed to cover which was formerly indorsed upon dynamite). And see Fir.d Cong. manv of the policies has been omitted Church V. Hoh'o' e Ins. Co., 158 Mass. in the standard form. 475, 32 N. E. 572 (naphtha was used to 3 First Congregational Church v. burn off paint); Boyer v. Grand Rapids Holyoke Mut. F. Ins. Co., 158 Mass. VACANCY CLAUSE 361 The addition of a definite length of time, ''ten days," is an im- provement upon the old form. The provision of the standard policy is reasonable and must be observed, inasmuch as the insurers have a right to know whether the subject of insurance is receiving ordi- nar}' supervision or is being neglected.^ Before the time limit was added to this clause considerable uncertainty existed as to the length of disuse which would constitute a vacancy, and it was held, among other things, that a temporary absence from a dwelling- house without deliberate purpose to stay away, and especially where the occupants left the furniture and household goods, would not avoid the policy or require a written consent; ^ but under the stand- ard policy the period of unoccupancy of any building described must not exceed ten days as expressly permitted.^ And though the in- sured premises are leased by the insured to another, the breach of this condition, committed by the tenant, will be equally fatal.'* The word "unoccupied" has been added to the word "vacant," to give the restriction a broader effect in favor of the insurance com- pany. By a technical construction, "vacant" had been held to mean empty of everything but air.^ 475, 33 N. E. 572, 19 L. R. A. 587, 35 Am. St. R. 508 (naphtha avoided); Whitmarsh v. Charier Oak F. Ins. Co., 2 Allen (Mass.), 581 (keeping oil, etc., avoided). 1 Baldwin v. German Ins. Co., 105 Iowa, 379, 75 N. W. 326; Names v. House Ins. Co., 95 Iowa, 642, 650, 64 N. W. 628 (purpose of the clause is "an added safety or security to the building"); Ilac.ett v. Phila. Under- ivriters, 79 Mo. App. 16; Hill v. Equita- ble M. F. Ins. Co., 58 N. H. 82; Barilett v. Brit.-Am. Assur. Co., 35 Wash. 525, 77 Pac. 812. 2 Unio7i Ins. Co. v. McCullough (Neb.), 96 N. W. 79; .Etna Ins. Co. v. Meyers, 63 Ind. 238; Worley v. State Ins. Co., 91 Iowa, 150, 59 N. W. 16; Woodruff V. Imperial Ins. Co., 83 N. Y. 133; Cuynmins v. Agricultural Ins. Co., 67 N. Y. 260, 23 Am. Rep. Ill; East Tex. Ins. Co. v. Kempner, 87 Tex. 229, 27 S. W. 122. •< Huber v. Manchester Fire Ins. Co., 92 Hun, 223, 72 N. Y. St. R. 396, 36 N. Y. SupD. 873; Roe v. D'relling House Ins. Co., 149 Pa. St. 94, 23 Atl. 718; Ohio Farmers' Ins. Co. v. Vogel (Ind. App.), 73 N. E. 612. Some cases, however, seem to intimate that the specified period does not begin to run until there is a deliberate purpose to vacate or stay away for some defi- nite period, Burlington Ins. Co. v. Louery, 61 Ark. 168, 32 S. W. 383; McMurraif v. Capital Ins. Co., 87 Iowa, 453, 54 N. W. 354; Home Ins. Co. V. Peyson, 54 Neb. 495, 74 N. W. 960; Laselle v. Hobolen F. Ins. Co., 43 N. J. L. 468; Cummins v. Agricultural Ins. Co., 67 N. Y. 260, 23 Am. Rep. 111. ^ * Knoulton v. Patrons', etc., Ins. Co., 100 Me. 481, 62 Atl. 289; Hill v. Ohio Ins. Co., 99 Mich. 466, 58 N. W. 359; Johnson v. Norualk F. I. Co., 175 Mass. 529, 56 N. E. 569 (which turned on peculiar phraseology); Johnsoii v. N. Y. Bouery Fire Ins. Co., 39 Hun (N. Y.), 410;' Raymond v. Farmers' Mut. F. I. Co., 114 Mich. 386, 72 N. W. 254 (tenant left to remove sick wife on approach of forest fire, held, no unoccupancy); Phwnix Ins. Co, v. Burton (Tex. Civ. App.), 39 S. W. 319. ^ Herrman v. Adriatic Fire Ins. Co., 85 N. Y. 162, 39 Am. Rep. 644; Herr- man v. Merchants' Ins. Co., 44 N. Y. Super. Ct. 444, 81 N. Y. 184, 37 Am. Rep. 488. "Vacant" means deprived of contents, Limburg v. German F. Ins. Co., 90 Iowa, 709, 57 N. W. 626; Pabst Brewing Co. v. Union Ins. Co., 63 Mo. App. 663. The building is not vacant if furniture is left, Shackelton v. Sun 362 MEANING AND LEGAL EFFECT OF FIRE POLICY Tliis provision is to be construed with special reference to the character of the building and its contemplated use.^ F. Office, 55 Mich. 288, 21 N. W. 343; GcTwnn-Am. hi.t. Co. v. Evants, 94 Tex. 4'.tl), 02 S. W. 417, or articles storeil, tliouf!;li no person is occupying the hoiis(\ Sorman v. Iur. Co., 74 Mo. App. 4r)(). " rnoccupied" means "un- inhabited," Dohlautry v. Ins. Co., 83 Wis. 181, 53 N. W. "448. Vacancy or unoccupancy is not per .se an increase of risk, see § 257. Compare Farmers' cfr M. his. Co. V. Bodge (Neb., 1907), 110 N. W. 1018. And where there is no suspicion as to tlie moral hazard it is a common thing for the insurers, without extra charge, to grant privi- lege "to be unoccupied during a part of the year." It has been iield that except for the vacancy clause, the fact of vacancy need not be disclosed with- out special inquiry. Browning v. Honie Ins. Co., 71 N. Y. 508, 27 Am. Rep. 86. The burden of alleging and prov- ing a breach is upon the defendant, Moody V. Ins. Co., 52 Ohio St. 12, 38 N. E. 1011, 26 L. R. A. 313 (which also defines what plaintiff must allege and prove under a policy). 1 Hampton v. Hartford Ins. Co., 65 N. J. L. 265, 47 Atl. 433, 52 L. R. A. 344 (the words "occupied" and "un- occupied" in a policy of insurance will be given force with reference to the nature and character of the building, the purpose for which it is designated and the uses contemplated by the parties as expressed in the contract. The construction given to these words as applied to a dwelling will not of course cover a barn, a mill, a sawmill, a factory, music halls, theaters, or churches); Fritz v. Home Ins. Co., 78 Mich. 565, 44 N. W. 139 (outbuildings need not be inhabited, but only used as intended); Central Montana Mines Co. v. Firemen's Fund Ins. Co., 92 Minn. 223, 99 N. W. 1120; Halpin v. Phoenix Ins. Co., 118 N. Y. 165, 23 N. E. 482 (under standard form the condition operates against personal property also) ; Whitney v. Black River I. Co., 72 N. Y. 117, 28 Am. Rep. 116; Caraher v. Roiial Ins. Co., 63 Hun (N. Y.), 82, 44 N. Y. St. R. 141, 17 N. Y. Supp. 858, aff'd 136 N. Y. 645, 32 N. E. 1015; Hoover v. Mercantile Town I. Co., 93 Mo. App. Ill, 69 S. W. 42 (the intended use of the premises must in all cases be considered); East Tex. Ins. Co. v. Kempner, 12 Tex. Civ. App. 534, 34 S. W. 393, 35 S. W. 1069. Whether the nature of the business reasonably calls for continuous or oc- casional use is a pertinent fact to be regarded, Des Moines Ice Co. v. Niagara F. Ins. Co., 99 Iowa, 193, 68 N. W. 600 (ice house); Morotock Ins. Co. v. Pankey, 91 Va. 259, 21 S. E. 487. The word "premises" if used in this connection should be applied to the dwelling house and not to the other buildings insured, Thomas v. Hartford F. Ins. Co., 21 Ky. L. Rep. 914, 53 S. W. 297, 56 S. W. 264. That the land is occupied is no excuse for vacancy of the dwelling house, Sexton V. Haivkeye Ins. Co., 69 Iowa, 99, 28 N. W. 462. Vacancy clause was ap- plied to a scow, Enos v. Sun Ins. Co., 67 Cal. 621, 8 Pac. 379; to a vessel, Reid V. Lancaster F. Ins. Co., 90 N. Y. 382. A building, if known to be in course of construction, though de- scribed in the policy as a dwelling house, is not to be regarded as "un- occupied" because no one is living in it while unfinished, Harris v. North Am. Ins. Co., 190 Mass. 361 ("the clause ... as no change appears to have taken place must be construed in connection with these conditions under which the parties entered into their contracts"). And see German Ins. Co. V. Penrod, 35 Neb. 273, 53 N. W. 74 (building in process of erec- tion). Rules and rates of undei'writers and their associations do not control the question of forfeiture for alleged unoccupancy, Quinsiqamond S. Co. v. Phoenix Ins. Co., \T2 Mass. 367, 52 N. E. 531, 177 Mass. 10, 58 N. E. 174; Stone V. Granite State Ins. Co., 69 N. H. 438, 45 Atl. 235. Nor does any rule of the particular company as to granting or withholding permits control the question, Rogers v. Phoenix Ins. Co., 121 Ind. 570', 23 N. E. 498. Nor, on the other hand, does the breach depend upon knowledge by the assured of the unoccupancy, Schuermann v. Dwelling House Ins. Co., 161 111. 437, 43 N. E. 1093; or upon his control of the situa- tion, Moriarty v. Home Ins. Co., 53 Minn. 549, 55 N. W. 740; or upon his intent or good faith, Watertown Ins, Co. V. Cherry, 84 Va 72, 3 S. E 876. Vacancy clause 363 If vacancy of a separable part of the insured prenriises affects the risk of that part only, in some jurisdictions the contract is held divisible.^ For example, in a Virginia case a policy for $3,000, covered sixteen tenement houses, $187.50 being apportioned to each house. During the life of the policy eight of the buildings became unoccupied, and so remained for more than ten days. The court held that the insurance was valid as to the occupied houses and void as to those unoccupied.^ But where the vacancy affects the risk on the item of property destroyed a different rule applies. For a single premium Johnson took out a policy against fire, lightning, and windstorm, apportioned, $125 on dwelling house; $95 on corncrib with stable addition; $80 on hay and grain. At the date of the policy a tenant was in occu- pancy. Subsequently, the tenant moved away, and the owner of the land farmed it from his residence on an adjoining tract, leaving in the corncrib certain unused farming implements. A windstorm wrecked the corncrib. The judgment below in favor of the plaintiff was reversed on appeal.^ In case of doubt, however, the question whether the premises in- sured were unoccupied must go to the jury; and in the Michigan reports we find a good illustration. The plaintiff's house insured was on a farm, and situated about ten miles from the city of Menominee. Although the plaintiff was engaged in cultivating this farm, yet she spent more than half her time in her city home; but she or members of her family were on the insured premises, so a witness testified, "a few days in every week." They slept and ate in the farmhouse while so staying on the farm, and the plaintiff's husband was in the insured building when the fire occurred. From this testimony the jury was allowed to infer that both city and farmhouse were occupied as dwelling houses; and the judgment in favor of the plaintiff was affirmed on appeal. ■* Where a ten tenement frame block, insured as an entirety, had 1 Republic Mut. F. Ins. Co. v. voted merely to the shelter of unused Johnson, 69 Kan. 146, 76 Pac. 419. implements and machinery and sub- And see §§ 115, 246, swpra. ject to be made the rendezvous of 2 Connecticut Fire Ins. Co. v. Tilley, tramps. . . . Any ordinary individual S8 Va. 1024, 14 S. E. 851, 29 Am. St. in charge of the premises would exer- R. 770. cise a preservative superintendence 3 Republic Co. Mut. F. Ins. Co. v. over them — would secure loosened Johnson, 69 Kan. 146, 76 Pac. 419 boards about the crib, close widening ("there is nothing to indicate that apertures, brace racked timbers, and the company would have entertained otherwise fortify the rigidity of the an application for the insurance of an structure against storms"), isolated, unfrequented corncrib and * Maas v. Anchor Fire Ins. Co stable, the prey of the elements, de- (Mich., 1907), 111 N. W. 1044. 364 MEANING AM) LEGAL EFFECT OF FIRE POLICY two of its tenements occupied, the court was of the opinion that it was not vacant or unoccupied.^ But if buildings arc separate, the condition of the policy is to be applied distributively to them, and the occupancy of one of the buildings named in the policy will not excuse a vacancy in tiie othere.^ If a violation of this clause occurs, by the better opinion the policy is absolutely avoided, and not merely suspended until reoccupancy; ^ the phrase of the standard po'icy "this entire contract shall be void if," etc., cannot well be construed in any other sense.^ A New York case under the standard fire policy is apposite. The insured had a policy on her dwelling house and household furniture. About Thanksgiving time she went off with her daughter to make a visit in New York and Philadelphia, lemaining away until April 22d. During that time no one either occupied the house or went into it. The in- sured intended to return about the middle of January, but was pre- vented from doing so by sickness. The fire occurred April 24, two days subsequent to her reoccupancy of the house. There was no proof that the unoccupancy had increased the risk or contributed to the loss. The court by Judge Hirschberg held that the insurance was avoided."'' 1 Harrington v. Fitchhurg Mid. Fire Ins. Co., 124 Mass. 126. So also as to house and barn, Worley v. (State Ins. Co., 91 Iowa, 150, .59 N. W. 16. And as to a mining plant with several buildings, Central, etc., Mines Co., 92 Minn. 223, 99 N. W. 1120. And see Bryan v. Feabodij Ins. Co., 8 W. Va. 605. ^ Hartshorne v. Agricultural Ins. Co., 50 N. J. L. 427, 14 Atl. 615; Herrman v. Adriatic Fire Ins. Co., 85 N. Y. 163, 39 Am. Rep. 644; Herrman v. Mer- chants Ins. Co., 81 N. Y. 184. But non-ocoupancy of an outbuilding is in itself no breach, Kimball v. Monarch Ins. Co., 70 Iowa, 513, 30 N. W. 862. Privilege given by the standard policy to employ mechanics fifteen days does not impliedly allow unoccupancy dur- ing the same extended period, Lim- burg v. German F. Ins. Co.. 90 Iowa, 709, 57 N. W. 626. But a partial fire loss excuses an incidental unoccu- pancy ensuing, Lancashire Ins. Co. v. Bush, 60 Neb. 116, 82 N. W. 313. 3 German Ins. Co. v. Russell, 65 Kan. 373, 69 Pac. 345; Wainer v. Mil- ford Mut. Fire Ins. Co., 153 Mass. 335; Hoover v. Mercantile Toirn M. I. Co., 93 Mo. App. Ill, 69 S. W. 42; Moore v. Phoenix Ins. Co., 62 N. H. 240, 13 Am. St. R. 556; Couch v. Farmers Ins. Co., 64 App. Div. 367, 72 N. Y. Supp. 95; Hardiman v. Fire Assn., 212 Pa. St. 383, 61 Atl. 990; East Tex. F. Ins. Co. V. Kernptner, 87 Tex. 229, 27 S. W. 122. The effect of a violation of this clause is often controlled by statute, McGannon v. Michigan Millers' M. F. I. Co., 127 Mich. 636, 87 N. W. 61, 54 L. R. A. 739. See Cronin v. Fire Assn. of Phila., 123 Mich. 277, 82 N. W. 45. •* Other courts, however, take the opposite view, Stephens v. Phoenix Assur. Co., 85 111. App. 671; Ring v. Phoenix Assur. Co., 145 Mass. 426, 14 N. E. 525; Pres., etc., of Ins. Co. v. Pitts (Miss., 1906), 41 So. 5 ("insur- ance is revived by occupancy though suspended during vacancy"). And see cases pro and con, §§ 114, 247. ^ Couch V. Farmers' Fire Ins. Co., 64 App. Div. 367, 72 N. Y. Supp. 95 ("the stipulation in regard to occu- pancy was an express warranty, and, unless it was either performed or waived, the policy became void"), contra. President, etc., v. Pitts (Miss., 1906), 41 So. 5. But by several stand- ard policies a temporary breach in effect suspends and does not avoid the policy, for example, Iowa, Michigan, New Hampshire, Wisconsin. VACAXCY CLAUSE-— DWELLINGS 365 It is not permissible to call experts and ask them whether it in- creases the risk to leave a house unoccupied; ^ and the unambiguous time limit contained in this clause cannot be disturbed by evidence of custom to the contrary in the case of the same or similar property.^ As different classes of property naturally require different kinds of occupancy, the question whether the building is occupied or not may, however, be a question for the jury;^ but what is meant by "vacant" or "unoccupied" is in general a question of law.^ § 272. Vacancy Clause — Dwellings. — If the property insured is described in the policy as a dwelling house, to meet the requirements of the vacancy clause, it may be said in general, someone must be living in it as a place of abode.^ A house is not vacant or unoc- cupied so long as someone is habitually living and sleeping there, for instance, several days a week.^ On the other hand, many cases 1 Luce V. Dorchester Mut. Fire Ins. Co., 105 Mass. 297, 7 Am. Rep. 522. 2 Stone V. Howard Ins. Co., 153 Mass. 475. Permit for vacancy for a specified number of days will be strictly limited to that period, Ranspach v. Teutonia F. Ins. Co., 109 Mich. 699, 67 N. W. 967; Maness v. Sun Ins. Co. (Tex. Civ. App.), 32 S. W. 326. 3 Hunt V. State Ins. Co., 66 Neb. 121, 92 N. W. 921; Home Ins. Co. v. Men- denhall, 164 111. 458, 45 N. E. 1078; Rock ford Ins. Co. v. Storig, 31 111. App. 486; Maas v. Anchor Fire Ins. Co. (Mich., 1907), 36 Ins. L. J. 600; Wood- ruff V. Imperial Ins. Co., 83 N. Y. 133. * Schuermann v. Dwelling House Ins. Co., 161 111. 437, 43 N. E. 1093; Harts- horne v. Agricultural Ins. Co., 50 N. J. L. 427, 14 Atl. 615. Cancellation of policy after loss and return of unearned premium is no waiver of a known for- feiture, Farmers & M. Ins. Co. v. Bodge (Neb., 1907), 110 N. W. 1018. 5 McMurray v. Capital Ins. Co. , 87 Iowa, 453, 54 N. W. 354; Thomas v. Hartford Fire Ins. Co., 21 Kv. L. Rep. 914, 53 S. W. 297, 56 S. W. 264; Agri- cultural Ins. Co. V. Hamilton, 82 Md. 88, 33 Atl. 429, 30 L. R. A. 633; Bonefant v. American F. I. Co., 76 Mich. 653, 43 N. W. 682; Hoover v. Mercantile Toum M. F. I. Co., 93 Mo. App. Ill, 69 S. W. 42 (mere super- vision without someone sleeping in dwelling is not enough); Herrman v. Adriatic Fire Ins. Co., 85 N. Y. 162, 39 Am. Rep. 644 (there must be a regular sleeper). Leaving furniture in a house is not occupancy, Hanscom v. Home Ins. Co., 90 Me. 333, 38 Atl. 324; Home Ins. Co. v. Boyd, 19 Ind. App. 173, 49 N. E. 285; though the presence of furniture prevents the house from being vacant, Norman v. Missouri Town Ins. Co., 74 Mo. App. 456; Omaha Ins. Co. v. Sinnott, 54 Neb. 522, 74 N. W. 955. Control and use by a tenant are no adequate substitutes for living and sleeping in a dwelling house, Stoltcnberg v. Continental Ins. Co., 106 Iowa, 565, 76 N. W. 835. Supervision by a third party living within the same inclosure may not save from forfeiture of the policy. Burner v. Gennan-Am. Ins. Co., 103 Ky. 370, 45 S. W. 109. Frequent visits are not enough, Hanscom v. Home Ins. Co., 90 Me. 333, 38 Atl. 324; Lester v. his. Co. (Miss.), 19 So. 99; Stapleton v. Greenwich Ins. Co., 16 Misc. 483, 38 N. Y. Supp. 973. Son of owner slept in house in daytime but not at night, policy was avoided, Eureka, etc., Ins. Co. v. Baldwin, 62 Ohio St. 368, 57 N. E. 57. In one case, it was held that occupancy by one conspiring to burn the house did not fulfill a special warranty of the policy regarding occupancy, Names v. Duell- ing House Ins. Co., 95 Iowa, 642, 64 N. W. 628. 6 Thieme v. Niagara Fire I. Co., 100 App. Div. 278. 91 N. Y. Supp. 499. And see N. Y. Mut. S. & Loan Assn. v. Westchester Fire Ins. Co., 110 App. Div. 760, aff'd N. Y. Ct. App. 1907. 366 MEANING AND LEGAL EFFECT OF FIRE POLICY convincingly hold, that to constitute an "occupied dwelling house" the jDresence of someone sleeping in the house is not in all cases essential.* A permit by the company to leave the house vacant for the sum- mer will he lil)erally construed as meaning the season broadly rather than the summer months. - By the Massachusetts form, "this policy shall be void if the prem- ises hereby insured shall become vacant by the removal of the owner or occupant, and so remain vacant for more than thirty days without such assent," that is, assent of the company in writing or in print. Under this clause, which says nothing about unoccupancy, the court concluded that a mere temporary absence on a visit would not even set the time running.^ 1 When house was furnished and frequently visited the Ohio court without dissent said: "Nor does it follow, as a matter of law, that a dwelling house is to be considered as unoccupied merely because it has ceased to be used as a family residence, when the household goods remain ready for use, and it continues to be occupied by one or more members of the family, who have access to the entire building for the purpose of caring for it, and who do care for it, and make some use of it as a place of abode," Moody v. Ins. Co., 52 Ohio St. 12, 22, 38 N. E. 1011, 26 L. R. A. 313, 49 Am. St. R. G99. To similar effect, Home Ins. Co. v. Wood. 47 Kan. 521, 28 Pac. 167; RocK- ford Ins. Co. V. Storig, 31 111. App. 486; Dwell- ing House Ins. Co. v. Osborn, 1 Kan. App. 197, 40 Pac. 1093; Hill v. Ohio Ins. Co., 99 Mich. 466, 58 N. W. 359; Omaha F. his. Co. v. Sinnott, 54 Neb. 522, 74 N. W. 955. So also the Massa- chusetts court has held that a building, though waiTanted to be a dwelling house, is not to be regarded as unoccu- pied, because uninhabited, if when the policy issued both parties knew that it could not be inhil>ited until com- pleted, Harris v. Xorth Am. his. Co., 190 Mass. 361, 77 N. E. 493. The many separate structures making up a modern Adirondack camp may fairly be described as a dwelling, but in many instances only a fraction of them are ever occunied by sleepers. There is no hard and fast rule of law. It is enough if only one person sleens there, and it is not essential that he should have access to all the rooms. Ins. Co. V. Hancock, 106 Tenn. 513, 62 S. W. 145. Where the building was described as "a store and dwelling," ceasing to use it as a dwelling does not make it unoccupied, Burlington Ins. Co. V. Brockway, 138 111. 644, 28 N. E. 799. Holding the keys of a house, however, is not occupancy, and this is true though some of the furniture remains in the house, hitch v. North Brit. & Mer. Ins., 136 Mass. 491; Corrigan v. Conn. Fire Ins. Co., 122 Mass. 298. Nor is the placing of farm utensils in a house an occupancy, Martin v. Rochester German I. Co., 86 Hun, 35, 67 N. Y. St. R. 237, 33 N. Y. Supp. 404. W^here a house is only used for taking meals, and a barn only for storing hay, both are unoccu- pied, Ashworth v. Builders Ins. Co., 112 Mass. 422. If a lessee of rented premises has not entered, the premises are unoccupied, Stoltenberg v. Con- tinental Ins. Co., 106 Iowa, 565, 76 N. W. 835. 2 Vanderhoef v. Agricultural Ins. Co., 46 Hun (N. Y.), 328; Barker v. Citizens Mut. Fire Ins. Co., 136 Mich. 626, 99 N. W. 866 (permit for winter season construed). A house insured as a summer residence need only be occu- pied as such. Western As.mr. Co. v. Mason, 5 111. App. 141 ("the plaintiff was only bound to maintain such occupancy as pertained to the ordinary use of the building in the manner and for the purposes for which it was de- signed to be used," held, question of fact). ^Johnson v. Norwalk Fire Ins. Co., 175 Mass. 529, 56 N. E. 569. The South Dakota policy prohibits vacancy VACANCY CLAUSE — BUILDINGS OTHER THAN DWELLINGS 367 The plaintiff had a poHcy in the New Hampshire standard form which contains a vacancy clause like the Massachusetts. The occu- pant of the house insured, on account of the state of her health, left the house unoccupied for three months, and until the fire, tak- ing with her, however, only her clothing. When she left she in- tended to be absent for three or four months, but a man in charge of the premises visited them in the daytime at least twice a week. The court was of opinion that there is a difference in meaning be- tween "absence" and "removal," and held that it was for the jury to determine under all the facts of the case whether the dwelling house was "vacant by removal." ^ § 273. Vacancy Clause — Buildings Other than Dwellings. — Build- ings or premises insured, other than dwelling houses, must have that kind of use and occupancy which naturally belong to the char- acter of the property described in the policy.^ Thus a factory or mill need have no one sleeping in it at night; but must be put to some practical and actual use, and not treated simply as a store- house.^ And where a sawmill was insured, the court held that it could not be the intention to occupy such a building like a domicile. The conclusion was arrived at that a vacancy clause must be con- strued in view of the situation and character of the property insured, and the contingencies affecting its use, to which property of like character to that insured and similarly situated is ordinarily sub- ject; and that interruptions of business and discontinuance of active use were in such a case to be anticipated, and would no more avoid the poHcy than would the omission to use a church building during week days; ^ but where a trip-hammer shop was not in operation, and unoccupancy for more than thirty late the condition, Bellevue Roller Mill days without the assent of the com- Co. v. London & L. F. Ins. Co., 4 pany — written assent is not specified. Idaho, 307,39 Pac. 196; Ladd v. /Etna A permit for vacancy does not im- 7ns. Co., 147 N. Y. 478, 42 N. E. 197; pliedly include a permit for repairs, Wankau Milling Co. v. Citizens, etc.. Hill V. Commercial Union Ins. Co., 164 Ins. Co. (Wis., 1906), lO'J N. W. <.37 Mass. 406, 41 N. E. 657. So where a mill shuts down for re- ^ Stone V. Granite State F. Ins. Co., pairs, Ain. Ins. Co. v. Brighton Cotton 69 N. H. 438, 45 Atl. 235. Mfg. Co., 125 111. 131, 17 N. E. 771. 2 RocLford Ins. Co. v. Wright, 39 A manufacturing plant, insured as 111. App. 574; Poor v. Humboldt Ins. an entirety, is not unoccupied so long Co., 125 Mass. 274,28 Am. Rep. 228; as a part is in use. Cent. Montana Mines Hnlpin V. Phrenix Ins. Co., 118 N. Y. Co. v. Firemen's Fund Itis. Co., 92 172, 23 N. E. 482; Morotock Ins. Co. Minn. 223, 99 N. W. 1120. v. PanHii, 91 Va. 259, 21 S. E. 487. * Whitney v. Black River Ins. Co., 3 Halrrin v. Mna Fire Ins. Co., 120 72 N. Y. 117, 28 Am. Rep. 116; Lock- N. Y. 70. A temporary cessation of wood v. Middlesex Mid. Assur. Co., operation of machinery because ^f 47 Conn. 553. A flouring mill, though sickness, breakdown, low water, or shut dowTi, was held to be not unoccu- other unavoidable cause does not vio- pied, Bellevue Roller Mill Co, v. London 368 MEANING AND LEGAL EFFECT OF FIRE POLICY though a man visited it almost every day to inspect it, it was held tiiiit the policy was avoided, and that such visits did not constitute an occupancy.^ On the other hand, where a schoolhouse was left vacant during the time of the ordinary vacations, and the furniture was not removotl, it was held that the provisions of the vacancy clause were not violated.^ And likewise a church is not unoccupied because services are discontinued in the absence of the pastor where the edifice is left in charge of the sexton.-'' § 274. Certain Causes of Loss Excepted. —This company shall not be liable for loss caused directly or indirectly by invasion, insurrection, riot, civil war, or commotion, or military or usurped power, or by order of any civil authority; or by theft, or by neglect of the insured to use all reasonable means to save the property at and after a fire, or when the property is endangered by fire in neighboring premises; or (unless fire ensues, and, in that event, for the damage by fire only) by explosion of any kind, or lightning, but liability for direct damage by lightning may be assumed by specific agreement hereon. Some of these exceptions to the liability of the insurers may not be at all likely to happen, but if they should happen their results might be so disastrous as to remove them from the operation of any general rule of average. "Invasion" means the entrance of an armed force from abroad with hostile intent.^ & Lan. Ins. Co., 4 Idaho, 307, 39 Pac. 344; Caraher v. Royal Ins. Co., 63 Hun, 196. So of a tannery occupied in part, 82, 44 N. Y. St. R. 141, 17 N. Y. Supp. Lebanon Ins. Co. v. Erb, 112 Pa. St. 858, aff'd 136 N. Y. 645, 32 N. E. 1015. 149, 4 Atl. 8. As to when a vessel is In the case of a saloon, it is enough unoccupied, see Reid v. Lancaster if a clerk lives in the building and Ins. Co., 19 Hun (N. Y.), 284. As to a sleeps there, Stensgaard v. Natl. Fire storehouse see Rockjord Ins. Co. v. Ins. Co., 36 Minn. 181. Wright, 39 111. App. 574; Home Ins. ^Portsmouth Ins. Co. v. Reynolds, Co. V. Scales, 71 Miss. 975, 15 So. 134. 32 Grat. (Va.) 613; Harris v. York As to a store, see Limburg v. German Mut. his. Co., 50 Pa. St. 341 (riot); Fire Ins. Co., 90 Iowa, 709, 57 N. W. Lycoming Fire Ins. Co. v. Schwenk, 95 626. As to an ice factory, Morotock Pa. St. 89, 40 Am. Rep. 629 (riot); 7ns. Co. V. Pankey, 91 Va. 259, 21 Spruill v. Ins. Co., 46 N. C. 126 (in- S. E. 487. As to an ice house, see surrection); ^tna Fire Ins. Co. v. Des Moines Ice Co. v. Niagara Ins. Boon, 95 U. S. 117, 24 L. Ed. 395 Co., 99 Iowa, 193, 68 N. W. 600. Ele- (military or usurped power held to be vators held to be occupied, Williams v. proximate cause of loss though the North German Ins. Co., 24 Fed. 625; fire thereby caused extended through Clijto7i Coal Co. V. Scottish Union & three intermediate buildings). And Nat. Ins. Co., 102 Iowa, 300, 71 N. W. as to this clause see Roval Ijis. Co. v. 433 (though not operating for more Martin, 192 U. S. 149, 24 S. Ct. 247, than ten days. 48 L. Ed. 385; Mich. F. & M. Ins. ^ Keith V. Quincy Mut. Fire Ins. Co., Co. v. Whitelaw, 25 Ohio C. C. 197. 10 Allen (Mass.), 228. It has been held under the Wisconsin 2 Am. Ins. Co. v. Foster, 92 111. 334, statute that it is unlawful for the par- 34 Am. Rep. 134. ties by agreement to add to the list 3 Hampton v. Hartford Fire I. Co. , of exemptions as enumerated in the Ho \. .1. T>. 265. 47 Atl. 433, .52 1.. R. A. standard policy an additional and LOSS BY EXPLOSION EXCEPTED UNLESS, ETC. 36S § 275. Loss by Order of Civil Authority Excepted. — To destroy insects, the town supervisors started a fire which, getting beyond control, destroyed grain belonging to the insured; the loss thereby occasioned was held to be within this exception of the policy.^ But where a building already doomed to destruction by approaching conflagration is intentionall}' destroyed with explosives to check the fire it is held to be loss by fire exclusively, as the proximate cause, and not a loss by explosion, or by order of civil authority.^ § 276. Loss by Theft Excepted. — Loss by theft, otherwise proxi- mate,^ is now within this express exception to the insurer's liability.'' § 277. Neglect of Insured After Fire. — From liability for loss caused directly or indirectly by the neglect of the assured himself to use reasonable precautions after the fire, as described in the standard policy, the company is exonerated. The burden, however, is upon the insurer to plead any such neglect on the part of the in- sured ; ^ and also to establish it on the trial to the satisfaction of a jury.^ § 278. Loss by Explosion Excepted Unless, etc. — The exception of loss by explosion was inserted in the policy because of a line of decisions holding that an explosion of gunpowder was in its nature fire, though occasioned without hostile fire or antecedent conflagra- tion J Therefore where the loss is caused by explosion and explosion is the proximate, that is, the primary, fault or catastrophe, the under- writer is relieved from liability under this exception ^ unless fire ensue, and then is liable for the fire loss only.^ inconsistent exemption, in tliat case, App. 429; Stanley v. Ins. Co., L. R. 3 loss by fire caused by an electric Exch. 71, 74. current, Wausau Telephone Co. v. ^ gee §231, supra. United Firemen's Ins. Co., 123 Wis. * L. & L. & G. Ins. Co. v. Creighton, 535, 101 N. W. 1100. 51 Ga. 95. But, it is said, the excep- 1 Conner v. Manchester Assur. Co. . tion applies only to theft happening 130 Fed. 743. So also where a fire during the fire, not during necessary was started to check bubonic plague, removal, Sllencher v. Fire Assoc, 72 Hauaii Land Co. v. Ins. Co., 13 N. J. L. 48, 60 Atl. 232. Hawaii, 164. ^Fletcher v. Gervan-Amer. I. Co., 2Greenuald v. his. Co., 3 Phila. 79 Minn. 337, 82 N. W. 647. (Pa.) 323. Same rule is declared in '^ Ellsworthv. jEtna Ins. Co., 89'N.Y. other cases, Foster v. Fidelity F. Ins. 186; Brings v. North Amer. & M. Ins. Co., 24 Pa. Sup. Ct. 585 (1904); Cohn Co., 53 N. Y. 446. V. Ins. Co., 96 Mo. Aop. 315 (1902); 7 See § 231, supra. Heuer V.Westchester F. Ins. Co., 4:il\\. ^ Mitchell v. Potomac Ins. Co., 183 8 Orient Ins. Co. v. Leonard, 120 Fed. Faneuil Hall Ins. Co., 127 Mass. 346, 808; Leonard v. Orient Ins. Co., 109 34 Am. Rep. 384; John Davis v. Ins. Fed. 286, 48 C. C. A. 369; Dow.<^ v. Co., 115 Mich. 382, 73 N. W. 393. 24 370 MEANING AND LEGAL EFFECT OF FIRE POLICY Mitchell had a policy for S5,000 on his stock of stoves and tinware in Georgetown, D. C. His clerk went down into the cellar of the store, and lighted a match there, because it was dark. The lighted match came in contact with the vapor of gasoline kept in the cellar, and a violent explosion at once followed, causing a collapse of the building. The damage to the insured stock was due to the falling of the iruilding and the crushing of the stock. The jury having found these facts, the court held that the loss was by explosion and that the insured could not recover under his policy.^ If, however, the explosion, no matter how violent, is but a re- sulting incident of an already existing conflagration,^ then the ex- plosion is not accounted a cause at all, but only an inevitable physical effect of the predominant, still operating, and all-embracing peril insured against, and the results, if not unreasonably remote, are included as fire loss exclusively. Notwithstanding two or three decisions to the contrary, this rule, many times reiterated by the United States Supreme Court, and other tribunals, must be con- sidered clear and well established.^ Nor in such a case should it be U S. 42, 22 S. Ct. 22, 46 L. Ed. 74; Ins. Co. V. Tweed, 7 Wall. (U. S.) 44; Tanneret v. Ins. Co., 34 La. Ann. 249; United L. F. & M. his. Co. v. Foote, 22 Ohio St. 340; Home Lodge Assn. v. Qneen Ins. Co. (So. Dak., 1907), 110 N. W. 778 (explosion from gas jet). And even without any exception, if the cause of explosion is sufficiently remote, the underwriter wuU not be liable under a fire policy, Everett v. London Assiir. Co., 19 C. B. N. S. 126, 11 Jur. N. S. 546, 34 L. J. C. P. 299 (loss by concussion only from a gun- powder explosion nearly a mile dis- tant). i^ Mitchell v. Potomac Ins. Co., 183 U. S. 42, 22 S. Ct. 22, 46 L. Ed. 74 ("a loss occurring solely from an ex- plosion not resulting from a preceding fire is covered by the exception in the policy"). 2 The natural and ordinary com- bustion of gunpowder and other high explosives is accompanied by violent concussion. 3 Mitchell v. Potomac Ins. Co. , 183 U. S. 42, 22 S. Ct. 22 (loss by explosion of gasoline not covered); The G. R. Booth, 171 U. S. 450, 19 S. Ct. 9, 43 L. Ed. 234 (carrier was liable where explosion was insured against and sea peril was excepted, though only sea water came in contact and did the damage to the cargo); Washbvrv v. Ins. Co., 2 Fed. 304 Goss by explosion covered, because of antecedent fire); Washburn v. Ins. Co., 29 Fed. Cas. 308, 329, 330; Heuer v. Northwestern Ins. Co., 144 111. 393, 33 N. E. 411; Trans. Fire Ins. Co. v. Dorsey, 56 Md. 70, 40 Am. Rep. 403 (loss by explosion of sulphuric acid caused by preceding fire is covered); Davis v. Ins. Co. of North Am., 115 Mich. 382, 73 N. W. 393; La Force v. Ins. Co., 43 Mo. App. 518 (loss by explosion of gasoline vapor caused by preceding fire is covered); Cohn v. Nat. Ins. Co., 96 Mo. App. 315, 319, 70 S. W. 259; Renshaw v. Missouri State Ins. Co., 103 Mo. 606,1 5 S. W. 945; Briggs v. Ins. Co., 53 N. Y. 446 Goss by explosion held not covered because no antecedent fire); Brown v. St. Nicholas Ins. Co., 61 N. Y. 332 (underwriter liable where stranding was insured against and ice detention excepted, yet the latter did the damage); Hall v. Nat. F. Ins. Co., 115 Tenn. 530 (1906), 92 S. W. 402 (criticising Hiistace v. Pha}ni.T Ins. Co., 175 N. Y. 292, 67 N. E. 592). Same doctrine is applied in accident insurance. And see Hart- ford Steam B., etc., Ins. Co. v. Sonne- bom, 96 Md. 616, 54 Atl. 610; see also §231, supra. Contra, Hustace v. Phoenix Ins. Co., 175 N. Y. 292, 67 N. E. 592, 62 L. R. A. 651 (one judge dissenting and reversing five judges below), Here an explosion purely in- LOSS BY EXPLOSION EXCEPTED UNLESS, ETC. 371 regarded as at all material that the conflagration originates outside the premises insured/ since the laws of nature in their operation pay no respect to intangible boundaries of ownership or limits of insurance.^ Nor should the circumstance that the effects of the incidental explosion alone, without accompanying ignition or com- bustion, reach the particular property insured, be considered as necessarily decisive in determining the issue of proximate cause; ^ though upon this point the authorities seem not to be in accord. The better rule in such cases is the one approved by the Federal Supreme and other courts, that where the question, what is the proximate cause, comes to the border line of uncertainty, it should be disposed of as a question of fact/ In the treatment of this diffi- cult subject an important circumstance has been too often over- cidental to a raging conflagration in a neighboring building did the damage, the fire subsequently swept the plain- tiff's premises also; and what is known as explosion insurance would not have met the loss. The last case has intro- duced uncertainty in rules of adjust- ment long considered settled in New York. In spite of the Hustace case, recovery was allowed on somewhat similar facts in actions of other neigh- boring o\%Tiers growing out of same catastrophe, Eppens, etc., Co. v. Hart- ford F. Ins. Co., 99 App. Div. 221, 90 N. Y. Supp. 1035; Mattlage v. German- Am. Ins. Co., 139 Fed. 704. The New York court, in another case, has stated the general rule concisely as follows: "The proximate cause of an event must be held to be that which in a natural sequence unbroken by any new cause, produces that event, and without which that event would not have occurred," Rider v. Stiracuse Ry. Co., 171 N. Y. 139, 147, 63 N. E. 836. 1 Heuer v. Northeastern Ins. Co., 144 111. 393, 33 N. E. 411. 2 Effects which follow by mere physi- cal necessity must be attributed to the predominant cause, see Bailey's defini- tion, McArthur, Ins. (2ded.), 108 n. A half interest in an entire block may be owned and insured by one man, the other half interest in each house may be separately owned and separately insured, but the fire burns and the explosion occurs unaffected by such lines of demarkation. On the other hand, underwriters take into account neighboring exposures, as well as in- trinsic hazards. Capital City Ins. Co. v. Caldwell, 95 Ala. 77, 85, 10 So. 355. ^Russell V. German F. Ins. Co., 100 Minn. 528, 111 N. W. 400; Ermen- trout V. Girard F. & M. Ins. Co., 63 Minn. 305, 65 N. W. 635, 30 L. R. A. 346; Johnston v. West., etc., Ins. Co., 7 Shaw & D. Scot. Ct. Sess. 52. And see Lynn Gas & Elec. Co. v. Meriden F. Ins. Co., 158 Mass. 570, 33 N. E. 690 (resulting loss was far from fire); Transatlantic F. Ins. Co. v. Dorsey, 56 Md. 70, 79, 40 Am. Rep. 403 (disap- proving Stanley v. Western Ins. Co., L. R. 3 Exch. "71, 17 L. T. N. S. 513). Contra, Hustace v. Phoenix Ins. Co., 175 N. Y. 292, 67 N. E. 592. And see Miller v. London & L. Ins. Co., 41 111. App. 395; Caballero v. Home Ins. Co., 15 La. Ann. 217; Ins. Co. v. Roost, 55 Ohio St. 581, 588, 36 L. R. A. 236; Hall V. Nat. F. Ins. Co., 115 Tenn. 530, 92 S. W. 402. In an unreported case (AitLen v. Midland, etc., Ins. Co.) the condition was, "This company shall not be responsible for loss arising from explosion of gunpowder or in conse- quence thereof." A fire arose in a fireproof compartment on the ground floor not comprised in the policy. This compartment was used for storing inflammable oils, and with them were stored about sixty-five pounds of blasting powder. Except for the ex- plosion of powder the fire would have been confined to the fireproof com- partment, and the court of session held that the damage came within the exception and that the insurer there- fore was not liable, Bunyon (5th ed.), 86. ■* Kellogg v. Mil. & St. Paid R. Co.. 94 U. S. 469; Russell v. German Fire Ins. Co. (Minn., 1907), 111 N. W. 40. 372 MEANING AM) LKGAL EKFI^CT OF FIRE POLICY looked. In most instances, at the time when risks are rated by in- surers, the insurers have no knowledge of the scope of the poUcies to which the rates will be applied, or of the extent of the ownership of the various persons to whom the policies are to be issued. One man may own, and insure by one policy or by fifty specific policies a block of fifty houses, or every house in the block may be separately owned and separately insured. It matters not to the insurance com- panies which situation is to exist. To hold, then, as matter of law, that the same natural, physical results, produced by the one cause and in the one casualty, happening within the one block, are proxi- mate as to the blanket policy, but not as to all the specific policies, is an unreasonable and needless distinction. No conflagration of ordinary buildings can long continue without numberless incidental explosions, some of greater and some of lesser violence. In general, the only indemnity offered to the public by underwriters for the loss occasioned by such incidental explosions is under the usual fire policy. The value and utility of this instrument should not be unreasonably curtailed. La Force had a policy on his dwelling, which like the standard policy excepted loss caused by explosion of any kind unless fire en- sued, and then included the loss by fire only. His housekeeper for the purpose of driving away cockroaches poured some gasoline on different parts of the kitchen floor. Some of the gasoline dripped through the cracks and evaporated, the vapor being confined between the floor and the ground underneath. There was no vapor in the kitchen, though on the kitchen floor there was liquid gasoline, which is not explosive. About half an hour later the housekeeper dropped a lighted match on the floor, which caused a fire but no immediate explosion. After the fire had extended entirely around the room and had burned the gasoline for from three to five minutes, and after the wainscoting around the wall had been ignited, the flames came in contact with the vapor beneath the floor and it exploded, blowing the floor up and shaking the walls down. The court held that the damage done to the building, both by reason of the actual burning and by reason of the concussion, was occasioned by fire within the meaning of the policy, and that the exception in favor of the insurer was not applicable.^ 1 La Force v. The Williams City Ins. natural results of the combustion of Co., 43 Mo. App. .518 ("it is no suffi- combustible substances; and as the cient answer to say that some of the combustion is the action of fire, this phenomena prockiced were in the form must be held to be the proximate and of an explosion. All the effects, what- legal cause of all damages done the ever they may be in form, are the premises of the plaintiff. There was a LOSS BY EXPLOSION EXCEPTED UNLESS, ETC. 373 In another case the plaintiff had insurance, with the same explosion clause, covering his stock of furniture and housefurnishing goods kept for sale. In a neighboring warehouse, the second building to the south, a raging fire, in progress for the space of an hour, extended to powder and dynamite stored in the warehouse, and occasioned a terrific explosion, the concussion from which did all the damage to the plaintiff's goods. No fire reached the plaintiff's store. The court while admitting that abstractly the contention of the plaintiff seemed sound, considered itself concluded by certain authorities cited, and held, reversing the court below, that on the facts as stated the plaintiff could not recover unless there was fire on the insured premises.^ The sound distinction is illustrated by a New York case in which lightning was the peril assumed and windstorm the exception. The damage in question was caused by windstorm following the stroke by lightning. The windstorm, however, was an altogether independent agency, in nowise caused by lightning, and therefore the judgment in favor of the insured was reversed.^ But where a whirlwind, itself caused by a raging conflagration, presently topples a wall over, the damage is by fire alone. The wind is accounted an effect and not a cause. And this rule has been extended to the case where a wind, arising several days after the fire, precipitated upon the adjoining premises of the plaintiff, the insured, a wall previously weakened by a fire which never reached the plaintiff's premises at all in the shape of combustion.^ The peril of fire insured against, though the primar}^ cause in point of time may, however, be too remotely connected with the damage in question to be accepted as the responsible cause. For instance, where fire starting in a vessel which was lying temporarily in the River Mersey resulted in a violent gunpowder explosion aboard, which in turn shattered the windows of buildings on the banks, it was conceded that the ex- plosion must be deemed the responsible cause of the damage to the fire within the policy which preceded concussion on tlieir stock, they could the explosion, and it logically results have recovered for loss by concussion that the insurer is liable to the assured on the building in which the stock was for the damages done by both fire and located. explosion," by Smith, P. J.). ^ Beakes v. Phoenix Ins. Co., 143 1 Hall & Hawkins v. National Fire N. Y. 402, 38 N.- E. 453, 26 L. R. A. Ins. Co. (Tenn., 1906), 92 S. W. 402. 267 (by Bartlett, J., who also dissented According to the rule laid down in the in the Hustace case, 175 N. Y. 292, 67 last case, if Messrs. Hall & Hawkins N. E. 592). had been owners of the whole block 3 Russell v. German F. Ins. Co. of buildings, insured by a policy cover- 100 Minn. 528, 111 N. W. 400. " For ing all the buildings, in blanket form, full discussion of proximate cause, see while recovering nothing for loss by ch. XX." 374 MEANING AND LEGAL EFFECT OF FIRE POLICY windows.^ Ilorc was a casual exposure which the underwriters,, perhaps, could hnrdly have been expected to take into their calcula- tions, and which certainly was not to be found scheduled upon their insurance maps and surveys. It must be observed, however, that the issue in the case arose between stockholders of the insurers, and the insurers, who, it was claimed, had made payment ultra vires to the insured on account of the loss. The court rendered judgment adverse to the contention of the stockholders. § 279. Falling Building.— Or if a building or any part thereof fall, except as the result of fire, all insurance on such building or its con- tents shall immediately cease. If any substantial portion of the structure falls, except as the result of antecedent fire, the insurance forthwith terminates; ^ but the rule is otherwise, if only a trifling portion falls.^' If, however, the fall is caused by an explosion and fire ensues, then, as is mani- fest, the company is liable for the fire loss, by virtue of the clause considered in the preceding section.'* 1 The Lottie Sleigh case, Taunton v. Roijal Ins. Co., 2 H. & M. 135, 10 Jur. N. S. 291, 33 L. J. Ch. 406, 10 L. T. N. S. 156. Even in that case the underwriters saw fit to settle, Bunyon, Ins. (5th ed.. 1906), 79. I^pon this ground alone, if at all, it would have seemed possible to justify a decision in favor of the insurer in the Hnstace case, in which two buildings and a street intervened between the Tarrant and Hustace buildings, 175 N. Y. 292. 67 N. E. 592. Explosion and not fire is the proximate cause, within the meaning of the exception, if the only fire causing the explosion is from a match, Mitchell v. Ins. Co., 183 U. S. 42, 22 S. Ct. 22; Heiier v. Ins. Co., 144 111. 393, 33 N. E. 411; or a fuse, Phoenix Ins. Co. V. Greer, 61 Ark. 509, 33 S. W. 840; or a lamp, Briggs v. Ins. Co., 53 N. Y. 446; or lightning, German Ins. Co. v. Roost, 55 Ohio St. 581, 45 N. E. 1097; or a gas jet, United L. F. & M. Ins. Co. V. Foote, 22 Ohio St. 340; Home Lodge Assn. v. Queen Ins. Co. (So. Dak., 1907), 110 N. W. 778. But see Heffron v. Kittanninq Ins. Co., 132 Pa. St. 580, 20 Atl. 698 (fire caused by explosion of a lamp; underwriters held liable). A lightning clause should be obtained by the assured. It usually costs nothing. Lightning clause con- strued, Bea'es v. Phoenix Ins. Co., 143 N. Y. 402, 38 N. E. 453; Kettelmann v. Fire Asso., 79 Mo. App. 447; Warm- castle V. Scot. Union & Nat. Ins. Co., 201 Pa. St. 302, 50 Atl. 941, 59 Atl. 1105; Clark v. Franklin, HI Wis. 65, 86 N. W. 549. 2 Kiesel v. Sun Ins. Office, 88 Fed. 243, 31 C. C. A. 515; Foster v. Home Ins. Co., 74 C. C. A. 445, 143 Fed. 307; Nelson v. Traders' Ins. Co., 181 N. Y. 472, 74 N. E. 421. 3 London & L. Ins. Co. v. Crunk, 91 Tenn. 376, 23 S. W. 140; Ho7ne Mut. Ins. Co. V. Tomkies, 96 Tex. 187, 71 S. W. 814. And see Breuner v. L. & L. & G. Ins. Co., 51 Cal. 101. But it is said that if the building is simply blown off of blocks and turns over, the company is still liable, Teutonia Ins. Co. V. Bonner, 81 111. App. 231. With- out tins clause the company would be liable for loss of a building by fire unless before the fire started the build- ing had lost its character as such and had become a mere congeries of ma- terials in consenuence of a collapse, Nave V. Home Miit. Ins. Co., 37 Mo. 430, 90 Am. Dec. 394; Farrell v. Ins. Co., 66 Mo. App. 153; L. cfe L. & G. Ins. Co. V. Ende, 65 Tex. 118. * Leonard v. Orient Ins. Co., 109 Fed. 286. 48 C. C. A. 369, 54 L. R. A. 706; Friedman v. Atlas Assur. Co.. 133 Mich. 212, 94 N. W. 757; Davis v. Ins. Co.. 115 Mich. 382, 73 N. W. 393; Dow v. Fanevil Hall Ins. Co., 127 Mass. 346. MEMOKANDUM ARTICLES 375 The Massachusetts standard policy contains no similar provi- sion. § 280. Earthquake and Volcano Clause. — In California and in other localities an earthquake clause is sometimes employed.^ Its purpose is to relieve the compan}^ from loss caused by a convulsion of nature. A defense under this exception usually presents an issue of fact for the jury as to whether the fire in question ma}^ not have been proximately due to some other cause than the earthquake. The burden is on the insurer.- § 281. Memorandum Articles. — This company shall not be liable for loss to accounts, bills, currency, deeds, evidences of debt, money, notes, or securities; nor unless liability is specifically assumed hereon, for loss to awnings, bullion, casts, curiosities, drawings, dies, implements, jewels, manuscripts, medals, models, patterns, pictures, scientific apparatus, signs, store or office furniture or fixtures, sculpture, tools, or property held on storage or for repairs; nor beyond the actual value destroyed by fire, for loss occasioned by ordinance or law regulating construction or repair of buildings, or by interruption of business, manufacturing processes, or otherwise; nor for any greater proportion of the value of plate glass, frescoes, and decorations than that which this policy shall bear to the ivhole insurance on the building described. If the property enumerated in this memorandum clause were covered by the policy, the insurers would be subjected to claims of uncertain amount and sometimes difficult of verification. For ex- And a building may be shattered with- see Russell v. German F. Ins. Co., 100 out falling, Eppens v. Hartford Ins. Minn. 528, 111 N. W. 400; Ermen- Co., 99 App. Div. 221, 90 N. Y. Supp. trout v. Girard Fire & M. I. Co., 63 1035. The collapse of a building with Minn. 305, 65 N. W. 635, 56 Am. St. R. fires in active operation in furnaces, 485, 30 L. R. A. 346. In both of the stoves, or other appliances is apt to be last two cases a wall of the adjoining immediately followed by a conflagra- building fell over on the insured tion, therefore in such cases the vital premises as the result of a fire con- inquiry arises whether the fall or the fined to the adjoining building. But conflagration started first. In the one where seven days elapsed between the case the company is exonerated. In fire and the fall of the building it was the other it is liable. The testimony held that the loss by the latter was not is apt to be sharply conflicting. The the proximate result of fire, Gaskarth issue is one for the jury, and the burden v. Law Union Ins. Co., 6 Ins. L. J. of proof rests on the insurance com- 159 [Manchester (Eng.) Civil Court]; pany, Phevix Ins. Co. v. Luce, 123 Cuesta v. Ronal Ins. Co., 98 Ga. 720, Fed. 257, 60 C. C. A. 655; Western 27 S. E. 172 (fall of walls occurred Assur. Co. V. Mohlman, 83 Fed. 811, twenty-five davs after fire). Com- 51 U. S. App. 577, 28 C. C. A. 157; pare 7?w.5 hotel by a tenant;" in fact the building was used a.s a liouse of ill-fame; held, no forfeit- ure, Hall V. People's Miit. F . Ins. Co., (i (Jray (Mass.), 185. It is said in general that a false description of the material of which a building is con- structed avoids the policy, Parrish v. Rosebud M. & M. Co., 140 Cal. 635, 74 Pac. 312. But see Landes v. Sajetjj Mut. F. Ins. Co., 190 Pa. St. 536, 42 .\tl. 961; Farmers' Ins. & L. Co. v. Swjder, 16 Wend. (N. Y.) 481, 30 Am. Dec. lis. Misdescription as to division walls was held fatal, Xorthrup v. Piza, 43 App. Div. 284, 60 N. Y. Supp. 363, aff' d 167 N. Y. 578; Northrup v. Porter, 17 App. Div. SO, 44 N. Y'. Supp. 814. Erroneous statements as to the dis- tance of other buildings or exposures in the vicinity will avoid, Burritt v. .Saratoga Co. Mut. F. Ins. Co., 5 Hill (N. Y.), 188, 40 Am. Dec. 345; Jen- nings V. Chenango Co. Mid. Ins. Co., 2 Denio (N. Y.), 75; Keller v. L. & L. & a. Ins. Co., 27 Tex. Civ. App. 102, 65 S. W. 695. So also under Massachu- .setts statute, the risk being increased by the existence of the other buildings, Ring v. Phoenix Assur. Co., 145 Mass. 426, 14 N. E. 525. But see Dennison V. Ins. Co., 20 Me. 125, 37 Am. Dec. 42. Misstatement as to age of building was held fatal, Lama v. Dwelling House Ins. Co., 51 Mo. App. 447. Otherwise, Ror/ers v. Phcenix Ins. Co., 121 Ind. 570, 23 N. E. 498 (matter of opinion); Fddg v. Hawkeye Ins. Co., 70 Iowa, 472,' 30 N. W. 808; Manufacturers' & M. Ins. Co. v. Zeitinger, 168 111. 286, 48 N. E. 179, 61 Am. St. R. 105. But see Phoenix Ins. Co. v. Pic^ el, 3 Ind. App. 332, 29 N. E. 432. When the ap- plication calls for a disclosure of in- cumbrances, to mention only one of two mortgages avoids the policy, Toivne v. Fitchburg Mut. F. Ins. Co., 7 Allen (Mass.), 5i. An estimate of value of the insured property in the application is generally regarded as matter of opinion rather than fact which, if given in good faith, docs not avoid the policy, Wheaton v. Ins. Co., 76 Cal. 415; Helbing v. Svca Ins. Co., 54 Cal. 156, 35 Am. Rep. 72; Susque- hanna Mut. F. Ins. Co. V. Stoats, 102 Pa. St. 529. And see §111, supra. Especially is this the rule where the policy is open and not valued, Ins. Co. V. Phoenix Ins. Co., 26 Ind. App. 88, 59 N. E. 181. Construction under statutes making warranties representa- tions, Rosser v. Georgia Home Ins. Co., 101 Ga. 716, 29 S. E. 286. False and fraudulent statements regarding the character and origin of an insured painting alleged to be by Leonardo da Vinci avoided the policy. Wood v. Firemen's Ins. Co., 426 Mass. 316. 2 Hartford Protection Ins. Co. v. Harmcr, 2 Ohio St. 452, 59 Am. Dec. 684; Anderson v. Fitzgerald, 4 H. L. Cas. 484. In the case of a promissory warranty , circumstances may so change that the warranty will be held to be inapplicable; for example, if a loss occurs before the time for the fulfill- ment of the warranty has arrived, the loss will, nevertheless, be covered by the policy, Gloucester Mfg. Co. v. Howard Fire Ins. Co., 5 Gray (Mass.), 497, 66 Am. Doc. 376. A warranty of the existence of a force pump on the insured premises, at all times ready for use, implies that there is sufficient power to work the pump, Sayles v. A'. W. Ins. Co., 2 Curtis (C. C), 610. And .see Mechanics' & Traders' Ins. Co. V. Thompson, 57 Ark. 279, 21 S. W. 468. Where the insured, in answer to the question whether his title to the property was absolute, said "his de- ceased wife held the deed," it was held that there was a breach of warranty, because the answer was not full and true; the fact being that his wife, in whose employ he had been prior to marriage, had executed in his favor, after marriage, an instrument acknowl- edging an indebtedness, and stating SURVEY, ETC., WHEN A WARRANTY. 37Q So also it is highly important to observe that a warranty as to the description of the premises by reference to a plan, survey or other paper of a certain date, expressed or implied, is not neces- sarily a warranty that such description will be accurate in all its details as of a later date; and particularly where the policy contains a privilege to make additions.^ And if a map is referred to in the policy apparently for the purpose of showing the relative situation of buildings, descriptive words upon it as to use or contents should not be held to prevent a rearrangement of the contents.^ Sometimes in the "forms" or description in the policies as em- ployed from year to year in renewing insurance on a certain prop- erty, the phrase "as per plan on file," or "as per survey on file" is used, whereas in fact such a plan or survey, though correct at the time when it was made, may be quite incorrect in particulars at date of renewal. Where both parties know that such a plan is out of date, the court implies an intent to refer to it for purposes of identifi- cation or description rather than as a warranty.^ A written application means one signed by the assured or by his authority. An application blank, if neither signed nor authorized l)y the assured, but filled out, signed and turned in to the company by its agent, does not bind the assured, though the company may have relied upon it.^ Likewise a policy though expressly referring that it should be a lien upon her prop- Court said: "the survey is referred to erty, Rohrbach v. Germania Fire Ins. in that portion of the policy which is Co., 62 N. Y. 47, 20 Am. Rep. 451. written in and is plainly and simply Where the insured described his build- the means used to identify and de- ing as "two stories high," the main scribe the property to be insured, part of the building in fact being two This is the more apparent since the stories, but a small rear addition being reference by its terms refers to no only one story, the inaccuracy was particular survey, though three, made held to be no breach of warranty, at different times, of the same property, Wilkins v. Germania Fire Ins. Co., .57 Avere on file at the agent's office," Vilas Iowa, 529. A warranty that a room is v. A^. 1'. Central Ins. Co., 9 Hun warmed by a stove, and that the pipe (N. Y.), 121 ("if the application was is well secured, means that the room evidence for any purpose it informed is so warmed, and the pipe so secured, the defendant of the nature of plain- when the stove is in use; but not at tiff's title at its date"), other times, Loud v. Citizens' Mut. Ins. •* Blass v. Agricultural Ins Co 18 Co., 2 Gray (Mass.), 221. App. Div. 484, 46 N. Y. Supp. 392, ^Arlington Mfg. Co. v. Colonial aff'd 162 N. Y. 639, 57 N. E. 1104; Asstir. Co., 180 N. Y. 337 (plan on file Benninghoff v. Agricultural Ins. Co., 93 with broker referred to in policy). N. Y. 495; Mowry v. Agricultural Ins. And see Butterworth v. Western Assur. Co., 64 Hun, 137, 18 N. Y Supp 834 Co., 132 Mass. 489. A warranty of aff'd 138 N. Y. 642, 34 N. E. 512. A present use is not of necessity a war- false description of the property may ranty of continuance, § 112, supra. prevent a meeting of the minds and so ^ Fair v. Manhattan Ins. Co., 112 defeat the contract, 5anc?ers v. Cooper, Mass. 320. 115 N. Y. 279, 22 N. E. 212. An ap- ^ Clinton v. Hope Ins. Co., 45 N. Y. plication signed by the president of 454, aff'g 51 Barb. 647. The Supreme another insurance company was held 380 MEANING AND lAldM. i;i'Ki;nen'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. T 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," Pearlstein 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 source 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 innuiries are material and proper, Claflin 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 afterAvards, he will be ant 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, 43 111. 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 insured must make a reasonable effort to comply with the demand, called 1 7ns. Co. V. Weides, 14 Wall. (U. S.) 375 (cannot be compelled to state on what terms he settled with other com- panies); Titus V. Glens Falls Ins. Co., 81 N. Y. 410; Enos v. St. Paul Ins. Co., 4 S. D. 639, 57 N. W. 919. Whether the conduct of the insured, upon the examination, amounts to a disobedi- ence of the injunction of this clause, may be a question of fact for a jury, Phillips V. Protection his. Co., 14 Mo. 220; for, while logically, the sufficiency of the examination, and the relevancy of the auestions asked, would seem to present issues of law for the court to determine, Fleischner v. Beaver, 21 Wash. 6, 56 Pac. 840; and see North Am. Life & Ace. Ins. Co. v. Borroughs, 69 Pa. St. 43, 8 Am. Rep. 212, yet, in practice, courts are very reluctant to dismiss the complaint on surh grounds, and generally leave the ai'estion 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 dutv, 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 theie put raised a mixed auestion of law and fact). 2 Scottish Union & Nat. Ins. Co. v. Keene, 85 Md. 263, 37 Atl. 33; O'Brien y. 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, DoUojf V. Phoenix Ins. Co., 82 Me. 266 (fraud as to part vitiates the whole); Hamberg v. St. Paul 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' Mui. Ins. Co., 118 Mich. 640, 77 N. W. 275; or by examining his representative instead of the assured himself, Western Assur. Co. v. Mc- Glatherv, 115 Ala. 213, 22 So. 104. By the better authority, requiring examination and production of books and bills does not waive forfeitures, § 148, supra. ^ Jones v. Hovard Ins. Co., 117 N. Y. 103, 22 N. E. 578 (place of fire, a proper place when books are kept there); Fleisch v. Ins. Co. of N. A., 58 Mo. App. 596; Murphy v. North Brit. & 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. Wells Whip Co. V. Farmers' Mut. Fire Ins. Co., 209 Pa. St. 488, 58 Atl. 894. De- 118 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 compliance practica- ble.2 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 loriting of any two shall determine the amount of such 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 7ns. 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. Hartford Fire Ins. Co., 70 iSeibelv. Lebanon Ins. Co., 197 Fa.. Iowa, 704, 29 N. W. 411; Jones v. St. 106, 46 Atl. 851; Langan v. Ro^;al 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. F. Ins. American Cent. Ins. Co. v. Ware, 65 Co., 10 Wash. 361, 38 Pac. 1127. Ark. 336, 46 S. W. 129. ^ Mispelhorn v. Farmers' Ins. Co., 2 Farmers' Ins. Co. v. Mispelhorn, 53 Md. 473; O'Brien v. Commercial Fire 50 Md. 180, 53 Atl. 473; Stephens v. Ins. Co., 63 N. Y. 108; Langan v. Roval Union Assur. Soc, 16 Utah, 22, 50 7ns. Co., 162 Pa. St. 357, 29 Atl. 7i0. 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. 6 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. 7 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 alike, 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 under the terms of the policy, but would be revocable as at common law.^ ^Hamilton v. Phoenix Ins. Co., 61 Fed. 379, 9 C. C. A. 530 (reasonable time). Thus after disagreement if the company wants to avail 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; Baillie v. Western Assur. Co., 49 La. Ann. 658, 21 So. 736; Davis v. Atlas 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. 545 (reasonable time); Ran- dall 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); Davis 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. 7ns. 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, 43 111. 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; Swearinger v. 7ns. Co., 66 Mo. App. 90. A joint demand by eeveral companies for one appraisal 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 , Wtjnkoop v. Niagara Ins. Co., 91 N. Y. 478. 2 British- Am. Assur. Co. v. Darragh, 128 Fed. 890; Continental Ins. Co. v. Vallandingham, 25 Ky. Law Rep. 468, 76 S. W. 22; Hogadone v. Grayige Mut. his. Co., 133 Mich. 339, 94 N. W. 1045; Kelly 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. Phoenix Ins. Co., 135 Mich. 10, 97 N. W. 57; Fouble v. Pha-nix 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. 7ns. 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 Assur. Co. V. Hall, 120 Ala. 547, 24 So. 936; Willoughby 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 poUcy provides: In case of loss under tliis policy, and a failure of the parties to agree as to the amount of loss, it is mutually agreed that the amount of such 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 policy 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 public policy to oust provides that waiver shall not result, Hampshire, and South Dakota. In 5 314. Minnesota if total insurance on build- 1 Similarly by the N. J. General In- ing, exclusive of foundation, is less surance Act, § 79, application may be than insurable value srecified in policy, made to court for the appointment of insured need not submit to arbitration, appraisers. In like manner 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, 3 Gen. Ins. Act (1907), § 60. application may be made to the insur- * Hayes v. Milford Mut. F. Ina. Co., ance commissioner to appoint him. 170 Mass. 492, 49 N. E. 754. 2 For example, Minnesota, New & McDowell v. Mtna Ins. Co., 164 APPRAISERS COMPETENT, DISINTERESTED 421 the courts altogether of their jurisdiction.^ But the provision of the New York standard poUcy, 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 jury, Lamson Cons. S. S. Co. V. Prudential F. Ins. Co., 171 Mass. 433. 1 Sanjord v. Conn. Trav. Mut. Ace. Assoc, 147 N. Y. 326, 41 N. E. 694; Delaware & H. Canal Co. v. Penn Coal Co., 50 N. Y. 250; Reed v. Wash- ington Ins. Co., 138 Mass. 575; Clement V. British- Am. Assur. Co., 141 Mass. 298, 5 N. E. 847; Scott v. Avery, 20 English Law & Eq. 327, 5 H. L. Cases, 811. And see Chadwick v. Phoenix, etc., Assn., 143 Mich. 481, 106 N. W. 1122. 2 Hamilton v. Liverpool, L. & G. his. Co., 136 U. S. 242, 10 S. Ct. 945, 34 L. Ed. 419; Chainless Cycle Co. v. Security Ins. Co., 169 N. Y. 304, 62 N. E. 392 (which also holds that de- fault by assured is matter of defense to be alleged and proved by the com- pany); Phoenix Ins. Co. v. Lorton, 109 III. App. 63; Zalesky v. Home Ins. Co., 102 Iowa, 613, 71 N. W. 566; Continental Ins. Co. v. Vallandingham, 116 Ky. 287, 76 S. W. 22; Kersey v. Phosnix Ins. Co., 135 Mich. 10, 97 N. W. 57; Fisher v. Mer. Ins. Co., 95 Me. 486, 50 Atl. 282, 85 Am. St. R. 428; Grand Lodge v. Gaddis, 65 N. J. Eq. 1, 55 Atl. 465; Phoenix Ins. Co. v. Carnahan, 63 Ohio St. 258, 58 N. E. 805 (the right being absolute, motive or good faith in making the demand is immaterial); Palatine Ins. Co. v. Mor- ton, etc., Co., 106 Tenn. 558, 61 S. W. 787; Chapman v. Rockjord Ins. Co., 89 Wis. 572. 62 N. W. 422; Spurrier v. La Cloche (1902), A. C. 446, 450; Caledonian Ins. Co. v. Gilmour (1893), A. C. 85; London & L. Ins. Co. v. Honey, 2 Vict. L. R. (Law) 7 (nor is it any waiver of known defenses). But in certain states appraisal prior to award even under the standard forni of policy is held to be revocable by either party on the ground that on so important an issue a party must not be deprived of the protection of the courts, Hartford Ins. Co. v. Ho7i, 66 Neb. 555, 92 N. W. 746, 60 L. R. A. 436; Franklin v. A'eiv Hampshire his. Co., 70 N. H. 251, 47 Atl. 91; Needy v. German-Am. Ins. Co., 197 Pa. St. 460, 47 Atl. 739; Yost v. Dwelling House Ins. Co., 179 Pa. St. 381, 35 Atl. 517; Mentz v. Armenia Ins. Co., 79 Pa. St. 478, 21 Am. Rep. 80. Appraisal and award are not a condition precedent where a policy does not expressly make them so, Hamilton v. Ins. Co., 137 U. S. 370, 11 S. Ct. 133, 34 L. Ed. 708; Birmingham Fire Ins. Co. v. Pulver, 126 111. 329, 18 N. E. 804, 9 Am. St. R. 598; Seward v. Citv of Rochester. 109 N. Y. 164, 16 N. E. 348; Collins v. Locke, 4 App. Cas. 674. Where an ap- praisal has been demanded under the Massachusetts policy and those like it, an award, unless waived, is a condition precedent, Lamson Cons. S. S. Co. v. Prudential Ins. Co., Ill Mass. 433; Schrepfer v. Rockford Ins. Co., 77 Minn. 291, 79 N. W. 1005. ^ Re Opinion Justices (Me.), 55 Atl. 828. The assured must be careful not to remove or dispose of the property before the company has had a reason- able opportunity of making its elec- tion, and the appraisers an opportunity of investigation, Hamilton v. Ins. Co., 136 U. S. 242; Astrich v. German-Am. Ins. Co., 131 Fed. 13, 16; Reading Ins. Co. v. Egelhoff, 115 Fed. 393; Schrepfer V. Rockford Ins. Co., 77 Minn. 291, 79 N. W. 1005; Prov. Wash. Ins. Co. v. Wolf (Ind. App.), 72 N. E. 606; Davis V. Am. Cent. Ins. Co., 7 App. Div. 488, 40 N. Y. Supp. 248, aff'd 158 N. Y, 688 (perishable goods need not be kept long). 422 MEANING AND LEGAL EFFECT OF FIRE POLICY umpire must be competent and disinterested. "Disinterested" does not refer simply to an absence of pecuniary interest. A disinter- ested appraiser is one who is free from bias or prejudice towards cither party.' While theoretically the appraisers, it is said, are supposed to act in a quasi-judicial capacity and wholly without partisanship, both in their selection of umpire and in the conduct of the appraisal,- nevertiieless, in practice each appraiser is apt to be a zealous advocate before the umpire, to the end that the in- terests of the party appointing him may be advanced, and not over- looked; and within limits such an attitude seems to be recognized by the courts as legitimate and indeed unavoidable.' He is, however, a judicial officer rather than an agent and is under obligations to be fair and disinterested. The appointment of a biased or unsuitable appraiser, coupled with concealment of his character, is ground for vacating the award.'* But if, with knowl- edge of his objectionable disposition or lack of competency, a party proceeds with the appraisal, such conduct amounts to a waiver, and the award will be binding upon both parties.^ § 309. Scope of Appraisal, Entire Loss. — By the better reason and authority the appraisers are not simply to pass upon property partially damaged, some remains of which are left in sight, but as 1 Bradshaw v. Aqricultuml Ins. Co., 137 N. Y. 137, 32 x\. E. 1055; Produce Refrig. Co. v. Xorivich Union Fire Ins. Co.. 91 Minn. 210, 97 N. W. 875 ("the arbitration beinial his. Co. v. Parlin Co., 12 Tex. Civ. App. 572, 34 S. W. 401. Whether appraisers are competent and disinterested generally presents a ques- tion of fact for the jury, and this rule brings much advantage to the as- sured, Bradshaw v. Agricultural Ins. Co., 137 N. Y. 137, 32 X. E. 1055; National Ins. Co. v. O'Brvan, 75 Ark 211, 87 S. W. 129; Meyerson \: HaH- ford Ins. Co.. 17 Misc. 121, 39 N. Y. Supp. 329. ^ Hall V. We.'itern Assur. Co., 133 Ala. 637, 32 So. 257; Goodwin v. Merchants' Ins. Co., 118 Iowa, 601, 92 N. W. 894; Christianson v. Norm'ch Union F. Ins. Co., 84 Minn. 526, 88 N. W. 16. 3 Am. Cent. Ins. Co. v. Landau, 62 N. J. Eq. 73, 49 Atl. 738; Schmidt v. Boston Ins. Co., 82 App. Div. 234, 81 N. Y. Supp. 767. * Hall V. Western Assur. Co., 133 Ala. 637, 32 So. 257; Ins. Co. v. Hege- uald, 161 Ind. 631, 66 N. E. 902; Kiernan v. Dutchess Co. Ins. Co., 150 N. Y. 190, 44 N. E. 698; X. Y. Mut. S. & L. .Assoc. V. Manchester Assur. Co., 94 App. Div. 104, 87 N. Y. Supp. 1075; Kaiser v. Hambxirg-Brem. Ins. Co., 59 App. Div. 525, 69 N. Y. Supp. 344, aff'd 172 N. Y. 663, 65 N. E. 1118 (in which award was $3,031, and true damage 83,830.28). 5 Indiana Ins. Co. v. Brehm, 88 Ind. 578; Produce Refria. Co. v. Nnnoirh M. Ins. Assoc, 91 Minn. 210, 97 N. W. 875. The circumstance that the ap- praiser had frequently before acted for the company does not necessarilv dis- qualify him. Remington Paper Co. v. London Assur. Co., 12 App. Div. 218, 43 N. Y. Supp. 431; Stemmer v. Scot- tish Ins. Co., 33 Oreg. 65, 53 Pac. 498; SCOPE OF APFHAISAL, ENTIRE LOSS 423 well upon property totally destroyed.' The policy provides that they are to estimate not only the "damage" but also "the loss," meaning apparently the entire loss, and that, if an appraisal is de- manded, the loss is payable only when so estimated.^ The opposite rule is hopelessly indefinite as applied to personal property, and the cases standing for it ^ cannot be approved. They rely for support upon a case in a lower court, which construed a somewhat different form of arbitration clause; "* and they proceed upon the mistaken theory, announced in another case in a lower court, that appraisers, appointed as experts, are limited to a per- sonal inspection of the remains of the propert}^ to enable them to estimate sound values and damages.^ But it would be almost impossible, by means of inspection only, in most instances of dam- age to personal property, to arrive at any satisfactory solution of the preliminary inquiry, namely, what articles are so far intact that an intelligible estimate may be made of their sound value and damage. No expert, however wise and experienced, can by eye- sight alone fairly arrive at the sound value of a bedstead and the amount of money damage occasioned by its combustion, if nothing of it is left but its casters and springs. Moreover, the principal purpose of creating the appraisal clause would be defeated if the way were alwa3^s open to a dishonest claimant to evade its practical effect by swearing that the bulk of his property is burned out of sight, and is therefore not included in the award. ^ Van Winkle v. Continental F. Ins. Co., And see Kaiser v. Hamburg-Brem. Ins, 55 W. Va. 286, 47 S. E. 82. But such Co., 59 App. Div. 525, 69 N. Y. Supp. relationship siiould not be concealed 344, aff'd 172 N. Y. 663, 65 N. E. 1118; by the company, Cheney v. Martin, 127 Rutter v. Ins. Co., 138 Ala. 202, 35 So. Mass. 304. An indorser on a note of 33. the insured is not necessarily dis- 2 Williamson v. L. & L. & G. Ins. qualified, Bullman v. North Brit. & M. Co., 122 Fed. 59, 58 C. C. A. 241. Ins. Co., 159 Mass. 118, 34 N. E. 169. ^ Lang v. Eagle Fire Co., 12 App. ^ Stout V. Phoenix Assur. Co., 65 Div. 39, 42 N. Y. Supp. 539; Fe/K/ei v. N. J. Eq. 566, 56 Atl. 691; Rutter v. Western Assur. Co., 21 Misc. 348, 47 Hanover Fire Ins. Co., 138 Ala. 202, N. Y. Supp. 141; L. & L. & G. Ins. Co. 35 So. 33 (1903); Adams v. N. Y. v. Colgin (1896, Tex. Civ. App.), 34 Boirerii Ins. Co., 85 Iowa, 6, 51 N. W. S. W. 291. 1149; Chippeira L. Co. v. Phoenix Ins. * Rosemvald v. Phoenix Ins. Co.. 50 Co., 80 Mich. 116, 44 N. W. 1055; Hun, 172, 5 N. Y. Supp. 215. Schrepfer v. Rockford Ins. Co. , 77 Minn. 5 Fleming v. Phoenix Ins. Co. , 75 291, 79 N. W. 1005; Mossne.ss v. Ger- Him (N. Y.), 530. See later case, wan-Am. Ins. Co., 50 Minn. 347; Kaiser v. Hamhurg-Bremen Ins. Co., Hervdnn v. Imverial Fire Ins. Co., 110 59 Apn. Div. 525, 69 N. Y. Supp. 344. N. C. 279, 14 S. E. 742: Conn. F. Ins. aff'd 172 N. Y. 663, 65 N. E. 1118. Co. V. Carvnhnn, 63 Ohio St. 258, 58 « In like manner the appraisers and N. E. 805; Palatine Ins. Co. v. Morton- umpire may determine the issue Scott-Rnhertson Co., 106 Tenn. 558, 61 whether there has been a total loss, S. W. 787; Hong Sling v. Scottish U. & Williamson v. L. & L. & G. Ins. Co., Nat. Ins. Co., 7 Utah, 941, 29 Pac. 170. 122 Fed. 59; Yendel v. Western Assur. 124 MEANING AND LEGAL EFFECT OF FIRE POLICY § 310. Conduct of Appraisal.— No very definite code of regula- tions for the guidance of umpire and appraisers can be deduced from the many decisions upon the subject. The rigid common-law rules of evidence and court procedure do not apply. ^ Nor is the appraisal precisely the same as an ordinary common-law arbitra- tion; ' but it is rather intended to afford a simple, informal, and speedy remedy ^ to be applied prior to the removal of the remains. Nevertheless the umpire and appraisers occupy very much the same position, and owe substantially the same duty, as common-law arbitrators; therefore, above all things, they must act fairly, with- out bias, and in good faith. ^ The policy does not dictate as to the character of evidence that may be received.^ Consequently in proper cases the arbitrators, if left to pursue their own methods, may content themselves with a personal inspection of the damaged property without further evi- dence,^ or they may call in an expert on their own account to aid Co., 21 Misc. 348, 47 N. Y. Supp. 141. The written appraisal agreement usu- ally exchanged after the fire covers the entire loss and the award under it is conclusive as to the amount of loss, and must correspond with the scope of the submission, Rutter v. Hanover Ins. Co., 138 Ala. 202, 35 So. 33; Georgia Home Ins. Co. v. Kline, 114 Ala. 366, 21 So. 958. But the policy provides for no such written agree- ment, and the assured is not bound to exeoite one, Walker v. German Ins. Co., 51 Kan. 725. If the parties exe- cute an agree iient which is not in ac- cord with the terns of the policy, svich agreement may nevertheless be bind- ing after award, as a common-law arbitration, or as an agreed modifica- tion of the policy provisioi, Broadivay Ins. Co. V. Djiinj, 55 N. J. L. 569, 27 Atl. 927; Mont JO ner'i v. Am. Cent. Ins. Co., 108 Wis. 146, 84 N. W. 175 (forms of agreement and award are given in full). Bat before award, a common- law arbitratioi is revocable, Harrison v. Hartford Fire Ins. Co., 112 Iowa, 77, 83 N. W. 823. The execution of an agreement differing from the terms of the_ policy amounts to a waiver of the policy clause, Davis v. Atlas A.^sjtr. Co., 16 Wash. 232, 47 Pac. 436, 16 Wash. 2.i3, 47 Pac. 485. If a written agreement of appraisal is executed, its terms cannot be varied by ante- cedent or contemporaneous conversa- tions, Riitter V. 7ns. Co., 138 Ala. 202, 33 So. 33. If there have been two fire losses unadjusted, any appraisal must cover both. Mechanics' Ins. Co. v. Hodqe, 149 111. 298, 37 N. E. 51. 1 Vincent v. German Ins. Co., 120 Iowa, 272, 94 N. W. 458. 2 Stout V. Phccnix Ins. Co., 65 N. J. Eq. 566, 570. ^ Farrell v. German Ins. Co., 175 Mass. 340, 347, 56 N. E. 572. •* Kaiser v. Hamhurg-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 Asstir. Co., 164 N. Y. 381, 58 N. E. 284; Uhrig v. Williamsburgh 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. ^ Stromc V. London Assur. Corp., 20 App. Div. 571, 47 N. Y. Supp. 481. ^ Hall V. Norwalk Fire Ins. Co., 57 Conn. 105, 17 Atl. 3.56; Vincent v. German Ins. Co., 120 Iowa, 272, 94 N. W. 458; Ins. Co. v. Pm/ne, 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 poHcy affirmatively 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 Mut. & L. A. v. Manchester ^ Redner v. A-. Y. Fire his. Co., 92 Fire Assnr. Co., 94 App. Div. 104, 87 Minn. 306, 99 N. W. 886; Phoenix Ins. N. Y. Supp. 1075; Schmitt v. Boston Co. V. Moore (Tex. Civ. App.), 46 7ns. Co., 82 App. Div. 234, 81 N. Y. S. W. 1131; Van Wirilde 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 alaide by jected"). Formal notice to the as- award, see Christiansen 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; Reminaton 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; portiir>ity to present his facts, Conti- Continental Ins. Co. v. Garrett, 125 vevtnl Ins. Co. v. Garrett, 125 Fed. 589; Fed. 589, 60 C. C. A. 395. Stovt V. Ph'erix Assur. Co., 65 N. J. ^ Farrell v. Germ an- American Ins. En. 566, f6 Atl. 691 : Coovs v. Coons, Co., 175 ^'nss. 340, 56 N. E. 572. 95 Va. 434, 28 S. E. 885, 64 Am. St. R. 7 Contivental Ins. Co. v. Garritt, 125 804. Fed. 589, 60 C. C. A. 395. ^ Strome v. London Assur. Corp., 20 ^ Michels v. Western Undernriters' App. Div. (N Y.) 571, 47 N. Y. Supp. Assoc, 129 Mich. 417, 89 N. W. 56 •126 MEANING AND LEGAL EFFECT OF FIRE 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 liable 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 legitimate 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 Prov. Wash. Ins. Co. v. Board of 49 Atl. 7.38. In one case the court con- Education, 49 W. Va. 360, 38 S. E. 679. eluded that an umpire had sufficiently ^ Smith 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., 88 App. Div. 323, 83 N. Y. Supp. shut himself up in his room with 903, aff'd 178N. Y. 631, 71 N. E. 1140. clerks, and split the difference be- 3 Kearne'i v. Washtenaw Mid. F. I. tween the estimates of the appraisers, Co., 126 Mich. 248, 85 N. W. 733. Hartford Fire Ins. Co. v. Bonner Mer. i Adams v. ^f. Y. Bouery 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, Farrell 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 6 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. 45S; Broadwav Ins. Co. v. N. W, 16; Stro-ne v. London Assur. Dovinq, 55 N. J. L. ,569, 27 Atl. 927; Corp., 20 Apo. 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. Trauh, 83 Md. 142 N. Y. 667, 37 N. E. 570. Each 524, 35 Atl, 1.3 (holding, also, that if appraiser is entitled to a reasonable one aporaiser withdrew before his work comt^ensation, 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. 726. UNFINISHED 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. German-Am. Ins. Co., 113 Iowa, 726, 84 N. W. 717; Caledonia Ins. Co. v. Trauh, 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. Tra2ib, 8(5 Md. 86, 37 Atl. 782; Broad- way Ins. Co. V. Doying, 55 N.J. L. 569, 27 Atl. 927. But see Franklin v. A'. //. Fire Ins. Co., 70 N. H. 251, 47 Atl. 91. 2 Uhriq v. Williamsbunjh City Fire Ins. Co.', 101 N. Y. 302, 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. Affricultural Ins. Co., 130 N. Y. 488, 59 N. E. 844; Bradshaw v. Aqricultural Ins. Co., 137 N. Y. 137, 32 N. E. 1055; Austen v. Niagara Ins. Co., 16 App. Div. 86, 45 N. Y. Supp. 106; Niaqarn Ins. Co. v. Bishop, 49 111. Anp. 388; Fotrtde v. Phoenix Ins. Co., 106 Mo. Anp. .527, 81 S. W. 485; Carp V. Qyern In'^. Co., 104 Mo. App. 502, 79 S. W. 757; Braddv v. A^. Y. Bovery Ins. Co., 115 N. C. 354, 20 S. E. 477; Chapman v. Rock ford Ins. Co., 89 Wis. 572, 62 N. W. 422,28 L. R. A 40? "* Davenport v. 7ns. Co., 10 Daly, 535; Vernon Ins. Co. v. Maitlen, 158 Ind. 393, 63 N. E. 755 (appraisers could not agree on umpire, held, no excuse for breach of condition); Westenhaver v. German-Am. Ins. Co., 113 Icwa, 726, 84 N. W. 717 (failure to agree on um- pire no excuse for lack of award); Fisher v. Merchants' Ins. Co., 95 Me. 480, 50 Atl. 282 (must arbitrate or give good legal excuse); Kerseij v. Phoenix 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; Williains 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 shouUl not de- cline to aopomt another, O'Rourke v. German Ins. Co. (Minn., 1905), 104 N. W. 900. If it does so decline it waives its right to an aprraisnl, Niag- ara Ins. Co. v. Bishop, 154 111. 9, 39 N. E. 1102, 45 Am. St. R. 105: Brock v 7ns. Co., 102 Mich. 583, 61 N. W. 67, 26 t R, A. 623, 47 Am. St. R. 562; 428 MEANING AND LEGAL EFFECT OF FIRE 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 rid 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 implication 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 liability 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.® McCullough 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. 1 Western Assur. Co. v. Decker, 98 St. 268. 57 Atl. 573. Fed. 381, 39 C. C. A. 383, Sanborn, J., ■» Rutter 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. 9.36; Bernhard 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 ag;reement 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. Starrs, 71 Fed. 120, 17 C. C. A, praisal and nominate his appraiser, 645; Hall v. Norualk F. Ins. Co., 57 and the company refuse to nominate Conn. 105, 17 Atl. 356; S-pringfield F. one, no binding award can be made, & M. Ins. Co. v. Payne, 57 Kan. 291, Penn. Plate Glass Co. v. Ins. Co., 189 46 Pac. 315. The award was pre- Pa. St. 255, 42 Atl. 138. sumed to cover also a question of ap- 2 Baumgarth v. Firemen's Fund Ins. portionment in Cassidv v. Ro- al Exch. Co. (Mich., 1908), 116 N. W. 449; Ver- Assn., 99 Me. 399, 59 Atl. 549. non Trust Co. v. Maitlen, 158 Ind. ^ Soars v. Home Ins. Co., 140 Masa 393. 343, 5 N. E. 149. SETTING ASIDE AWARD 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 unlawful, 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 Giles 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. ^Michels v. Assoc, 129 Mich. 417, 89 N. W. 56; Kearney v. Washtenaw Ins. Co., 126 Mich. 246, 85 N. W. 733; Stemmcr v. Scottish Ins. Co., 33 Oreg. 65, 53 Pac. 498; Strome v. London Assnr. 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. * Billmver v. Ins. Co., 57 W. Va. 42, 49 S. E. 901. 5 Kaiser v. Ins. Co. , 59 App. Div. 525, 69 N. Y. Supn. 344, aff'd 172 N. Y. 663, 65 N. E. 1118 Ooss $3,930; award $3,031); Strome v. London Assur. Co., supra; N. Y. Mvt. S. & L. A. v. Manchester Fire Assur. Co., 94 Arp. Div. 104, 87 N. Y. Snpp. 1075 (Iofs $1,300; award $1,032); Ins. Co. ofN.A. V. Hegewald, 161 Ind. 631, 66 N. E. 902 (award less than one-half the loss) ; Vincent v. German 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. Greenwich Ins. Co., 137 N. C. 402, 49 S. E. 889 (award $73.50; loss $750). 7 Prov. Wash. Ins. Co. v. Board of Education, 49 W. Va. 360, 38 S. E. 679. ^ Mosness v. Germa7i-Am. Ins. Co., 50 Minn. 341, 52 N. W. 932; Stemmer v. Scottish U. Ins. Co., 33 Oreg. 65, 53 Pac. 498; Canfield v. Watertown Ins. Co., 55 Wis. 419; and see Hart v. Kenney, 47 N. J. Eq. 51, 20 Atl. 29. 9 Prov. Wash. Ins. Co. v. Board of Education, 49 W. Va. 360, 38 S. E. 679; Clover v. Greenuich Ins. Co., 101 N. Y. 277, 4 N. E. 724. ^0 Hills V. Home Ins. Co., 129 Mass. 345 (in which two out of three pre- judged the case on ex parte testimony); Svrinq-field F. & M. Ins. Co. v. Paijne, 57 Kan. 291, 46 Pac. 315. 11 Rrr'vnr v. ,V. Y. Fire Ins. Co., 92 Minn. 306, 99 N. W. 886; Schreiber v. German-Arn. Ins. Co., 43 Minn. 367; and see § 310, swpra. 43U MEANING AND LEGAL EFFECT OF FIRE POLICY ulcnt concealment of books and inventory or ether 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 plaintiff altogether,^' or f .r 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 2 Adams v. .V. Y. Bowery Ins. Co., Ins. Co., 75 App. Div. 226, 78 N. W. 85 Iowa, 6, 51 N. W. 1119: Am. F. Ins. Supp. 44; Bellinger v. German Ins. Co., Co. V. Bell, 33 Tex. Civ. App. 319, 75 95 App. Div. 262, 88 N. Y. Supp. 1022; S. W. 319; Phmnix Ins. Co. v. Moore Davis v. Atlas Assur. Co., 16 Wash. (Tex. Civ. App.), 46 S. W. 1131; Hong 232, 47 Pac. 436; Canfieldv. Watertown Sling V. Ins. Co., 7 Utah, 441, 27 Pac. Ins. Co., 55 Wis. 419, 13 N. W. 252. 170. 6 Continental Ins. Co. v. Garrett, 125 3 See § 310. Fed. 589, 60 C. C. A. 395; Robertson v. ^Hanover F. Ins. Co. v. Lewis, 28 Ins. Co., 68 Fed. 173; Ga. Home Ins. Fla. 209, 10 So. 297; Bates 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 Orep;. 154, Townsend v. Greenwich Ins. Co., 86 77 Pac. 123; Billmyer v. Hamburg- 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; Garrebrantv. 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, Montiomeni 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. Phoenix Ins. Co., 124 118 Iowa, 601, 92 N. W. 894. App. Diiv. 241. PRO RATA CLAUSE — OTHER INSURANCE 431 after the notice of ascertainment, estimate, and satisfactory proofs have been received, inclvding 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 polic}' 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 Clause — 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 such property; and the extent of the application of the insurance under this policy, or of the contribution 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; ^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, BoruszewsH v. Middlesex Mut. Assnr. see § 145, swpra. Co., 186 Mass. 589, 72 N. E. 250. * Lesure Lumber Co. v. Mutual Ins. Complaint should show that sixty Co., 101 Iowa, 514, 70 N. W. 761 432 MEANING AND LEGAL EFFECT OF FIRE POLICY 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 under 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."* Injauenced 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 attitude 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 paj's in full, and no question of apportionment arises). 1 Fireman's Fund Ins. Co. v. Pala- tine (Cal., 1907), 88 Pac. 907 (each policy independent); Hanover F. Ins. Co. V. Brown, 77 Md. 64, 72, 25 Atl. 989, 27 Atl. 314; Ca.ssil>^ v. New Or- leans Ins. Assoc, 65 Miss. 49; North Brit. & M. Ins. Co. v. L. & L. & G. Ins. Co. (1877), 5 Ch. D. 569, 581; West of Eng. F. Ins. 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 F. Ins. Co. v. Weed, 55 Neb. 146, 151, 75 N. W. 539 (cases cited); West. Assur. Co. v. Phelps, 77 Miss. 625, 27 So. 745. ^ Godin 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; Gaudy 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 his. Co. v. Pekor, 106 Ga. 1, 11,31 S. E. 779. 4 Thus after judgments were ob- tained and settlements made with various companies by authority of Arlington Co. v. Colonial Assur. Co., 180 N. Y. 3.37, 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- sion subsequently decided that the policy of one company, though in the same terms, did not cover the build- ing burned, Arlington Co. v. Empire Citv Ins. Co., 116 App. Div. 458, 101 N. Y. Supp. 772. 5 Schmaelzle v. London & Lan. Ins. Co., 75 Conn. 397, 53 Atl. 863; Under- writers' Ins. Co. V. Powell, 94 Ga. 359, 21 S. E. 565; Am. Cent. Ins. Co. v. Landan, 56 N. J. 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 liability 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 under 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. — Policies 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 uncan- * Virginia Chemical Co. v. Ins. 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 Citi/ of Albert Lea V. Nielsen, 83 Minn. 246, 86 N. W. 83. 2 Fegelson v. Niagara Fire Ins. Co. , 94 Minn. 486, 103 N. W. 495 (six com- panies, but Minnesota standard clause does not contain the words "valid or invalid"); Pretzf elder v. Merchants' Ins. Co., 116 N. C. 491, 21 S. E. 302; Fuller V. Detroit F. & M. Ins. Co., 36 Fed. 469, 1 L. R. A. 801 (nine companies). 3 Hartford F. Ins. Co. v. Post, 25 Tex. Civ. App. 428 (two companies im- properly joined); BardueU v. Conicay 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 other which may enable the insured to claim or recover for a larger valuation or amount of loss"). 4 Fireman's Fund Ins. Co. v. Palatine (Cal., 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 (imma- terial that others have paid the whole loss); Ins. Co. v. Tumbull, 86 Ky. 236, 5 S. W. 542; Hanover Ins. Co. v. Broicn, 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; Fitzsimmons 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 Ins. Co., ,50 N. Y. 388, 390. It is the duty of the assured after loss to disclose all other insurance, Teidonia Ins. Co. v. Bussell (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 Ins. Co., 10 W. Va. 507. 5 Straus v. Hoadley, 23 App. Div. 360. See § 11, supra. ^Rogers v. ^tna Ins. Co., 76 Fed. 569. 7 See discussion of other insurance, §§ 252, 253, supra; Niagara F. Ins. 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 pohcy or by a mort- gagee clause attached to the mortgagor's pohcy, 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. 499, 28 N. E. 2 Home Ins. Co. v. Koob, 113 Ky. 919; Lowell Mfj. Co. v. Safejuard Ins. 360, 68 S. W. 453; Eddy v. London Co., 88 N. ^. 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. E. 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. Phoenix Ins. Co., 52 Me. 333; Scottish, Ins. Co., 116 App. Div. 723, 102 N. Y. etc., Assn. v. Northern Assur. Co., 11 Supp. 82. For definition of excess S. S. C. 287, 4th series, 21 vSc. 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. -V. Im. Co., 65 App. Div. 70, 72 N. Y. 3 Hine v. Wooh'-orth, 93 N. Y. 75; Supp. 732, reversed on another point, Hastinqs 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 avithority of Australian, etc., Co. \. Saunders {\S15), insured is no insurance at all, London 10 C. P. 668. & Lan. Ins. Co. v. Turnbull, 86 Ky. * Kellner v. Fire Asso., 128 Wis. 233 230, 5 S. W. 542. Assured cannot take (many cases cited in briefs and opin- insurance on one item of the policy and ion). apply it to another item, J^tna Ins. Co. s California Ins. Co. v. Union Com- V. Ghxsgow, 107 Ky. 77, 52 S. W. 975 press Co., 133 U. S. 387, 10 S. Ct. 365; POLICIES WITH NONCONCURRENT TERMS 435 the properties described in the different pohcies be the same; it is enough, in most jurisdictions, if they are in part the same.^ The other insurance may cover less,^ or it may cover more; ^ but, un- fortunately for the assured, pohcies that have been avoided for breach of warranty must be included in the category of other in- surance,"* and so must those of insolvent companies. § 317. Policies with Nonconcurrent Terms. — On the back of almost every policy is printed the following warning: "It is im- portant that the written portions of all policies covering the same property read exactly alike. If they do not they should be made uniform at once." ^ Where, in accordance with this warning, the different policies contain similar terms, and are identical in their descriptions of the property covered, there is usually little em- barrassment in dividing the loss proportionately among them; ^ but when the policies cover only in part the same property, or con- Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S. 527; Home Ins. Co. v. Minn., St. Paul & M. R. R. Co., 71 Minn. 296, 74 N. W. 140; Ferguson v. Pekin Plow Co., 141 Mo. 161, 42 S. W. 711. Any balance above his own in- terest the party named must hold in trust for the others, see cases supra and Hough v. Peoples' Fire Ins. Co., 36 Md. 398; Roberts v. Fire Ins. Co., 165 Pa. St. 55, 30 Atl. 450; Southern Cold Storage Co. v. Dechnan (Tex. Civ. App.), 73 S. W. 545. The owners or others in interest are entitled to full and equal benefit with the insured named, in proportion to their interests, Johnston V. Abresch Co., 123 Wis. 130, 101 N. W. 395 (1904); Snow v. Carr, 61 Ala. 363; Liter v. Marrs, 13 Pa. St. 220. The modern coinsurance clause is likely to drive the common carrier, warehouse- man, etc.. into the position that he had no intention of insuring more than his own interest and liability. In this the courts will aid the insured as far as the language of the policy will permit. 1 Corlery v. Security Ins. Co., 99 Iowa, 382, 68 N. W. 792. See many cases next section and § 252, notes, supra. Contra, Pennsylvania, which seems to stand very much alone, Clar'e v. Western Assur. Co., 146 Pa. St. 561 , 23 Atl. 248; W. Branch Lum- bermen's Exchange v. Am. Cent. Ins. Co., 183 Pa. St. 366, 38 Atl. 1081; Meigs v. Ins. Co. of N. A., 205 Pa. St. 378, 54 Atl. 1053. On the same facts the Federal court concluded that the Pennsylvania court was clearly wrong, Meigs v. London Assur. Co., 126 Fed. 781. But see United Underwriters' Ins. Co., 94 Ga. 359, 21 S. E. 565. 2 A'^. J. Rubber Co. v. Commercial Union Ins. Co., 64 N. J. L. 580, 582, 46 Atl. 777 ("concurrent insurance is that which to any extent insures the same interest, against the same casualty, at the same time as the primary insur- ance, on such terms that the insurance would bear proportionately the loss happening within the provisions of both policies"). 3 Washburn, etc., Co. v. Merchants', etc., Ins. Co., 110 Iowa, 423, 81 N. W. 707. * Rickerson v. German-Am. Ins. Co., 6 App. Div. 550, 39 N. Y. Supp. 547; Bateman v. Lumbermen's Ins. Co., 189 Pa. St. 465, 42 Atl. 184; Gandy v. Orient Ins. Co., 52 S. C. 224, 29 S. E. 655. Unless a statute intervenes, Gurnett v. Atlas Mut. Ins. Co., 124 Iowa, 547, 100 N. W. 542. For exam- ple, Iowa Code, § 1746. 5 A broker usually employs a uni- form printed rider for the one set of policies. 6 Thus defendant's policy was for $3,000, other insurance $7,000, whole loss $6,250, sound value $9,274.62. Defendant pays $1,875, to wit, three- tenths of the loss, Eacrett v. Gore, etc. Ins. Co., 6 Ont. L. R. 592. 436 MEANING AND LEGAL EFFECT OF FIRE POLICY tain different and inconsistent provisions applicable to the one loss, it may readily be seen that it becomes a difficult matter to deter- mine the amount of liability under each policy.^ Thus where the policy in suit contains no coinsurance clause, but the other policy does contain such a clause, the question arises which, under the pro rata clause of the policy in suit, shall be con- sidered the amount of the other policy, the whole face amount or the amount operative as insurance, to wit, the amount resulting after the application of the coinsurance clause? Two courts, one in the East, the other in the West, deciding the matter in favor of the companies gave the same answer on the same day, "the whole face amount of the other policy is the amount intended." ^ Two lower courts, perhaps more in harmony with analogous decisions, in con- struing the meaning of the same phrase "whole insurance" as used in the apportionment clause,' have come to the opposite conclusion.'* 1 See discussion, Bunyon (5th ed.), ch. IX. 2 Farmers' Feed Co. v. Scottish U. & N. Ins. Co., 173 N. Y. 241, 65 N. E. 1105 (reversing five judges below. The Court of Appeals cites no cases in point, and says "the question is new"); Stephenson v. Agricultural Ins. Co., 116 Wis. 277, 93 N. W. 19. That portion of the reasoning adopted in the opinions of both these cases to the effect that the assured had agreed to become a coinsurer to some amount is not in itself convincing, because certainly no such agreement had been made with the defendant, but, if at all, only with the other company, Kansas City Co. V. Am. F. Ins. Co., 100 Mo. App. 691, 75 S. W. 186. The plaintiff might offer the counter arguments: (1) that the main promise of the defendant is that the plaintiff shall enjoy a full actual indemnity up to the amount of the policy in suit undisturbed by any doctrine or extraneous agreement re- garding coinsurance not contained in the policy in suit; and (2) that the exigencies of business in many in- stances call for nonconcurrent policies and that underwriters who have worded the policies are responsible for the lack of clearness in this regard; (3) that other insurance is not taken into account in fixing the rate of premium, and that if the defendant gains the benefit of any after the loss it is a piece of pure good luck. Nor perhaps is it correct to say that such an agreement to become coinsurer is ever made by virtue of the standard coinsurance clause though such a stipu- lation was contained in earlier forms, Chesebrough v. Home Ins. Co., 61 Mich. 333, 28 N. W. 110. The provision of the standard clause "is merely a mode of fixing the proportion to be paid by the defendants;" so stated in Quinn V. Fire Association, 180 Mass. 560, 562, 62 N. E. 980. In the defendant's policy there was no such clause either in the Farmers' Feed Co. case or in the Stephenson case. 3 Schmaelzle v. London & Lan. Ins. Co., 75 Conn. 397, 53 Atl. 863 (must adopt the method that will give full indemnity); Baltimore F. Ins. Co. v. Loney, 20 Md. 20; Angelrodt v. Dela- uare Ins. Co., 31 Mo. 593 (must adopt the method that will make the loss good); Deming v. Merchants' Cotton Co., 90 Tenn. 306, 347, 17 S. W. 89 ("in no case will contribution be en- forced so as to deny indemnity''); Sloat V. Royal Ins. Co., 49 Pa. St. 14, 88 Am. Dec. 77; Sherman v. Madison Mut. Ins. Co., 39 Wis. 104 (the other policies must make good the reduction); Bun- yon, Ins. (5th ed.), 303. Lord Mans- field said: "In no case must the con- tribution clause be construed in such a manner as to throw loss upon the in- sured, against which he would have * Farmers' Feed Co. v. Scottish U. & N. Ins. Co., 65 App. Div. 70, 72 N. Y. Supp. 732 (five judges); Armour Pack- ing Co. V. Reading Fire Ins. Co., 67 PARTIALLY CONCURRENT APPORTIONMENTS 437 §) 318. Partially Concurrent Apportionments.— A difficult class of problems is frequently presented for adjustment, where blanket or general insurance, covering the larger range of property, is called upon to contribute with specific or less general insurance, covering a part or several parts of the same property. These problems relate to a subject known as "partially concurrent apportionments." Thus suppose, for convenience of illustration, that a common carrier has a blanket policy on all the property, "his own, or held in trust," which happens to be located on his pier. At the time of a fire, stacked up on dif!"erent sections of the pier, are shipments of cotton, jute, coffee, and sugar, just arrived and belonging to four consignees, respectively, each of whom, at the time of the fire, has som.e specific insurance on his own property. The fire injures all the shipments, and the aggregate insurance exceeds the loss. The owner of each shipment brings separate action upon his specific policy; and each defendant in turn claims for itself the benefit of the full face of the blanket policy as a contributor towards its particular loss, hoping thereby greatly to reduce it. How, in such an instance, shall the loss be apportioned by the court as between each specific policy and the blanket insurance? The same sort of question arises where a merchant or manufacturer, or other owner, has both blanket and specific insurance running directly in his own favor, and covering only in part the same property. been fully protected had the policies by nonconcurrence of policies, if the been free from that clause," Godin v. aggregate of the insurance exceeds the London Assur. Co., 1 Burr. 489. And loss. (2) That a coinsurance clause see Lucas v. Jefferson Ins. Co., 6 Cow. serves its purpose if it is a guaranty (N. Y.) 635. In an interesting appor- that at least the benefits of full insur- tionment by the arbitration committee ance are secured. (3) That a floating of the New York Eoard of Tire Under- policy, with condition that it shall not writers, growing out of a fire in the attach until all specific insurance is Rossiter stores in New York City, some exhausted, cannot be held by reason years ago, but not under the present of nonconcurrence of specific policies, form of coinsurance clause, the ar- save for the excess of the aggregate bitrators laid down these principles amount covered by all such non- which they considered fundamental. concurrent policies." "(1) That the insured shall not suffer Mo. App. 215 (unanimous). As to the may make the apportionment clause effect of three-fourths value clause, inoperative, Havens v. Germania Ins. see Haley v. Dorchester Ins. Co., 12 '^o., 123 Mo. 403, 27 S. W. 718, 135 Mo. Gray (Mass.), 545; Millis v. Scottish (549, 37 S. W. 497. Some courts hold U. & N. Ins. Co., 95 Mo. App. 211, 68 that the complaint need not state other S. W. 1066. As to effect of limit of loss uiaurance, Jitna Ins. Co. v. McLead, 57 on any one article, see Golde v. Whifh- Kan. 95, 45 Pac. 73; Ermentrout v. -pie, 7 App. Div. 48, 39 N. Y. Supp. American Ins. Co., 60 Minn. 418, 62 964. As to excess floaters, see Macon N. W. 543. Contra. Coats v. West In^. Co. V. Poirell, 116 Ga. 703, 43 Coast F. & M. Ins. Co., 4 Wash. 375, S. E. 73; Fairchild v. L. & L. & G. Ins. 30 Pac. 404. And see Continental Ina. Co., 51 N. Y. 65. Valued policy law Co. v. Coona, 14 Ky. L. Rep. 136. 438 MEANING AND LEGAL EFFECT OF FIRE POLICY The courts have never agreed upon any uniform and clearly de- fined set of rules to be applied to all the varying conditions presented in such and similar cases. Shall the blanket be piled up to its full amount, successively, on the various classes or parcels of property sustaining the loss, so that the whole of it shall contribute with each specific policv, or, before seeking to apportion the loss, shall the more general insurance be first distributed in some way either among all the classes or parcels of property which it covers, or among those only which have sustained damage, or among those only which need it, or among those which most need it, and if so, in what way shall it' be distributed? In other words, what is the "whole insur- ance," both general and specific, upon the classes of property or items damaged, the policies nowhere defining the phrase. In search- ing for an answer to these practical inquiries, we find it impossible to^harmonize the decisions of the courts or the views of experts. One principle, however, the courts seem to hold in common, to wit, that, unless the express phraseology of the policies prohibits,^ the contribution clause ought not to be so applied as to diminish the protection of the insured; since usually the insurer fixes the amount of his premium regardless of other insurance, and if, after the fire, he happens to find other insurance which relieves him in part from his liability, it is a piece of pure good fortune. His principal engage- ment is to pay the loss in full up to the face of his policy, and the insured has given no promise to take out or to keep up other in- surance.^ Where, however, the apportionment involves only what is called simple nonconcurrence, that is, where only one of the several classes of property covered by the blanket policy is also covered by specific insurance, two rules have been adopted by the courts, which when the facts warrant may be invoked to determine the proper appor- tionment. These rules are as follows: First, the full amount of the blanket or general policy must contribute with the specific policy to pay the loss on property covered by the specific policy where this i As in Kansas Citii , etc. , Co. v. Am. 863; Niagara Ins. Co. v. Heenan, 81 F./ns. Co., 100 Mo. App. 691,75 8. W. III. App. 678, aff'd 181 III. 575, 54 186. The modern coinsurance clause N. E. 1052; Illinois Mid. Ins. Co. v. powerfully affects the question and Hoffman, 132 111. 522, 24 N. E. 413; renders impracticable some of the Angelrodt v. Delavare Ins. Co.. 31 Mo. earlier rules of adjustment. See Mr. 593; Deming v. Merchants' Cotton Co., Robb's treatment of this subject in a 90 Tenn. 306, 347, 17 S. W. 89; Sher- note at the end of this section. man v. Madison Ins. Co., 39 Wis. 104; ^ Lucas V. Jefferson Ins. Co., 6 Cow. Godin v. London Assur. Co., 1 Burr. (N. Y.) 635; Schmaelzle v. London & 489. Lan. Ins. Co., 75 Conn. .397, 53 Atl. PARTIALLY CONCURRENT APPORTIONMENTS 439 is the only loss.^ Second, where there is a loss both on the property which the specific policy covers and on that which it does not cover, the blanket policy must first pay the latter loss, and then with its balance contribute with the specific to pay the loss covered by both.^ But where the nonconcurrence is double or complex, that is, where two or more of the classes of property covered by the blanket policy are the subjects of specific policies, and are involved in loss, there are no uniform and generally accepted rules of law or practice by aid of which the apportionment may be authoritatively settled. The experts who framed the standard fire policies were, of course, familiar with the difficulties and uncertainties of the present situa- tion, but they preferred not to attempt any further definition, leaving applicable the decisions of the courts already rendered, with which also they must have been familiar. The Connecticut court has arbitrarily held in such a case, that if there are several such classes of property damaged, all under cover of a blanket policy, and each specifically insured as well, they will be taken up in the order of greatest loss, and, after contribution be- tween the blanket and the specific, to the loss on the first class, say the cotton, the entire balance of the blanket will be called upon to contribute with the specific insurance on the second class, say the 1 Page v. Sun Ins. Co., 74 Fed. 203, 20 C. C. A. 397, 33 L. R. A. 249 (plain- tiff's lumber worth .$59,095.52, of which .S16,727.06 was in block A and $42,368.46 in block B. Loss of $30,982.02 confined to lumber in B. Plaintiffs had blanket of $40,000 on both blocks and $10,000 of specific policies on lumber in B., of which de- fendant's policy for $2,500 was one. Held that defendant was liable for two thousand five hundred fifty thou- sandths, to wit, $1,549.10 of the loss). 2 Cromie v. Kentucky, etc., Ins. Co., 15 B. Mon. (Ky.) 432. And see American Cent. Ins. Co. v. Heath, 29 Tex. Civ. App. 445, 69 S. W. 235. This, known as the Cromie rule, is sometimes stated as follows: "In ap- portioning losses between policies which are only partially concurrent, the nonconcvirrent liability of the gen- eral policy shall be di.scharged before contribution is mnde to a loss for which all are liable." The specific in such a case is entitled to contribution from the more general policy, if the more general is not otherwise exhausted, Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S. 527, 23 L. Ed. 868; Ogden V. his. Co., 50 N. Y. 388, 10 Am. Rep. 492; Hough v. 7ns. Co., 36 Md. 398; Blake v. Ins. Co., 12 Gray (Mass.), 265; Meigs v. London Assur. Co., 126 Fed. 781 (contra on same facts 205 Pa. St. 378, 54 Atl. 1053, the Hill School case, in which there was blanket insurance covering main building and addition, also blanket covering their contents. The addition was covered by specific policies. Its contents were covered to a part of their value by specific. The Pennsylvania court took the ex- ceptional view that the insured could look to specific insurance alone for recovery for loss on the addition and its contents, though there was not enough specific on contents to furnish full indemnity for the loss thereon. By like reasoning, if there had been specific insurance on the main building and its contents, the general insurance would have escaped altogether. They argued that it was carrying out the intent of the insured; but the insured clearly intends to get the benefit of insurance where there is a loss, not where there is no loss). 440 MEANING AND LEGAL EFFECT OF FIRE POLICY jute, to meet its loss, and so on until all the loss is provided for.^ Other authorities, however, contend with force, especially where the question is solely between different sets of underwriters, that it is inequitable thus to pile up the blanket insurance by mere in- terpretation, perhaps nearly to its full amount several times over, and thereby perhaps largely overinsuring certain damaged parcels. They argue that the specific insurer never calculated upon, and has no right'to expect, any such extraordinary and fortuitous assistance, and they maintain that, before calling upon the blanket for con- tribution, it is fairer to apportion its amount over the classes of property covered by it, in the ratio of their values, making it in effect for this purpose separate pohcies, one on each class of property.^ Another rule analogous to the last was applied by the arbitration committee of the New York Board of Underwriters, first to apportion the general insurance among the different classes of property in the ratios, not of their values, but of their losses respectively.^ Other rules, quite as valuable and perhaps more so, together with an ad- mirable summary of this complex subject, follow in the footnote by Mr. Willis 0. Robb, the secretary and experienced adjuster of the loss committee of the New York Board of Fire Underwriters. His explanation of the effect of the modern coinsurance clause in ren- dering largely impracticable the Connecticut rule, and other earlier methods of apportionment, will receive the careful attention which it deserves.^ 1 Schmaelzle v. London & Lan. Ins. tions of the loss, within the amount of Co., 75 Conn. 397, 53 Atl. 863 (see the concurrent insurance; though some Mr. Robb's comments upon this case of the policies may cover other prop- in the last note of this section). erty in addition to that destroyed, or "i Chandler v. his. Co. of N. A., 70 protect specific items not embraced in Vt 562, 41 Atl. 502. And see Blake any of the others," Fire Underwriters' V. Exchan^je Mut. Ins. Co., 12 Gray Text Book (1899), p. 713. (Mass.), 265, 272; Ogden v. East River 3 Mayer v. Am. Ins. Co., 2 N. Y. Ins. Co., 50 N. Y. 388, 10 Am. Rep. Supp. 227. 492. Contra, in case of simple non- * The history and the present condi- concurrence, Meigs v. London Assur. tion of this subject of nonconcurrent Co., 126 Fed. 781; Page v. Sun Ins. (or, strictly speaking, partially con- Co., 74 Fed. 203, 20 C. C. A. 397, 33 current) apportionments may be sum- L. R. A. 249. Mr. Griswold says: marized as follows: Starting with the "The contribution clause, like con- proposition that the question of doubt tribution under the old form, is held in this whole class of cases is, "what to be operative only between the com- is the whole insurance upon the item panics, in case of double insurance, and or items damaged, the policies nowhere between policies containing it; and defining the phrase?" (but this propo- then only whan the concurrent insur- sition may be challenged, see Farmers' ance exceeds the general loss. . . . Feed Co. v. Scotti.'^h U. & N. Ins. Co., The liability of coinsuring companies 173 N. Y. 241, 65 N. E. 1105, in which, under this clause is based upon the in another connection, the court de- degree of concurrency of the policies, fined the full face of a policy to be its and is restricted to the ratable propor- true amount), and then applying the REINSURANCE 441 § 319. Reinsurance. — Lidbility for reinsurance shall he as specifi- cally agreed hereon. Reinsurance has already been described.^ It constitutes a new general rule that ambiguities in the policy language are to be resolved most favorably to the insured, the courts and the experts have only agreed in deducing these two specific conclu- sions: tirst. The full amount of the blanket or general policy must con- tribute with the specific policy to pay the loss on property covered by the latter, where this is the only loss {Page V. Sun, supra); and second, When there is a loss both on the property the specific policy covers and on that it does not cover, the blanket policy must first pay the latter loss, then contribute with the specific to pay the loss they both cover. This is the Cromie rule, supra. These two rules comprise the whole body of generally accepted law on the subject of nonconcurrent ap- portionments, and it will be noted that they apply only to cases of what is called simple nonconcurrence, i. e., cases where only one of the several classes of property covered by the blanket policy is also covered by specific insurance. When two or more of the classes comprised in the cover of the blanket policy are the subjects of specific insurance, and involved in loss, the apportionment becomes a "free for all," neither courts nor adjusters having arrived at anything like an agreement as to method. Perhaps the commonest rule in practice, though it is certainly losing ground, is the (1) "Gradual Reduction" rule, lately adopted by the Connecticut Court of Errors in the Schmaehle case. This makes the blanket policy contribute first on its full amount on that item where the loss is greatest (which some in- terpret to mean greatest, having regard to deficiency in the specific insurance applicable, and others to mean abso- lutely largest), then with its remainder on the next greatest loss, etc. Of course this is based on the desire to give the insured the fullest possible indemnity, and it is in fact the rule that goes furthest in that direction in the largest number of cases. But when, as often happens, any one of several rules will alike indemnify the insured in full, so that the apportion- ment is a question among underwriters only, the unconscionable way in which this rule penalizes the blanket policy (which is often abstractly the most nearly correct in form of all the policies on the risk) makes most fair minded experts revolt from its application. But in seeking a substitute they scatter in all directions. Other princi- pal rules are: (2) The Reading rule, which divides the blanket policy among the several items of property in the ratio of their respective values. This was adopted by the Vermont Supreme Court in the Chandler case, supra. Some adjusters would make the division only among items in- volved in loss (harmonizing with the rule in Page v. Sun for simple non- concurrence), others among all items or classes of property whether damaged or not. (3) The modified Reading rule, which so divides the blanket policy among all classes of property, whether involved in damage or not, that when possible, and as nearly as possible, the ratio of available insur- ance to value will be the same on each class as on all together. (4) The Finn, or Griswold, or Kinne rule (they are in essentials the same), which divides the blanket policy among the classes of property in the ratio of the respective losses thereon. This was adopted in the New York Supreme Court case of Mayer v. The American Insurance Co., supra, which never went to the Court of Appeals. (5) The Rice rule, which, though basing the division of the blanket policies, like the Finn rule, on losses, not values, makes that division in such a way that the excess of ag- gregate insurance over aggregate loss shall be apportioned to the separate items in the same ratio that would re- sult from assigning the whole blanket insurance successively to each item for contribution. (6) The simplified Finn, or Rice rule, which so divides the blanket policy among all classes of property involved in loss that when possible, and as nearly as possible, the ratio of available insurance to loss will be the same on each class as on all together. This has practically the 1 See § 23, supra. 142 MEANING AND LEGAL EFFECT OF FIKE POLICY contract and is governed by the law of the place where it is made; but it largely rests upon the provisions of the original policy.' Its same relation to rule 4 as rule 3 has to rulo 2, and aims, in effect, to cut the ( Jordian knot by making all policies l)ay the same ratio of loss when that is "possible. The.se, then, are some, though by no means all, of the various rules applied by various legal and lay authorities on apportionments, to what are called double or compound non- concurrences. Of course there are other cases of complex or combined uonconcurrence where the simple Cromie rule will be first ai)plied, and the work of apportionment then car- ried on under some one of these rules for compound nonconcurrence. But those cases, as well as the frecjuently occurring instances where reappor- tionments are rendered necessary un- der many of these rules, we may ignore altogether in this general survey. Now, anyone who merely reads over these various rules will be prepared, I think, for the conclusion which careful study of their respective underlying principles and long experience in their practical application to actual prob- lems has forced on me, viz., that no one of them is either demonstrably sound in theory, or universally appli- cable in practice. And the subject is getting no clearer. Indeed, one fea- ture of modern underwriting practice of more recent development than most of these rules has powerfully con- tributed to discredit almost all of them and to hasten their progress to the junk heap. That is the coinsurance clause. This is in effect a limited lia- bility clause, and provides that the policy, or any item or division of the policy, to which it is attached, shall not be liable for any greater share of the loss on the property covered there- by than the amount of such policy or item constitutes of, say 80 (or 100) per cent of the entire value of such property. There can be no doubt (1) that this clause must be applied to the result of any apportionment, con- current or nonconcurrent, after that apportio .ment has been completed, with the effect in many eases of reduc- ing the loss payment figured out by that apportionment; and (2) that for the purpose of applying the coinsurance clause the policy will be divided only into those items or divisions which it originally contained, not into those which may be arbitrarily and tem- porarily forced on it in making a non- concurrent apportionment of loss with other policies. Manifestly, therefore, if a nonconcurrent apportionment based on losses instead of values, or especially one that follows the "grad- ual reduction" rule, has been worked out, a blanket policy company would thereby be called on to pay a sum far in excess of its coinsurance clause lia- bility, even though there is, in the aggregate, and under all policies, ample insurance, and this excess pay- ment it will promptly and successfully refuse to make, relying for its refusal upon its rights under the coinsurance clause, with the result either that the insured fails to recover his loss, or that a different apportionment must be arbitrarily adopted. In other words, the very rule which, in the absence of a coinsurance clause, will go furthest towards indemnifying the insured will, where that clause is present, heap up a nominal liability on the blanket policy far above what can be enforced in practice, while the other policies will get off with payments far below their coinsurance clause limit of liability. It is curious to note that in the Schmaelzle case, where the gradual reduction rule was applied by the Connecticut Court of Errors and Ap- peals, the court and the lawyers alike, in their engrossment with the appor- tionment, forgot that the blanket policy had a coinsurance clause and that it was therefore absolutely pro- tected from paying the whole amount apportioned to it by the judgment; in other words, that the insured could not be made whole, in that case, by the very rule adonted for that sole pur- pose. But adjusters and brokers, in practice, are not allowed to be so for- getful, and their efforts to npplv the general rule of providing the fullest indemnity for the insured to the double 1 Phoenix Ins. Co. v. Erie Travfsp. Co., 117 U. S. 312, 323, 6 S. Ct. 750, 29 L. Ed. 873; Sun Ins. Co. v. Ocean Iv.9. Co., 107 U. S. 485; Mackenzie v, Whitworth, L. R. 10 Exch. 142. REINSURANCE 443 immediate subject-matter is not property, but the liability, or a share of the liability, of the original insurer. It must not be con- founded with other or double insurance, or with renewals. The practice of reinsuring, risks, though formerly prohibited by statute in England, has always been lawful at common law, and in this country,^ and is of convenience and benefit to the public, prima- rily, because it imposes upon the original or straight insurer the nec- essary burden of dividing up a large risk among many companies, and, secondaril}^, because it adds, though indirectly, to the security of the original insured. The original insurer may reinsure his entire liability on a risk, or only a part of it, or he may reinsure his entire problem presented by nonconcurrent policies, subject also to coinsurance clauses, have already begun to make waste paper of almost all the rules given above for double nonconcurrent apportionments, which were devised before coinsurance clauses were at- tached to fire policies. Rule 3 alone of the seven just given can be made to do duty fairly well under coinsurance conditions, and that by no means always. Among the inventions or adaptations devised to meet this changed situation are the so-called Giesse and Morristown rules. The former reads thus: " First find the limit of liability of each class of insurance, under the average or coinsurance clause, and find the total of those limits (which will usually be somewhat greater than the aggregate loss) by adding them together; then find what each class would pay if it got the full benefit of its contribution clause, i. e., contribution from the face or full amount of all other insurance cover- ing the whole or any part of the prop- erty which itself covers, and find the total of these amounts (which of course will be less than the aggregate loss) by adding them together. We thus find the most each class can be made to pay, and also the least it can possibly get off for. Add the several differences between these pairs of limits, find what proportion of that total the aggregate excess of the unper limits OA'er aggre- gate loss constitutes, and deduct that proper' ion of each of the differences from the resnective upper limits, to find what each class of insurance shall pay to make up the loss." The Morris- town rule starts each policy at its lower limit, as fixed by the Giesse rule, and then distributes to each, pro rata, the loss remaining unpaid, if necessary until each reaches its coinsurance clause limit. A curious result of these efforts to make new apportionment rules suitable to coinsurance clause conditions is that, since there is no fixed rule of the courts governing non- concurrent apportionments where two or more specifically insured items are involved in loss, it is possible arbi- trarily to treat the blanket policy so as to avoid or minimize the operation of the coinsurance clause in these cases: but since there is a well established rule (the Cromie rule, supra) for cases involving loss on only one of the specifically insured items, it is im- possible to avoid apportioning two payments to the blanket policy in these cases, and the aggregate so apportioned is often above the co- insurance limit of liability, and the ex- cess the insured simply loses outright, even though his whole insurance was equal to his whole value. Perhaps nothing can better illustrate the ab- surdity of the present situation than this discrepancy, which manifestly makes it to the insured's interest, if he has one policy on each of two buildings and one blanketing both, all subject to coinsurance provisions, and a loss on only one building, to force the appear- ance of a loss, however small, on the other also, since only thus can he col- lect his whole loss. 1 Phoenix Ins. Co. v. Erie & W. Tramp. Co., 117 U. S. 312, 323, 6 S. Ct. 750, 29 L. Ed. 873. 1 I I MEANING AND LEGAL EFFECT OF FIRE POLICY liability on uU his risks.' The character of the risk is supposed to be the same in the contract of original insurance and in the con- tract of reinsurance; but it is said that, though the contract of reinsurance may involve a less hazard, it must not involve a greater.^ While this is true, it not infrequently happens, however, that, for a time, the amount of the policy of reinsurance will be greater than the amount of the original insurance, where the latter has been re- duced by indorsement on account of a diminution in the property; but the amount of liability under the policy of reinsurance must always l)o limited by the amount of liability under the straight in- surance, and can never exceed it, since the contract, in its nature, is essentially one of indemnity.^ The statute of frauds is not applicable to the contract of re- insurance, inasmuch as it is not a collateral agreement of guaranty, made with a creditor, to answer for the debt of another,"* nor does it ordinarily constitute a novation in favor of the original insured.^ It has been held in Nebraska that it is ultra vires for mutual fire insurance companies organized under the laws of that state to transact a reinsurance business.^ Inasmuch as the usual contract of reinsurance obligates the re- insuring company to await, and be governed by, the terms of ad- justment of loss as made between the original insurer and the original insured, it is held that the provisions regarding proofs of loss,^ appraisal, and the contract limitation of time within which to sue,* 1 Ins. Co. of N. A. V. Hihernia Ins. Rep. 620. Terms of the two policies Co., 140 U. S. 565, 11 S. Ct. 909, 35 need not be identical, Mil. Mech. Ins. L. Ed. 517; Johannes v. Phoenix Ins. Co. v. Palatine Ins. Co., 128 Cal. 71, Co., 66 Wis. 50, 27 N. W. 414. The 60 Pac. 518. possible liability of the original in- * Commercial Mut. Ins. Co. v. Union -surer creates his insurable interest in Mut. Ins. Co., 19 How. (U. S.) 318, 15 reinsurance. Berry v. Ins. Co., 132 L. Ed. 636; Bartlett v. Firemen's Fund N. Y. 49, 30 N. E. 254, 28 Am. St. R. Ins. Co., 11 Iowa, 155, 41 N. W. 601. 548. Such insurable interest, in the Contra, Egan v. Ins. Co., 27 La. Ann. absence of bad faith, need not exist at 368. the time the contract of reinsurance is s Barnes v. Heckla Ins. Co., 56 Minn, made, if then contemplated and ac- 38, 57 N. W. 314, 45 Am. St. R. 438. quired thereafter, and before loss, Sun e Allison v. Fidelity Mut. Fire Ins. Fire Office v. Merz, 64 N. J. L. 301, 45 Co. (Neb., 1908), 116' N. W. 274. Ail. 185; Boston \\ Globe Fire Ins. Co., ''Consolidated Real Estate Co. v. 174 Mass. 229, 54 N. E. 543. Cashoiv, 41 Md. 59. Held, sufficient 2 London Assur. Corp. v. Thompson, to transmit the proofs of original as- 170 N. Y. 94, 62 N. E. 1066. If the sured, .V. Y. Boirerv Ins. Co. v. N. Y. policy of reinsurance is lost its con- Ins. Co., 17 Wend. (N. Y.) 359. tents must be proved, for there is no « JacHon v. St. Paul F. & M. Ins. presumption that the risk described is Co., 99 N. Y. 124, 1 N. E. 539; AVer v. the same, Ins. Co. v. Tclfmr, 45 App. Rhoades, 73 App. Div 158, 76 N Y Div. (N. Y.) 564, 61 N. i^. Supp. 322. Supp. 808; Ins. Co. v. Telfair, 27 Misc. 3 Illinois Mut. Fire Ins. Co. v. (N. Y.) 247: Home Ins. Co. v. Victmia Andes Ins. Co., 67 111. 362, 16 Am. etc., Ins. Co. (1907), App Cas 59 REINSURANCE 445 are not applicable; but the ordinary rules relating to material mis- representation/ or concealment,^ by the original insurer may be invoked by the reinsuring company. In the absence of affirmative misrepresentation made to itself, the reinsurer must not complain though the representations of fact contained in the original applica- tion, correct when made, have ceased to be true, since in that event he is insuring a valid contract as it stands.^ The original insured cannot bring suit against the reinsurer unless the contract of reinsurance expressly stipulates that he may do so, or such be the intent of the arrangement, for without such intent no privity of contract exists between them.'' If, however, the policy of reinsurance is made expressly for the benefit of the original in- sured, the latter may, at least in most jurisdictions,^ pursue his remedy upon either policy,^ or both, but can have only one satis- faction.'' Any defense which is available to the original insurer may always be raised b}^ the reinsuring company, for it is only the liability of the former that is reinsured.* But if, before having re- course to the reinsurer, the first insurer pays or adjusts its loss, or compromises it so as to fix its amount, this amount will control its right of recovery against the reinsurer, for the contract of rein- surance is one of indemnity only, and furthermore it is usually And see Manufact. F. & M. Ins. Co. v. 464, 59 Pac. 897; Barnes v. Heckla Western Assur. Co., 145 Mass. 419, 14 7ns. Co., 56 Minn. 38, 57 N. W. 314, N. E. 632; Eagle Ins. Co. v. Lajayette 45 Am. St. R. 438. And see Fischer v. Ins. Co., 9 Ind. 446. Hope Mut. Life Itu. Co., 69 N. Y. 161. I Louisiana Mid. Ins. Co. v. New "Where one con pany ^\ith the assent Orleans Ins. Co., 13 La. Ann. 246. of its policyholders absorbs another by ^ New York Bouerxj Ins. Co. v. reinsurance the latter becomes directly New York Ins. Co., 17 Wend. (N. Y.) responsible to the policyholders by 359. And see Siin Mut. Ins. Co. v. reason of the nature of the transaction. Ocean Ins. Co., 107 U. S. 485, 1 S. Ct. People's Assnr. Fund v. Boesse, 92 Ky.' 582, 27 L. Ed. 337. 290, 17 S. W. 630; Travelers' Ins. Co. ^Cahen v. Ins. Co., 69 N. Y. 300; v. California Ins. Co., 1 N. D. 151, 45 JacHon v. Ins. Co., 99 N. Y. 124, 1 N. W. 703; Johannes v. Phoenix Ins. N. E. 539. Co., 66 Wis. 50, 27 N. W. 414. And * Strong v. Phoenix Ins. Co., 62 Mo. see Whitney v. Am. Ins. Co., 127 Cal. 289, 21 Am. Rep. 417; Carrington v. 464, 59 Pac. 897; Shoaf v. Palatine Ins. Commercial Ins. Co., 1 Bosw. (N. Y.) Co., 127 N. C. 308, 37 S. E. 451; Fire 152; Travelers' Ins. Co. v. California Ins. Asso. v. Canada F. & M. Ins. Co., Ins. Co., 1 N. D. 151, 45 N. W. 703; 2 Ont. 481, 495. Goodrich's Appeal, 109 Pa. St. 523, 2 « N. Y. State Marine Ins. Co. v. Atl. 209; Ruohs v. Traders' Ins. Co., Protection Ins. Co., 1 Story, 458; 111 Tenn. 405, 78 S. W. 85; Nehon v. Eagle Ins. Co. v. Lafayette Ins. Co., 9 Empress Ass. Corp. (1905), 2 K. B. 281. Ind. 443. A reinsurer is not concluded 5 But see Wood v. Moriarty, 15 R. I. by an improper payment by the origi- 522, 9 Atl. 427. nal insurer, Chippendale v. Holt (1895), ^Glen V. Hove Mut. Life Ins. Co., 65 L. J. Q. B. 104. "Other insurance" 56 N. Y. 379; Fischer v. Hope Mut. Life in a policy of reinsurance means other /ns. Co., 69 N. Y. 161. reinsurance, Mut. Safeiy . Ins. Co. v. 7 Whitney v. Am. Ins. Co., 127 Cal. Hone, 2 Comst. (N. Y.) 235. 446 MEANING AND LEGAL EFFECT OF FIRE POLICY made expressly subject to adjustments concluded by the original insurer.' The contract of reinsurance, as has been observed, .> an insurance of liability for loss, and consequently, as soon as the liability of the first insurer has actually accrued, it may bring suit against the reinsurer before an actual payment of the loss.^ And so also the reinsurer may be obliged to pay the original insurer the amount of its liability, although the latter may have become insolvent, and although it may ultimately be unable to pay its indebtedness to the original insured. '"^ The usual practice is for the original insurer, if sued by the original insured, to give the reinsuring company opportunity to come in and defend the suit at the expense of the latter. If the reinsuring company declines to do this, it will be liable for the reasonable costs of the suit, incurred by the original insurer.^ § 320. The Usual Reinsurance Rider. — The most frequent in- stance of reinsurance occurs where, for its own anticipated profit, or for the convenience of its customer, a company takes a larger line on a risk than it wishes to carry unaided. It then reinsures the whole or a part of its liability with one or more companies at the same or nearly the same rate of premium. Such a contract of re- insurance frequently consists of the standard form of policy with the usual reinsurance rider pasted upon it, including in the rider a pro rata phrase of its own, and also unrestricted permission for other reinsurance.'' To the rider as thus described, a retainer clause is occasionally added, the object of which is to prevent the original 1 Illinois Mut. Fire Ins. Co. v. Andes ^ Blackstone v. Alemannia F. his. Ins. Co., 67 111. 362, 16 Am. R. 620; Co., 56 N. Y. 104; Hunt v. New Hamp- Insurance Co. V. Insurance Co., 38 Ohio shire his. Co., 68 N. H. 305, 38 Atl. St. 11, 43 Am. Rep. 413. And see 145 (proceeds here, however, were held Consolidated Real Est. & Fire Ins. Co., for sole benefit of original insured, and V. Cashoiv, 41 Md. 59. A judgment in not as part of general assets of insol- favor of the owner of the property vent original insurer); /lZ/ew«nma Ffre against the original company binds the Ins. Co. v. Firemen's Ins. Co., 209 reinsurer in any proceeding of which U. S. 326. it had notice. Commercial Union A.^sur. * N. Y. State Mar. Ins. Co. v. Pro- Co. V. Am.. Central Ins. Co., 68 Cal. 430, tection Ins. Co., 1 Story, 458; Ha.'^tic v. 9 Pac. 712; Strong v. Ins. Co., 62 Mo. De Peyster, 3 Caines (N. Y.), 190. The 289, 21 Am. Rep. 417. The reinsurer reinsuring company is not liable for has a right to protect its interests in the costs of a suit of which it has no such litigation, Gantt v. Am. Cent. Ins. notice, Faneuil Hall Ins. Co. v. L. & Co., 68 Mo. 503; Cass Co. v. Mercantile L. & G. Ins. Co., 153 Mass. 63, 26 N. E. Ins. Co., 188 Mo. 1, 86 S. W. 237. 244, 10 L. R. A. 423; Pcnn. Ins. Co. v. 2 Mutual Safet^i Ins. Co. v. Hone, 2 Telfair, 27 Misc. 247, 57 N. Y. Supp. Comst. (N. Y.) 235; Gantt v. Amer. 780. Cent. Ins. Co., 68 Mo. 503; Ex parte 6 For form of a rider see Appendix Western Ins. Co. (1892), 2 Ch. 423. ch. II. THE USUAL REINSURANCE RIDER 447 insurer from fully reinsuring its liability, and to compel it to retain a net share of liability. Before any -pro rata phrase was introduced into the reinsurance rider, it was held that the reinsuring company was obliged to pay the loss in full up to the face of the policy of reinsurance and could not call upon any excess of original insurance to relieve it by con- tribution.^ This decision naturally was unsatisfactory to underwriters and the question was one between underwriters only. Therefore a new clause was adopted which with some variations in its phrase- ology was in general use for about half a century, the purpose of this second form of clause being to compel the original insurer to contribute to the loss equitably with the reinsurer on the basis of any excess of original insurance over reinsurance, taking the amount of both sets of insurance as they subsisted at the time of the fire. But in 1905 the highest court in New York, overruling the decision of Hamilton Odell, Esq., referee in the earlier trial of the same case, construed this clause as meaning that the original amount of straight insurance, though since diminished (or by parity of rea- soning increased), and though the policy contain no retainer clause, must be made the basis of the apportionment or contribution with the reinsurance.^ This construction, never intended by under- 1 Mutual Safety Ins. Co. v. Hone, 2 clear by assuming that in the Home Comst. (N. Y.) 235. Thus under the Ins. Co. case the original policy instead ancient form of reinsurance involved of being diminished in amount during in the Hone case if the owner of goods its term had been increased, say insured them for $10,000 with com- doubled, because of an accession of pany A and A reinsured for .S5,000 goods in the warehouse. By the doc- with company B, and a loss of say trine seemingly adopted by the Court $5,000 or less occurred, B would have of Appeals, the straight insurer, though to pay the whole loss; though both then obtaining half the net premium companies, if solvent, were practically or profits at the time of the fire, would on the risk for the same net liability, have borne no net liability at all for any $5,000, and were earning the same loss not exceeding the amount of re- amount of net premium or profit, and insurance. Again, suppose the straight therefore equitably ought to divide the insurance at first to be $10,000 rein- loss equally. sured with B for $5,000, witliout a re- 2 Home Ins. Co. and Phoenix Ins. Co. tainer clause, the straight policy is V. Continental Ins. Co., 180 N. Y. 389, increased to $15,000 and then rein- 73 N. E. 65 (Judge Edward Bartlett sured with C for $5,000, without re- dissenting). In the last case, the court tainer clause. A loss of $6,000 occurs, based its ruling largely upon the fact Under that rider as construed by the that the rider was intended to do away Court of Appeals B must pay $3,000, with the injustice disclosed by the C, though on for the same amount and Hone case, but, it is submitted, the at same premium pays only $2,000; only way to accomplish that desirable and A with more premium than either result is to cake for apportionment the pays only $1,000; but these results can- amounts of insurance and reinsurance not be reconciled with the standard as subsisting at the time of the loss, pro rata clause contained in the body This conclusion is made convincingly of each policy. Again, suppose the 148 MEANING AND LEGAL EFFECT OF FIRE POLICY writers who framed the clause, and at variance with the meaning which they had universally put upon it for many years,* as was shown by undisputed testimony from numerous eminent experts, made desirable the adoption of a revised form which is given in the Appendix.2 xhis form was adopted and promulgated in May, 1906, by the National Board of Fire Underwriters as the standard form approved and recommended by it; =* but its use is not compulsory, as in the case of a statutory policy. This revised form in the absence of the retainer clause takes as the basis for apportionment the amounts of the original insurance and reinsurance in force at the time of loss."* Like the other, this later rider is framed upon the theory that the ifeinsuring company may safely trust to the good faith of the original company and must submissively follow where the convenience of business reasonably requires. Thus the later rider has the provision, in substance like the preceding, "subject to the same risks, privi- leges, conditions and indorsements (except changes of location), as- signments, changes of interest or of rate, valuations and modes of settlement." ^ § 321. Special Contracts of Reinsurance.— A company sometimes has all its risks reinsured by another company or other companies as a convenient method of retiring from business,^ or all risks within straight policy to be $1 ,003,000 on con- N J. L. 453; Hand v. Ins. Co., 57 N. Y. tents of a warehouse, all reinsured in 41. tt r ^ one hundred policies of $10,003 each, ^Imperial Ins. Co. v. Home Ins. Co., without retainer clauses. The goods 68 Fed. 698, 30 U. S. App. 409, 15 are diminished by $50,003 in value, C. C. A. 609 (as to coinsurance clause); and the straight insurance reduced by Ins. Co. v. Associated Manufact. Ins. like amount. Under the same rider Co., 70 App. Div. 69, 74 N. Y. Supp. A may not now proceed in New 1038, aff'd 174 N. Y. 541, 66 A. E. York, in accordance with the general 1110 (bound by adjustment); Manufac- and convenient custon practiced for turers' Ins. Co. v. Western Assi/r. Co., fifty years, to cancel five policies of 145 Mass. 419, 14 N. E. 6.32 (reinsurer reinsurance, but must canvass the mar- is bound by indorsement of change of ket and arrange, if he can, a reduc- interest); Faneuil Hall Ins. Co. v. L. & tion pro rata with one hundred com- L. & G. Ins. Co., 153 Mass. 63, 26 N. E. panies. 244. But the original company should 1 See dissenting opinion of Justice not allow a substantial increase of risk Bartlett. without assent of reinsuring company, 2 See Appendix, ch. II. St. Nicholas Ins. Co. v. Merchants' Ins. 3 It was prepared by counsel for the Co., 83 N. Y. 604. And see Lower plaintiffs in conference with counsel Rhine & W. his. Assoc, v. Sedgewick, 1 for defendant in the litigation which Q. B. 179 (1899.) necessitated it, Ho^ne Ins. Co. v. Con- ^ Ruohs v. Traders' F. Ins. Co., Ill tinental Ins. Co., 180 N. Y. 389, 73 N. Tenn. 405, 78 S. W. 85; Olsen v. Cali- E. 65. fornia Ins. Co., 11 Tex. Civ. App. 371, * This is also the rule under the 32 S. W. 446. So also in case of lifo legular pro rata clause of the standard insurance. Brown v. Mut. R. L. Assn., policies, Lattan v. Royal Ins. Co., 45 224 111. 576. SUBROGATION 449 certain dates,^ or all in a certain locality .^ In such a case the special provisions of the particular contract govern.^ In modern times reinsurance is also conducted to a large extent under running contracts, terminable perhaps on six months' notice in writing by either company and known as "treaties."^ The abrogation of the regular cancellation clause of the standard policy is in order, because the standard policy itself provides, "Liability for reinsurance shall be as specifically agreed hereon," which sanc- tions unlimited right of variation from the usual conditions. § 322. Subrogation. — Subrogation of rights to the extent of pay- ment shall be assigned to the company. The common-law right of subrogation has already been con- sidered. It grows out of the doctrine of indemnity, and also finds an equitable basis in the consideration that the person who caused the loss or who is primarily hable ought to be made ultimately responsible for the damage sustained. ° The insured in the first instance has his option between two forms of remedy. If he pursues his remedy against the wrongdoer and recovers compensation, the insurance company will escape.^ But 1 Sun Ins. Co. v. Merz, 64 N. J. L. 301,45Atl. 785. 2 London & L. F. Ins. Co. v. Lycom- ing F. Ins. Co., 105 Pa. St.' 424; Johannes v. Phoenix Ins. Co., 66 Wis. 50, 27 N. W. 414. 3 Proofs of loss may be served upon the reinsuring company when it absorbs the business and assumes all liabilities of the other company, Whitney v. Am. Ins. Co., 127 Cal. 464, 59 Pac. 897. * Special features of a reinsurance treaty are often in substance as fol- lows, the original insurer or reinsured company being here called "A," the company reinsuring it, "B:" 1. B is to be preferred to other reinsurance companies in the cessions of reinsur- ance made from time to time by A; 2. The amount on any one risk to be ceded by A to B is restricted and also must not exceed the amount retained for itself by A; 3. All cessions by A are obligatory on B and without right of cancellation by five days' notice; 4. Items of original policy, for example building and contents, are reinsured pro rata with the straight insurance; 5. Liability of B relates back if A's risk has not been running more than fourteen days, otherwise runs from 29 date of inscription; 6. A transmits to B the particulars of risks ceded by means of a bordereau rendered to B, say daily or weekly; 7. Reinsurance follows stip- ulations and rate of premium of origi- nal policy; 8. Cancellation or reduction of a cession ensues only when there is like indorsement on original policy; 9. B pays to A a small percentage by way of compensation; 10. A renders to B monthly accounts current showing premiums, commissions, return premi- ums and losses; 11. A has sole right of settling losses, but any differences be- tween A and B are settled by arbitra- tion. 5 See § 52, supra. 6 Chi., B. & Q. R. Co. v. Emmons, 42 111. App. 138; Kennedy Bros. v. State Ins. Co., 119 Iowa, 29, 91 N. W. 831. If he collects his insurance concealing the fact of recovery from the railroad company for the same loss, it is a fraud and the insurance company can re- cover back its payment, ChicLasaw Co. Ins. Co. V. Weller, 98 Iowa, 731, 68 N. W. 443; but a settlement with the railroad company is not conclusive as to the amount of loss. Home Ins. Co. v. Atch., etc., R. Co., 4 Kan. App. 60, 46 Pac. 179. 450 MEANING AND LEGAL EFFECT OF FIRE POLICY if he chooses first to enforce his claim against the insurance com- pany, the latter is entitled, by way of subrogation, to have recourse over against the party primarily responsible.^ Inasmuch as the insurance company, after making payment, is entitled to the right of subrogation, the insured, as before shown, will not be permitted after loss to defeat that right by releasing the wrongdoer or com- promising with him to the prejudice of the insurance company without the consent of the latter.^ The provision of the policy requiring the insured to make a formal assignment j)ro tanto of any rights that he may have against the person or corporation causing the fire, enables the insurance com- pany without any question to institute action in its own name against the party primarily liable.^ Insurance companies, however, having regard to the prejudice which juries are apt to exhibit towards corporations, sometimes make an arrangement with the insured whereby it is agreed that a suit shall be brought in the name of the insured against the wrongdoer for the whole amount of damage sustained, and that the proceeds of the suit and expenses shall be apportioned between the insured and the insurers under some stipulated arrangement. Sometimes the insurance money is paid, or in large part advanced, under the form of a "loan," ^ before the suit, and sometimes payment is not made until after its termina- tion. In such a case the insurance company does not take any as- signment. So also where the loss exceeds the insurance the com- panies and the assured may properly make agreement to sue for joint benefit.^ The party primarily liable who is sued for causing the loss cannot make a defense out of the payment of the insurance money to the insured by the insurance company, since the policy is res inter alios acta.^ 1 The wise course for the insured to v. Atlanta Coast L. R. Co., 132 N. C. adopt ordinarily is to recover his in- 75, 43 S. E. 548. The right is not a surance moneys in the first instance mere equity, but a legal right, Stough- before becoming party to any suit ton v. Mfrs.' Nat. Gas Co., 165 Pa. St. against the wrongdoer. 428, 30 Atl. 1001. ^ Bloomingdale v. Columbia Ins. Co., * Deming v. Storage Co., 90 Tenn. 84 N. Y. Supp. 572; Sims v. Mid. Ins. 306, 17 S. W. 89, 13 L. R. A. 518 (held Co., 101 Wis. 586, 77 N. W. 908, and to be a payment), cases in § 57. ^Chicago, etc., R. Co. v. Pullman ^Kinq V. Victoria Ins. Co., L. R. Car. Co., 139 U. S. 79, 11 S. Ct. 490. P. C. (1896), A. C. 250. And see § 58, See § 58, supra. supra. The company under this 6 Missouri, K. & T. R. Co. v. Fuller, clause may require assignment as a 72 Fed. 467, 18 C. G. A. 641, 36 U. S. condition of payment, Niagara Ins. App. 456; Regan v. R. R. Co., 60 Conn. Co. V. Fidelity Co., 123 Pa. St. 516, 124, 22 Atl. 503; Weber v. Morris & 16 Atl. 790. But no assignment is Essex R. R. Co., 35 N. J. Law, 409, 10 necessary to perfect the right of the Am. Rep. 253; Tex. & Pac. R. Co. v. company, Hamburg-Bremen Fire I. Co. Levi, 59 Tex. 676; Harding v. Tovm- SUBROGATION — TORTIOUS FIRES 451 § 323. Subrogation — Tortious Fires.— It not infrequently hap- pens that the fire which causes the loss to the property of an insured person is negligently started by a common carrier, or other person, on premises more or less distant from the property of the insured. The insurers, upon paying the loss, thereupon become subrogated to any rights of the insured against the wrongdoer. The prosecution of these rights often involves the difficult ques- tion, in respect to the spread of the fire, how far the damages caused thereby are to be attributed to the negligence of the wrongdoer as a proximate cause. The proximate cause is to be determined not so much by any relationship of propinquity in time or space, as by the intimacy of causal connection between the negligent act and the resulting consequences. It is natural for fire, especially if started amid inflammable material, to spread, and the dangerous character of this element presents no excuse for imprudence in its use. Though the number of sufferers from a conflagration may be many, and the extent of the damage great, this in itself offers no reason for shifting the burden of loss from those who are guilty to those who are in- nocent, provided the results are naturally to be expected. The extent of proximate loss ought not to be bounded by limits of owner- ship, nor confined within arbitrary and intangible lines. ^ In Ryan v. A^. Y. Central R. R. Co.,^ however, it was held that where a house in a populous city takes fire through the negligence of the owner or his servant, and the flames destroy a neighboring building one hundred and thirty feet distant, the owner of the first building is not liable to the owner of the second building for the damage sustained. So far as the Ryan case stands for the proposition that where the facts are sufficiently plain they present a question of law for the court, its doctrine has been repeatedly approved.^ But as an ex- position of the law, applicable in general to the question of proximate loss by the spread of fire, it is opposed by the current of judicial opinion ^ and has been so far distinguished by the courts of the same shend, 43 Vt. 536, 5 Am. R?p. 304. v. Hesters, 90 Ga. 12; East Tenn. R. And see Chi., etc., R. Co. v. Pull- Co. v. Hall, 90 Ga. 17. man Car Co., 139 U. S. 79, 11 S. Ct. 235 N. Y. 210. 490. 3 Read v. Nichols, 118 N. Y. 229, 23 1 See § 231, supra. Whether the ex- N. E. 468. tent of the loss, under all the circum- * The G. R. Booth, 171 U. S. 450, 458, stances of the case, is remote or rea- 19 S. Ct. 9; Ins. Co. v. Boon, 95 U. S. eonably proximate is often a question 117; Mil. R. R. Co. v. Kellogg, ^'i U. S. for the jury, Milwaukee, etc., R. R. Co. 469; Goodlander Mill Co. v. Standard V. Kellogg, 94 U. S. 469. An extra- Oil Co., 63 Fed. 400, 405, 27 L. R. A. ordinarily violent wind intervening 583; Perley v. Eastern R. R. Co., 98 may be a new cause, East Tenn. R. Co. Mass. 418, 96 Am. Dec. 645. 452 MEANING AND LEGAL EFFECT OF FIRE POLICY state as to have lost much of its authority.^ Nevertheless that court, in one case, has again declared the soundness of the doctrine, and has gone so far as to hold that while the spread of fire to the land of the first abutting owner is proximate, beyond that it must be regarded as remote.^ § 324. Subrogation— Negligence of Water Company.— Is a water company liable in tort to the insured citizen and taxpayer tor fire loss caused by a negligent insufficiency of water supply, where the supply is expressly contracted for between the municipality and the water company? On this subject of practical importance to the underwriter, authorities differ.^ The weight of reason as expressed 29 Am. St. Rep. 856; and Judge Parker's remarks in Olmsted v. Aque- duct, 46 N. J. L. 495, 501. The follow- ing cases, constituting a large ma- jority, hold that the water company is not responsible at the suit of a citizen, since the contract is not made with the individual, but with the mu- nicipality, Town V. Ukiah, etc., Co., 142 Cal. 173, 75 Pac. 773; Fowler v. Athens, etc., Co., 83 Ga. 219, 9 S. E. 673; Fitch V. Seymour Water Co., 139 Ind. 214, 37 N. E. 982; Bec::er v. Keokuk, etc., Co., 79 Iowa, 419, 44 N. W. 694; Mott v. Cherryvale, etc., Co., 48 Kan. 12, 28 Pac. 989; Allen, etc., Co. v. Shreveport W. Co., 113 La. 1091, 37 So. 980; WUanson v. Light, etc., Co., 78 Miss. 389, 28 So. 877; Howsmon v. Water Co., 119 Mo. 304, 24 S. W. 784; Eaton v. Fairburv, etc., Co., 37 Neb. 546, 56 N. W. 201 (on the ground that the municipality itself could not be sued) ; Ferris v. Water Co., 16 Nev. 44, 40 Am. Rep. 485; Wainwright v. Queens Co. Wat'-r Co., 78 Hrni, 146, 28 N. Y. Supp. 987 (approved in 165 N. Y. 30); Blunk V. Dennison, etc., Co. (Ohio), 73 N. E. 210 (on the ground that the municipality would not be liable, hence its contractor is not liable); House v. Houston W. Co., 88 Tex. 233, 31 S. W. 179; Nichol v. Water Co., 53 W. Va. 348; 44 S. E. 290; Britton v. Green Bay, etc., Co., 81 Wis. 48, 51 N. W. 84. There is said to be no privity of con- tract between the water company and the citizen. Nickerson v. Bridgeport Hyd. Co., 46 Conn. 24; Bush. v. Arte- sian, etc. .Co.,^ Idaho, 618, 43 Pa. St. 69; McEntee v. Kingston W. Co., 165 N. Y. 27, 58 N. E. 785; Smith v. Water Co., 82 App. Div. 427, 81 N. Y. Supp. 812. If the municipality itself furnishes the 1 Frace v. N. Y.,etc.,R. R., 143 N. Y. 182. 38 N. E. 102; O'Neill v. N. Y., D. & W. R. Co., 115 N. Y. 579, 22 N. E. 217; Tannery. N. Y. Central Co., 108 N. Y. 623, 15 N. E. 379; Webb v. Rome W. & 0. R. R. Co., 49 N. Y. 420; Hine v. Gushing, 53 Hun (N. Y.), 519; Martin V. A^. Y., O. & W. R. Co., 62 Hun, 181. 2 Hoffman v. King, 160 N. Y. 618; Van Inwegen v. Port Jervis, etc., R. R. Co., 165 N. Y. 626, 58 N. E. 878. The application of this rule would seem to produce incongruous results, for ex- ample, where at one section the inter- vening strip is a foot wide and at the next section a mile wide. The common carrier under this rule apparently could effectually dispose of claims by induc- ing some friendly party to buy the adjacent foot of land on either side all along the road. A negligent party is not chargeable with knowledge of the boundary lines of his neighbor's prop- erty, and often in fact knows nothing about them, but he is presumed to know that a conflagration is likely to burn, so long as it finds inflammable material in its pathway. 3 The following cases held the water company responsible to the injured taxpayer, Guardian Tr. Co. v. Fisher, 200 U. S. 57, 28 S. Ct. 186, aff'g 128 N. C. 375; Guardian, etc., Co. v. Greens- boro Water, etc., Co., 115 Fed. 184; Mugge v. Tampa, etc., Co. (Fla., 1906), 42 So. 81 (court prefers reasons to number of authorities); Graves Co. Water Co. v. Ligon, 112 Ky. 775, 66 S. W. 725 (citing other Kentucky cases); Gorrell v. Greensboro, etc., Co., 124 N. C. 328, 32 S. E. 720. The fore- going minority probably have the best of the argument, see Judge Freeman's note to Britton v. Green Bay, etc., Co., LIMITATION OF TIME TO SUB 453 by the United States Supreme and other courts seems to allow such an action. The majority of the courts, as shown by the cases cited in the notes, rule otherwise. If such an action is maintainable at the instance of the insured citizen, his insurer on paying the loss be- comes subrogated to the same right. § 325. Subrogation — Order of Civil Authority. — Where buildings are justifiably blown up by order of civil authority to check a con- flagration, can the underwriter, on paying the loss, recover of the municipality? Evidently not at common law.* § 326. Limitation of Time to Sue. — No suit or action shall be sus- tainable until after full compliance by the insured with all the fore- going requirements, nor unless commenced within twelve months next after the fire. A comphance with all the provisions of the contract is thus ex- pressly made a condition precedent. Without this express condi- tion it has been held that the provisions relating to an ascertain- ment of the loss, the appraisal clause, for example, are independent and collateral, and that suit may be brought by the insured upon the policy without complying with their requirements.^ But ob- servance of the restrictive limit of twelve months for starting litiga- tion on the standard policy is thus made a condition precedent to any right of recovery thereunder; and by the terms of the contract the general statute of limitations is superseded, unless, as in all similar cases, the insurer has waived his contract privilege.^ This water, it has been held that it cannot v. Mayor, 7 Ga. 200; White v. City be made liable to the citizen for such Council, 2 Hill (S. C), 571. This was damage by reason of insufficient water an important question after the San supply, Springfield Fire Ins. Co. v. Francisco earthquake of 1906. Village of Keeseville, 148 N. Y. 46, 42 ^ Hamilton v. Home Ins. Co., 137 N. E. 405. Contra, under diiYerent U. S. 370, 11 S. Ct. 133; ieeed v. W-'as/i- form of contract, Watson v. Needham, ington Ins. Co., 13S Mass. 572. 161 Mass. 404, 37 N. E. 204. Nor. it is -^ Riddiebarger v. Hartford Ins. Co., said, can the municipality itself sue a 7 Wall. (U. S.) 386, 19 L. Ed. 257; water company for such damage to Chichester v. I^ew Hampshire F. I. Co. , municipal property, Totrn v. Ukiah, 74 Conn. 510, 51 Atl. 545; Southern etc., Co., 142 Cal. 173, 75 Pac. 773. On Fire I. Co. v. Knight, 111 Ga. 622, 36 the question of privity of contract see S. E. 821, 78 Am. St. R. 216, 52 L. R. A. Pond V. New Rochelle Water Co., 183 70; Garretson v. Merchants' Ins. Co., N. Y. 330. 114 Iowa, 17, 86 N. W. 32; Smith v. 1 Bowditch V. Boston, 101 U. S. 16; Herd, 110 Ky. 56, 60 S. W. 841; Barry Dunbar V. Alcalde, I Cal. 355; Russell V. Lumber Co. v. Citizens' Ins. Co., 136 Mayor, 2 Denio (N. Y.), 461; Lord v. Mich. 42, 98 N. W. 761; Ward v. Fire Mayor, 3 Hill (N. Y.), 426; Mayor v. Ins. Co., 82 Miss. 124, 33 So. 841; Lord, 18 Wend. 126; iSione V. Ma?/or, 25 Sullivan v. Prudential Ins. Co., 172 Wend. 157. But compare United States N. Y. 482, 65 N. E. 268; Appel v. v.Rmfsell, 13 Wall. (V. S.) 623; Bishop Cooper Ins. Co. (Ohio St.), 80 N. E. 454 MEANING AND LEGAL EFFECT OF FIRE POLICY restrictive clause is binding upon an infant insured/ and also upon a mortgagee under the mortgagee clause.^ The contract limitation of twelve months, together with the other provisions of the usual policy, is also, by legal inference, imported into the oral or written binder although the insured has no knowledge of such a limitation; ^ but, it has been held, that an independent promise to pay the amount of an adjusted loss upon consideration of the surrender of the policy will not be governed by the policy limitation.^ The one-year limit for beginning action has been held inapplicable to a contract of reinsurance.'^ § 327. When the Period Begins to Run.— By the better authority the period of limitation begins to run, under the standard policy, from the date of the fire, as specifically stated.^ In older forms of 955 (six months clause); Morrill v. A'. E. Fire Ins. Co., 71 Vt. 281, 44 Atl 358; Ryer v. Prudential Ins. Co., 185 N. Y. 6 (if last day is Sunday, Monday is too late under New York Construc- tion Act). Contra, Nebraska where it is held that the one-year limit is void as against public policy, Omaha Ins. Co. V. Drennen, 56 Neb.'^623, 77 N. W. 67; Grand View Bldg. Ass. v. Northern Assur. Co. (Neb.. 1905), 102 N. W. 246. And see, as to South Dakota, Vesey v. Commercial Union Assur. Co., 18 S. D. 632, 101 N. W. 1074. Igno- rance of the insured is no excuse for nonfulfillment, De Grove v. Met. Ins. Co., 61 N. Y. 594, 19 Am. Rep. 305. Mistake of the insured is no excuse. Farmers' Mut. F. Ins. Co. v. Barr, 94 Pa. St. 345. In case of technical de- feat in the first action certain statutes allow a second suit within twelve months thereafter, Riddlesbargcr v. Hartford Ins. Co., 7 Wall. (U. S.) 386; Waydell v. Gahrielson, 72 Fed. 648; Lancashire Ins. Co. v. Stanley, 70 Ark. 1, 62 S. W. 66; Wooster v. Railroad Co., 71 N. Y. 471. i Mead v. Phoenix Ins. Co., 68 Kan. 432, 75 Pac. 475, 64 L. R. A. 75; Suggs V. Ins. Co., 71 Tex. 579, 9 S. W. 676, 1 L. R. A. 847. ^ Am. Bldg. & L. Assoc, v. Farmers' Ins. Co., 11 Wash. 619, 40 Pac. 125. But a mortgagee's default does not bar a timely action by the mortgagor, Shawnee F. Ins. Co. v. Bayah, 8 Kan, App. 169, 55 Pac. 474. A payment to a mortgagee does not waive the time limitation as against the assured, King V. Waterfo)nn Ins. Co., 47 Hun, ]. This clause does not apply to reinsur- ance, see § 319, supra. As to the effect of war, see § 108, supra. As to the ef- fect of death of the insured, coupled with delay in appointing representative of his estate, see Matthews v. Am. Cent. Ins. Co., 154 N. Y. 449, 48 N. E. 751, 39 L. R. A. 433. A breach of the limitation is matter of defense. There- fore the plaintiff need not plead per- formance. Miller Brewing Co. v. Capital Ins. Co., Ill Iowa, 590, 82 N. W. 1023, 82 Am. St. R. 529. But if plaintiff re- lies upon waiver, it is wiser not to plead due performance of all condi- tions, Allen v. Dutchess Co. Mut. Ins. Co., 95 App. Div. 86, 88 N. Y.Supp. 530. To do so is perhaps fatal irregu- larity in some jurisdictions, Williams V. Ins. Co., 119 App. Div. (N. Y.) 573 (waiver of one-year limitation must be alleged). See § 154,.s?/pra. The gen- eral rule is that waiver cannot be shown under an allegation of full performance, Reich V. Maryland Cas. Co., 54 Misc. (N. Y.) 585. ^ De Grove v. Metropolitan Ins. Co., 61 N. Y. .594; § 82, supra. ■i Smith V. Glens Falls Ins. Co., 62 N. Y. 85; Willoughby v. St. Paul Ger- man Ins. Co., 68 Minn. 373, 71 N. W. 272. A compromise agreement made after loss will not be controlled by the twelve months clause, Hanover F. Ins. Co. V. Hatton (Ky.), 55 S. W. 681. 5 See § 319, supra. ^ Allen V. Dutchess Co. Ins. Co., 95 App. Div. 86, 88 N. Y. Supp. 530; King v. Watertown Ins. Co., 47 Hun, 1; Daly V. Concordia Ins. Co., 16 Colo 349; (15 Pac. 116; Chiche.-iter v. .¥-••' "WHEN THE I'KUlOl) BEGINS TO RUN 455 policies, however, in which the word "loss," instead of fire, was used, it was held by many courts that "loss" in that connection meant "liability," and that therefore the specified period ran from the time when the cause of action on the policy accrued to the in- sured, for instance, often at expiration of sixty days after service of the proofs of loss.^ B}^ like course of reasoning, even under the wording of the standard form, or similar phraseology, some courts continue to apply the old rule, contending that other clauses of the instrument relating to proofs of loss, appraisal, examination under oath, and so on, a compliance with which sometimes more than exhausts the period of a year, indicate an intention to give to the assured twelve available months after the fire within every part of which his action will be sustainable, since otherwise, by the terms of the instrument in their entirety, he may have no time at all left for starting action after his right of action matures.^ Indeed the United States Supreme Court, though expressly declining to pass upon the point, said, in reversing the court below, "There are, it is said, adjudged cases that would authorize such a construction of this policy as would give the insured the whole term of twelve months from the date when he could demand, as of right, that his claim for loss be satisfied.^ Hampshire Ins. Co., 74 Conn. 510, 51 Atl. 545; Allemania Ins. Co. v. Little, 20 111. App. 431; State Ins. Co. v. Stoffels, 48 Kan. 205, 29 Pac. 479; Owen V. Ins. Co., 87 Ky. 571, 10 S. W. 119; Egan v. Oakland Ins. Co., 29 Oreg. 403, 42 Pac. 990; Hocking v. Howard Ins. Co., 130 Pa. St. 170, 18 Atl. 614; Hart v. Citizens' Ins. Co., 86 Wis. 77, 56 N. W. 332, 21 L. R. A. 745, 39 Am. St. R. 880; Prevost v. Scottish U. <& N. Ins. Co. (Rap. Jud., Quebec), 14 S. C. 203. 1 New Haven S. Co. v. Prov. Wash. Ins. Co., 159 N. Y. 547, 54 N. E. 1093; Steen v. Niagara Ins. Co., 89 N. Y. 315, 42 Am. Rep. 297; Sun Ins. Co. v. Jones, 54 Ark. 376, 15 S. W. 1034; Miller v. Hartford Ins. Co., 70 Iowa, 704, 29 N. W. 411; Chandler v. St. Paul Ins. Co., 21 Minn. 85, 18 Am. Rep. 385; Murdock v. Franklin Ins. Co., 33 W. Va. 407, 10 S. E. 777, 7 L. R. A. 572. 2 Steel V. Phoenix Ins. Co., 51 Fed. 715, 7 U. S. App. 325, 2 C. C. A. 463 (aff'd, but not necessarily on this point, in 154 U. S. 518); Friezen v. Allemannia Ins. Co., 30 Fed. 352; Vette V. Clinton Ins. Co., 30 Fed. 668 (but policy limit only six months); Reade v. State Ins. Co., 103 Iowa, 307, 72 N. W. 665, 64 Am. St. R. 180; German Ins. Co. v. Davis, 40 Neb. 700, 59 N. W. 698 (but limit only six months); Leach v. Republic F. Ins. Co., 58 N. H. 245; Sample v. Lond. & Lan. Ins. Co., 46 S. C. 491, 24 S. E. 334, 47 L. R. A. 696, 57 Am. St. R. 701; Ins. Co. V. Scales, 101 Tenn. 628, 49 S. W. 743 (but limit only six months); Hong Sling V. Royal Ins. Co., 8 Utah, 135, 30 Pac. 307. And see Rogers v. Home Ins. Co., 95 Fed. 109, 35 C. C. A. 402. But compare Chambers v. Atlas Ins. Co., 51 Conn. 17, 50 Am. Rep. 1; Brooks v. Ga. Home Ins. Co., 99 Ga. 116, 24 S. E. 869; Johnson v. Humboldt Ins. Co., 91 111. 92; Carraway v. Merchants' Ins. Co., 26 La. Ann. 298; Fullani v. N. Y. Ins. Co., 7 Gray (Mass.), 61; Rattier v. German Ins. Co., 84 Minn. 116, 86 N. W. 888; Grigsby v. German Ins. Co., 40 Mo. App. 276; Travelers' Ins. Co. V. California Ins. Co., 1 N. D. 151, 45 N. W. 704; McFarland v. R. Officials & Employees' Ace. Assn., 5 Wyo. 126, 38 Pac. 347, 27 L. R. A. 48, 63 Am. St. R. 29. 3 Thompson v. Phoenix Ins. Co., 136 TV S. 287 298, 10 S. Ct. 1019 ^decider* 456 MEANING AND LKGAL EFFECT OF FIRE POLICY § 328. Commencement of Action. — Delivery of a summons to the sheriff for service under the New York law is equivalent to be- ginning an action.^ But if the summons is set aside, the service of a second summons after the expiration of the twelve months will not avail the insured. ^ If the action, brought to trial, was com- menced after the expiration of the period named, the fact that another action was begun within the period will not aid the insured as an excuse for his nonfulfillment.'"' But if a suit in equity for reformation of the policy fails, the complaint may be amended in order to allow continuance of the suit as an action upon the policy."* § 329. Construction of Limitation Clause.— While this limitation clause is to be enforced according to its reasonable intendment, nevertheless, in arriving at its fair meaning, regard must be had to the other provisions of the contract. Thus if a compliance with the appraisal clause prevents the claim of the insured from matur- ing until after the expiration of twelve months, the time for bringing suit must be considered extended.^ So also where a Lloyd's policy on ground of waiver). A provision limiting the insured to a particular forum for his action would be invalid, Nute V. Hamilton Mut. Ins. Co., 6 Gray (Mass.), 174. ^Hamilton v. Royal Ins. Co., 156 N. Y. 327, 50 N. E. 863. So in other states, Miller Brewing Co. v. Capital Ins. Co., in Iowa, 590, 82 N. W. 1023; Modern Woodmen v. Bauersfeld, 62 Kan. 340, 62 Pac. 1012; German Ins. Co. V. Wright, 6 Kan. App. 611, 49 Pac. 704; Farrell v. German-Am. Ins. Co., 175 Mass. 340, 56 N. E. 572; Harvey V. Ins. Co., 120 Mich. 601, 79 N. W. 898; Georgia Home Ins. Co. v. Holmes, 75 Miss. 390, 23 So. 183 (no agent within county). With an unofficial process server the rule is said to be otherwise, Lesure Lumber Co. v. Mut- ual Ins. Co., 101 Iowa, 514, 70 N. W. 761. The filing of a prcecipe for a summons /le/r/, sufficient service, Schroe- der V. Mer. & Mech. bis. Co., 104 111. 71. An alias summons, it is said, will relate back to the time of the original, Everett v. Niagara Ins. Co., 142 Pa. St. 322, 21 Atl. 817; Virginia F. & M. Ins. Co. V. Vaughan, 88 Va. 832, 14 S. E. 754. 2 State Ins. Co. v. Stoffels, 48 Kan. 205. 29 Pac. 479. 3 Sullivan v. Prudential Ins. Co., 172 N. Y. 482, 65 N. E. 268; Melson v. Phenix Ins. Co., 97 Ga. 722, 25 S. E. 189; McElroy v. Ins. Co., 48 Kan. 200, 29 Pac. 478; Ward v. Penn. Ins. Co., 82 Miss. 124, 33 So. 841. And see Chi- chester V. New Hampshire Ins. Co., 74 Conn. 510, 51 Atl. 545; Wilhelmi v. Des Moines Ins. Co., 103 Iowa, 532, 72 N. W. 685. An injunction does not prevent the operation of the limita- tion clause of the policy, Wilkinson v. First Nat. Ins. Co., 72 N. Y. 499. But the insured may gain relief by a sea- sonable cross-bill in the injunction suit. North Brit. & M. Ins. Co. v. Lathrop, 70 Fed. 429, 25 U. S. App. 443, 17 CO. A. 175. ■* New York Ice Co. v. Northwestern /ns. Co., 23 N.Y. 357. And see Jacobs V. St. Paid Ins. Co., 86 Iowa, 145, 53 N. W. 101. But it is said that an en- tirely new cause of action cannot be allowed by amendment after the policy limit of time has expired, Grier v. North. Assur. Co., 183 Pa. St. 334, 39 Atl. 10. 5 Williams v. German-Am. Ins. Co., 90 App. Div. 413, 86 N. Y. Supp. 98 (time extended until sixty days after award); Austen v. Niagara Ins. Co., 16 App. Div. 86, 45 N. Y. Supp. 106; Case v. Sun Ins. Co., 83 Cal. 473; Harrison V. Hartford Ins. Co., 112 Iowa, 307, 83 N. W. 820; Fritz v. Brit.-Am. Assur. Co., 208 Pa. St. 268, 57 Atl. 573. And see Rogers v. ^tna Ins. Co., 95 INSURED INCLUDES LEGAL REPRESENTATIVE 457 provides that action shall be brought against one underwriter only, and that the other underwriters shall abide the event of such action, actions against the other underwriters need not be brought within the year succeeding the fire.^ § 330. Waiver of Limitation. — The policy provision being in derogation of the general statute of limitation, the courts are not slow in holding the company estopped from insisting upon it, where the promise or conduct of the company has induced the delay. ^ The Massachusetts clause names as the limit of time for bringing suit two years from the time the loss occurred.^ § 331. Insured Includes Legal Representative. — Whenever in this policy the word "insured" occurs it shall be held to include the legal representative of the insured and wherever the word "loss" occurs it shall be deemed the equivalent of "loss or damage." The policy is not so far a personal contract as to terminate on the death of the assured. Such a result would be highly incon- venient, and is not needful to the protection of the insurer. On the occurrence of that event the executor or administrator of the assured has the right to collect the insurance money in case of loss, whether the policy is on real or personal estate.^ Fed. 103, 35 C. C. A. 396 (where judg- Lond. Assur. Co., 93 Va. 553, 25 S. E. ment in collision suit was prerequisite 597. As to effect of setting aside a to claim against defendant); Martin fund by an insolvent company, see V. State Ins. Co., 44 N. J. L. 485, 43 St. Paul German Ins. Co., 58 Minn. Am. Rep. 397. 163, 59 N. W. 996. But mere negotia- 1 A'. J. Concentrating Works v. tions for an adjustment are no waiver Ackerman, 6 App. Div. (N. Y.) 540, of the limitation, Vincent v. Mut. Res. 39 N. Y. Supp. 585; Lawrence v. Fund L. Ass., 74 Conn. 684, 51 Atl. Schoefer, 19 Misc. 239, 42 N. Y. Supp. 1066; Carlson v. Met. L. his. Co., 172 992. As to reinsurance see § 319, Mass. 142, 51 N. E. 525; Allen v. supra. Dutchess Co. Mut. Ins. Co., 95 App. 2 Thompson v. Phoenix Ins. Co., 136 Div. 86, 88 N. Y. Supp. 530; Morrill U. S. 287, 10 S. Ct. 1019, 34 L. Ed. v. Ins. Co., 71 Vt. 281, 44 Atl. 358. 408; De Farconnet v. Western Ins. Co., 3 For statutes see Appendix, ch. I. 110 Fed. 4:05; Steel V. Phoenix Ins. Co., * Laurence v. Niagara Ins. Co., 2 51 Fed. 715, 2 C. C. A. 463; Magner v. App. Div. 267, 37 N. Y. Supp. 811, Mut. Life Assoc, 17 App. Div. 13, aff'd 154 N. Y. 752, 49 N. E. 1099; aff'd 162 N. Y. 657, 57 N. E. 1116; Wyman v. Wyman, 26 N. Y. 253. As Fireman's Fund Ins. Co. v. Western to meaning of the term "legal rep- Refrig. Co., 162 111. 322, 44 N. E. 746; resentative," see Matthews v. Am. Goodwin v. Merchants' Ins. Co., 118 Cent. Ins. Co., 154 N. Y. 449, 48 N. E. Iowa, 601, 92 N. W. 894; Scottish U. 751; Alford v. Consol. Ins. Co., 88 & N. Ins. Co. V. Enslie, 78 Miss. 157, Minn. 478, 93 N. W. 517 (receiver of a 28 So. 822; Phoenix Ins. Co. v. Rad corporation); Metzger v. Manchester F. Bita Hora, 41 Neb. 21, 59 N. W. 752; Assur. Co., 102 Mich. 334, 63 N. W. Dibbrell v. Georgia Home Ins. Co., 110 650 ("representative" does not mean N. C. 193, 14 S. E. 783; Cochran v. "agent"). 458 MEANING AND LEGAL EFFECT OF FIRE POLICY § 332. Mutual Companies. — // this policy he made by a mutual or other company haoiiuj apcciuL regulations lawfully applicable to its organization, membership, policies, or contracts of insurance, such regulations shall apply to and form a part of this policy as the same may be written or printed upon, attached or appended hereto. The regulations or by-laws of mutual companies often affect the particulars of the contract. These regulations are, in general, bind- ing upon the policyholders, who in mutual companies constitute the riiembers of the company.^ This direction of the standard policy wisely and equitably provides that such regulations must be dis- closed in connection with the contract itself; for instance any special provision relating to the method of paying premium by deposit note, wholly or partly in place of a present cash payment. ^ This clause does not appear in the Massachusetts policy, but the Massachusetts public statutes and the statutes of other states pro- vide that provisions of the by-laws, or the application which forms a part of the contract, must be set forth in the policy, or that a copy must be attached thereto, and under such statutes, it .has been held that a failure to comply precludes a defense based on anything con- tained in the application.^ § 333. Authority of Agents to Waive Limited to Writing. — This policy is made and accepted subject to the foregoing stipulations and conditions, together with such other provisions, agreements or conditions as may be indorsed hereon or added hereto and no officer, agent or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed hereon or added hereto, and as to such provisions and conditions no officer, agent, or representative shall have such power or be deemed or held to have waived such pro- visions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached. The importance of this clause to the insurance companies is illustrated by the frivolous and oftentimes false testimony by which, 1 Wilson V. Union Mid. F. Ins. Co., the company's defense is fraud, a 77 Vt. 28, 58 Atl. 799. And see § 5, medical witness may use the applica- supra. As to assessments, see Meley tion, though not incorporated or at- V. Whitaker, Receiver^ 61 N. J. L. 602. tached to the policy, to aid his mem- 2 See § 228, supra. ory, H olden v Prudential Ins. Co., 191 ^ Rauen v. Prudential Ins. Co., 129 Mass 163. Iowa, 725, 106 N. W i98. But where AUTHORITY OF AGENTS TO WAIVE LIMITED TO WRITlxVG 459 under the doctrine of waiver and estoppel, the essential conditions of the written policy are subverted. By the prevailing rule the provisions of the clause are not invalid upon their face or contrary to pubhc policy, and are to be enforced, except as facts amounting to a waiver of the clause itself, or to an estoppel against the com- pany, are established. The meaning and legal effect of the clause have been considered at length under the subject of waiver and estoppel.^ Within the deliberate opinion of the United States Supreme Court, as before shown, this provision of the contract is reasonably calculated to protect both parties from the uncertainties and perils of oral testi- mony, and should be applied by the courts according to its terms and in pursuance of its purpose, and should not be evaded.^ Many of the provisions of the standard fire policies are needful in general to guard the public against fires having their origin in carelessness or fraud. All proper modifications, suited to special instances, can be made by indorsements or riders attached to the statutory form of policy.^ Nevertheless a majority of the state courts, encroach- 1 For full discussion see ch. VIII, supra. 2 Northern Assur. Co. v. Grand View Bldg. Assn.. 18S L . S. 308, 22 S. Ct. 133, 46 L. Ed. 213 3 Often so attached ."^s occasion de- mands, are such pern'iti. as the follow- ing: For other insuran-?^ (§ 252); to remain unoccupied a portion of each year (§§271, 272, 273). or to remain imoccupied a portion of et^ch year in charge of a competent per.^on; to use kerosene, oil, or gas sto-^es; to use steam and electricity for heating, lighting and power; to use benzine or gasoline or other prohibited articles, or occupations, with or without restric- tions (§§ 269. 281); to make additions, alterations and repairs (§ 233), or to make ordinary alterations and repairs exclusive of j^dditions or reconstruc- tions; or to cover builder's risk (§ 258); to cover though on leased ground (§ 260); to work in factories over time (§ 255). Besides such permits, other clauses are often added, for example: lightning, mortgagee (§ 290), coinsur- ance (§ 242), average (§ 242), auto- matic sprinkler equipmer.t (§ 109); watchman (§ 256); clear -^space; iron safe; three-fourths value (§ 242); three- fourths loss, etc. The iron-safe clause, requiring a safe, inventory, al^-;:' set of books, is used mainly in the South; recent cases construing it are ap- pended, Mtna Ins. Co. v. Johnson (Ga., 1907), 56 S. E. 643 (substantial compliance will suffice); Ai^tna Ins. Co. V. BIoujU (Miss., 1907), 44 So. 162 (assured failed to keep books in safe. Policy avoided); Coggins v. .'li^tna Ins. Co. (N. C, 1907), 56 S. E. 506 (policy avoided; no inventory kept as re- quired); Reynolds v. German-Am. Ins. Co. (Md., 1907), 68 Atl. 262 (policy avoided; inventory not made within 30 days); McMillan v. 7ns. Co. (S. C, 1907), 58 S. E. 1020 (substantial com- pliance sufficient); Sccttish U. & N. Ins. Co. V. Moore, 36 Tex. Civ. App. 312 (substantial compliance sufficient). Even imder a liberal statute there must be a reasonable fulfillment of the iron-safe clause warrantv, Arkansas Ins. Co. V. Luther (Ark.^ 1908), 109 S. W. 1022; Arka7isas Ins. Co v. Stuckey (Ark., 1907), 106 S. W. 203; Yates V. Thomason (Ark., 1907), 102 S. W. 1112 (policy avoided); Arkaiisas Ins. Co. V. McManus (Ark., 1908), 110 S. W. 797. But the company has been held estopped from insisting upon for- feiture, where the agent issuing the policy knew that there was no safe, Rudd V. Am. Guarantee, etc., Ins. Co. (Mo. App., 1906). 35 Ins. L. J. 948 Sometimes an earthquake clause is at- tached to the policy (§ 280). And see 460 MEANING AND LEGAL EFFECT OF FJRE POLICY ing apparently upon the prerogative of the legislatures, have largely nullified this clause of the standard policies by applying to it the modern American doctrine of parol waiver.^ The Massachusetts policy, and other standard policies like it, have no similar provision. To the similar clause in the Wisconsin policy are added phrases regarding knowledge by the company's agent prior to the inception of the contract, and also regarding his knowledge after loss, which powerfully affect its operation in favor of the assured.^ The South Dakota policy has the following ex- traordinary provision, which, so far as conditions affecting the risk prior to the fire are concerned, places the insurer practically at the mercy of unscrupulous claimants: It shall he the duty of the insurer, in order to avail himself of any provision in this policy rendering it void, to promptly cancel the policy as provided herein upon having or obtain- ing notice or knowledge of the existence of any facts or circumstances which would, according to the terms of the policy, render it void; other- wise it will he deemed to have waived such provision or provisions void- ing the policy. Provided, that, if the grounds for cancellation under the last clause shall he distinctly specified in the written notice, such cancellation may he effected upon twenty-four hours' notice to the in- sured; and actual notice to, or the knowledge of, any agent of the com- pany as above mentioned shall be deemed notice to, and knowledge of, the company. § 334. Policy not Valid Until Countersigned. — This provision is binding,^ but in no wise interferes with a closing of the contract by preliminary oral or written binder.-* The clause often fixes the place where the contract is consummated and the policy delivered, and, in that event, may determine what body of law shall govern as to its validity, construction and discharge.^ Richmond Coal Co. v. Commercial ""- Welch y. Fire Assn., \20W\s. ^5^, Union Assur. Co., 37 Ins. L. J. 97; 98 N. W. 227. Board of Education v. Alliance Ins. ^Badger v. Ins. Co., 103 Mass. 244. Co., 159 Fed. 991. 4 See §§ 80, 81. 1 See §§ 128, 173, 174. And see s Orient Ins. Co. v. Rudolph, 69 German-Am. Ins. Co. v. Hyman (Colo., N. J. Eq. 570, 61 Atl 26 1908), 94 Pac. 27; Dulaney v. Fidelity '& Cas. Co. (Md.), 66 Atl. 614. CHAPTER XVI Life Insurance Policy § 335. Life Insurance Policy — Introductory. — The general prin- ciples of law governing the fire policy are applicable also to the life policy. It will be well to note, however, that while almost every individual property owner is practically under compulsion to seek the protection of fire insurance, life insurance appears to the public to be more a matter for free choice. Life insurance, therefore, must be made to look attractive and valuable, if it is to win popular favor. The mercantile fire insurance policy usually runs for the term of a year. It is frequently renewed. Each premium is independent and is relatively small; but the life insurance policy may run for a long period, indeed for a lifetime. Its premiums in the aggregate with interest may largely exceed the face of the policy. To pay pre- miums during the whole span of a life, in return for a contract eventually turning out to be worthless would bring dismay, if not disaster, to those in interest. An apprehension of such a possible result tends to neutralize the effect produced by the most alluring advertisements circulated by life insurance agencies. From such considerations it may easily be inferred that a litigious reputation is not a desirable asset for any life insurance company to possess. Hence in its policy we are not surprised to find the modern "incon- testable'' clause; and we rightly conclude that the legal practitioner is likely to be engaged in less controversy over the warranties of the usual life policy than over those of the usual fire policy.^ Notwith- standing the soundness of these premises we must not, in our com- prehensive review of the law of life insurance, ignore provisions which are pecuhar to the policy of life insurance. In New York the legislature has made obligatory, except as applied to industrial insurance, four standard forms of life insurance con- tracts, comparatively simple in their terms.^ It will be profitable, 1 The life insurance policies of assess- other forms, and has already modified ment companies have given rise to the statutory forms. Standard hfe in- much litigation. surance policies have been adopted 2 Ins. L.. sec. 101 The insurance by the legislatures of several other superintendent may allow the use of states. [461J 462 MEANING AND LEGAL EFFECT OF LIFE POLICY however, in treating of this subject, to follow clause by clause one of the older and more complex forms of policy^ still in general use, which will at the same time present the law points involved in the construction of the standard forms. § 336. Designation of Beneficiary. — Payable to the insured, his executors, administrators, or assigns. A policy taken out in this form is the property of the insured, is subject to the claims of his creditors, and upon his death is collectible by his executors or administrators like any other personal assets of his estate; unless he has previously assigned it.^ § 337. Other Beneficiaries.— Oftentimes the policy is made payable to others than the insured, who may be designated by such general terms that it is not easy to determine to whom the description is in- tended to be applicable, under the circumstances as they happen to exist at the time of the decease of the insured.^ In such cases the 1 Appendix, ch. II. For definition of life insurance and its nature see Ritter V. Mrd. L. Ins. Co., 169 U. S. 139, 151, 18 S. Ct. 300. At p. 151 the court says: "Life insurance imports a mutual agreement, whereby the in- surer, in consideration of the payment by the assured of a named sum an- nually or at certain times, stipulates to pay a larger sum at the death of the assured. The company takes into con- sideration, among other things, the age and health of the parents and relatives of the applicant for insurance, together with his own age, course of life, habits and present condition; and the premium exacted from the assured is determined by the probable duration of his life, calculated upon the basis of past experience in the business of in- surance. The results of that experi- ence are disclosed by standard life and annuity tables showing at any age the probable duration of life." 2 § 71 , supra. 3 If no beneficiary is sufficiently designated the insurance reverts to the estate of the insured, Boy den v. Massachusetts Masonic L. Assoc, 1G7 Mass. 242, 45 N. E. 735. So, also, if the beneficiary cannot lawfully take, Mayher v. Manhattan L. Ins. Co., 87 Tex. 169, 27 S. W. 124. But where there vv'as no person in existence of any class specified, who could take as beneficiary, the Nebraska court held that the fund would revert to the society and would not go to the ad- ministrator of the member or to his creditors, Warner v. Modern Woodmen (67 Neb. 233), 93 N. W. 397 (citing many cases). Sometimes the insurance company protects itself with the fol- lowing provision: "The production by the company of this policy and a re- ceipt for the sum assured, signed by any person furnishing proof satis- factory to the company that he or she is an executor or administrator, hus- band or wife, or relative by blood, or lawful beneficiary of the insured, shall be conclusive evidence that such sum has been paid to and received by the person or persons lawfully entitled to the same, and that all claims and de- mands upon said company under this policy have been satisfied." Payment thus made to anyone so named will furnish the company with a complete defense. Brooks v. Met. Life his. Co. (N. J., 1903), 56 Atl. 168; Ruojf v. John Hancock M. L. Ins. Co., 86 App. Div. 447. No one of those thus named for the exercise of the companies' elec- tion has an exclusive right of action on the policy. Hence, it has been held, no one alone has an attachable interest in the insurance fund, Providence Co. S. Bk. V. Vadnais (R. I., 1904), 58 Atl. 454. But any receipt fraudulently ob- tained by the company may not be conclusive, McNicholas v. Prudential Ins. Co., 191 Mass. 304. OTHER BENEFICIARIES 463 words are given a popular rather than a technical signification,^ and especially where the appointment is gratuitous, parol evidence is freely received to arrive at the real meaning of the insured.^ A designation of beneficiaries, however, can be made only from the classes specified and in accordance with statutes and with the charter and by-laws of the company, so far as they may govern the subject.^ Thus, in a Tennessee case, Offill, a member of the Knights of Honor, had his benefit certificate made payable to his niece, the plaintiff. The constitution and laws of the society provided for three classes of beneficiaries: (1) members of the family; (2) blood relatives; (3) persons dependent on the member. Offill surrendered his certificate and took out another in place of it payable on his death to Miss Coram whom, though she lived with her parents, he had promised to support. But after his decease it appeared that his assistance in fact rendered to her was limited to some music lessons, and the gift of a dress, a pair of shoes, and a watch. The court held that Miss Corum, not being dependent upon the insured, was not entitled to the appointment, and that the proceeds of the insurance belonged to the niece, the prior appointee."* Other courts approach this matter from a different point of view. John M. Irvine, named the plaintiff, who was his sister-in-law, i Walter V. Hensul, 42 Minn. 204,44 zenberg, 162 Mass. 98, 38 N. E. 17 N. W. 57. (creditors excluded); Marsh v. Amer. 2 Griswold v. Sawyer, 125 N. Y. 411, Legion of Honor, 149 Mass. 515, 21 N. E. 35 N Y. St. R. 396, 26 N. E. 464; Pittel 1070; Britton v. Roml Arcanum, 46 N. J. V. Fidelity Mut. L. Assn., 86 Fed. 255, Eq. 102. 18 Atl. 675; Sanger v. Roths- 30 C. C. A. 21, 52 U. S. App. 638 c/iiM, 123 N. Y. 577, 34 N. Y. St. R. 258, ("legal representatives" construed in 26 N. E. 3; Grand Lodge v. Iselt (Tex. the light of an assignment of policy by Civ. App.), 37 S. W. 377. The policy the insured himself); Knights Templars may reserve to the company the right & Masonic M. A. Assn. v. Greene, 79 to appoint the beneficiary from certain Fed. 461 (all the circumstances and classes. Brooks v. Metropolitan Life context may be invoked to determine Ins. Co., 70 N. J. L. 36, 56 Atl. 168. whether "heirs" includes widow). The subject of change of beneficiary is The rule of construction is analogous considered in §§ 64, 68, 69, supra. to that applied in the case of wills and * Ofpll v. Supreme Lodge (Tenn., other gifts, Mut. Ben. Life Ins. Co. v. 1898), 46 S. W. 758. Where one desig- Bank, 24 Ky. L. R. 580, 69 S. W. 1; nation of beneficiary fails, a previous Duvall V. Goodson, 79 Ky. 224; Rnss v. valid designation remains in force, Supreme Council, 110 La. 588, 34 So. Smith v. Boston & M. R. Relief Assn., 697. 168 Mass. 213, 46 N. E. 626; Grand 3 Masonic Mut. Ben. Assoc, v. Sever- Lodge of Wisconsin of Order of H. S. son, 71 Conn. 719, 43 Atl. 192 (by-laws v. Lemke, 124 Wis. 483, 102 N. W. 911 in force at time of member's decease (survivors). The New York court has may govern); Norwegian Old People's decided that a company, by accepting Home Soc. v. Wilson, 176 111. 94, 52 dues, is estopped from contesting a N. E. 41; Smith v. Supreme Tent, 127 certificate in favor of a "dependent," Iowa, 115, 102 N. W. 830 ("rela- on the ground that she was not a de- tives"); Carson v. Vicksburg Bank, 75 pendent, Tramblay v. Supreme Coun- Miss. 167, 22 So. 1, 37 L. R. A. 559 ci7, 90 App. Div. 39, appeal withdrawn, (creditors excluded); Clarke v. Swart- 179 N. Y. 517. 464 MEANING AND LEGAL EFFECT OF LIFE POLICY beneficiary in his certificate of membership in the Knights of Pythias. The association with full knowledge of the relationship, which in- deed was disclosed upon the face of the certificate, issued the certifi- cate and received payment of dues thereunder. On the trial, how- ever, it contended that the appointment was not lawful within the meaning of its by-laws. The New York court, reversing the court below, held that the association was estopped from raising this defense.^ But although the designation of the beneficiary may be irregular, or may altogether fail, the court will enforce the contract if possible and not allow it to be defeated. ^ As already shown the general rule is that as soon as the contract is made rights of third party beneficiaries become vested, and cannot be disturbed by a fresh appointment unless such a power is expressly reserved to the insured. •"* § 338. Insurance Payable to Heirs or Legal Representatives.— In the case of gratuitous arrangements, the probable intent of the donor, if lawful, must be carried out. As popularly used, the words "heirs" and "heirs at law" and similar phrases usually refer to the distributees or persons who would receive personalty in case of intestacy, and, in the absence of other evidence of intent, such is the signification accepted by the courts in construing the life policy or certificate.^ Thus it was held that the phrase "lawful heirs" was 1 Strange v. Supreme Lodge, 189 gent v. Supreme Lodge, 158 Mass. 557, N. Y. 346, 82 N. E. 433. See § 130, 33 N. E. 650; Addison v. New Eng. su-pra. In the same case it was also Comml. Traveller:^' Assoc, 144 Mass. held that where the first designation 591; Carson v. Vicksburg Bank, 75 is made for value received from the Miss. 167, 22 So. 1, 37 L. R. A. 559. beneficiary, the rights of the bene- It has been held in New York by a ficiary are vested, and the usual power divided court that, where an associa- of making a new appointment, re- tion issues a certificate in favor of a served to the insured by the by-laws, beneficiary outside the permitted class, no longer exists without consent of the only the association can avail itself beneficiary ; citing Conselyea v. Su- of the act ultra vires. The beneficiaries preme Council, 3 App. Div. 464, aff'd contemplated by the by-laws were not 157 N. Y. 719; Webster v. Welch, 57 allowed to recover, by reason of the App. Div. 558; Smith v. National Ben. fact that the association made no Soc, 123 N. Y. 85. Compare the objection to those irregularly ap- Nebraska case in which it was held pointed, Coulson v. Flynn, 181 N. Y. that though conviction for felony 62, 73 N. E. 507. amounted by the by-laws to expulsion 3 See § 64, supra; Perry v. Tweedy from membership, yet collection of (Ga., 1907), 57 S. E. 782. A right to assessments with full knowledge of the change beneficiaries, though expressly facts constituted a waiver, Pringle v. reserved, does not include power to Modern Woodmen (Neb., 1907), 113 surrender the policy for cancellation N. W. 231. without consent of the beneficiaries, ^ Hadlei/ v. Odd Fellows, 173 Mass. Holder v. Prudential Ins. Co. (S. C, 583, 54 N. E. 345; Clarke v. Su-aHzen- 1907), 57 S. E. 853. hrrg, 162 Mnss 98, .-^S N. E. 17; Snr- * .Johnson v. Knights of Honor, 63 INSUEANCE PAYABLE TO WIFE 465 used in a colloquial sense and included the widow, though technically not one of the heirs at law.^ And "legal heirs," it is said, includes all the distributees under the statute of distributions.^ The phrase "legal representatives" properly means executors or administrators, including also assigns/"* and such signification will naturally be given to it,^ but not necessarily, since the purpose of the donor, if lawful, must control. Thus where a policy was made payable to the "legal representatives" of the insured, the court re- fused to allow the proceeds to fall into the general assets of his estate for the benefit of his creditors, and held that he intended in that instance to designate his wife and children.^ Where a policy is payable to wife and children, or other benefici- aries, they all divide the proceeds equally, and not in accordance with the statute of distributions, unless statutes or by-laws so provide.* § 339. Insurance Payable to Wife. — An "affianced wife" is not "a wife " within the meaning of statutes or of rules of an association.'' Ark. 255, 13 S. W. 794, 8 L. R. A. 732; Mullen V. Reed, 64 Conn. 240, 29 Atl. 478, 24 L. R. A. 664, 42 Am. St. R. 174; Hubbard v. Turner, 93 Ga. 752, 30 I.. R. A. 593, 20 S. E. 640 (money went to brother); Britton v. Supreme Coun- cil, 46 N. J. Eq. 102, 18 Atl. 675, 19 Am. St. R. 376 (money went to mother); Northwestern M. A. Assoc, v. Jones, 154 Pa. St. 99, 26 Atl. 253, 32 W. N. C. 169 ("heirs" does not mean executor or administrator of estate of insured). It is held in some jurisdic- tions, however, that the administrator or executor of the insured may collect by suit and distribute to the rightful beneficiaries, Janda v. Union, 71 App. Div. 150, 75 N. Y. Supp. 654, aff'd 173 N. Y. 617, 66 N. E. 1110; Bishop V. Grand Lodge, 112 N. Y. 627, 20 N. E. 562; Clarke v. Swartzenberg , 162 Mass. 98, 38 N. E. 17; Rose v. M^ortha7n, 95 Tenn. 505, 32 S. W. 458, 30 L. R. A. 609; but see Schoep v. Bankers' Alliance Ins. Co., 104 Iowa, 354,73 N. W. 825; Iowa State T. M. Assoc, v. Moore, 73 Fed. 750, 34 U. S. App. 670, 19 C. C. A. 662. 1 Hannigan v. Ingraham, 55 Hun (N. Y.), 257, 28 N. Y. St. R. 530, 8 N. Y. Supp. 232; Alexander v. Associa- tion, 126 111. 558, 18 N. E. 556, 2 L. R. A. 161 (all went to widow); Lyons v. Yerex, 100 Mich. 214, 58 N. W. 1112, 43 Am. St. R. 452 ("heirs at law" includes widow); Schnltz v. //?.<•■. Co., 59 Minn. 308, 61 N. W. 331; Leavitt v. Dunn, 56 N. J. L. 309, 28 Atl. 590, 44 Am. St. R. 402 ("heirs "means "widow as well as children"); contra, Gauch V. Ins. Co., 88 111. 251, 30 Am. Rep. 554; Phillips v. Carpenter, 79 Iowa, 600, 44 N. W. 898. 2 Thomas v. Covert, 126 Wis. 593. The term "heirs" includes widow where the widow is one of the next of kin. Burns v. Burns, 190 N. Y. 211. 3iV. Y. Milt. L. Ins. Co. v. Arm- strong, 117 U. S. 591, 597, 6 S. Ct. 877, 29 L. Ed. 997. ^Sulz V. M. R. F. L. Assoc, 145 N. Y. 563, 40 N. E. 242, 28 L. R. A. 379; People v. Phelps, 78 111. 147. And see Leonard v. Harney, 173 N. Y. 352, 66 N. E. 2 and Colder v. Chandler, 87 Me. 63, 32 Atl. 784 (legal representatives held the proceeds in trust for "heirs"). 5 Murray v. Strang, 28 111. App. 608; Schultz V. Citizens' Mtd. L. Ins. Co., 59 Minn. 308, 61 N. W. 331; Rose v. Wortham, 95 Tenn. 505, 32 S. W. 458, 30 L. R. A. 609. And see Griswold v. Sawrjer, 125 N. Y. 411, 35 N. Y. St. R. 396, 26 N. E. 464. (^Bell V. Kinneer, 101 Ky. 271, 40 S. W. 686, 19 Ky. L. Rep. 545; Small V. Jose, 86 Me. 120, 29 Atl. 976; Jack- man v. Nelson, 147 Mass. 300. 1 Palmer v. Welch, 132 111. 141, 23 N. E. 412. But an "affianced wife" might come within the class of "de- pendents," McCnrthy v. Svprem.e Lodge, 466 MEANING AND LEGAL EFFECT OF LIFE POLICY §340. Insurance Payable to Children.— The term "children" will not generally be extended to include grandchildren,^ but if needful to effectuate the apparent intent of the insured, "child" is held to mean an adopted child; ^ and "orphans" is held to mean "children," rather than those only who are bereft of both parents.^ Children born after the contract are included, unless the children are specificajly named; ^ and children subsequently born by a second wife participate equally in the fund.^ In case of a policy to "my wife Mary and children," a child by a former wife is a beneficiary.'^ To "be paid to his wife M. K. and children," means to his children by this wife or others, not M. K.'s children^ § 341. Insurance Payable to Family, Dependents, Survivors, etc. —"Family" may include persons who are not relatives, if residing with the insured. » Here again the intent of the insured must if possible be ascertained.^ Thus an adult son though not dependent upon or residing with the insured may be included ;^'^ also stepchildren who have married and left the household of the insured. ^^ 153 Mass. 314, 26 N. E. 868, 11 L. R. A. 144, 25 Am. St. R. 637. So a woman, believing herself to be a lawful wife, was held protected within the same class, Crosby v. Ball, 4 Ont. Law R. 490. It has been held that the in- surance company is protected in mak- ing payment in good faith to the al- leged beneficiary named as wife and need not investigate the validity of the marriage. Met. Life Ins. Co. v. Louisville Trust Co. (Ky., 1905), 89 S. W. 268. As to mistresses named as beneficiaries. Independent, etc., Sons of Jacob V. Henderson, 76 Miss. 326, 71 Am. St. R. 532, 24 So. 702 (appoint- ment sustained); Keener v. Grand Lodge, 38 Mo. App. 543 (appointment not sustained); Brown v. Mansur, 64 N. H. 39, 5 Atl. 768 (assignment of certificate to mistress for support of child sustained). Second wife held en- titled to insurance on death of first wife, Speegle v. Sovereign Camp (S. C, 1907), 58 S. C. 435. » Russell V. Russell, 64 Ala. 500; Small V. Jose, 86 Me. 120, 29 Atl. 976; U. S. Trust Co. V. Mut. Ben. Life Ins. Co., 115 N. Y. 152, 24 N. Y. St. R. 1, 21 N. E. 1025; Winsor v. Association, 13 R. I. 149. But see Continental Life Ins. Co. V. Palmer, 42 Conn. 60, 19 Am. Rep. 530; Re Conrad's Estate, 89 Iowa, 396, 56 N. W. 535; Duvall v. Goodson, 79 Ky. 224. 2 Virgin v. Marwick, 97 Me, 578, 55 Atl. 520; Martin v. ^'Etna Life Ins. Co., 73 Me. 25, and see Kemp v. New York Produce Exchange, 31 App. Div. 175, 54 N. Y. Supp. 678. Illegitimate chil- dren described as "adopted children" allowed to recover, Hanley v. Supreme Tent, 38 Misc. 161. 77 N. Y. Supp. 246. 3 Fischer v. Malchow, 93 Minn. 396, 101 N. W. 602. * Roquemore v. Dent; Dent v. Roque- more, 135 Ala. 292, 33 So. 178, 93 Am. St. R. 33; Scull v. jEtna L. Ins. Co., 132 N. C. 30, 43 S. E. 504, 60 L. R. A. 615, 95 Am. St. R. 615; Thomas v. Leake, 67 Tex. 469, 3 S. W. 703. But see Conn. Mut. Life Ins. Co. v. Bald- win, 15 R. I. 106, 23 Atl. 105. 5 Helmken v. Meyer, 118 Ga. 657, 45 N. E. 450; Ric'er v. Ins. Co., 27 Minn. 193, 6 N. W. 771, 38 Am. Rep. 289. 6 McDermott v. Centennial Mut. Life Asso., 24 Mo. App. 73. If the phrase "our children" is used the rule is different, Evans v. Opperman, 76 Tex. 293, 13 S. W. 312. 7 Koehler v. Centennial Mut. Life Ins. Co., 66 Iowa, 325. 8 Carmichael v. Northwestern Mvi. Ben. Assoc, 51 Mich. 494. 8 Folmer's Appeal, 87 Pa. St. 133. 10 Klotz v. Klotz, 15 Ky. L. Rep. 183, 22 S. W. 551. 11 Tepper v. Supreme Council, 16 N. J. Eq. 638. BENEFICIARIES MAY SUE 467 A wife and child were held to be the "immediate family" in place of the father of the insured who had ceased to be properly desig- nated.^ Occasional presents to a beneficiary are not enough to make him a "dependent." There must be dependency in a material degree for assistance or support.^ A person who is neither a relative of the insured, nor a member of his household, nor connected with him by marriage is not to be regarded as a "survivor," as that term is used in a certificate or in the rules of an association.^ In a Massachusetts case, the household consisted of Wilber, the insured, his wife and her two unmarried sisters. One of the sisters and the insured earned the needed funds for the common support while the wife and the remaining sister cared for the house. Wilber took out a benefit certificate after the death of his wife, to aid the sisters in the event of his own death, making one of them beneficiary by the terms of the policy. The court concluded that a jury might find from the evidence that the beneficiary was "dependent" upon the assistance of Wilber to support herself and sister in his lifetime in the same degree of comfort in which they had theretofore lived, and that an obligation to furnish such assistance, although perhaps not enforceable at law, might have rested upon moral and equitable grounds.^ § 342. Beneficiaries May Sue. — Upon maturity of the policy, third parties appointed therein by the insured as beneficiaries may in most 1 Knights of Columbus v. Rowe, 70 3 Grand Lodge v. Lemke, 124 Wis. Conn. 545, 40 Atl. 451. As construing 483, 102 N. W. 911; Koerts v. Grand " immediate family " see also Norwegian Lodge, 1 19 Wis. 520, 97 N. W. 163. Soc. V. Wilson, 176 111. 94, 99, 52 N. E. * Wilber v. Supreme Lodge, 192 Mass. 41 (married daughter included though 477, 78 N. E. 445. The same court in residing elsewhere); Larkin v. Knights an earlier case said: "Trivial or casual, of Columbus, 188 Mass. 22, 73 N. E. or perhaps wholly charitable assist- 850 (widow preferred to designated ance, would not create a relation of father). What constitutes member- dependency within the meaning of the ship in a "family," Grand Lodge v. statute or by-laws. Something more McKay (Mich., 1907), 112 N. W. 730; is undoubtedly required. The bene- Supreme Lodge v. Dewey, 142 Mich. ficiary must be dependent upon the 666, 106 N. W. 140. "A member of member in a material degree for sup- his immediate family or in default of port or maintenance or assistance, and such family one of his blood rela- the obligation on the part of the mem- tions," construed in Dalton v. Knights her to furnish it must, it would seem, r/ Co/wmftus, 80 Conn. 212, 67 Atl. 510. rest upon some moral, or legal or ^ Offill V. Supreme Lodge (Tenn., equitable grounds, and not upon the 1S98), 46 S. W. 758; Alexander v. purely voluntary or charitable im- Parler, 144 111. 355, 33 N. E. 183; pulses or disposition of the member," McCarthy v. Supreme Lodge, 153 Mass. McCarthy v. New Eng. Order of Pro- 314, 26 N. E. 866; Wilbur v. Supreme tection, 153 Mass. 314, 318, 26 N. E. Lodge, 192 Mass. 477 866. ^ 468 MEANING AND LEGAL EFFECT OF LIFE POLICY jurisdictions bring action at law in their own name as the real parties in interest to recover the fund.^ § 343. Anticipatory Breach.— By the weight of authority, if the insurer renounces the continuing contract of insurance, upon his part, and unequivocally refuses in advance of its maturity,^ to per- form it, the insured may at his option take the insurer at his word. The insured is then relieved of the duty of further performance on his part, and may maintain an action at law for damages, before the specified date of expiration.^ For example, where during the life of the policy the association repeatedly repudiated liability for $5,000, the face of the policy, and declared that it would pay only $2,000 on maturity of the policy, the New Jersey Supreme Court sustained a present action at law for damages.^ In the leading case cited from the reports of the United* States Supreme Court,^ the contract under consideration, it should be 1 McLaughlin v. McLaughlin, 104 Cal. 171, 37 Pac. 865; Martin v. jEtna Ins Co., 73 Me. 25; Fisher v. Donovan, 57 Neb. 361, 365, 77 N. W. 778 ("the money became absolutely the property of the beneficiaries"); Carraher v. Ins. Co., 11 N. Y. St. R. 665; Gould v. Association, 26 R. I. 142, 58 Atl. 624. See Lawrence v. Fox, 20 N. Y. 268. The estate of the insured has nothing to do with it, Taylor v. Hair, 112 Fed. 913; Rollins v. McHatton, 16 Colo. 203, 27 Pac. 254; Pinneo v. Goodspeed, 120 111. 524, 12 N. E. 196; McFarland v. Creath, 35 Mo. App. 112; Hellenberg V. Dist. No. 1, 94 N. Y. 580; Manley V. Manley, 107 Tenn. 191, 64 S. W. 8; West V. Grand Lod'je, 14 Tex. Civ. App. 471, 479, 37 S. W. 966. In Massachu- setts the rule was otherwise, and no one but a party to a contract could sue upon it; but by statute the beneficiary may now sue in that jurisdiction also, Dean v. American Legion, 156 Mass. 435,31 N. E. 1. ■"-Roehm v. Horst. 178 U. S. 1, 20 a Ct. 780, 44 L. Ed. 953 (approving Hochster v. De la Tour. 2 El. & Bl. 678); Bla\,.ly V. Fidelity Mut. L. Ins. Co., 143 Fed. 619; Supreme Council v. Dai.v, 130 Fed. 101. 64'C. C. A. 4.35; Supreme Council v. Black, 123 Fed. 650, 59 C. C. A. 414; O'Neill v. Supreme Coun- cil, 70 N. J. L. 410, 57 Atl. 463; Mutual Res. Fund L. Assn. v. Tavlor, 99 Va. 208, 37 S. E. 854 (value of policy is the measure of damages); Lee v. Mut. Life A^sn., 97 Va. 160, 33 S. E. 556; John- stone V. Millimj, L. R. 16 Q. B. D. 460 ("when one party assumes to renounce the contract, that is, by anticipation refuses to perform it, he thereby, so far as he is concerned, declares his inten- tion then and there to rescind the con- tract. Such a renunciation does not of course amount to a rescission of the contract, because one party to a con- tract cannot by himself rescind it, but by wrongfully' making such a renun- ciation of the contract he entitles the other party, if he pleases, to agree to the contract being put an end to, sub- ject to the retention by him of his right to bring action in respect of such wrongful rescission. The other party may adopt such renunciation of the contract by so acting upon it as in effect to declare that he too treats the contract as at an end, except for the purpose of bringing an action upon it for the damages sustained by him in consequence of such renunciation," Lord Esher at p. 467). See 14 Harv. Law Rev. 432 et seq. Likewise an insurance agent wrongfully dismissed may sue at once for damages, ^^tna Life Ins. Co. v. Nexsen, 84 Ind. 347. 3 O'Neill V. Supreme Council, 70 N. J. L. 410, 57 Atl. 463. 4 Raehm v. Horst, 178 U. S. 1, supra. At page 14 the court cites with ap- proval an insurance case, where the insurer abandoned the contract by his act and a present action for damages was held appropriate. ANTICIPATORY BREACH 469 observed, was for the sale of hops; but the opinion and views of the court seem to extend to contracts of insurance as well. In the three insurance cases cited from the lower federal courts the action of the assured in each case was brought to recover the amount of assessments paid upon a policy and interest; ^ but these cases also seem to approve the doctrine of the text, and to take the amount of premiums paid and interest as an appropriate measure of dam- ages for the breach, if the assured so elect, upon renunciation of the contract by the insurer.^ Especially is the rule clear, where the insurer not only repudiates the contract by his declaration that he will not pay in future, but also violates a present obligation under the contract, by refusing to accept a premium when due.^ It would indeed be a harsh doctrine that com- pelled the insured to struggle on paying premiums all his life or ten- dering premiums to an unfriendly insurance company, in constant apprehension of a lawsuit in place of an immediate cash payment, as his family's inheritance upon his own decease."* The insurer's refusal to perform his promise, however, must be distinct, unequivo- cal and absolute, and the reliance by the insured upon such renun- ciation must be equally clear to warrant his action for damages before maturit}^ of the contract.^ And if with knowledge of the facts the insured elects to continue with the contract, he cannot subsequently exercise a second and inconsistent election to treat it as abrogated.^ On the other hand, the courts of New York and Massachusetts hold that an attempted reduction of the face of a policy by an unwar- ranted by-law, or a refusal to accept a premium, will give no present right of action for damages against the insurer.'^ The New York 1 Blakely v. Fidelity Mut. L. Ins. Co., 5 Wells v. Hartford M. Co., 76 Conn. 143 Fed. 619; Supreme Council v. 27, 55 Atl. 599. Daix, 130 Fed. lOl; Supreme Council V. ^Supreme Council v. Lippincott, Black, 123 Fed. 650 (citing many cases). 134 Fed. 824, 67 C. C. A. 650, 69 L. R. 2 Supreme Council v. Black, 123 Fed. A. 803; Blakeh/ v. Fidelity Mut. L. Ins. 650, 59 C. C. A. 414 (citing Roehm v. Co., 143 Fed. 619. Horst, 178 U S. 1, and other cases); ^ Porter v. Supreme Council, 183 Fawcett v. Iron Hall, 64 Conn. 170, 192, Mass. 326, 67 N. E. 238 (court does 29 Atl. 614, 24 L. R. A. 815; Union not decide whether a present suit in Cent. Life Ins. Co. v. Pottkor, 33 Ohio equity would lie); Kelh/ v. Security St. 459, 31 Am. Rep. 555; American Mut. L. Ins. Co., 186 N. Y. 16 (strong Life Ins. Co. v. McAden, 109 Pa. St. dissenting opinion by E. T. Bartlett, 399, 1 Atl. 256. J.); Langan v. Supreme Council, 174 3 Fischer v. Hope Ins. Co., 69 N. Y. N. Y. 266, 60 N. E. 932. The New 161; Wald's Pollock, Contracts (3d ed.), York and Massachusetts rule is dis- 363. approved in Wald's Pollock, Contracts * See dissenting opinion of Judge (3d ed.), 363. Notwithstanding thc Bartlett in Kelly v. Security Mut. L. declaration by the company that it Im. Co., 186 N. Y. IS, 78 N, E. 58^ ^'^n pay only the ajcaouut as reduced 470 MEANING AND LEGAL EFFECT OF LIFE POLICY court has decided that the proper remedy for the insured in such a case is a suit in equity to compel the insurer to hve up to its contract ^ and to recognize its obhgation thereunder. The court in adopting this exceptional view was apparently influenced by the apprehension that present actions for damages for rescission or renunciation in such cases, if sustained, might throw mutual benefit life insurance companies into bankruptcy. ^ In opposition it may be forcibly urged that under the Massachusetts and New York rule, and especially by a succession of illegal acts, a company can easily induce many of the insured to abandon their insurance, rather than to engage in a hostile and unpromising campaign against the company. This unfortunate result has in fact followed to a startling extent. § 344. Anticipatory Breach— Remedies Available.— By the pre- vailing rule, where the insurer renounces the contract prior to date of performance, the policyholder may take the insurer at his word and presently sue for damages, or he may bring an equitable action to preserve the contract, or he may tender the premium and upon maturity of the contract bring action on the policy.^ A federal judge says: "On the one hand it is held that where the insurance company wrongfully revokes its policy, and refuses further to be bound by it, the holder may elect whether to enforce the con- tract or to treat it as rescinded. If he elects to pursue the latter course, his measure of relief is the amount of premiums paid, with interest, and this though he has had the benefit of insurance under the policy from its inception to the time of revocation, and even though such revocation would not operate in law to avoid the pol- icy. . . . On the other hand, it is held by many authorities that, if the assured is in such a state of health that he can secure other insurance of like nature and kind, his measure of damages is the by the by-law, nevertheless, on ma- ^ Day v. Conn. G. Life Ins. Co., 45 turity of the contract it must pay the Conn. 480. But the South Carolina full amount, Porter v. Supreme Coun- court holds that the amount of the cil, 183 Mass. 326; Gavt v. American note for the first premium is the meas- Legion, 107 Tenn. 603, 64 S. W. 1070. ure of damages where t) '^ insur^i Upon abandonment or renunciation of refuses to deliver a policy uti agreec;, the contract before maturity, a meas- Prince v. State Mut. Ins. Co. (S. C, ure of damages is the amount of pre- 1907), 57 S. E. 766. If the contract miums or assessments paid, and in- is vitiated from its incep+ion by the terest. See cases cited in last section. insurer's fraud, the policyholder can 1 Langan v. Supreme Council, 174 recover back all premiums paid and N. Y. 266, 66 N. E. 932. interest, Moore v. Mvt. Res. Life Fund 2 Kelly v. Security Mut. Life Ins. iissn., N. Y. App. Div. (Sept., 1907). Co,, 186 N. Y. 16, 20, 78 N. E. 584. APPLICATION INCOKPORATED 471 difference between the cost of carrying the insurance which he has, for the term stipulated for, and the cost of new insurance at the rate he would then be required to pay for a like term. If, however, he is unable to obtain other insurance, then his measure of damages will be the present value of his policy as of the date of death, less the estimated cost of carrying the same, from the date of cancellation, at his then age." ^ § 345. Application Incorporated. — In consideration of the state- ments and agreements in the application which are hereby made a part of this contract, and warranted to he true, etc. This form of words incorporates the statements of fact and stipu- lations of the application into the contract and makes them express warranties. If the application is made a part of the policy, it is immaterial in which instrument the words "warranted to be true" may be inserted.^' But in mere matters of opinion good faith only is required.^ If the warranties of the application are not expressly 1 Krebs v. Security Trust & Life Ins. Co., 156 Fed. 294 (citing many cases; the court also considers the measure of damages in case of insurance with an investment feature added, or when the assured is entitled to accumulations and profits, and concludes that the company in fault must surrender the entire profits and be content to retain only compensation for the risk run, citing Abell v. Penn. Mut. Life Ins. Co., 18 W. Va. 400). Where the con- tract is rescinded for the insurer's fraud, the insurer cannot offset against the amount of premiums paid by the insured the cost to the insurer of carry- ing the insurance to time of rescission, Moore v. Mut. Res. Fund Life Assn., 121 App. Div. (N. Y.) 335. 2 Fell V. John Hancock Mut. Life Ins. Co., 76 Conn. 494, 57 Atl. 175; Standard Life & .Ace. Ins. Co. v. Mar- tin, 133 Ind. 376, .35 N. E. 105; Clemans V. Supreme Assembh/, 131 N. Y. 485, 488, 30 N. E. 496,^ 16 L. R. A. 33; Cxishman v. U. S. Life Ins. Co., 63 N. Y. 404; Schane v. Metropolitan L. Ins. Co., 76 App. Div. (N. Y.) 271 (breach of warranty a:'oids as matter of law; materinlity of thing warranted is unimportant); IlaC'ett v. Svpreme Council, 44 App. Piv. 524, 60 N. Y. Supp. 806, aff'd 168 N. Y. 588, 60 N. E. 1112 (assured presumed to read application); Northwestern L. Assur. Soc, 23 Ind. App. 121, 53 N. E. 787. As to what reference will incorporate an extrinsic paper and make its state- ments warranties, see §§ 85, 106. As to rule of construction favorable to assured see Provident Life Assvr. Soc. V. Reutlinger, 58 Ark. 528, 533, 25 S. W. 835; Brignac v. Pacific Mut. L. Ins. Co., 112 La. 574, 36 So. 595 ("do you use liquors?"); Supreme Council V. Brashears, 89 Md. 624, 43 Atl. 866, 73 Am. St. R. 244; Kattenbach v. Omaha L. Assoc, 49 Neb. 842, 69 N. W. 135, 70 N. W. 392. As to where third party examined simulated the insured, see Given v. Prudential Ins. Co., 44 App. Div. (N. Y.) 549, 60 N. Y. Supp. 959. The application and policy together usually form the contract, Paquctte v. Prudential Ins. Co., 193 Mass. 215. A statement of fact on the face of the policj^ does not in life, as in marine, insurance become a warranty unless the contract by stipulation ex- pressly makes it so, Ellinger v. Mut. Life ins. Co. (1905), 1 K. B. 31, 35; Thompson v. Weems, 9 App. Cas. 671, 684. 3 § 111, supra; Ames v. Manhattan L. Ins. Co., 40 App. Div. 465, 58 N. Y. Supp. 244, aff'd 167 N. Y. 584, 60 N. E. 1106 (statement as to obscure disease construed as opinion); es- pecially as applied to answers in medical examination which nHi.«t often 472 MEANING AND LEGAL EFFECT OF LIFE POLICY made a part of the contract, they are held to be extrinsic representa- tions only.^ So also there is no absolute warranty if the application provides that the statements are true to the best of the applicant's knowledge and belief; ' but if by the undisputed testimony a war- ranty has been broken, it matters not that the breach in no wise contributed to the loss, or that the insured acted in good faith. In the absence of statutory relief the insurance is defeated. There is no issue left for the jury.-'' The study of numerous modern instances will bring us to a clearer comprehension of the doctrine of warranty as applied in the law of life insurance. Thus in a Wisconsin case the decedent, Loehr, hus- band of the plaintiff, had warranted the truth and fullness of his answers as written by the representatives of the company, includ- ing the statement that the applicant had "never been sick." In fact he had had three attacks of inflammatory rheumatism of a serious character on different occasions within a period of three years. No mention of any of these attacks appeared in the written application, but it was shown on the trial that he had orally stated to the medical examiner and to the agent that he had had grippe and rheumatism a year before the application for the policy. He did not, however, specify inflammatory rheumatism or say any- thing about three attacks. On appeal the Supreme Court, reversing the court below, held that the policy was avoided for breach of warranty, and that the doctrine of waiver, upon a partial disclosure of the facts orally to the agent, would not apply in aid of the plain- tiff.4 Another good illustration of the application of an affirmative be largely matter of opinion, Jennings Lodge, 5.3 N. J. L. 17, 20 Atl. 873; V. Supreme Council, 81 App. Div. 76, Ain. Popular Life Ins. Co. v. Day, 39 81 N. Y. Supp. 90; Louis v. Conn. N. J. L. 89, 23 Am. Rep. 198. Mut. L. Ins. Co., 58 App. Div. 137, 68 2 See §§ 110, 111, supra. N. Y. Supp. 686, aff'd 172 N. Y. 659, 3 See § 107, supra. Jennings v. 65 N. E. 1119; Henn v. Met. Life Ins. Supreme Council, 81 App. Div. (N. Y.) Co., 67 N. J. L. 310, 51 Atl. 689 (dis- 76, 81 N. Y. Supp. 90; Lutz v. Metro- ease); Finn v. Met. Life Ins. Co., 70 politan Life Ins. Co., 186 Pa. St. 527, N. J. L. 255, 57 Atl. 438 (pneumonia; 40 Atl. 1104. In most jurisdictions but statement as to other application the burden is on the defendant to show for insurance is matter of fact). So falsity of statement, for example, also as to "consumption" and "medi- Spencer v. Citizens' Mut. L. Ins. Assn., cal attendance," Schofield v. Met. L. 142 N. Y. .505, 37 N. E. 617; Supreme Ins. Co 79 Vt. 161, 64 Atl 1107. Council v. Brashears, 89 Md. 624, 43 i Accident Ins. Co. v Crandal, 120 Atl. 866, 73 Am. St. R. 244. Biit see U. S 527, 7 Smp. Ct. 685, 30 L. Ed. S^'-eeneu v. Met. L. Ins. Co., 19 R. I. 740; Bankers' Life ins. Co. v. Miller, 171, 36 Atl. 9, .38 L. R. A. 297, 61 Am. 100 Md 1, .59 Atl. 116; Fitzgerald v. St. R. 751. Supreme Council, 39 Aon. Div. 251, ^ Lcehr v. Supreme Assembly (Wis., 56 N. Y. Supp. 1005, aff'd 167 N. Y. 1907), 112 N. W. 441. Compars 568, 60 N. E. 1110; McVey v. Grand § 173, supra. APPLICATION INCORPORATED 473 warranty is furnish'^d in a Michigan report of the same year. Mudge, the decedent, had warranted that he had "never had the disease of insanity." By the undisputed testimony it appeared that he had previously been insane and had been so adjudged, and that he had been confined and treated as insane and that, although aware of these facts, he had made no allusion to them in his interview with the examiner. There was evidence, however, tending to show that the examiner and also the agent had knowledge of the previous in- sanity of the applicant. The court decided that the policy was avoided, and that the claimant, the widow, could not avail herself of the principle of estoppel, inasmuch as the insured must have known that his answers were not correct.^ In a Pennsylvania case, the insured in his application declared, ■'I guarantee that the applicant does not and will not practice any bad or vicious habit that tends to the shortening of life." The judge held that this was a warranty as to the future, and charged the jury that if afterwards the insured practiced the pernicious habit of intemperance the policy became void. A verdict was rendered for the defendant and the judgment entered thereon was affirmed on appeal.^ But in another Pennsylvania case, while recognizing that a war- ranty must be fulfilled, the court, in the course of its interpretation of the meaning of the instrument, found a way of escape for the plaintiff, by locating the untrue declaration outside the reach of the warranty. In his application the decedent had declared "that he does not now, nor will he, practice any pernicious habit which obviously tends to the shortening of life." The policy provided, "If any of the declarations made in the application, upon the faith of which this policy is issued, shall be found in any respect untrue, this policy shall be null and void." At the time of the application the applicant was of correct habits; but some years afterwards he became addicted to the immoderate use of intoxicating drinks, resulting in delirium tremens and death. The court deduced from the word "declared" no covenant, promise, or warranty for the future, but a mere statement of future intention. The declaration as to present habits being true, the court concluded that there was no breach of warranty, and reversed in favor of the plaintiff.^ i Mudfje V. Suvreme Court, etc. ^Knight v. Mut. Life Ins. Co., 9 (Mich., 1907), 112 N. W. 1130 ("good Weekly Notes Cas. (Pa.) 501. faith is essential to an estoppel"). ^ Knecht v. Mut. Life Ins. Co., 90 Compare § 173. Pa. St. 118, 35 Am. Rep. 641 (Trun- key, J., dissenting). Compare § 110. 474 MEANING AND LEGAL EFFECT OF LIFE POLICY Analogous to the last is a case in Illinois. In response to the interrogatory, "Have you other insurance? If so, name amount and companies," the written statement appeared in the applica- tion, "Atlas, $5,000; Star, $10,000; will drop Star July 15, '96." The answers to the interrogatories were by the policy incorporated and warranted to be full and complete. In fact the answer to the interrogatory regarding other insurance was correct so far as it was responsive to the question, but the volunteered statement, regarding the future, "will drop Star," etc., was not true. The court held that the answers were warranties only so far as they were strictly responsive to the questions, and that the additional statement was mere surplusage, an error in which would not avoid the policy.^ The rule is well settled that if upon the face of the application it appears that a question is unanswered, or the answer is incomplete, the company, by accepting the application as it is, waives the obvious defect. Mrs. Beck, the beneficiary named in her hus- band's policy, brought action in a case of this character. Mr. Beck had agreed as follows: "The truthfulness of each statement above made, by whomsoever written, is material to the risk, and is the sole basis of the contract; I hereby warrant each and every state- ment herein made to be full, complete, and true." The defendant, the life insurance company, contended for a breach of warranty in that the questions were not fully answered. One of the answers was as follows: "I have never had, or been afflicted with, any sick- ness, disease, ailment, injury, or complaint, except rheumatism, three years ago." Close to the answer was the printed direction, "Duration, whether trivial or otherwise. If rheumatism, state whether muscular, sciatic, or inflammatory." This requirement was not complied with, but there was no fatal breach. If the company wanted a more particular answer it should have insisted upon it.^ Likewise the rule is well settled that if the phraseology of the contract in its entirety permits, the court will construe the erroneous statement as representation or matter of opinion rather than strict warranty. Connor answered in the negative each of these questions: "Is the party subject or predisposed to dyspepsia, dysentery, diar- rhoea, or any other disease or bodily infirmity?" "Has the party had, or been affected, since childhood, with . . . fits or con- vulsions?" By the policy he agreed that if the declaration, or any 1 Commercial Mut. Ace. Co. v. Bates, (Ark., 1907), 104 S. W, 533. Compare 176 111. 194, 52 N. E. 49. § 113, supra. * Fidelity Mut. Ldfe Im. Co. v. Beck APPLICATION INCORPORATED 475 part thereof, should be found to be in any respect untrue, the policy should be null and void. There was testimony tending to show that from his eighteenth to his twentieth year Connor had had a disorder described as "fits," "convulsions," or "spasms." But the policy purported to be issued "in consideration of the representa- tions" made in the application; and in the application the bene- ficiaries declared that no "material circumstance" had been with- held. Taking the contract in its entirety the court was of opinion that the answer was a representation, and that if the jury found that the answer was substantially true and made in good faith, the plaintiff was entitled to recover.^ Many other illustrations of the doctrine of warranty are cited in the following sections of this and the next chapters. It sometimes happens that the application, though expressly made part of the contract, does not correspond in its terms with the policy. The question then arises, when the action is brought on the contract and not for its reformation, to which part of the contract shall the court give preference. Under such circumstances it is usually held that the policy expresses the later and final in- tention of the parties. For example, in a Pennsylvania case, the policy itself was made payable to the insured, his executors, administrators, and assigns; while in the application a different beneficiary was named. The insured had the policy in his possession for twelve years and the premiums thereon were all duly paid. The court adjudged that the 1 Alabama Gold Life Ins. Co. v. tradictory provisions relating to the Johnston, 80 Ala. 467, 2 So. 125, 59 subject, or be otherwise reasonably sus- Am. Rep. 816 (symptoms of disease ceptible of such construction. The not intended to "be material, unless court, in other words, will lean against affecting soundness of health, or tend- that construction of the contract which ing to shorten life). In the last case will impose upon the assured the bur- the court says: "In construing con- dens of a warranty, and will neither tracts of. insurance there are some create nor extend a warranty by con- settled rules of construction, bearing struction. (3) Even though a war- on this subject, which we may briefly ranty, in name or form, be created by formulate as follows: (1) The courts the terms of the contract, its effect being strongly inclined against forfeit- may be modified by other parts of the ures, will construe all the conditions of policy, or of the application, including the contract, and the obligations im- the questions and answers, so that the posed lilierally in favor of the assured, answers of the assured, so often merely and strictly agninst the insurer. (2) It categorical, will be construed not to be reoiiires the clearest and most un- a warranty of immaterial tacts, stated eauivocal language to create a war- in such answers, but rather a warranty rantv, and everv statement or engage- of the assured's honest belief m their ment of the assured will be construed truth— or, in other words, tliat they to be a representation and not a were stated in good faith. 1 he strong warranty, if it be at all doubtful in inclination of the courts is thus to meaning, or the contract contains con- make these statements, or answers^ 476 MEANING AND LEGAL EFFECT OF LIFE POLICY proceeds of the policy belonged to the executor of the insured and not to the person specified as beneficiary in the application.^ § 346. Statutory Provisions. — As already shown, numerous classes of statutes affect and control the purport and legal meaning of the life insurance policy. Two classes of these statutory provisions, of varied phraseology in different states, may appropriately be recalled in this connection. The one class require in substance that the in- sured must be furnished with the entire contract, so that at all times he may have the opportunity of knowing just what his obligations are.^ Within the reach of such statutes, therefore, if the application is part of the contract, it is usually provided that a copy of it must be given to the insured, or incorporated into the policy itself. A failure to comply with the statute requirement precludes a defense based on anything contained in the application.^ Nevertheless, while such an unattached application is inadmissible in evidence, it may be used by a witness to refresh his memory.'' The other class of statutes usually provide in substance that a breach of warranty, unless in a matter material to the risk, or in- volving bad faith on the part of the insured, shall not avoid the policy.^ binding only so far as they are ma- terial to the risk, where this can be done without doing violence to the clear intention of the parties expressed in unequivocal and unqualified lan- guage to the contrary." Compare §§ 110, 111. 1 Burt V. Burt (Pa., 1907), 67 Atl. 210; HutHon v. Jenson, 110 Wis. 26; Hunter v. Scott, 108 N. C. 213. The ap- plication, in the first instance, is an offer, MrCuUy's Admr. v. Phoenix, etc.. Co., 18 W. Va. 782. If the terms of the policy do not tally witii the applica- tion, the policy amounts to a mere counter-offer, Stevens v. Capital Ins. Co., 87 la. 28.3, which requires accept- ance in order to become a contract, Gore v. Bankers', etc., A.'tsn., 88 Cal. 609. But from long-continued posses- sion of the policy and payment of premiums thereon, such acceptance may be implied, Bostwick v. Mutual Life Ins. Co., 116 Wis. 392. ^Holden v. Prudential Ins. Co., 191 Mass. 153, 157, 77 N. E. 309. 3 Rauen v. Prudential Ins. Co. , 129 la. 725 (the case is to be considered as if no such paper existed); Moore v. Provident Sav. L. Assur. Soc, 97 la. 226, 66 N. W. 157, 32 L. R. A. 473, 59 Am. St. R. 411; Met. L. Ins. Co. v. Moore, 25 Ky. L. R. 1613, 79 S. W. 219; Manhattan L. Ins. Co. v. Albro, 127 Fed. 281, 62 C. C. A. 213 (paper attached not a true copy because an answer was omitted); Lanqdean v. John Hancock M. L. Ins. Co. (Mass., 1907), 80 N. E. 452 (a copy substantially correct satisfies the stat- ute). Though part of application is in evidence of which copy was furnished, the defendant cannot put the other part in evidence of which no copy was attached to the policy, Paquette v. Prudential Ins. Co., 193 Mass. 215. ■1 Holden v. Prudential Life Ins. Co., 191 Mass. 153, 77 N. E. 309.- 5 N. Y. Ins. L., § 58, combines both provisions in one clause: "Every policy of insurance issued or delivered within the state on or after the first day of Jan., 1907, by any life insurance corporation doing business within the state shall contain the entire con- tract between the parties and nothing shall be incorporated therein by refer- ence to any constitution, by-laws, rules, application, or other writings unless the same are endorsed upon or attached to the policy when issued; and all statements purporting to be made by the insured shall in the ab- STATUTOHV PROVISIONS 477 Under these liberal statutes, however, the interests of the parties are not of necessity turned over to the discretion of a jury, though it may be difficult in practice to draw the line with precision between issues which properly belong to the court and those which should go to the jury. Thus under such a statute the Texas court decided that answers in the application concerning medical attendance and treatment, though false, would not necessarily avoid the policy, if relating to a trivial and not a serious disease.^ And likewise, under a similar statute, the Kentucky court heid that whether the representations of the applicant regarding his other insurance and his use of in- toxicants were substantially, though not literally, true, presented a question for the jury.^ In a Massachusetts case, Barker, the insured, warranted in his application that he had no kidney disease. He died of that trouble about three months later. By the statute of that state warranties, if contained in the application, are in effect converted into mere representations, which, to avoid the policy, must be shown to be material to the risk or to hove been made in bad faith. On the trial, evidence was produced tending to show that at the date of the ap- plication Barker was in sound health, or, if not, that at least he had not intentionally misrepresented, and, furthermore, that any mis- statements were not of matters necessarily increasing the risk of loss. The plaintiff's verdict was left undisturbed.^ Where an applicant has suffered from a disease so grave in its nature that generally it is recognized as having a tendency to shorten life, and fails to disclose the fact in answer to a question which calls for such information, it may be ruled as matter of law that as the risk is thus increased the policy is void.'* So also a material misstatement as to age may have the same effect as matter of law.^ And if, with intent to deceive the insurer, the applicant falsely states that he had sence of fraud be deemed representa- itself, Barker v. Met. Life Ins. Co., 188 tions and not warranties. Any waiver Mass. 542, 74 N. E. 945 (sound health); of the provisions of this section shall Met. Life Ins. Co. v. Howie, 62 Ohio St. be void." And see § 118, supra. 204. 1 Modern Order v. Hallmig (Tex. Civ. ^ Barker v. Met. Life Ins. Co. (Mass., App., 1907), 103 S. W. 474. Otherwise 1908), 84 N. E. 490, citing many cases, if incorrect answer refers to a serious •• Kidder v. Supreme Commanderv, disease, Life Ass. v. Harris, 94 Tex. 192 Mass. 326, 78 N. E. 469: Brown 25, 57 S. W. 635, 86 Am. St. R. v. Greenfield Life Assn., 172 Mass. 813. 498; Rainger v. Boston Mut. L. Assn., ^Met. Life Ins. Co. v. Ford (Ky., 167 Mass. 109, 44 N. E. 1088. 1907), 102 S. W. 876. But certain of 5 Kidder v. Supreme Commandery, such statutes refer only to answers and 192 Mass. 326, 78 N. E. 469; Dolan v. statements contained in the applica- Mzd. Res. Fund L. Assn., 173 Maea tion, not to a condition in the policy 197, 200, 53 N. E. 398. 478 MEANING AND LEGAL EFFECT OF LIFE POLICY never used intoxicating liquors to excess, or had never been rejected by any other company, the court will dismiss his action on the policy,^ notwithstanding the statutory provision. But, on the other hand, where the insurer in reply to a question calling for the fact has not been informed of a disease which, although serious, may not have a tendency to shorten life, it is for the jury to say whether the risk has been increased,^ or whether the insured was guilty of bad faith in giving his answer. And if the statute further provides that no misrepresentation shall be deemed material unless the matter misrepresented shall actually contribute to the event insured against, and whether it so contributed shall be a question for the jury, then the question of avoidance of the policy for false or fraudulent misrepresentations of material facts, is taken from the court and relegated to the jury.^ § 347. Statements as to Health or Freedom from Disease. — Health is a relative term, for probably no one is altogether free from ailments. No general definition of sound health can be given which would accurately apply to all cases, therefore the question of disease or unsound health must often go to the jury.'' To violate a warranty of good health it must appear that the sickness was one having a tendency to shorten life or permanently impair the health or that it amounted to a vice in the constitution.^ The Ohio court concludes i Langdean v. John Hancock Mut. lings v. Ins. Co., 70 Vt. 477, 41 Atl. L. Ins. Co. (Mass., 1907), 80 N. E. 452. 516. 2 Kidder v. Supreme Commandery, ^ Conn. Mut. Life Ins. Co. v. Union 192 Mass. 326, 78 N. E. 469 (slight Tr7/.s< Co., 112 U. S. 250, 5 Sup. Ct. 119, ailments confining to bed); Hogan v. 28 L. Ed. 708; Bancroft v. Home Ben. Met. L. Ins. Co., 164 Mass. 448; Levie Asso., 120 N. Y. 14, 30 N. Y. St. R. V. Met. L. Ins. Co., 163 Mass. 117. 175, 23 N. E. 997; Grattan v. Metro- And see Penn Mut. L. Ins. Co. v. politan Life Ins. Co., 92 N. Y. 274, 44 Mech. Sav. Bk., 72 Fed. 413, 19 C. C. Am. Rep. 372, 80 N. Y. 292, 36 Am. A. 286, 38 L. R. A. 33, aff'd 73 Fed. Rep. 617 (germs of a lurking hidden 653, 19 C. C. A. 316. disease do not avoid); Schmitt v. Mich. 3 Keller v. Home Life Ins. Co., 198 Mut. L. Ins. Co., 101 App. Div. (N. Y.) Mo. 440 (certificate of medical ex- 12 (temporary ailment not "a dis- aminer recommended the risk; two ease"); Maine Ben. Assn. v. Parks, 81 attending physicians testified that Me. 79, 16 Atl. 339, 10 Am. St. R. 240; they had told the insured prior to his Packard v. Metropolitan Ins. Co., 72 N. application that he had consumption); H. 1, 54 Atl. 287 ("sound health" is op- Williams v. Ins. Co., 189 Mo. 70; posed to serious disease or vice in the Jenkins v. Ins. Co., 171 Mo. 375; constitution); Frenc/i v. M?/i. 7?e.s. F)/«ff Schuermann v. 7ns. Co., 165 Mo. 641; Assn., Ill N. C. 391, 16 S. E. 427, 32 Aloe v. Life Assn., 164 Mo. 075; Jacobs Am. St. R. 803 (slight illness no breach). V. Life A.ssn., 146 Mo. 523. But see Mut. Life Ins. Co. v. Simpson, * Pacard v. Met. Ins. Co., 72 N. H. 88 Tex. 333, 31 S. W. 501, 28 L. R. A. 1; 54 Atl. 287; Dorey v. Ins. Co., 172 765, 53 Am. St. R. 757. Open sores Mass. 234, 51 N. E. 974; Barnes v. from wound are not a disease. Home Fidelity Mut. L. Assoc, 191 Pa. St. Mut. Lif$ Assn. v. Gillespie, 110 Pa. 618. 43 Atl. 341. 45 L. R. A. 264; Bil- St. 84, 1 Atl. 340. As to sore on the STATEMENTS AS TO HEALTH OR FREEDOM FROM DISEASE 479 that in life insurance "sound health" means that state of health which is free from any disease or ailment that seriously affects the general healthfulness of the system; not a mere indisposition.' A federal judge reviews many authorities on this subject, and has this to say: "What is to be understood by 'serious illness'? If any sickness which may terminate in death, then it must embrace almost every distemper in the entire catalogue of diseases. To give such an interpretation to this expression, would, we have no doubt, defeat a recovery in a large majority of the certificates issued by the society. The true construction of the language must be that the applicant has never been so seriously ill as to permanently im- pair his constitution, and render the risk unusually hazardous." ^ In answer to the question, "Have you ever had any difficulty with your head or brain?" the applicant said "No;" and the court decided that the question called for a functional or organic derange- ment, and that periodic headaches though severe did not constitute a ground for forfeiture.^ The fact that the applicant was afflicted with dyspepsia six months or more before the application was signed did not make untrue his statement that he was not subject to dyspepsia at the time of the policy.^ tongue developing into cancer, com- pare Story V. United L. & Ace. Ins. Assn., 51 Hun, 644, 4 N. Y. Supp. 373, aff'd 125 N. Y. 761, 27 N. E. 408, with Peck V. Wash. Life Ins. Co., 91 App. Div. 597, 87 N. Y'. Supp. 210. As to whether an idiot or insane person is in sound health, compare Robinson v. Met. Life Ins. Co., 1 App. Div. 269, 37 N. Y. Supp. 146, aff'd 157 N. Y. 711, 53 N. E. 1131, with McNeil v. Assn., 40 App. Div. 581, 58 N. Y. Supp. 119. There is said to be no presumption that insanity existing in the past continues till the date of application, Mvt. Life Ins. Co. V. Wisu-ell, 56 Kan. 765, 44 Pac. 996, 35 L. R. A. 258; Blaclstone V. Stand. L. & Ace. Ins. Co., 74 Mich. 592, 42 N. W. 156, 3 L. R. A. 486. As to whether a statement regarding health or disease is to be construed as matter of fact or of opinion see Provi- dence Sav. Life Assur. Soc. v. Pruett, 141 Ala. 688, 37 So. 700 (disease of liver); Rvpert v. Supreme Court, 94 Minn. 293, 102 N. W. 715 (when only bona fide belief and judgment wi'I be required); Finn v. Met. Life Ins. Co., 70 N. J. L. 255, 57 Atl. 438. And in determining whether the statement is of fact or opinion it is reasonable to consider whether it relates to matters concerning which the insured could have no certain knowledge and whether good faith in the answer does not sat- isfy the requirement of the contract, Moulor V. Am.. Life Ins. Co., Ill U. S. 335, 4 S. Ct. 466, 28 L. Ed. 447; Fergu- son V. Mass. Ben. L. Ins. Co., 32 Hun, 306, aff'd 102 N. Y. 647; Keatley v. Travelers' Ins. Co., 187 Pa. St. 197, 40 Atl. 808; March v. Met. Life Ins. Co., 186 Pa. St. 629, 40 Atl. 1100, 65 Am. St. R. 887; Schwarzbach v. Ohio Vol. Protective Union, 25 W. Va. 622, 52 Am. Rep. 227. 1 Met. Life Ins. Co. v. Howie, 62 Ohio St. 204 (breach of the warranty avoids policy). 2 Keiper v. Equitable Life Assur. Soc, 159 Fed. 206. 3 Higbie v. Guardian Mut. Life Ins. Co.,53N. Y^603. i World Mut. Life Ins. Co. v. Schidtz, 73 111. 586 (dyspepsia temporarily con- nected with an abscess); Lerie v. Met. Life Ins. Co., 163 Mass. 117, 39 N. E. 792 (as to hernia, question was con- strued as referring to time of applica- tion); Murphy v. Mut. Ben. L. & F. 480 MEANING AND LEGAL EFFECT OF LIFE POLICY A congestion or disorder of the liver is not necessarily a disease of the liver within the meaning of the policy; and in these and similar cases, if the testimony leaves it in doubt whether the disorder is a slight attack or a permanent or serious disease, the question is for the jury.^ Accordingly, in general, the jury must determine whether a slight attack of pneumonia or sunstroke is a disease; ' but an attack may be so slight that the court will refuse to send the issue to the jury.3 If, however, after applying to the language of the contract a liberal rule of construction in favor of the assured the court per- ceives that a warranty of "sound health" has been broken, the Ins. Co., 6 La. Ann. 518 (inflammation of bowels whether chronic disease). Statements refer to time of closing the contract, therefore material changes pending negotiations should be dis- closed, Thompson v. Travelers' Ins. Co., 13 No. Dak. 444, 101 N. W. 900. See also § 100. Compare the case of state- ments made for reinstatement of lapsed policy, Mut. Ben. Life Ins. Co. v. Higginhotham, 95 U. S. 380, 24 L. Ed. 499; Mulligan v. Prudential Ins. Co., 76 Conn. 676, 58 Atl. 230; American Order v. Stanleij (Neb.), 97 N. W. 467 (non-disclosure of pregnancy); Pea- cock V. N. Y. Life Ins. Co., 20 N. Y. 293. Good health is consistent with a touch of dyspepsia, Morrison v. Wis. Odd Fellows Mid. Life Ins. Co., 59 Wis. 162, 18 N. W. 13. With a slight billious attack. Mutual Reserve Fund L. Assoc. V. Ogletree, Tl Miss. 7, 14, 25 So. 869. With a mere cold. Met. Life Ins. Co. v. McTague, 49 N. J. L. 587, 9 Atl. 766, 60 Am. Rep. 661; Sievcrts v. National Ben. Assoc, 95 Iowa, 710, 64 N. W. 671; N orthtrestern Mut. Life Ins. Co. v. Woods, 54 Kan. 663, 39 Pac. 189. But a warranty of "good health" is not consistent with severe dyspepsia continued for many years, Jeffrey v. United Order, 97 Me. 176, 53 Atl. 1102; .V. Y. Life Ins. Co. V. Flack, 3 Md. 341, 56 Am. Dec. 742. "Acute gastritis," "acute bronchitis," or grip is not necessarily an illness, Billings v. Met. L. Ins. Co., 70 Vt. 477, 41 Atl. 516. Tuberculosis of the brain is a "local disease," Scales v. Universal Life Ins. Co., 42 Cal. 523. 1 Cushman v. U. S. Life Ins. Co., 70 N. Y. 72. So the jury may have to pass on the question of health or dis- ease in case of pharyngitis, Mut. Ben. Life Ins. Co. v. Wise, 34 Md. 582; or throat disease, Eisner v. Guardian Mut. L. Ins. Co., 8 Fed. Cas. 398; gastritis, Price V. Phoenix Mut. Life Ins. Co., 17 Minn. 497; bronchitis, Campbell V. Neiv England Mid. Life Ins. Co., 98 Mass. 381; Mausbach v. Met. L. Ins. Co., 53 How. Pr. (N. Y.) 496; kidney trouble or Bright's disease, Contl. Life Ins. Co. V. Yung, 113 Ind. 159, 15 N. E. 220, 3 Am. St. R. 630; Hogan v. Met. Life Ins. Co., 164 Mass. 448, 41 N. E. 663; Brown v. Met. Life Ins. Co., 65 Mich. 306, 32 N. W. 610, 8 Am. St. R. 894 (for jury); Weinstraub v. Met. Life Ins. Co., 27 Misc. 546, 58 N. Y. Supp. 295 (policy avoided); Archibald v. Mut. Life Ins. Co., 38 Wise. 542 (policy avoided); consumption. Met. Life Ins. Co. v. Mitchell, 175 111. 322, 51 N. E. 637; Tucker v. United L. & Ace. Assn., 133 N. Y. 548, 30 N. E. 723; Vose v. Eagle Life & Health Ins. Co., 6 Cush. (Mass.) 42; Woodward v. Iowa L. Ins. Co., 104 Tenn. 49, 56 S. W. 1020. But see Murphy v. Pru- dential Ins. Co., 205 Pa. St. 444, 55 Atl. 19; gout, Fowkes v. Manchester & L. Life Ins. Co., 3 Fost. N. W,'7S1. PAYMENT OF PREMIUMS 497 the insurance, nq such result follows.^ And if a promissory note is accepted by the company in lieu of a cash payment called for by the terms of the policy, nonpayment of the note at maturity will not cause forfeiture in the absence of express provision, although the nonpayment of the cash premium would have had that effect.^ But a note, itself containing a forfeiture provision, if executed con- temporaneously with the policy, may be construed as constituting part of the contract, and nonpayment of the note will then cause avoidance of the policy.^ The rule, however, is otherwise where such a note forms no part of the contract or where such forfeiture clause in the note is inconsistent with other clauses in the policy.'' It has been held that the ostensible scope of authority of a solicit- ing agent is limited to the receipt of the first premium, and that, if intrusted with the delivery of the poUcy, he is apparently authorized to receive payment of the first premium without any rpecial or separate receipt, no matter what the policy says, but not of subse- quent premiums.^ So also, unless the application contains a limita- tion upon his authority to do so, a solicitor intrusted with the duty of closing the contract may take a note for the first premium and bind his company, though the policy, subsequently delivered, pro- vide that it shall not go into effect until the premium is paid in cash. Kimbro, upon signing his application, gave his note for the first premium to Haynes, local agent for the defendant. The defendant on receiving the application decided not to issue the policy in the form applied for, but sent to the agent a different form of policy to be submitted to Kimbro. The agent, however, made no men- tion of the alteration, but simply notified Kimbro by letter of the receipt of the policy, stating that he would deliver it on the day the note became due. Kimbro was ignorant of the company's declination, nor did he know that the policy by its terms was not effective without prepayment of premium. Meanwhile he was taken sick and died before maturity of the note. During his illness his 1 Mutual L. Ins. Co. v. Allen, 212 Manhattan Life Ins. Co. v. Myers, 109 111. 134. 72 N. E. 200; StewaH v. Ky. 372, 59 S. W. 30; Manhattan L. Union Mut. L. Ins. Co., 155 N. Y. 257, Ins. Co. v. Patterson, 109 Ky. 624, 53 49 N. E. 876, 42 L. R. A. 147. L. R. A. 378, 95 Am. St. R. 393. 2 Penn Mut. Life Ins. Co. v. Nor- * Dwellinq House Ins. Co. v. Hardie, cross, 163 Ind. 379, 72 N. E. 132; 37 Kan. 674, 16 Pac. 92; Montgomery Griffith V. Life Ins. Co., 101 Cal. 627, v. Ins. Co., 14 Bush (Ky.), 51; Mut. 36 Pac. 113, 40 Am. St. R. 96. Life Ins. Co. v. French, 30 Ohio St. 240, 3 Iowa Life Ins. Co. v. Lewis, 187 27 Am. Rep. 443. U. S. 335, 23 S. Ct. 126, 47 L. Ed. 204; 5 Lauze v. .V. Y. Life Ins. Co. (N. H., Thompson v. /n-s. Co., 104 T^. S. 252; Nov.. 1907>, fiS Atl. 31. 498 MEANING AND LEGAL EFFECT OF LIFE POLICY wife tendered payment of the premium in cash to the agent and demanded delivery of the policy, which was refused. The court held that the act of Haynes in accepting a note in place of cash, and his representation that the policy was received and was being held for Kirabro were, in legal effect, the act and representation of the insurance company, and that Kimbro accordingly had the right to assume that his application was accepted as proposed and that the contract was closed. The judgment for the plaintiff was affirmed.^ If the previous course of dealing between the company and the insured warrant, or if the company accept it,^ payment may be by check, or other equivalent, instead of cash, though the policy call for cash,^ and the receipt and retention of the premium at the home office constitute a waiver of any informality in the method of pay- 1 Kimbro v. N. Y. Life Ins. Co. (la., Sept., 1906), 108 N. W. 861. The court said: "That agent was its representa- tive, not only to receive and forward the application, but was also its repre- •sentative expressly authorized to com- plete the negotiations and deliver the policy which the appellant prepared and returned for the applicant's ac- ceptance. He was the only medium through whom the business between the contracting parties was carried on. Within the scope of that employment, his hand was the appellant's hand, his voice was its voice, and his promises and assurances were the promises and assurances of his principal, notwith- standing any undisclosed instructions or limitations existing in his contract of employment." And see § 375, infra. The South Carolina court says: "As insurance agents should not, and as a rule do not, deliver over policies with- out payment of the premiums unless they intend to give credit, the mere fact of delivery without demand of the premium raises a presumption that credit is intended," Dargan v. Equita- ble Life Assur. Soc, 71 'S. C. 359; Cauthen v. Hartford Life Ins. Co. (S. C, 1908), 61 S. E. 478. But where the in- sured has given a note instead of cash payment of premium, it is held that the solicitor has no implied authority to extend the time of payment of the note, American Ins. Co. v. Hornbarger, 85 Ark. 337, 108 S. W. 213. If, by a course of dealing, the company has treated an unauthorized agent as au- thorized to collect renewal premiums. the company will be estopped, though the agent has failed to turn over the premium to it. State Life Ins. Co. v. Murray, 159 Fed. 408. So also if a society by custom allows assessments to be paid by mail, receipt at the designated post office on the day when due will save from forfeiture though the poUcy provisions are otherwise, Vancura v. Zapadni Cesko Bratrska Zednota (Neb., 1907), 111 N. W. 845. 2 Mass. Ben. L. Assoc, v. Robinson, 104 Ga. 256, 30 S. E. 918, 42 L. R. A. 261: Michigan Mut. Life Ins. Co. v. Bowes, 42 Mich. 19, 51 N. W. 962. 3 Kenyan v. Knights Templar & M. Mut. Aid Assoc, 122 N. Y. 247, 25 N. E. 299; Long v. Ins. Co., 137 Pa. St. 335, 20 Atl. 1014, 21 Am. St. R. 879; Union Cent. Life Ins. Co. v. Duvall, 20 Ky. L. Rep. 441, 46 S. W. 518 (check of third party); Knickerbocker Life Ins. Co. V. Pendleton, 112 U. S. 696, 5 S. Ct. 314, 28 L. Ed. 866 (draft on third party); Fidelitu & Cas. Co. v. Johnson, 72 Miss. 333, 17 So. 2, 30 L. R. A. 206 (order on third party). If the course of dealing has been to use the mail, a check mailed apparently in good time will avail to prevent forfeiture though not received or not received in season; but if the check is not paid the pre- mium remains due, though then there is no forfeiture of policy, Kenyon v. Kninhts Temvlar, 122 N. Y. 247, 25 N. E. 299; Hollowell v. Life Ins. Co., 126 N. C. 398, 35 S. E. 616. Remitting a worthless check or draft is no pay- ment, National Life Ins. Co. v. Gable, 51 Neb. 5 70 N. W. 503. PAYMENT OF PREMIUMS 499 merit, as well as waiver of all known breaches of the policy.' And if the company accept a note or other instrument in payment of the premium its only remedy for collection will be upon the instru- ment so accepted in substitution. It cannot claim a forfeiture of the policy on the ground that the premium remains unpaid. ^ In a case in South Carolina the insured, Hill by name, had given his note for the first premium, and this had been duly accepted by the agent of the insurance company, and, after its maturity, had been transferred to Doyle, the plaintiff, who brought action upon it against Hill. Hill defended on the ground that the policy was avoided from the inception of the contract and that therefore there was no consideration for the note. He offered to show that the policy was void because of a false answer written in the application by the medical examiner, but he admitted that he had given the correct answer orally to the medical examiner. The court held that the proffered testimony was not admissible and that the defense was not established, since the company was estopped from setting up forfeiture of the policy.^ The New York standard policies as amended by the superintend- ent of insurance contain the following clause, "A grace of thirty days subject to an interest charge at the rate of per centum 1 John Hancock Ins. Co. v. Schlink, mium in place of cash, Smith v. Prov. 175 III. 284, 51 N. E. 795; Home Ins. Sav. Life Assur. Sac, 65 Fed. 765, 13 Co. V. Oilman, 112 Ind. 14, 13 N. E. C. C. A. 284; Dilleber v. Knickerbocker 112; Rice v. New Enq. Mut. Aid Soc, Life Ins. Co., 76 N. Y. 567; National 146 Mass. 248; McGurk v. Met. Life Life Ins. Co. v. Tweddell, 22 Ky. Ins. Co., 56 Conn. 528; De Frece v. Law R. 881, 58 S. W. 699. And may National Life Ins. Co., 136 N. Y. 144, dispense with the receipt called for by 48 N. Y. St. R. 909, 32 N. E. 556 the terms of the policy, McNeilly v. (waiver of prompt payment and of for- Continental L. Ins. Co., 66 N. Y. 23. feiture by a subsequent agreement of As to waiver see also Peck v. Wash- the parties). But a local agent has no ington Life Ins. Co., 91 App. Div. 597, implied authority to take anything but 87 N. Y. Supp. 210, aff'd 181 N. Y. 585 cash in payment of premium. Carter v. (authority to waive payment); Russell Ins. Co., 56 Ga. 237; Ratib v. N. Y. v. Prudential L. Ins. Co., 176 N. Y. Life Ins. Co., 14 N. Y. St. R. 573; 178, 68 N. E. 252 (no authority to Tomsecek v. Ins. Co., 113 Wis. 114, 88 waive); Stewart v. Union Mut. L. Ins. N. W. 1013, 57 L. R. A. 455, 90 Am. Co., 155 N. Y. 257, 49 N. E. 876 (au- St. R. 846 (agent cannot offset his thority to waive cash payment); debt due to the insured). But com- Hewitt v. Am. Union L. Ins. Co., 85 paveWooddifv. Old Dominion Ins. Co., App. Div. 279, 83 N. Y. Supp. 232; 31 Grat. (Va.) 362, 31 Am. Rep. 739. Tooker v. Security Trust Co., 26 App. An agent has no implied authority to Div. 372, 49 N. Y. Supp. 814, aff'd 165 receive property as payment for pre- N. Y. 608, 58 N. E. 1093 (waiver of mium, Hoffman v. Ins. Co., 92 U. S. cash payment). 161, 23 L. Ed. 539; Equitable Life "^National Ben. Assn. v. Jackson, Assur. Soc. V. Cole, 13 Tex. Civ. App. 114 111. 533, 2 N. E. 414. 486, 35 S. W. 720. President or secre- 3 Doyle v. Hill (S. C, 1906), 55 S. E. tary or agent if possessing actual au- 446. thority may give credit for the pre- 500 MEANING AND LEGAL EFFECT OF LIFE POLICY per annum shall be granted for the payment of every premium aiter the first year during which time the insurance shall continue in force. If death occur within the days of grace the unpaid portion of the premium for the then current policy year shall be deducted from the amount payable hereunder." ^ But such a provision does not by implication provide also a grace of thirty days for payment of a note given for a past-due premium. ^ If by a statutory provision, as for example in Massachusetts a grace of ''one month" is specified, it will not do for the company to substitute a grace of thirty days, since one month is not neces- sarily the same as thirty days. The provision being made for the benefit of the insured any departure from it must be as favorable to the insured.^ And the policyholder is also entitled to the protection and bene- fit coming from the provisions described in the next two sections, which are not to be waived or disturbed by inconsistent stipulations in the policy.^ § 360. Statutory Notice of Premiums Due. — In many states it ia provided that before claiming forfeiture for nonpayment of premium the insurance company must send a specified notice to the insured, which is intended to operate as a reasonable warning.^ 1 Ins. L. § 101. St. R. 774. But in general notice is to 2 Bank of Commerce v. N. Y. Life be served only on the insured, Osborne Ins. Co., 125 Ga. 552, 54 S. E. 643. v. Home Life Ins. Co., 123 Cal. 610, 56 3 Ai^. Y. Life Ins. Co. v. Hardison Pac. 616. If the company has been (Mass., 1908), 85 N. E. 410. informed of absolute assignment of the 4 Equitable Life Assur. Soc. v. policy, notice should be sent to the Clements, 140 U. S. 226, 11 S. Ct. 822, assignee, Brannin v. Ins. Co., 28 35 L. Ed. 497. N. J. L. 92. Otherwise it should be 5 Appendix, ch. I; N. Y. Ins. L. § 92, sent to the original insured, Franklin given in Mut. Life Ins. Co. v. Phinney, Life Ins. Co. v. Am,. Nat. Bank, 74 178 U. S. 327, 20 S. Ct. 906, 44 L. Ed. Ark. 1, 84 S. W. 789. The company 1088. Under the New York statute no need not repeat the notice on maturity notice need be given if the term is less of a note taken for premium, Banholzer than a year or if the premiums are v. N. Y. Life Ins. Co., 74 Minn. 387, payable monthly or weekly, Baldwin 77 N. W. 295; Conway v. Phoenix Mut. V. Prov. S. Life Assur. Soc, 23 App. L. Ins. Co., 140 N. Y.' 79, 35 N. E. 420. Div. 5, 48 N. Y. Supp. 463, aff'd 162 Days of grace do not affect the proper N. Y. 636, 57 N. E. 1103. And if the date of notice, Trimble v. N. Y. Life insured has voluntarily abandoned the Ins. Co., 20 Wash. 386, 55 Pac. 429. insurance he has also abandoned the As to what notice constitutes a com- right to statutory notice, Mut. Life pliance with the statute, see Nederland Ins. Co. V. Hill, 193 U. S. 551, 24 S. Life Ins. Co. v. Meinert, 199 U. S. 171, Ct. 538. If the company knows that 26 S. Ct. 15, disapproving A^. Y. Life the_ insured is mentally incapacitated, Ins. Co. v. Dingley, 93 Fed. 153. And notice should be sent to the third party see also Schad v. Security Mut. L. beneficiary, if there be one, Buchanan Assoc, 11 App. Div. 487, 42 N. Y. V. Supreme Conclave, 178 Pa. St. 465, Supp. 314, aff'd 155 N. Y. 640, 49 35 Atl. 873, 34 L. R. A. 436, 56 Am. N. E. 1104; McDougaU v. Prov. Sav. STATUTORY NOTICE OF PREMIUMS DUE 501 In order to establish forfeiture of the poHcy for non-payment of the premium the burden is thrown upon the insurer to prove a compUance with the terms of the statute.^ The fact that the ir»- sured is financially unable to pay the premium, and can derive no benefit from the notice furnishes the company with no excuse for omitting to conform to the statutory requirement.^ A foreign company issuing a pohcy in New York is subject to the New York statute; ^ but a New York company making a contract of life insurance in another state is not subject to the New York statute unless the policy so provides."* Life Assur. Soc, 135 N. Y. 551, 32 N. E. 251; Baxter v. Ins. Co., 119 N. Y. 450, 23 N. E. 1048, 7 L. R. A. 293; Phelan v. Northwestern Mut. Life Ins. Co., 113 N. Y. 147, 20 N. E. 827, 10 Am. St. R. 441; Carter v. Ins. Co., 110 N. Y. 15, 17 N. E. 396. Plaintiff need not prove payment of premiums under the statute, but the company must plead and prove a service of the statutory notice followed by a non- payment of the premium within the period specified for that purpose, Fischer v. Met. Life Ins. Co., 167 N. Y. 178, 60 N. E. 431; Seelei/ v. Manhattan Life Ins. Co., 73 N. H. 339, 55 Atl. 425. Proof of proper mailing may be enough under the statute, McConnell v. Soci- ety, 92 Fed. 769, 34 C. C. A. 663. And the court will allow an agent of the company possessing knowledge in a general way to prove a prima facie case of mailing the notice though the various steps involved in mailing are taken by several agents, Wolarsky v. .V. Y. Life Ins. Co., 120 App. Div. 99, 104 N. Y. Supp. 1047. Where the amount of the premium is variable the burden is on the company to prove the amount, Gooduin v. Prov. Sav. L. Assur. Soc, 97 Iowa, 226, 66 N. W. 157. The New York act does not apply to mortality assessments, Merriman v. K. M. B. Assoc. 138 N. Y. 123, 33 N. E. 738. It has been held that it is contrary to public policy to allow the insured to waive the provisions of the statute. Forfeiture in such case is ultra inres, Griffith v. Ins. Co., 101 Cal. 627, 36 Pac. 113. 40 Am. St. R., 96. And see § 130, supra. In New York the statutory provision does not apply to fraternal benefit societies, Bopple v. Supreme Tent, 18 App. Div. 488. Nor to mutual benefit assessment com- panies incorporated under L. 1883, ch. 175, Ronald v. M. R. L. F. Assn., 132 N. Y. 378. Nor to associations conducting assessment life and accident insurance, Greenwald v. United L. Ins. Ass., 18 Misc. (N. Y.) 91. 1 Strauss v. Union Cent. L. his. Co., 170 N. Y. 349. The affidavit of mail- ing must show contents of notice and identify the policy, McCall v. Pru- dential Ins. Co., 98 App. Div. (N. Y.) 225. The notice must be addressed correctly and to the right person, Equitable L. Assur. So. v. Fonmmhold, 75 111. App. 43; Nielson v. Prov. Sav. L. A. Soc. (Cal., 1901), 66 Pac. R. 663. Proof must show that postage was prepaid, Prov. Sav. L. A. Soc. v. Nixon, 73 Fed. 144. Day of mailing is excluded in computing 30 days. Hicks V. Nat. L. Ins. Co., 60 Fed. 690. Affidavit of mailing is not conclusive in another state, and proof that the notice was not received has some bear- ing, Equitable Life Assur. Soc. v. Nixon, 81 Fed. 796. If addressed and mailed in pursuance of the directions of the statute, the receipt of the notice is immaterial, McConnell v. Prov. Sav. Life A. Soc, 92 Fed. 769; N. Y. Life Ins. Co. V. Scott (Tex. Civ. App.), 57 S. W. 677. The contract in general is to be governed by the statutes of the place where it is made. See § 92, supra. 2 Equitable Life Assur. Soc. v. Per- kins (Ind. App., 1907), 80 N. E. 682. 3 Strauss v. Union Cent. Life his. Co., 170 N. Y. 349, 63 N. E. 347. * Mut. Life Ins. Co. v. Cohen, 179 U. S. 262, 21 S. Ct. 106, 45 L. Ed. 181; Mut. Life Ins. Co. v. Hill, 193 U. S. 551, 24 S. Ct. 538, 48 L. Ed. 788; Met. Life Ins. Co. v. Bradley, 98 Tex. 230, 82 S. W. 1031. But see Nail v. Prov. S. L. Assur. Soc (Tenn. Ch. App.), 54 S. W. 109 (1899); Summitt v. U. S. Life Ins. Co., 123 Iowa, 681, 99 N. W. 563. 502 MEANING AND LEGAL ICFFECT OF LIFE POLICY § 361, Extended or Paid-up Insurance. — In the absence of stat- utory provision or express agreement, a policy lapsed for non- payment of premium has no surrender value/ since by forfeiture all rights of the insured under it are terminated; but inasmuch as the premiums during the earlier years are larger than the hazard re- quires, the lapsed policy has what is called a surrender value which can equitably be made the occasion of concession to the honest but delinquent policyhol-d-er. In most instances this benefit is secured to him either by statute ^ or express agreement or both, where the policy lapses for nonpayment of premium. A usual provision in such a case gives him the option to take either an extension of the original amount for such further time as the net reserve will fairly purchase, or paid-up insurance for the original lifetime or other term, but for a commuted or reduced amount, provided at least two or three annual premiums have been paid before default.^ It is a condition precedent to the enjoyment of this privilege that the insured make his demand, and if required surrender his policy, within the period specified for so doing.'* But by the terms of a statute or statutory policy, as in the case of the New York standard policies, although the owner of the policy shall fail to ^Haskell v. Societij, 181 Mass. 341, 63 N. E. 899. 2 See Appendix, ch. I. The method of computing the reserve or surrender value of lapsed or forfeited policies is defined by the New York Ins. L. § 88. 3 By the New York standard hfe policies, the options on surrender or lapse, after a poHcy has been in force three full years, are .'specified in the policy itself, Ins. L., § 101. As to New York statute, see Nielsen v. Society, 139 Cal. 332, 73 Pac. 168, 96 Am. St. R. 146. As to Missouri statute, see Cravens v. Ins. Co., 148 Mo. 583, 50 S. W. 519, 53 L. R. A. 305, 71 Am. St. R. 628; Nichols v. Ins. Co., 176 Mo 355, 75 S. W. 664, 62 L. R. A. 657. As to rule of construction applied to nonforfeiture statutes, see Ins. Co. v Butcher, 95 U S. 269. 24 L. Ed. 410 (premium paid by note); Drury v. .V. Y. Life Im^. Co.. 115 Ky. 681, 74 S. W. 663, 61 L. R. A. 714; Carter v. Ins. Co., 127 Mass. 153 (endowment policy); Hazen v. Mass. Mvt. Life Ins. Co., 170 Mass. 254. 49 N. E. 119. Extended insurance referred to in this section is sometimes called "tem- porary insurance," see Burridge v. -V. Y. Life Ins. Co. (Mo., Feb., L890), 37 Ins. L. J. 449. On "paid-up in- surance" no further premiums are payable. 4 Knapp V. Homeopathic Mut. L. Ins. Co., 117 U. S. 411, 6 S. Ct. 807, 29 L. Ed. 960; Nielsen v. Prov. Sav. L. A. Soc, 139 Cal. 332, 73 Pac. 168; Attor- neij General v. Continental Life Ins. Co., 93 N. Y. 70; Union Cent. Life Ins. Co. V. Buxer, 62 Ohio St. 385, 57 N. E. 66, 49 L. R. A. 737; Universal Life Ins. Co. V. Devore, 88 Va. 778, 14 S. E. 532. But see Kentucky cases: Equita- ble Life Assiir. Soc. v. Bank, 25 Ky. Law Rep. 839, 75 S. W. 275; Washing- ton Life Ins. Co. v. Miles, 112 Ky. 743, 66 S. W. 740; Manhattan Life Ins. Co V. Patterson, 109 Kv. 624, 60 S. W. 383, 53 L. R. A. 378. 95 Am. St. R. 393; Mut. Life bis. Co. v. Jarboe, 102 Ky. 80, 42 S. W. 1097, 39 L. R. A. 504, 80 Am. St. R. 343. As to loss of policy as an excuse for failure to surrender it to the company, see Wilco.v v. Society, 173 N. Y. 50, 65 N. E. 857, 93 Am. St. R. 579. Time limit for the demand may be waived by the insurer, Linden- thai v. Germania Life Ins. Co., 174 N. Y. 76, 66 N. E. 629; Neihen v. Prov. S. Life A. Soc, 139 Cal. 332, 73 Pac. 168, 96 Am. St. R. 146. WHEN PREMIUM IS A UELT COLLECTIBLE BY COMPANY 503 exercise the options specified, the insurance must be continued for his benefit as provided for.^ The Kentucky court, however, has repeatedly held that though a policy provide that surrender of policy and demand for a paid-up policy must be made within six months of lapse, nevertheless time is not of the essence of the contract and that the demand may be made within a reasonable time.^ Sometimes the certificate or policy provides that, in case of lapse for nonpayment of premium, the delinquent may be reinstated on payment of arrears and on furnishing satisfactory proof of good health. On complying with the conditions named, the applicant is entitled to reinstatement.^ If, however, reinstatement is, by the terms of the policy, made subject to the approval of certain officers, their duty is discretionary rather than ministerial, and if, in refusing an application for reinstatement, their action is not fraudulent or purely arbitrary, the courts cannot interfere.'' § 362. When Premium is a Debt Collectible by Company. — The general rule applicable to all branches of insurance is, that in the absence of express provision to the contrarj?^, the premium or com- pensation of the company becomes due and collectible as soon as the policy is delivered ; ^ but the usual provisions of the life policy and the custom of the business relating to payment of first and subsequent annual premiums differ widely from the corresponding •terms of the fire and marine policies and the practice of under- writers in issuing them. It is the regular thing in this country for the fire or marine insurer to issue his policy without exacting pre- payment of the premium, and no clause of the usual policy pro- 1 N. Y. Ins. L. § 101. and conditions of the by-laws above 2 Washington L. Ins. Co. v. Glover quoted, it does not follow that the (Ky., 1904), 78 S. W. 146. committee was bound to reinstate her 3 Lovick V. Life Assn., 110 N. C. to membership in the association. 93, 14 S. E. 506; Wichman v. Met. While the by-laws empowered them to Life Ins. Co.. 120 Mo. App. 51, 96 grant her request, they were not bound S. W. 695. nor could they be compelled to do so ")• * Butler V. Grand Lodge. 146 Cni. ^ loua Life his. Co. v. Lewis, 187 172; Brun v. Supreme Council, 15 Col. U. S. 335, 23 S. Ct. 126 ("payment of App. 538; McLaughlin v. Supreme the premium can be exacted simul- Council, 184 Mas.<. 298; Lane v. Fi- taneously with the delivery of the delity Mut. Lif" Ins. Co. (N. C, 1906), policy"); Schi^vp v. Ins. Co., 124 111. 54 S. E. 8.^4; Harrington v. Keystone 354, 16 N. E. 229 (entire premium due Assn., 190 Pa. St. 77 ("conceding, for as soon as risk attaches); Albert v. Ins. the purrose of argument, that her an- Co., 122 N. C. 92, 30 S. E. 327, 65 pHcation was in time, and that she Am. St. R. 693 (whole annual pre- compiled or was ready and willinfr mium earned as soon as risk attaches to fully comply with all the terms though payable quarterly). 504 MEANJNG AND LEGAL EFFECT OF LIFE POLICY hibits this; but as soon as the poHcy is deUvered the premium for the whole term, whether one, three, or five years, or other period, becomes a debt. This debt for premium of fire insurance is not, however, very frequently made the subject of Htigation, since, by promptly invoking the aid of the cancellation clause, the under- writer is enabled to relieve himself from further responsibility before the earned portion of the premium has assumed serious proportions. But in the case of the ordinary life policy, the liability of the com- pany does not attach at all, and no compensation is earned, until the first premium is paid, or until note, or credit, or other substitute, is accepted in its stead. Under such a policy the only result of non- payment of the first premium is that the contract is not closed.^ In like manner when the second premium becomes payable under the regular life policy, if the insured makes default in its payment the insurance terminates ipso facto, and no premium is earned or can be recovered by the company thereafter.^ Upon nonpayment of the premium in such a case the insurance ceases, and the insured on his part has no further claim upon the company except what is conferred by the nonforfeiture clause; ^ but if in place of a present cash payment the company gives credit in any form, then, as soon as the risk attaches, the compensation or premium for the entire year becomes a debt.'* Premium notes and assessments are frequently the subject of suit brought at the instance of life insurance companies, and as- sessment companies generally. § 363. Assessments. — In mutual associations and beneficiary soci- eties the premiums are often paid in the form of assessments, and it is in order on the happening of a death to call for an assessment with which to meet it, nonpayment of which ipso facto usually oc- casions suspension or forfeiture of all rights on the part of the in- sured member.-*^ 1 Northwestern Mut. Life Ins. Co. v. 19 Am. Rep. 495, or as an arrange- Elliott, 5 Fed. 225; Cravens v. A^. Y. ment for life conditioned upon the Life Ins. Co., 148 Mo. 583, 599, 50 S. W. payment of each annual premium as 519, 53 L. R. A. 305, 71 Am. St. R. in N. Y. Life Ins. Co. v. Statham, 93 628. U. S. 24, 23 L. Ed. 789, the practical 2 Lehman v. Clark, 174 111. 279, 51 result is as stated in the text. So held N E. 222, 43 L. R. A. 648; Clark v. in People v. Security Life Ins. Co., 78 Schromeyer, 23 Ind. App. 565, 55 N. E. N. Y. 114, 34 Am. Rep. 522 (referring '°*^- , to both the preceding cases). ^Goodwin V. Ins. Co., 73 N. Y. 480. i Albert v. Ins. Co , 122 N C 92 Whether the contract theoretically is 30 S. E. 327, 65 Am. St. R. 693 regarded as an arrangement renew- 5 Butler v. Grand Lodge, 146 Cal 172, able from year to year during life as in 79 Pac. 861; Delaney v. Kelly, 103 Worthington v. Ins. Co., 41 Conn. 372, App. Div. (N. Y ) 412 92 N Y Supp ASSESSMENTS 505 Such assessments are practically deferred premiums, levied upon members to meet losses of others occurring during the term of mem- bership, and based, not upon estimated laws of average, but rather upon an amount of ascertained losses.^ They are a part of the con- sideration payable by the member to the association in return for the benefit of insurance actually enjoyed by him, the balance of pecuniary consideration often consisting of small fees and dues or stated assessments for expenses. Therefore, by reason and by the great weight of authority, when properly levied, assessments con- stitute a collectible debt in favor of the association, regardless of whether the member has expressly promised to pay them or whether their nonpayment occasions forfeiture of his rights and insurance.^ In most instances an express promise to pay assessments can be deduced either from the statutes, by-laws, application, or certificate applicable to the case.^ Where, however, no express undertaking by the member to pay assessments can be found, several courts and several standard text-writers have concluded that if forfeiture is pre- scribed as a penalty for nonpayment of assessments no other result can be inferred; and that, therefore, the association cannot collect the assessment from the delinquent member.^ But the difficulty with these decisions is that they allow to the defaulting member his own insurance for a period without exacting in return the proper con- sideration; and their authority is weakened by the course of reason- ing adopted in the opinions rendered in their support. For in these, the conclusion seems to be in substance based upon the two proposi- 1021; McNeil v. So. Tier Mas. R. Atl. 498. And see loiva Life Ins. Co Assn., 40 App. Div. 581, 58 N. Y. v. Lews, 187 U. S. 335, 23 S. Ct. 126 Supp. 119; Sovereign Camp v. Hicks (if liability of company attaches re- (Tex. Civ. App., 1904), 84 S. W. 425; ciprocal obligation to pay for it is in- Sterling v. Head Camp, 28 Utah, 505, curred). 80 Pac. 375. Examining physician ^Gray v. Daly, 40 App. Div. 41, 57 has no authority to receive payment, N. Y. Supp. 527; McDonald v. Ross Teeter v. United Life Ins. Assoc, 159 Lewin, 29 Hun (N. Y.), 87; Baker v. N. Y. 411, 54 N. E. 72. But payment A^. Y. State Mut. Ben. Assn., 9 N. Y. to wife of secretary was held good by St. Rep. 653; New Era Life Assn. v. custom, Anderson v. S. C. O. of Rossiter, 132 Pa. St. 314, 19 Atl. 140; Chosen Friends, 135 N. Y. 107, 31 Dettratt v. Kestner, 147 Pa. St. 566, 23 N. E. 1092. Atl. 889; Fidton v. Stevens, 99 Wis. 1 Supreme Commandery v. Ains- 307, 74 N. W. 803. worth, 71 Ala. 436, 443. * Lehman v. Clark, 174 111. 279, 51 2 Cal'ins v. Angell, 123 Mich. 77, 81 N. E. 222, 43 L. R. A. 648; Covenant N. W. 977; Ellerhe v. Barney, 119 Mo. Miit. L. Assn. v. Kentner, 188 111. 431, 632, 25 S. W. 384, 23 L. R. A. 435; 58 N. E. 966; Chicago Mut. L. hidem. Re Globe Mut. Benefit At-sn., 63 Hun, Assoc, v. Hunt, 127 111. 257, 20 N. E. 263, 17 N. Y. Supp. 852, aft'd 1.35 55, 2 L. R. A. 549; Gibson v. Megrew, N. Y. 280, 32 N. E, 122; Gray v Dalv, 154 Ind. 273, 56 N. E. 674, 48 L. R. A. 40 App. Div. 41, 57 N. Y. Supp. .V27; 362; Re Protection Life Ins. Co., 9 Whipple V. Im. Co., 20 R. 1. 260, 38 Biss. (U. S.) 188. .'■)()6 MEANING AND LEGAL EFFECT OF LIFE POLICY tions that the ordinary life policy is unilateral and that the assess- ment policy should be governed by similar doctrines. It is true that the regular life policy is in a sense unilateral. The instrument is executed by only one party. It is also true, that where, ;it the inception of the contract, the assured has paid the entire premium for a year's insurance there is nothing more for him to do during the year.' If, on the other hand, the applicant for insur- ance has failed to make advance payment of the first premium, the regular policy does not attach to the risk. There is no contract. The applicant pays nothing and gets nothing. The insurance com- pany cannot sue for the premium, since no part of it has been earned.^ These well-established principles, however, furnish no sanction for a rule relieving the insured member in an assessment company from liability for assessment for deferred premium where the liability of the company has already attached, and where the member has been actually receiving the protection of his certificate for at least a por- tion of the corresponding period.^ § 364, Assessments Must be Lawfully and Properly Levied. — The association can be compelled in equity to levy a mortuar}' assess- ment pursuant to its laws, or upon its failure to do so the member may sue for damages.'* The officials lawfully entrusted with this power cannot delegate it to others.-'' Proper proofs of death must 1 N. Y. Life Ins. Co. v. Statham, 93 786. An assessment is a necessary U. S. 24, 23 L. Ed. 789; Goodwin v. condition to an action on a premium Ins. Co., 73 N. Y. 480. note, Savage v. Medhury, 19 N. Y. 32. 2 Cravens v. N. Y. Life Ins. Co., 148 As to measure of damages where in- Mo. 583, 599, 50 S. W. 519, 53 L. R. A. surer fails to levy assessment, see 305, 71 Am. St. R. 628; Northwestern Lawler v. Murphy, 58 Coim 294 20 Mxd. L. Ins. Co. v. Elliott, 5 Fed. 225. Atl. 457, 8 L. R. A. 113; Keyser v. 3 If any assessment is lawfully made Mut. R. Fund Assoc, 60 App. Div. in Massachusetts by a corporation of (N. Y.) 297, 70 N. Y. Supp. 32 (cost that state on a contract made there of putting risk in sound company is a with a New York citizen, suit may be rule of damages). Assessments how brought in New York to collect it levied in case of the insolvency of the though the company has not qualified insurer, Langworthy v. Flouring Mills to transact business under the New Co., 77 Minn. 256, 79 N. W. 974 (may York statutes. Western Mass. F. Ins. include expenses' of winding up)- S- Jo ^r'^^^"^' c9 '^PP- ^'''- (N. Y.) Whital-er v. Meley, 61 N. J. L. 1, 38 ■f' ?8 N. \ Supp. 996; Allgeyer v. Atl. 840; Wood v. Standard Mut. L. Lommana, 165 U. S. 578, 17 S. Ct. 427. Stock Ins. Co., 154 Pa St 157 26 Atl on i'T'^ZJ-oH'''?!''^\ -^^ ^°""- 294, 103 (reasonable discretion ' as to -U Atl 457, 8 L. R. A. 113 (there is amount); Camtal City Mut. Fire /tj.s. nnphed a promise to levy to meet Co. v. Boggs, 172 Pa. St. 91, 33 Atl. losses); Covenant Mut Ben Assn. v. 349 (by receiver); Life Ins. Co. v. Ful- %Z^'' ^^Si"- ^n^' -^ ^- E- 480; ton, 101 Wis. 1, 76 N. W. 775. And ^1 n 99 M ^''"n'r.^'D "^T- ' ^ M ^- Y- ^^« ^"^'^«« ''•■ ^^«-^-^- Safet,, Fund Assn. , r -J ,oa ^- V i, . o^i^y- ■^"so'^^c 147 Mass. 360, 17 N. E. 874. 1 L. R. A. (rinld, 126 N. Y. 615, 27 N. E. 1037; 146; Cornmonwealth Mut. F. Ins. Co. fac^son Z-^<>jhxcesternMut. R. Assn., v. Wood, 171 Mass. 484, 51 N. E. 19. '3 Wis. 507, 41 N. W. 708, 2 L. R. A. s Garretson v. Eq. Mut L., etc., Assn., ASSESSMENTS MUST BE LAWFULLY AND PROPERLY LEVIED 507 first be received,* and the requirements of the charter and by-'aws must be observed.^ The assessment upon a member must not m- elude losses occurring before he became a member; ^ but may in- clude losses occurring during membership, although assessment therefor is not levied until membership has ceased.'* Illegal assess- ments need not be paid to avoid forfeiture.^ It is said that the burden is upon the association to show the legality, regularity, and necessity of the assessment.^ The member must not be assessed for more than his just proportion of the loss; '' nor for future prospective losses; * unless the statute or by-laws provide for it.** While a reasonable discretion must be left to the directors or other officials levying the assessment, because of contingencies, and in view of the fact that some members may default,^" yet an assessment for twice the indebtedness was held void.^^ 93 Iowa, 402, 61 N. W. 952; Fee v. yiat. Masonic Ace. Assn., 110 Iowa, 271, 81 N. W. 483; Passenger Con- ductors' L. I. Co. V. Birnbaum, 116 Pa. St. 565, 11 Atl. 378; Miles v. Mut. R. F. Assn., 108 Wis. 421, 84 N. W. 159. 1 Coyle V. Ken. Grangers' Mut. Ben. L. Soc, 8 Ky. L. R. 604, 2 S. W. 676. 2 Grand Lodge v. Bagley, 164 111. 340, 45 N. E. 538; Mee v.' Assoc, 69 Minn. 210, 72 N. W. 74; Chappie v. Sovereign Camp, 64 Neb. 55, 89 N. W. 423. 3 Capital City Mut. Fire Ins. Co. v. Boggs, 172 Pa. St. 91, 33 Atl. 349. * Prov. Mut. R. As.sn. v. Pelissier, 69 N. H. 606, 45 Atl. 562; Ionia, etc., Mid. Fire Ins. Co. v. Ionia Judge, 10() Mich. 606, 59 N. W. 250, 32 L. R. A. 481; Peake v. Yule, 123 Mich. 672, 82 N. W. 514; but see Gray v. Daly, 40 App. Div. 41, 57 N. Y. Supp. 527; Hendel v. Revest. F. Assn., 2 Pa. Dist. R. 116; Fulton v. Stevens, 99 Wis. 307, 74 N. W. 803. 5 Benjamin v. Mut. R. Fund Assn., 146 Cal. 34, 79 Pac. 517. 6 Am. Mut. Aid Soc. v. Helburn, 85 Ky. 1, 2 S. W. 495, 7 Am. St. R. 571; Shea V. Mass. Ben. Assn., 160 Mass. 289, 35 N. E. 855, 39 Am. St. R. 475; Pacific Mut. Ins. Co. v. Guse, 49 Mo. 329, 8 Am. Rep. 132 (must show that losses have actually occurred); Sus. Mut. Fire Ins. Co. v. Gachenhach, 115 Pa. St. 492, 9 Atl. 90 (must follow established rule of levy); Hartford Ins. Co. V. Hijde, 101 Tenn. 396, 48 S. W. 968 (company must prove regularity). But as to prima facie regularity, see Demings v. Supreme Lodge, 131 N. Y 522, 30 N. E. 572; Raegener v. Willard, 44 App. Div. 41, 60 N. Y. Supp. 478; Anderson v. Association, 171 111. 40, 49 N. E. 205. What relief can be had where company levies too large an assessment. People's Mid. F. Ins. Co. V. Groff, 154 Pa. St. 200, 26 Atl. 63. '' U. S. Mut. Ace. Assn. v. Mueller, 151 111. 254, 37 N. E. 882 (incorrect amount named in notice); Ehert v. Assoc, 81 Minn. 116, 83 N. W. 506 (must not discriminate between classes, though rate may be changed); Sands V. Graves, 58 N. Y. 94; Pratt v. Dwell- ing H. Mut. Co., 7 App. Div. 544, 40 N. Y. Supp. 179; Bangs v. Gray, 12 N. Y. 477. There must be no dis- crimination, Shaughnessey v. Ins. Co., 21 Barb. (N. Y.) 605; Kcehler v. Beeber, 122 Pa. St. 291, 16 Atl. 354. 8 Vandalia Mut. Co. Fire Ins. Co. v. Beasley, 84 111. App. 138. 9 A member is liable for only one assessment to meet a death claim. People V. Assn., 126 N. Y. 615, 27 N. E. 1037. A member of an insolvent mutual assessment company cannot set off the company's indebtedness to him against an assessment levied upon him to pay losses. Stone v. N. J. & H. R. R. & Ferry Co. (N. J., 1907), 66 Atl. 1072. ^'^ Ionia, etc., Mut. Fire Ins. Co. v. Ionia Judge, 100 Mich. 606, 59 N. W. 250, 32 L. R. A. 481; Seamans v. Millers' Mid. Ins. Co., 90 Wis. 490, 63 N. W. 1059. 11 Lawler v. Murphy, 58 Conn. 294, 508 MEANING AND LEGAL EFFECT OF LIFE POLICY Where an assessment company or association has become liable to make payment upon a certificate, and refuses to levy an assess- ment to meet the claim, the claimant may bring action at law with- out first suing in equity to compel the levy of an assessment.^ § 365. Power to Change Rate of Assessments. — The nature of the contract in an assessment association is such as naturally to call for a varying rate of assessment. A power to change the rate equita- bly from time to time will be inferred ^ unless the plain meaning of the contract prohibits; ^ but such change must not be unreasonable, or repugnant to vested rights.'' The member often expressly agrees to be bound by future by- laws and regulations by which, in that event, the rate may be changed pursuant to the charter.""^ A change even from assessments to regular premiums may not be in violation of the Constitution of the United States. « § 366. Notice of Assessment to Insured. — Until notice of the amount of a mortuary assessment is duly given to the member, no obligation to pay is imposed upon him.' A subsequent by-law, 20 Atl. 457, 8 L. R. A. 113; Thompson V. Piedmont Mut. Ins. Co. (S. C, 1907), 58 S. E. 341; Batson v. S. C. Mut. Ins. Co. (S. C. 1907), 58 S. E. 936; Jackson V. Northwestern Mut. Relief Ass., 73 Wis. 507, 41 N. W. 708, 2 L. R. A. 786. 1 Rosenberger v. Ins. Co. , 87 Pa. St. 207; and see York Co. Mut. Fire Ins. Co. V. Boicden, 57 Me. 286. So if mem- bers liable are knowingly omitted, Swing v. Lumber Co., 62 Minn. 169, 64 N. W. 97. Slight errors in amount will not invalidate the assessment, Thropp V. Ins. Co., 125 Pa. St. 427, 17 Atl. 473, 11 Am. St. R. 909; Wardle V. Townsend, 75 Mich. 385, 42 N. W. 956, 4 L. R. A. 511. But an unreason- ably excessive amount w^ill avoid the assessment. People's Eg. Mut. F. Ins. Co. V. Babbitt, 7 Allen (Mass.), 235; Traders' Mut. F. Ins. Co. v. Stone, 9 Allen (Mass.), 483; Pencille v. State Farmers' Mut. Hail Ins. Co., 74 Minn. 67, 76 N. W. 1026, 73 Am. St. R. 326. 2 EbeH V. Mut. R. Fund L. Assn., 81 Minn. 116, 83 N. W. 506; Messer v. Grand Lodge, 180 Mass. 321. 62 N. E. 252 (adoption of new^ by-law, valid). But see Miller v. Tuttle (Kan., 1903), 73 Pac. 88 (void). 3 Hogan v. Pac. Endowment League, 99 Cal. 248, 33 Pac. 924; Covenant Mut. L. A.ssn. v. Tuttle, 87 111. App. .309; Covenant Mut. L. Assn. v. Kent- ner, 188 111. 431, .58 N. E. 966. ■*■ Strauss v. Mut. R. Fund L. Assoc, 126 N. C. 971, 36 S. E. 3.52, 54 L. R. A. 605, 83 Am. St. R. 699. Contra, Gaut v. Mut. R. Fund. L. Assoc, 121 Fed. 403. 5 Fullenwider v. Supreme Council, 180 111. 621, 54 N. E. 485, 72 Am. St. R. 239; Miller v. National Council, 69 Kan. 234, 76 Pac. 830; Haydel v. Mut. R. F. L. Assn., 98 Fed. 200, 104 Fed. 718; Barbot v. Mid. R. F. Assn., 100 Ga. 681, 28 S. E. 498; Crosbtj v. Mut. R. F. Assn., 78 N. Y. Supp. 237, 38 Misc. 708; Seymour v. Mid. R. F. Assn., 35 N. Y. Supp. 793, 14 Misc. 151; Mut. R. F. A.s.sn. v. Tavlor, 99 Va. 208, 37 S. E. 854; Sowles v. Mid. R. F. Assn., 71 Vt. 466, 45 Atl. 1045. s Wright v. Minnesota Mut. L. Ins. Co., 193 U. S. 657, 24 S. Ct. 549. 7 Wright v. Supreme Commandery, 87 Oa. 426, 13 S. E. .564, 14 L. R. A. 283; Cronin v. Supreme Council, 199 111. 228, 65 N. E. 323, 93 Am. St. R. 127; Co7irtney v. Assoc. (Iowa), 53 N. W. 238. But notice of stated dues SUICIDE 509 rescinding a provision for such notice before forfeiture, would be unreasonable and inoperative.^ If the testimony admits of doubt the jury determines whether the notice has been received. If not received there is no forfeiture,^ unless the contract provides that sending or mailing of the notice is sufficient service.^ § 367. Suicide. — Exemption from liability for suicide. Frequently in life policies, and almost invariably in accident policies, there is a provision that the company shall not be liable in case the injuries named are self-inflicted, or, as it is often worded, if the insured dies "by suicide," or "by his own hand or act," or "by self-destruction," or "takes his own life." These have been held to be substantially equivalent forms of expression,"* and they are valid conditions, binding upon the assured,^ but the insurer is liable, in spite of such clauses, where death is purely accidental and not the result of an intent to commit self-destruction.^ The rule of construction just mentioned applies, though the contract exemp- tion from liability is worded "self-destruction, voluntary or involun- need not be given, Riddick v. Farmers' L. Assn., 132 N. C. 118, 43 S. E. 544; Smith V. Bown, 75 Hun, 231, 27 N. Y. Supp. 11. Though a "posting" of the notice may be the regulation, the mem- ber may have a right to rely upon a long-continued custom of receiving a mailed notice, Giinther v. New Orleans Cotton Exch., 40 La. Ann. 776, 5 So. 65, 2 L. R. A. 118, 8 Am. St. R. 554. As to what is sufficient form of notice, see Cronin v. Supreme Council, 199 111. 228, 65 N. E. 323, supra (no stamp or seal); Assn. v. Thompson, 91 111. App. 580 (demanding payment before ma- turity); Hansen v. Supreme Lodge, 40 111. App. 216 (amount of assessment was through another channel known to member) ; Bridges v. National Union, 73 Minn. 486, 76 N. W. 270 (purpose was through another channel known to member). As to sufficiency of no- tices of assessment, see also Sands v. Graves, 58 N. Y. 94; Bodle v. Chenango Mut. Ins. Co., 2 N. Y. 53, 59; Bangs v. Duckinfield, 18 N. Y. 592. 1 Thibert v. Supreme Lodge, 78 Minn. 448, 81 N. W. 220, 47 L. R. A. 136, 79 Am. St. R. 412. 2 Courtney v. Assn. (Iowa), 53 N. W. 238; Garbutt v. Assn., 84 Iowa, 293, 51 N. W. 148; McCorkle v. Texas Ben. Assoc, 71 Tex. 149. ^Modern Woodmen v. Terns, 117 Fed. 369, 54 C. C. A. 293; Union Mut. Ace. A.S.SOC. v. Miller, 26 111. App. 230; Yoe V. Howard, etc., Ben. Assoc, 63 Md. 86 (and sickness no excuse for nonpayment). •t Connecticut Life Ins. Co. v. Akens, 150 U. S. 468, 473, 14 S. Ct. 155, 37 L. Ed. 1148; Accident Ins. Co. v. Crandal, 120 U. S. 527, 7 S. Ct. 685, 30 L. Ed. 740; Mutual L. Ins. Co. v. Wis well, 56 Kan. 765, 44 Pac. 996, 35 L. R. A. 258; Brignac v. Pac. Mut. L. Ins. Co., 112 La., 574, 36 So. 595, 66 L. R. A. 322. 5 Hart V. Modern Woodmen of Amer., 60 Kan. 678, 57 Pac. 936, 72 Am. St. R. 380; Robson v. United Order of Forest- ers, 93 Minn. 24, 100 N. W. 381; Van Slooten V. Fidelity & Cas. Co., 78 App. Div. 527, 79 N. Y. Supp. 608. For ef- fect of incontestable clause, see § 378. As to by-law adopting suicide provision after issuance of certificate, see Tisch v. Protected Home Circle, 72 Ohio St. 233, 74 N. E. 188. 6 Knights of Golden Rule v. Ains- worth, 71 Ala. 436, 46 Am. Rep. 332; Equitable Life Assur. Soc. v. Paterson. 41 Ga. 338, 5 Am. Rep. 535 (overdose of laudanum during intoxication); Seitzinger v. Modern Woodmen, 204 111. 58, 68 N. E. 478. 510 MEANING AND LEGAL EFFECT OF LIFE POLICY tory," ^ or where the phraseology is "if the insured die by his own hand or act." ' In all such cases, to relieve the company from lia- bility it must appear that the insured killed himself by design; otherwise the main purpose of the contract would be seriously im- paired.^ The obvious intent of the insured in taking out insurance is to secure payment in the event of accidental death. It cannot, therefore, readily be presumed that he would have accepted the policy, if for self-destruction, purely accidental, there could be no recovery. The reasonable purpose of the insured must be invoked to aid in the interpretation where the company chooses the lan- guage.'' Accordingly the company is still Hable though the insured unintentional!}^ kill himself by the act of his own hand, for instance, while using a gun or other dangerous instrument,^ or in administer- ing poison to himself; ^ or by the act of his own feet in falling over a precipice; since his unconscious act of killing is not to be regarded as his act at all within the fair meaning of the policy. On the other hand, the contract of insurance being one of the highest good faith, it is obvious that if the insured take out a policy with the guilty purpose of committing suicide the contract is void ah initio, though it contain no suicide clause and no express refer- ence to self-destruction.'^ So also if the beneficiaries intentionally compass the death of the insured after the policy is taken out they can recover nothing upon it,* and for the same reason, by the over- whelming weight of authority, both in the decisions and in the text-books, where the policy is payable to the insured or to his estate, i Knights Templar v. Crayton, 209 ^Gooding v. U. S. Life Ins. Co., 46 111. 550, 557, 70 N. E. 1066 (accidental 111. App. 307. shooting of gun); Penfold v. Universal ^ Mich. Mut. L. Ins. Co. v. Naugle, Life Ins. Co., 85 N. Y. 317, 39 Am. Rep 660 (overdose of poisonous medicine) 2 Brignac v. Pac. Mid. L. Ins. Co. 112 La. 574, 36 So. 595, 66 L. R. A 322 (taking morphine without intent 108 Iowa, li7, 78 N. W. 826; Smith to kill, no defense); Courtemanche \ Supreme Court, 136 Mich. 30, 98 N. W carbolic acid to frighten his wife) Clement v. Supreme Lodge, 113 Tenn 130 Ind. 79, 29 N. E. 393; Mut. Life Ins. Co. V. Wiswell, 56 Kan. 765, 44 Pac. 996, 35 L. R. A. 258. ''Parker v. Des Moines Life Assoc, V. National Ben. Soc., 123 N. Y. 85, 25 N. E. 197,9L. R. A. 616. 749, 64 L. R. A. 668 (insured took s ]\t y. Mut. Life Ins. Co. v. Arm- strong, 117 U. S. 591, 6 S. Ct. 877; Prince of Wales, etc., A.^soc. v. Palmer, 40 81 S. ^^. 1249 (took morphine with 25 Beav. 605; Clmvcr v. Mut. Reserve probable knowledge of fatal result). Fund L. Assoc. (1892), 1 Q. B. 147 3Mauch V. Supreme Tribe. 100 App. (Mrs. Maybrick, beneficiarv, was con- iJiv. 49, 91 N. Y. Supn 367; Grand. victed of murdering her husband). In ^^fon ^'- I'^orne^-'an, 10 Kan. Apn. such cases there is a resulting tr'st in 5/7 63 Pac. 292; Moore v. North- favor of the estate of the insured, the •■7;,.°?- ^ Assoc, sujyra.: Supreme Lodge V. Men'- Phitlips V. Louisiana Eq. Life Ins. hausen, 209 111. 277, 70 N. E 567 65 Co.,26La. Ann. 404,21 Am. Rep. 549. L. R. A. 508, 101 Am. St. R. 239; SUICIDE 511 though there be no express exemption from Hability for suicide, intentional self-destruction by the insured, if sane, vitiates the con- tract.^ Thus in an interesting case in the United States Supreme Court, although the insured, one Runk, had warranted and agreed in the apphcation, ''I will not die by my own act, whether sane or insane," etc., nevertheless as the company had omitted to attach the appli- cation to the policy as provided for by the Pennsylvania statute the warranty could not be considered as part of the contract or admitted in evidence, and therefore the question arose as though the contract had been altogether silent on the subject of suicide. There was no finding by the jury that the insured had taken out the policy in suit with the purpose of committing suicide. Their only finding was that Runk was sane when he committed the act. He had misap- propriated large sums of money belonging to his friends and relatives, and believed that out of the half million dollars of insurance on his life which he was carrying his obligations would be paid. The court held that the death of the assured, if directly and intentionally caused by himself, when in sound mind, was not a risk intended to be covered, or which could legally have been covered by the policies in suit.^ Schmidt v. Northern Life Assn., 112 Iowa, 41, 83 N. W. 800, 51 L. R. A. 141 , 84 Am. St. R. 323; A^ Y. Life Ins. Co. V. Davis, 96 Va. 737, 32 S. E. 475, 44 L. R. A. 305. i Ritter v. Mut. Life Ins. Co., 169 U. S. 139, 18 S. Ct. 300, 42 L. Ed. 693. The conclusion is put upon two grounds, good faith and public policy. An agreement to insure intentional self- destruction would be void, Knights Templar v. Jarman, 187 U. S. 197, 23 S. Ct. 108, approves Ritter case; Mut. Life Ins. Co. v. Kelly, 114 Fed. 268; Supreme Commandery v. Ainstcorth, 71 Ala. 436, 46 Am. Rep. 332; Supreme Lodge v. Kidscher, 72 111. App. 462; Monneii v. Ancient Order, 114 Ky. 950, 72 S. W. 288; Hatch v. Mvt. Life Ins. Co., 120 Mass. 550, 552; Shipman v. Protected Home Circle, 174 N. Y. 398, 67 N. E. 83, 63 L. R. A. 347; Hall v. Mvt. Res. Fund L. Assoc, 19 Pa. Super. Ct. 31 (1902); Hartman v. Key- stone Ins. Co., 21 Pa. St. 466; Cleaver V, Mid. Res. Fund L. Assoc. (1892), 1 Q. B. 147; Amicable Soc. v. Bolland, 4 Bligh (N. S.), 194, 211; Moore v. Woolsey, 4 Ell. & Bl. 243, 254. And see Patterson v. National Premium Mut. L. I. Co., 100 Wis. 118, 75 N. W. 980, 42 L. R. A. 253, 69 Am. St. R. 899 (in which the court concludes that the doctrine of the Ritter case on the merits "is well-nigh irresistible"). 2 Ritter v. Mut. Life Ins. Co., 169 U. S. 139, 18 S. Ct. 300, 42 L. Ed. 693. The court held as follows: "If the as- sured understood what he was doing, and the consequences of his act or acts, to himself as well as to others — in other words, if he understood, as a man of sound mind would, the conse- quences to follow from his contem- plated suicide, to himself, his char- acter, his family and others, and was able to comprehend the wrongfulness of what he was about to do, as a sane man would, then he is to be regarded as sane. In the case of fire insurance it is well settled that although a pol- icy, in the usual form, indemnifying against loss by fire, may cover a loss attributable merely to the negligence or carelessness of the insured, unaf- fected by fraud or design, it will not cover a destruction of the property by the willful act of the assured himself in 512 MEANING AND LEGAL EFFECT OF LIFE POLICY Opposed to this rule will be found two or three text-writers, supported by a few dicta from opinions of judges in cases where the point was not involved.^ And the Nebraska court states the general principle of its preference broadly in the following terms: "Suicide will not defeat a recovery upon a contract of life insurance or a mutual benefit certificate, not procured by the insured with the intention of committing suicide, unless the contract so provides in express terms. ^ If, however, the interest in the policy is vested in third parties as beneficiaries, and the contract was entered into in good faith, the subsequent guilty act of self-destruction by the insured will not vitiate it to the prejudice of the beneficiaries, in the absence of a suicide clause.^ It is indeed a serious matter to allow an insurance company to retain premiums of a lifetime without making any return, and as between the innocent beneficiaries and the company the contract may well be enforced in such a case in the absence of a suicide clause; ^ but apparently upon grounds of public policy the setting fire to it, not for the purpose of avoiding a peril of a worse kind but with the intention of simply effecting its destruction. Much more should it be held that it is not contemplated by a policy taken out by the person whose life is insured and stipulating for the payment of a named sum to himself, his executors, administrators or as- signs, that the company should be lia- ble, if his death was intentionally caused by himself when in sound mind. When the policy is silent as to suicide, it is to be taken that the subject of the insurance, that is, the life of the as- sured, shall not be intentionally and directly, with whatever motive, de- stroyed by him when in sound mind. To hold otherwise is to say that the occurrence of the event upon the hap- pening of which the company under- took to pay, was intended to be left to his option. That view is against the very essence of the contract. A con- tract, the tendency of which is to en- danger the public interests or injuri- ously affect the public good, or which is subversive of sound morality, ought neyer to receive the sanction of a court of justice or be made the foundation of its judgment." 1 Supreme Conclave v. Miles, 92 Md. 613, 628, 48 Atl. 845, 84 Am. St. R. 528; Robson v. United Order, 93 Minn. 24, 100 N. W. 381; Morton v. Supreme Council, 100 Mo. App. 76, 73 S. W. 259. Opinion of Judge Collins in Campbell v. Supreme Conclave, 66 N. J. L. 274, 49 Atl. 550, 54 L. R. A. 576 (whether majority of court agreed with Judge Collins or Judge Garretson does not appear). 2 Lange v. Royal Highlanders (Neb., 1907), HON. W. 1110. 3 Supreme Council v. Pels, 110 111. App. 409, aff'd 209 111. 33, 70 N. E. 697; Parker v. Des Moines Life Assn., 108 Iowa, 117, 78 N. W. 826; Seiler v. Economic L. Assn., 105 Iowa, 87, 43 L. R. A. 537, 74 N. W. 941; Supreme Conclave I. 0. of H. v. Miles, 92 Md. 613, 48 Atl. 845, 84 Am. St. R. 528; Robson V. United Order, 93 Minn. 24, 100 N. W. 381; Morton v. Supreme Council, 100 Mo. App. 76, 73 S. W. 259; Campbell v. Supreme Conclave, 66 N^ J. L. 274, 49 Atl. 550, 54 L. R. A. 576; Supreme Lodge v. Underwood (Neb.), 92 N. W. 1051; Darrow v. Family Fund Societu, 116 N. Y. 537, 22 N. E. 1093, 6 L. R. A. 495, 15 Am. St. R. 430; Fitch v. American Popu- lar Life Ins. Co , 59 N. Y. 557, 17 Am. Rep. 372; Morris v. State Mut. L. Assur. Co., 183 Pa. St. 563, 39 Atl. 52, 41 W. N. C. 353; Patterson v. Natural Premium Mut. L. Ins. Co., 100 Wis. 118, 42 L. R. A. 253, 75 N. W 980, 69 Am. St. R. 899. * Campbell v. Supreme Conclave, 66 SUICIDE 513 federal courts extend the implied ground of exception or forfeiture even to innocent beneficiaries with vested interests, although there be no suicide clause in the policy.^ While other courts, applying a criterion, not altogether satisfactory, find in the act of suicide, an implied ground for forfeiting the rights of beneficiaries, provided only the contract be such that the power of making new appoint- ments is reserved to the insured.' As before shown such power is reserved in the case of most contracts of insurance in beneficiary associations.^ The majority of the courts, however, make no dis- tinction in this regard between beneficiaries designated in the ordi- nary life policy and beneficiaries designated in the contract of the mutual beneficiary association or fraternal society.'^ And the view of the majority is doubtless supported by the better reason. Con- siderations based upon good faith towards the company and the welfare of the public would seem to apply in very much the same degree to the one class of beneficiaries as to the other. There- fore where the company has inserted no suicide clause in its contract the rights of both classes of innocent beneficiaries may well be left undisturbed by the subsequent suicidal act of the insured over which they had no control.^ The foregoing discussion leads up to the recognized rule, that in N. J. L. 274, and other cases supra; Moore v. Woolsey, 28 Eng. L. & Eq. 248. 1 Mutual Life Ins. Co. v. Kelhi, 114 Fed. 268, 275; Hophins v. North- uestern Life Assur. Co., 94 Fed. 729, aff'd 99 Fed. 199, 40 C. C. A. 1. And see Ritter case, supra, 169 U. S. 139, 18 S. Ct. 300. ^ Mooney v. Ancient Order, 114 Ky. 950, 72 S! W. 288; Shipman v. Pro- tected Home Circle, 174 N. Y. 398, 67 N. E. 83, 63 L. R. A. 347; Weber v. Supreme Tent, 172 N. Y. 490, 65 N. E. 258, 92 Am. St. R. 753. So also the Massachusetts court seems to regard suicide by a sane man as a risk which is not covered by the pohcy, vmless the appointment of the beneficiary is irrev- ocable, Davis V. Supreme Council (Mass., 1907), 81 N. E. 255. 3 See § 68, supra. * Supreme Conclave v. Miles, 92 Md. 613, 48 Atl. 845, 84 Am. St. R. 528; Robson V. United Order, 93 Minn. 24, 100 N. W. 381; Campbell v. Supreme Conclave, 66 N. J. L. 274, 49 Atl. 550, Darrow v. Family Fund Society, 116 N. Y. 537, 22 N. E. 1093, G L. R. A. 33 495, 15 Am. St. R. 430 (without dis- sent, but overruled by Shipman case, supra); Patterson v. National Prem. Mut. Life Ins. Co., 100 Wis. 118, 75 N. W. 980, 42 L. R. A. 253, 69 Am. St. R. 899 (approving the Darroiv ca.w). See list of authorities, 4 Cooley, Ins., 3226, 3227. And Rawson v. Mil. Mut. L. Ins. Co., 115 Wis. 641, 92 N. W. 378. 5 Supreme Conclave v. Miles, 92 Md. 613, 628, 48 Atl. 845, 84 Am. St. R. 528; Campbell v. Supreme Cojiclave, 66 N. J. L. 274, 49 Atl. 550; Darrow v. Family Fund Society, 116 N. Y. 537, 22 N. E. 1093, supra. A contingent vesting of rights in favor of a bene- ficiary and against the insured, the donor, is one thing. A vesting of rights as against the insurance com- pany, where the insured has made no neAv appointment of beneficiaries, is another thing, Patterson v. National Premium Life Ins. Co., 100 Wis. 118, 75 N. W. 980, 42 L. R. A. 253, 69 Am. St. R. 899 (if no new appointment has been made the rights of the benefi- ciaries are vested). 514 MEANING AND LEGAL EFFECT OF LIFE POLICY the absence of the words "sane or insane," in the suicide clause, self-killing by a man while non co7npos mentis will not forfeit his rights, or the rights of other beneficiaries named in his policy, pro- vided the insurance was taken out in good faith,^ since in that event an intelligent conscious intent, which alone constitutes the essence of the offense, is lacking.^ In other words, where the con- tract exemption from liability simply relates to self-destruction or death from suicide, without the additional phrase "sane or insane," the exception will not avail the insurers as a defense, if it appear that the insured was devoid of reason when he took his life, this conclu- sion being put upon the ground that an act beyond the conscious control of the insured is not to be regarded as his act at all but rather a misfortune befalling him.^ By the New York standard form of life insurance any restriction of liability on the part of the company for suicide is applicable only to suicide committed within one year after the issuance of the policy.^ § 368. Degree of Insanity Required to Save the Insurance. — As to the degree of insanity which will operate as an excuse to the in- sured to prevent the application of a suicide clause not containing the words "sane or insane," two rules in general have been laid down. The English, New York, and Massachusetts courts, and others, have adopted the view that to relieve from the suicide clause on the ground of insanity, the insured must have been so mentally dis- ordered as riot to understand that the act he committed would cause his death, or he must have committed it under the influence of some uncontrollable insane impulse. These courts hold that in order to escape forfeiture, it is not sufficient to show that he was unconscious merely of the moral obliquity of the act.^ But the United States Supreme Court and many others following its authority have with greater liberality to the assured defined the 1 Mut. Life Ins. Co. v. Terrij, 15 < See § 357, supra. Wall. 580, 21 L. Ed. 236. 5 Borradaile v. Hunter, 5 M. & G ^Shipman v. Ho77ie Circle, 174 N. Y. 639, 44 E. C. L. 335; Cooper v Mass. 398, 67 N. E. 83, 63 L. R. A. 347. Mut. Life Ins. Co., 102 Mass. 227, 3 bimilarly if insane beneficiary kill the Am. Rep. 451; Van Zandt v. Mutual insured the policy is not voided, Benefit Life Ins. Co., 55 N. Y 169, 14 Holdom V. Ancient Order, 159 111. 619, Am. Rep. 215; Weed v. Mut Res Ins 43 N. E. 772. Co., 70 N. Y. 561; Newton v. Mut. Ben. 3 Conn. Mut. Life Ins. Co. v. Akens, Life Ins. Co., 76 N. Y 426 32 Am 150 U. S. 468, 14 S. Ct. 155, 37 L. Ed. Rep. 335; Nimick v. Ins. Co , 3 Brewst. ^^.4?j ^^^ proper meaning of the (Pa.) 502; Hathaway v. National Life suicide clause, where the words "sane 7ns. Co., 48 Vt. 335; and see Equitable or insane" do not form a part of it is Life Assur. Soc. v. Paterson 41 Ga. traced historically at length in May 338, 5 Am. Rep. 535 on Ins. . ch. XV. SUICIDE AND SELF-DESTRUCTION, SANE OR INSANE, EXCEPTED 515 rule as follows: "This court on full consideration of the conflicting authorities upon that subject has repeatedly and uniformly held that such a provision, not containing the words 'sane or insane,' does not include a self-killing by an insane person, whether his unsoundness of mind is such as to prevent him from understanding the physical nature and consequences of his act or only such as to prevent him, while foreseeing and premeditating its physical conse- quences, from understanding its moral nature and aspect." ^ The distinction between these two rules of law is perhaps so metaphysical as to make it of somewhat questionable moment in many instances whether the jury is charged in terms of the one or in terms of the other; ^ but the Federal Supreme Court considers its rule as sounder in principle as well as simpler in application.^ § 369. Suicide and Self-destruction, Sane or Insane, Excepted. — To extend for their benefit the operation of the restriction, the insurers have generally added to the suicide clause the words "sane or insane," and with this addition the exemption covers all cases of intentional self-destruction.'* Under such an exception the insurers are relieved from responsibility unless the death of the insured is purely accidental.^ And it matters not whether the policy is pay- 1 Ace. Ins. Co. V. Crandal, 120 U. S. he knowing and intending that his 531; Bigelow v. Berkshire L. Ins. Co., 93 death shall be the result of his act, but U. S. 284, 19 Am. Rep. 628, note; when his reasoning faculties are so far Ritter v. 7ns. Co., 169 U. S. 139, 18 S. impaired that he is not able to under- Ct. 300, 42 L. Ed. 693; Mich. Mut. stand the moral character, the gen- Life Ins. Co. v. Naugle, 130 Ind. 79, eral nature, consequences, and effect 29 N. E. 393; Roval Arcanum, v. Pels, of the act he is about to commit, or 209 111. 33, 70 N. E. 697; Royal Circle v. when he is impelled thereto by an Achterrath, 204 111. 549, 558, 68 N. E. insane impulse which he has not the 492, 33 Ins. L. J. 20, 58 Cent. L. J. 128, power to resist, such death is not 63 L. R. A. 452,98 Am. St. R. 224; within the contemplation of the parties Grand Lodge I. 0. of M. A. v. Wieting, to the contract and the insurer is lia- 168 111. 408, 48 N. E. 59, 61 Am. St. ble," Mut. Life Ins. Co. v. Terry, 15 R. 123; Hart v. Modern Woodmen Wall. 580, 21 L. Ed. 236. of Amer., 60 Kan. 678, 57 Pac. 936, ^ Spruill v. Ins. Co., 120 N. C. 141, 72 Am. St. R. 380; Mut. Ben. Life 144, 29 S. E. 39. 7ns. Co. V. Daviess, 87 Ky. 541, 9 S. W. 3 Manhattan Life Ins. Co. v. Brough- 812; Knickerbocker Life Ins. Co. v. ton, 109 U. S. 121, 3 S. Ct. 99, 27 L. Peters, 42 Md. 414; Blackstone v. 7ns. Ed. 878. Co., 74 Mich. 592, 42 N. W. 156, 3 i Bigelow v. 7ns. Co., 93 U. S. 284, L. R. A. 486; Knapp v. Order of Pendo, 23 L. Ed. 918, in which the court says, 36 Wash. 601, 79 Pac. 209. Mr. Jus- p. 287, "nothing can be clearer than tice Hunt says: "If the assured, being that the words 'sane or insane' were in the possession of his ordinary rea- introduced for the purpose of except- soning faculties, from anger, pride, ing from the operation of the policy jealousy, or desire to escape from the any intended self-destruction, whether ills of life intentionally takes his own the insured was of sound mind or in a life, the proviso attaches, and there can state of insanity." be no recovery. If the death is caused ^ Moore v. 7ns. Co., 192 Mass. 468, by the voluntary act of the assured, 78 N. E. 488 ("it makes no difference 516 MEANING AND LEGAL EFFECT OF LIFE POLICT able to the insured or to his estate or to other designated bene- ficiaries, as, for instance, creditors. The voluntary suicidal act avoids the policy altogether.^ But to produce forfeiture of such a policy there must be something more than a mere accident; ^ there must be an intent, though not of necessity a rational intent, to commit the act of self-destruction. ^ Such intent would seem logically to involve at least some consciousness of the physical nature or con- sequences of the act and this seems to be the prevailing and better doctrine.'' Other cases seem to draw the distinction that there can be no recovery where the insured, while insane, commits the act of killing himself, though such act be done unconsciously and without knowl- edge even of its physical nature and consequence.^ But of this last rule it is by no means easy to make a satisfactory application. If, for example, a sane man drinks a fatal cup of poison when not know- ing that it is poison, the validity of his policy is not disturbed. The unexpected result is a mere accident or misfortune, which is doubt- less covered by the policy.® If, however, an insane man possessed what the state of mind was"); -De Gogorza v. Knickerbocker Life Inc. Co., 65 N. Y. 232; Sargeant v. Ins. Co., 189 Pa. St. 341, 41 Atl. 351 (policy void if insured killed himself by his own act, before incontestable period begins). 1 Ellinger v. Mutual Life Ins. Co. (1905), i K. B. 31. 2 Clarke v. Equitable Life Assur. Soc, 118 Fed. 374, 55 C. C. A. 200; Dennis v. Ins. Co., 84 Cal. 570, 24 Pac. 120; Soarth V. Security Mut. Life Ins. Co., 75 Iowa, 346, 349 (the exception "never was intended to include death by accident, as by taking poison by mistake, the accidental discharge of a gun or pistol held in the hands of the insured or the like"). 3 Union Cent. Life Ins. Co. v. Hollowell, 14 Ind. App. 611, 43 N. E. 277 (it need not be a deliberate intent). iBigelow v. Ins. Co., 93 U. S. 286, 23 L. Ed. 918; Jenkins v. National Union, 118 Ga. 587, 45 S. E. 449; Supreme Lodge v. Gelbke, 198 111. 365, 64 N. E. 1058 (there must be purpose to end life; but it need not be a ra- tional intent); Hart v. Modern Wood- men, 60 Kan. 678, 57 Pac. 936, 72 Am. St. R. 380; Supreme Council v. Heineman, 25 Ky. L. Rep. 1604, 78 S. W. 406 (enough mind to know th£it he was taking his life by poison); SprniU v. Northwestern Mvt. L. Imi. Co., 120 N. C. 141, 27 S. E. 39 ("there must be a physical intent," whatever that means); Sabin v. Union, 90 Mich. 177, 51 N W. 202 (insured hung him- self by a rope arranged by himself, in- tent was presumed); Streeter v. West. Union Mut. Life Ins. Co., 65 Mich. 199, 201, 31 N. W. 780, 8 Am. St. R. 883 (intentionally with a pistol); Sparks v. Indemnity Co., 61 Mo. App. 109 (intentionally with a razor). But see Ins. Co. v. McConkey, 127 U. S. 661, 8 S. Ct. 1360, 32 L. Ed. 308 (the court says: "either unintentionally or when insane," thus intimating that the intent of the insured if insane need not be shown); Latimer v. Sovereign Camp, 62 S. C. 145, 40 S. E. 155 (court equally divided). 5 Seitzinqer v. Modern Woodmen, 204 111. 58, 68 N. E. 478; Browerv. Supreme Lodge, 74 Mo. App. 495; Havnie v. Kniqhts Templars, 139 Mo. 416, 41 S. W. 461 ; Tritschler v. Kei'stone Mut. Ben. As.soc, 180 Pa. St. 205, 36 Atl. 734; Keefer v. Modern Woodmen, 203 Pa. St. i29. But see also Scarth v. Securitu Mut. Life Ins. Co., 75 Iowa, 346 (which, however, holds that an accident will not avoid); Billings v. Accident Ins. Co., 64 Vt. 78, 24 Atl. 656, 33 Am. St. R. 913, 17 L. R. A. 89. Scarth v. Security Mvt. Life Soc, 75 Iowa, 346, 39 N. W. 658; Brovm v. BURDEN OF PROOF— SUICIDE, INSANITY 517 of no csufficient mental power to discrimmate between what is poison and what is harmless, or to perceive that his act of drinking on the one occasion differs from his usual habit,, does the same thing, the phraseology of this last rule would seem to require a forfeiture of his insurance.' It is to be observed that the exercise of intent is a mental operation, and when the mental powers of the insured are abnormally deficient, or seriously disordered, the investigation of his intent is apt to produce uncertain results. In this last class of cases certain judges have perhaps laid undue stress upon the practical difficulty of estimating different degrees of insanity, and conscious- ness, and have thus been led to adopt a rule which might operate to relieve the company from liability in cases of purely accidental death. If, however, the destructive act be intended and its character be known b}^ the insured to be destructive, it is clear that neither an irresistible insane impulse,' nor ignorance and unconsciousness of the moral aspect of the act will afford any excuse to the insured or other beneficiary, where the suicide clause contains the phrase, "sane or insane." ^ § 370. Burden of Proof — Suicide, Insanity. — Neither suicide nor insanity will be presumed; therefore if the company sets up the defense of suicide, the burden of proof rests upon it, and if the facts are equally susceptible of either construction, it will be presumed that death was the result of an accident or natural cause and not of a wrongful intent.'* The issue, thus raised, is usually one of fact Sun Life Ins. Co. (Tenn.), 57 S. W. Daviess, 87 Ky. 541, 9 S. W. 812; 415, 51 L. R. A. 252. Streeter v. West. Union Mut. Life Ins. 1 Seitzinger v. Modern Woodmen, 204 Co., 65 Mich. 199, 31 N. W. 780, 8 Am. 111. 58, 68 N. E. 478 (the degree of in- St. R. 883; Sabin v. Union, 90 Mich. sanity thought to be immaterial. Act 177, 51 N. W. 202. A policy may ex- of killing without intent held to avoid pressly exclude accidents from in- the policy) ; Latimer y. Sovereign Camp juries, though unintentionally self- 62 S. C. 145, 40 S. E. 155 (the com- inflicted by the insured while insane, pany was expressly liable for acci- Blvnt v. Fidelity & Cas. Co., 145 Cal. dents; court equally divided on neces- 268, 78 Pac. 729. sity of intents ; Billinqn v. Ace. Ins. * Home Ben. Assoc, v. Sargent, 142 Co., 64 Vt. 78, 24 Atl. 656, 33 Am. St. U. S. 691, 12 S. Ct. 332, 35 L. Ed. 1160 R. 913, 17 L. R. A. 89 (the degree of (pistol); Travelers' Ins. v. McConkey, insanity thought to be immaterial). 127 U. S. 661, 8 S. Ct. 1360, 32 L. Ed. "i Bigelow v. Ins. Co., 93 U. S. 286. SOS; National Unionv. Fitz pair ick, 133 23 L." Ed. 918; Supreme Lodge v. Fed. 694; Stephenson v. Assoc, 108 Gelbke, 198 111. 365, 64 N. E. 1058; Iowa, 637, 79 N. W. 459; Carnes v. Manhattan Life Ins. Co. v. Beard, 112 Iowa State, etc., Assn., 106 Iowa, 281, Ky. 455, 66 S. W. 35. 76 N. W. 683, 68 Am. St. R. 306; 3 Bigelow v. Ins. Co., 93 U. S. 286, Furbush v. Maryland Cas. Co., 133 23 L. Ed. 918; HaH v. Modern Wood- Mich. 479, 95 N. W. 551; Laessig v. m^n, 60 Kan. 678, 57 Pac. 936, 72 Am. Travelers' Protection Assn., 169 Mo. St. R. 380; Mvf. Ben. Ufe Ins. Co. v. 272. 69 S. W. 469; Mallory v. Travel- 518 MEANING AND LEGAL EFFECT OF LIFE POLICY for the jury; ' but if the facts point only to one conclusion, it is error to submit the question to the jury.^ If, on the other hand, the plaintiff relies upon insanity of the insured as the excuse for self- destruction the burden rests upon the plaintiff to establish its exist- ence by a preponderance of evidence.^ The mere fact of suicide is not sufficient to prove insanity.^ lers' Im. Co., 47 N. Y. 52, 7 Am. Rep. 410. See also Knights Temp. & Mas. L. I. Co. V. Crayton, 209 lii. 550, 70 N. E. 1066; Rumhold v. Supreme Coun- cil, R. L., 206 111. 513, 69 N. E. 590; Union Casualty & Surety Co. v. God- dard, 25 Ky. Law R. "(1903) 1035, 76 S. W. 832. "The love of life is ordinarily a sufficient inducement for its preservation, and, in the absence of proof that death resulted from other than natural causes, suicide will not be presumed," Hale v. Life Ind. & Inv. Co., 61 Minn. 516, 519, 63 N. W. 1108, 52 Am. St. R. 616. Intentional self-destruction is contrary to the gen- eral conduct of mankind, Union Cas. & S. Co. V. Goddard, 25 Ky. Law R. 1035, 76 S. W. 832. The company must show that every reasonable hypothesis of accidental death is ex- cluded, Boynton v. Assoc, 105 La. 202, 29 So. 490, 52 L. R. A. 687. Upon evenly balanced testimony the law assumes innocence rather than crime, Walcott v. Ins. Co., 64 Vt. 221, 228, 24 Atl. 992, 33 Am. St. R. 923. Though suicide is not itself made a crime in America generally, but rather an illegal act, Ship>nan v. Protected Home Circle, 174 N. Y. 398, 67 N. E. 83, 63 L. R. A. 347; Grand Lodge v. Wieting, 168 111. 408. 1 Supreme Lodge v. Beck, 181 U. S. 49, 21 S. Ct. 532, 45 L. Ed. 741; Tack- man V. Brotherhood (Iowa, 1906), 106 N. W. 350 (insured was found hung by bridle from a peg) ; Harms v. Metropoli- tan Life Ins. Co., 67 App. Div. 139, 73 N. Y. Supp. 513. Opinions of ex- perts and others on the subject of sanity are often received, Grand Lodge V. Wieting, 168 111. 408. "^Supreme Tent v. King, 142 Fed. 678, 73 C. C. A. 678; Masonic Life Assn. V. Pollard (Ky., 1905), 89 S. W. 219 (shot himself before witnesses); Moore v. Ins. Co., 192 Mass. 468, 78 N. E. 488 (shot after writing a good- bye); Sovereign Camp v. Hruby, 70 Neb. 5, 96 N. W 998; Seybold. v. Su- preme Tent, 86 App. Div. 195, 83 N. Y. Supp. 149; Clemens v. Royal Neighbors, 14 N. Dak. 116, 103 N. W. 402; Agen v. Ins. Co., 105 Wis. 217, 80 N. W. 1020, 76 Am. St. R. 905. A letter or other declaration of intent by insured to commit the act is admissible in evidence, if reasonably contem- poraneous. Conn. Mut. Life Ins. Co. v. Hillmon, 145 U. S. 285, 295, 12 S. Ct. 909, 36 L. Ed. 706; Clemens v. Royal Neighbors (N. Dak., 1905), 103 N. W. 402. But the coroner's verdict in this country is not generally admissible, JEtna Life Ins. Co. v. Kaiser, 115 Ky. 539, 74 S. W. 203; Wasey v. Travelers' Ins. Co., 126 Mich. 119, 85 N. W. 459, Cox V. Royal Tribe, 42 Ore. 365, 71 Pac. 73, 60 L. R. A. 620, 95 Am. St. R. 752; Chambers v. Modern W. of A., 18 S. Dak. 173, 99 N. W. 1107; Fey v. Ins. Co., 120 Wis. 358, 98 N. W. 206. Contra at common law and U. S. Courts, Life Ins. Co. v. Vocke, 129 111. 557, 22 N. E. 467, 6 L. R. A. 65; Fletcher v. Sovereign Camp, 81 Miss. 249, 32 So. 923; Sharland v. Wash. Life Ins. Co., 101 Fed. 206, 41 C. C. A. 307. Declarations of conspirators are admissible, Conn. Mid. Life Ins. Co. v. Hillmon, 188 U. S. 208. Financial em- barrassment or other circumstances making suicide probable may be shown, Furbush v. Maryland Cas. Co., 131 Mich. 234, 91 N. W. 135, 100 Am. St. R. 605; Supreme Conclave v. Miles, 92 Md. 613, 48 Atl. 845, 84 Am. St. R. 528. Also large amounts of other in- surance subsisting, Elliott v. Des Moines Life Assn., 163 Mo. 132, 63 S. W. 400. 3 Travelers' Ins. Co. v. McConkey, 127 U. S. 661, 8 S. Ct. 1360, 32 I,, Ed. 308; Meacham v. N. Y. State M,utual Benefit Assn. , 120 N. Y. 237; McClure v. Mutual Life Ins. Co., 55 N. Y. 651. So also to prove a certain degree of in- sanitv, Dickerson v. 7ns. Co., 200 111. 270, 65 N. E. 694. Compare Roval Arcanum v. Pels, 209 111. 33, 70 N. E. 697. But see Schidtz v. Ins. Co. , 40 Ohio St. 217, 48 Am. Rep. 676. ^ Weed V. Mv(. Ben. Life hi». Co., BURDEN OF PKOOF—SUICIDE, INSANITY 519 Two late Minnesota cases on the subject of suicide, resting side by side in the reports, are instructive. The Western Life Indemnity Company, the defendant, insured the Ufe of Kornig by a poHcy which provided that there should be no recovery in case of death by suicide, intentional or unintentional, and whether deceased was sane or insane at the time. Kornig who had been living happily and in good health was found dead one afternoon from a bullet in his head, with a pistol in his hand, in a room in Minneapolis, which he had leased from a woman, the principal witness for the insurance company. This woman testified that she had gone to the room in answer to Kornig's complaint that it was not in order, that with- out a word he shot and wounded her and that she heard no second shot. The accuracy of this narrative was slightly impeached. She denied improper relations with Kornig. The court refused to dis- turb a verdict in favor of the widow. ^ Zearfoss had a polic}^ from the Switchmen's Union containing a clause exonerating the association in case of deliberate suicide. He lived with his family and on good terms. He stopped working as a switchman January 20, and took his pay. Two daj^s later he went for a spree to a lodging house near his home, kept by the Fishers, where he drank and played cards in the saloon at night, and took and occupied a bedroom above. He said he had had a little trouble in the family. The next evening about seven o'clock he was found dead in the bedroom, where a bottle with carbolic acid was also discovered. The post-mortem examination showed that the de- ceased had died from the effects of carbolic acid, but the surgeons testified that there were no burns apparent in his mouth or on his fingers. The proprietor of a neighboring drug store identified Zear- foss as without much doubt the man who had bought the acid, though the witness would not swear that he was sure of it. There 70 N. Y. 561. Colorado and Missouri 932, 16 C. C. A. 618, 32 U. S. App. 753, have adopted statutes that suicide will 30 L. R. A. 87. See Appendix, ch. I, not avail as a defense if the insurance for statutes. was taken out in good faith, Knights i Kornig v. Western Life Indemnity Templars v. Jarman, 187 U. S. 19?', 23 Co. (Minn., 1907), 112 N. W. 1039 S. Ct. 108, 47 L. Ed. 139; McDonald v. (when circumstantial evidence is re- Banl-ers' Life Assoc, 154 Mo. 618, 55 lied on, defendant must establish facts S. W. 999. See Logan v. Fidelity & Avhich preclude any reasonable hy- C. Co., 146 Mo. 114, 47 S. W. 948; pothesis of natural or accidental Christian v. Connecticut Mid. L. Ins. death). .\nd see Pythias Knights v. Co., 143 Mo. 460, 45 S. W. 268; Beck, 181 U. S. 49, 21 S. Ct. 532, 45 Havnie v. Knights Templars' & M . L. L. Ed. 741 (head of insured blown I. Co., 139 Mo. 416, 41 S. W. 461; off by shot gun. He had gone to National Union v. Marlow, 74 Fed. neighbor's to induce his own wife to 775, 21 C. C. A. 89, 40 U. S. App. 95; return home. Issue of suicide for Mtna L. Ins. Co. v. Florida, 69 Fed. jxoiy). 520 MEAxNING AND LEGAL EFFECT OF LIFE POLICY was no evidence tending to show that the insured had been foully- dealt with. A verdict in favor of the widow was set aside by the court as unsupported by the evidence, the fair meaning of which was consistent only with an inference of deliberate suicide.^ In a New York case the company refused to pay the insurance upon the ground that the insured, Louise L. Buxton, had com- mitted suicide within a year after the policy was issued. Some time prior to her death the insured had an operation at St. Luke's Hospital and thereafter suffered from hemorrhages, but was discharged as cured about two weeks before her death. The evening before her death she came downstairs, appearing greatly excited and with hair somewhat disheveled. The next day she was found dead in her bed with both gas jets turned on but not lighted. There was no evi- dence tending to show that anyone had entered the room from the time the insured retired until she was found dead, or that the bed was in a position where she could read or that there had been a turning off and on of the gas supply from outside the room. By a divided court the judgment in favor of the plaintiff was reversed,^ § 37L Exception of Death by the Hands of Justice or in Viola- tion of Law. — Accident policies almost universally contain an ex- ception of injuries or death "in consequence of violation of law," or "while engaged in violation of law," or some similar clause; and life policies also not infrequently make an express exception of death by the hands of justice, or in violation of law, or of known violation of law. The decisions of the courts in the interpretation of this exception have often turned upon the particular phraseology of the clause.^ Crenshaw's certificate stipulated that, "if death is caused or superinduced at the hands of justice or in violation of or attempt 1 Zearfoss v. Switchmen's Union 2 White v. Prudential Ins. Co., 120 (Minn., 1907), 112 N. W. 1044 ("the App. Div. 260. The court said: "The ultimate fact is required to be proven law indulges in the presumption that a by a preponderance of evidence only, person will not take his own life, and and this rule is in no way affected by where the facts and circumstances are the subsidiary requirement that de- as consistent with death from negli- fendant must by the evidence exclude gence, by accident or homicide, as by eveiy other reasonable theory of ac- suicide, the presumption is against counting for the death"). In the last suicide. . . . This is a presumntion, two cases many recent authorities were however, which yields to evidence cited. And see Supreme Tent v. King, tending to show that death was self- 142 Fed. 678, 73 C. C. A. 349 (insured inflicted, and where no other reason- sick, depressed, in need of money, was able inference may be drawn from the found shot with revolver. When the evidence, it is the duty of the court to reasonable inference is irresistible, the direct a verdict upon the theory of court may withdraw the question of death by suicide." suicide tfom the jury). 3 gee also § 403. EXCEPTION OF DEATH BY THE HANDS OF JUSTICE 521 to violate any criminal law," only a diminished amount would be payable. At the time of attempted or realized criminal relations between Crenshaw and another's wife, the husband, in a burst of indignation over the discovery, shot and killed the insured. The court, in perhaps a border-line decision, refused to find any defense in favor of the insurer, holding that the death was not caused or superinduced in violation, or attempted violation, of law within the meaning of the polic5^^ It has been held, however, by the Supreme Court of the United States,^ following the English House of Lords, ^ that even in the absence of any such exemption the rights of the insured, or his assigns, or other representatives, would be forfeited upon his con- viction and execution for crime. This conclusion also finds sup- port in the prevailing view regarding the effect of suicide upon the rights of the insured and his estate.^ And in analogy to the rules respecting suicide, where death at the hands of justice is not ex- pressly excepted in the policy, the vested rights of third parties, innocent beneficiaries designated as payees, would seem to be left undisturbed by the legal sentence and execution of the insured for crime, many courts considering that any question of public policy on the one side is more than offset by the injustice of depriving innocent survivors of their natural means of subsistence, and of leaving with the insurance company both the premiums and the insurance money .^ This view is further strengthened by the cases, English and American, which infer a resulting trust in favor of the estate of the insured where a designated beneficiary has forfeited his own rights by murdering the insured.^ 1 Supreme Lodge v. Crenshaw (Ga., courage false testimony relating to 1907), 58 S. E. 628. The court said, murder). And see Collins v. Met. Life "It is deducible, from the authorities, Ins. Co., 27 Pa Super. Ct. 345. that a stipulation of the character now 3 Amicable Soc. v. Bolland, 4 Bligh under consideration must be given a (N. S.), 194. reasonable construction, and that the ' See § 64, supra. liability of the company is not to be ^ McDonald v. Order of Triple Alli- discharged, unless the violation of the ance, 57 Mo. App. 87 (in the absence law consisted in an act of which the of express provision the law does not death of the insured was the reason- look at the cause of death); Campbell able and legitimate consequence;" cit- v. Supreme Conclave, 66 N. J. L. 274, ing Gatzman v. Conn. Mut. L.Ins. Co., 49 Atl. 550, 54 L. R. A. 576; Fitch v. 3 Hun (N. Y.), 515, and other cases. Am. Popular Life Ins. Co., 59 N. Y. 2 Burt V. his. Co., 187 U. S. 362, 23 557, 17 Am. Rep. 372; Moore v. Wool- S. Ct. 139, 47 L. Ed. 216 (court re- sey, 28 Eng. L. & Eq. 248, 4 El. & Bl. fused to admit evidence shoving that 243. And many cases cited in § 307, conviction was unjust, since there can supra. Compare also Collins v. Met. be no valid insurance against a mis- Life Ins. Co., 27 Pa. Super. Ct. 345 carriage of justice. Such insurance (void as to the estate of insured), might tend to discredit courts and en- ^ See § 64, supra. 522 MEANING AND LEGAL EFFECT OF LIFE POLICY But the doctrine of the federal courts, which with the Supreme Court is obiter dictum, seems to be that death by the hands of justice or by suicide is not a risk assumed by the company, although the policy purport to cover death from any cause, and that therefore the company is relieved of all liabilit}' to any class of beneficiaries for death from such a cause, in like manner as though the exception were express.^ Where, however, such a restrictive clause is in- serted in the contract, it will be enforced against all beneficiaries,^ by every court, in the absence of statutory provision to the con- trary. § 372. In Violation of Law. — Engaging in assault, robbery, mur- der and similar crimes of recognized gravity tends largely to in- crease the risk of death. Such occupations, therefore, may well be made the subject of exception to the insurer's liability. Thus death was held to be "in the known violation of the law" where the in- sured died within a few hours from wounds inflicted by the husband of a woman upon whom he was committing assault and battery.^ On the other hand, there are multitudinous laws including crimi- nal, civil, federal, state, and municipal, statutes and ordinances and many of them seem to have no relation to any question of hazard in connection with insurance. Accordingly the question presents itself, what is "a violation of law" within the fair intend- ment of this clause of the policy? The Massachusetts court in the leading case of Cluff v. Mutual Ben. Life Ins. Co.^ concluded that a similar clause, worded "in known violation of law," referred to known violation of criminal 1 Burt V. Ins. Co.. 187 U. S. 362, 23 Union Life Guards, 136 Mich. 416, 99 S. Ct. 139, 47 L. Ed. 216; Ritter v. N. W. 376; Davis v. Modern Woodmen, Mut. Life Ins. Co., 169 U. S. 139, 18 98 Mo. App. 713, 73 S. W. 923. But S. Ct. 300, 42 L. Ed. 693; Mut. Life insured may lawfully defend himself Ins. Co. V. Kelly, 114 Fed. 268. Com- against personal injury, Overton v. St. pare Lange v. Royal Highlanders (Neb., Louis Mut. Life Ins. Co., 39 Mo. 122, 1907), 110 N. W. 1110. 90 Am. Dec. 455. As to exception of 2 Breasted v. Farmers' Loan & Tr. injuries from fighting, see Coles v. Co., 8 N. Y. 299, 59 Am. Dec. 482. N. Y. Cas. Co., 87 App. Div. 41, 83 Burden of pleading and proving the N. Y. Supp. 1063; and see§ 403. breach is upon the company, Jones v. * 13 Allen (Mass.), 308, 99 Mass. 318. Ace. Assoc., 92 Iowa, 653, 61 N. W. And see Lehman v. Great Eastern Cas. 485 (visiting house of ill fame and carry- & Ind. Co., 7 App. Div. 424, 39 N. Y. ing concealed weapons. Policy not Supp. 912. aff'd 158 N. Y. 689, 53 N. e! avoided); Matthes v. Imperial Ace. 1127 (crossing railroad track at a place Assoc, 110 Io\Aa, 222, 81 N. W. 484. where persons were allowed to cross); 3 Bloom V. Franklin Life Ins. Co., 97 Harper v. Phcenix Ins. Co 18 Mo 109 Ind. 478, 49 Am. Rep. 469. See also 19 Mo. 506; Wolff v. Con7i. Mut. Life Prudential Life Ins. Co. v. Higbee, 22 Ins. Co., 5 Mo. App 236- Brown v Ky. L. R. 495, 57 S. W. 614; Payne v. Supreme Lodge, 83 Mo. App 633 SUICIDE NOT A CRIME 523 law. The New York court upon the same facts, in an action brought by an assignee of Cluff, refused to decicle whether violations of criminal law alone were included in the exception, the judges dif- fering in their views. ^ Both courts, however, found material issues of fact for the jury to' pass upon. In this case Cluff, the insured, attempted to unhitch and take forcible possession of the horses of Cox, his debtor, when they were in charge of Cox's son, who was driving them with a wagon. During, or just after, the trespass or assault, the son shot and killed Cluff with a pistol. Bad feeling had previously been engendered between the families which might have had influence in leading up to the shooting. The New York court, reversing a judgment obtained by the defendant, held it error to refuse to allow the jury to decide, whether the shooting was in con- sequence of the unlawful act of the insured, and whether the in- sured knew that it was unlawful. It is not easy to find a logical theory upon which this clause can be limited to violations of criminal law. Certainly any violation of law that substantially enhances the risk would seem to be contem- plated.^ A voluntary submission to illegal abortion is clearly a violation of criminal law.^ But to bring the casualty within the exception there must be some overt unlawful act committed in connection with it. A mere purpose or preparation to violate law is not enough.^ § 373. Suicide not a Crime. — Suicide at common law was a crime, i Bradley V. Mut. Ben. Life Ins. Co., to him; was refused admission and 45 N. Y. 422, 6 Am. Rep. 115. shot himself while in the water-closet, 2 Conboy v. Ace. Assoc., 17 Ind. App. perhaps accidentally, held, no forfeit- 62, 46 N. E. 363, 60 Am. St. R. 154 ure); Smith v. .Etna Life Ins. Co., 115 (seining in streams above tide water); Iowa, 217, 88 N. W. 368, 56 L. R. A. Bloom V. Ins. Co., 97 Ind. 478, 49 Am. 271, 91 Am. St. R. 153 (insured was Rep. 469; Bradley v. Ins. Co., 45 N. Y. making preparations to get off a train 422, supra. Getting pigeons from in motion); Johanns v. Nat. Ace. Soc, cupola seems no violation of Iowa 16 App. Div. 104, 45 N. Y. Supp. 117 Sunday law, Matthes v. Imperial Ace. (attempting to board moving street Assn., 110 Iowa, 222, 81 N. W. 484. car, is not standing on platform); Nor is riding a bicycle to a funeral a Cornxcell v. Frat. Ace. Assn., 6 N. D. violation of the Maine Sunday law, 201, 69 N. W. 191, 40 L. R. A. 437, 66 Eaton V. Atlas Ace. Ins. Co., 89 Me. Am. St. R. 601 (starting out to hunt 570, 36 Atl. 1048. prairie chickens in closed season is not 3 Weds V. Neiv En/jland Mut. Life within exception); Lehman v. Great Ins. Co., 191 Pa. St. 207, 43 Atl. 126, Eastern Cas. & Ind. Co., 7 App. Div. .53 L. R. A. 327, 71 Am. St. R. 763; 424, 39 N. Y. Supp. 912, aff'd 158 Hatch V. Ins. Co., 120 Mass. 550, 21 N. Y. 689, 53 N. E. 1127 (statute for- Am. Rep. 541. bade walking upon or along the track * Pythias Knights v. Beck, 181 U. S. insured was about to step upon it, but 49, 21 S. Ct. 532, 45 L. Ed. 741 (in- there was a crossing there, with ac- sured went to house of neighbor to quiescence of railroad company; held persuade or compel his wife to return no forfeiture). 524 MEANING AND LEGAL EFFECT OF LIFE POLICY but is not so defined in the statutes of most of the United States. In those states it is held, generally, that suicide is not a violation of law within the meaning of this clause of the policy.^ § 374. Death Must be Caused by Unlawful Act.— To effect for- feiture it is held that there must be some causative and reasonably contemporaneous connection between the violation of law and the ensuing death, or injury.^ For example, the policy is not avoided because the insured hap- pens to be engaged illegally in selling lottery tickets at the time when he is stricken with heart disease unconnected with his occu- pation;^ and if the insured is accidentally injured by a gun shot from a distance the company is not relieved because by chance he is in the act of violating a law against profane swearing,"* On the other hand, the insurer was held not liable when the insured met his death because of a collision that occurred during a horse race for- bidden by law.^ And where the insured while retreating was killed by a shot fired in provocation, caused by an affray that had ended, a judgment in favor of the insurer was sustained on the ground that if the acts of the insured were such as to produce in his slayer a high degree of passion, and while he was in such a state he shot and killed the insured, though perhaps unintentionally, the death was the natural consequence of the assault.*' So also where the insured in trying to escape shortly after committing robbery was shot by a police officer/ 1 Royal Circle v. Achterrath, 204 111. of law). There must be a causative 549, 68 N. E. 492, 63 L. R. A. 452, 98 connection between the unlawful act Am. St. R. 224; Kerr v. Assoc, 39 and the injury, Jones v. U. S. Mid. Minn. 174, 39 N. W. 312, 12 Am. St. R. Ace. Assn., 92 Iowa, 692, 61 N. W. 485. 631; Darrow v. Family Fund Soc, 116 3 Bradley v. Ins. Co., 45 N Y 422 N. Y. 537, 22 N. E. 1093, 6 L. R. A. supra. 495, 15 Am. St. R. 430 (suicide not a * Ace. Ins. Co. v. Bennett, 90 Tenn. crime); Shipman v. Home Circle, 174 256, 16 S. W. 723, 25 Am St R N. Y. 398, 67 N. E. 83, 63 L. R. A. 347 685. ' ' ' (but is said to be a wrongful act under » Travelers' Ins. Co v Seaver 19 N. Y. Pen. Code, § 172); Patterson v. Wall. 531, 22 L. Ed. 155 (insured Ins. Co., 100 Wis. 118, 75 N. W. 980, jumped down, became entangled in 42 L. R. A. 253, 69 Am. St. R. 899 reins and was dragged against a stone; (court applied the usual rule, though held, all one continuous transaction), suicide technically is a crime in that 6 Murray v. .V. V. Life Ins Co , 96 state). Defense of suicide is barred by N. Y. 614, 48 Am. Rep 658 the incontestable clause, § 382, infra. 7 Prudervtial Ins. Co. v. Halev 91 111 .n^;f#^^ AntvMs V. Bee'-, 181 U. S. Adp. 363. aff'd 189 III. 317, 59 N. E. 49, 21 S. Ct. 532, 45 L. Ed. 741; Conhov 545. But see Griffin v. Western Assn , li ^^'oa.^f^'': ^l ^"^- ^PP- 62, 46 20 Neb. 620, 31 N. W. 122, 57 Am. N. k.. 363, 60 Am St. R. 154; Ace. Ins. Rep. 848 (the phrase under considera- yoi\F'r'^k?^J^ao'^P^'^^^-'^- t'°" ^^'^S' "die while violating any 723, 25 Am. bt R._685 (attack upon law," held, that the insured who was the wife of another is known violation shot after robbing a bank waa not then AUTHORITY 01" AGENTS 525 § 375. Authority of Agents. — Agents not authorized to make, alter, or discharge this or any other contract in relation to the matter of this insurance, or to waive any forfeiture hereof, or to grant permits, or to receive for cash due for premiums anything but cash. The effect of this waiver clause has been heretofore discussed.* If such statements contained in the poUcy relating to lack of authority on the part of certain agents, and brought actually or constructively to the notice of the insured, are true, the insurer should have the benefit of them. But as shown under the discus- sion of waiver and estoppel the decisions of the various courts are not in harmony as to the effect of this and similar clauses, largely because the courts differ in their views as to the extent of the actual authority of such agents when acting for their prin- cipals. In a California case Iverson, the insured, warranted that he had never had paralysis. The soliciting agent of the defendant, at the time the application was signed b}^ Iverson, knew that he had had a stroke of paralysis. The ofhcers of the company had no knowl- edge of this. In the application was a stipulation that only the officers had authority to determine whether the policy should issue, and that no statements of the solicitor should be binding unless presented in writing to the officers. The court held that the issu- ance of the policy was not a waiver of the forfeiture, that the so- licitor's knowledge was not knowledge by the company and that the solicitor had no authority to waive the forfeiture. ^ The court adopted substantially the course of reasoning laid down in the famous federal case, which has heretofore been discussed at length,^ and which was cited with approval in its opinion together with other cases. On the other hand, in a later case, the South Carolina court, with the California case before it, takes the opposite view, and concludes that the knowledge of the solicitor, acquired in the course of his work for the company, is imputable to the company, no matter what the policy says. The applicant Rearden made a false answer in his application regarding his fainting fits, but the soliciting agent engaged in violating law); Supreme Ins. Co., 63 Vt. 437, 22 Atl. .530, 13 Lodqe V. Bradley, 73 Ark. 274, 83 S. W. L. R. A. 637, 25 Am. St. R. 773 (in- 10,55. 67 L. R. A. 770 (two judges dis- sured in returning from hunting on sentinp^); Utter v. Travelers' Ins. Co., Sunday slipped on frozen ground, held, 65 Mich. 545, 32 N. W. 812, 8 Am. St. comnanv was not liable). R. 913. In Prader v. Ace. A.-'sn., 95 i Ch. VIII. s^'vra. Iowa, 149, 63 N. W. 601 (illegal Sunday 2 Iverson v. Met. Life Ins. Co. (Cal., hunting was finished, and company 1907), 91 Pac. 609. was held liable). Compare Duran v. 3 See §§ 173, 174, supra. 526 MEANING AND LEGAL EFFECT OF LIFE POLICY knew the facts. The application provided that the company should not be bound by knowledge of the solicitor not contained therein. The court held that the company was estopped from setting up the breach of warranty.^ An agent employed to collect premiums has in general no ap- parent power to waive forfeitures, when the policy recites that certain officers alone have that power.^ And where a policy con- tains a stipulation that "payments of premiums to be recognized by the company must be entered at the time of payment in the premium receipt book belonging with this policy," one suing on the policy can show payments only by the book or by proving a suffi- cient reason for the absence of such entry.^ But on the other hand the Arkansas court decided, on the evi- dence before it, that a superintendent of agencies had actual au- thority to waive forfeitures and to accept past-due premiums, although the policy declared that such a result could be accom- plished only by a writing signed by the president or secre- tary.^ Though the policy provide that it shall not take effect until the first premium is paid at the home office or until it is paid in cash, nevertheless, it is held, that by authorizing the soliciting agent to make delivery of the policy the insurance company impliedly em- powers him to take a note or give credit for the first premium, provided the application does not negative his authority to do so.-^ But if it is provided in the application that the solicitor has no power to extend the time of payment or that the policy shall not be in force until the first premium is paid in cash, such provision, in most jurisdictions, will prevail in spite of the delivery of the policy by the solicitor.^ § 376. Errors in Age. — Any error made in understating the age of I Rearden V. State Mut. Life Ins. Co. 1907), 68 Atl. 31 ("by delivering a (S. C, 1908), 60 S. E. 1106 (here, how- poHcy, it imphedly ratifies the acts of ever, the solicitor affirmatively ad- the soliciting agent as to the payments vised the applicant that his fainting required to entitle the insured to the spells amounted to nothing). delivery"); Kilborn v. Prudential Ins ^Cayford v. Met. L. Ins. Co. (Cal. Co., 99 Minn. 276, 108 N W 861- App., 1907), 91 Pac. 266. Michigan Mut. Life Ins. Co. v. Hall, ^ McNicholas v. Prudentud Ins. Co., 60 111. App. 159; A^ Y. Life Ins. Co. v. 191 Mass. 304 (industrial insurance Greenlee (Ind. App., 1908) 84 N E with weekly payments). 1101. ' 4 Industrial Mut. Indem. Co. v. 8 Powell v. Prudential Ins Co (Ala Thompson (Ark., 1907), 104 S. W. 200. 1907), 45 So. 208; Russel v. Prudential ^Mutual Res. Life Ins. Co. v. Ins. Co., 176 N. Y. 178, 68 N E 252 Heidel, 161 Fed. 535 (cases cited); 98 Am. St. R. 656 (by a divided coiirt)! Lame v. A^. Y. Ufe Ins. Co. (N. H., And see § 359, supra. ASSIGNMENTS 527 the insured mil he adjusted by paying sux^h amount as the premiums paid would purchase at the table rate. This provision is more reasonable than a stipulation providing for absolute forfeiture in case of an error in stating the age.' The New York standard policies and others are worded, "if the age of the insured has been misstated, the amount payable hereunder shall be such as the premium paid would have purchased at the correct age.^ § 377. Assignments. — No assignment of this policy shall take effect until written notice thereof shall be given to the company. This provision, be it observed, does not prohibit an assignment of the policy,^ but only relieves the company from the obligation of recognizing it until written notice is served.^ The assignment without a compliance with the regulations of the company may nevertheless be operative as between the parties to it.^ It is desir- able that the insured should have the opportunity of making free commercial use of his life insurance as available property, for it may often be convenient to secure money, by loan or otherwise, upon it. Unlike the case of a fire policy, as before shown, a life policy was considered assignable at common law.^ And, by the better opin- ion, a policy of life insurance may be assigned or made payable to one who has no insurable interest, if the transaction is not a mere cover for a wager7 The demands of business quite outweigh the remote possibility that some unscrupulous assignee may succumb to the temptation of murdering or shortening the life of the in- 1 Singleton v. Prudential Life Ins. pany alone can take advantage of the Co., 11 App. Div. 403, 42 N. Y. Supp. requirement, Lee v. Murrell, 9 Ky. 446. Similar relief is sometimes af- L. R. 104. If policy so provide, an forded by statute, Sieverts v. A'at. Ben. assignment is of no force as against Assn., 95 Iowa, 710, 64 N. W. 671; the company, Moise v. Mut. Res. Fund Albert v. Mut. Life Ins. Co., 122 N. C. Assn., 45 La. Ann. 736, 13 So. 170; 92, 30 S. E. 327, 65 Am. St. R. 693. Corcoran v. Mut. Life Ins. Co., 179 Pa. But compare Sup. Council v. Bovle, 10 St. 132, 36 All. 203. Ind. App. 301, 37 N. E. 1105; Kabok v. * Colbum's Appeal, 74 Conn. 463, 51 Phoenix Mut. Life Ins. Co., 51 Hun, Atl. 139, 92 Am. St. R. 231; but com- 639, 4 N. Y. Supp. 718; Wiberg v. pare Hogue v. Minn. Packing & Pro. Minn. S. Relief Assn., 73 Minn. 297, 76 Co., infra, 59 Minn. 39, 60 N. W. 812. 'ii.W.37; Doll V. Prudential Ins. Co., 21 '^ He wins v. Baker, 161 Mass. 320. Pa. Super. Ct. 434. 37 N. E. 441; Hogue v. Minn. Packing 2 See § 353, supra. & Pro. Co., 59 Minn. 39, 60 N. W. 812; 3 If policy provide that it will be Kimball v. Lester, 43 App. Div. 27, 59 avoided by assignment without con- N. Y. Supp. 540, aff'd 167 N. Y. 570, sent of company the provision will be 60 N. E. it 13. enforced, Merrill v. New Eng. Mut. 6 See § 63, supra. Life Ins. Co., 103 Mass. 245, 4 Am. '' N. Y. Mut. Life Ins. Co. v. Arm- Rep. 548. But Iowa, for example, strong, 117 U. S. 591, 6 S. Ct. 877, 29 has statute, Crocker v. Hogin, 103 L. Ed. 997; Moore v. Chi. Guar. Furui Iowa, 243, 72 N. W. 411. The com- Life Soc, 178 111. 202, 52 N. E. 882; 528 MEANING AND LEGAL EFFECT OF LIFE POLICY sured for the sake of hastening payment of the insurance money.* Moreover, there would seem to be room for the operation of any such sinister designs regardless of whether the assignee has an in- surable interest. A creditor, for example, may be quite as strongly tempted, as the donee of a gift, to realize a prompt payment of the insurance upon the life of the assignor.^ Any one of those named as beneficiaries may in general assign his expectant or contingent interest, and the assignee will take the right to which he was entitled ; ^ but a member of a beneficiary society may not assign his certificate to one outside the classes of permitted beneficiaries.^ It has been held, however, that the society may waive the restriction.^ In the absence of restraining statutes a wife has a right to assign her interest in a policy.^ Many states have passed statutes designed Davis V. Brown, 159 Ind. 644, 65 N. E. 908; Milner v. Bowman, 119 Ind. 448, 454, 21 N. E. 1094, 5 L. R. A. 95; Steinback v. Diepenbrock, 158 N. Y. 24, 52 N. E. 662, 44 L. R. A. 417, 70 Am. St. R. 427; Schuckmann v. Hein- rich, 93 App. Div. 278, aff'd 182 N. Y. 538 (insured transferred to one who did not become his fiancee as he ex- pected); § 41, supra. This appears now to be the rule in the courts of New York, Ohio, Massachusetts, Illinois, Michigan, New Jersey, California, Minnesota, Connecticut, Louisiana, Rhode Island, Wisconsin, Nebraska, Tennessee, South Carolina, Mississippi, Maryland, and Indiana. While on grounds of supposed public policy the contrary view is entertained by the courts of the following states: Ala- bama, Kansas, Kentucky, Missouri, North Carolina, Pennsylvania, Texas, and Virginia, see list of states and de- cisions given in Gordon v. Ware Nat. Bank, 132 Fed. 444, 446-448. Contra, for example, Warnock v. Davis, 104 U. S. 775, 26 L. Ed. 924, and Cheeves v. Anders, 87 Tex. 287, 47 Am. St. R. 107, 28 S. W. 274 (limit of creditors' interest is amount of debt, interest thereon and expense of insurance; balance to go to estate of insured). With the majority must also be classed Georgia, Steele v. Gatlin, 115 Ga. 929, 42 S. E. 253, 59 L. R. A. 129; Morris v. Banking Co., 109 Ga. 12, 34 E. S. 378, 46 L. R. A. 506, and England, Re Turcan, L. R. 40 Ch. Div. 5. As to the views of the federal courts, see § 43, supra. 1 Cator v. Mut. Res. Fund Life Ass., 78 Md. 72, 26 Atl. 959 (different rule in fire insurance). 2 In general the validity of an assign- ment is governed by the law of place where it is made. Succession of Miller v. Man. Life Ins. Co., 110 La. 652, 34 So. 723; Robinson v. Hurst, 78 Md. 59, 26 Atl. 956, 20 L. R. A. 761, 44 Am. St. R. 266; Miller v. Campbell, 140 N. Y. 457, .35 N. E. 651. And see Conn. Mut. Life Ins. Co. v. Westervelt, 52 Conn. 586; Spencer v. Myers, 150 N. Y. 269, 44 N. E. 942, 34 L. R. A. 175, 55 Am. St. R. 675. 3 Conn. Mut. Life Ins. Co. v. Bald- win, 15 R. I. 106. The insured may assign his contingent interest in an endowment policy. Pierce v. Charter Oak Life Ins. Co., 138 Mass. 151; Miller v. Campbell, 140 N. Y. 457, 35 N. E. 651. See p. 80, note 1, supra. 4 Brierhj v. Equitable Aid Union, 170 Mass. 218, 220, 48 N. E. 1090, 64 Am. St. R. 297; Supreme Conclave v. Dailey, 61 N. J. Eq. 145, 47 Atl. 277. See §§ 68, 69, supra. ^ J arris v. Binkley, 206 111. 541, 69 N. E. 582; Coleman v. Anderson (Tex. Civ. App.), 82 S. W. 1057. See § 130. 6 Phoenix Mut. L. Ins. Co. v. Opper, 75 Conn. 295, 53 Atl. 586; Mente v. Townsend, 68 Ark. 391, 59 S. W. 41 (to secure debt of her husband); Herr V. Reinahl, 209 Pa. St. 483, 58 Atl. 862. Husband may assign his own interest in policy taken out in part for wife, though statute restrain her .Travelers' Ins. Co. V. Healey, 164 N. Y. 607, 58 N. E. 1093. ASSIGNMENTS 529 to secure to the wife and children of the insured the proceeds of his life insurance payable to them free from claims of creditors.^ Under such statutes it was held by the courts of New York and Wisconsin that it was the legislative intent to prohibit the wife altogether from assigning her interest; ^ but by subsequent statute in New York the wife may assign her interest with the written consent of the insured.^ In other jurisdictions it was held that the statutes protecting policies from creditors did not inferentially restrain an assignment by the wife of her interest.^ Policies are often pledged or assigned as collateral security for a loan,^ A mere pledge or deposit of a policy is not of itself an as- signment within the meaning of that term as used in the policy.® A transfer of a policy, where not prohibited by its terms, may be valid without any written assignment, either by way of gift,' or in return for a valuable consideration,* provided the policy be 1 See § 72, supra. 2 Eadie v. Slimmon, 26 N. Y. 9, 82 Am. Dec. 395; Brick v. Campbell, 122 N. Y. 337, 25 N. E. 493, 10 L. R. A. 259; Dannhauser v. Wallenstein, 169 N. Y. 199, 62 N. E. 160 (policy pay- able to husband's "legal representa- tives" is not for benefit of wife); Ellison V. Straio, 116 Wis. 207, 92 N. W. 1094. 3 L. 1896, c. 272, § 22, superseding earlier laws and construed in Kittel v. Domeyer, 175 N. Y. 205, 67 N. E. 433. See p. 80, note 1, supra. As to written consent of husband, see Anderson v. Goldsmidt, 103 N. Y. 617. 9 N. E. 495; Spencer v. Myers, 150 N. Y. 269, 44 N. E. 942, 34 L. R. A. 175, 55 Am. St. R. 675 (applies to policies of foreign companies); Sherman v. Allison, 77 App. Div. 49, 80 N. Y. Supp. 148, aff'd 177 N. Y. 574, 69 N. E. 1131 (husband and wife each executed a separate assignment); Milhous v. John- son, 51 Hun, 639, 4 N. Y. Supp. 199. If policy is matured the money due is subject to levy for wife's debt, other- wise not, Amberg v. Manhattan Life Ins. Co., 171 N. Y. 314, 63 N. E. 1111. *Mente v. Townsend, 68 Ark. 391, 59 S. W. 41; Wirqman v. Miller, 98 Ky. 620, 33 S. W. 937; Emerick v. CoaT-hy, 35 Md. 188; Baker v. Young, 47 Mo. 453. 5 Milt. Ben. Life Ins. Co. v. First Nat. Bank (Ky., 1902), 69 S. W. 1; Hurst v. Mut. Res. Fund, 78 Md. 59, 26 Ati. 956; Hirsch v. Mayer, 165 N. Y. 236. On payment of debt title to 34 policy again vests in assignor without formal reassignment, Alabama Gold Life Ins. Co. v. Garmany, 74 Ga. 51. But renewal of note will not cancel assignment of collateral, Kendall v. Eq. Life Assur. Soc, 171 Mass. 568, 51 N. E. 464; Corcoran v. A'. Y. Mut. L. Ins. Co., 183 Pa. St. 443, 39 Atl. 50. ^Griffey v. A'. Y. Cent. Ins. Co., 100 N. Y. 417, 3 N. E. .309, .53 Am. Rep. 202. Default by pledgor, Toplitz v. Bauer, 161 N. Y. 325, 55 N. E. 1059. As to rights of pledgee to realize on policy as collateral see Dungan v. Mut. Ben. Life Ins. Co., 46 Md. 469; Rathborne v. Hatch, 90 App. Div. 161, 85 N. Y. Supp 775; Palmer v. Mut. Life Ins. Co., 77 N. Y. Supp. 869, 38 Misc. 318; Bailey v. Am. Deposit & Loan Co., 52 App. Div. 402, 65 N. Y. Supp. 330; Manton v. Robinson, 19 R. I. 405, 37 Atl. 8. Purpose of assignment whether absolute or for collateral may be shown by parol, Kendall v. Equit- able Life Assur. Soc, 171 Mass. 568, 51 N. E. 464; Westbury v. Simmons, 57 S. C. 467, 35 S. E. 764. '^ Hani v. Gcrmania L. Ins. Co., 197 Pa. St. 276, 47 Atl. 200, 80 Am. St. R. 819; Opitz V. Karel, 118 Wis. 527, 95 N. W. 948, 62 L. R. A. 982, 99 Am. St. R. 1004. s Hewins v. Baker, 161 Mass. 320, 37 N. E. 441. No particular form of words is essential to the validity of an assignment of a policy, Ormond v. Conn. Mut. L. Ins. Co. (N. C, 1907), 58 S. E. 997. 530 MEANING AND LEGAL EFFECT OF LIFE POLICY delivered to the assignee with that intent. Likewise if the assign- ment or other proper evidence of the transfer is duly delivered to the assignee, it is not essential that the policy itself be delivered to him in order to convey an interest.^ So also the rights of an as- signee may become perfected without an actual delivery either of an assignment or of the policy itself.^ Where, with the consent of the insurers, an assignment has been consummated, this amounts to a new contract between the com- pany and the assignee.^ As to the past, however, the assignee sim- ply steps into the position of the assignor, and can only recover under the policy in case the assignor has not been guilty of any breach."* No one except the company can, in general, make objection to an assignment from the original insured,^ unless the policy is pay- able to other beneficiaries, who have a vested interest therein; ® and after the death of the insured, the interest in the policy be- comes a chose in action which can be assigned without consent of the insurers, and without regard to any provision of the policy which may forbid an assignment.'^ 1 McDonough v. ^trm Life Ins. Co., 38 Misc. (N. Y.) 625. 2 Richardson v. White, 167 Mass. 58, 44 N. E. 1072 (equitable assignment for money actually advanced); Janes V. Folk, 50 N. J. Eq. 468, 26 Atl. 138, 35 Am. St. R. 783 (declaration of trust by executor in favor of the estate). As to when an assignment without con- sideration or by way of gift becomes complete, see Colburn's Appeal, 74 Conn. 463, 51 Atl. 139, 92 Am. St. R. 231; Weaver v. Weaver, 182 111. 287, 55 N. E. 338, 74 Am. St. R. 173; A^. Y. Life Ins. Co. v. Flack, 3 Md. 341, 56 Am. Dec. 742; CocJcrell v. Cockrell, 79 Miss. 569, 31 So. 203; Kulp v. March, 181 Pa. St. 627, 37 Atl. 913, 59 Am. St. R. 687; Lard v. N. Y. Life Ins. Co., 95 Tex. 216, 66 S. W. 290, 56 L. R. A. 596, 93 Am. St. R. 927. Mere prom- ises to give, or statements as to pur- pose and intent do not establish com- pleted gifts, Re Webb's Estate, 49 Cal. 542; Williams v. Chamberlain, 165 111. 210, 46 N. E. 250. ^ Fogg v. Middlesex Mxd. Fire Ins. Co., 10 Cush. (Mass.) 337. The as- signee m.ay sue in his own name, Tremblay v. Ins. Co., 97 Me. 547, 55 Atl. 509, 94 Am. St. R. 521; Sovth. FeHilizer Co. v. Reames, 105 N. C. 283, 11 S. E. 467: Mut. Protection Ins Co. V. Hamilton, 37 Tenn. 269. Contra, Mut. L. Ins. Co. V. Allen, 113 111. App. 89, 96, aff'd 212 111. 134, 72 N. E. 200. How suit is to be brought is deter- mined by the law of the forum, Neder- land Life Ins. Co. v. Hall, 84 Fed. 278, 27 C. C. A. 390. 4 Leonard v. Charter Oak Life Ins, Co., 65 Conn. 529, 33 Atl. 511; Schmidt V. Northern Life Assn., 112 Iowa, 41, 83 N. W. 800, 51 L. R. A. 141, 84 Am. St. R. 323; Smith v. National Ben. Soc, 123 N. Y. 85, 25 N. E. 197, 9 L. R. A. 616; McQuillan v. Mut. Res. Fund Assn., 112 Wis. 665, 87 N. W. 1069, 56 L. R. A. 233, 88 Am. St. R. 986. ^ Leinkauf v. Caiman, 110 N. Y. 50. A measure of damage to a beneficiary whose vested rights have been invaded is cost of replacing policy in a sound company, Keyser v. Mut. Res. Fund L. Assoc, 60 App. Div. (N. Y.) 297, 70 N. Y. Supp. 32. Compare Mut. L. Ins. Co. V. Allen, 212 111. 134, 72 N. E. 200; Quinn v. Suvreme Council, 99 Tenn. 80, 41 S. W. 343. And see Top- litz V. Bauer, 161 N. Y. 325, 55 N. E. 1059. 6 Robinson v. Duvall, 79 Ky. 83, 43 Am. Rep. 208; Tremblay v. /Etna Life Ins. Co., 97 Me. 547, 55 Atl. 509, 94 Am. St. R. 521. 7 Hall V. Dorchester Mut. Fire In*. INCONTESTABLE CLtUSE 531 § 378. Incontestable Clause.— This policy, after two years, mil be incontestable, except for non-payment of premium. To win popular favor the life insurance contract must be made attractive. After the death of the insured it is often difficult for the surviving beneficiary to produce competent testimony with which to meet charges of breach of warranty or fraud, then for the first time advanced by the insurer. The company is very apt to claim in its pleading that a breach of warranty involves also dis- honesty on the part of the insured. However groundless and in- excusable the charge, if made and insisted upon, the issue must always be fought out in court before the insurance money can be collected. It is obviously a matter of public policy that widow, children, or dependents should not be deluded with a mere chose in action in place of available means of support upon decease of the breadwinner. Remove all fear of lawsuits and the soliciting agent finds that his business is prosperous. Most of the regular life companies, therefore, advertise and insert in their policies as a conspicuous feature the incontestable clause, and public welfare is clearly on the side of its full enforcement.^ This clause is somewhat analogous to a short statute of limita- tion or' repose. By it the company declares in effect, that within the period named it will undertake to make any desired and need- ful investigation into the circumstances and good faith of the as- sured, and that if within that period no action has been taken by it to rescind the contract, or according to some policies ^ if no breach has occurred within that period, thereafter the policy shall be paid without litigation.^ Co., Ill Mass. 53, 15 Am. Rep. 1; policy, the period again runs from date Mellen v. Hamilton Fire Ins. Co., 17 of reinstatement, Teeter v. United L. N. Y. 609. /n.s. Assoc, 159 N. Y. 411,54 N. E. 72. 1 Two years is not always named as And see A ustin v. Mut. Res. Fund the period. Some policies name one Assn., 132 Fed. 555. year; some three, some five. Occa- ^ Kelley v. Mut. Life Ins. Co., 109 sionally one is incontestable from its Fed. 56. date. The New York standard life ^Wright v. Mid. Ben. Life Assn., 118 policies provide, "The policy shall N. Y. 237, 23 N. E. 186, 16 Am. St. R. here provide that it shall be incon- 749, 6 L. R. A. 731 ("it is in the nature testable, except for non-payment of of and serves a similar purpose as premiums, either from its date or after statutes of limitation and repose, the one or two years." Some incontest- wisdom of which is apparent to all able clauses specify other exceptions reasonable minds); Bates v. United besides non-payment of premiums; for Life Ins. Assn., 68 Hun, 144, 52 N. Y. instance, misstatements as to age, St. R. 86, 22 N. Y. Supp. 626, aff 'd 142 fraud in procurement, change to for- N. Y. 677, 37 N. E. 824; Clements v. bidden employment, sojourning in for- Ins. Co., 101 Tenn. 22, 46 S. W. 561, bidden regions, etc. As to representa- 42 L. R. A. 247, 70 Am. St. R. 650. tions inducing reinstatement of lap.sed And see Wheelton v. Hardisty, 8 El. & 532 MEANING AND LEGAL EFFECT OF LIFE POLICY Notwithstanding the incontestable clause, however, the claim- ant must furnish proofs of death as stipulated by the policy, and institute any action on the policy within the period limited, if there be a limit prescribed, since the clause is not aimed at remedies or provisions to be complied with by the claimant after death of the insured.^ The incontestable clause within its own phraseology usually contemplates payment of premiums as a condition precedent to any right of recovery on the policy,^ and such a proviso is reason- able, and quite consonant with the liberal purpose of the clause. § 379. Same Subject — Policy Procured by Fraud. — By some au- thorities the contention is made that if the underwriter can show that the policy was procured from him by fraud, he should be re- lieved from his waiver of defense as contained in the incontestable clause:^ the argument being that a stipulation induced by fraud should be held inoperative, but this line of reasoning is based upon doubtful premises, and certainly is not available where the incon- testable clause is provided by legislative enactment. The insured, neither in the Welch case, 108 Iowa, 224, nor in the Holden case, 191 Mass. 153, nor in any other case cited in this and the following section, framed this clause or fraudulently induced the life insurance companies to adopt it. Either by compulsion of statute, or of their own volition and to subserve their own inter- ests, the insurers have inserted the provision in the policy with the manifest purpose of inducing the insured to believe that if the premiums are all paid and the claim presented with due formality, payment of the insurance money will promptly follow upon maturity of the contract without complication or litigation of any sort. The companies preparing the terms of their engagement deliberately concluded to make no exception of fraud, and so far as they are concerned are entitled to the benefit of no such omitted restriction. Courts do not coerce defendants into setting up defenses founded upon allegations of fraud. It is always optional with a defendant El. 232. Many states have statutes Co. v. Walton, 25 Ohio Cir. Ct. 587, providing for an equitable adjustment. As to misstatements relating to as;e, where there has l)een misstatement of see Bradu v. Prudential Ins. Co., 168 age, Appendix, eh. I. Pa. St. 645, 32 Atl. 102; Doll v, Pru- ^Mass. Ben. Life As.'^ur. Soc. v. dentinl In.s. Co., 21 Pa. ?>xiver. Ct. 434. Robinson, 104 Ga. 256, .30 S. E. 918; ^ Welch v. /n.s. Co., 108 Iowa, 224, Brady v. Ins. Co., 168 Pa. St. 645, 32 78 N. W 853, 50 L. R. A. 774 (holding Atl. 102. that clause making policy incontest- ^Schmertzv. U. S. Life Ins. Co., 118 able from its date would not cover Fed. 250, 55 C. C. A. 104; Vetter v. fraud). Contra, Union Cent. Life Ins. Mass. Nat. Life Assn., 29 App. Div. Co v. Fox, 106 Tenn. 347,61 S. W. 62, 72. 51 N, Y. Supp 393; Met. Life Ins. 82 Am St, R. 885. INCONTESTABLE CLAUSE— POLICY PROCURED BY FRAUD 533 to waive such a defense. Apparently the right of waiver may be exercised prior to the action as well as at the time of pleading. The fraud of the insured in procuring a policy does not vitiate the contract. It merely renders it voidable at the insurer's option, but the right to take advantage of this option may be abandoned by the insurer. Has he abandoned it by the clause in question? Two pertinent and distinct questions are presented for the deter- mination of the courts in connection with this subject; first, what does the language of the clause fairly mean? second, if it is so worded as to include fraud, is the provision so far opposed to public policy as to be void to that extent? The answer to the first question is clear. Fraud when not among the exceptions is covered.^ In dis- posing of the second question, the courts have very generally con- curred that the clause is not invalid though intended to cover fraud, and that the company is not excused from payment because of fraud in procuring the policy, or for breach of warranty, intentional or unintentional, provided it seeks no relief until after the expiration of the period of limitation specified in its contract.^ One court, however, has decided that a suit in chancery for rescission of the contract on the ground of fraud would lie if brought by the com- pany in the lifetime of the assured and within a reasonable time.^ In an Illinois case the company claimed that the insured had made false and fraudulent misrepresentations as to his health, inducing it to take the risk, but the policy provided that it should be incon- testable after one year if the premiums were duly paid. When the insured died, the policy had been running more than three years and the premiums had been paid. The court held that the company set up no defense, and affirmed judgment for the plaintiff.'* 1 Mutual Res. Fund Life Assn. v. N. W. 980, 42 L. R. A. 253, 69 Am. St. Austin, 142 Fed. 398, 73 C. C. A. 498. R. 899; McQuillan v. Mut. Res. Fund 2 Wright v. Mut. Ben. L. Assn., 118 L. A.ssn., 112 Wis. 665, 88 N. W. 925, N. Y. 237, 23 N. E. 186, 16 Am. St. R. 87 N. W. 1069. It is sufficient for the 749, 6 L. R. A. 731; Mass. Ben. Life company to begin suit for relief within Assn. V. Robinson, 104 Ga. 256, 30 the period, John Hancock Mut. Life S. E. 919, 42 L. R. A. 261; Roiml Circle Ins. Co. v. Houpt, 113 Fed. 572. V. Achterrath, 204 111. 549, 68 N. E. 3 .V Y. Life Ins. Co. v. Weaver, 114 492, 63 L. R. A. 452, 98 Am. St. R. Ky. 295, 70 S. W. 629. If the clause 224; Goodu-in v. Prudential L. Ins. Co.. expressly excepts fraud, the company 97 Iowa, 234, 66 N. W. 157, 32 L. R. A. may then set up actual but not con- 473, 59 Am. St. R. 411; Murraif v. structive fraud in defense, Northwest- State Mid. Life Ins. Co., 22 R. I. 524, em Mut. Life Ins. Co. v. Montgomery, 48 Atl. 800, 53 L. R. A. 742; Clement v. 116 Ga. 799, 43 S. E. 79; Kline v. Nat. Ins. Co., 101 Tenn. 22, 46 S. W. 561. Ben. Assn., Ill Ind. 462, 11 N. E. 620, 42 L. R. A. 247, 70 Am. St. R. 650; 60 Am. Rep. 703; Met. Life Ins. Co. v. Franklin Ins. Co. v. Villeneuve, 25 Walton, 25 Ohio Cir. Ct. 587. Tex. Civ. App. 356, 60 S. W. 1014; * Flanigan v. Federal Life Ins. Co. PaUerscm v. Ins. Co., 100 Wis. 118. 75 (111., Dec, 1907), 83 N, E. 178. 534 MEANING AND LEGAL EFFECT OF LIFE POLICY § 380. Incontestabi<^ from Date — Policy Procured by Fraud.— Certain courts, while adhering to the prevailing rule in those cases where the polic}^ giw-'g. the insurer a year or other specified period for investigation, have held that, in spite of an incontestable clause the insuicr may show in defense that the issuance of the policy was induced by fraud on the part of the insured, in those cases where the clause runs from date of the contract. This conclusion is based on considerations of public po.Ucy.^ It would seem, however, that the weight of public intereK"^t rest? in the other scale. The insurer makes whatever examination ke chooses to make before closing his engagement and command;:; niCihods of getting at the material facts with a measure of thoroughness and accuracy. Now and again he may be seriously deceived by an applicant; nevertheless it is more important that millions of holiest families should purchase peace of mind and immunity from litigation than that insurer; should be given a longer and better opportunity of detecting audi taking advantage of occasional fraud which in. their own interest they have expressly agreed to ignore.^ The opposite rule is not without some reason to support it; but in practice it does not work well, since it large/y defeats the main purpose of the incontestable clause, and, despite tfuch a clause, puts it within the power of the insurer to throw eveiy claim, no matter how meritorious, into complicated litigation by a mere allegation of fraud in a pleading. Furthermore, it must be remembered that the almost universal custom is for the insurer to make hi? investiga- tion of the risk prior to the issuance of the policy, not during the year or years thereafter while the policy is running. It may also be observed that if the fraud complained of amounts to a felony of a misdemeanor, the interests of the public are protected under the penal code. § 381. Same Subject— Insurable Interest.— The necessity of an insurable interest is grounded upon considerations of public policy, and in spite of the incontestable clause, therefore, it must appear that the original insured had sufficient insurable interest in the life insured to sustain the contract.^ I Welch V. Ins. Co., 108 Iowa, 224, = Union Central L. Ins. Co v Fox, 78 N. W. 853, 50 L. R. A. 774; Reagan 106 Tenn. 347, 61 S. W 62 82 Am V. C/mon Mr/,'. L?7e 7ns. Co., 189 Mass. St. R. 885. Statutes authorize in- 555, 76 N. E. 217; Holden v. Prudential contestability from date, for example, L Ins. Co., 191 Mass. 153. Contra, New York standard life policies, Ins. Union Central L. Ins. Co. v. Fox, 106 L § 101 Tenn. 347, 61 S. W. 62, 82 Am. St. R. s Clement v. Ins. Co., 101 Tenn 22, 885. 46 S. W. 561, 42 L. R. A. 247, 70 Am. INCONTESTABLE FROM DATE — SUICIDE 535 § 382. Same Subject — Suicide. — By the general incontestable clause, according to the prevaihng rule, the company is obligated not to set up suicide as a defense and is bound by its stipulation.' Whether the Federal Supreme Court will give its approval to this doctrine is rendered uncertain by its recent decisions. Apparently it -will not do so.- That high court has, indeed; enforced and given wide range to the Missouri statute denying to the companies the defense of suicide; ^ and there is no intimation in the opinion that that statute is void as contravenmg public poUcy; •* but as the court declares "the same words may require a difterent construction when used in different documents as, for instance, in a contract and a statute." ^ Accordingly, it is clear that the federal courts will enforce the following provisions of the New York standard policies, as amended by the superintendent of insurance, " (The policy may here provide for restrictions of liability by reason of travel, occupation, change of residence and suicide. These restrictions must be applicable only to cases where the act of the insured provided against occurs within one year after the issuance of the policj'.) Incontestability. — (The policy shall here provide that it shall be incontestable, except for non-payment of premiums either from its date or after one or two years)." The suicide and incontestable clauses may be so worded that effect can be given to both as harmonious and independent provisions.^ St. R. 650 (the assignment was a mere 2 RUter v. Ins. Co., 169 U. S. 139, cover for a wager); Andil v. Ins. Co. 18 S. Ct. 300, 42 L. Ed. 693 (inten- (1899), A. C. 604 (no insurable interest tional self-destruction by a sane man within Canada Code). But see Wright not a risk insured against); Burt v. V. Ben. Assn., 118 N. Y. 237, 23 N. E. Ins. Co., 187 U. S. 362, 23 S. Gt. 139, 186, 6 L. R. A. 731, 16 Am. St. R. 749. 47 L. Ed. 216 (death by legal execu- i Mut. Life Ins. Co. V.Kelly, ll4Fed. tion for crime not a risk insured 268; Goodwin v. Assurance Assn., 97 against). Iowa, 226, 66 N. W. 157, 32 L. R. A. 3 Knights Templars v. Jarman, 187 473, 59 Am. St. R. 411; Royal Circle v. U. S. 197, 23 S. Ct. 108, 47 L. Ed. 139. Ac/i^erm/^, 204 111. 549, 68 N. E. 492, * Supreme Court v. Updegraff, 68 63 L. R. A. 452, 98 Am. St. R. 224; Kan. 474, 75 Pac. 477, 478. Supreme CouH v. Updegraff, 68 Kan. ^ Knights Templars v. Jarman, 187 474, 75 Pac. 477; Sun Life Ins. Co. v. U. S. 201, supra. Taylor, 108 Ky. 408, 56 S. W. 668, 94 e Starck v. Union Cent. Life Ins. Co., Am. St. R. 383; Mareck v. Life Assn., 134 Pa. St. 45, 19 Atl. 703, 7 L. R. A. 62 Minn. 39, 64 N. W. 68, 54 Am. St. 576, 19 Am. St. R. 674; Childress v. R. 613; Holland v. Chosen Friends, 54 Fraternal Union of Am., 113 Tenn. N. J. L. 490; Simpson v. Ins. Co., 115 252, 82 S. W. 832 (a smaller amount N. C. 393, 20 S. E. 517; Mut. Res. Fund payable in case of suicide, and clauses L. Assn. V. Payne (Tex. Civ. App.), 32 held to be independent and both en- S W. 1063; Patterson v. Ins. Co., 100 forceable). So also Hall v. Mut. Res. Wis. 118. 75 N. W. 980, 42 L. R. A. Fund L. Assn., 19 Pa. Super. Ct. 31. 253. 69 Am. St. R. 899. But see §371, But see Mareck v. Mut. Res. Fund tupra Assoc, 62 Minn. 39, 64 N. W. 68, 54 j'dG MKANING AND i.EGAL EFFJHCT OF LIFE FOLICY § 383. Same Subject — Death at Hands of Justice. — If the general incontestable clause bars the insurance company from setting up in defense the act of suicide, even when committed by a sane man, it is difficult to discover any sufficient reason for allowing the com- pany to except from its application, the death of the insured by legal sentence and execution for crime. The act of suicide, it may often be shown, is committed with the express purpose of hastening pay- ment of the insurance money; whereas it rarely appears that the in- sured is actuated by any thought of insurance on his own life when persuaded to commit crime. So far as innocent beneficiaries are concerned the reasons for allowing them to take their insurance money are no stronger in case of suicide than in the case of legal execution; and so far as the insurance company is concerned it shows no equity in its own favor in either case inasmuch as it has expressly contracted by the clause in question to raise no such defense. When it comes to any question of public policy, it should be ob- served that whatever rule of construction may be applied by the court, one part}^ or the other to the contract is V)ound to be bene- fited pecuniarily b}^ such premature and enforced death of the in- sured — either the company by a forfeiture of the policy with reten- tion of the premiums already paid ; or the beneficiaries by speedier maturity of the policy. Where beneficiaries, as well as insurer, are in no wise responsible for hastening the date of maturity, it is not altogether clear, that in disregard of the express terms of the con- tract the insurer should be so unexpectedly favored, and the bene- ficiaries so heavily penalized. Premiums are often paid for many years, and at great sacrifice, a sacrifice felt, perhaps, by all the mem- bers of the household. Before leaving the insurance moneys with the company and depriving innocent widows and children of their natu- ral means of support, in violation of the terms of the contract, the courts must be convinced that the general welfare of the community will thereby be promoted. Accordingly it is not surprising that the drift of opinion in the state courts is in the direction of extending the operation of the incontestable clause to the fullest protection of innocent beneficiaries.' Am. St. R. 613; Simpson v. Life Inn. Union Cent. Life Ins. Co., 187 U. S. Co., 115 N. C. 393, 20 S. E. 517. 362, 23 S. Ct. 139, 47 L. Ed. 216; ^Siin Life Ins. Co. v. Taylor, 108 Collins v. Met. Life Ins. Co., 27 Pa. Ky. 408, 56 S. W. 668, 94 Am. St. R. Super. Ct. 353. 383; § 379, supra. But see Burt v. CHAPTER XVIII The Accident Policy § 384. Introductory. — Accident insurance is a branch of life in- surance, and is governed by the same general principles of law.^ The accident policy illustrates conspicuously, on the one hand, the disposition of the insurers to narrow liability by the addition of restrictive clauses,' and, on the other hand, the determination of the courts to hold the company to the principal obligation of the contract by evading exceptions which are unreasonably inconsistent with the main purpose of the contract."'' 1 State V. Federal Investment Co. , 48 Minn. 110, 50 N. W. 1028. And the statutes, applicable to life, apply, also, to accident insurance, Maryland Cas. Co. V. Gehrmann, 96 Md. 634, 54 Atl. 678 (by statute warranty must be materially or fraudulently false to avoid); Loqan v. Fidelity & Cas. Co., 146 -Mo. 114, 47 S. W. 948 (suicide no defense); Pickett v. Pac. Mut. Life Ins. Co., 144 Pa. St. 79, 22 Atl. 871, 13 L. R. A. 661, 27 Am. St. R. 618; Zim.mer v. Cent. Ace. Ins. Co.. 207 Pa. St. 472, 56 Atl. 1003; unless the contrary appears from the wording of the statute, Standard L. d: A. Ins. Co. V. Carroll, 86 Fed. 567, 30 C. C. A. 253, 41 L. R. A. 194. The Massachu- setts court holds that neither health nor accident insurance can be incorporated in a life policy as a subsidiary feature, ^tna Life Ins. Co. v. Hardison (Mass., 1908), 84 N. E. 407. The doctrines of warranty and liberal rule of construc- tion, of course, apply to accident in- surance, for example, the warranty as to sound health, French v. Fideliti/ & Cas. Co. (Wis., 1908), 115 N. W. 869; U. S. Health & Ace. Ins. Co. v. Bennett (Ky., 1907), 105 S. W. 433 (statute); warranty as to amount of weekly in- come, Heintz v. Continental Cas. Co., 121 App. Div. (N. Y.) 75. But in the following case under the liberal statute of Kentucky an overstatement of earnings was held immaterial. ,FJna Life Ins. Co. v. Claypool (Kv.. 1908) [ 107 S. W. 325. The doctrine of waiver applies to accident insurance, thus where the agent of the insurer knew the true age of the insured, Crawford v. Travelers' Ins. Co. (Ky., 1907), 99 S. W. 963; or knew that the insured was crippled. Standard Life & Ace. Ins. Co. V. Holloioay (Ky.), 7i: S. W. 796. 2 For list of such restrictive clauses, see Travelers' Ins. Co. v. McConkey, 127 U. S. 661, 8 S. Ct. 1360, 32 L. Ed. 308. But the accident companies in their more recent forms of policies are coming to realize the wisdom of show-, ing greater liberality to the assured. An older form of policy issued by the Travelers' Ins. Co., containing numer- ous restrictions, is selected for this chapter as a convenient model for consideration. 3 Metropolitan Ace. Assn. v. Froi- land, 161 111. 30, 43 N. E. 766, 52 Am. St. R. 359. To construe otherwise would well-nigh destroy the value of the contract to the insured, /Etna Life Ins. Co. V. Hicks, 23 Tex. Civ. App. 74, 56 S. W. 87. Probable intent of the parties is the test in construing the meaning of the contract, Lovelace V. Travelers' Protective A., 126 Mo. 104, 28 S. W. 877, 30 L. R. A. 209; United States Mnt. A. A. v. Newman, 84 Va. 52, 58, 3 S. E. 805. Strict construc- tion is applied against the company. Doubt resolved in favor of the insurer!, Globe Ace. I. Co. v. Gerisch, 163 111. 625. 54 Am. St. R. 486; Peterson v. 537] oijN MEANING AND LEGAL EFFECT . Co., 16 iJ. S. App. 290, 22 L. R. A. 620; 158 Fed. 1. To similar effect is the Raihray, etc., Ace. Assn. v. Coadv, English case of Scarr v. General Ace. 80 111. App. 563; Modern Woodmen Ass. Corp. (1904), 1 K. B. 387. There Assn. V. Shryock, 54 Neb. 250, 74 the policy covered bodily injuries N. W. 607, 39L. R. A. 826. caused by "violent, accidental, ex- ^ jEtna Life Ins. Co. v. Fitzgerald, ternal and visible means." The as- 544 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY And where the insured died of septica-mia after an operation for appendicitis, the court decided that the death was due to disease and not to external, violent and accidental means. ^ In the controversy over McCormack's policy, the question arose, whether his death was the result of his fall, or his fall the result of his death. On the trial, evidence was received tending to show that the assured by his condition and habit of life was predisposed to an attack of apoplexy. He was driving a buggy in the city of St. Paul. While his horse was on a walk, and while he was putting on his gloves, he reached forward, apparently to gather up the reins, and at that instant the buggy bumped against an obstruction. The assured fell forward, struck his head against the pavement and died within a few minutes. Conflicting expert testimony was received as to the cause of death. The court concluded that the case was one for the jury. 2 Where, however, it appears that the death or injury was caused by an accident, the burden then rests on the insurer to show that the accident happened by reason of something that was excepted from the provisions of the policy, and not on the insured to af- firmatively show that the accident did not occur by reason of any or all of the exceptions incorporated therein.^ § 387. Sole and Proximate Cause. — Independently of all other causes. By the last section it was shown that unless the injury is effected by accidental means it does not come within the reach of the policy; but every injury must be the result of a combination of circum- stances which in a sense may be termed contributing causes. And where the injury is the result of an accidental occurrence, acting sured had a weak and unhealthy heart, his legs together, separated his knees, though he was not aware of the fact. leaned forward, and made a grab at the He attempted to eject a drunken man marble, and in doing so wrenched his from his master's premises. In conse- knee. The contention of the plain- quence of the physical exertion needed tiff's coimsel was that, as the plaintiff for this purpose a dilatation of the did not mean to get into a position in heart was set up which caused the which he might wrench his knee, there death of the insured. There was no was something accidental. The court slip or fall or blow. The drunken man held the contention sound, Hamb'n v. offered only passive resistance. The Croivn Accidental Ins. Co. (1893), 1 insured pushed or pulled him exactly Q. B. 750. as he intended to do. The court held ' Herdic v. Maryland Cas. Co., 146 that the injury was not sustained by Fed. 396. accidental means. In another English 2 McCornmck v. Illinois C. Men's case, the insured was stooping forward Ass., 159 Fed. 114. to pick up a marble dropped bv a cliild 'Starr v. Ai!t7io Life Ins Co., 45 as it rolled from him. He stood witli Wash. 128, 87 Par. 1119. SOLE AND PROXIMATE CAUSE 545 conjointly or contemporaneously with one or more causes expressly excepted by the terms of the policy, like disease, for example, the question whether the insurer is liable or exonerated is not always easy of solution.* So far as any sanction of law is concerned there is no reason why the accident policy may not be framed to cover bodily disability, or even death, arising from accidental sickness; ^ and most sickness is of that character.^ The ordinary accident policy, however, specifi- cally excepts disease and various other causes of injury,'* and it is incumbent upon the court to determine under what circumstances the casualty insured against can be fairly considered the sole and proximate cause of the injury. The policy provision that the injury contemplated must be ef- fected by the specified means, "independently of all other causes," if understood literally, is so unreasonable and repugnant to the main purpose of the contract,^ that the courts construe it very strictly against the insurers, and sometimes really seem to disregard it altogether.^ Thus, though the policy excepted death arising from fits, acting directly or jointly with accidental injury, the insurance w'as held to cover a case where the insured was seized with a fit and fell under the wheels of an engine which caused his death.''' And likewise the federal court regarded drowning as the sole and proxi- mate cause of death unless the other cause, a fainting fit, would have produced the injury in the absence of water.^ Accordingly, by the prevailing rule, where a disease follows and is induced by the accident, as a natural, or inevitable consequence, the accident is re- garded the sole and proximate cause of the injury or death.^ And 1 Freeman v. Mercantile Ace. Assn., St. R. 560 (where kidney was ruptured 156 Mass. 351, 30 N. E. 1013, 17 by an accidental fall which might not L. R. A. 753. Compare doctrine of have produced rupture except for proximate cause in marine insurance, diseased condition of kidney). §§437-442, infra; in fire insurance, ^ Lawrence v. Accidental Ins. Co., 7 §§ 231, 278, supra. Q. B. D. 216; Fitton v. Accidental 2 The ordinary life insurance policy Death Ins. Co., 17 C. B. (N. S.) 122; does not cover non-fatal injuries. Winspear v. Ins. Co., 6 Q. B. D. 42 3 Accident companies now often offer (insured seized with a fit, fell into the health insurance, that is, indemnity river and was drowned). for loss from temporary or permanent » Mfrs. Ace. Indem. Co. v. Dorgan, disablement arising from sickness. See 58 Fed. 945, 7 C. C. A. 581, 16 U. S. health clause in Appendix, ch. II. App. 290, 22 L. R. A. 620. < See §396, infra. ^Western Commercial Travelers' Assn. 5Mna Life Ins. Co. v. Hicks, 23 v. Smith, 85 Fed. 401, 56 U. S. App. Tex. Civ. App. 74, 56 S. W. 87. 393, 29 C. C. A. 223, 40 L. R. A. 653 6 It is held that the words of the (blood poisoning resulting from acci- exception refer to proximate and di- dental chafing of toe by new shoe); rect and not to remote causes. Fetter Delaney v. Modern Ace. Club, 121 v. Fidelity & Cas. Co., 174 Mo. 256, Iowa, 528, 97 N. W. 91; Travelers' Ins. 73 S. W. 592, 61 L. R. A. 459, 97 Am. Co. v. Hunter, 30 Tex. Civ. App. 489, 35 546 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY even where before the accident the insured is afflicted with a disease which may have remotely contributed to the injury, the courts attribute the injury to the accident as the sole and proximate or predominant cause, unless such a construction would do violence to the unmistakable import of the language employed.^ But where disease is unmistakably excepted from the chain of causation, the rule may be modified.' Accordingly it seems clear, that whether the cooperating cause is antecedent or subsequent to the accident, the courts are astute to regard the peril insured against as the proximate and sole cause of the injury. George C. French, a passenger conductor, had an accident policy 70 S. W. 798 (accident caused rheu- matism which in turn caused death); Half V. American Masonic Ace. Assn., 86 Wis. 518, 57 N. W. 366. See many cases § 396. Where an ac'^'ident pro- duced a weakened condition of the system, from which cold and pneu- monia resulted, it was held that the whole chain of events was caused by the accident as a proximate cause, Isitt V. Railway Passengers' Assur. Co., L. R. 22 Q. B. D. .504. Within the same principle of law was classed an accident which caused physical in- juries which, in turn, resulted in apoplexy and death, National Benefit Assn. V. Grauman, 107 Ind. 288, 7 N. E. 233. And in another case, al- though the policy expressly excepted "injuries from taking poison in any manner," the Illinois court allowed a recovery for death from an overdose of laudanum taken by mistake, Mid. Ace. Asso. V. Tuggle, 1.38 111. 428, 28 N. E. 1066. Contra, Hill v. Ins. Co., 22 Hun (N. Y.), 187. 1 Freeman v. Mercantile Ace. Assn., 156 Mass. 351, 30 N. E. 1013, 17 L. R. A. 753 (fatal peritonitis induced by a fall. Insured had previously had same disease). In the last case the court said: "Where different forces and con- ditions concur in producing- a result, it is often difficult to determine which is properly to be considered the cause, and in dealing with such cases the maxim causa proximo, non remoia speetatur is applied. But this does not mean that the cause or condition which is nearest in time or space to the result is necessarily to be deemed the proxi- mate cause. It means that the law will not go farther back in the line of causation than to find the active, efficient, procuring cause, of which the event under consideration is a natural and probable consequence in view of the existing circumstances and condi- tions. The law does not consider the cause of causes beyond seeking the efficient predominant cause which, following it no farther than those con- sequences that might have been an- ticipated as not unlikely to result from it, has produced the effect. An injury which might naturally produce death in a person of a certain temperament or state of health is the cause of his death if he dies by reason of it even if he would not have died if his tem- perament or previous health had been different; and this is so, as well when death comes through the medium of a disease directly induced by the injury, as when the injury immediately in- terrupts the vital processes." And see Mna Life Ins. Co. v. Hicks, 23 Tex. Civ. App. 74, 56 S. W. 87. ^ Smith V. Accident Ins. Co., 22 L. T. N. S. 861. See § ,396, infra. To avail the insurer the excepted risk must, in general, be the direct cause of the injury, Wilkinson v. Travelers' Ins. Co. (Tex. Civ. App., 1903), 72 S. W. 1016. As to the meaning of the clause that the insurance shall not extend "to any case except where the injuiy is the proximate and sole cause of the dis- ability or death," see Martin v. Mfrs. Ace. Indem. Co., 151 N. Y. 94, 45 N. E. 377 (if accidental wound coincidently causes blood poisoning, the insurer is liable). But see Bacon v. U. S. Mnt. Ace. Assn., 123 N. Y. 304, 25 N. E. 399, 20 Am. St. R. 748, 9 L. R. A. 61 7 (malignant pustule held, a disease though caused by contact with putrid matter). SOLE AND PROXIMATE CAUSE 547 for $5,000. He accidentally struck the lower part of his leg against a small iron safe in the baggage car, causing an abrasion of the skin. Septic poison set in, resulting in his death about two weeks after the happening of the accident. The court considered that the disease of blood poisoning was to be regarded as a mere incident or effect of the accidental injury and in no sense an independent cause; and held that the claimant was entitled to recover on the policy.^ In another case the insured, a railway employee, by being pre- cipitated against the edge of timbers, sustained severe bruises on his chest. Pneumonia or pleurisy, accompanied by a large ac- cumulation of pus resulted, and death followed about two months after the accident. The court held that the accident was to be regarded as the sole cause of death. ^ The federal court enforces the same doctrine. A policy sued on in that court insured "against disability or death resulting, directly and independently of all other causes, from bodily injuries sustained through external, violent and accidental means." The insured en- gaged in an altercation with another party, and struck him in the mouth, causing an abrasion on the hand of the insured. Blood poisoning set in, caused by microbes in the mouth of the person receiving the blow. The arm of the insured was amputated and death ensued. A recovery on the policy was sustained.^ In a Kansas case the policy insured Despain against the "effects of bodily injuries sustained during the term of this policy and caused solely by external, violent and accidental means," and provided that indemnity in the sum of $2,000 should be paid in case "the irre- ' French v. Fidelity & Cas. Co. (Wis., tive, efficient cause that sets in motion 1908), 115 N. W. 869 ("we must hold, a train of events which bring about a therefore, that where death results result without the intervention of any from disease which follows as a natu- force from a new and independent ral, though not the necessary, conse- source may be regarded as the direct quence of an accidental physical injury, and proximate cause. If the immedi- it is within the terms of the accident ate cause of death is a disease produced policy; the death being deemed the wholly by an injury, the death must be proximate result of the injury, and not attributable to the injury and not to of the disease as an independent the disease. In this case, the insured cause"; many cases cited). was a strong young man in vigorous 2 Continental Cas. Co. v. Colvin health at the time he received the in- (Kan., 1908). 95 Pac. 565. The court jury, and his condition thereafter was said: "An injury may be said to be the clearly traceable to the injury as the sole producing cause of death when it effective and producing cause thereof; stands out as the predominating factor it must, therefore, be held that the in the production of the result. It injury was the sole cause of his need not be so violent and vinilent as death." to have necessarily and inevitably pro- 3 Carroll v. Fidelity & Cas. Co., 137 duced the result regardless of all other Fed. 1012. And see Mardorf v. Ace circumstances and conditions. The ac- Injt. Cn. (1903), 1 K. B. 584, 54S MEANING AND LEGAL EFFECT OF ACCIDENT POLICY coverable loss of the sight of both eyes" should "result from such injuries within ninety days independently of all other causes;" and further provided that the insurance did not cover "anything of which the sole or secondary or contributory cause is, or which occurs while affected by, or under the influence of, bodily infirmity." During the life of the policy, Despain met with injuries which re- sulted in his total blindness, but some three months before the issuance of the policy his right eye had been so injured as to require medical treatment in a hospital for about a month. The severity and effect of this earlier wound were in dispute. The plaintiff's testimony tended to show that his right eye had been restored to its normal condition more than a month before the policy issued. The defendant's testimony tended to prove that the first injury was serious, its effects lasting, and likely to produce the destruction of the other eye within the course of a few months, through sym- pathetic inflammation. The court reversed the plaintiff's judg- ment on the ground that the issue should have been submitted to the jury as to whether the earlier injury was not the secondary or contributory cause of the blindness.^ § 388. Same Subject—" Immediately and Wholly Disable."— The word "immediately" in this clause is construed as referring to time and not to the proximate or remote character of the cause. ^ The meaning of the phrase, "wholly disable him from transacting any and every kind of business pertaining to his occupation," must depend largely upon the character of the occupation in which the insured is engaged.^ If he cannot safely and efficiently follow his usual employment,^ or can work only with great pain,^ though he ^PacificMut. Life Ins. Co. V. Despain 39 Atl. 1117. Twenty-four days held (Kan., 1908), 95 Pac. 580. to be too late, Vess v. United Benev. 2 Merrill v. Travelers' Ins. Co., 91 Soc, 120 Ga. 411, 47 S. E. 942. And Wis. 329, 64 N. W. 1039. See also see Marshall v. Commercial Trav. Mut. Pepperv.Order of Commercial Travelers, Ace. Assn., 170 N. Y. 434, 63 N. E. 113 Ky. 918, 69 S. W. 956. But see, 446; Rorick v. Railway, etc., Assn., 119 contra, Thera v. Ocean Ace. & G. Corp., Fed. 63, 55 C. C. A. 369; Aw. Ace. Ins. 32 Ont. 411; Pac. Mut. Life Ins. Co. v. Co. v. Norment, 91 Tenn. 1, 18 S. W. Branham, 34 Ind. App. 243, 70 N. E. 395. Insured, a doctor, was allowed 174. The disability, therefore, must to recover though he succeeded in visit- appear within a short time of the in- ing a patient the next day, but was jury, Preferred Mut. Ace. Assn. v. afterward confined to house, Brendan Jones, 60 111. App. 106; Haqadorn v. v. Traders' & Travelers' Ace. Co., 84 Masonic Eq. Aec. Assn., 59 App. Div. App. Div. 530, 82 N. Y. Supp. 860. 321, 69 N. Y. Supp. 831. But not 'iWolcott v. United Life, etc., Assn., necessarily at once, Williams v. Pre- 55 Hun (N. Y.), 98; Beach v. Supreme f erred Mut. Ace. Assn., 91 Ga. 698, Tent, 177 N. Y. 100, 69 N. E. 281. 17 S. E. 982. Three or four days held * U. S. Casualty Co. v. Hanson, 20 to be within the term "immediately," Colo. App. 393, 79 Pac. 176. Riiter v. Ace. Assn., 185 Pa. St. 90, ^ Hohn v. Interstate Cas. Co., 115 IMMEDIATELY AND WHOLLY DISABLE 549 may be able toTvisit his store or office and perform some trivial acts in connection with his business, he is held to be totally disabled.' The disability may be either physical or mental; ^ and the insurer is not to be relieved simply because the insured is able to perform light duties, or easy work disconnected with his usual occupation.-'' Death, how^ever, is not the kind of disability here referred to.'' Where the insured, after the accident, is able to take substantial management of his business though his efforts be accompanied by some pain and inconvenience, the insurer must be allowed the benefit of this restrictive clause.^ Mich. 79, 72 N. W. 1105. For exam- ple, intolerable discomfort from Avear- ing truss for hernia, McMahon v. (Su- preme Council, 54 Mo. App. 468. 1 Young v. 7ns. Co., 80 Me. 244, 13 Atl. 896 (merchant may be totally disabled though physically able to go to store and do inconsiderable acts especially if at risk of health); Lobdill V. Laboring Men's Mut. Aid Assn., 69 Minn. 14, 71 N. W. 696, 38 L. R. A. 537, 65 Am. St. R. 542 (if common prudence require him to desist from business). See also Mutual Ben. Assn. V. Nancarrow, 18 Colo. App. 274, 71 Pac. 423 (able to go to his physician's office); Turner v. Fidelity & C. Co., 112 Mich. 425, 70 N W. 898, 38 L. R. A. 529, 67 Am. St. R. 428; Faulhner v. Grand Legion, 63 Kan. 400, 65 Pac. 653 (partial paralysis of arm, shoulder, and side). Compare McKinley v. Bank- ers' Ace. Ins. Co., 106 Iowa, 81, 75 N. W. 670. 2 McMahon v. Supreme Council, 54 Mo. App. 468. For instance, lunacy, McCullough v. Expressmeri's, etc., Assn., 133 Pa. St. 142, 19 Atl. 355, 7 L. R. A. 210. 3 Starling v. Supreme Council, 108 Mich. 440, 66 N. W. 340, 62 Am. St. R. 709; Neill v. Order United Friends, 149 N. Y. 430, 44 N. E. 145, 52 Am. St. R. 738. A solicitor, confined to his room, though able to conduct correspondence was held ''totally disabled," Hooper v. Ins. Co., 5 H. Ar'N. 546, 7 Jur. (N. S.) 73, 6 H. & N. 839. But an attorney is not totally disabled by loss of use of one hand, U. S. Mut. Ace. Assn. v. Millard, 43 111. App. 148. A surgeon, not a pharmacist, is totally disabled by loss of a hand, Smith v. Supreme Lodge, 62 Kan. 75, 61 Pac. 416. Twisting of a knee was held to disable a physician "immediately, continu- ously and wholly" though he was able to go home in a street car, Brendan v. Traders' & Trav. Ace. Co., 84 App. Div. 530, 82 N. Y. Supp. 860. * Shaw V. Equitable Mut. Ace. Assn. (Neb., 1904), 99 N. W. 672. 5 Coad V. Travelers' Ins. Co., 61 Neb. 563, 85 N. W. 558. Not enough that insured, "a leather cutter and mer- chant," was disabled as a leather cut- ter only, Ford v. U. S., etc.. Relief Co., 148 Mass. 153, 19 N. E. 169, 1 L. R. A. 700 (insurer not liable). Loss of time may be the specified criterion to de- termine right of recovery, not total or permanent disability. Bean v. his. Co., 94 Cal. 581, 29 Pac. 1113; Pennington v. Pac. Mut. L. his. Co., 85 Iowa, 468, 52 N. W. 482, 39 Am. St. R. 306. The provision is worded in various terms, thus "disability from carrying on all kinds of business," Supreme Tent v. King, 79 111. App. 145; Lyon v. Assur. Co., 46 Iowa, 631; Rhodes v. Railway Pass. Ins. Co., 5 Lans. (N. Y.) 71; Supreme Tent v. Cox, 25 Tex. Civ. App. 366, 60 S. W. 971. "Total in- ability to labor," Bal. & O. Employees' R. Assn. V. Post, 122 Pa. St. 579, 15 Atl. 885, 2 L. R. A. 44, 9 Am. St. R. 147. Sometimes confinement to house is made a condition of the company's liabilitv. Dunning v. Mass., etc., Assn., 99 Me.'^390, 59 Atl. 535; Bishop v. U. S. Cas. Co.. 99 App. Div. 530, 91 N. Y. Supp. 176. But it ha.s been held that insured need not stay in the house con- tinuously, indeed, such a course might prevent recoverv, Hoffman v. Michi- gan, etc., Assn., 128 Mich. 323, 87 N. W. 265, 54 L. R. A. 746; Scales v. Masonic etc., A.^sn., 70 N. H. 490, 48 Atl. 1084. But the insured must not be well enough to go to his business two or three hours a dav. Shirts v. Phainix etc.. .4.s-.sn.. 135 Mich. 4.39. 97 N. W 550 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY Bishop Green, a freight handler, was insured by a policy which provided that it should be liable in case of injury "at once resulting in continuous total disability" to engage in business. January 31st Green was seriously injured by a heavy crate of glass which fell upon him. February 2d, however, he returned to his work and continued at it until March 25th, when he died in consequence of the accident. The appellate court below, applying to the policy a liberal rule of construction in favor of the insured, held that the terms of the policy requiring the inability to be continuous had no reference to a death loss and affirmed the judgment in favor of the plaintiff. But the Supreme Court reversed, holding that the lan- guage of the policy being without ambiguity, and the disability resulting from the accident not being continuous, the claimant was entitled to no recovery from the defendant.^ Letherer's policy provided indemnity for loss of time resulting from bodily injuries which should "immediately, wholly and continu- ously disable and prevent the assured from performing any and all duties pertaining to any business or occupation." The insured fell and struck a scantling. The injury finally resulted in his giving up work altogether, but meanwhile he continued his duties in connec- tion with running an engine in a cider mill for over a week, though the labor was accompanied with great pain. The court held that he was not entitled to recover his insurance money, and reversed his judgment.^ In the last two cases, if the insured had been less impatient to return to work, it seems probable that they would have succeeded in collecting their insurance. In an earlier Michigan case the plaintiff, Hohn, was a barber. He was injured on Friday. On Saturday he went to his shop late and did some work but not nearly as much as he would have done if well. He rested on Sunday. On Monday he again went to his shop, and attempted to work, but suffered such pain that he fainted away; a physician was called, and the plaintiff was taken home in a car- riage. He continued to visit his shop during the week, suffering 966. And see Liston v. N. Y. Cas. Co., ' Continent Cas. Co. v. Wade (Tex., 58 N. Y. Supp. 1090, 28 Misc. 240. 1907). 105 S. W. 35. For meaning of "fontinnins or per- ^ Letherer v.. U. S. Health d' Ace. Ins. manent di'^ability," see Grand Lodne Co., 145 Mich. 310, 108 N. W. 401. If V. Orrell, 206 111. 208, 69 N. E. 68; the insured was able to perform his Pac. Mut. L. Ins. Co. v. Branham, 34 usual work for a week he was not im- Ind. App. 243, 70 N. E. 174: HoJlo- mediatphi disabled, Preferred Masonic hauqh V. People's, etc., Ass7i., 138 Pa. Mid. Ace. Ass. v. Jones, 60 111. Anp. •St, 595, 22 Atl. 29; Gonlon v. U. S. Cas. 106; Williams v. Ace. Assn., 91 Ga. Co. (Tenn. Ch. App., 1899), 54 S. W. 98. 698. LOSS or BODILY MEMBER 551 pain all the while, and occasionally working a little, but was unable to perform all the duties of his business because of the pain he suf- fered. The court held, that the case was one for the jury.^ Colehouse held a certificate in a fraternal order, organized for the protection of switchmen, the laws of which provided that any mem- ber who should become totally blind should bo considered per- manently disabled and receive the full amount of his certificate, and also for any physical disability that might permanently disqualify a member from performing the duties of a switchman. The insured lost one eye, not two eyes, but because of his defective eyesight he was unable to retain his position with his employer, a railroad com- pany, and for the same reason he was refused employment by an- other railroad company. The defendant contended that the certifi- cate covered only total blindness and injuries of an entirely different character, but the court, construing the language liberally in favor of the insured, held that the later clause of the certificate would apply to the plaintiff's case.^ § 389. Same Subject — Loss of Bodily Member. — The clause en- titling the insured to a recovery for the loss of an entire hand does not mean that the entire hand must be severed or amputated as a result of the injury, but there may be a recovery if the member is so injured as to become practically useless.'"' So also where the in- sured was shot in the back, causing a paralysis which involved the loss of the use of his feet, it was held to be a loss of " two entire feet." "* > Hohn V. Interstate Cas. Co., 115 Ben. Assn., 139 Pa. St. 214, 20 Atl. Mich. 79, 72 N. W. 1105. 1047, 11 L. R. A. 564 (insured lost his ^Switchmen's Union v. Colehouse only eye), Mavnard v. Locomotive, etc., (III., 1907), 81 N. E. 696. citing, among Assn., 16 Utah, 145, 51 Pac. 2.59, 67 other cases, TerwiUiger v. Nat. Masonic Am. St. R. 602. Loss of a foot, Sheanon Ace. Assn., 197 111. 9, 63 N. E. 1034; case, 77 Wis. 618, 46 N. W. 799. But Forest City Ins. Co. v. Hardesty, 182 see Stevers v. People's Ins. Assn.. 150 111. 39, 55 N. E. 139, 74 Am. St. R. 161. Pa. St. 132, 24 Atl. 662, 16 L. R. A. 3 Lord V. American Mut. Ace. Assn., 446; Fuller v. Locomotive, etc., As.m., 89 Wis. 19, 61 N. W. 293, 26 L. R. A. 122 Mich. 548, 81 N. W. 326, 48 L. R. 741; Sisson v. Supreme Court, 104 Mo. A. 86, 80 Am. St. R. 598. Violini.'^ts, App. 54, 78 S. W. 297; Supreme Court pianists, and other professional musi- V. Turner, 99 111. App. 310. "Loss by cians sometimes insure each finger severance of one entire hand" con- separately. stnied similarly in Sneck v. Traveler.'^' * Sheanon v. Pacific Mutual Life Ins. Im. Co , 88 Him, 94, .34 N. Y. Supp. Co., 77 Wis. 618, 46 N. W. 799, 20 Am. 545. Same rule applied as to loss of St. R. 151, 9 L. R. A. 685, 83 Wis. 507. an arm, Garcelon r. Commercial Trav- 53 N. W. 878. Where a leg was am- elen^' Fasfprn Ace. Assn., 184 Mass. 8, putated three months after accident 67 N. E. 868 (cut off a little below the the company was held liable. Marshall elbow). Loss of an eye, or eyesight, v. Com. Travelers' Mut. Ace. Assn., 170 Mooi V. Societe, etc., 167 Mass. 298, N. Y. 434, 63 N. E. 446. The term 39 L. R. A. 736; Humphreys v. Nat. "breaking of a leg" was defined in the 552 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY § 390. Exception of Hazardous Employment.— The clause ex- cepting the insurer from liabiUty for a loss resulting from an injury received in a more hazardous occupation than that stated in the policy is binding upon the insured or his beneficiary and the in- surer is not hable in the case of an injury so received.^ But where a person is insured as engaged in a certain specified occupation, ho may do whatever customarily appertains to such an occupation,^ including acts that may be forbidden by general restrictions in the policy.^ And an employment or occupation does not refer to some unusual and incidental act, which a person may chance to be en- gaged in temporarily, for convenience, pleasure, or recreation, but to his regular and usual vocation or calling in life.^ Thus where the insured, cashier of a bank, lost his hand while engaged in trying to policy in Peterson v. Modern Brother- hood, 125 Iowa, 562, 101 N. W. 289, 67 L. R. A. 631; "Broken leg" defined by by-law, see Ross v. Modern Brother- hood, 120 Iowa, 692, 95 N. W. 207. 1 Standard Life cfe A. I. Co. v. Mar- tin, 133 Ind. 376, 33 N. E. 105 (whether risk is increased is often a question for the jury; brakeman of passenger train became brakeman of construction train). Recovery was allowed for death by cyclone because wholly un- connected with the change of occupa- tion. Standard Life & Ace. Ins. Co. v. Koen, 11 Tex. Civ. App. 273, 33 S. W. 133. 2 Bean v. Travelers' Ins. Co., 94 Cal. 581, 29 Pac. 1113 ("capitalist"). ^Richards v. Travelers' Ins. Co., 18 S. D. 287, 100 N. W. 428 ("a cattle dealer visiting yards" is not bound by a clause restricting to passenger cars); Daily v. Preferred Masonic Mut. Ace. Assn., 102 Mich. 289, 57 N. W. 184, 26 L. R. A. 171 (railway conductor may enter moving train, in spite of general prohibition); Wilson v. North- western Mut. Ace. Assn., 53 Minn. 470, 55 N. W. 626 ("pointing" a building is part of a brickmason's trade). "Cattle shipper," covers "tender of horses," Brock V. Brotherhood Ace. Co., 75 Vt. 249, 54 Atl. 176. A railroad employee crossing tracks on way home is "in discharge of duty," Kinney v. B. & 0., etc., Assn., 35 W. Va. 385, 14 S. E. 8, 15 L. R. A. 142. 4 Berliner v. Travelers' Ins. Co., 121 Cal. 458, 53 Pac. 918, 41 L. R. A. 467 (a mining expert casually riding in locomotive is not an engineer or fire- man); Travelers' Preferred Ace. Assn. V. Kelsey, 46 111. App. 371 (a farmer may recover, though temporarily act- ing as police at state fair); Union Mutual Ace. Assn. v. Frohard, 134 111. 228, 25 N. E. 642, 10 L. R. A. 383, 23 Am. St. R. 664 (merchant injured hunting, not "a hunter"); Holiday v. American Mut. Ace. Assn., 103 Iowa, 178. 72 N. W. 448 (same rule applies to a bookkeeper); Wildey Ca.'i. Co. v. Sheppard, 61 Kan. 351. 59 Pac. 651, 47 L. R. A. 650 (a barber hunting is not "a hunter"); Kentucky L. Ins. Co. v. Franklin, 102 Ky. 512, 43 S. W. 709 (grocer, imnting); Stone v. U. S. Casualty Co., 34 N. J. L. 371 (teacher fell from building which he was hav- ing built. No change of occupation); Hoffman v. Standard Life & Ace. Co., 127 N. C. 337, 37 S. E. 466 ("a flagman is not a switchman" when engaged in a single act of coupling); Fox v. Masons' Fraternal Ace. Assn., 96 Wis. 390, 71 N. W. 363 (" mill owner overseeing only" engaged in incidental act of cutting tree for sawmill); McNeven v. Canadian Ril. Co., 32 Ont. 284 ("baggage man" killed while casually coupling cars). But the policy may expressly prohibit even temporary change or temporary exposure, Thomas v. Masons' Fraternal Ace. Assn., 64 App. Div. 22, 71 N. Y. Supp. 692 (restriction as to hunting); Dood^i V. National Masonic Ace. Assn., 66 Neb. 493, 92 N. W. 613, 60 L. R. A. 424 (restriction as to using firearms). As to meaning of phrase "usual or some other occupation," see N^eill v. Order of U. F., 149 N. Y. 430, 44 N. E. 145. EXCEPTION OF HAZARDOUS EMPLOYMENT 553 saw some boards for use in making a cabinet, he was allowed to recover.^ And riding a bicycle for recreation is consistent with any vocation if not specifically forbidden.^ But operating a buzz saw for amusement is not permissible, within the meaning of the policy, it has been said, to one insured as a "retired gentleman."' •' An unauthorized employment must be actually entererl upon to affect the policy. An intent to adopt a new occupation, until con- summated, does not amount to a prohibited change. For example, where a lawyer intending to become a prospecting miner in Alaska lost his life on his way thither, it was held that the insured hdd not yet commenced to be a miner.^ In a Nebraska case, Simmons was insured with the defendant as a traveling salesman for a wholesale drug company. Having lost his position, for a period of some two years while trying to obtain another position he lived on his father's ranches. He came and went at his own will, put in most of his time hunting or visiting from one place to another, and though he sometimes communicated orders from his father to the employees on the ranches, he received no compensation and was never employed as a superintendent. The occupation of "stock farmer, owner or superintendent, super- vising only" was classed by the policy as more hazardous than salesman. The father of Simmons asked him to examine the wind- mills at two of the wells to see if they were pumping properly. In compliance with this request Simmons stopped at the Lost Tank well and there accepted an invitation to dine with Mr. Franklin, the foreman of the ranch. He sat down on the ground with Frank- lin to eat dinner, when a large rattlesnake came out of the grass and bit him so that he died the following day. In the action on the policy the court held that Simmons had not changed his occupa- tion to the more hazardous employment.^ Some policies provide, not that the insurance shall be avoided but that the indemnity shall be diminished ^ if the insured be in- jured while engaged in an employment classified as more hazardous than that named by him. The same principles, already explained, are appHcable. Thus if a man insure as "a stockdealer visiting ^ Hess V. Preferred Masonic Ace. * Mtrm Life Ins. Co. v. Frierson,\l^ As.9n., 112 Mich. 196, 70 N. W. 460, 40 Fed. 56, 51 C. C. A. 424. L R A 444; Hess v. Van Auken, 32 ^ Simmons y Western Travelers' Ace. N. Y. Supp. 126, 11 Misc. 422. Ass. (Neb., 1907), 112 N. W. 365. 2 Baldwin v. Fraternal Ace. Assn., 21 6 Such clause is a consent to charge Misc 124, 46 N. Y. Supo. 1016; Com- of occupation, Standard L. <<: Ace. Ins. stock V. Same, 1 16 Wis. 382, 93 N. W. 22. Co. v. Carroll, 86 Fed 567, 30 C. C. A. 3 Knapp V. Preferred, etc., Assn., 53 253, 41 L. R. A. 194; Xational Masonic Hun, 84, 6 N. Y. Supp. 57. Ace. Assn. v. Seed, 95 111. App. 43. 554 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY yards, not tending in transit," when in reality at the time of injury his vocation is that of "stockdealer and tender in transit," classified in such a policy as more hazardous, his recovery will be reduced accordingly.^ But a farmer's occupation does not change to that of a "pile driver," because he temporarily engages in driving piles in the construction of a private bridge.^ The policy issued to the plaintiff by the defendant contained the clause: "If the assured shall change his occupation to or be injured in any occupation or exposure or in performing acts classified by this company as more hazardous than that in which the member was classed when accepted, then and in all such cases, the insur- ance, fixed indemnity or weekly indemnity payable shall be only the amount fixed for such increased hazard in accordance with the classification of risks by the company and as per the table on the back hereof." Kenny was insured as a manager of a mill, but when on a visit of a few days at his brother's farm he undertook to work with his brother's new six-foot McCormick mowing ma- chine. The season was unusually wet. The horses attached to the machine jumped a ditch of water with which Kenny had not been made acquainted. As a result Kenny was thrown into the air and on his descent struck his leg and back on the front part of the seat receiving injuries which developed into traumatic neuritis. The court held that Kenny was none the less a miller because tem- porarily occupied in riding a mowing machine as an act of exercise or diversion, and the larger scale of indemnity was allowed him.'' If, however, the more hazardous work in connection with which the injury is sustained is not incidental or occasional, but amounts to a change of vocation, though only for a limited season, the in- sured cannot claim the benefit of the original classification. Thus ^ Loesch V. Union Cas. & Sur. Co., App. 97. Grocer may occasionally 176 Mo. 654, 75 S. W. 621; Emplotjers' deliver goods, Hall v. Aitierican Ma- Liability Assur. Corp. v. Back, 102 .some Ace. Ass?i., 86 Wis. 518, 57 N. W. Fed. 229, 42 C. C. A. 286 ("an im- 366. "Ice man proprietor" may de- porter and dealer" became "a fore- liver ice, Neafie v. Mfrs. Ace. Ind. Co., man of labor"); Metropolitan Ace. 55 Hun, 111 , 8 N. Y. Supp. 202. Assn. V. Hilton, 61 111. App. 100 3 Kenny v. Banker.9, supra. Co., 26 Iowa, 170, 2S Iowa, 12; John * Cady v. Fidelity & Cas. Co. (Wis., Hanrncl- Mut. Life Ins. Co., v. Moore, 1907), 113 N. W. 967. In the last case 34 Mif^h. 41. the court said, "death resulting from * Modern Woodmen v. Gerdom (Kan., an act committed under the influence 1908), 94 Pac. 788 ("The parents of delirium, as by one who in a par- should only be held to the exercise of oxysm of fear precipitates himself from reasonable diligence in endeavoring to a window, or having been bled re- obtain tidings of their son. They were moves the bandage, or takes poison by not required to prove conclusively that mistake and death ensues, never re- he was dead")- ceived nor deserved the name 'sui- 2 Porter V. Home F. Soc, 114 Ga. cide,' r.nd is not within the meaning of 937, 41 S. E. 45; Kelly v. Suvreme the language, 'death by suicide, felo- Council, 46 Apo. Div. 79, 61 N. Y. nious or otherwise, sane or insane.' Supp. 394. Burden of identifying Such language does not include an act insured after decease is on the claim- of self-destruction resulting in death ;int, Quirk v. Metropolitan Life Ins. whether intentional or not, unac- 560 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY The issue of suicide must often go to the jury with appropriate instructions by the trial judge, but where the facts clearly indicate death by suicide there is no presumption of accidental death. And where an inference of suicide is the only inference that reasonable minds could fairly gather from the testimony, it is not error to withdraw the question from the jury.^ § 395. Visible Mark of Injury Required. — Injuries not covered of ivhich there is no visible mark on the body, the body itself in case of death not being deemed such mark. The purpose of this clause is to guard the insurers from liability for injuries and death due solely to natural causes and for other fictitious or j^retended accidents.^ By virtue of this condition the burden is put upon the claimant to show some sign or mark of the injury of such a character that it may be apprehended by one of the senses; but a very strict rule of construction against the company is adopted.^ Thus a discoloration of the skin,'* or pallor,^ or emacia- companied by a purpose to effect death, with the absence of all design to take life. ... It does not appear that Mr. Cady had ever been in that part of the building where he went to his death prior to the occasion in question. There is evidence tending to show that he might probably have left his room in a state of delirium and continued in euch condition to the instant of the fatal act, not realizing what he was doing. There is evidence tending to prove that when he ran to the side of the shaft he was in a state of alarm and was fleeing from some fancied danger, and that a person in a delirious state is liable to do things dangerous to his own life or the lives of others under a misapprehension of what he is doing and its consequences. On the whole, there is room for belief that when Mr. Cady went over the railing he did not appreciate that he was going into the shaft; that he was not conscious of the nature of his act and did not have in mind any idea of self-destruction which, as we have seen, is essential to suicide." ' Supreme Tent v. King, 142 Fed. 678 (the insured, a policeman in need of money, shot himself). 2 Union Cas. & Surety Co. v. Mondy, 18 Colo. App. 39.5, 401, 71 Pac. 677; Gale V. Mut. Aid & Ace. A.ssn., 66 Hun, 600, 21 N. Y. Supp. 893. Formerly the exception was often worded "any bodily injury of which there shall be no external or visible signs upon the 3 Union Cafi. & Surety Co. v. Mondy, 18 Colo. App. ,395, 71 Pac. 677. In Barry v. U. S. Mut. Ace. Assn., 23 Fed. 712, aff'd 131 U. S. 100, 9 S. Ct. 7.55, 33 L. Ed. 60, the jury was charged, " 'Visible signs of injury,' within the meaning of this policy, are not to be confined to broken limbs or bruises on the surface of the body. There may be other external indications or evi- dences of an injury. Complaint of pain is not a visible sign because pain you cannot see. Complaint of internal soreness is not such a sign, for that you cannot see. But if the internal in- jury produces, for example, a pale and sickly look in the face; if it causes vomiting and retching or bloody and unnatural discharges from the bowels; if, in short, it sends forth to the ob- servation of the eye, in the struggle of nature, any sign of injury — then those are external and visible signs, provided they are the direct result of the injury." * Sun Ace. Assn. v. Olson, 59 III. App. 217. 5 Horsfall v. Pac. Mut. L. Ins. Co., 32 Wash. 132, 72 Pac. 1028, 63 L. R. A. 42.5, 98 Am. St. R. 846. VISIBLE MARK OF INJURY REQUIRED 561 tion or decline,^ may be visible signs of internal injury sufficient to satisfy the policy requirement.^ Indeed, the court will not limit the phrase "visible signs" to evi- dence which may be perceived by the sense of sight. On the contrary, it is held sufficient if the indication of the injury affects the .sense of touch or smell. Thus where a physician was able to feel the effect of a sprain in the muscles, though nothing unusual was visible to the eye.^ So also the emanation of illuminating gas from the body of the insured as the effect of artificial respiration was held to be "an external and visible mark upon the body.'"* Nor is it essential that the sign of injury should appear upon the outside surface of the body; ^ or that it should become visible immediately after the acci- dent; ^ or that it should remain visible until ensuing death.'' body of the insured." Under that wording the exception does not apply to fatal injuries, Eggenbcrger v. Guar- anty Mut. Ace. Assn., 41 Fed. 172, Bernays v. U. S. Mut. Ace. Assn., 45 Fed. 455; Paul v. Travelers' Ins. Co., 112 N. Y. 472, 20 N. E. 347, .3 L. R. A. 443, 8 Am. St. R. 758; McGlinchey v. Fidelity & Cas. Co., 80 Me. 251, 14 Atl. 13, 6 Am. St. R. 190 (the dead body itself "is external and visible sign enough that the injury was re- ceived"). In consequence of these rulings the clause was extended by the companies as recited in tlje head- ing of this section; but the New York court says of the later phraseology: "The defendant evidently intended that this clause should exclude lia- bility in case of death from accident, unless there is a visible mark upon the body. It is very doubtful whether the scope of the language will be so extended in any event," Root v. Lon- don Guarantee & Ace. Co., 92 App. Div. 578, 582, 86 N. Y. Supp. 1055, aff'd without opinion, 180 N. Y. 527. 1 Root v. London Guaratiiy & Ace. Co., 92 App. Div. 578, 86 N. Y. Supp. 1055. 2 Thayer v. Standard Life & Ace. his. Co.,_ 68 N. H. 577, 41 Atl. 182 ("any visible evidence" "which may appear within a reasonable time" is sufficient; it "need not be a bruise, contusion, laceration, or broken limb"); Whitehouse v. Travelers' Ins. Co., 29 Fed. Cas. 1038 (bleeding from nose); Summers v. Fidelity Mut. Aid Assn., 84 Mo. App. 605 (hernia); Wehle v. U. S. Mut. Ace. A.^sn., 153 N. Y. 116, 47 N. E. 35, 60 Am. St. R. 598 (water 36 running out of the mouth as proof of drowning); U. S. Mut. Ace. Assn. v. Neuman, 84 Va. 52, 3 S. E. 805 (bloody froth exuding from mouth as proof of asphyxiation). 3 Gale V. Mtd. Aid & Ace. Assn., 66 Hun, 600, 21 N. Y. Supp. 893 ("the evidence of the injury must be ex- ternal, objective, but it must not necessarily be visible to the eye. . . . An object that is noticeable, apparent to the touch may be said to be visi- ble"); U. S. Cas. Co. V. Hanson. 20 Colo App. .393, 79 Pac. 170 (sufficient, if perceptible to a digital examination). •* Menneiley v. Employers' Liability A.sur. Corp., 148 N. Y. 596. 43 N. E. 54, 31 L. R. A. 686, 51 Am. St. R. 716. "Direct and positive" proof of in- jury does not necessarily mean by eyewitnesses. Peck v. Equitable Ace. Assn., 52 Hun (N. Y.), 255. The char- acter of the injury itself may furnish evidence sufficiently " direct and posi- tive " where there is no presumption that the injury was intentionally in- flicted. Travelers' Ins. Co. v. MeConkey, 127 U. S. 661, 8 S. Ct. 1360, 32 L. Ed. 308; Utter v. Travelers' Ins. Co., 65 Mich. 545, 32 N. W. 812, 8 Am. St. R. 913. 5 Union Cas. & Sureti/ Co. v. Mondy, 18 Colo. App. 395, 71 Pac. 677; Free- man v. Mercantile Ace. Assn., 156 Mass. 351, 30 N. E. 1013 (redness of one lobe of the brain revealed by autopsy). 6 Pennington v. Pacific Mut. Life Ins. Co., 85 Iowa, 468, 52 N. W. 482, 39 Am. St. R. 306. 7 Bernays v. U, S. Mid. Ace. Assn., 45 Fed. 455. 562 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY In a Massachusetts case, the liability of the insured, by the terms of the policy, was limited in case of drowning, where the facts were not shown by eyewitnesses or the body recovered. Five minutes before drowning the insured was seen rowing in a canoe which could easily be overturned. It was held that the facts were shown by eye- witnesses within the meaning of the policy. ^ A study of the many cases cited in this section brings conviction that the courts are not inclined to pay much respect to provisions of the policy which purport to control or modify the laws of evidence.^ In case of any disputed material fact the question whether the injury was accidental must go to the jury.^ The jury, too, is apt to decide the fact upon the testimony before them, without much regard to any rule of evidence that may be specified in the contract. §396. Accidents Caused by Disease, etc., Excepted. — "Nor acci- dent, nor death, nor loss of limb, or sight, nor disability, resulting wholly or partly, directly or indirectly from any of the following causes, or while so engaged or affected: Disease or bodily infirmity, hernia, fits, vertigo, sleepwalking, medical or surgical treatment, except amputa- tions necessitated solely by injuries and made within ninety days after accident." ^ The distinction between an accident and a disease, within the mean- ing of the accident policy, is sometimes very subtle. Thus it has been held that blood poisoning, the result of a chafing or rubbing of the toe by a new shoe, is an accident.^ But on the other hand, typhoid fever contracted by the unintentional swallowing of noxious germs hidden in water is undoubtedly a disease. And it is also held that a malignant pustule caused by putrid matter accidentally brought into contact with the lip must be classified as a disease.^ ' Lewis V. Brotherhood Ace. Co., 194 the system through wounds in profes- Mass. 1, 79 N. E. 802. sional operations; held, that septic mat- "^ Reynolds v. Equitable Ace. Assoc, ter introduced into the eye of a dentist 59 Hun (N. Y.), 13, 15 ("The evidence from the mouth of a patient while was sufficient within the rules of law, coughing, which did not bruise or and the language of the policy ['direct penetrate the membrane, was not and affirmative'] cannot be construed within the policy, Fidelity & Cas. Co. to take the case out of the ordinary v. Thornpson, 154 Fed. 484. rules of evidence"). ^Western Commercial Travelers' 3Mfrs. Ace. Ind. Co. v. Dorgan, 58 Assn. v. Smith, 85 Fed. 401, 56 U S Fed. 945, 7 C. C. A. 581, 16 U. S. App. App. 393, 29 C. C. A. 223, 40 L R. A. 290, 22 L. R. A. 620. 653. So also of blood poisoning from * This and similar clauses are omitted cutting a corn, Nax v. Travelers' Ins. from the policy of health insurance. Co., 130 Fed. 985. An accident policy insured against « Bacon v. Association, 123 N. Y. blood ) oisoning sustained by surgeons 304, 25 N. E. 399, 9 L. R. A. 617, 20 through septic mnttor introduced into Am, St. R. 748. Same holding where ACCIDENT CAUSED BY DISEASE, ETC., EXCEPTED 563 The authorities, however, are well agreed that within the fair meaning of this exception a slight or temporary disorder or derange- ment of the functions is not to be regarded as a disease or bodily infirmity.^ For example, fainting due to an attack of indigestion does not amount to a bodily infirmity; and in a case much cited the court concluded that drowning, though it happened in conjunction with such a temporary bodily condition of fainting or unconscious- ness, was to be regarded the sole cause of the death, unless it were shown that death would have resulted without the presence of the water.^ Indeed, the rule is firmly established that to constitute "a disease" or "bodily infirmity" there must be a material impairment of the bodily powers, an actual inroad upon the physical health/"^ An accident policy, before a federal court for construction, covered death which "resulted proximately and solely from accidental causes, and excluded death resulting wholly or partly, directly or indirectly, from disease, in any form, either as a cause or effect;" the court allowed the claimant to recover on the policy although the insured went to the platform of a railway car to vomit, and in consequence sustained a fatal fall.'* Earner's policy issued by the defendant contained two kinds of insurance, one against accidents and the other against disease. The part relating to accidents provided insurance, "For loss through personal, bodily injuries caused solely through accidents due wholly to violent means external to the body .... and such as are not caused or contributed to by any deformity or disease." Another provision of the policy declared: "All cases of ... . con- tact with poison, or with poisonous or infectious substances, are covered only under the health provisions of this policy." While Farner was sitting in front of his hotel holding a little dog on his lap, someone came behind him and pinched the dog's tail, where- upon the dog bit the insured on his thumb, from the poisonous an unintentional fretting of the proas ^ Black v. Travelers' Ins. Co., 121 muscle from use of a bicycle, resulted Fed. 732, 58 C. C. A. 14 (previous gun- in appendicitis, Appel v. ^Et7ia Life shot wound fracturing skull does not Ins. Co., 86 App. Div. 83, 83 N. Y. necessarily result in subsequent state Supp. 238, aff'd 180 N. Y. 514, 72 of "bodily infirmity. " Question for N. E. 1139. jury). 1 Meyer v. Fidelity & Cas. Co., 96 * Preferred Ace. Ins. Co. v. Mmr, Iowa, 378, 65 N. W. 328, 59 Am. St. 126 Fed. 926, 61 C. C. A. 456 ("Muir's R. 374 (staggering before fall not sickness at the stomach was a mere attributed to "fits or vertigo;" com- coincidence. It was the occasion of pany liable). his going upon the platform of the 2 Mfrs. Ace. Indem. Co. v. Dorgan, car, but it was net a cause of death 58 Fed. 945, 7 C. C. A. 581, 16 U. S. within the fair meaning of this pro- App. 290, 22 L. R. A. 620. vision"). 564 MEANING AND LEGAL EFFECT (JF ACCIDENT POLICY effects of which, two weeks thereafter, he died. The court held that within the meaning of the pohcy it was a case of accident and not of disease or poisoning, and that the bite was to be regarded as the sole cause of the death. ^ Bailey's policy excepted injuries resulting directly or indirectly from any disease. The insured was a physician, and, being in a some- what emaciated and exhausted condition due to a prior injury, in order to gain stimulus during his drive on the highway in the coun- try, he dissolved a tablet of morphia, as he had been accustomed to do, and injected it into his leg with a hypodermic needle, while sitting in his carriage. Owing to the disease of cellulitis, or blood poisoning, which shortly resulted. Dr. Bailey was disabled for about twenty weeks. On appeal, the judgment of nonsuit was reversed and it was held that the question whether the injuries complained of were sustained through external, violent, and accidental means should have been submitted to the jury.- But if the insured is afflicted with a real disease at the time of the accident, except for which the accident would not have resulted in death, or if such disease aggravates the injury, there"^ can be no re- covery under such a clause.^ Many instances may be cited by way of illustration. Thus if in consequence of delirium accompanying a feverish condition, due to grippe, an insured patient falls out of the window of a hospital, his insurer is relieved from liability; ^ or if, in consequence of a fit or vertigo, the insured falls into the water and is drowned; ^ or if a tumor at the base of the brain is the cause of his fall and injury; ^ or if, because of an apoplectic stroke and consequent fall, the insured is run over and crushed to death by an approaching * Farner v. MasH. Mut. Ace. Assn. 3 Western Commercial Travelers' (Pa. St., 1907), 67 Atl. 927. The court Assn. v. Smith, 85 Fed. 401, 29 C. C. A. said: "The insured died from the bite 223, 40 L. R. A. 653 (causing or aggra- of a dog — certainly an accident, not a vating injury); Commercial Travelers' disease. The proximate cause of death Mut. Ace. Assn. v. Fulton, 79 Fed. was the bite, and the way in which it 423, 24 C. C. A. 654, 45 U. S. App! operated to produce death, whether by 578; Binder v. National Masonic Ace. hemorrhage or lockjaw or blood poison- Assyi., 127 Iowa, 25, 102 N. W. 190 ing, was a medical detail which did not (causing or aggravating injury); AUtna affect the material fact of death re- Life Ins. Co. v. Dorney, 68 Ohio St. suiting from the accident." Similar 151, 67 N. E. 254. ruling in Kenny v. Bankers' Ace. Ins. « Carr v. Pacific Mut. Life Ins. Co., Co. (Iowa, 1907). 113 N. W. 566. 100 Mo. App. 602, 75 S. W. 180. Same doctrine applied to the fire policy s Mfrs. Ace. & Indem. Co. v. Dorgan, where fire is the risk and explosion the 58 Fed. 945, 7 C. C. A. 581, 22 L. R. A. exception, German Am. Ins. Co. v. 620. >H^.?/moM (Colo., 1908),94 Pac. 27. And « Sharpe v. Commercial Travelers' see §§ 278, .386, supra. Mut. Ace. Assn., 139 Ind. 92, 37 N. E. 2 Bailey v. Interstate Cos. Co., 8 App. 353. Div. 127, aff'd 158 N. Y. 723. ACCIDENT CAUSED BY DISEASE, ETC., EXCEPTED 565 wagon; ^ or if sleepwalking,^ or hernia,^ or heart disease,'' is a con- tributing cause of the injury, the exception is operative and the in- surer is exonerated. The court, however, justly attaches great importance to the word "causes" in this exception, and if it appear that a disease in no sense contributes to the accident, but is either wholly independent of it, or simply a result of it, a strained construction, if need be, will be put upon the other restrictive words of the clause in order to grant indemnity for an injury purely accidental.^ For example, in a Colorado case the claimant was allowed to pre- vail against the insurer under the form of policy recited at the head of this section, notwithstanding the phrase "or while so engaged or afflicted," where the accident resulted in hernia followed by an un- successful surgical operation, in turn causing fatal peritonitis.^ Like- wise the Texas court, under the same form of policy, refused to release the company where an injury purely accidental caused rheumatism which in turn caused death. ^ And the same court allowed a recovery where, though the insured was diseased at the time, the accident did not result wholly or partly, directly or in- directly, from the disease.^ 1 Clark V. Employers' Liahility Assur. Co., 72 Vt. 458, 48 Atl. 639 (apoplexy the remote cause, but covered by the word "indirectly"). Compare Win- spear v. Accident Ins. Co., L. R., 6 Q. B. D. 42; Laurence v. Accidentallrus. Co., L.R., 7 Q. B. D. 216. 2 Travelers' Ins. Co. v. Harvey, 82 Va. 949, 5 S. E. 553. 3 Miner v. Travelers' his. Co. , 3 Ohio Dec. 289, 2 Ohio N. P. 103. * National Masonic Ace. Assn. v. Shryock, 73 Fed. 774, 20 C. C. A. 3, 36 U. S. App. 658. 5 To hold otherwise would well-nigh annul the contract, /Etna Life Ins. Co,. V. Hicks, 23 Tex. Civ. App. 74, 56 S. W. 87. See cases § 387, supra. 6 Travelers' Ins. Co. v. Murray, 16 Colo. 296, 26 Pac. 774, 25 Am. St. R. 267. Substantially the same ruling was made in Thornton v. Travelers' Ins. Co., 116 Ga. 121, 42 S. E. 287, 94 Am. St. R. 99; Miner v. Travelers' Ins. Co., 3 Ohio Dec. 289, 2 Ohio N. P. 103. Also held in following cases that the insurer is not relieved if hernia is caused by the accident, all the courts enforcing the view that the natural results are to be attributed to the one sole proximate cause, to wit, the acci- dental injury, Atlantic Ace. Assn. v. Alexander, 104 Ga. 709, 30 S. E. 939, 42 L. R. A. 188; Summers v. Fidelity Mid. Aid Assn., 84 Mo. App. 605. And where a resulting disease is a mere incident of the accident the latter is construed to be the sole cause, Jiroch V. Travelers' Ins. Co., 145 Mich. 375, 108 N. W. 728 (diabetes); Cary v. Preferred Ace. Ins. Co., 127 Wis. 67 (blood poisoning). Otherwise where the excepted cause, a disease, existed at time of accident, White v. Stand., etc., Ins. Co., 95 Minn. 77, 103 N. W. 735. And prior disease though still existing if not a contributory cause does not exonerate the company. Commercial Travelers' Mut. Ace. Assn. V. Fulton, 79 Fed. 423, 24 CCA. 6.54; Thornton v. Travelers' Ins. Co., 116 Ga. 121, 42 S. E. 287, 94 Am. St. R. 99. .&na L. Ins. Co. v. Hicks, 23 Tex. Civ. App. 74, 56 S. W. 87. 7 Travelers' Ins. Co. v. Hunter, 30 Tex. Civ. App. 489, 70 S. W. 798. » ^tna Life Ins. Co. v. Hicis, 23 Tex. Civ. App. 74, 56 S. W. 87. As between disease and accident as a cause for the injury it is said that there is no legal presumption, Taylor v. General Ace. Assuf. Corp., 208 Pa St 566 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY § 397. Intoxication or Narcotics. — It is reasonable to require that the insured, wPien exposed to hazards, shall not be culpable of volun- tarily putting himself under disturbing or exciting influences, likely to affect his judgment, or calculated to interfere with the full exercise of his faculties in their normal condition. Lack of sobriety brings peril, as shown by a case in New York The insured, one of the guests at a convivial dinner, had been drinking freely of stimulants. One of his boon companions present boasted of his skill in the use of his pistol and declared his aljility to shoot the insured in the ear without hurting him elsewhere. Presumably owing to his condition, the insured made no objection to the experiment. He was shot in the forehead and killed by his friend.^ The policy w^as avoided. Habits of intemperance in general, however, will not bring the insured within this particular exception unless he was intoxicated, or under the influence of narcotics, at the time of the accident;' but, to make the exception operative, it need not appear that the contemporaneous intoxication caused the injury or contributed to it.^ § 398. Poison, etc. — Voluntary or involuntary taking of poison or contact with poisonous substances. This exception covers the accidental taking of poison; ^ but many 439, 57 All. 830 (insured fell going up to intoxication, see Standard L. & office steps); Keefer v. Pacific Mut. Ace. Ins. Co. v. Jones, 94 Ala. 434, 10 Life Ins. Co., 201 Pa. St. 448, 455, 51 So. 530; Prader v. Nat. Masonic Ace. Atl. 366, 88 Am. St. R. 822. But it Is Assn., 95 Iowa, 149, 63 N. W. 601; also held that the burden is on the Campbell v. Fidel. & Cas. Co., 109 company to show that disease, being Ky. 661, 60 S. W. 492; Conadean v. a specified exception, is the cause of Am. Ace. Co., 95 Ky. 280, 25 S. W. 6; the injury, McCarthy v. Travelers' Travelers' Ins. Co. v. Harvey, 82 Va. Ins. Co., 15 Fed. Cas. 1254; Fetter v. 949, 5 S. E. 553 (insured fell out of a Fidelity & Cas. Co., 174 Mo. 256, 73 window of a boarding house). As to S. W. 592, 61 L. R. A. 459, 97 Am. St. what questions are pertinent on the R. 560. And so, generally, the burden trial to prove a condition of sobriety is on the defendant to show that the or drunkenness, see Cook v. Standard injury falls within any exception relied Life & Ace. Ins. Co., 84 Mich. 12, 47 upon for defense, Antho7iy v. Mercantile N, W. 568. And compare § 355. Bur- Mut. Ace. Assn., 162 Mass. 354, 38 N. E. den is on the company to allege, Jojies 73, 26 L. R. A. 406, 44 Am. St. R. 367. v. U. S. Mnt. Ace. Assn., 92 Iowa, 652 1 Shader v. Assurance Co., 66 N. Y. 61 N. W. 485 (not on plaintiff to nega- 441, 23 Am. Rep. 65. tive); and establish intoxication as a 2 Prader v. National Masonic Ace. defense, Sutherland v. Standard L. & As.m., 95 Iowa, 149, 63 N. W. 601; Ace. Ins. Co.. 87 Iowa, 505, 54 N. W. Covadeau v. Am. Aec. Co., 95 Ky.2S0, 453 (insured fell from street car); 25 S. W. 6; Flint v. Travelers' Ins. Co. Hester v. Fidel. & Cas. Co , 69 Mo (Tex. Civ. App.), 43 S. W. 1079, death App. 186. The issue is usually for the from hypodermic dose of morphine ad- jury; Follis v. U. S. Mnt. Ace. A.'isn., ministered by physician to relie\^e de- 94 Iowa, 435, 62 N. W. 807, 28 L. R. A. iiriuni tremens. 78, 58 Am. St. R. 408; DeVan v. Com- ^ Standard L. & .ice. his. Co. V.Jones, mercial Travelers' .Mut Ace As,m 92 94 Ala. 434, 10 So. 530; Shader v. Rail- Hun, 256, 36 N. Y. Supp 931 aflf'd way Pass. Assur. Co., 66 N. Y. 441, 157 N. Y. 690, 51 N. E. 1090. 23 Am. Rep. 65. As to what amounta * Early v. Standard Life & A. Co., POISON, ETC. 567 courts agree that if the exception contain only the phrase "taking poison," the insurer will not be relieved from liability in the case of a purely accidental taking, since the word "taking" points to a con- scious act.^ And the New York court was of opinion that the phrase "injury caused by poison" does not apply to death from a malignant pustule resulting from contact between an abraded part of the lips and a putrid animal substance, but that poison in its meaning is confined to the internal reception of a poisonous substance. It was, however, held, that the pustule in question was a disease, and so the case was brought within another exception in favor of the company.2 113 Mich. 58, 71 N. W. 200; 67 Am. St. R. 445 (aqua ammonia swallowed by mistake; held, "death by poison" and company not liable); Meehan v. Traders' & Travelers' Ace. Co.. 34 Misc. 158, 68 N. Y. Supp. 821 (carbolic acid thrown by a woman in the face of the insured); Hill v. Hartford Ace. Ins. Co., 22 Hun, 187; Pollock v. U. S. Mut. Ace. Assn., 102 Pa. St. 234, 48 Am. Rep. 204; Maryland Cas. Co. v. Hudgins, 97 Tex. 124, 76 S. W. 745, 64 L. R. A. 349 ("poison or anything accidentally, or otherwise, taken, ad- ministered, absorbed, or inhaled;" the insured was poisoned by eating one or two bad oysters, company not liable); Preferred Ace. Ins. Co. v. Robinson (Fla.), 33 So. 1005 (same form of policy as the last; held, ex- ception covered inflammation of eye caused by contact with poisonous ivy); Kennedy v. /Etna. Life Ins. Co., 31 Tex. Civ. App. .509, 72 S. W. 602 (over- dose of poisonous medicine instead of doctor's prescription); Kasten v. Inter- state Cos. Co., 99 Wis. 73, 74 N. W. 534, 40 L. R. A. 651 (septic poisoning from dentist's cotton); Cole v. Ace. Ins. Co., 61 L. T. N. S. 227. Other courts take a different view of like clauses and hold, despite them, that if a poisoning is purely accidental, the company is not to be relieved by the exception, Dezell v. Fidelity & Cas. Co., 176 Mo. 253, 75 S. W. 1102. And see Metropolitan Ace. Assn. v. Froiland, 161 111. 30, 43 N. E. 766, 52 Am. St. R. 359; Traveler.'^' Ins. Co. v. Dunlap, 160 111. 642, 43 N. E. 765. 52 Am. St. R. 355; Miller v. Fidelit'i & Cas. Co., 97 Fed. 836. The word "absorbed" used in such a clause means imbibing through the pores, Fidelity & Cas. Co. V. Waterman, 161 111. 632, 44 N. E. 283, 32 L. R. A. 654. I Miller v. Fidelity & Cas. Co., 97 Fed. 836; Travelers' Ins. Co. v. Dun- lap, 160 111. 642, 43 N. E. 765, 52 Am. St. R. 355; Healey v. Mut. Ace. Assn., 133 111. 557, 25 N. E. 52, 9 L. R. A. 371, 23 Am. St. R. 637; Dezell v. Fi- delity (fc Cas. Co., 176 Mo. 253, 75 S. W. 1102; Panl v. Travelers' Ins. Co., 112 N. Y. 472, 20 N. E. 347, 8 Am. St. R. 758, 3 L. R. A. 443, Contra, Richard- son V. Travelers' Ins. Co., 46 Fed. 843 and Preferred. Ace. Ins. Co. v. Robin- son (Fla.), 33 So. 1005. A federal court decided that the exception of "death resulting from poison" covered an accidental drinking of poison by the insured in the belief that it was harmless, although the phrase "taking poison" might involve the notion of a conscious act, MeGlothcr v. Prov. Mid. Ace. Co., 89 Fed. 685, 32 C. C. A. 318; Westmoreland v. Preferred Ace. Ins. Co., 75 Fed. 244 (chloroform administered by physician). The exception does not cover the poisonous bite or sting of an insect, Omberg v. Assoc, 101 Ky. 303, 40 S. W. 909, 72 Am. St. R. 413. Whether coal gas is a poison was left to the jury, U. S. Mut. Ace. Assn. v. New- man, 84Ya. 52, 3S.E. 805. The burden is on the company to show that the death is within the exception. Travel- ers' Protective Ass?i. v. Gilbert, 111 Fed. 269, 49 C. C. A. 309, 55 L. R. A. 538. ^ Bacon v. U. S. Mut. Ace. Assn., 123 N. Y. 304, 25 N. E. .399, 9 L. R. A. 617, 20 Am. St. R. 748. The Penn- sylvania court suggests that poison must be taken internally to come within the exception. Preferred Mut. Ace. Assn. V. Beidelman, 1 Monag. (Pa.) 481. 568 MEANING AND LEGAL EFFPXT OF ACCIDENT POLICY Garvey, a railroad yard conductor, had an accident policy which provided that in the event of injuries or disabiUty resulting directly or indirectly, accidentally or otherwise from poison or infection, the compan3''s liability should be limited to one-tenth of the amount otherwise designated. While walking up an incline leading to the platform of a freight house, the insured slipped and fell, sustaining a severe and lacerated wound about two inches long on the left leg below the knee. About a week later septic or p3'emic symptoms appeared. The insured was totally disabled for about four months. This prolonged disability was caused by the infectious condition of the wound which retarded the process of healing. The court con- cluded that the disability did not result from the poison, but the poison from the injury and sustained the plaintiff's judgment for the larger amount.^ §399. Inhaling of Gas or Vapor. — The words "inhaling gas" have been construed as applying to an intentional, voluntary or con- scious act of the insured.' Hence in some policies the exception has been further strengthened by the addition of the words "voluntary or involuntary." ^ Where the insured died from the effects of chloro- form intentionally administered it was held that the exception was operative to release the company.'' The strong leaning of the courts towards a construction of the terms of the accident policy which shall favor the insured is strik- ingly illustrated by an Illinois case. The policy provided: "This insurance shall not cover .... death .... resulting, wholly or partly, directly or indirectly .... from any gas or vapor." The insured met his death by reason of the unconscious and involuntary inhaling of escaping gas at night while he was asleep. The court allowed the plaintiff to recover on the policy, interpreting the clause to refer to a conscious inhaling of gas in connection with ^Garvey v. Phoenix P. Ace. Ins. Co., A. 29, 46 L. R. A. 450; Paul v Trav- 123 App. Div. (N. Y.) 106 ("conditions elers' Ins. Co., 112 N. Y. 472, 8 Am. which inevitably or ordinarily are the St. R. 758, 20 N. E. 347, 21 N. Y. St. effect of a disability covered by the R. 624. 3 L. R. A. 443; Pickett v. policy are also within its compass, Pacific Mid. Life Ins. Co., 'l44 Pa. St. otherwise the contract is a sham"). 79, 22 Atl. 871, 13 L. R. A. 661, 27 ^Menneilley v. Emvloyer.'i' Liability Am. St. R. 618 (insured descended Assur. Corp., 148 N. Y. 596, 43 N. E. into a well to repair a pump and was 54, 31 L. R. A. 86, and see Fidelity & asphixiated. Company held liable. Cas. Co. V Waterynan, 161 111. 632, 44 "To inhale gas reouiros an act of voli- N.-E. 283, 32 L. R. A. 654. tion"). But see Richardson v. Travel- 3"Breathmg gas" involuntarily is ers' /ns. Co., 46 Fed. 843. not "inhaling gas," Fidelity & Cas. * Westmoreland v. Preferred Ace. Ins. Co. V. Loivenstein, 97 Fed. 17, 38 C. C. Co., 75 Fed. 244 INTEN TJ ON A L 1 \ .1 U RIES 569 medical or surgical treatment, or dentist's work, or a suicidal purpose.^ § 400. Duelling or Fighting. — This exception should not be con- strued as meaning that the insured shall submit without resistance to whatever violence may be offered him." But if the insured is injured in consequence of his voluntary engagement in a fight the insurer will be exonerated from liabilitv under this clause.^ § 401. Intentional Injuries. — Intentional injuries inflicted by the insured or any other 'person. The insurance contract being one of highest good faith '* the in- sured would not, even in the absence of such a clause, be permitted to take advantage of injuries designedly inflicted by himself. Intention, which is a question of fact to be inferred from the act itself and surrounding circumstances, is an essential element under this clause to relieve the insurer from liability.^ But though the injury may be wholly accidental to the insured in that it was unfore- seen by him, yet, if intended by his assailant, there can be no recovery under this exception.® And such an intent exists where a person has intentionally struck the insured in order to protect himself though without intent to inflict the particular injury sustained.' ' Travelers' Ins. Co. v. Ayers, 217 111. 390, 75 N. E.^ 506 (citing many Illinois and Nev/ York cases). 2 Coles V. Nem York Cas. Co., 87 App. Div. 41 , 83 N. Y. Supp. 1063 (insured bartender forcibly ejected a noisy per- son, insurer liable); Robinson v. Uni- ted States Mxd. Ace. A.ssn., 68 Fed. 825. Compare U. S. Mid. Ace. Assn. v. Mil- lard, 43 111. App. 148; Gresham v. Equi- table Ace. Ins. Co., 87 Ga. 497, 13 S. E. 752, 13 L. R. A. 838, 27 Am. St. R. 263, where both parties voluntarily en- gaged in combat. See clause under life policy as to violation of law, §§ 371, 372, supra. 3 Jones V. [/. S. Mut. Aec. Ass., 92 Iowa, 653, 61 N. W. 485 (insured was shot in the street in connection with a quarrel about a hack after a visit by himself and a companion to a house of ill fame). * § 94, supra. ^Stevens v. Continental Cas. Co., 12 N. D. 463, 97 N. W. 862 (in case of death from gunshot presumption is of accident. Burden of proof is on de- fendant; many ca.ses cited). See Rail- n-ay Officials & E. A. Assn. v. Drum- mond, 56 Neb. 235, 76 N. W. 562 (shooting was by a robber and jury was allowed to find for plaintiff). The Kentucky court construed "injuries" as meaning non-fatal injuries only. Am. Aec. Co. v. Carson, 99 Ky. 441, 36 S. W. 169, 34 L. R. A. 301, 59 Am. St. R. 473. ^Orr v. Travelers' Ins. Co., 120 Ala. 647, 24 So. 997; Fischer v. Travelers' Ins. Co., 77 Cal. 246, 19 Pac. 425, 1 L. R. A. 572; Travelers' Ins. Co. v. McCar- thy, 15 Colo. 351, 25 Pac. 713, 11 L. R. A. 297, 22 Am. St. R. 410; De Graw v. National Ace. Soc.,51 Hun, 142, 4 N. Y. Supp. 912; Butero v. Travelers' Ace. Ins. Co., 96 Wis. 536, 71 S. W. 811, 65 Am. St. R. 61. T Fidelity & Cas. Co. v. Smith, 31 Tex. Civ. App. Ill, 71 S. W. 391.^ And see Matson v. Travelers' Ins. Co., 93 Me. 469, 45 Atl. 518, 74 Am. St. R. 368; Richards v. Travelers' Ins. Co., 89 Cal. 170, 26 Pac. 762, 23 Am. St. R. 455 (held, construing a clause differently worded, that company was not re- lieved unless assailant "designed" not OIO MEANING AND LEGAL EPTECT OF ACCIDENT POLICY By virtue of this exception, if the insured is murdered the com- pany is relieved from Uability.' And if a constable is intentionally injured in making an arrest or serving a process this exception in his accident policy becomes applicable.^ But the act of an insane person incapable of forming a rational intent will not fall within the restric- tion.^ Weidner had an accident policy which provided that only a limited j)roportion should be paid in case of intentional injuries at the iiands of another, except in case of assaults for the sole purpose of robbery. Weidner and his wife had spent the morning with Wotta- shek at Hale's Corners. In the afternoon Wottashek started to drive them and others back to Milwaukee in an express wagon. As they approached the toll gate they passed two men, one of whom, named Tinger, asked for a ride, and handed to one of the party a toll ticket. There were seven in the wagon and the request was i-efused. Tinger demanded his ticket back. It had been returned to the other man who said, "Come on! come on! I got the ticket." Tinger then took from the floor of the wagon a pair of rubber boots belonging to Weidner and started off. Weidner got out of the wagon, exclaiming, "See here! those are my boots, and I want them back." Thereupon Tinger, retaining possession of the boots, struck Weidner, knocked him down and while lying on the ground, he hit him with the heel of the rubber boot breaking his glasses and his nose. Septic poisoning and death resulted a few days later from the wound. The trial court granted a nonsuit in the action on the policy, deciding as matter of law that robbery was not the sole pur- only to strike but to kill). The use of Marceau v. Travelers' Im. Co., 101 a deadly weapon may raise a presump- Cal. 338, 35 Pac. 856, 36 Pac. 813. tion of intent to kill, Travelers' Ins. Intoxication may prevent " an intent " Co. V. Wyness, 107 Ga. 584, 34 S. E. Northwestern Benev. Sac v Dudleii 113. 27 Ind. App. 327, 61 N. E. 207. Fi- 1 Travelers Ins. Co. v. McConkey, nancial condition of insured bears 127 U. S. 661, 8 S. Ct. 1360, 32 L. Ed. upon issue whether injuries were self- 308; Jarnajin v. Travelers' Protec. inflicted, Mna L. Ins Co v Vandecnr .IssTi. 133 Fed, 892, 66 C. C. A. 622; 86 Fed. 282, 30 C. C.-A.' 48; Lonq v' Iravelers Protective Assn. v. Langholz, Travelers' Ins. Co 113 Iowa 259 85 f ^'i-J\'^^ ^' ^ri. ^- P^; 52 U. S. N. W. 24. Burden is on company to App 543; Ginj v. Iravelers' Ins. Co., plead, Cobnrn v. Trnvelers' Ins 'Co 74 Minn. 505, 77 N. W. 291. But see 145 Mass. 226, 13 N E 604- Stevens v Arri. Ace Co. v. Carson, 99 Kv. 441, Contmentnl Cos. Co , 12 N D 463 97 34 LR. A. 301 59 Am, St. R. 473. N. W. 862; and prove the exception, ^Grimes V. Fidelity & Cas. Co., 33 LampHn v. Travelers' Im. Co 11 Tex. Civ. App. 275, 76 S. W. 811; Mil- Colo. App. 249, 52 Pac 1040 If the cl '"^V./,"^^''^^"^* ^^^- C'^'-. 17 Pa. Super. evidence is conflietins the question ; n, m , , T. whether the injury was intentional or JLorCeyv. Iravelers' Protection Assn., accidental is for jury, Giddenkirch v 105 Fed. 854, 46 C. C. A. 278; Berger v. U. S. Mnt. Ace. Assn., 5 N Y Supp' Pacific Mid. L. Ins. Co., 88 Fed. 241; 428 IN VIOLATION OF LAW 571 pose of the assault. But the Supreme Court by a divided vote re- versed, holding that the question whether the assault was com- mitted for the sole purpose of robbery was one of fact for the jury.^ § 402. Voluntary Overexertion. — Under the exception the in- sured does not lose his right to recover unless there has been a con- scious or intentional overexertion or a reckless disregard of conse- quences.^ § 403. In Violation of Law. — This exception was considered, in dealing with the provisions of the life policy. •"' The Nebraska court holds that by collecting dues on the policy with knowledge of the facts, the insurer waives forfeiture caused by conviction for the crime of felony.^ Further illustration may be useful. Duran's accident policy provided that the insurance did not cover an injury resulting wholly or partly, directly or indirectly, from violation of law. The Vermont statutes prohibited hunting, and unnecessary traveling, on Sunday. On a Sunday, however, Duran set out from Burlington for Colchester on a hunting expedi- tion. After hunting, he started for home in the afternoon through a field, and while crossing frozen plowed ground to get to the high- way, his foot slipped upon the frozen ground and his knee was injured. The court held that the injury was caused by the viola- tion of law and that the risk was one not assumed by the company.^ ^Weidner v. Standard Life & Ace. Reynolds v. Equitable Ace. Assn., 59 7ns. Co., 130 Wis. 10, 110 N. W. 246. Hun, 13, 1 N. Y. Supp. 738, aff'd 121 The majority of the court gave to the N. Y. 649, 24 N. E. 1091. Indulging in word "robbery" a somewhat popuhir a bicycle race raises a question for meaning. The dissenting judges were jury under this clause, Keeffe v. Na~ of opinion that there was no robbery, tional Ace. Soc, 4 App. Div. 392, 38 since the only violence followed, and N. Y. Supp. 854. The issue is usually did not precede or accompany, the tak- for the jury, McKinley v. Banlers' ing of the boots. Ace. Ins. Co., 106 Iowa, 81, 75 N. W. 2 Rvsfin V. Standard Life & A. A. L 670. But a verdict was held against Co.. 58 Neb. 792, 76 N. W. 712, 46 L. the weight of evidence in Metropolitan B. A. 253. 76 Am. St. R. 136 (lifting a Ace. Assn. v. Bristol, 69 111. App. 492. 300 pound weight is not within the ex- 3 §§ 371, 372, supra. Burden is on cention as matter of law). Raising insurer to establish the exception, heavv machinery in regular course of Smith v. Mtva Life Ins. Co., 115 Iowa, employment is no offense under this 217, 88 N. AV. 368. clause'. Standard L. & Ace Ivs. Co. v. * Prinple v. Modern Woodmen (Neb, Schmaltz, 66 Ark. 588, 53 S. W. 49, 74 1907), 113 N. W. 231. Am. St. R. 112. Great exertion de- ^ Duran v . Standard Life & Ace. Ins. manded in time of danger does not Co., 63 Vt. 437, 22 Atl. 530, 13 L. R. A. come within this restrictive clause, 637, 25 Am. St. R. 773. Compare case 572 MEANING ANM) LEGAL EFFKCT OF ACC'IDKVJ' POLICY Walters' certificate was to be null and void if he "should die in consequence of a duel or in consequence of the violation or at- tempted violation of the laws of the State, or of the United States." Walters and Spinks, his brother-in-law, lived together in Kentucky. Walters had been absent from home for a few days, and, upon his return, went into the room occupied by Spinks and his family, where Walters' wife was. The wife of Spinks was sick in bed at the time, and his little baby was in a dying condition. After leaving the room Walters and his wife returned shortly with their own baby. A few words — not of serious import — passed between the men, and immediately they began shooting at each other, it ap- pearing by the weight of evidence that Spinks, as the aggressor, fired the first shot. In a few moments both men were lying dead in the hall adjacent to the room. The court sustained the verdict in favor of the insured, holding that there was no sufficient evidence to support the theory of a duel, and that the insured was not guilty of a violation of law, if he used his pistol in the belief that Spinks was then about to take his life, or inflict upon him great bodily harm.^ In an interesting case of first impression in Illinois, recently reported, Kilpatrick, the insured, was convicted and executed for murder. The defendant had issued to him a policy of life insurance which contained no special stipulation relating to loss of life in violation of law or at the hands of justice. In an action on the policy the defendant contended, that considerations of public policy precluded a recovery, and the courts l)elow so decided. But the Supreme Court reversed, holding tliat the argument was erroneous and rested upon the same grounds that were urged centuries ago in support of the now obsolete doctrine of attainder and corruption of blood.2 § 404. Voluntary Exposure to Unnecessary Danger. — A con- spicuous object of insurance is to provide indemnity for misfortunes resulting from inadvertent heedlessness.^ By the insertion of an when hunting expedition was con- hausen, 209 111. 277, 70 N. E. 567; eluded and company held liable, Shellenberger v. Ransom, 41 Neb. 641, Prader v. Accident Assn., 95 Iowa, 149, 59 N. W. 935, 25 L. R. A. 564; Ou-ens v. 63 N W, 601. Owens, 100 N. C. 240, 6 S. E. 794; > Woodmen of the World v. Walters Carpenter's Estate, 170 Pa. St 203, 32 (Ky., 1907), 99 S. W. 930. Atl. 637, 29 L. R. A. 145, 50 Am. St. R. 2 Collins V. Met. Life Ins. Co. (IW. 765. Dec, 1907), 83 N. E. 542, citing, ^ Providence Life Ins. & Inv. Co. v. among other cases, Knights v. Menk- Martin, 32 Md. 310, 313; Lehman v. VOLUNTARY EXPOSURE TO UNNECESSARY DANGER 573 exception covering injury or death caused by voluntary exposure to unnecessary danger/ insurers against accidental injuries have at- tempted to impose a very considerable restriction upon their general liability. While this provision of the contract may not be altogether ignored, the courts do not construe the words as meaning the same as contributory negligence in the law of torts." They hold rathei that there must be a conscious and intentional exposure to unneces- sary danger, that is to say, that the insured must he aware of such danger and purposely assume the risk of it, before the insurer can invoke the aid of this clause in defense.^ Self-defense, apparently necessary, is justifiable.^ An act is not unnecessary if porformed in Great Eastern Cas. & Ins. Co., 7 App. Div. 424, 39 N. Y. Supp. 912, aff'd 158 N. Y. 689, 53 N. E. 1127. 1 Sometimes "due diligence for per- sonal safety or protection " is required, § 408, infra. 2 Travelers' Ins. Co. v. Randolph, 78 Fed. 754, 24 C. C. A. 305, 47 U. S. App. 260 (cases cited); Keene \ , Xeir Eng. Mut. Ace. Assn., 164 Mas:j. 170, 41 N. E. 203; Wilson v. Xortkwestern Mut. Ace. Assn., 53 Minn. 470, ^79, 55 N. W. 626 (distinction explained). But see Sargent v. Central Ace. Ins. Co., 112 Wis. 29, 87 N. W. 790, 88 Am. St. R. 946; Shevlin v. Association, 94 Wis. 180, 68 N. W. 866, 36 L. R. A. 52. 3 Ashenfelter v. Emploiiers' Liability Assur. Corp., 87 Fed. 682, 31 C. C. A. 193 (contractor suffocated by burning bucket of tar, company liable); Col- lins V. Ban! ers' Ace. Ins. Co., 96 Iowa. 216, 64 N. W. 778, ,59 Am. St. R. 307 (fishing in the dark from boat without knowledge of snags, company liable); Irwin V. Phoenix Ace., etc., Assn., 127 Mich. 630, 86 N. W. 1036 (not mere thoughtlessness meant, as where mason stepped on unsupported end of scaf- fold), Thomas v. Masons' Fraternal Ace. Assn., 64 App. Div. 22, 71 N. Y. Supp. 692 (gun standing against a tree slipped and injured hunter. The court said, "voluntary exposure in such cases is not mere carelessness and recklessness, but implies that the per- son accused has knowingly and with- out reason put himself in the way of some danger from which injury is likely to occur"). It is not enough that the act of the insured is voluntary; there must also be knowledge of the danger, Equitable Ace. Ins. Co. v. Os- bom, 90 Ala. 201, 9 So. 869, 13 L. R. A. 267. The words are not to be strictly and literally interpreted as including every exposure avoidable by exercise of due care, U. S. Mut. Ace. Assn. v. Hubbell, .56 Ohio St. 516, 47 N. E. 544, 40 L. R. A. 453 (traveling salesman drowned in a slough which he delib- erately attempted to cross, company held liable). Some courts hold even that the negligence must be "gross and wanton" to avail the company, Johnson v. London G. & Ace. Co., 115 Mich. 86, 72 N. W. 1115, 40 L. R. A. 440, 09 Am. St. R. 549 (insured at- tempted to drive a bull out of a pas- ture, company liable); So it is said, there must be knowledge of the special danger; thus, a warning that it is dan- gerous in general to sleep over a steam- boat boiler is not knowledge of danger from steam escaping from safetv v^alve of boiler, Travelers' Ins. Co. v. Clark, 109 Ky. .350, 59 S. W. 7, 95 Am. St. R. 374. But knowledge of danger does not mean knowledge that injury will surely ensue. Carpenter v. American Ace. Co., 46 S. C. 541, 24 S. E. 500 (in- sured handled a kicking mule. The court said: "If the unnecessary danger be such that a reasonable, prudent man ought to have known it, and he voluntarily goes into it, it would be a voluntary exposure to unnecessary danger"). And see De Loij v. Travel- ers' Ins. Co., 171 Pa. St. 1, 32 Atl. 1108, 50 Am. St. R. 787 (intention may be determined in some cases from acts and conduct and if a man acts so care- lessly as to show an utter disregard of a known danger he then may be said to voluntarily expose himself within the meaning of the provision). 4 Campbell v. Fidelitif & Cas. Co., 109 Ky. 661, 60 S. W. 492. 571 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY the line of duty.^ Attempts to save life are not prohibited, for ex< ample, to prevent a person from being run over; ' or to rescue wrecked sailors.^ The exception as worded above, however, is applicable to a death or injury where the insured is struck by a railroad train while need- lessly running along the track at night."* But if the insured is injured when boarding a slowly moving street car a question for the jury is presented.^ And whether going upon or crossing a railroad track is within the exception, it is usually for the jury to say.^ 1 Pacific Mut. Life Ins. Co. v. Snow- den, 58 Fed. 342, 7 C. C. A. 264 (cattle dealer in transit), Rustin v. Ins. Co., 58 Neb. 792, 79 N. W. 712, 46 L. R. A. 253, 76 Am. St. R. 136 (proprietor of pleasure resort to test veracity of one of his performers raised a very heavy dumb-bell, company liable); Freeman V. Travelers' Ins. Co., 144 Mass. 572, 12 N. E. 372 (employee of railroad com- pany shoveling snow); Bateman v. Travelers' Ins. Co., 110 Mo. App. 443, 85 S. W. 128 (flagman involuntarily went to sleep); Jamison v. Continen- tal Cos. Co., 104 Mo. App. 306, 78 S. W. 812 (flagman fell asleep, question for jury, many cases reviewed); Coles v. A^. Y. Cas. Co., 87 App. Div. 41, 83 N. Y. Supp. 1063 (bartender ejected a noisy customer); Richards v. Travelers' Ins. Co. 18 S. D. 287, 100 N. W. 428 67 L. R. A. 175 ("cattle dealer visiting yards"). When the insured was en- gaged regularly in electric light repair- ing, and fell from a tree while so en- gaged it was not voluntary exposure to unnecessary danger. Continental Cas. Co. V. Jennings (Tex. Civ. App., 1907), 99 S. W. 423. 2 William's v. U. S. Mid. Ace. Assn., 82 Hun, 268, 31 N. Y. Supp. 343, aff'd 147 N. Y. 693, 4 J N. E. 726. 3 Tucker V. Ins. Co., 50 Hun, 50, 4 N. Y. Supp. 505, aff'd 121 N. Y. 718. * T utile V. Travelers' Ins. Co., 134 Mass. 175, 45 Am. Rep. 316. And see Cornish v. Accident Co.,L. R., 23 Q. B. D. 453. The exception applies in favor of the company when the in- sured is injured sitting on tlie track. Metropolitan Ace. Assn. v. Taylor, 71 111. App. 132. (But compare Fidelity & Cas. Co. v. Chambers, 93 Va. 138, 24 S. E. 393, 40 L. R. A. 432.) Or cross- ing at an improoer place, Glass v. Masons' Fraternal Ace. Assn., 112 Fed. 495. Or attempting to cross between freight cars, Willard v. Masonic Eq. Ace. Assn., 169 Mass. 288, 47 N. E. 1006, 61 Am. St. R. 285. Or climbing over car couplings. Bean v. Employers' L. Assur. Corp., 50 Mo. App. 459. Or where the insured is injured by jump- ing from a moving train after passing station, Smith v. Preferred Mid. Ace. Assn., 104 Mich. 634, 02 N. W. 990; Shevlin v. American Mid. A. Assn., 94 Wis. 180, 68 N. W. 860, 36 L. R. A. 52 (rapidly moving car, gross negligence). Or needlessly attempting to pass over a dangerous trestle on a dark night, Travelers' Ins. Co. v. Jones, 80 Ga. 541, 7 S. E. 83, 12 Am. St. R. 270; Follis v. Assoc, 94 Iowa, 435, 62 N. W. 807, 28 L. R. A. 78, .58 Am. St. R. 408. Or needlessly making a passageway of a blocked railroad yard and boarding a moving freight train. Alter v. Union Cas. & Surety Co., 108 Mo. App. 169, 83 S. W. 276. Or steeplechase riding,. Smith V. .Etna Life Ins. Co., 185 Mass. 74, 69 N. E. 10.59, 64 L. R. A. 117, 102 Am. St. R. 326. Or lowering himself from a window to escape a policeman, Shaffer v. Travelers' Ins. Co., 31 111. App. 112, 22 N. E. 589. Or pulling a loaded, cocked gun through a fence, Sargent v. Central Ace. Ins. Co., 112 Wis. 29, 87 N. W. 796, 88 Am. St. R. 946. ^ Johanns v. Nat. Ace. Soc, 16 App. Div. 104, 45 N. Y. Supp. 117. 6 Keene v. New Eng. Mid. Ace. Assn., 161 Mass. 149, 36 N. E. 891; Meadows V. Pac. Mut. Life Ins. Co., 129 Mo. 76, 31 S. W. 578, 50 Am. St. R. 427; Duncan v. Preferred Mut. Ace. Assn., 59 N. Y. Super. 145, 13 N. Y. Supp. 020, aff'd 129 N. Y. 622, 29 N. E. 1029. So of bicycle racing, Keeffe v. Nat. Ace. Soc, 4 App. Div. 392, 38 N. Y. Sunp. 854. And of engaging in a fight, Campbell v. Fidel. & Cas. Co., 109 Ky. 661, 60 S. W. 492; Collins v. Fidel. & Cas. Co., 63 Mo. App. 253; Union Cas. & S. Co. v. Ilarroll, 98 Tenn. 591, 40 S. W. 1080, 60 Am. St. R. 873. VOLUNTARY EXPOSURE TO UNNECESSARY DANGER 575 An insured does not, however, voluntarily expose himself to un- necessary danger by scaling a bank with a loaded gun; ' or by clean- ing a gun in ignorance that it is loaded; - or by crossing a railroad track at a point recognized as a thoroughfare; ^ or, as matter of law, by standing on the platform or steps of a railroad car; '' or by passing from one car to another in a vestibuled train. ^ And where the in- sured stepped from a train through a hole in the floor of a bridge, on which the train had temporarily stopped, the assured having no reason to suspect the existence of the hole, the court held that the exception did not apply and that the company was liable.^ Rebman's policy contained the provisions; "Nor does this con- tract extend to, nor insure against, death or any kind of disable- ment resulting wholl}' or parth', directly or indirectly, from voluntary' exposure to unnecessary danger. The certificate holder is required to use all due diligence for personal safety and protection." Reb- man had frequently taken the 1 : 02 p. m. train for Pittsburg at a station near his home. Shortly before the accident, orders had been given not to take on passengers at this station, but mail was re- ceived and discharged there. Rebman did not know of this order. He went to the station expecting the train to stop. He saw it ap- proach with steam off and at reduced speed. While it was running six or eight miles an hour and passing to his right, he seized the handrail at the front platform of the last car with his left hand, placed his left foot on the lower step, and was in the act of raising his body, when his hold was broken, and he fell backward and was killed. He was nearly sixty-six years of age, weighed 184 pounds, and had an umbrella under his left arm. The Pennsylvania Su- preme Court held that a judgment of nonsuit was proper, since the insured was injured by exposing himself to a risk not covered by the policy. ''' 1 Cornivell v. Fraternal Ace. Assn.. A. 271, 91 Am. St. R. 153. Especially 6 N. D. 201, 69 N. W. 191, 40 L. R. A. if forced out of the car by the crowd, 437, 66 Am. St. R. 601. Equitable Ace Ins. Co. v. Sandijer, 12 2 Union Cas. & S. Co. v. Goddard, Kv. L. R. 797. Or by illness, Pre- 25 Ky. L. R. 1035, 76 S. W. 832; jcrrcd Ace. Ins. Co. v. Muir, 126 Fed. Miller v. American Mut. Ace. Assn., 926, 61 C. C. A. 456. 92 Tenn. 167, 21 S. W. 39, 20 L. R. A. & Robinson v. Societij, 132 Mich. 695. 765. 94N. W. 211. s Payne v. Fraternal Ace. Assn., ^ Bur hard v. Travelers' Ins. Co., 119 Iowa, 342, 93 N. W. 361; Lehman 102 Pa. St. 262, 48 Am. Rep. 205; V. Great Eastern Cas. d" /. Co., 7 App. Scheiderer v. Travelers' Ins. Co., 58 Div. (N. Y.) 424, 39 N. Y. Sur^n. 912. Wis. 13, 46 Am. Rep. 618. * Travelers' Ins. Co. v. Mitchell, 78 ^ Rehman v. General Ace. Ins. Co. Fed. 754, 24 C. C. A. 305, 47 U. S. (Pa. St.), 66 Atl. 859 ("the words .\pp.2G0; Smith y. .■^tna Life Ins. Co.. 'voluntary exposure to unnecessary 115 Iowa, 217, 88 N. W. 368, 56 L. R. danger' .... have been construed 576 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY Ihe Massachusetts court came to a somewhat similar conclusion. The defendant had issued to the plaintiff, Garcelon, its policy, by the terms of which no indemnity was to be paid to anyone for an injury caused wholly or in part, directly or indirectl}-, by voluntary exposure to unnecessary danger, or for any injury which he might have averted or prevented by the exercise of ordinar}' care, prudence and foresight, or to which his own negligence might have contributed. Garcelon was a commercial traveler and desired to go by a freight train from one town in Nebraska to another. He arrived seasonably at the railroad station, found the freight train there, and put his baggage in the caboose which was the last car of the train. Seeing that the train was not ready to start, he got off the caboose and went along the street a short distance away from the train, and was then returning toward the train when it suddenly started. Believing that the train was proceeding on its journey he ran up to it, and, while it was in motion, started at a point in the street to climb up the iron ladder upon the side of one of the freight cars, intending to reach the top of that car, and, by walking upon the top of it and the following cars while the train was in motion, to reach the caboose. As he grasped one of the rounds of the ladder, the train, which was still in motion, gave a sudden and violent jerk, and he was thrown to the ground in such a manner that his left hand and arm extended over one rail of the track and the car wheel passed over it and crushed it, necessitating its amputation. It was shown that commercial travelers in Nebraska and the neighboring states are accustomed to take the same risks that Garcelon took. The court on appeal held that a verdict for the defendant was rightly ordered because upon the undisputed facts the inference was unavoidable that Garcelon's negligence contributed to the injury for which he sued.^ In another case, the plaintiff's recovery was affirmed on appeal. The insured was employed as a brakeman on a freight train known as "Extra East." His train was backed in on a side-track at Balfour to permit train No. 108, which was due there soon, to pass. It was his duty to close the switch after his train had backed upon the side-track. The engineer of "Extra East" testified that it was the duty of the insured to remain on the engine when not at work, but there was no evidence that he disobeyed any instructions or by this court and generally, as an ' Garcelon v. Commercial Travelers' intentional and unnecessary exposure E. Ace. Assn., 195 Mass. 531, 81 N. E. to danger so obvious that a prudent 201 (citing many ca.ses). person exercising reasonable foresight, would have avoided it"). VOLUNTARY EXPOSURE TO UNNECESSARY DANGER 577 rules in remaining at the switch some thirty or forty minutes until the arrival of train No. 108. This train in some way passed over both his feet and ankles, causing injuries from which death ensued. The appellate court held that the most that could have been claimed by defendant was that there was sufficient evidence to require the submission to the jury of the question as to whether the injury re- sulted from "unnecessary exposure to danger or to obvious risk of injury." ^ Hunt's policy excepted injuries resulting from "voluntary or un- necessary exposure to danger." Hunt, thirty-six years of age, was engaged in playing a game of indoor baseball in a gymnasium of the Young Men's Christian Association. The floor was slippery. Having batted the ball, he overran first base and, as he was in the habit of doing to stop himself, he put out his foot and hand against the side wall of the gymnasium which was between six and ten feet beyond the base. In doing this he broke his ankle. He admitted that he could have stopped short of the wall if he had tried. The court below directed a verdict for the defendant. The judgment was reversed and a new trial ordered. - It must be observed that while in ordinary actions for personal injuries the burden of proof rests upon the plaintiff to prove his due care, or absence of contributory negligence, under the clauses of the accident policy the burden is upon the insurance company to show that there was a voluntary exposure to unnecessary danger or a lack of due diligence.^ Where the exemption was worded to except injuries from "ex- posure to obvious risk," the English court gave the following rule: * Kephart v. Continental Cas. Co. playing baseball in the usual manner (N. Dak., 1908), 116 N. W. 349. is repugnant to the provisions of the 2 Hunt V. U. S. Ace. .4s.sn., 146 Mich. policy. The same doctrine would seem .521, 109 N. W. 1042. The court sug- to be applicable to football, polo, gested that Hunt might have slipped swimming, etc., but some policies pro- on the floor if he had tried to stop short vide for a lesser indemnity for injuries of the wall, and held that the clause received while the insured is engaged refers to cases in which there is a in such sports. And see Keefe v. realization that an accident will in all National Ace. Soc, 4 App. Div. 392, 38 probability result, and an injury fol- N. Y. Supp. 854. low, from the action about to be taken, 3 Garcelon v. Commercial Travelers' and that the danger of injury must E. Ace. Assn., 195 Mass. 531, 81 N. E. be obvious, citing many cases among 201 ; Xoyes v. Commercial Travelers' E. them, Johnson v. Accident Co., 115 .4cc. /Issn., 190 Mass. 171, 183. Where Mich. 86, 40 L. R. A. 440, where it was a party has the burden of proving a said: "The term 'voluntary exposure fact by the testimony of witnesses the to unnecessary danger' .... means jury cannot often be required by the a conscious or intentional exposure, court to say that the fact is proved, involving gross or wanton negligence Anthony v. Mercantile Ace. Assn., 162 on the part, of the insured." There Mass. 354, 357. seems to have been no contention that 37 578 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY "Two classes of accidents are excluded from the risks insured against: viz. (1) accidents which arise from an exposure by the insured to risk of injury, which risk is obvious to him at the time he exposes himself to it; (2) accidents which arise from an exposure by the in- sured to risk of injury, which risk would be obvious to him at the time, if he were paying reasonable attention to what he was doing." ^ § 405. Boarding or Leaving Cars in Motion. — Entering or trying to enter or leave a moving conveyance using steam as a motive 'power, except cable and electric street cars. This provision is valid and enforceable. ^ That the insured had alighted at an intermediate station and had not expected the train to start so suddenly offers no excuse for failing to observe the policy restriction.^ If, however, the car is not moving when the insured begins his attempt to enter, but just afterwards moves and causes his fall, the insurer will be liable.'* 1 Cornish v. Accident Ins. Co., L. R., 23 Q. B. D. 453 (1889). The insured must not wantonly take the risk of a known danger, North Am. Ace. Ins. Co. V. Gulick, 25 Ohio Cir. Ct. 395. But there is no obvious danger to an experienced house painter in using a rope-sling, thirty feet above the floor, Matthes v. Imperial Ace. Assn., 110 Iowa, 222, 81 N. W. 484. The policy provision is held to include those cases where the insured negligently exposes himself to unnecessary danger. Price V. Standard Life & Ace. I. Co., 92 Minn. 238, 99 N. W. 887 (attempting to light fire with kerosene; question for jury); as where he attempts to board a train, running eight or ten miles an hour, Small V. Travelers' Protective A.ssn., 118 Ga. 900, 45 S. E. 706, 63 L. R. A. 510. Whether an act constitutes "vol- untary exposure to unnecessary dan- ger" is often for jury. Traders', etc.. Ace. Co. V. Waglei/, 74 Fed. 457, 20 C. C. A. 588, 45 U. S. App. 39; Fidelity & Cas. Co. V. Sittig, 181 111. Ill, 54 N. E. 903, 48 L. R. A. 359 (getting on car when moving); Anthony v. Mercan- tile Mut. Ace. AsSn., 162 Mass. 354, 38 N. E. 973, 44 Am. St. R. 367, 26 L. R. A. 406. The burden is on the company to allege the facts in defense, Voluntary R. Depart, of Penn. Lines v. Spencer, 17 Ind. App. 123, 46 N. E. 477. And to prove the facts in de- fense, De Greayer v. Fidelity Cas. Co., 126 Cal. 17, 58 Pac. 390 (shot In alter- cation with park policeman), Anthony V. Mercantile Mut. Ace. Assn., 162 Mass. 354, 38 N. E. 973, 44 Am. St. R. 367, 26 L. R. A. 406 (citing cases); Meadows v. Pac. Mut. Life Ins. Co., 129 Mo. 76, 31 S. W. 578, 50 Am. St. R. 427. 2 Miller v. Travelers' Ins. Co., 39 Minn. 548; Travelers' Ins. Co. v. Snow- den, 45 Neb. 249, 63 N. W. 392. See cases in last section. 3 Travelers' Ins. Co. v. Brookover, 71 Ark. 123, 71 S. W. 246. Nor, if mak- ing an attempt to enter, is it any excuse that the insured slips and falls just before taking hold of the rail, Huston V. Travelers' Ins. Co., 66 Ohio St. 246, 64 N. E. 123. •• Terwilliger v. National Masonic Ace. Assn., 197 111. 9, 63 N. E. 1034. And going to a platform of the moving train to voznit is not within the excep- tion, Prejerred Ace. Ins. Co. v. Muir, 126 Fed. 926, 61 C. C. A. 456. In some policies the exception is aimed speci- fically at "riding on the platform or steps." This is held to mean some- thing more than being there tempo- rarily and necessarily, Standard Life & Ace. Co. V. Thornton, 100 Fed. 582, 40 C. C. A. 564, 49 L. R. A. 116. But see Hull V. Equitable Ace. Assn., 41 Minn. 231, 42 N. W. 936; Saiotelle v. Rail- waij Pass. Assur. Co., 21 Fed. Cas. 555, 15 Blatch. 216. Sometimes the phraseology of the clause is "in any part of the conveyance not provided WALKING OR BEING ON RAILWAY BRIDGE OR ROADBED 579 § 406. Riding in or on any such conveyance not provided for trans- portation of passengers. Under this clause it was held that the company is not reUeved from Uabihty by reason of the fact that the insured when injured is tem- porarily riding in a locomotive constituting part of a passenger train.* The defendant insured Ward as a "contractor, office and travel- ing," these words being written in the policy. By its printed terms, the policy did not cover injury or death, "while or in consequence of riding in or on any locomotive." Ward, in his capacity of rail- road contractor and in company with the superintendent of the road and a bridge contractor, was riding over the Rutland railroad in the Nehasane. This conveyance was in fact a locomotive, though part of it was a cab or observation car regularly used by the officials of the road. Being stopped to permit an inspection of bridge No. 78, the locomotive was started again, causing Ward to fall accidentally from the cab. He was run over by the locomotive as he lay upon the track and his head severed from his body. The court held that the written words of the policy must be given precedence over the printed clauses, and that since Ward was insured as a railroad con- tractor he impliedly had the right to travel in the Nehasane in con- nection with his business, notwithstanding the inconsistent pro- visions of the printed clauses.^ § 407. Walking or being on Railway Bridge or Roadbed. — This exception is not aimed at defects in bridges and roadbeds causing for occupancy by passengers," Over- insured is covered by the policy until beck V. Travelers' Ins. Co., 94 Mo. App. he has completely alighted in spite of 453, 68 S. W. 236. Such general pro- the above exception, King v. Travel- visions do not apply if inconsistent ers' Ins. Co., 101 Ga. 64, 28 S. E. 661, with the orderly conduct of the occu- 65 Am. St. R. 288. And see Travelers' pation of the insured stated in policy. Preferred Ace. Assn. v. Stone, 50 111. Cotten V. Fidel. & Cas. Co., 41 Fed. App. 222. Burden is on the insured 506 (baegage cheoker); Daileri v. Pre- to establish facts within the exception, ferred Masonic Mvt. Ace. Assn., 102 Anthony v. Mercantile Mnt. Ace. Mich. 299, 60 N. W. 694, 26 L. R. A. Assn., 162 Mass. 354, 38 N. E. 973, 171 (conductor); Emvlo^'ers' Liability 26 L. R. A. 406, 44 Am. St. R. 367; Assur. Corp. v. Rochdle, 13 Tex. Civ. Smith v. ^tna Life Ins. Co., 115 Iowa, App. 232, 35 S. W. 869 (railroad 217, 88 N. W. 368, 56 L. R. A. 271, 91 employee). An alleged practice of in- Am. St. R. 153. Issue often for jury, sured to jump on cars in motion is not Myler v. Standard L. & Ace. Ins. Co., relevant and cannot be shown by the 92 Fed. 861, 35 C. C. A. 55. company, Mulville v. Pac. Mut. Life ^ Berliner v. Travelers' Ins. Co., 121 his. Co., 19 Mont. 95, 47 Pac. 650. Cal. 458, 53 Pac. 918, 41 L. R. A. 467. Some policies provide a double in- 66 Am. St. R. 49. But see Mna Life demnity, "If such injuries are sus- Ins. Co. v. Vandecar, 86 Fed. 282, 30 tained while riding as a passenger in C. C. A. 48. any passenger conveyance using steam, 2 Trow v. Preferred Ace. Iris. Co, cable or electricity as a motive power; " (Vt., 1907), 67 Atl. 821. under this clause it is held that the 580 MEANING AND LEGAL EFFECT OF ACCIDENT POLICY injury to passengers engaged in lawful transit, but rather at the need- less danger of voluntary and unnecessary track walking.' In construing the meaning of the term "roadbed" the court limits it to the dangerous space occupied by track and ties. Hence the prohibition of the policy applies only to the danger zone as so de- fined and does not extend to the entire right of way of the railway company. 2 Nor does the term "roadbed" include a space of ten feet in width between double tracks.^ § 408. Due Diligence for Personal Safety and Protection.— The provision found in some policies calling for due diligence for personal safety and protection is satisfied if reasonable diligence is exercised.^ 1 Metropolitan Ace. Assn. v. Taylor, 71 111. App. 132. Thus the insurer was held liable where the insured alighting from a stationary train on a bridge fell through a concealed hole in it, Burk- hard v. Travelers' Ins. Co., 102 Pa. St. 262, 48 Am. Rep. 205. Also, where the insured unintentionally stumbled dowTi a bank against the engine, Equitable Ace. Ins. Co. v. Osborn, 90 Ala. 201, 9 So. 8G9, 13 L. R. A. 267. Also where the insured properly went on the roadbed to take a train, De Loy V. Travelers' Ins. Co., 171 Pa. St. 1, 32 Atl. 1108. Or properly crossed the track to reach the station, Duncan V. Prejerred Mut. Ace. Assn., 13 N. Y. Supp. 620, aff'd 129 N. Y. 622. Or was bitten by a dog or struck by lightning when on the track or bridge, Dougherty v. Pac. Mut. L. Ins. Co., 154 Pa. St. 385, 25 Atl. 739. Or crossed the track at the regular place provided for that purpose. Traders' & T. A. Co. V. Wajley, 74 Fed. 457, 20 C. C. A. 588, 45 U. S. App. 39; Payne V. Fraternal Ace. Assn., 119 Iowa, 342, 93 N. W. 361; Dougherty v. Pacific Mut. L. I. Co., 154 Pa. St. 385, 25 Atl. 739. But see Keene v. New England Mut. Ace. Assn., 164 Mass. 170, 41 N. E. 203. That many others may be in the habit of using the same portion of the track for a similar purpose offers no justification to the insured for vio- lation of restriction, Piper v. Mercan- tile Mut. Ace. Assn., 161 Mass. 589, 37 N. E. 759; Weinschenk v. ^tna Life I. Co., 183 Mass. 312, 67 N. E. 242. 2 Standard Life & A. I. Co. v. Lang- ston, 60 Ark. 381, 30 S. W. 427 (ends of extra long ties held to be not in- cluded in the restriction); De Lay v. Travelers' Ins. Co., 171 Pa. St. 1, 32 Atl. 1108. 3 Meadows v. Pac. Mut. L. Ins. Co. , 129 Mo. 76, 31 S. W. 578, 50 Am. St. R. 427. * Kentucky L. & Ace. Ins. Co., 102 Ky. 512, 43 S. W. 709 (hunter on fence with gun cocked). The burden of proof is on the insurer, Keene v. New Englarui Mut. Ace. Assn., 161 Mass. 149, 36 N. E. 891 (crossing railway tracks); Freeman v. Travelers' Ins. Co., 144 Mass. 572, 12 N. E. 372. And the issue is usually for the jury, U. S. Cos. Co. v. Hanson, 20 Colo. App. 393, 79 Pac. 176 (failing to follow advice of physician); Sutherland v. Stand. L. & Ace. Ins. Co., 87 Iowa, 505, 54 N. W. 453 (riding on platform of street car); Badenfeld v. Mass. Mut. Ace. Assn., 154 Mass. 77, 27 N. E. 769, 13 L. R. A. 263 (insured found dead on the edge of the track); Stone v. U. S. Cas. Co., 34 N. J. L. 371 (a fall from barn in process of construction); Duncan v. Preferred Mut. Ace. Assn., 59 N. Y. Super. Ct. 145, 13 N. Y. Supp. 620, afif'd 129 N. Y. 622 (crossing track); North Am., etc., Ins. Co. v. Burroughs, 69 Pa. St. 43 (accidental strain). But the court will hold cer- tain acts of negligence to be plainly within the exception. Standard L. & Ace. Co. V. Langston, 60 Ark. 381, 30 S. W. 427 (fell asleep on railroad tie); Morel V. Miss. Val. L. Ins. Co., 4 Bush (Ky.), 535 (put arm out of car window); Tuttle v. Travelers' Ins. Co., 134 Mass. 175, 45 Am. Rep. 316 (ran along track at night in front of moving train). The insured may, however, do whatever naturally appertains to hia occupation as stated in policy, Pac. Mvt. L. Ins, Co. V. Snowdon, 58 Fed. INSURANCE AGAINST INJURIES RECEIVED WHILE TRAVELING 581 § 409. Insurance against Injuries received while Traveling. — Many policies are confined to an insurance against loss while travel- ing by public or private conveyances for transportation of passengers. Under this class of insurance the assured was allowed to recover for an injury received by a fall on a sidewalk while walking from a steam- boat landing to a railway station, this walk being usual for travelers on that route, although he might have ridden in a hack; the court regarding the act of walking as an inseparable part and incident of an uncompleted journey.^ But, in general, walking cannot be held to be a " traveling by public or private conveyance." ^ Ira H. Wood was insured against loss by accident while actually riding as a passenger in or on any regular passenger conveyance. He was by occupation a United States railway mail clerk. In pursuance of the duties of his employment he was in the mail car of a moving train, when an accident by derailment caused his death. The court held that the phraseology of the policy would not cover the case.^ Where double compensation is allowed by the policy for injuries received "while riding as a passenger in a passenger conveyance" such compensation cannot be recovered if the insured is injured while riding on the open platform of a railway car."* 342, 7 C. C. A. 264. A passenger on a vestibuled train is not guilty of negli- gence in going into the dining car when the train is moving at full speed, if he does not know that a side door of the vestibule is open, Robinson v. U. S. Ben. Soc, 132 Mich. 695, 94 N. W. 211. See cases § 404, supra. 1 Northrup v. Railway Passenger Assur. Co., 43 N. Y. 516, 3 Am. Rep. 724, and see Theobald v. Railway Passengers' Assur. Co., 10 Ex. 45. And injuries were covered sustained in boarding a train at an intermediate station, Tooley v. Raihcay Pass. Assur. Co., 24 Fed. Cas. 53. 2 Ripley v. Ins. Co., 16 Wall. 336, 21 L. Ed. 469 (attacked bj' robbers walking home after railway journey ended). Insured to recover must be a passenger at the time. Fidelity & Cas. Co. v. Tcter, 136 Ind. 672, 36 N. E. 283 (stock dealer fell from loft of livery stable; company not liable), Hendrick v. Employers' Liability Assur- Corp., 62 Fed. 893 (returning to speak to train-man after journey ended is not enough to make the insured still "a passenger"). Pay car is not "a public conveyance for transportation of passengers," Travelers' In.t. Cn. v. Austin, 116 Ga. 264. 42 S. E. 522, 59 L. R. A. 107, 94 Am. St. R. 125. But insured, a prospector, is a passenger on steamboat, though steamboat com- pany shares the profits of the expedi- tion, /Etna Life Ins. Co. v. Frierson, 114 Fed. 56, 51 C. C. A. 424. The shot that killed the insured was fired from a passing street car, but the insured was on the front steps of her house. The defendant was not liable, Wheeler V. Fidelity & Cas. Co., 129 Ga. 237, 58 S. E. 709. 3 Wood V. General Ace. Ins. Co., 160 Fed. 926. See note 38 C. C. A. 3. ■« ^tna Life I. Co. v. Vandecar, 86 Fed. 282, 30 C. C. A. 48, 57 U. S. App. 446; Van Boklelen v. Travelers' Ins. Co., 34 App. Div. 399, 54 N. Y. 307, aff'd 167 N. Y. 590. But see Berliner v. Travelers' Ins. Co., 121 Cal. 458, 53 Pac. 918, 41 L. R. A. 467, 66 Am. St. R. 49 (a recovery was not precluded from the fact that the insured rode on the engine). An engineer may ride on his engine. Brown v. Railway Pass. Assur. Co., 45 Mo. 221. And a cattle dealer on freight cars, Richards v. Travelers' Ins. Co., 18 S. D. 287, 100 N. W. 428, 67 L. R. A. 175. CHAPTER XIX The Marine Policy^ § 410. Introductory. — The marine policy in common use in this country ^ is largely a transcript from the policy formerly adopted by English Lloyds.^ The conventional marine policy is in marked contrast with many other classes of policies, in that it is occupied mainly in describing what the underwriters are content to bear or undertake, not what they refuse to undertake. ' It is to this circumstance, namely, the general tenor of the contract itself as framed by marine under- 1 In the first edition of this book pre- pared for an impending course of reci- tations in a law school, this chapter and the next contained many excerpts from the excellent treatises on Marine In- surance by Mac Arthur and Lowndes, the phraseology of which is in part still retained. 2 See Appendix, ch. II. 3 English policy is given in full in Arnould, Ins. § 10; Chalmers & Owen, Ins. (1907), 138. Adopted as a stand- ard form for England in 35 Geo. 3, c. 63, 30 Vict., c. 23 and Mar. Inf. Act (1906), § 30. Its use is not compul- sory, Mar. Ins. Act (1906), § 30, which provides, "a policy may be in the form in the First Schedule to this Act." If a special clause is inconsistent with the provisions of the general form, the special clause will control, Hydarnes S. S. Co. V. Indemnity Mnt. M . Ins. Co. (1895), 1 Q. B. 500. For descrip- tion of English Lloyds and Lloyds policy, see § 10, notes, supra. In Eng- land and in Continental countries the marine insurance contract must be in writing; see 54 & 55 Vict., c. 39, § 93; and in England the term of a time policy must not exceed 12 months, Royal Exch. Assur. Corp. v. Sjoforsak- rings,etc. (1902), 2 K. B. 384. Stat- utory provisions as to type refer to what clauses, Cline v. Western Assur. Co., 101 Va. 496, 44 S. W. 700. As to whether under the English stamp act, a binding slip if stamped, will become a v.nlid polioy, see Home Mar. /?>.~;. Co. V. Smith (1898), 2 Q. B. 351, 67 L. J. Q. B. (N. S.) 777, 78 Law T. Rep. 734. Compare lonides v. Pacific, etc., Co., L. R. 7 Q. B. 517 (it may be evidence); Cory V. Patton, L. R. 9 Q. B. 577; Lish- man v. Northern Mar. Ins. Co., L. R. 10 C. P. 179. In construing the mean- ing of a marine policy great weight is given to usage, §§ 10, 89, supra, 1 Arn. Ins. §§ 55, 56 et seq.; 1 Duer, Ins., p. 158 et seq.; Merf v. South Car o. Ins. Co., 3 Brev. (S. C.)* 329, 331; Kingston v. Knibbs, 1 Camp. 508 n. But evidence of usage is not admissible if the usage is repugnant to the terms of the policy as written, Hearne v. Mar. Ins. Co., 20 Wall. 488, 249, 22 L. Ed. 395 (citing cases); The Schooner Reeside, 2 Sumn. 567 (Story, J.); Trueman v. Loder, 11 A. & E. 589. See also Moore v. Uni- ted States, 196 U. S. 157, 166 ("usage may be resorted to in order to make definite what is uncertain, clear up what is doubtful, or annex incidents, but not to vary or contradict the terms of a contract"); Lillard v. Kentucky, etc., Co., 134 Fed. 168 (citing many cases). Written and special clauses prevail over general printed form, Hagan v. Scottish Ins. Co., 186 U. S. 423, 428, 429, 22 S. Ct. 862. As to rules of construction generally, see §§ 84-93, supra. i Except where the underwriters add special restrictive clauses in their own favor. The modem memorandum clause constituteR one of such restric- tioii.'^. soe 5 456, infra. 2] NAME OF THJ-; At^.SURED 583 M'riters, that we must look to find a reasonable explanation of the iriendly attitude of the courts towards that class of underwriters in matters pertaining to the interpretation of the meaning and effect of the marine policy, as compared with the attitude of the courts in construing other classes of policies.' It is also interesting to note, that in spite of obscure phraseology in certain portions of the instrument ,2 the British Parliament, when codifying marine insurance law in the year 1906, gave the seal of its approval to the form of policy adopted long ago and known as the English Lloyd's policy,, almost every word of which has been judicially construed. '"* In maritime matters, Great Britain, as ocean carrier of the world's goods, has always occupied a foremost place among the Powers. The marine policy has naturally been regarded by her courts as a commercial instrument of the highest importance, and ever since the accession of Lord Mansfield to the bench we find that the great judges of England, including that illustrious jurist, have devoted their ability and learning without stint to a consistent and har- monious development of marine insurance law, difficult of attain- ment in our own country, where there are some fifty independent jurisdictions, one for each State in the Union, and federal courts besides. In this connection, however, it is worthy of mention that the English judges, as well as the American, often cite with approval a text-book on this subject written many years ago by a New Eng- land gentleman,'* which ranks in merit with the standard work of old England by Mr. Arnould. §411. Name of the Assured. — All persons except alien enemies, that is, subjects of a foreign state at war with the home country, have the right to protect their property with the home insurer.^ 1 See, for example, § 107, notes, rules existing in their favor, and bor- swpra, §§ 440, 446, injra. In view of rowed from marine insurance law, t(< the unsympathetic attitude, of both wit, that the contract is one of highest legislatures and courts, towards fire good faith, and that therefore, on peril and life insurance companies, it is a of forfeiture, there must be no misrep- question whether it would not have resentation or concealment of material been more expedient for those com- facts in negotiating the contract, and panics originally to have framed their no willful enhancement of the risk by contracts of insurance in very simple the insured diiring the period of in- form, making suitable provision for surance, §§ 10, 94, 107, 81/7^0. requiring proofs of loss or death, but - See, for example, § 456, injrn. as to other matters trusting verj' much ^ Mar. Ins. Act (1906). for their own protection to their pre- * Phillips on Ins. liminary examination of the proffered 5 Sands v. A'. Y. Life Ins. Co., 50 risk, and to the stringent common-law N. Y. 626, 10 Am. Rep. 535; Ex parte 584 MEANING AND LEGAL EFFECT OF MARINE POLICY The name of the insured should be inserted after the words "on account of."' The words "on account of whom it may concern," or similar phrases, are frequently added to the marine policy; ^ but without them a marine policy is assignable at common law, even before loss, to the assignee of the thing insured.^ § 412. Lost or not Lost. — The effect of this stipulation ^ is that the insurer takes upon himself not only the risk of future loss, but also loss, if any, that may have already happened.^ The necessity for such a retrospective apphcation in policies is evident; for, owing Lee, 13 Ves. Jr. 64. It is contraiy to public policy to allow a subject insur- ance company to give help and pe- cuniary indemnity to foreign enemies, Brandon v. Curling, 4 East, 410; Fur- tado V. Rodgers, 3 B. & P. 198. But see Driejontcin, etc.. Gold Mines v. Jan^on (1901), 2 K. B. 419. Unless the alien enemy is licensed to trade in the home country, Usparicha v. Nohle, 13 East, 332. 1 By the phrase often used in con- nection with the name of the insured in the marine policy "on account of whom it may concern," only those classes are included who were intended by the insured to be covered when the insurance was procured, Hagan v. Scottish Ins. Co., 186 U. S. 423, 22 S. Ct. 862, 46 L. Ed. 1229. But to make the phrase operative the insured need not have in mind a specific individual of the intended class, Munich Assur. Co. v. Dodwell, 128 Fed. 410 (citing many cases); Palmer v. Great Western, 10 Misc. 167, 30 N. Y. Supp. 1044, aff'd 153 N. Y. 660. A person intended to be included is covered by such a gen- eral description though his name was not disclosed to the underwriter when the policy issued. Buck v. Chesapeake /ns. Co., 1 Pet. 151,7 L. Ed. 90. Only those parties for whose benefit the policy was in fact effected, are covered by general descriptions, Boston Fruit Co. V. British . Co., 48 Barb. (N. Y.) 445 (an intent to deviate is not devia- tion). The "voyage" may cover also a subsidiary or incidental overland transit, Phetteplace v. Brit. & For. Mar. Ins. Co., 23 R. I. 26, 49 Atl. 33. And see Kratzenstein v. Western Assur. Co., 116 N. Y. 54, 22 N. E. 221, 5 L. R. A. 799. See also § 22. The voyage may be confined to inland waters. "Voyage" may refer to the enterprise rather than the route. Friend v. Gloucester Mut. Fishing Ins. Co., 113 Mass. 326. Gulf of Mexico held to be part of Atlantic Ocean, Merchants' Mut. Ins. Co. v. Allen, 121 U. S. 67, 7 S. Ct. 821, 30 L. Ed. 858. So of Charleston Bay, St. Paul F. & M. Ins. Co. v. Knickerbocker, etc., Co., 93 Fed. 931, 36 C. C. A. 19. Bayou held "a tributary" of the Mississippi, Miller v. Citizens', etc., Ins. Co., 12 W. Va. 116, 29 Am. Rep. 452. As to what are the limits of a port or har- bor or other waters see Fulton v. Presi- dent, etc., of Ins. Co., 127 Fed. 413; Cogswell v. Chubb, 1 App. Div. 93, 36 N. Y. Supp. 1076, aff'd 157 N. Y. 709, 53 N. E. 1124; Kirk v. Home Ins. Co., 92 App. Div. 26, 86 N. Y. Supp. 980. See § 418. 3 §5 186-188. DURATION AND TERMINATION OF RISK 593 departure from this will discharge the underwriters as from the time of departure. The defendants insured the plaintiff's coal on a voyage by the bark Coryphene from Seattle to Alaskan ports. The final port of discharge was Teller, on Port Clarence Bay. On arriving off Tin City, an intermediate port of discharge, the vessel was unable to land freight on account of a strong shoreward wind and fog, and so she continued onward to and anchored in the bay of Port Clarence. After being at anchor there for three days she went out to sea again for the purpose of delivering freight at Tin City, intending to return to Teller, but before she reached Tin City she was wrecked and the plaintiff's cargo aboard was lost. The court held that the voyage covered by the insurance terminated when the vessel reached her port of final destination and that the insurers were not liable for the cargo lost after she had voluntarily left the bay of Port Clarence.^ § 422. Duration and Termination of Risk. — Until the ship hath moored anchor twenty-four hours in good safety ; until the goods and merchandises shall be safely layided} Under a voyage policy the subject insured is protected during the voyage between the termini designated, regardless of needful or acci- dental interruptions and delays whether on sea or in ports.^ It is important to understand clearly what is meant by mooring in good safety or mooring in good safety for a specified time, after which the ship is no longer covered by the policy. In the first place, these words presuppose the arrival of the vessel at the terminal 1 Alasl:a B. & Safe Deposit Co. v. within the regular course of the voyage Maritime Ins. Co., 156 Fed. 710. a marine policy does not cover on land, 2 Or as in Lloyd's policy "be there Broum v. Carstairs, 3 Camp. 161; discharged and safely landed." Australian Agri. Co. v. Sauncers, L. 3 Compare §§418, 421. Thus to R. 10 C. P. 668; Harrison v. Ellis, 7 load or discharge cargo, Annen v. E. & B. 465, 3 Jur. N. S. 908, 26 L. J. Woodman, 3 Taunt. 299. Or to make Q. B. 239, 5 W. R. 494; Martin v. necessary repairs to ship, Phillips v. Mar. Ins. Co., 2 Mass. 420, and see Irving, 7 M. & G. 325, 13 L. J. C. P. § 421, rotes. Goods may be covered 145, 8 Scott N. R. 3; Motteux v. Lon- in a wuiehouse or substituted vessel don Assur. Co., 1 Atkyns, 545, 548; if landing or transshipment becomes Smith V. Surridge, 4 Esp. 25. Frozen imperatively necessary, Malinckrodt in by ice, Broum v. St. Nicholas /jw. v. Jefferson Mut. Ins. Co., 1 Mo. App. Co., 61 N. Y. 332; Delahunt v. Ins. 205; Salisbury v. Ins. Co., 23 Mo. 553. Co., 97 N. Y. 537. If landing and 66 Am. Dec. 687; Field v. Citizens' Ins. transshipment of cargo fall within Co., 11 'Mo. 50; Plantamour v. Staples, regular course of the voyage the 1 T. R. 611n; De Cuadra v. Su am, 16 policy covers goods on land, Under- C. B. (N. S.) 772. Or if landing and writers Agency v. Sutherlin, 55 Ga. transshipment are expressly permitted 266; Parsons v. Mass., etc., Ins. Co., by the policy, Tiemey v. Etherington, 1 6 Mass. 197 (in small boat); Petty v. Burr. 348; Mna Ins. Co. v. Stivers, 47 R. E. Ins. Co.. 1 Biu-r. 348. Tf'not Til. 86, 95 Am. Dec. 467. 38 594 MEANING AND LEGAL EFFECT OF MARINE POLICY point of the voyage, which is, in the case of a cargo-laden ship, the usual place of discharge; ' and, secondly, they provide that she shall have been securely anchored at that spot for the period described. ^ The term "good safety" does not mean absolute immunity from danger, for that would be a condition impossible of attainment at any stage of a marine adventure, but such a measure of security as will suffice to enable the vessel to discharge her cargo and accom- plish the other ordinary purposes of a stay in port. Two kinds of security are included in the term "good safety"; namely, physical and political safety.'^ Good physical safety means not the safety of the moorings, but of the ship; not absolute freedom from damage, for then the loss of a rope or sail or spar would prevent the vessel from being considered in safety; but, on the other hand, she must not be in a sinking condition, as was the case with a vessel which arrived at her j)ort of destination a complete wreck, and after being kept afloat for a few days, lashed to a hulk, sank in the harbor.^ Good political safety means immunity from capture or arrest; thus a British vessel, which the day after her arrival at a French port was laid under an embargo then existing against all British ships, was held to have never moored at anchor twenty-four hours in good safety.^ A cargo-laden ship must be moored at her usual place of dis- charge in good safety during the whole twenty-four hours or other period specified in the policy,*^ and accordingly in the case of a vessel which arrived at her moorings in the Thames, but the same day received an order to go into quarantine, and was, many days after, destroyed by fire before obtaining her release, it was held that the policy on the ship was still running at the time of loss be- cause the vessel had not been moored at anchor twenty-four hours in good safety.''' Where the insurance is on a vessel to a place generally without 1 Samuel v. Royal Exchange Assur. hours each, beginning from the time of Co., 8 B. & C. 119, 6 L. J. O. S. K. B. the safe mooring of the ship, Cornjoot 315 (ship lost while being Avarped v. Royal Exch. Ass. Corp. (1904), 1 K. towards the doclv); Sar/e v. Middle- B. 40, 73 L. J. K. B. 22, 89 L. T. town Ins. Co., 1 Conn. 239; King v. 490. Middletown Ins. Co., 1 Conn. 184; ^ Horneyer v. Lushington, 15 East, Upton V. Salem Commercial Ins. Co., 46, 3 Camp. 85. 8 Mete. 605; Bramhall v. Sun Ins. Co., * Shaive v. Felton, 2 East, 109. 104 Mass. 510, 6 Am. Rep. 261. As 5 Minett v. Anderson, 1 Peake's N. P. to limits of "port" see § 418. 277. And see Horneyer v. Lushington. 2 Meigs v. Mvt. Mar. Ins. Co., 2 15 East. 46. Cush. (Mass.) 439; Dickeii v. United « Simpson v. Pacific Mut. Ins. Co.. Ins. Co., 11 Johns. (N. Y.) 358. Period 22 Fed. Cas. 174; Meigs v. Sun Mid] in port, if named as days, is reckoned Ins. Co., 16 Fed. Cas. 1323. as <'onsecut.iv(> periods of twonty-fonr ^ Wriplr.<< v. Eoryirs, 2 Sir. 1243. DURATION AND TERMINATION OF RISK ;j9o any provision as to her safety there, the risk on the vessel terminates when she is safely anchored at her port of destination, in the usual place and manner. By special endorsement on the policy, in consideration of an additional premium, the ship Ravensworth Castle was at liberty to go to Antwerp. She never reached the inner dt)ck at Antwerp, which was the usual place for discharging cargo, although she ar- rived at the outer dock of that port. The court held that the voyage was not at an end.^ Although it is necessary that a vessel should have arrived at her place of discharge to terminate the insurance,^ it is not necessary that the discharge should have actually commenced; for if the vessel has arrived at her moorings dnd remained there the specified period, awaiting her turn to unload, the risk on the ship is ended. ^ Policies on outward bound vessels are sometimes so framed as to continue in force for thirty days after arrival at port of destination. The ship Afton was insured for a voyage to any port of discharge in the United Kingdom "and whilst in port during thirty days after arrival." She arrived at Greenock on the Clyde, discharged her cargo, and was placed in a dock for repairs. Within thirty days after arrival at this port of discharge she proceeded in tow on a new voyage for Glasgow. She had reached the channel of the Clyde, her stern being about 500 feet distant from the Greenock harbor works, when she was capsized by a sudden gust of wand. It was held that she was not "in port" and that the underwriters were not liable." With regard to time policies, the precise dates of commencement and termination of the risk are named in the policy.^ The day, un- less otherwise expressed, begins and ends at midnight.^ 1 Stone V. The Marine Ins. Co., etc., L. R. 13 App. Cas. 717 (port is a place 1 Exch. D. 81. If it is doubtful of safety or shelter), whether the ship in a given situs has s pm y Phoenix Ins. Co., 10 Daly arrived at the specified harbor, place, (N. Y.), 281. Se6 Leeds v. Mechanics' or anchorage, the question is one of Ins. Co., 8 N. Y. 351. Time policies, fact for the jury, Lindsay v. Jansori, 4 however, often provide that if the H. & N. 699. vessel is at sea or on passage the risk ^ Lajham v. Atlas Ins. Co., 24 Pick. shall continue until she arrives at port (Mass.) 1. of destination. A vessel was held to be 3 Bill V. Mason, 6 Mass. 313; Lidgett at sea or on passage, when started on a v. Secretan, L. R. 5 C. P. 190. river twenty-five miles inland, Union * Hunter v. Northern Mar. Ins. Co., Ins. Co. v. Tysen, 3 Hill (N. Y.), 118 6 Usually noon is expressed which Reckoned according to longitude of means solar and not standard time, place of contract, Walker v. Protection Jones V. German Ins. Co., 110 Iowa, Ins. Co., 29 Me. 317. Compare § 230, 75, 81 N. W. 188, 46 L. R. A. 860. supra. 595 MEANING AND LEGAL EFFECT OF MARINE POLICY The risk on cargo continues until the goods have been deposited upon the wharf or their customary place of discharge.^ It then ceases, for the underwriter is not liable for loss arising from theft, fire, or any other perils to which the goods may be subjected while lying on the wharf or in dock,' unless an express clause to that effect has been inserted in the policy. In order that the polic}^ may con- tinue to protect the goods while in course of landing, they nmst be taken from the ship to the shore in the mode which is usual in the trade at the port where the discharge takes place. If it is customary in the trade to convey goods from the ship to the shore in lighters, launches, or other small craft, they are protected by the policy dur- ing such transport.^ Otherwise the insured should secure the bene- fit of the special craft clause, as in the case of loading.^ B}' endorsement on an open canal cargo policy Petrie's shipment of cement was insured against perils of the seas, canals, rivers, etc., "to New York harbor." The cargo in fact was shipped to Tarry- town from the Brooklyn stores. Evidence of custom, however, was received on the trial in the action against the insurer to the effect that the term "harbor of New York," as used in the business of ("sailing" and "departure" distin- guished); driven into port by compul- sion of capture or weather, Hutton v. Am. Ins. Co., 7 Hill (N. Y.), 321. Vessel held to be at sea or on passage when detained in foreign port by com- pulsion, Wood V. New England Mar. Ins. Co., 14 Mass. 31, 7 Am. Dec. 182. Held otherwise where vessel was in port to obtain necessary clearance, water and crew, Washington Ins. Co. v. White, 103 Mass. 238. So also where vessel was in a roadstead, not a port, to take cargo, Cole v. Union Mut. Ins. Co., 12 Gray (Mass.), 501, 74 Am. Dec. 609. See Wales v. China Mut. Ins. Co., 8 Allen (Mass.), 380; American Ins. Co. V. Hutton, 24 Wend. (N. Y.) 330. 1 Grade v. Marine Ins. Co., 8 Cranch, 75, 3 L. Ed. 492; Mobile, etc., Ins. Co. V. McMillan, 31 Ala. 711, 27 Ala. 77. They need not reach consignee, Gat- liffe v. Bourne, 4 Bing. N. C. 314, 7 M. & Gr. 8.50. The risk continued where goods were detained outside port by ice, Samuel v. Ro'jal Exch. A.5.9. Co. (1828), 8 B. & Cr." 119. 2 Mansur v. New England Mut. Mar. Ins. Co.. 12 Gray (Mass.), 520; Beddall v. Brit. & For. Mar. Ins. Co., 143 N. Y. 94, 37 N. E. 613. Compare Fletcher v. St. Louis Mar. Ins. Co., 18 Mo. 193; Gardiner v. Smith, 1 Johns. Gas. (N. Y.) 141. 3 Wadsworth v Pacific Ins. Co., 4 Wend. (N. Y.) 33; StewaH v. Bell, 5 B. & Aid. 238; Matthie v. Potts, 3 Bos. & P. 23 (cases cited in note); Osacar v. Louisiana Ins. Co., 5 Mart. (N. S.) 574 (386). If, however, the assured depart from the usual course of trade by taking charge of the goods at an earlier period than they would have been delivered to him under ordi- nary circumstances, the underwriters will be discharged from responsibility, Houlder v. Merchants' Alar. Ins. Co., 17 Q. B. D. 354 (goods put in lighters, risk ended); Sparrow v. Caruthers, 2 Str. 1236 (owner put goods in lighter). But see Paul y. Ins. Co., 15 T. L. R. 535. The policy covers goods only while they are at the risk of the as- sured; and consequently, if cargo be sold afloat, without an assignment of the policy, and the buyers take de- livery of the cargo in lighters sent alongside, the risk of lighterage from ship to shore will not be covered, as the underwriters' risk would, under such circumstances, cease on delivery, North of England, etc., Co. v. Archangel M. Lis. Co., L. R. 10 Q. B. 249, 32 L. T. 561, 2 Asp. M. C. 571. * See § 419, supra. DURATION AND TERMINATION OF RISK 597 marine insurance, included Tarrytown and other points within the New York custom house district. It also appeared that the boat, which was seaworthy, arrived at Tarrytown, was moored alongside the dock, but when the tide went out it grounded and was so broken or strained that it sank and the cargo was destroyed. The jury found for the plaintiff and the judgment was affirmed, the court holding that a loss had occurred within the harbor of New York by a peril insured against, and that the insurer was liable.' Cargo should be landed within a reasonable time after the ship's arrival where no time is specified; otherwise it will cease to be cov- ered by the policy. What is a reasonable time in any particular case depends upon the usages of the trade. ^ When goods are insured b}^ vessel bound to several ports in suc- cession, the risk ends at the final port of discharge named in the policy. But the insurance may be prolonged by the addition of the words "the risk to continue until arrival of the goods at a market at their final port of discharge." ^ The underwriters' risk upon the bill of lading freight may be con- sidered coincident with the risk on goods, since it does not com- mence until the cargo is shipped, and then only applies to such portion of it as may be actually on board, unless cargo has been contracted for under a valid agreement, and is lying in readiness to be placed on board, the ship also being ready to receive it."* The termination of the risk on cargo and freight, respectiveh', is in gen- eral simultaneous. For concurrently with the landing of the goods in safet}^ the shipowner earns the freight upon them, and the risk of the underwriter on freight is proportionately reduced;^ so that, in the event of the ship being lost after a part of her cargo has been discharged, the loss on the freight policy will be limited to the freight on the cargo remaining on board.^ In the case of chartered freight, however — that is, money payable for hire of a ship under a charter party ''' — the risk commences as soon as there is an inception of per- formance under the charter party (i. e., when the owner or hirer has incurred expenses and taken steps toward earning freight) irrespective ^Petriev.Phxnix Ins. Co. ,\Z2^.Y. '"The Scottish Mar. Ins. Co. v. 137, 30 N. E. 380. Turner, 17 Jur. 631; Benson v. Chap- 2 Parkinson v. Collier, 2 Park, Ins. man, 2 H. L. Cas. 696. 653; Xoble v. Kennoway, 2 Dougl. « Fa?/ v. Alliance Ins. Co., 16 Gray- Si 0. (Mass.), 455. 3 Richardson v. London Assur. Co., ^ U. S. Shippiyig Co. v. The Empress 4 Camp. 94; Deblois v. Ocean Ins. Co.. Ass. Corp. (1906), 12 Com. Cas. 142; 16 Pick. (Mass.) 303; Maxwell v. Rob- Jackson v. The Union Mar. Ins. Co.. inson, 1 Johns. (N. Y.) 333. L. R. 10 C. P. 125. * See § 418. 598 MEANING AND LEGAL EFFECT OF MARINE POLICY of the question whether any cargo has been placed on board or is in readiness to be so placed, and continues until the vessel has per- formed her contract. But the words "from the loading thereof" in a freight policy exclude the goods not actually loaded, and also the freight for them.^ § 423. Touch and Stay. — And it shall be lawful for said vessel in her voyage to proceed and sail to, touch and stay at, any ports or places if thereunto obliged by stress of weather, etc., without prejudice to this insurance. The words "if obliged by stress of weather, etc.," ^ practically nullify the important privilege which would otherwise be extended to the insured by this clause. If such a privilege is given to touch and stay at any ports or at certain ports named, it is understood in the case of a voyage policy that the ports visited must lie within the ordinary track of the voyage, and that they must be visited for some purpose connected with the object of the adventure.^ Whether liberty to call at a port gives liberty to land or load cargo there, must depend on whether such an intention may naturally be inferred from the description of the voyage in the policy taken in conjunction with the customs of the particular trade; ^ and wherever a ship has liberty to call at a place, she may always land or load goods there, provided this can be done without additional delay.^ § 424. Prohibited Waters. — In the case of insurance on coasting or inland trade it is customary either to specifically limit the course or else to expressly exclude certain waters, regions, or ports. Such limitations are warranties and, therefore, must be strictly observed.* 1 Jones V. Neptune Marine Ins. Co., form without the addition of any L. R. 7 Q. B. 702, 41 L. J. Q. B. 370, special clause. 1 Asp. M. C. 416, 27 L. T. 308. * Metcalfe v. Parry, 4 Camp. 123; 2 These words are sometimes omit- Urquhart v. Barnard, 1 Taunt. 450, 10 ted and specific ports named. Rev. Rep. 574. ^ Lavabre v. Wilso7i, 1 Dougl. 284; ^Kingston v. Girard, 4' Dall. 274; Hogg V. Horner, 2 Park, 626; Bragg v. Hughes v. Union Ins. Co., 3 Wheat. Anderson, 4 Taunt. 229; Williams v. (U. S.) 159; Kane v. Columbian Ins. Shee, 3 Camp. 469; Hammond v. Ried, Co., 2 Johns. (N. Y.) 264; Kaine v. 4 B. & Aid. 72; Sollij v. Whitmore, 5 Bell. 9 East, 195; Cormack v. Gladstone, B. & Aid. 45; Laing v. Union Mar. Ins. 11 P^ast, 347. Co., 1 Com. Cas. 11; Bottomley v. Bovill, ^ Lovett v. China Mid. Ins. Co., 174 5 B. & Cr. 210. Where steamers or Mass. 108, 54 N. E. 338 (prohibited sailing vessels of a particular line or in from Cape Breton waters, Otc); Parker a particular trade Habitually follow a v. China Mid. Ins. Co., 164 Mass. specific route or call at certain ports, 237,41 N. E. 267 (Gulf of Campeachy); the usage so to do will be tacitly in- Odiorne v. New Eng. Mut. Mar. Ins I'orporated in a policy in the ordinary Co., 101 Mass. 551, 3 Am. Rep. 401 PROHIBITED WATERS 599 The limitation or exception often takes the form of an express warranty.^ The house boat Mon Mon was insured by a policy which "war- ranted confined to the inland waters of Xew Jersey, New York and Long Island." She sank under tow from Gravesend to Sheepshead Bay and when opposite the Oriental Hotel and within about a quarter of a mile of Coney Island. The court held that the natural boundary of inland waters was to be found in the line connecting the extremity of Sandy Hook with the nearest point on Rockaway Beach and that the insurers were liable.' (cannot by offer of usage contradict a plain description contained in the policy); Cobb v. Lime Fork F. & M. Ins. "Co., 58 Me. 326; Fulton v. Pre>ri- dent, etc., of Ins. Co., 127 Fed. 413 ("confined to inland waters of New Jersey, New York, and Long Island"); Kirk V. Home Ins. Co., 92 App. Div. 26, 86 N. Y. Supp. 980 ("confined to waters of New Haven Harbor," etc.). The same rule applies to ocean traffic, Birrell v. Dryer, 9 App. Cas. 345; Colledge v. Hartij, 6 Exch. 205. See § 186. That a breach in no wise con- tributes to the loss is immaterial, Co^.-j- u-ell V. Chvbb, 1 App. Div. 93, 72 N. Y. St. R. 20, 36 N. Y. Supp. 1076, aff'd 157 N. Y. 709, 53 N. E. 1124. But mere intention or attempt, for instance, going towards prohibited places, con- stitutes no breach, Thames, etc., Ins. Co., 86 Fed. 150, 56 U. S. App. 676, 29 C. C. A. 624; Snoiv v. Columbian Ins. Co., 48 N. Y. 624, 8 Am. Rep. 578; Beams v. Columbian Ins. Co., 48 Barb. 445. Whether customary or statutory boundary lines control, see FuUon v. Ins. Co., 136 Fed. 182. iSee §455, infra. Cullen, Ch. J., says, though not in a case of marine insurance, "It has been suggested that, under the decision we are about to make, insurance companies, to avoid the law of waiver, will change the terms of their policies and, instead of inserting conditions the breach of which render a policy void, provide that in case of such a breach the policy shall not cover the loss. There is no such danger. A provision of the kind suggested would be just as much a forfeiture as if expressed in the form now in use, that the policy shall be void," Draper v. Oswego Co. Fire Re- lief Assn., 190 N. Y. 18, 82 N. E. 755. "i Fulton v. Ins. Co. of N. A., 136 Fed. 182, 69 C. C. A. 198. But Rond- out Creek, two and one-half miles from the North River, cannot be construed to be part of the "North River," Has- torf V. Greenvich Ins. Co., 132 Fed. 122; Tarrytown shown to be within "New York harbor," Petrie v. Phoenix Ins. Co., 132 N. Y. 137, 30 N. E. 380. CHAPTER XX Marine Policy — Concluded § 425. Perils of the Sea.^ — In considering the scope of the marine insurance policy, it must be observed that the term "perils of the seas" refers only to fortuitous casualties of the seas, and does not include the ordinary action of the winds and waves, known as "wear and tear," nor incidental delay; ^ but any ordinary occurrence may become extraordinary if qualified by unusual conditions. Thus, a transport in government service was ordered into Boulogne, where there is a dry harbor, and was moored near one of the quays. The vessel took the ground on the ebb of the tide, as was inevitable; but, owing to the presence of a considerable swell in the harbor, she struck the ground with unusual violence, and subsequently eighteen of her knees were found to be broken. The court held that this damage was the result of a peril of the sea.* 1 "Touching the adventures and perils which the said insurance com- pany is contented to bear, and takes upon itself in this voyage, they are of the seas, men-of-war, fires, enemies, pirates, rovers, thieves, jettisons, let- ters of mart and countermart, re- prisals, takings at sea, arrests, re- straints and detainments of all Kings, princes or people, of what nation, con- dition or quality soever, barratry of the master and mariners, and all other perils, losses and misfortunes that have or shall come to the hurt, detriment or damage of the said .... or any part thereof." 2 Dudgeon v. Pembroke, L. R. 9 Q. B. 596 (wreck). Lord Bramwell sug- gests the following definition of "perils of the seas": "Every accidental cir- cumstance, not the result of ordinary wear and tear, delay, or the act of the assured, happening in the course of the navigation and incidental to the navigation, and causing loss to the subject-matter of the insurance," Thames F. M. Ins. Co. v. Hamilton (1887), 12 App. Cas. 492. It must be a peril of the sea and not merely a peril on the sea, Cullen v. Butler, 5 M. & Sel. 461 (another ship fired upon and sunk the ship insured. Held, however, covered under the later phrase "all other perils"), Laveroni v. Drury, 8 Exch. 166, 22 L. J. (Exch.) 2 (damage to cargo of cheese by rats not covered). But striking a vessel on sunken rock on a calm day and foun- dering is a sea peril. The Xantho, 12 App. Cas. 503; Ajum Goolam v. Union Mar. Ins. Co., 17 T. L. R. 376. So also striking an iceberg, Hamilton v. Pan- dorf, 12 App. Cas. 527. A marine policy may be worded to cover nothing but fire loss, Dwinnell v. Minneapolis F. & M. Mut. Ins. Co., 90 Minn. 383, 97 N. AV. 110. May even follow pro- visions of standard fire policy, Jack- son V. British Am. A.ssnr. Co., 106 Mich. 47, 63 N. W. 899, .30 L. R. A. 636. Ship moored as hospital is a fire rather than a marine risk, City of De- troit V. Grummond, 121 Fed. 963, 58 C. C. A. ,301. But held that insurance on a seagoing vessel against fire only is a marine contract coming within ad- miralty jurisdiction, North Germari Fire Ins. Co. v. Adams, 142 Fed. 439, 73 C C A 555 3 Fletcher v. Inglis, 2 B. & Aid. 315. [600] PERILS OF THE SEA 601 In another case, the ship proceeded in the course of her trading to Sunderland, where she was moored head and stern, and took the ground in the usual way at the ebb of the tide. The beach was hard and steep, and the ship lay with a shght Ust toward it. She appeared to strain in this position, especially when taking the ground and floating, and after remaining some time in the place it wns found that she was hogged. The court held that the damage received under the above circumstances was not caused by perils of the seas, but fell within the designation of wear and tear. Here the vessel in conse- quence of the rising and falling of the tide, rested upon the river's bed and received damage. There was nothing fortuitous, no peril, no accident.^ So also the English court has declared that difficulties arising merely from the ordinary obstruction or closing in by ice of a port, which is subject to be closed, and is always closed, in the winter months, do not amount to a peril of the seas within the ordinary meaning of a policy of marine insurance, but that when the obstruc- tion by ice is accidental and unexpected, due, for example, to the ^Magnus v. Bvttemer, 11 C. B. 876. Compare Seaman v. Ins. Co., 21 Fed. 778. Held, that loss was by peril of the sea in following cases: Where live cattle carried between decks were thrown violently together and killed by the tremendous rolling of the sea, though not touched by water, Snojc- den V. Guion, 101 N. Y. 458, 5 N. E. 322. And see Coit v. Smith, 3 Johns. Cas. (N. Y ) 16. So also though the cattle, in the course of their distur- bance, kicked one another to death, Gabarj v. Lloyd, 3 Barn. & C. 793, 10 E. C. L. 229 (compare Compania de, etc.,\. Brauer, 168 U. S. 104). Where a cargo was thrown into the river by the careening of the vessel though due to carelessness of those unloading, Crescent Ins. Co. v. Vicksburgh, etc., Packet Co., 69 Miss. 208, 13 So. 254. 30 Am. St. R. 537. Where drums of glycerine were displaced and injured on board, by the rolling, The Frcy, 106 Fed. 319. Contact with sea water in the hold, Neidlinger v. Ins. Co., 11 Fed. 514. Heavy cross seas though not uncommon. BuUnrd v. Ins. Co., 1 Curt. (U. S.) 148 (contra, Gvlnare, 42 Fed. 861). Taking ground in bad po- sition, or striking hard substance on the harbor bottom as tide ebbs, Hnqnr v. Ins. Co., 59 Me. 460 (cases cited); McNally v. Ins. Co.. 63 N. Y. Supp. 125, 31 Misc. 61; Petrie v. Phrevix Ins. Co., 132 N. Y. 137, 30 N. E. 380. Ac- tion of wind while the injured boat was being hauled to a railway, Ellery v. New Eng. Ins. Co., 8 Pick. (Ma.ss.)'l4. Parting of a raft of logs caused by cur- rents in a river, Moores v. Louisville Underwriters, 14 Fed. 226. Water en- tering a dead light left open, The Sil- via, 68 Fed. 236; Starbitck v. Phcenix Ins. Co., 19 App. Div. 139, 45 N. Y. Supp. 995, 47 App. Div. 621, 62 N. Y. Supp. 264, aff ;d 166 N. Y. 593, 59 N. E. 1130. Injuries while making land- ings. Seaman v. Enterprise F. ct ^1/. Ins. Co., 21 Fed. 778. Accident to a small boat from ordinary swell of a steamer, Washington Mid. Ins. Co. v. Peed, 20 Ohio, 199. Damage by sea water through hole in the vessel eaten by rats, Garrigues v. Coxe, 1 Binn. (Pa.) 592; Hamilton v. Pandorf, 12 App. Cas. 518. An escape of steam injured eight mules under a river policy. Union Ins. Co. v. Groom, 4 Bush. (Ky.) 289. Burden is on the insured to show that the damage was from perils of sea. Coles v. Mar. Ins. Co., 6 Fed. Cas. 65; Fleming v. Marine Ins. Co., 3 Watts & S. 144, 38 Am. Dec. 747. But as to burden of proof in case of unseaworthiness see § 183, sitpra. The term "perils of the seas" as occurring in a policy and in a bill of lading com- pared, Wilson V. Xantho, 12 App. Cas. 503. ()02 MEANING AND LEGAL EFFECT OF MARLVE POLICY prevalence of unexpected winds or currents, then an extraordinary difficulty and danger is created and such obstruction and danger constitute a peril of the seas.^ In another English case twenty-six packages of dead pigs had been shipped at Hamburgh on board the Leopard. Thirty-two quarters of beef had been shipped at a later date for the same voyage on board the Ostrich. Both shipments were consigned to the plain- tiff, the insured. All the meat so shipped became putrid and was necessarily thrown ovei'board, not because of any direct action of storms or seas affecting it, but solely on account of the unusual delay in the voyage which, however, was occasioned by tempestuous weather. The English court held that this was not a loss b}' perils of the seas, or within the words "all other perils, losses, and mis- fortunes," etc., in the policy.- During a voyage of one of the ocean liners from New York to Liverpool the ship's carpenter and the deck hands erect a temporary structure on deck to protect passengers while dancing. The job is done so carelessly that the shelter with its heavy supports falls to the deck in calm weather. The collapse breaks certain cabin windows, damages the temporary structure and also injures one of the ladies who was engaged in dancing at the time. The injured passenger recovers compensation for her hurt and her fright from the steamship company. The steamship company, however, fails to recover from its underwriters for the damage sustained by the temporar}^ erection and the ship; since the loss is not within the scope of the perils clause of the marine policy as construed by the courts.^ Nor can the steamship company look to that policy to recover reimbursement for the amount of the judgment paid by it to the injured passenger; since the usual marine policy does not cover employers' liability, which forms the subject of another class of insurance.^ ^ Popham V. St. Petersburg Ins. Co., sions, whether by the seamen or by 10 Com. Cas. 31 (ships rammed and sentinels placed on board by a superior driven aground by ice in Kara Sea; force, and loss of possible earnings of miderwriters liable). the vessel, prevented by embargo, are 2 Tat/lor v. Dunbar, L. R. 4 C. P. none of them within the usual policy, 206, approved in Thames & Mersey Martin v. Salem Mar. Ins. Co., 2 Mar. Ins. Co. v. Hamilton, 12 App. Mass. 420. Cas. 484. Damage to cargo by ordi- 3 Thames & Mersey Mar. Ins. Co. nary dampness of the hold "^is not v. Hamilton, L. R. 12 App. Cas. 493, covered by the policy though aggra- 50 L. J. Q. B. 626 (so of damage to the vated by the length of the voyage due ship's chronometer, if tlie master, to stress of weather, Balder v. Mjrs. through a fit of giddiness, should drop Ins.. Co., 12 Gray (Mass.), 603. Dam- it into the hold), age to cargo by worms or climate, and * See § 475, infra. extraordinary expenditure of provi- COLLISION 603 "Maritime perils" is a much broader phrase than "perils of the seas. § 426. Foundering at Sea. — Foundering at sea is included among the perils of the sea if caused by the violence of the winds or waves or any other accidental occurrence, but not so if caused by overload- ing, original defect, or inherent weakness in the ship.^ § 427. Grounding. — Grounding, whether arising from stress of w-eather, ignorance of the locality, blunder or stupidity, the desire to avoid some approaching vessel or other danger, in short, for any reason out of the ordinary course of things in the voyage, is con- sidered one of the perils of the sea.^ § 428. Collision. — Collision is also a peril,'* and this whether the collision be the result of inevitable accident, or fault on the part of the ship insured, or of fault on the part of the other ship; for, on the principle of causa proxima, the underwriters must pay, be the fault whose it may.^ The courts differ, however, as to whether the under- 1 " ' Maritime perils' means the perils consequent on, or incidental to the navigation of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seiz- ures, restraints, and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind or which may be designated by the policy," Eng. Mar. Ins. Act (1906), § 3. "The policy enumerates many maritime perils, such as capture, seiz- ure, fire, etc., which are incidental to marine adventure, but which are not perils of the seas," Chalmers & Owen Ins. (1907), 145. 2 Merchants' Trad. Co. v. Universal Mar. Ins. Co., L. R. 9 Q. B. 596; Ham- ilton V. Pander], 12 App. Cas. 524; Gartside v. Orphans' Ben. Ins. Co., 62 Mo. 322. If a ship has not been heard of for so long a time after sailing that there remains no reasonable hope of her safety, she is presumed to have foundered at sea. There is neither in this country nor in England any fixed rule as to when that presumption arises, Houstman v. Thornton, Holt N. P. 242 (nine months); Green v. Broivne, 2 Strange, 1199 (four years) ; Broum V. Seilson, I Games, 525. In England, after an interval of time supposed to be sufficient to cover the reasonable chances of arrival, the ship is posted at Lloyd's as missing, and then the un- derwriters are expected to pay. As to proving loss see Tivemslow v. Osioin, 2 Camp. 85; Koster v. Reed, 6 B. & Cr. 19. 3 Running on a shoal. Dent v. Smith, L. R. 4 Q. B. 414. Malposition on bottom of tidal harbor, McNaWi v. Ins. Co., 63 N. Y. Supp. 125, 31 Misc. 61. And §§425, 426, 428. * Peters v. Warren Ins. Co., 14 Pet. (U. S.) 99, 10 L. Ed. 371. Compare under bill of lading, Woodlei/ v. Mitch- ell, 11 Q. B. D. 47 (collision without waves or wind, not a peril of the sea). 5 Richelieu Nav. Co. v. Boston Ins. Co., 136 U. S. 408, 421, 10 S. Ct. 934, 34 L. Ed. 398; Matthews v. Howard Ins. Co., 11 N. Y. 9. Compare as to clause in bill of lading. The Xantho, 12 App. Cas. 503 (a sea peril though no extraordinary violence of winds and waves). Collision is de- fined in England to be the contact of two objects both of which are naviga- ble. Chandler v. Bloqg (1898), 1 Q. B. 32, 67 L. J. Q. B. (N. S.) 336, 77 L. T. Rep. 524 (barge was previously sunk but held navigable). Striking a wreck is not collision with another vessel, Burnham v. China Mut. Ins. Co.. 189 Mass. 100 (1905), 75 N. E. 74. Held, in Virginia, that collision does not in- 604 MEANING AND LEGAL EFFECT OF MARINE POLICY writers' liability extends to cover payments made by the insured for damages to the other ship. The English and federal courts hold that such loss is too remote to be covered unless expressly insured.^ The Massachusetts court adopts the opposite view and considers the loss within reach of the ordinary marine policy without specific mention.^ It is usual, how- ever, to provide for this liability by a distinct contract called the collision or running down clause.'"' elude striking a sunken vessel or other sunken object, Cline v. Western Assur. Co., 101 Va. 496, 44 S. E. 700 (cases cited). In New York it was held, re- vciiing the court below (23 App. Div. 152), that while the above rule is per- haps too narrow, yet collision does not include an intentional forcing of a vessel through floating ice, though the injuries be inifore.seen, Newton Creek Toning Co. v. .Etna Ins. Co., 163 N. Y. 114. ,57 N. E. 302. But the court admitted the tendency of modern de- cisions to broaden the protective effect of the policy, and perhaps public in- terests would be better, and ciuite as logically, served in such cases by holding, as many courts have held under the accident policy, that acci- dental and unforeseen results of a violent and destructive character, though due to intentional acts may be covered by the policy, § 385. This argument gathers force in construing the ordinary marine policy which in- sures even against barratry though the policy in the Newtown Creek Towing Co. case was not of that class. If the master drives the vessel into the ice floes with intent to scuttle her, the underwriters must pay, § 434. Why not if the violent impact of the ice and the consequent damage are un- expected and unintentional? Either- ship in collision may be anchored or moored, London Assur. v. Companhia de Moagens, 167 U. S. 150, 17 S. Ct. 784. 42 L. Ed. 113; The Granite State, 3 Wall. 310. And an anchor though far from ship is part of ship. In re Margetts (1901), 2 K. B. 792, 70 L. J. K. B. 762, 85 L. T. 94, 9 Asp. 217. And a tug and ship may be regarded as one, The Niobe (1891), App. Cas. 401. Some- times the policy clause expressly in- cludes risk of striking wharves, ice, wreckage, etc.. The Munroe (1893), Prob. 248; Reischer v. Borvrick (1894), 2 Q. B. 548 (collision witli snag held proximate cause of loss); Union Mar, Ins. Co. V. Borwick (1895), 2 Q. B. 279. As to what amount of impact amounts to a collision, see London Assur. V. Companhia de Moagens, 167 U. S. 150, 17 S. Ct. 784. By English law under clause "free from partic- ular average un1e.ss" vessel be "in collision," underwriters are not re- lieved from liability for subsequent partial loss though not due to the col- lision itself. As to damages occasioned by two collisions, dock dues, and de- murrage, etc., during repairs, see The Hnverham Grange (1905), Prob. 307, 74 L. J. P. 115. 1 De Vaux v. Salvador, 4 A. & E. 420; The Barnstable, 181 U. S. 464, 21 S. Ct. 684; Gen. Mid. Ins. Co. v. Sherwood, 14 How. (U. S.) 3.52. 2 Massachusetts; Whorf v. Equitable Mar. Ins. Co., 144 Mass. 68, 10 N. E. 513. As to right of subrogation in favor of insurer after paying a loss, .see §§ 52 e< seq.; and N eiv England Mut. Mar. Ins. Co. v. Dunham, 18 Fed. Cas. 99; Fox V. Blossom, 9 Fed.. Cas. 638; Newell V. Norton, 3 Wall. 257, 18 L. Ed. 271; Atlantic Ins. Co. v. Storrow, I Edw. Ch. (N. Y.) 621. 3 Tatham v. Burr (1898), App. Cas. 382; London Steamship Owners' Ins. Co. V. Grampian S. Co., L. R. 24 Q. B. D. 663, 59 L. J. Q. B. 549, 38 W. R. 651, 62 L. T. 784, 6 Asp. M. C. 506. See Appendix of Forms, ch. II. The principle of the collision clause is that the underwriters will relieve the in- sured of three-fourths of his liability to pay damages for loss of property in and on board the other ship. Scope of the clause. Burger v. Indemnitif, etc., Co. (1900), 2 Q. B. 348, 69 L. J. Q. B. 838, 82 L. T. (N. S.) 831; The NoHh Britain (1894), P. 77. Period of year for bringing suit on policy runs from date of fixing liability by judicial ac- tion, Rogers v. ^Etna'lns. Co., 95 Fed, 103. The insured is to take one-£ourth STRESS OF WEATHER 605 In New York the term "collision" seems not to be limited to an impact between vessels or navigable objects, but to include also an accidental striking of a vessel against ice or other foreign object.^ § 429. Stress of Weather.— Under the head of sea perils must be classed, also, damages suffered through stress of weather; ^ as by blows of the seas carrying away bulwarks, boats, deck houses, and the like; loss of masts and yards in a gale; springing of a leak through violent straining; shifting or wetting of the cargo. The only diffi- culty in such cases consists in distinguishing between sea peril which is covered and wear and tear which is not covered by the policy.^ If there be a fortuitous grounding or stranding of the vessel, the underwriter will be liable for the loss thereby occasioned, although the action of the winds and waves may not be extraordinarily violent or tempestuous. The steamer Miles H. insured by the defendant, while navigating Tug Fork of the Big Sandy river, was accidentally stranded on a rocky bar. The wind is frequently heavy in that bend of the river. himself, as a check upon carelessness in the choice of servants; and his re- sponsibility in respect of loss of life and personal injury, as well as for damage to the cargo in his own ship, is left untouched. There is a difference to the insured in the language of dif- ferent collision clauses in respect to the matter of costs of litigation, a pro- vision for which is sometimes omitted from the clause, in which case the un- derwriters are not responsible for their share of costs, Fernald v. Prov. Washington Ins. Co., 27 App. Div. 1.37, 50 N. Y. Supp. 83S; McWilliams v. Home l7is. Co., 40 App. Div. 400, 57 N. Y. Supp. 1100; Xenos v. Fox, L. R. 3 C. P. 630, 4 C. P. 665, 38 L. J. C. P. 351, but the federal court allowed the expenses of successfully defending the suit exclusive of counsel fees, Egbert v. St. Paul F. & M. Ins. Co., 92 Fed. 517. And compare West field v. Mayo, 122 Mass. 100. But see Mxinson v. Stand- ard Mar. Ins. Co., 156 Fed. 44. The liability under the collision clause is not particular average; consequently is not subject to the limitation of five per cent in the memorandum clause. A special collision clause given in Wharf V. Equitable Mar. Ins. Co., 144 Mass. 68, 10 N. E. 513. The collision clause was adopted because of the decisions of the courts, De Vaux v. Salvador, 4 A. & E. 420; Peters v. Warren Ins. Co., 3 Sumn. 389. The word "ship" as em- ployed in the clause is given a very broad meaning, and embraces her launch, boats, etc., The Devonian (1901), Prob. 221; M'Coiuan v. Baine (1891), App. Cas. 401; and anchor. In re Margetts (1901), 2 K. B. 792. But does not include a tug towing her, Coastwise S. S. Co. v. /Et7ia Ins. Co., 161 Fed. 871; and see Western Transit Co. V. Brown, 161 Fed. 869. If both ships in collision belong to the same owner he cannot recover under the collision clause since he cannot sue himself, Simpson v. Thomson, 3 App. Cas. 279. As to removal of obstruc- tions provision in collision clause, .see Tatham v. Burr (1898), App. Cas. 382; The North Britain (1894), Prob. 77; Burger v. Indemnity , etc., Co. (1900), 2 Q. B. 348. As to what losses are re- coverable under a collision clause, see The Kate (1899), Prob. 165; The Ar- gentino, 14 App. Cas. 519; The Consett, 5 Prob. D. 229. Damages paid for loss of life are not recoverable, Taylor v. Deivar, 33 L. J. Q. B. 141. 1 Neivtown Creek Toiving Co. v. ^tna Ins. Co., 163 N. Y. 114, 57 N. E. 302 (in the briefs are cited many au- thorities). ^Murray v. Receivers, eic.,58 Barb (N. Y.) 9,'l7. 3 § 444, infra. 606 MEANING AND LEGAL EFFECT OF MARINE POLICY On the day of the accident it was high and came in gusts and the accident was attributable to the wind, although it did not amount to a tornado, nor was there anything extraordinary about it. The policy provided that no claim would be made for damage resulting from stranding or grounding unless caused by stress of weather. The jury was allowed to find for the plaintiff and on appeal the judgment was sustained.^ § 430. Fire. — Fire ^ may arise from a variety of causes — from lightning, the spontaneous combustion of the cargo, the negligence of the master or crew,^ the acts of enemies, or the precautionary measures of rulers (as in case of a vessel burned by the municipal authorities for fear of being infected).'* Under the ordinary marine policy the underwriter is liable for loss occasioned b}^ fire, whether its origin is inexplicable or Avhether it can be assigned to one of the causes mentioned above or some other kindred cause, with the exception of combustion generated through the inherent defect of the subject insured, or because the goods were shipped in a damaged state.^ But if the combustion is originated by sea damage sustained by the goods after shipment, it is covered by the policy; and however the fire may have been occasioned, if it extend to other goods which are unconnected with the cause of the disaster, or to the ship herself, the insurance on such other goods is responsible for the fire loss to them, and the insurance on ship is re- sponsible for the damage so sustained by it.^ The risk of fire is covered during the whole of the transit of goods, ^Huntington, etc., Transp. Co. v. Knight of St. Michael (189S), Froh. ^0, Western Ass. Co. (W. Va., 1907), 57 67 L. J. P. D. & A. (N. S.) 19, 78 L. T. S. E. 140. Usual freezing of water in R. 90. Slacking of lime is a fire, pipes is not by "stress of weather" Singleton v. Phoenix Ins. Co., 132 N. Y. under an exception in a bill of lading, 298, 30 N. E. 839. Damage to the in- C, C, C. <& St. L. R. Co. V. Heath, 22 terior of a boiler from lack of water is Ind. App. 47, 53 N. E. 198. not a loss by hostile fire, American 2 As to what is a hostile fire, see Towing Co. v. German F. Ins. Co., 74 § 231, supra. Md. 2.5, 21 Atl. 553. An insurance was 3 Busk V. Royal Exch. Assur. Co., against fire only by valued policy. 2 B. & Aid. 73; Waters v. Merchants' Previous to the fire, the ship stranded Ins. Co., 11 Pet. (U. S.) 213. with loss so great that repairing would ^McArthur, 115, 116. Voluntary fire have been unprofitable. Held, that to avoid capture is covered, Gordon v. the insured was entitled to recover for Rimmington (1807), 1 Camp. 123. total loss on shin, Wood.nde v. Globe '''Bond V. Dubbois, 3 Camp. 133; Mar. Ins. Co. (1896), 1 Q. B. 105, 73 Prov. Wash. Ins. Co. v. Adler, 65 Md. L. T. R. 626, 65 L. J. Q. B. (N. S.) 162, 4 Atl. 121. 117. Under policy "free from average ^ Monto-a v. London Assur. Co., 6 unless general or the ship be iaurnt," Exch. 451. Imminent danger of fire ship must be substantially destroyed disturbing the voyage may amount to to give rigjit of recovery, The Glenlivet a fire loss under a freight policy, The (1894), Prob. 48. PERILS OF WAR, ETC. 607 on shore as well as on shipboard, provided the transit is for one en- tire or unbroken voyage.^ It was held in one case that an explosion of steam caused by the bursting of a marine boiler, though not identical with fire, is a peril of a sufficiently like kind to be covered by the clause of the policy specifying "all other perils, losses, and misfortunes."^ But that case was subsequently criticised by the House of Lords and sub- stantially overruled.^ If the word "fire" is omitted from the list of enumerated perils which the underwriters declare themselves "contented to bear," apparently the usual clause, with this omission, will not include losses by fire unless the fire be caused by some sea peril or other peril specified, as, for example, barratry, or the action of the winds or waves. ^ § 431. Perils of War, etc. — Men of war, enemies, pirates, rovers, thieves, letters of mart and countermart, reprisals, takings at sea, ar- rests, restraints, and detainments, etc. The common feature in this list of perils is violence at the hands of man. The underwriter takes upon himself the burden of all loss or damage thus occasioned,^ whether it consist of injury to the ves- sel's hull, spars, and rigging by an enemy's shot or shell, or by other hostile acts, or the total destruction of the property insured by the operation of the same causes, and whether the insured is a belligerent or a neutral. As, however, merchant vessels are not, in general, able to offer a successful resistance to the attack of an armed ship, the casualty which most frequently results from hostilities is capture. Capture, in the proper signification of the term, is the forcible appropriation of property by an enemy or belligerent with intent to keep it.^ "Takings at sea" or "seizure" is a broader term ^ and in- ^ Pelhj V. Royal Exch. Assur. Co., expressly limited, Straas v. Mar. Ins. 1 Burr. 341. And see § 22, supra. Co., 23 Fed. Cas. 210, 1 Cr. C. C. 343; 2 Wed India & P. Tel. Co. v. Home, Elting v. Scott, 2 Johns. * 157. etc.. Marine Ins. Co., 4 Asp. Mar. L. C. ^ Suinnerton v. Columbian Ins. Co., 341, L. R. 6 Q. B. D. 51, 50 L. J. Q. B. 37 N. Y. 174, 93 Am. Dec. 560, 6 L. R. 41. A. 248 {held, that the seizure and sink- 3 Thames & Merseu Marine Ins. Co. ing of a vessel, if the act of the South- V. Hamilton, L. R. 12 App. Cas. 484, em Confederacy and not the act of a 6 Asp. M. C. 200, 56 L. J. Q. B. 626, mob, were within the F. C. S. war- 36 W. R. 337, 57 L. T. 695. And sec ranty); Lovering v. Mercantile Mar. Louisville Undenvriters v. Durland, Ins. Co., 12 Pick. (Mass.) 348; Dale v. 123 Ind. 544, 24 N. E. 221, 7 L. R. A. New Eng. Mut. Mar. Ins. Co., G Allen 399. (Mass.), 373; Mauran v. Alliance Ins. 4 Thames & M. Ins. Co. v. Hamilton, Co., 6 Allen (Mass.), 384, notj. 12 App. Cas. 484; Cullen v. Butler, 5 ' Cory v. Burr, 8 App. Cas. 393; M. & Sel. 461. Rodocanachi v. Elliott, L. R. 8 C. P. * Levy V. Merrill, 4 Me. 180. Unless 649. 608 MEANING AND LEGAL EFFECT OF MARINE POLICY eludes every forcible proceeding whereby the insured is deprived of the control or possession of his property, whether permanently or only temporarily/ whether the act be legal,^ or illegal,^ whether com- mitted by regularly commissioned vessels of war, privateers, pirates,^ or by a friendly power in consequence of mistake,^ or by mutinous passengers or slaves.^ The phrase "capture, seizure, and detention" in its entirety as employed in a policy, is not to be confined to acts of an enemy or to acts of warfare/ For example, the taking may be by the gov- ernment of the insured, and yet come within the clause.* This phrase, or one of modified import, is used on occasions to describe the sole risk insured against.^ On the other hand it frequently follows the words "free from" or "free of" to denote not a liability, but an exception to the underwriters' liability which would other- wise be imposed upon them by the words of the general perils clause set forth at the head of this section.^" The words "men-of-war" and "enemies" obviously refer to those who, authorized by a prince or sovereign state, make war in the mode sanctioned by the law of nations as distinguished from "pirates," "rovers," and "thieves," who are unauthorized depredators.^^ "Letters of mart" are commissions granted by the sovereign power to those persons whose property has been seized by subjects of other states, authorizing the former to indemnify themselves for the loss sustained by making reprisals. "Letters of countermart" are letters issued in favor of those threatened by such reprisals, ^Savage v. Pleasants, 5 Binn. (Pa.) ^Fowler v. English & Scot. Ins. Co., 403, 6 Am. Dec. 424; Johnston v. Hogg, 34 L. J. C. P. 253. 5 Asp. Mar. I.. C. 51, 10 Q. B. D. 432. lo See § 453, infra: Black v. Marine 2 Goss V. Withers, 2 Burr. 683. Ins. Co.,!! John. (N. Y.) 286. 3 Powell V. Hyde, 5 E. & B. 607. As n Emerigon, 413; Eldridge, Ins., 110; to exception of seizure for illicit trade, Ritssell v. Niemann, 34 L. J. C. P. 14 see Carrington V. Merchants' Ins. Co., ("the 'king's enemies' means the ene- 8 Pet. (U. S.) 495. mies of the carrier's sovereign, whatever * Dean v. Hornby, 3 E. & B. 180. title he may enjoy — whether queen, 5 Powell V. Hyde, supra; Lozano v. emperor, president, duke, doge or Janson, 2 E. & E. 160, 28 L. J. Q. B. aristocratic assembly"); Fowler v 337. Eng., etc.. Ins. Co., 34 L. J. C. P. 25. ^ Kleinwort v. Shepard, 1 E. & E. A mutinous crew who make off Avith 447, 28 L. J. Q. B. 147; Naylor v. the ship are pirates, Brown v. Smith, 1 Palmer, 8 Exch. 739, 10 Exch. 382. Dow P. C. 349. So also a body of But compare Greene v. Pac. Mut. Ins. mutinous emigrants, Na'>ior v. Palmer, Co., 9 Allen (Mass.), 217. 8 Exch. 739, lo Exch. 382; KleimvoH T Miller v. Law Ace. Ins. Co. (1903), v. Shepard, 28 L. J. Q. B. 147. So also 1 K. B. 712, 722; Cory v. Burr, 8 App. a plundering mob, Nesbitt v. Liishing- Cas. 393. ton, 4 T. R. 783. "The term 'pirates' ^ Robinson Gold M in. Co. V. Alliance includes passengers who mutiny and Ins. Co. (1902), 2 K. B. 489; Green v. rioters who attack the ship from the Young, 2 Ld. Raym. 840; Hagedorn v. shore," Eng. Mar. Ins. Act (1906), 1 Whitmore, 1 Stark. 157. Sch. 8. PERILS OF WAR, ETC, 609 authorizing them to resist the privateers furnished with letters of mart.^ Captured property is not considered to have been divested from its original owner until it has undergone sentence of condemnation in a legally constituted court of the enemy .^ But the assured may abandon to the underwriter, and claim for a total loss, on first hear- ing of the capture. If the abandonment is accepted by the under- writer, the matter is settled. If it is declined, the assured may take legal proceedings on the policy, and will recover by the English rule, provided the property is not restored before action is brought.^ By the American rule, it is said that the right to recover is made absolute by the state of facts on which the abandonment is founded at the date of abandonment, and does not depend on subsequent events.^ Necessary expenses incurred in the redemption or recovery of captured property are, in general, recoverable under the policy.^ lEldridge (1907), 116. "^Barney v. Maryland Ins. Co., 5 Har. & J.(Md.) 139. 3 Rriys V. London Assur. Corp. (1897), 2 Q. B. 135, 77 L. T. R. 23, 66 L. J. Q. B. (N. S.) 534 (recovery allowed in full though ship was returned pend- ing action). 4 Man/land & Phoenix Ins. Co. v. Balhursi, 5 Gill & J. 159; Lee v. Boardman, 3 Mass. 238, 3 Am. Dec. 134; and see Lovering v. Mercantile Ins. Co., 12 Pick. (Mass.) 348; § 194, supra. 5 Havelock v. Rockivood, 8 T. R. 268; Parsons v. Scott, 2 Taunt. 363. But not wages, provisions, or demurrage during capture, Barney v. Maryland Ins. Co., 5 Har. & J. (Md.) 139. Also the following are held to be captures or seizures either within the general perils clause in favor of the insured or within the meaning of the excep- tion "free from capture, seizure," etc., in favor of the underwriters, Mauran V. Alliance In.9. Co., 6 Wall. 1 , 18 L. Ed. 836 (by southern confederacy); Dole V. Merchants' Mid. M. Ins. Co., 51 Me. 465; Baltimore Ins. Co. v. Mc- Fadon, 4 Har. & J. (Md.) 31 (capture, sale, and return of proceeds to insured); Dole v. New Eng. Mut. M. Ins. Co., 6 Allen (Mass.), 373; Swinnerton v. Columbian Ins. Co., 37 N. Y. 174, 93 Am. Dec. 560; Duval v. Commercial Ins. Co., 10 Johns. (N. Y.) 278; Fi- field V. Ins. Co., 47 Pa. St. 166, 86 Am. b9 Dec. 523 (capture by confederacy); Savage v. Pleasants, 5 Binn. (Pa.) 403, 6 Am. Dec. 424 (voyage broken and delayed); Merchants' Ins. Co. v. Ed- moTbd, 17 Grat. (Va.) 138, citing many authorities; St. Paid F. & M. Ins. Co. V. Morice (1906), 11 Com. Cas. 153 (cattle disease on board. Bull seized and slaughtered by local authority); Cory V. Burr, 5 Asp. Mar. L. C. 109 (warranty covers seizure though the result of barratrous smuggling, and imderwriters discharged)' Johnston V. Hogg, 5 Asp. Mar. L. 6. 51 (so of forcible detention by natives with in- tent to plunder); Powell v. Hyde, 5 E. & B. 607 (so of seizure by mistake supposing vessel Turkish); Green v. Elmslie, Peake N. P. C. 212; Livie v. Janson, 12 East, 648. Actual con- demnation need not be proved, Dorr v. Pope, 8 Pick. (Mass.) 232. The master need not abandon the voyage because of a threat of illegal capture, Williams v. Suffolk Ins. Co., 13 Pet. (IT. S.) 415. The following are held not to be cap- tures or seizures, Patterson v. Mar. Ins. Co., 5 Har. & J. (Md.) 417 (ship stopped by blockade and sent back). So where master abandoned voyage because of hostilities, NicHls v. Lon- don & P. Mar. Ins. Co., 70 L. J. K. B. 23, G Com. Cas. 15; Greene v. Pac. Mut. Ins. Co., 9 Allen (Mass.), 217 (mutinous possession by the crew not a capture or seizure under the warranty). Muti- nous possession by the crew may be GiO MEANING AND LEGAL EFFECT OF iMARINE POLICY § 432. Arrests, Restraints of Kings, Princes, or People, etc. — This clause refers only to acts of state, or acts authorized by the sovereign autliority in the country.^ An unauthorized seizure or detention, as by a mob in a meal riot, does not come within the clause, though the underwriter would be liable for it as a loss by pirates or thieves.^ Nor does the peril specified embrace an arrest or detention occurring by virtue of ordinary legal process, as, for instance, where a vessel is libeled for non-payment of her debts. ^ While capture, the peril described in the last section, is taking possession with intent to keep, arrest may be defined as a taking with intent ultimately to restore to the owner, and restraint, a prevention of the goods from going.^ Restraints of princes comprehends every case of interruption by lawful authority.^ piracy, Brown v. Smith, 1 Dow. 349; or barratry, Dixon v. Reid, 5 B. & Aid. 597. Taking of vessel just out- side port is not a seizure within port, Watso7i V. Marine his. Co., 7 Johns. (N. Y.) .57 Duval v. Commercial Ins. Co., 10 Johns. (N. Y.) 278, Brown v. Tierney, 1 Taunt. 517; Mellish v. Staniforih, 3 Taunt. 499. As to what is requisite to make condemnation valid, see The Flad Oyen, 6 C. Rob. 135; Havelock v. Rockwood, 8 T. R. 268; Oddy V. Bovill, 2 East, 475; Smart v. Woif, 3 T. R. 283; Schooner Sophie, 6 C. Rob. 138. 1 Simpson v. Charleston F. & M. Ins. Co., Dudley (S. C), 239; Miller v. Law, etc., Ins. Co. (1902), 2 K. B. 694, aff'd (1903) 1 K. B. 712. As where by order of Transvaal government, cer- tain shipments of gold were seized on the eve of hostilities, Janson v. Con- solidated Mines (1902), App. Cas. 484, 71 L. J. K. B. 857, 87 L. T. 372, 51 W. R. 142; Robinson Gold M. Co. v. Alliance Assur. Co. (1904), App. Cas. 359. Arrest and detention by a Brit- ish privateer. Grade v. A^. Y. Ins. Co., 13 Johns. 161. And see Hurtin v. Phcenix Ins. Co., 12 Fed. Cas. 1047; Shapley v. Tappan, 9 Mass. 20. " The term 'arrests, etc., of Kings, princes and people' refers to political or execu- tive acts, and does not include a loss caused by riot or by ordinary judicial process," Eng. Mar. Ins. Act (1906), 1 Sch. 10. 2 Neshitt V. Lushin/jton, 4 T. R. 783. Restraints and detainments of princes are synonymous in meaning, Richard- son V. Maine Ins. Co., 6 Mass. 102, 4 Am. Dec. 92. Loss by arrest bv the government of an alien insured may be recovered against under- writers in this country if the arrest was not committed with hostile intent towards this country, Aubert v. Gray, 3 B. & S. 163. An unfounded fear of capture does not amount to res-traint. King v. Delaware Ins. Co., 6 Cr. 71, 3 L. FA. 155; Corp. v. United Ins. Co., 8 Johns. (N. Y.) 277. As to meaning of "unlawful restraint," see McCall v. Marine Ins. Co., 8 Cr. 59, 3 I.. Ed. 487; Olivera v. Union Ins. Co., 3 Wheat. 183, 4 L. Ed. 365; Thompson v. Read, 12 Serg. & R. (Pa.) 440. Loss by danger of capture may be recoverable. Knight of St: Michael (1898) , P. 30. And see The San Roma, L. R. 5 P. C. 301; Nobel's Explosives Co. v. Jenkins (1896), 2 Q. B. 326. Wages, provi- sions, demurrage during detention are not recoverable, Barney v. Maryland Ins. Co., 5 Har. & J. (Md.) 139; Field S. S. Co. V. Bnrr (1899), 1 Q. B. 590. ^ Finlag v. Liverpool, etc., Co., 23 L. T. (N. S.) 251. There must be some violent departure from the ordinary course of things. Miller v. Land, etc., Ins. Co. (1902), 2 K. B. 694, aff'd (1903) 1 K. B. 712 (diseased cattle were prohibited by municipal law from admission into port of destina- tion; held, no arrest or detention). * Rodocanachi v. Elliott, 28 L. T. Rep. 840. 5 Russell v. Niemann, 34 L. J. C. P. 14. As where the government of which the assured was subject, being in need of transports laid an embargo on all ships in port, Aiibert v. Gray, 32 L. J. Q. B. 50. And see Smith v. Rosario Nitrate Co. (1894), 1 Q. B. 174 BARRATRY 611 The species of arrest to which shipping has been most frequently subject is an embargo, which is a decree issued by the government of a state to prohibit the departure of vessels lying within its juris- diction.^ An embargo laid upon any vessel entitles the assured, in general, to give notice of abandonment as for a total loss;^ but a mere rumor of a hostile embargo would not justify an abandon- ment to the underwriters; ^ nor an embargo which the insured knew would involve only a temporary and unimportant detention.'' A blockade operates as a restraint of princes with respect to prop- erty detained within its compass; ^ and if a blockade breaks up and terminates a voyage the insured may abandon to the underwriters, and claim a total loss.^ §433. Thieves. — The word "thieves," associated as it is with "enemies, pirates, rovers," has in England been held applicable only to persons outside the ship who enter and commit robbery, this con- clusion being put upon the ground that the ship or master is liable in tort for goods stolen or embezzled by anyone on board.''' But in America the clause is held applicable as well to a larceny or theft committed by passengers or those in the service of the ship.* §434. Barratry. — The term "barratry" includes every wrongful act willfully committed by the master or crew to the prejudice of the 1 Walden v. Phoenix Ins. Co., 5 Dec. 222; Hadkinson v. Robinson, 3 Johns. * 310. B. & P. 388. As to warranty not to 2 Odlin V. Ins. Co., 18 Fed. Cas. 583; abandon in case of blockade, see § 462, Lorent v. South Car. Ins. Co., 1 Nott. & infra. McC. (S. C.) 505 (cases cited). t Steinman v. Angier Line (1891), 3 Atkinson v. Ritchie, 10 East, 534. 1 Q. B. 619 (and cases cited). So also So also where government official gave Tennessee, Marshall v. Nashville M. & erroneous information regarding the F. Ins. Co., 1 Humph. 99. Same ri:I° law of the port, Brunner v. Webster, 5 ing as to bill of lading, Steinman case, Com. Cas. 167. supra, and Taylorv. Liverpool, etc., Co., i Rotch V. Edie, 6 T. R. 413; Foster L. R. 9 Q. B. 546, 2 Asp. Mar. L. C. 277. V. Christie, 11 East, 205. « Spinetti v. Atlas S. Co., 80 N. Y. 5 Rodocanachi V. Elliott, 28 L.T.(N. 71, 36 Am. Rep. 579 (cases cited); S.) 845. Atlantic Ins. Co. v. Storrow, 5 Paige ^ Simonds v. Union Ins. Co., 22 (N. Y.), 285; American Ins. Co. v Fed. Cas. 165, 1 Wash. C. C. 382, 4 Brijan, 26 Wend. 563, 37 Am. Dec. 278. Dall. 417; Vvjers v. Ocean Ins. Co., 12 As to whether a destructive mob can La. (O. S.) * 362, 32 Am. Dec. 118; be regarded as "assailing thieves," Schmidt v. United Ins. Co., 1 Johns. see Babbitt v. Sun Mut. Ins. Co., 23 (N. Y.) 249, 3 Am. Dec. 319; Wilson v. La Ann. 314. A seizure by consul United Ins. Co., 14 Johns. (N. Y.) 227. without proof of felonious intent, Pad- The mere fear or warning of blockade dock v. Commercial Ins. Co., 2 Allen or of interdiction of trade is not suffi- (Mass.), 93. Seizure by sovereign of cient to come within the terms of island Labonaga of goods purchased the policy, Richardson v. Maine Ins. without paying or intending to pay Co., 6 Mass. 102, 4 Am. Dec. 92; Craig for them. Parsons v. Mass. F. & M. V. United Tns. Co., 6 .Tohns. 226, ■> Am. Tni^. Co., 6 Mass. * 197. "The term 612 MEANING AND LEGAL EFFECT OF MARINE POLICY owner, or, as the case may be, the charterer of the ship.' But mere negUgence or error of judgment does not constitute barratry.^ Though acts to be barratrous must be prejudicial to the owner, they need not be so intended, if intentionally committed.^ Accord- ingly, any unauthorized breach of law exposing the owner to penal- ties is barratry, even though intended for his advantage; "* nor need the barratrous act, if unlawful, be intended to enure to the self-bene- fit of the master or mariners committing it.'' 'thieves' does not cover clandestine theft or a theft committed by anyone of the ship's company, whether crew or passengers," Eng. Mar. Ins. Act (1906), 1 Seh. 9. 1 Many definitions and authorities given by Chalmers & Owen (1907), p. 163. Lawton v. Sun Mid. Ins. Co., 2 Cush. (Mass.) 500, 511, 512; Atkin- son V. Gi-eat Westein Ins. Co., 65 N. Y. 531 (citing many cases). Any fraudu- lent or criminal conduct against the owner of ship or goods, Earl v. Row- crojt, 8 East, 126 (though same man own both ship and cargo); Cook v. Commercial Ins. Co., 11 Johns. (N. Y.) 40. It is said that the intent must be to defraud either the general owners or the charterer of the ship, 2 Arn. (7th ed.), p. 1501; Messonier v. Union Ins. Co., 1 Nott & McC. (S. C.) * 155, * 165; Nnitt V. Bourdieu, 1 T. R. 323. Barra- try is a Crime at common law, Mes- sonier V. Union Ins. Co., supra. And by statute, for instance, N. Y. Penal Code §§ 575, 576. There must be an intent to commit a wrongful act, whether criminal or only fraudulent, Wiggin v. Amory, 14 Mass. 1, 7 Am. Dec. 175 (stopping and recapturing a vessel, no barratry). "The term 'barratry' includes every wrongful act wilfully committed by the master or crew to the prejudice of the owner, or, as the case may be, the charterer," Eng. xMar. Ins. Act (1906), 1 Sch. 11. 2 There was no barratry where the captain, with bad judgment only, broke up a sea damaged ship before she was surveyed, Todd v. Ritchie, 1 Stark, 240. Likewise where a captain mistook the meaning of his sailing in- structions, Bottomley v. Bovill, 5 B. & Cr. 210. There was no barratry where the mate neglected to assume command nv>o\\ incapacity of the cap- tain, Hvtchins v. Ford, 82 Me. 363, 19 Atl. 832. Negligence, however, may be so gross as to afford almost conclu- siveevidence of awillful breach of duty: as when a captain neglects to rise from his berth, though seeing another per- son about to fire the ship, Patapsco Ins. Co. v. Coulter, 3 Pet. (U. S.) 222, 7 L. Ed. 659. Or where a captain, dis- regarding the pilot's instructions, cuts the cable and drifts on rocks, Heyman V. Parish, 2 Camp. 149. 3 Earle v. Rowcrojl, 8 East, 126 (going into enemy's settlement to trade more advantageously without instructions). So also an unlawful capture by a neu- tral vessel, Wilcocks v. Union Ins. Co., 2 Binn. (Pa.) 579, 4 Am. Dec. 480. But mere deviation from the course, if not fraudulent, is not barratry, Ph/n V. Royal Exch. Ass. Co., 7 T. R. 505. Honest mistake as to sailing instruc- tions is not barratry, Bottomley v. Bo- vill, 2 B. & Cr. 210. •* Grill V. General Iron Screw Col- liery Co., L. R. 3 C. P. 476, 18 L. T. 485, 37 L. J. C. P. 205. 10 W. R. 796. Omission to pay port dues incurring forfeiture is barratry, Stamma v. Brown, 2 Strange, 1174. And so is breach of embargo, Robertson v. Ewer, 1 T. R. 127. Willful breach of blockade, though intended to benefit owner, is barratry, Goldschmidt v. Whitmore, 3 Taunt. 508. Likewise a willful resist- ance to right of search, or unlawful attempt to rescue vessel rightfully de- tained, Dederer v. Delaware Ins. Co., 2 Wash. (C. C.) 61 Fed. Cas. No. 3, 733; Wilcocks v. Union Ins. Co., 4 Binn. (Pa.) 579. A willful violation of statute by carrying Polynesian laborers without license, Australasian Ins. Co. v. Jack- son, 3.3 L. T. R. (N. S.) 286. Cruising in deliberate violation of instructions, Moss V. Byrom, 6 T. R. 379. 5 Dederer v. Delaware Ins. Co. , 2 Wash. (C. C.) 61, Fed. Cas. No. 3,733. Other instances of barratry are srut- tling, Voisin v. Commercial Mid. Ins. Co., 62 Hun, 4, 16 N. Y. Supp. 410. Stranding the ship, Soares v. Thorn- ton, 7 Taunt. 627. Burning the ship, Pntn.pscn Ins. Co. v. Coulter. 3 Pet. BARRATRY 613 But it should be clearly understood that any complicity between the owner and the master in the commission of the fraudulent or unlawful act will exclude it from the category of barratry.' Nor can the owner of goods recover, under the term barratry, for any act sanctioned by the shipowner; ^ nor the owner of the ship, for any act done by the charterer's agent. ^ By the law of insurance the insured is not to take advantage of his own wrong, nor can one commit barratry against himself; there- fore a master, who is also sole owner of the ship, cannot commit barratry; ■* but, if only part owner, he may commit barratry as against his innocent coowners and their underwriters.^ (U. S.) 222, 7 L. Ed. 659; Phoe7iix Ins. Co. V. Moog, 78 Ala. 284, 56 Am. Rep. 31. Selling the ship or any part of it, Lawton v. Sun Mid. Ins. Co., 2 Cush. (Mass.) 500; Hibbert v. Martin, 1 Camp. 538. Running away with the ship, Falkner v. Ritchie, 2 Maule & S. 290; Dixon V. Reid, 5 B. & Aid. 597, 7 E. C. L. 201. No barratry, if the owner knew of the proposed deviation, Thurston v. Columbian Ins. Co., 3 Caines (N. Y.), 89. Deviating from the course for a private adventure of the captain is barratry, Ross v. Hunter, 4 T. R. 33. Criminal delay is barratry, Roscoiv v. Corson, 8 Taunt. 684. Like- wise a stowage of cargo on deck, in- stead of under deck in violation of known duty, Atldnson v. Great West. Ins. Co., 65 N. Y. 531, overruling, 4 Daly, 1 (many cases cited). So also stealing cargo, Stone v. National Ins. Co., 19 Pick. (Mass.) 34. Unlawfully selling cargo though with the belief that the owners' pecuniary interests would be enhanced thereby, Meyer v. Great West. Ins. Co., 104 Cal. 382, 38 Pac. 82; New Orleans Ins. Co. v. Albro Co., 112 U. S. 506, 5 S. Ct. 289, 28 L. Ed. 809. Plundering or making away with proceeds of cargo, Falkner V. Ritchie, 2 Maule & S. 290. Any mischief done to ship or cargo by mutineers, EUon v. Brogden, 2 Str. 1264; Vallejo v. Wheeler, 1 Cowp. 154. Or like mischief done by mariners in conspiracy with prisoners, Toulmin v. Anderson, 1 Taunt. 227. Examples of barratry through mere illegality are smuggling, Havelock v. Hancill, 3 T. R. 277. Illegal trading, American Iris. Co. V. Dunham., 15 Wend. (N. Y.) 9; Earle v. Roucroft, 8 East, 126. See Carrington v. Merchants' Ins. Co., 8 Pet. (l^. S.) 495. Resistance by a neutral to a belligerent's lawful right of search. Brown v. Union Ins. Co., 5 Day (Conn.), 1, 5 Am. Dec. 123. Breach of port regulations, exposing the ship to seizure or penalties, Knijht v. Cambridge, referred to in 8 East, 136. 1 Ward V. Wood, 13 Mass. 539. Com- plicity may be inferred from a want of reasonable vigilance, as where a cap- tain had gone on smuggling for three successive voyages without interfer- ence on the part of the owner, Pipon v. Cope, 1 Camp. 434. - Stamma v. Brown, 2 Strange, 1173; Nutt V. Bourdieu, 1 T. R. 323. 3 Hobbs V. Hannam, 3 Camp. 94. i Marcardier v. Ins. Co., 8 Cr. 39, 3 L. Ed. 481. Nor can owTier of ship commit barratry as to cargo. 5 Pha;nix Ins. Co. v. Moog, 78 Ala. 284, 56 Am. Rep. 31; Hutchins v. Ford, 82 Me. 363, 19 Atl. 832; West- port Coal Co. v. McPhail (1898), 2 Q. B. 132; Jones v. Nicholson, 10 Exch. 28, 23 L. J. Exch. 330; Contra, Wilson V. Ins. Co., 12 Cush. (Mass.) 360, 59 Am. Dec. 188. And such part owner may commit barratry as against the mortgagee of his interest in the ship, Small V. United Kingdom, etc., Assoc. (1897), 2 Q. B. 311, 76 L. T. R. 828, 66 L. J. Q. B. (N. S.) 736. As to when charterers are to be regarded as owners in relation to masters and mariners, see Marcardier v. Chesapeake Ins. Co., 8 Cr. 39, 3 L. Ed. 481; Taggard v. Loring, 16 Mass. 336, 8 Am. Dec. 140; Hallet V. Columbian Ins. Co., 8 Johns. (N. Y.) 272; Trinitij House v. Clark, 4 M. & S. 288; Vallejo v. Wheeler, 1 Cowp. 143; Soares v. Thornton, 7 Taunt. 627. Mariners may commit barratry against mate who is a freighter of goods, Stone V. National his. Co., 19 Pick. (Mass.) 34. Barratry is not included 614 MEANING AND LEGAL EFFECT OF MARINE POLICY § 435. Jettison.— This is the intentional throwing overboard of a part of the cargo, or any article on board of a ship, or the cutting or casting away of masts, spars, rigging, sails, or other furniture, usually for the purpose of lightening or relieving the ship in case of necessity or emergency.^ For such losses, the underwriter of the goods jet- tisoned is in the first instance directly liable, but, having paid, he is subrogated to the claim of the insured in general average against that part of the venture, if any, saved by such a sacrifice for the com- mon safety.^ A jettison, however, is not always made with the purpose of pro- moting the common safety, as, for instance, where the ship being in imminent danger of capture, the master dropped a bag of specie into the sea lest it should fall into the hands of the enemy, for which the underwriter was held liable under the head of jettison;^ but where goods are thrown overboard on account of their inherent vice, the underwriters are not liable.^ § 436. All Other Perils, Losses, or Misfortunes. — The terms of this clause are so comprehensive as at first sight to convey the im- pression that the}^ embrace every kind of mishap, not already enu- merated, to which property at sea can be subjected. Such, however, is not the case; for here the rule of construction applies that general terms following particular terms apply only to matters which are of the same kind with those specified.^ Accordingly, the effect of the general undertaking, expressed as above, is to bring within the as a "sea peril" unless specifically Burton v. English, 10 Q. B. D. 426, 12 mentioned, Waters v. Merchants' Ins. Q. B. D. 218; Johnson v. Chapman, 35 Co., 11 Pet. (U. S.) 213, 9 L. Ed. 69; L. J. C. P. 23; Wright v. Mancood, 7 Mathews v. Hoicord Ins. Co., U N. Y. Q. B. D. 62. 11. 16; Gazzam V.Ohio Ins. Co., Wright '■'Dickenson v. Jardine. L. R. 3 C. (Ohio), 202; Citizens' Ins. Co. v. Marsh. P. 639, 37 L. J. C. P. 321, 16 W. R. 41 Pa. St. 386; Contra dictum, Atkinson 1169, 18 L. T. 717. As to jettison in v.GieatWest. Ins. Co., 65N.Y. 531,552. its relation to general average see, But barratry is included in the clause § 216, supra. "usual marine risks," Parkhurst v. ^ Butler v. Wildman, 3 B. & A\d. S9S Gloucester Mut. Fishing Ins. Co., 100 (not a general average act, see § 216). Mass. 301. 4 Taylor v. Dunbar, L. R. 4. C P. 206, iThe Portsmouth, 9 Wall. 682; 38 L. J. C. P. 178, 17 W. R. 382. Merchants' S- Mfrs. Ins. Co. v. Shillito, 5 Thames dc M. Ins. Co. v. Hamilton 15 Ohio St. 559, 86 Am. Dec. 491 (jet- 12 App. Gas. 484, 17 Q. B. D. 195* tison of goods on deck where such 56 L. J. Q. B. 626, 57 L. T. 695, 6 Asp! stowage was proper). A jettison of M. C. 200 (reviewing many cases* in- goods carried on deck is not covered by jury to donkey engine in ordinary the ordinary policy, unless it is the use not included); Cullen v. Butler, 5 custom so to carry them, Da Costa v. M. & Sel. 461, 465. And see discussion Edmunds, 4 Camp. 142; as usually is of this clause, § 446, infra. "The term the case of inland river voyages, 'all other perils' includes only perils Apollinaris Co. v. Nord Deutsche Ins. similar in kind to the perils specifically Co. (1904), 1 K. B. 252. See Royal mentioned in the policy," Eng Mar Exch. S. Co. v. Dixon, 12 App. Cas. 11 ; Ins. Act (1906), 1 Srh. 12. ri;OXi.\lATE CAUrSt 615 .scope of the contract all casualties which, though not identical with, are similar to, the risks enumerated. Thus, the expression of "all other perils, losses, and misfortunes," has been held to include damage to a ship which had been heeled over by the wind in a graving dock; ' the loss of dollars thrown overboard from a vessel on the point of capture, in order that they might not be taken possession of by the enemy; - the wrecking of a steamer through the bursting of the boiler, etc., if from the unusual action of the sea.*'' § 437. Proximate Cause. — Every event is the culmination of a series of numerous antecedent causes or influences "^ more or less intimately associated together, some operating successively, others in combination. Where a chain of causative forces or circumstances terminates in a loss, and only one of the causative links is a peril insured against, while the others are either without mention in the policy, or else are expressly warranted by the insured to be excluded from its operation,^ the liability or exoneration of the underwriter may easily turn upon the correct answer to this inquiry, namely, in accounting for the effect, which cause ought to be selected as the significant or controlling cause? ^ Difficult problems under the topic "proximate cause" are pre- sented for solution, more frequently, perhaps, in connection with insurance than with any other class of contracts, and can only be mastered by a careful examination of many decisions. It will be profitable to consider this subject as related to the marine policy for two reasons, first, because that policy has to do wdth many perils, including fire, and, second, because the subject of proximate cause has been developed with marked thoroughness in this branch of insurance law. As already shown in prior chapters the dominant, efficient cause is termed the proximate cause, though not always nearest to the loss either in time or place,^ and it has often been declared generally that ^ Phillips V. Barber, 5 B. & Aid. 161. contenteth itself with the immediate ^ Butler v.Wildman, 3 B. &A\d. 398. cause," Bac. Max. Reg. 1; Devaux v. 3 West India & P. Tel. Co. v. Home cfe, Salvador (1835), 4 A. & E. 431. C. Mar. Ins. Co., 4 Asp. M. C. 341, L. 5 Thus, "free from capture and all R. 6 Q. B. D. 51, 50 L. J. Q. B. 41; consequences, of hostilities," etc.; or but questioned in Thames & Mersey "excepting want of ordinary care and Mar. Ins. Co. v. Hamilton, supra. Loss skill in navigation," etc. of freight from imminent danger of fire 6"Apt to lead into philosophical is covered, The Knight of St. Michael mazes," Inman S. Co. v. Bischoff (1898), P. 30, 67 L. J. P. D. & A. (N. S.) (1882), 7 App. Cas. 683. 19, 78 L. T. Rep. TO. ' The United States Supreme Court *"It were infinite for the law to has repeatedly approved the rule, "The consider the causes or causes and their question is not what cause was nearest impulsions one on another, therefore it in time or place to the catastrophe. OIG MEANING AND LEGAL EFFECT OF MARINE POLICY the underwriter is liable for no loss which is not proximately caused by the perils insured against.' § 438. When Nearest Antecedent Cause held Responsible. — In examining this subject, it will be convenient first to consider the case where no operative cause is expressly excluded by the terms of the policy. Here if the peril insured against is to be found in the chain of cause and effect the law will not look back further for antecedent contributing causes, though without them the disaster would not have occurred.^ For example, in an English case a vessel insured "against capture only" was driven by a storm upon a hostile coast where, having re- ceived little damage from the stranding, she was captured by the enemy. This was held to be a loss, not by perils of the sea, but by capture and as such recoverable under the policy.^ By like reasoning where rats gnawed a hole in a pipe communicating with the plaintiff's cargo of rice, which was damaged by sea water flowing in through the hole, sea damage, not the action of the rats, was held to be the proximate cause of the loss.^ And so also in the case of an English time policy, which, under English decisions, carries no implied war- ranty of seaworthiness, though it was conceded that the ship's lack of seaworthiness prevented her from successfully battling with the perils of the sea, nevertheless stress of weather was held to be the sole proximate cause of her wreck.'^ That is not the meaning of the maxim ranty, for instance of seaworthiness of causa proxima non remota spectalur. the ship, will discharge the insurer The proximate cause is the efficient though the proximate cause of the cause, the one that necessarily .sets loss be a sea peril, T/iwm/json v. //o/>per, the other causes in operation. The 6 E. & B. 172, 191. The loss must be causes that are merely incidental, or the direct not th<^ remote consequence instruments of a superior or controlling of the peril, Shelbourne v. Law I. & I. agency are not the proximate causes Corp. (1898), 2 Q. B. 626. and the responsible ones, though they ^Louisville Underwriters v. Pence, may be nearer in time to the result. It 93 Ky. 96, 102, 19 S. W. 10, 40 Am. is only when the causes are independ- St. R. 176. The Massachusetts court ent of each other that the nearest is, of says: "The law will not go farther back course, to be charged with the disaster," in the line of causation than to find the The G. R. Booth, 171 U. S. 450, 457, active, efficient, procuring cause, of 19 S. Ct. 9, 4.3 L. Ed. 234; Lynn Gas & which the event vmder consideration Electric Co. v. Meriden F. Ins. Co., 158 is a natural and probable consequence, Mass. 570, 575, 33 N. E. 690, 20 L. R. in view of the existing circumstances A. 297, 35 Am. St. R. 540. See Mono- and conditions," Freeman v. Mercan- han V. Eidlitz, 59 App. Div. (N. Y.) tile Ace. A.s.soc, 156 Mass. 351, 3.53, 30 224, 227. N. E. 1013, 17 L. R. A. 753. 1 2 Arn. § 783; Eng. Mar. Ins. Act 3 Green v. Elmslie, 1 Peake's N. P. (1906), §.55; Pink v. Fleming (1890), Cas. 278. 25 Q. B. D. 396; Clinc v. We.Hern Assur. * Hamilton v. Pandorf (1887), 12 Co., 101 Va. 496, 498, 44 S. E. 700. Of App. Cas. 518 (bill of lading case). course any fraud on the part of the in- s Dudgeon v. Pembroke, 2 App. Cas. sured himself or breach of any war- 284, 297, 3 Asp. Mar. L. C. 393, in PROXIMATE CAUSE, HOW FAR FOLLOWED IN ITS RESULTS 617 The Bawnmore was insured by a valued time policy against losa or damage by fire or explosion only. She stranded on the coast of Oregon and sustained such injuries by sea perils that the cost of repairing her would have been greater than her value when repaired. Thirty-six hours afterwards she was completely destroyed by fire. The English court held that the insurer was liable for the full amount underwritten.^ In the light of the same doctrine are to be explained those many decisions, both English and American, by which the rule, formerly denied or questioned,^ is now firmly established, that when the loss is caused directly by a peril insured against the underwriter will not be exonerated, though it appear that the disaster would not have occurred except for the neglect, or careless navigation, of the master, including the insured himself,^ or the seamen or other agents of the insured.'* § 439. Proximate Cause, how far Followed in its Results. — A peril insured against having been fastened upon as the proximate or responsible cause of loss, a secondary inquiry sometimes remains by which to determine how far it is legitimate, in estimating the liability of an underwriter, to follow the results occasioned by the cause. ^ For example, as already shown, damage by smoke, by water from which Lord Penzance says: "A long land, 5 B. & Aid. 171, 174 (sloop on course of decisions in the courts of this rocks because seamen in charge were country has established that cmisa asleep); Busk v. Royal Exch. Ass. Co., proxima et non remota spectatur is the 2 B. & Aid. 73 (careless mate lighted maxim by which these contracts of a fire and left ship without watchman); insurance are to be construed, and that Bishop v. Pentland, 7 B. & C. 219 (ship any loss caused immediately by the fell over on her side in harbor and perils of the sea is within the policy, bilged because a rope was not strong though it would not have occurred but enough to hold her to the pier); Smith for the concurrent action of some other v. Scott, 4 Taunt. 126 (coUison in calm cause which is not within it." weather through fault of lookout or 1 Woodside v. Globe Mar. Ins. Co. helmsman). See list of instances in (1896), 1 Q. B. D. 105. And see A'. F. which negligence or misconduct was etc. Exp. Co. V. Ins. Co. ,132 Mass. 377. regarded the proximate cause of the "^ Pntapsco Ins. Co. v. Coulter, 3 Vei. loss, Matthews v. Howard Ins. Co., 11 222, 7 L. £d. 6.59; Grim v. Phoenix N. Y. 15. Ins. Co., 13 Johns. (N. Y.)451; Lod- 5 The Massachusetts court in a lead- wicks V. Ohio Ins. Co., 5 Ohio, 434 ing case, after referring to "the effi- and cases cited. cient, predominant cause," says, by 3 Trinder v. North Queensland Ins. way of guidance on this point, "fol- Co., 66 T.. J. Q. B. (N. S.) 802, 77 L. T. lowing it no farther than those con- Rep. 80, part owner himself master. sequences that might have been an- * List of cases, 3 Cooley, Ins. p. 2904; ticipated as not unlikely to result from Phoenix Ins. Co. v. Erie Transp. Co., it," Freeman v. Mercantile Ace. Assoc, 117 U. S. 312, 323, 6 S. Ct. 750 (fire 156 Mass. 351, 353, 30 N. E. 1013, 17 negligently caused); Walker v. Mail- L. R. A. 753. And see 164 Fed. 404 618 MEANING AM) LEGAL EFFE{;T OE MARINE POLICY fire engines, by falling walls, by incidental explosions, even by dep- redations of thieves attributable to tlie conflagration, may be con- sidered the natural and proximate results of fire as the moving and efficient cause; ^ while loss of profits or of use and occupancy and various other consequences, in the absence of stipulation to the contrary, are held to be too remote to fall within the probable con- templation of the parties.^ Loss of cargo by fire may include loss of goods by the sinking of the vessel containing them and though no fire touch them, pro- vided the fire is the cause of the sinking.^ Apparently it is only on the ground of the remote and improbable character of the results of the fire, as matter of fact, that the much criticized decision in the Tarrant case, under the standard fire policy of New York, might possibly find justification. That case was tried on an agreed statement of facts. A conflagration, originat- ing in the Tarrant building in New York City, in course of the burn- ing, and within less than half an hour after starting, reached a large stock of explosive drugs and chemicals stored in the building. In consequence of their ignition a terrific explosion ensued, which wrecked neighboring buildings, including the building belonging to Hustace, the plaintiff, and insured by the defendant. This building was distant fifty-six feet, eleven inches from the Tarrant building, and was separated from it by two buildings and an alleyway, about eight feet wide. These two intervening buildings were also wrecked by the explosion, but the conflagration from the Tarrant building subsequently swept over this space and consumed the ruins of the plaintiff's building. Five judges below found for the plaintiff, but the majority of the Court of Appeals, in an opinion which fails to recognize the real object of the explosion clause contained in the standard policy, reversed, and held that the loss was not by fire but by explosion, and that the insurance company was not liable.'* 1 §§ 231, 276, supra. So where in- 2 gee further instances of remote surance was against collision only, and losses, § 443, infra. after a collision the motion of the ves- 3 A^. }'. & B. Despatch Exp. Co. v. sel, while being towed away, opened Traders' & M. his. Co., 135 Mass. 221. leaks in her and she sank, collision was ■* Hustace v. Phoemx Ins. Co., 175 held to be the proximate cause of the N. Y. 292, 67 N. E. 592. See § 278, loss by sinking, Reischer v. Borwick supra. Hustace should not have (1894), 2 Q. B. 548. A policy insured agreed to the facts, but should have hides and tobacco. The hides were claimed that at the very least he was soaked as the result of a storm, and entitled to go to the jury. It was a became putrid. Fumes from them in- question of the natural spread of fire jured the tobacco. The damage to the and its natural physical results. Ex- tobacco was proximately caused by plosives burn by exploding. In an sea peril, Montoya v. London Assur. unimproved meadow lot, the physical (1851), 6 Exch. 451. laws of nature operate precisely the AN INDEPENDENT INTERVENING CAUSE 619 If the results of the peril specified are so indirect and improbable as to make it doubtful whether they should fairly be considered within the contemplation of the parties to the policy, the issue in general should be regarded as one of fact to be determined by the jury.^ But especially in marine insurance the courts have shown a disposition to settle such issues as matter of law, in order to give greater uniformity to the meaning and effect of the contract. § 440. An Independent Intervening Cause. — Analogous with the last rule is another, which may be stated in connection with it. A new and wholly independent cause intervening between the peril insured against and the loss may break the chain of natural causation, in which event the damage is held to be remote and the underwriter is exonerated.^ This principle is illustrated by an English case in which a ship- owner, owing to embargo, properly abandoned ship and freight to the underwriters. Contrary to expectation the voyage was completed and the underwriters who had accepted the abandonment received the freight. It was held that any loss of freight sustained by the insured was not by the peril insured against, but by the voluntary intervention of the assured himself.^ same, whether the lot happens to be nant. . . . One of the most valuable owned by one man, or whether, by of the criteria furnished us by these impalpable boundary lines of owner- authorities is to ascertain whether ship, it is divided up into fifty lots. any new cause has intervened between Likewise in the case of a block of city the fact accomplished and the alleged houses, whether they are all owned and cause. If a new force or power has insured by one man and one policy, or intervened of itself sufficient to stand whether they are separately owned and as the cause of the misfortune, the separately insured, it matters not, so other must be considered as too re- far as the spread of any conflagration mote," The G. R. Booth, supra. And among them and its physical effects see Niver Coal Co. \. Chironea S.S. are concerned. Co., 142 Fed. 402, 410. "Did the facts 1 Milwaukee, etc., R. Co. v. Kellogg, constitute a continuous succession of 94 U. S. 469; Russell v. German Fire events, so linked together as to make /?i.s. Co., 100 Minn. 528, 111 N. W. 400. a natural whole, or was there some 2 The United States Supreme court new and independent cause interven- has repeatedly declared, "The inquiry ing between the wrong and the in- must always be whether there was any jury?" Milwaulee, etc., R. Co. v. Kel- intermediate cause disconnected from logg, 94 U. S. 409, 475 (holding also the primary fault, and self-operating, that the question is often for the jury), which produced the injury," The G. R. A cause is proximate when the effects Booth, 171 U. S. 450, 458, 19 S. Ct. follow "by mere physical necessity," 9, 43 L. Ed. 234 (quoting with ap- Bailey's definition, MacArthur, Ins. proval from 7ns. Co. v. Boon, 95 U. S. (2d ed.), 108, note. Thus where a ves- 117 and Milwaukee & St. P. R. v. Kel- sel is lost by an explosion of gunpowder logg, 94 U. S. 469). Again the same occurring after the ship is on fire, fire court says: "That cause which set is the proximate and sole cause, Tf'o/cra the other in motion and gave to it v. Merchants' Ins. Co., 11 Pet. (U. S.) its efficiency for harm at the time of 213, 9 L. Ed. 69. the disaster must rank as predomi- 3 McCarthy v. Abel, 5 East, 3S8. And 620 MEANING AND LEGAL EFFECT OF MARINE POLICY In another English cuse goods were insured against damage consequent on colUsion. The ship on which the goods were shipped came into colUsion with another vessel and had to go into port for repair. For the purpose of such repairs the goods, which were of a perishable nature, had to be discharged, and they were damaged by the handling necessary for their discharge and reshipment. It was held that the collision was not the proximate cause of the loss and that the underwriters were not liable.^ At this point, as in other respects, we find the courts somewhat more liberally disposed towards the insured in construing the fire policy, for instance, in the ruling that in the absence of an express exemption the insurer against fire is liable also for loss by conse- quential theft. 2 § 441. Joint Action of Peril Insured Against and Peril Excepted. — Where different causes commingle or combine to produce the loss, one a peril insured against, and the other a peril expressly excepted, the question arises, which is the significant or proximate cause. ^ The rules adverted to in the last sections have an important bear- ing; but, in classifying perils or causes in this connection, a useful rule for guidance, recognized in most jurisdictions, is found in the proposition that an inevitable, or natural, physical incident or con- comitant of the primar}^ peril or cause should not be accounted in any respect a separate peril or cause, though separately mentioned in the policy, but merely one of the subordinate phenomena or re- sults of the proximate and controlling force which will stand as the sole cause. Instances from several branches of insurance law may serve to illuminate this subject. An English marine policy on living animals contained a warranty "free from mortality and jettison." The violence of a storm which was a peril insured against so injured some of the animals as to cause see himan S.S. Co. v. Bischoff, 7 App. mental disorder, Scheffer v. Railroad Cas. 670. Similarly, in considering Co., 105 U. S. 249, 26 L. Ed. 1070. proximate cause for general average Compare 7ns. Co. v. Seaver, 19 Wall. purposes where a steamer struck on a (U. S.) 531, 542; Daniels v. R. R. Co., rock and was then intentionally 183 Mass. 393. stranded as an attempted salvage i^t ^ Pink v. Fleming (1890), 25 Q.B.D. was held that stranding was the pro.x- 396, 59 L. J. Q. B. 559 (American law imate cause of loss because of the vol- said to differ from English on this sub- untary act intervening, Nor'rich, etc., ject). Tramp. Co. v. Ins. Co., 118 Fed. 307. 2 See § 231, supra. So also in an action for neglisrence an 3 "Always a difficult question to act of suicide and not the accident was determine in the case of a conjunction held the proximate cause of death of causes," Brovm v. St. Nicholas In& though occasioned by a preceding ac- Co., 61 N. Y. 332, 337. cident with ensuing sickness involving JOINT ACTION OF PERIL INSURED AGAINST 621 their death. The insurer was held liable notwithstanding the ex- ception embodied in the warrant}-.^ In another English case, under a bill of lading which excepted "accidents of the seas," the question arose whether an accident of the sea, or the resulting heat from the engine-room, which dam- aged the plaintiffs' cargo of grain, was to be regarded as the proxi- mate or significant cause of the loss. During the voyage from Balti- more to Avonmouth, owing to exceptionally heavy weather, and for the safety of the ship, the ventilators of the steamship were closed for about a week, with the result that the air in the hold nearest the engine-room space became heated, and, not being able to escape through the ventilators, damaged a portion of the plain- tiffs' grain. The court held that an accident of the sea was the proximate cause of the loss, and that, therefore, the exception in the bill of lading applied in favor of the defendants, the shipowners.^ In a New York case a marine policy upon the cargo of a canal boat contained an "ice clause" providing that if the boat "was prevented or detained by ice, or the closing of navigation, from terminating the trip," the policy should cease. The canal boat with others in a tow, was proceeding down the Delaware River, when, in consequence of a gale, the towing tugs were separated from the boats which were driven ashore and stranded. During the night, ice formed about them so that the tugs could not get at them. The boat remained thus frozen in until a thaw, when the wind and ice forcing her upon another boat, she broke in two, sank, and the cargo was injured. The court held that the primary, predominating, all-embracing cause to which all the ensuing loss must be attributed was the storm and not the ice, and that, therefore, the defendant was liable.^ In like manner, before the United States Supreme Court, the question arose whether a loss to part of a cargo was by explosion, ^Lawrence v. Aberdein (1821), 5 a boat is lost after a storm has ceased B. & Aid. 107. in consequence of damage done during 2 The Thrunscoe (1897), Prob. 301. a storm." So also where there was 3 Brown v. St. A^icholas Ins. Co., 61 prospectively a total loss to owner of N. Y. 332 (Dwight, C, reviewing his cargo by stranding of ship, though many cases). In referring to another goods were warranted free from cap- case the court said at p. 340: "The ves- ture, the underwriters were in no sel was never delivered from that wise relieved because of a subsequent peril until she was virtually destroyed chance rescue and appropriation of a and unable to perform the voyage. portion by an enemy, Hahn v. Corbett, In such a case the insurers are liable 2 Bing, 205. Compare where carrier though the loss is followed by the op- was responsible for negligence but eration of a peril excepted from the exempt from fire loss, negligence was policy." And at p. 338: "It is well held to be proximate cause, Deming v. settled that an insurer is liable for all Merchants' , etc., Co., 90 Tenn. 306, 17 the consequences directly resulting S. W. 89, 13 L. R. A. 518. from a peril insured against, as where 62.2 MEANING AND LEGAL EFFECT OF MARINE POLICY for which the defendant was responsible, or by a peril of the sea which was expressly excepted in the bill of lading. While the de- fendant's vessel was at the pier unloading detonating caps intended for blasting operations, one of them burst, though without negligence or fault on the part of the ship's hands, and the explosion blew a large hole in the ship's side, through which the sea water flowed to the injury of the plaintiff's cargo of sugar. The court held that the explosion alone was to be regarded the efficient and responsible cause of the loss. The influx of sea water was but an incidental result.^ By parity of reasoning the peril insured against may intervene and become the proximate and responsible cause. A policy excepted "consequences resulting from derangement of machinery." The mud valve needing repairs, steam was blown off. The captain, not knowing that steam was off, deliberately gave orders to start the boat, which, without steam to propel, was carried over the falls and sunk. Held, that the sea peril was proximate and the excepted cause remote, since the captain's act of volition intervened.^ The doctrine of proximate cause is frequently involved where a loss is occasioned by the joint operation of fire and explosion, the one agency being named in the policy as a peril insured against and the other as an exception. A conflagration is usually if not always attended by a series of explosions of greater or less violence as nec- essary physical results or concomitants of fire when in hostile action. Such incidental explosions, whether of dry wood, or gas, or gunpow- der or other material, are to be regarded merely as effects and not as causes. So also an explosion, often though not always, results in a fire. 1 The G. R. Booth, 171 U. S. 450, 19 2 Camp. 149, Arcangelo v. Thompson, 2 S. Ct. 9, 43 L. Ed. 234 (on bill of lading. Camp. 620); Hutchins v. Ford, 82 Me. but court treated it as though it were 363, 19 Atl. 832. If negligence is ex- an insurance case). Compare proxi- pressly excepted and a negligent de- mate cau.se under fire policy, § 231 , and feet in the compass causes the vessel accident policy, § 387. Unlawful speed to succumb to the perils of the sea, of ship was the sole cause of the loss, the underwriter is relieved under the not the stranding, Flint v. Marine Ins. exception, Richelieu & O. Nav. Co. v. Co., 71 Fed. 210. And see Bensande v. Boaton M. Ins. Co 136 TT S 408 10 Thames & M. his. Co. (1897), App. S. Ct. 934, 34 L. Ed. 398. Cas. 609 ("free from any claim con- "^ Orient Ins. Co. \. Adams 123 IT S. sequent on lo.ss of time, whether aris- 67, 8 S. Ct. 68, 31 L. Ed. 63. Policy ing from a peril of the sea or otherwise). on plate glass windows. During fire Similarly if master barratrously bore mob broke glass. Mob violence, not fire, holes in the ship causing her to fill held proximate cause, Afar.sr/en v. C%[ and sink, barratry and not .sea peril is etc., Ins. Co., L. R. 1 C P 232 12 Jur. the proximate cause. Waters v. Mer- N. S. 76, 35 L. J C P 60 13 L T (N chants' Ins. Co., 11 Pet. (U. S.) 213, S.) 465; Ins. Co. v. Wrllard, 164 Fed' 9 L. Ed. 69 (but see Heyman v. Parish, 404 (fire, not eajthquake, the cause). INDEPENDENT CAUSES 623 By virtue of the doctrine here presented the law holds that the hostile agency first in operation gives character to the whole con- nected catastrophe, unless otherwise expressly defined by the terms of the policy. For example, if an explosion named as an excepted peril, causes a destructive fire, as well as breakage or displacement, explosion is taken as the predominant and exclusive cause of the entire loss.^ And by the same logic if in the natural course of a con- flagration insured against, incidental explosions occur, no matter how violent, the effects of combustion and explosion alike if not too remote and improbable are attributed to fire as the sole primary and all-embracing cause. - The same doctrine finds copious and striking illustration in many court decisions, already adverted to, relating to the construction of the accident policy; for example, where the accidental injury, insured against, in turn results in blood poisoning, pneumonia, or some other form of disease, disease being expressly designated in the policy as an excepted risk.^ § 442. Independent Causes, Producing Distinguishable Dam- ages. — Where two perils, the one insured against, the other excepted, are in their nature really independent, for instance, shipwreck and capture by an enemy, and the losses produced by both are not so commingled as to be indistinguishable, it has been held that such losses will be apportioned between the perils producing them. During the American civil war the light on Cape Hatteras having been extinguished by the Confederate troops for military reasons, the captain of a ship missed his reckoning, struck on a reef of rocks, and the ship became a wreck. The cargo consisted of 6,500 bags of coffee, of which 150 bags were saved and 1,000 more would have been 1 Ins. Co. V. Tweed, 7 Wall. 44. (insurrection and not the resulting fire Explosion started a conflagration held to be the sole cause), which spread to an intermediate build- ^Mitchell v. Potomac his. Co., 183 ing thence to building containing cot- U. S. 42,52,22 S. Ct. 22, 46 L. Ed. 74 ton of the insured. Held, explosion ("a loss occurring solely from an ex- to be proximate cause (approved, 171 plosion not resulting from a preceding IT. S. 450); Montgomery v. Firemen's fire is covered by the exception"); Ins. Co., 16 B. Mon. (Ky.) 427; Roe v. Hall v. National F. his. Co., 115 Tenn. Columbus Ins. Co., 17 Mo. 301, 305 513, 92 S. W. 402; The G. R. Booth, ("it is a single and continuous event"); 171 U. S. 450, 19 S. Ct. 9, 43 L. Ed. Strong V. Sun Mut. Ins. Co., 31 N. Y. 234; Contra, Hustace v. PhoenLz Ins. 103, 109; St. John v. American Mut. Co., 175 N. Y. 292, 67 N. E. 592 (a F. & M. Ins. Co., 11 N. Y. 516, 519 heavy explosion, a mere incident to (a "ver^/ usual concomitant of the ex- a preexisting conflagration, was held plosion of a steam boiler is that the to be the proximate cause and the place is set on fire"). And see Insur- insurer was exonerated). See that and ance Co. v. Boon, 95 U. S. 117, 131 many other cases, § 278, supra. 3 See §§ 387, 396, supra. 624 MEANING AND LEGAL EFFECT OF MARINE POLICY saved if Federal salvors had not been interrupted by Confederate troops. This coffee was insured "free from all consequences of hos- tilities." On these facts the English court held that the underwriters were liable for the loss of the 5,350 bags left on the ship. The case was to be dealt with, the court said, as if there were two policies, one on the war risk and the other on the sea risk, and the question here was, which of the two was the proximate cause of each loss? One hundred and fifty bags were actually recovered. As to the 1,000 bags remaining aboard, it was the Confederate forces which directly prevented the rescue, and hence caused the loss. But the extinguishing of the light was only the remote cause of the loss of the remainder, the proximate cause being the striking on the reef, which could not be said to follow as a natural or ordinary, still less as a necessary, consequence of the extinguishing of the light. ^ § 443. Proximate Cause as Limiting Insurers' Liability. — The rule looking only to the proximate cause of loss sometimes, it will be observed, operates in favor of the insurers. For example, when a ship is damaged by sea peril the insurer is liable for the cost of repairing but not for the shipowner's loss be- cause the ship is laid up and unable to earn freight while being repaired.^ Nor, again, supposing that during that period it is nec- essary to retain the ship's crew, or any portion of them, is he liable for the owner's loss in having to pay and feed them while the ship is so unemployed,^ unless, indeed, the crew actually worked on the repairs, having been kept for that purpose after they would otherwise have been discharged.^ These losses result not from the damage, but from the delay incidental to the damage, so that the damage suffered by the ship, it may be argued, is only the re- mote cause of them. So if fruit, meat, or any other article of like perishable nature putrifies by reason of delay springing out of sea peril, the insurer of these articles is not liable.^ In like manner, 1 lonides v. Universal Marine Ins. B. 821 (1899), 1 Q. B. 579 (cost of Co., 14 C. B. (N. S.) 259, 10 Jur. (N.S.) dealing with cargo after collision); 18, 32 L. J. C. P. 170, 8 L. T. 705. So DeVaux v. Salvador, 4 Ad. & Ell. 420, also the damages by fire and collision 1 H. & W. 751, 6 N. & M. 713, 5 L. J. were held apportionable in Howard K.B. 134; Martin v. Salem M. Ins. Co., Fire Ins. Co. v. Norwich, etc., Transp. 2 Mnss. 420. Co., 12 Wall. 194. 20 L. Ed. 379. But * Hcill v. Ocean Ins. Co., 21 Pick, see comment in later case in the line (Mass.) 472. Comriare the different of restriction and reaffirming principal rule applicable in the United States in rule as to sole proximate cause (171 case of genernl average, ^221, svpra. U. S. 456). Damages held apportion- 5 Pinl- v. Fleming (1890), 25 Q. B. able in Rice v. Homer, 12 Mass. 230. D. 396 (fruit); Tai/lor v. Dvvhar, L. R, 2 See I 439. 4 C. P. 206, 38 L.J. C. P. 178 (meat). 3 Field. S.S. Co. v. Burr (1898), 1 Q. Death of slaves from failure of pro- ORIGINAL DEFECT 625 as already shown, the insurer of goods, in the absence of specific agreement to the contrary, is not liable for loss of prospective profits; * in other words, the anticipated selling price of the goods is in no sense the criterion for estimating the loss under the policy. ^ § 444. Wear and Tear. — No ship can engage in navigation for any length of time without suffering a certain amount of injury and de- preciation from the ordinary action of wind and wave, called wear and tear. For this the underwriter is never liable.^ § 445. Original Defect. — Underwriters are not liable for any loss which is the immediate result of an original defect in any part of the hull or materials.^ visions because of delay in stormy weather, Tatham v. Hodgson, 6 D. & E. 656. So sale or consumption of cargo for repair of ship or preserving Hves of passengers is not within terms of poHcy, Z)?/er V. Piscataqua, etc., Ins. Co., 53 Me. 118; Rvckman v. Ins. Co., 12 N. Y. Super. Ct. 342; Powell v. Gudgeon, 5 M. & S. 431. See § 209, notes. Loss of voyage because of blockade at port of destination not covered, Hadkinson v. Robinson, 3 B. & P. 388; Nickels v. London & P. Ins. Co., 6 Com. Cas. 15. Nor loss by fall of market during unexpected de- lay in voyage, Cator v. Great West. Ins. Co., L. R. 8 C. P. 552, 2 Asp. Mar. L. C. 90, 42 L. J. C. P. 266, 29 L. T. 136, 21 W. R. 850. Nor loss by bot- tomry on cargo for benefit of ship, Greer v. Poole, 5 Q. B. D. 272. 49 L. J. Q. B. 463, 42 L. T. R. 687, 28 W. R. 582. Nor statutory salvage or reward for saving life from wreck, Nourse v. Liverpool, etc., Assoc. (1896), 2 Q. B. 16, 74 L. T. R. 543, 65 L. J. Q. B. (N. S.) 507. Nor forfeiture of freight, arising from the exercise of a power of mulct or canceling option by the charterer, etc., Inman S.S. Co. v. Bischnff, 5 Asp. Mar. L. C. 6, 52 L. J. Q. B. 169, 31 W. R. 141, 7 ^ pp. Cas. 670, 47 L. T. 581; Mercantile S.S. Co. v. Tyser, 5 Asn. Mar. T-. C. 6, note, 7 Q. B. D. 73, 29 W. R. 790. See instances of remote damage in Mathews v. Howard Ins. Co., 11 N. Y. p. 15. 1 See § 439, svrrra. 2 See §§ 201, 202, 205. su-pra. 3 Soelherq v. Western Assur. Co., 119 Fed. 23, 32, 55 C. C. A. 601; Dupeyre v. Western Mar. & F. Ins. Co., 2 Rob. (La.) 457, 38 Am. Deo. 218; The 40 Xanthn, 12 App. Cas. 509; Magnus v. Buttemar, 11 C. B. 875. Thus a policy does not cover the chemical action of the sea on the Atlantic cable coiled in a. ship, there being no influx of sea water, Paterson v. Harris, 1 Best. & S. 336, 101 E. C. L. 336. Nor damage to the subject insured caused by climate, Martin v. Salem Mar. Ins. Co. , 2 Mass. 420. Nor injuries to boilers or ma- chinery on ship board occasioned by their ordinary operation, unaffected by sea peril, Thames & M. Ins. Co. v. Hamilton, L. R. 12 App. Cas. 484. 56 L. J. Q. B. 626, 6 Asp. M. C. 200, 57 L. T. R. 695. Nor the explosion of boiler, unless specifically mentioned in the policv, Miller v. Cal. Ins. Co., 76 Cal. 145,^18 Pac. 155, 9 Am. St. R. 184. But as to explosion of boilers, see Citizens' his. Co. v. Glasgow, 9 Mo. 411; Perrin v. Protection Ins. Co., 11 Ohio St. 147, 38 Am. Dec. 728. Bilging of ship by the rising tide during re- pairs was held not covered by the policy, Thompson v. Whitmore, 3 Taunt. 227. But compare The Natchez, 42 Fed. 16 J. 4 Fawcus V. Sarsfield, 6 E. & B. 192. For instance, where a chain parts owing to a defective link, the consequent loss of the anchor and chain is not re- coverable under the policy. Again, there may be an original flaw in the welding of a sternpost, shaft, or other part of the hull or machinery, which, though at first so slight as to be im- perceptible, gradually reveals itself and becomes enhanced by the working of the vessel at sea, imtil it culminates in a breakdown of the part affected. In such a case the cost of making good the injury will not form the subject of 626 MEANING AND LEGAL EFFECT OF MARINE POLICY Thus the court said that the question for the jury's determina- tion was as follows: Was the leak from which the vessel foundered attributable to inju;*}^ or violence from without or to weakness from within? For if it was not attributable to perils of the seas — that is, to the violent action of the elements from without, or any- other casualty involved in perils of the seas, — the jury could come to no other conclusion than that it was due to an inherent in- firmity in the ship itself.^ § 446. Inherent Vice. — A loss occasioned by an inherent defect or vice in the insured article is not within the terms of the policy,^ al- though it may be aggravated by the prolongation of the voyage oc- curring because of sea perils.^ Loss by inherent vice includes, for example, natural and ordi- nary diminution by leakage or evaporation, natural and ordinary disease, decay, fermentation or other deterioration in the subject insured.^ Thus if an insured cargo of hemp effervesced because put on board in a damp state and generated fire which consumed it, Lord Ellenborough said that the underwriters would not be liable.^ But on the other hand, if leakage from casks is occasioned by the shifting of the casks in the ship's hold caused by a gale of wind the loss must be attributed to a peril of the seas.^ a claim under the policy, Thames & Nor loss of a slave leaping overboard, Mersey Marine Ins. Co. v. Hamilton, Jones v. Schmole, cited 1 T. R. 130. L. R. 12 App. Cas. 484, .56 L. J. Q. B. Nor injury to ship directly or proxi- 626, 6 Asp. M. C. 200, 57 L. T. 695, 36 mately occasioned by rats. Hunter v. W. R. 337. Potts, 4 Camp. 203. Or by worms or i Dudgeo7i v. Pembroke, L. R. 9 vermin, i/asarr? v. /ns. Co., 8 Pet. 557, Q. B. D. 596; Swift v. Union Mut. Mar. 8 L. Ed. 1043; Rohl v. Parr, 1 Esp. 444. Ins. Co., 122 Mass. 573. But otherwise if, as a consequence of 2 Providence Wash. his. Co. v. Adler, the action of rats, sea water enters and 65 Md. 162, 4 Atl. 121, 57 Am. Rep. proximately causes the damage, Gar- 314; Botjd v. Dubois, 3 Camp. 133. riques v. Core, 1 Binn. (Pa.) 592; Ham- 3 Thus where fish and m3at becomes ilton v. Pandorf, 12 App. Cas. 518. putrid, rice or flour heated, fruit rotten, * Cory v. Bo^'lston F. & M. Ins. Co., wine sour, or hides tainted, not by con- 107 Alass. 140, 9 Am. Ren. 14; Eldridge tact with sea water, but by natural (1907), pp. 94, 95. Willes,'j., says: decomposition, Ta?/Zorv. DMn6ar,L. R. "By the expression 'vice' is meant 4 C. P. 206, 38 L. J. C. P. 178, 17 W. R. only that sort of vice which by its 382; Koebel V.Saunders, 17 C.B. (N.S.) internal develoDment tends to the 71; Baker v. Mfrs. Ins. Co., 12 Gray, destruction or the injury of the animal 603; Perry v. Cobb, 88 Me. 435, 34 Atl. or thing to be carried, and which is 278, 49 L. R. A. 389 ("the policy does likely to lead to such a res^ult," Blower not secure against a protracted voy- v. Gt. W. R. Co., L. R. 7 C. P. 662. age. . . . Insurance is not on the voy- 5 Bo^'d v. Dvbois, 3 Camn. 13. age but for the voyage.") Death of « Crofts v. Marshall, 7 C. & P. 597. slaves insured caused by lack of provi- So also in case of injury to cattle sions owing to prolongation of voyage caused by rolling of the vessel, La^o- due to sea perils is not covered, rence v. Aberdein, 5 B. & Aid 107 Tathnm v. Hodgson, 6 D. ct E. 656. T.eakage by stranding may be ex- INHERENT VICE 627 Accordingly, it will be clearly seen by a perusal of this and the preceding sections of this chapter that, to fasten liability upon a marine underwriter, it is not enough merely to show a loss to the insured occasioned by a misfortune or casualty happening on the sea, or aboard a ship. The insured must go further than this, and prove that the loss to his insured interest was caused by a peril of the sea, or by some agency or force for the action of which, under the decisions of the courts, the underwriter is held responsible. And some of these decisions are technical. . In a famous case tried in England, the steamer Inchmaree with her machinery, including a donkey-engine, was insured by the de- fendant. For purposes of navigation the donkey-engine was being used in pumping water into the main boilers, when, owing to a valve having been inadvertently closed, water was forced into and split open the air-chamber of the donkey-pump, damaging it to the extent of about £72, 10s. The closing of the valve was not due to ordinary wear and tear, nor had the action of the sea, waves, or winds anything to do with it. The House of Lords, reversing the court below, held that whether the injury occurred through negli- gence, or accidentally without negligence, the loss was not covered by the policy, either under the words "perils of the seas," or under the general words "all other perils, losses, and misfortunes that have or shall come to the hurt, detriment or damage of the subject- matter of insurance." ^ According to the doctrine of this and other cases, if the crew, during an adventure insured, intentionally and maliciously smash a donkey-pump in the ship, their act is barratrous and the loss is covered by the ordinary marine policy,- but if in connection with the navigation of the ship they inadvertently cause the same dam- age, the loss is not covered. Such a narrow interpretation of the general words "all other perils, losses," etc., though in accord with other decisions relating to marine insurance, seems somewhat in contrast with the inclusive rule of construction usually applied to the fire policy,^ and materially diminishes the commercial value of the instrument containing them. It is not improbable that the pressly covered, De Farconnet v. West- pendix, ch. II. As to construction of em Ins. Co., 110 Fed. 405. Inchmaree clause see Oceanic. S. Co. v. 1 Thames & Mersey Mar. Ins. Co. v. Faber, 11 Com. Cas. 179 (latent de- Hamilton, 12 App. Cas. 484 (reviewing feet, breakage of shafts); Cleveland & manv cases; itself cited in 171 U. S. B. Transit Co. v. Ins. Co. of N. A., 115 461 ,202 V. S. 397.) In consequence of Fed. 431. this decision the Inchmaree or ma- - See § 434, supra. chinery clause was devised, see Ap- 3 gee § 90, supra. 628 MEANING AND LEGAL EFFECT OF MARINE POLICY original framers of the marine policy intended that it should carry with it a broader scope than has been given to it by the established views of the courts of England and of this country. The ancient Florentine policy in the perils clause, after the words "robbery by friend or foe," contains the sweeping expression "and every other chance, peril, misfortune, disaster, hindrance, misadventure, though such as could not be imagined or supposed to have occurred, or be likely to occur," etc. So far as the intention of the insuring public is concerned, when they pay their premiums for marine insurance, their aim and purpose are, in general, to procure full protection tp the insured interest during the specified adventure. They do not have in mind philosophical distinctions relating to causes and effects b}' means of which certain classes of accidental injuries occurring in connection with the adventure are to be excluded from the opera- tion of the usual policy. With the Inchmaree case may be compared another English case in which the policy words "all risks by land and by water," though used in conjunction with an enumeration of certain risks by many special clauses, were held not to be limited in meaning by associa- tion with the special clauses, but to signify "all risks whatsoever," and "to cover all losses by any accidental cause of any kind." ^ § 447. Application of Principles to Particular Average. — The prac- tical application of the foregoing principles to the adjustment of particular average, that is of partial loss, under the usual policy of marine insurance, is a matter of delicacy and gives employment to professional adjusters. ^ § 448. The Sue and Labor Clause. — The sue and labor clause,^ ^ Schloss Bros. v. Stevens (1906), 11 safeguard, and recovery of the said Com. Cas. 270; and see Jacob v. vessel [or goods and "merchandises, Gaviller (1902), 7 Com. Cas. 116. etc.] or any part thereof, without 2 MacArthur, Mar. Ins. (2ded.),2r2- prejudice to this insurance; nor shall 273; Arnould, Mar. Ins. (7th ed.), the acts of the insured or insurers in §§ 1008-42. To distinguish what is saving, recovering, and preserving the wear and tear or ordinary deterioration property insured, in case of disaster, from sea damage in particular cases be considered a waiver or an accept- is often a complicated matter, Phillips ance of an abandonment; to the charges V. Xairne. 4 C. B. 343. 11 Jur. 45.5, 16 whereof the said insurance company L. J. C. P. 194; and must, to a great will contribute according to the rate extent, be left to the trained judgment and Quantity of the sum herein in- of experts in such matters. sured." Although the sue and labor 3 "And, in case of any loss or mis- clause has been part of the conven- fortune, it shall be lawful and neces- tional English and American marine sary to and for the assured, his factors, policy from time immemorial, Phill., servants, and assigns, to sue, labor, and Ins., §43, Munson v. Standard Mar. travel for, in, and about the defense, Ins. Co., 156 Fed. 44, the decisions THE SUE AND LABOR CLAUSE 629 though part of the poHcy, is to be treated as wholly distinct from the engagement to indemnify for losses caused by the perils insured against,^ and, therefore, in exceptional cases this collateral agreement may impose upon the underwriter an obligation to make payment to the insured even in excess of the entire amount for which the policy is underwritten. 2 For example, in case of expenses paid by the master in an unsuccessful attempt to recover captured property, in addition to a total loss of the property by the capture. For the same reason liability under the sue and labor clause is not a liability for particular average, and is not subject to the percentage under it in this country have not been very numerous, due in a measure, per- haps, to the presence in the usual American poUcy of the warranty "free from any expense in consequence of capture, seizure, detention, or block- ade." See § 462, infra. 1 Lohre v. Aitchison, 2 Q. B. D. 509. The English codification provides as follows: "(1) Where the policy con- tains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the assured may recover from the insurer any ex- penses properly incurred pursuant to the clause, notwithstanding that the insurer may have paid for a total loss, or that the subject-matter may have been warranted free from particular average, either wholly or under a cer- tain percentage. (2) General average losses and contributions and salvage charges, as defined by this Act, are not recoverable under the suing and labour- ing clause. (3) Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause. (4) It is the duty of the assured and his agents, in all cases, to take such measures as may be rea- sonable for the purpose of averting or minimizing a loss," Eng. Mar. Ins. Act (1906), § 78. The last subdivision is supposed to be based upon Benson v. Chapman (1849), 2 H. L. C. 496; Notara v. Henderson (1872), L. R, 7 Q. B. 225; see Chr.lmers & Owen, Ins. (1907), 118. But it hns been said, "If this subsection means that the right to recover is to be conditional on the per- formance of this duty, it seems to be new law, imposing a most serious obli- gation on the assured, and inconsistent with Trinder & Co. v. Thames and Mersey Mar, Ins. Co. (1898), 2 Q, B. 114; 67 L. J. Q. B. 666; and with § 55 (2) (a), which gives effect to the decision in that case," De Hart & Simey, Ins. (1907), 87. 2 Aitchison V. Lohre, 2 Q. B. D. 502, 3 Q. B. D. 553, 566, 4 App. Cas. 755; Gilchrist v. Chicago Ins. Co., 104 Fed. 566, 44 C. C. A. 43. Temporary^ re- pairs to vessel safe in port to make her seaworthy are not covered by the sue and labor clause, Alexander v. Sun Mvt. Ins. Co., 51 N. Y. 253, 262. In the last case, Lott, Ch. J., says at p. 257: "That provision has ref- erence to charges not covered by the insurance and does not embrace losses caused by damage to the property in- sured. Its object was to secure dili- gence in its preservation and protec- tion, and thereby prevent a loss or reduce its amount and to provide com- pensation for the labor done and e.x- penses incurred in accomplishing that end." And see Providence & S. S.S. Co. V. Phoenix Ins. Co., 89 N. Y. 559; Francis v. Boullon, 73 L. T. R. 578, 65 L. J. Q. B. (N. S.) 153; Meyer v. Ralli, 1 C. P. D. 358. Such expenses, however, must be reasonable, Lee v. Southern Ins. Co., L. R. 5 C. P. 397. The United States Supreme Court uses these words: "The public interest requires both the assured and assurer to labor for the preservation of the property, and to that end this provision is made so that it may be done without preju- dice," Washburn & M. Mfg. Co. v. Reliance Mar. Ins. Co., 179 U. S. 1, 18, '21 S. Ct. 1, 45 L. Ed. 49. Inde- pendent of this clause it has been held that where a partial loss of a vessel has been repaired and a subsequent total loss happens the underwriter must pay both, though exceeding amount of policy, Matheson v. Equitable Mar. Ins. Co., 118 Mass. 209. See §208. ■■^upra. 630 MEANING AND LEGAL EFFECT OF MARINE POLICY restrictions contained in tlie memorandum clause/ but is to be met in due proportion Avhatever the amount.^ Ihis provision of tiie policy has reference to expenditures not covered by the general perils clause; ^ and in England general average losses including contributions are not recoverable under the sue and labor clause; "* nor in England does the clause include the reward payable by maritime law to voluntary salvors; but if compensation is payable to salvors under contract with the insured the rule is otherwise.-^ In the latter event the expense becomes recoverable either under the sue and labor clause, or as general average according to cir- cumstances.^ Two reasons are offered by the English court to explain why the words of the sue and labor clause should not be held to include the extraordinary recompense paid to voluntary salvors. In the first place voluntary salvors cannot be regarded as the agents of the insured/ since they intervene of their own accord to save ship and cargo from impending disaster and act independently of contract. In the second place their compensation is not based upon a quantum meruit, but in case of success they receive a large reward and in case of failure they get nothing.* In the United States the view seems to prevail that where an expense has been properly incurred in order to avert a loss insured against and the measure for relief has been rendered by direction of the master of the ship or other agent of the insured, the expenditure is recoverable under the sue and labor clause regardless of whether it belongs to general average or not.^ But in case of the salvage or 1 See § 456, infra. ject of the suing and laboring clause, 2 Kidston v. Empire Marine Ins. Co., and that there is no authority for say- L. R. 1 C. P. 535. In estimating the ing that they do." proportionate Habihty for such ex- '"' Peters v. Warren Ins. Co., 14 Pet. penses under a valued policy, the (U. S.) 99; International Nav. Co. v. policy valuation and not the actual Atlantic Mid. Ins. Co., 100 Fed. 304; value controls, though the sum so Eng. Mar. Ins. Act (1906), §65; De computed equal the entire amount in- Hart & Simey. Ins. (1907), 76. sured. Standard Mar. Ins. Co. v. Nome, 7 The English law does not recognize etc., Co., 133 Fed. 636. the doctrine of "agents of necessity," 3 Alexander v. Sun Mnt. Ins. Co., 51 Chalmers & Owen, Ins. (1907), 96 N. Y. 253. 8 Aitchison v. Lohn, 4 App. Cas. 755, 4 Mar. Ins. Act (1906), §78 (2);^ 49 L. J. Q. B. 123, criticized by Mr. Montgomenj v. Indemnity Mvt. Mar. Maclachlan in Amould (6th ed.), 793. Ins. Co. (1901), 1 Q. B. 147; Aitchison The reward to volunteer salvors is V. Lohre, 4 App. Cas. 755, 49 L. J. Q. B. often very large, The Glengvle (1898), 123. App. Cas. 519; r;te/??ca, ]2Moo. P. C. 6 Aitchison v. Lohre, 4 App. Cas. 755, 189. For thorough discussion of rules in which Lord Blackburn, with the ap- relating to salvage contracts see The proval of other judges, says, "I think Elfrida, \T2 U. S. 186, 19 S. Ct. 146, that general average and salvage do not 43 L. Ed. 413. come within either the words or the ob- » International Nav. Co. v. Atlantic THE SUE .\ND LABOR CLAUSE 631 remuneration payable to volunteer salvors by maritime law inde- pendent of contract, the English rule has been applied by a federal court as the law of this country. The bark Samuel Welsh, owned and insured by Buzby, was driven ashore on the rocks on the coast of Nova Scotia. The master and crew left the vessel to save their lives. Wreckers got possession of her afloat, brought her into the port of Yarmouth and libeled both vessel and cargo for their salvage reward. To release the lien of the salvors Buzby sent an agent to Yarmouth at considerable expense, and contended in his suit on his policy that the defendant, one of the insurers, was liable for its share of the salvage charges and expenses of the agent connected therewith, by virtue of the usual sue and labor engagement of the underwriters. A federal district judge, however, decided that these charges and expenses were not recoverable under that clause, and hence under the w^arranty of that particular policy the}^ w^ere not recoverable at all.^ The object of the clause is to furnish compensatory encourage- ment to the insured, to put forth diligent and prudent effort towards a prevention or diminution of the underwriters' loss, without preju- dice to the rights of either party under the policy of insurance.^ Two conditions are requisite to constitute a valid claim under the sue and labor clause: the apprehended loss must be something for which the underwriters would have been liable, and the measure for safety which gives rise to the expense claimed must be the act of the assured himself or of his agent or servant.^ If, for example, goods are insured "free of capture," it is clear that an expense incurred to prevent a capture could not be claimed under this clause; nor, if "against total loss only,""* an expense incurred merely to diminish damage or avert a loss other than total.^ Mut. Ins. Co., 100 Fed. 313, 322 '^ Munroe v. Ins. Co., 52 Fed. 777, (Brown, J.); Alexander v. Sun Mut. 3 C. C. A. 280 (encouragement); Soel- Ins. Co., 51 N. Y. 253; Jumel v. berg v. Western Assur. Co., 119 Fed. 23 Marine Ins. Co., 7 John. (N. Y.) 412; (without prejudice). Phill., Ins., § 1742. If no other agent 3 Aitchison v. Lohre, 4 App. Cas. 755; is appointed the master of the ship is Uzielli v. Boston Mar. Ins. Co., 15 the agent to represent all interests un- Q. B. D. 11. der the sue and labor clause, Hume v. < Or "free from average unless gen- Frenz, 1.50 Fed. 502. An original in- eral," etc. surer is not the agent or factor of his ^ Kidston v. Empire Ins. Co., L. R. reinsurer within the meaning of this 1 C. P. 543, Exch. L. R. 2 C. P. 357; clause, Uzielli v. Bo.^ton Mar Ins. Co. Booth v. Gair, 15 C. B. (N. S.) 291, 33 (1884), 15 Q. B. D. 1 1 , 54 L. J. Q. B. 142. L. J. C. P. 99. Where salvors pick up a 1 Buzby V. Phcenuv Ins. Co., 31 Fed. ship derelict at sea, or as volunteers, 422 (on the authority of Aitchison v. and bring the property to port in safety, Lohre, 4 App. Cas. 755). And see In- without being in any sense hired by an ternational Nav. Co. v. Atlantic Mut. agent of the assured, the payment for Ins. Co., 100 Fed. 313. salvage is not a claim under the sue and 632 MEANING AND LEGAL EFFECT OF MARINE POLICY The advantage to the insured in being able to assign expenditures to the sue and labor clause lies in the circumstance, already men- tioned, that it contains a promise of payment by the underwriters which is supplementary to their contract of insurance. Therefore recovery under this special promise is not limited to the face amount of the policy, and the supplementary engagement is still operative although the insurer may have paid for a total loss,^ and although the subject-matter may have been warranted free from particular average, either wholly or under a certain percentage.^ In the majority of cases, however, it is wholly immaterial to the parties whether expenses incurred for the purpose of averting or diminishing a loss insured against are or are not assignable to the sue and labor clause; ^ but there cannot be more than one recovery on the same item of loss by its repetition under different heads or counts.'* labor clause, Aitchison v. Lohre, 4 App. Cas. 755. An award to salvors for sav- ing Egyptian obelisk on way to London not covered, Dixon v. Whitworth, 4 Asp. Mar. L. C. 327. The cost of re- pairs to ship in safety is not a claim under that clause, Alexander v. Sun Mut. Ins. Co., 51 N. Y. 253; while the cost of becoming entitled to charter freight by a justifiable transshipment into another's vessel is; because in the latter case there is a worse evil averted, while in the former case there is not, Kidston v. Empire Mar. Ins. Co., L. R. 1 C. P. 535, Exch. Ch., 2 C. P. 357. The expense of sending out a tug to look up insured scows, erroneously supposed to be adrift, is not recover- able under the sue and labor clause, Barney Dumping Boat Co. v. Niagara F. Ins. Co., 67 Fed. 341, 14 C. C. A. 408, 35 U. S. App. 100. This clause did not justify insured in moving a vessel warranted to be safely moored in the harbor, Riian v. Prov. Wash. Ins. Co., 79 App. Div. 316, 79 N. Y. Supp. 460. Nor has the sue and labor clause any- thing to do with the collision clause so as to include costs of defending a colli- sion suit, Xeiios V. Fox, L. R 3 C P 630, 4 C. P. 665. And see Fernald v. Ins. Co., 27 App. Div. (N. Y.) 137. Compare § 428. Where the carrier's insurance was not on a cargo of mules but only on his liability as carrier it was held that his expenses for saving some of them after a stranding of the ship were not recoverable, since the sue and labor clause has no application to such an insurance, though not erased in the policv, CUnard S. Co. v. Marten (1903), 2 K. B. 511. Policy was for total loss only. The loss turned out not to be total. Held, that the under- writers, thus relieved from liability, could not get back salvage expenses voluntarily paid by them, though re- sulting in benefit to the assured, Crouan v. Stanier (1904), 1 K. B. 87. The costs of an unsuccessful suit against a lighterman for negligence were apportioned between the insurer and assured where the suit was brought by consent and for joint benefit of both, Brown v. Binning (1906), 11 Com. Cas. 190. 1 Alexander v. Sun Mut. Ins. Co., 51 N. Y. 253 (many cases cited by court and counsel). And see Buzby v. Phoenix Ins. Co., 31 Fed. 422. 2 The Indianapolis Ins. Co. v. Mason, 11 Ind. 171 ; Shidtz v. Ohio Ins. Co., 1 B. Mon. (Ky.) 336. And see Biays v. Chesa- peake Ins. Co., 7 Cranch (U. S.), 415. 3Arn., Mar. Ins. §864. Such ex- penses are recoverable either on the theory of the express agreements con- tained in the policy or on the theory of an implied obligation of the under- writers analogous to the case of general average. Am.' § 863; International Nav. Co. v. Atlantic Mut. Ins. Co., 100 Fed. 304; Seicall v. United States Ins. Co., 11 Pick. (Mass.) 90. In the case of certain expenditures the insured may have the option of pleatling on either the general perils clause or the sue and labor clause, Arn. § 869; Levie v. Jari- son (1810), 12 East, 648. * Alexander v. Sun Mut. Ins. Co., 51 THE SUE AND LABOR CLAUSE 633 Familiar instances of the operation of the sue and labor clause are found in the case of expenditures for the rescue and removal of a wrecked or submerged vessel from the strand or other position of danger to a place of safety;^ expenses for unloading, dr}ing, warehousing, packing and forwarding required for the preservation of the cargo from injury or destruction; - charges for expense of litigation or otherwise incurred, usually in a foreign land, in the endeavor to recover back property seized or captured/'' As to the form that the expenditure may take, it is said that there is no re- striction so long as it is directed to saving interests in peril at the time the expense is incurred.'* Thus it will be observed that this clause is strictly confined to the cost of efforts made to save the thing insured from damage by the perils insured against in the policy.^ N. Y. 253 ^''the two provisions, as I have stated, relate to different sub- jects, and the right to compensation and payment under one of them necessarily excludes a right to a claim or demand under the other," by Lott, Ch. C). 1 Soclberg v. Western Assur. Co., 119 Fed. 2.3; EUicott v. Alliance Ins. Co., 14 Gray (Mass.), 318; Perry v. Ohio 7ns. Co., 5 Ohio, 305. 2 Con/ V. Bo'iston Ins. Co., 107 Mass. 140, 9 Am. Rep. 14. ^Jvmel V. Mar. Ins. Co., 7 Johns. (N. Y.) 412; Watson v. Mar. Ins. Co., 7 Johns. (N. Y.) 57; McBride v. Mar. Ins. Co., 7 Johns. (N. Y.) 431 ; Lawrence V. Van Home, 1 Caines (N. Y.), 276; Bordcs V. Hallett, 1 Caines (N. Y.), 444. i Eldridge (1907), 129. But the ex- pense to fall within this particular clause must have been incurred to pre- vent impending loss when the subject insured is actually in peril. Great Indian Peninsular R. Co. v. Saunders, 31 L. J. Q. B. 206 (iron rails not in peril). And see Frichette v. State, etc., Ins. Co., 3 Bosw. (N. Y.) 190 (ship being launched). 5 Eldridge (1907), 127. If the goods are in no d.anger at the time, the ex- pense of forwarding them by other ships, the original ship being a con- structive total loss, is not recoverable under the sue and labor clause. Great Indian Pen. Ry. v. Saunders. 2 B. & S. 266, 31 L. J. Q. B. 206; Booth v. Gair, 33 L. J. C. P. 99. But particular charges for drying, warehousing, and packing, incurred to save the insured goods are recoverable under this clause, Francis v. Boidton, 73 L. T. R. 578. The insured, however, is only bound to pay salvage expenses reason- ably incurred, see Anderson v. Ocean S. S. Co., 10 App. Cas. 107. For such reasonable charges the insured is en- titled to be reimbursed in proper pro- portion by his underwriters though exceeding tlie whole amount under- written, Watson V. Mar. Ins. Co., 7 Johns. (N. Y.) 57; Lohre v. Aitchison (1878), 3 Q. B. D. .558; Dixon v. Whit- worth, L. R. 4 C. P. D. 371, reversed 4 Asp. M. L. C. 327. An English policy insured live cattle against all risks, including mortality from any cause whatsoever. While the vessel in which they were shipped was detained in a port of refuge for necessary repairs due to perils of the sea, extra cost for fodder supplied to the cattle was in- curred. For this expense, incurred to avert danger of loss of the cattle, the underwriters were held liable under the sue and laboring clause. The Pomera- nian (1895), Prob. 349. The N^w York court says, but without express reference to the sue and labor clause: "That all losses, charges and expenses necessarily, prudently or reasonably incurred in respect to the property saved, from the time of the shipwreck to the time when the property could be directly transported to its ultimate destination, are proper charges upon the property so transported, and ought to be borne by the assurers. That the sums paid for transporting the master and crew, for their support, board, and lodging and passages during the same 634 MEANING AND LEGAL EFFECT OF MARINE POLICY A case in the federal court furnishes a good illustration of the reasonable application of the sue and labor clause. There the in- sured, a storage company, was engaged in the business of selling, in Alaska, certain refrigerated supplies. Its policy covered a cargo of refrigerated meats, canned goods, etc., on a voyage from Tacoma Wash., to Dawson, Yukon Territory. Owing to the very low watei there was a stranding of the refrigerating vessel on the Yukon river causing a delay of several days. Part of the cargo was thereupon transferred to a lighter steamer without refrigerating plant. Both vessels reached Circle City in October. The river above had become partially closed by ice and navigation was dangerous. The re- frigerating vessel was then laid up and the lighter steamer proceeded until frozen in seventy miles from Dawson. Both vessels were in danger of being crushed or disabled by the ice and their cargoes lost by the spring freshets. To avert this peril, both cargoes were transported to Dawson by land during the winter. The court held that the expense of this transportation was within the sue and labor clause of the policy.^ The plaintiff Munson had a liability policy attaching on his steam- tug Carbonero and indemnifying against liability to her tows or other vessels by collision or stranding. A barge in her tow was lost and to recover damages the plaintiff's tug was libeled, but the libel was ultimately dismissed. In obtaining this successful result of the litigation against him Munson of course was put to the expense of counsel fees and other disbursements. He brought action against his insurer to reclaim his expenses under the sue and labor clause. The court held that there was no liability on the part of the insurer when there was no liability on the part of the tiig or its owner, and that there could be no recovery under the sue and labor clause for the expense of determining judicially that the tug was free from liability to the tow.^ It will also be remembered that if the total amount of insurance, except in case of a liability policy,^ is short of the value of the prop- period , are also proper charges upon i St. Paul Fire & Mar. Ins. Co. v. the property, and ought to be borne by Pacific Cold Storage Co., 157 Fed. the assurers. That the master and sea- 625. men also, after becoming disconnected 2 Munson v. Standard Mar. Ins. Co., from the vessel by the shipwreck, are 156 Fed. 44. For libel suit see 122 Fed. entitled to coniDensation as laborers, 753, 58 C. C. A. .553, 106 Fed. 329, 45 or salvors for theii services in trans- C. C. A. 314. porting and in saving the cargo; to be 3 Ursula Briaht v. Am.ture); Com. Cas. 1,5. Goss V. Withers, 2 Burr. 683 (by » Hahn v. Corheft. 2 Bini & Cas. Co., 63Fed. 48, 11 C. C. A. 96. In the case of individual suretyship, usually gra- tuitous, the employer, it has been said, must on discovery promptly dis- close to the surety any dishonest acts of the employee committed during the term of suretyship. Saint v. Wfieeler & W. Mfg. Co., 95 Ala. 362, 10 So. 539, 36 Am. St. R. 210; Lancashire Ins. Co. v. Callahan, 68 Minn. 277, 71 N W. 261, 64 Am. St. R. 475; Sanderson V. Astoji, L. R. 8 Exch. 73; Phillips v. Foxall, L. R. 7 Q. B. 666. How far such an obligation, if not expressed, would be read into the voluminous bond of the surety company prepared by it and issued for a premium (see Watertown Fire Ins. Co. v. Simmons, 131 Mass. 85, 41 Am. Rep. 196; McKecknie v. Ward, 58 N. Y. 541) is doubtful and is perhaps largely an academic question, since the corpora- tion bond almost always contains one or more stipulations on this subject, § 472, infra. The corporate surety, except as controlled by statute, is wont to insert in its bond whatever clauses it deems desirable. If, in com- petition with other companies and for purposes of advertisement, a com- pany should omit the clause requiring an immediate disclosure of known acts of dishonesty committed by the em- ployee during the term of the bond, for a court to infer that the obligation still remained in the contract and that its violation would still produce forfeiture would seem to be a con- struction unusually indulgent towards the insurer. If the act of the employee fell short of a defalcation insured against, the insurer might deem its disclosure unnecessary. If, on the other hand, the act was within the scope of the policy and damnified the insured, the insured would be likely in his own interest to present his claim_ without delay. The general rule in insurance law relating to the doctrine of concealments is that the duty of disclosing material facts ter- minates with the closing of the con- tract, § 100, supra. s A bond by its provision terminated if the insured cashier quitted fiervirc STIPULATION TO GIVE IMMEDIATE NOTICE OF MISCONDUCT 659 If a bond procured by a state officer guaranteeing the faithful performance of his duties, is indefinite as to the period of risk, the court will infer that it is to continue during his present term of office.^ § 472. Stipulation to Give Immediate Notice of Misconduct. — On the discovery of any fraudulent or dishonest act on the part of the employee, the employer shall give immediate loritten notice thereof, with the fullest information obtainable at the time, to the company} Immediate notice means with reasonable promptness under the circumstances of the case.^ With the aid of prompt notice the insurer might be enabled to recover embezzled property which otherwise would be squandered or dissipated; or to anticipate the flight of an absconding defaulter and, by his arrest, to enhance the chances of pecuniary restitution. The insured employer is not under obligation, however, to watch or investigate the conduct of the employee or to use due diligence to detect dishonesty in the absence of express agreement to do so, but only to disclose the pertinent facts, when discovered and know^n.'* Apparently the doctrine that "when a person has sufficient informa- tion to lead him to a fact he shall be deemed conversant with it," applied at times against insurers,^ is not in this connection, at least, to be applied in their favor.^ And a federal court has decided that where loss by embezzlement or larceny is insured against, the em- of the bank. The bank suspended, but notice is given with due diHgence under the cashier continued to do certain the circumstances of the case, and acts of service for it. Held, that the without unnecessary and unreasonable suspension did not set the period of delay, it will answer the requirements six months running, American Surety of the contract," Fidelity tfe Deposit Co. V. Pavhi, 170 U. S. 144, 18 S. Ct. Co. v. Courtney, 186 U." S. 342, 22 552, 42 L. Ed. 977. S. Ct. 833, 46 L. Ed. 1193. 1 Brrant v. American Bonding Co. •* Guarantee Co. v. Trust Co., 80 Fed. (Ohio St., 1907), 82 N. E. 960. 766, 26 C. C. A. 146; Fidelity & Cas. 2 The provision is varied in its word- Co. v. Bank, 97 Ga. 634, 25 S. E. 392, ing in different bonds, for instance. 33 L. R. A. 821, 54 Am. St. R. 440: "If at any time during the term of Irregularities on the part of the em- this bond the employer learn or be ployee falling short of the contract informed that the employee is unre- requirement of course, need not be liable, dishonest, intemperate, gam- disclosed, Atlantic & P. Tel. Co. v. bling or indulging in other vices, the Barnes, 64 N. Y. 385, 21 Am. Rep. 621. employer shall immediately notify ^Skinner v. Norman, 165 N. Y. 565, the surety." In other bonds immediate 571. disclosure of any act causing loss un- ^ But it has also been held that der the policy is called for with right of the employer must use reasonable dili- cancellation to the company as to fu- gence to ascertain the facts. Fidelity it ture acts. Cluar. Co. v. Western Bank (Ky., 1906), 3 See § 479, injra; Remington v. Fi- 94 S. W. 3; U. S. Fidelity & Guar. Co. delity & Dep. Co., 27 Wash. 429 (de- v. BlacUey, 25 Ky. Law. Rep. 1271 lay of 45 days, issue for jury). "If a 77 S. W. 709. 660 FIDELITY BONDS ployer is not bound to give the notice until hie has acquired knowl- edge sufficient to justify a reasonable man in making a charge of felony against his employee.^ In construing a somewhat similar clause the United States Su- preme Court drew a distinction between "becoming aware" of gambling operations and "knowing" of them, and, under the former phraseology, held that the insurance was avoided because the presi- dent of the insured bank omitted to notify the insurer of informa- tion regarding the teller's speculations, though the president hon- estly believed that the teller had discontinued such practices.^ § 473. Knowledge of What Agents Is Imputed to the Employer. — In construing the meaning of the clause obligating the employer to give immediate notice of misconduct on the part of the employee, as soon as the employer has knowledge of it, the question at once arises, knowledge by what agents is to be counted as knowledge of the employer. A corporation can possess knowledge only through its agents, and indeed many individual employers, also, transact their business through agents. The rule is clear that the knowledge of the guilty employee is not to be imputed to the employer, since a defaulter is not likely to publish information regarding his own misdeeds.^ Nor is the prin- cipal charged with the knowledge of any employee who is in collu- sion with the wrongdoer,^ nor with the knowledge of a coemployee of the same rank as that of the wrongdoer,^ but by the better au- thority the employer is chargeable with the knowledge of those superior officers or agents whose duty it is to become acquainted with such facts in the usual conduct of the business.^ In the case of fidelity bonds issued to trust companies, banks and other institutions of a fiduciary character, so far as the phrase- • 1 ^tna Indemnity Co. v. J. R. Crowe U. S. 144, 18 S. Ct. 552, 42 L. Ed Coal & M. Co., 154 Fed. 545, 83 C. C. 977. A. 431. Compare U. S. Fidelity Co. v. * Fidelitu & Deposit Co. v. Courtney, Rice, 148 Fed. 206, 78 C. C. A. 164; 186 U. S. 342, 360, 22 S. Ct. 833, 46 L. National Surely Co. v. Long, 125 Fed. Ed. 1193 (cases cited); Pittsburg , Ft. W. 887, 60 C. C. A. 623. And see 28 Cent. & C. Ry. Co. v. Shaeffer, 59 Pa. St. 350. Dig. §§196, 198. A bond insuring ^ See ^ 479, infra. against lo.ss through "fraud or die- « See § 479, in/ra. The surety bonds honesty" is broader in its scope, U. S. provide that proofs of loss must be Fidelitu & (j. Co. v. Eag Shippers', etc., served on the company within a speci- Co., 148 Fed. 353. 78 C. C. A. 345. fied time after discovery of the dis- 2 Guarantee Co. v. Mechanics' Sav. honesty, in some bonds, thirty days, Bk., 183 IT. S. 402, 22 S. Ct. 124, 46 in others, three months. Fidelity dk L. Ed. 253. Cas. Co. v. Bank, 71 Fed. 116, 17 3 American Surety Co. v. Pauly, 170 C. C. A. 641. KNOWLEDGE OF WHAT AGENTS IS IMPUTED 661 ology of the instruments is susceptible of such a result, powerful reasons exist in favor of an interpretation which will hold the surety to the full measure of its responsibility, undisturbed and undi- minished by acts of omission or commission, whether fraudulent or merely inadvertent, on the part of any of the representatives of the insured. This subject has received consideration by the United States Supreme Court in connection with the alleged embezzlement of nearly $20,000 of the bank funds for purposes of personal specula- tion by one McKnight, during his incumbency in the offices of vice- president and president. The bond, with renewals, insuring his fidelity contained a provision "that the employer shall observe, or cause to be observed, due and customary supervision over the employee for the prevention of default, and if the employer shall at any time during the currency of this bond condone any act or default upon the part of the employee which would give the em- ployer the right to claim hereunder, and shall continue the emploj'ee in his service without written notice to the company, the company shall not be responsible hereunder for any default of the employee which may occur subsequent to such act or default so condoned." The court said "manifestly, this stipulation is not fairly subject to the construction that it was the intention that the neglect or omis- sion of a minority in number of the board of directors or the neglect or omission of subordinate officers or agents of the bank should be treated as the neglect or omission of the bank." And the court con- cluded that the things forbidden to be done or agreed to be done by the stipulation were to be either done or left undone by the bank in its corporate capacity, speaking and acting through the representative agents empowered by the charter to do or not to do the things pointed out. Such a representative the court suggested might be the governing body, the board of directors, or a superior officer, for instance, the president, having a general power of super- vision over the business of the corporation, and vested with the authority to condone the wrongdoing or to discharge a faithless employee.^ On the strength of the case last cited, the Circuit Court of Appeals has gone further and has held that under a state code vesting cor- porate management in the trustees, knowledge on the part of a single officer, trustee or even the president will not be imputed to 1 Fidelity & Deposit Co. v. Courtney. the vice-president of a bank of the 186 U. S. 342, 22 S. Ct. 833, 46 L. Ed! president's default is not imputable 1193 (knowledge by a director and by to the bank). 062 CKEDIT LXSURANCE the corporation to effect a breach of warranty based upon misstate- ments in the tippUcation.^ § 474, Credit Insurance. — It is difficult to bring mercantile fail- ures within exact laws of average. For this reason and because the terms and conditions of an insurance against loss, accruing from giving credit to customers, elude precise definition, this class of insurance is apt to be unsatisfactory either to the insurer or to the insured, and is not very extensivel}" practiced.^ Such a contract is to be construed as one of insurance rather than of guaranty.^ The policy in usual form covers only mercantile accounts of the insured with persons having satisfactory ratings by specified mer- cantile agencies at the time of its issuance,^ and a limit of credit to each debtor of the insured is imposed, usually in terms of a per- centage of the mercantile rating of his capital. If credit is given by the insured to a customer in excess of this stipulated percentage or amount, only the excess will be excluded from the operation of the policy. The stipulated amount will be covered.^ But usually, in order to stimulate the exercise of prudence on the part of the insured, it is provided that the insured shall himself be a coinsurer and shall sustain a certain percentage or amount of initial loss be- fore the insurer's liability attaches.^ A specified percentage of such initial loss is to be computed as of the date of the expiration of the bond and not as of the date of the failure first occurring." 1 American Bonding Co. v. Spokane Co., 57 N. J. L. 12,29 Atl. 421; Shak- Bldg., etc., Soc, 130 Fed. 737, 65 man v. Credit Systeyn Co., 92 Wis. 366, C. C. A. 121. The court made no refer- 66 N. W. 528, 32 L. R. A. 383, 53 Am. ence to the case of Guarantee Co. v. St. R. 920. A bond given in full and Mechanics' Sav. Bk., 183 U. S. 402, 22 construed in Talcott v. Gray, 59 N. J. S. Ct. 124, 46 L. Ed. 253. Eq. 595, 42 Atl. 603. 2 Tebbets v. Mercantile Credit G. Co., ^ Shakman v. Credit System Co., 92 73 Fed. 95, 19 C. C. A. 281. A patent Wis. 366, supra. was refused on a plan for insurance ^Jacket v. Am. Credit Ind. Co., 54 against losses from bad debts, U. S. N. Y. Supp. .505. 34 App. Div. 565, Credit S. Co. v. American Ind. Co., aff'd 164 N. Y. 598; Rice v. National 51 Fed. 751. Credit Ins. Co., 164 Mass. 285, 41 N. E. 3 Am. Credit Ind. Co. v. Athens W. 276. The court construing the 75% Mills, 92 Fed. 581, 34 C. C. A. 161; limit in favor of the insured held that State V. Phelan, 66 Mo. App. 548; it did not applj' to the face amount of People V. Rose, 174 111. 310, 51 N. E. the policy but only to the amount pay- 246, 44 L. R. A. 124. A contract to able on account of any one debtor, purchase for a fixed price, accounts Peden Iron & Steel Co. v. Ocean Ace. against insolvent debtors, is a contract & G. Co., 151 Fed. 992, 81 C. C. A. 178. of insurance, Claflin v. U. S. Credit ^ Strouse v. Am. Credit Ind Co., 91 System Co., 165 Mass. 501, 43 N. E. Md. 244, 46 Atl. 328. The doctrine of 293, 52 Am. St. R. 528 (contract void, misrepresentations and concealment of insurer not being authorized to do material facts, in general, applies to business). this class of insurance. Am. Credit Iml. * Robertson v. U. S. Credit System Co. v. Wimpfheimer, 14 App. Div. CREDIT INSURANCE 668 It is not necessary that a debtor of the insured should be ad- judicated a bankrupt in order to be "insolvent" within the meaning of the policy; nor that his assets in fact should be less than his lia- bilities. It is enough if he is shown to be unable to meet his obliga- tions in the usual course of business.^ Insolvency of the insurer, evidenced by an assignment for the benefit of creditors under an insolvency law, operates to terminate the policy as to future losses, and the insured is then entitled to recover back the unearned portion of the premium.^ Although the legal status of insolvency on the part of the insurer, evidenced, for example, by the appointment of a receiver and the sequestration of the assets of the company, cancels the insurance as to future losses,^ nevertheless, because of the breach of contract 498, 43 N. Y. Supp. 909. The doc- trines of warranty and waiver by agents also apply, Carrollton, etc., Mfg. Co. V. Am. Credit Ind. Co., 124 Fed. 25, 59 C. C. A. 545; Baer v. Am. Credit Ind. Co., 116 App. Div. 233, 101 N. Y. Supp. 672, aff'd 191 N. Y. 540 (knowledge of breach by mere solicitor affects no waiver). The changing of the copartnership name of the insured without a change of mem- bership will not forfeit the policy, il?n. Credit Ind. Co. v. Wood, 73 Fed. 81, 19 C. C. A. 264. The liberal rule of construction is always applied in favor of the insured in case of am- biguities, Aw. Credit Ind. Co. v. Athens W. Co., 92 Fed. 581, 34 C. C. A. 161 (Taft, J.); People v. Mercantile Credit G. Co., 166 N. Y. 416, 60 N. E. 24 (what is an assignment or insolvency); Goodman v. Mercantile Credit G. Co., 17 App. Div. 474, 45 N. Y. Supp. 508 (what is not a general assignment). But see Mercantile Credit G. Co. v. Wood, 08 Fed. 529, 15 C. C. A. 563. Loss held covered where sale was made within the period specified in the policy, but the loss accrued after- wards, Sloman v. Mercantile Credit G. Co., 112 Mich. 2.58, 70 N. W. 886. Under another bond the opposite ruling was made, Hogg v. Am. Credit Ind. Co., 172 Mass. 127, 51 N. E. 517. Teath of a partner is not discontin- uanfe cf the business within the meaning of the bond, Aw. Credit Ind. Co. V. Cas.sard, 83 Md. 272, 34 Atl. 703. Losses clearly excluded cannot be included by construction, Talcott v. National Credit Ins Co., 9 App. Div. 433, 41 N. Y. Supp. 281, aff'd 163 N. Y. 577, 57 N. E. 1125; Brierre v. Americaii Ind. Co., 67 Mo. App. 384. Meaning of the phrase "pro-rated," Talcott V. National Credit Ins. Co., 28 App. Div. 75, aff'd 163 N. Y. 577. 1 People V. Mercantile Credit G. Co., 166 N. Y. 416, 60 N. E. 24 (assign- ment); Strouse v. Am. Credit Ind. Cc, 91 Md. 244, 46 Atl. .328 (the fact of insolvency of a debtor may be proved in other ways as well as in those set forth in the policy). "Failure" means what in policv. Am. Credit Ind. Co. v. Carrollton, etc., Mfg. Co., 95 Fed. Ill, 36 C. C. A. 671. Construction as to losses under renewal certificates, Amer- ican Credit Ind. Co. v. Cliampion, etc., 103 Fed. 609, 43 C. C. A. 340; Lauer v. Gray, 55 N. J. Eq. 544, 37 Atl. 53. And see American Credit Ind. Co. v. Champion C. Paper Co.. 103 Fed. 609. 2 Smith V. National Credit Ins. Co. , 65 Minn. 283, 68 N. W. 28, 33 L. R. A. 511. An action to recover back the premium is not an action on the policy and need not be brought within the one-year limit, McCallum v. A^a- tional Credit Ins. Co., 84 Minn. 134, 86 N. W. 892. Losses sustained after the insurer becomes insolvent cannot be recovered. Gray v. Reynolds, 55 N. J. Eq. 501, 37 Atl. 461. Proofs of loss, how to be made, American Credit Ind. Co. v. Athens W. Mills, 92 Fed. 581, 34 C. C. A. 161; Jac' el v. American Credit Ind. Co., 54 N. Y. Supp. 505, 34 App. Div. 565, aff'd 164 N. Y. 598; Strouse v. Am. Credit Ind. Co., 91 Md. 244, 46 Atl. 328. 3 Commonwealth v. Mass. Ins. Co., 664 employers' liability insurance on the part of the insurer in suspending business and in becoming disabled from fulfilling its engagements, the insured has a valid claim against the insurer, measured by the present value of his policy at the time of the company's default.' § 475. Employers' Liability Insurance. — Proprietors of large es- tablishments employing many agents and workers, as, for exam- ple, factories, mills, and department stores, also common carriers, contractors, and others are subjected to numerous claims growing out of personal injuries. These claims naturally fall into two classes, those of the em- ployees, based upon injuries sustained by themselves in connection with their work for the employer, and those of the customers and the outside public generally who have been injured by the care- less or improper acts of the employer or his employees in connection with running the employer's elevators or machiner}^ or driving his delivery wagons or automobiles, or conducting other branches of his business. The amount of these claims against any one pro- prietor, sometimes very large, it is impossible to estimate in ad- vance, but the aggregate recoveries against many proprietors may be brought Avithin laws of average, and, therefore, such liabilities offer a fit subject for a scheme of insurance.^ Policies of this general character have become popular within the past few years, though in their purposes, terms, and scope they vary widely. For injuries to persons caused by the careless manage- ment of the employers' draught animals or vehicles a separate policy is often issued known as a "teams liability policy," and for injuries to any person or property, including also the machine itself, connected with running automobiles, "an automobile policy."^ The premium in what is known as "the general liability policy" is based upon the total compensation to employees, together with specific charges for floor area, street frontage, and elevators. In what is known as "the employers' liability policy," a policy of 119 Mass. 45; Tavlor v. Xorth Star American Life Ins. Co., 162 Pa. St. Mvt. Ins. Co., 46 Minn. 198, 48 N. W. ,586, 29 Atl. 660. 772. 2 See § 2, supra. Casualty com- 1 Carr v. Hamilton, 129 U. S. 252; panics may carry on business in other Taylor v. North Star Mid. Ins. Co., 49 states than where orocanized. People v. Minn. 198; People v. Commercial AUi- Van Cleave, 187 111. 125, 58 N. E. 422; ance L. Ins. Co.. 154 N. Y. 95 (status People v. Fidelitn & Cas. Co., 153 111. is fixed as of date of commencement of 25, 38 N. E. 752, 26 L. R. A. 295; action for dissolution); Peorle v. Em- Employers' Liability As.'iur. Corp. v. pire Mvt. Life Ins. Co.. 92 N. Y. 105; Merrill, 155 Mass. 404, 29 N. E. 529. People V. Security Life Ins. & Ann. 3 Gould v. Brock (Pa. St., 1908), 69 Co.. 78 N. Y. 114; Commonwealth v. Atl. 1122. EMPLOYERS LIABILITY INSURANCE 665 romewhat more restricted scope, the premium is based upon the total compensation to employees.^ In "the teams liabihty poHcy" the premium is usually based upon the total compensation to the drivers.^ These and other modified forms of similar policies all constitute legitimate varieties of accident insurance.^ An approximate estimate of pay rolls is usually made in advance to roughly determine the premium, and the precise adjustment is postponed until the end of the term of insurance, inasmuch as meanwhile the schedule of 8mployees and their wages is likely to show fluctuation.^ To aid the insurer in testing the accuracy of the final adjustment for premium, the policy provisions often secure to him the privilege of examining the books of the insured. This right the courts will enforce by ordering the production of the books unless the insured allow inspection at reasonable times. ^ 1 Swedish Am.. Tel. Co. v. The Fi- delity & Cas. Co., 208 111. 562, 70 N. E. 768. 2 Sometimes upon the number of vehicles, Grai/ v. Standard Life cfc Ace. Co., 170 Mass. 558. 3 Employers' Liability Assnr. Corp. v. Merrill, 155 Mass. 404, 29 N. E. 529. The policy may be limited to injuries to employees, Travelers' Ins. Co. V. Henderson Cotton Mills (Ky., 1905), 85 S. W. 1090; or to personal injuries caused by an elevator, or by steam boiler explosions. ^ But by some policies the wages of both the injured person and the person injuring him must be included in the estimated wages named in its schedule attached to the policy, East Carolina Ey. Co. v. Maryland Cas. Co., 145 N. C. 114, 58 S. E. 906. ^ Sicedish Am. Tel. Co. v. Casualtif Co., 208 111. 562, 70 N. E. 768; Fi- delitif & Cas. Co. v. Seagrist Jr. Co., 79 App. Div. 614, SO N. Y. Supp. 277. As in other forms of insurance the doctrine of waiver applies. Andrits V. Marvland Cas. Co., 91 Minn. 358, 98 N. W. 200 (knowledge of forfeiture at inception of contract). In con- struing the meaning and scope of the policy the insured is favored in case of ambiguity. Thus, an injury received in an elevator was held covered though the elevator was not mentioned, as required by the policy, in the schedule, Fvller Bros. T. & Lumber Co. v. Fi- delity & Cas. Co., 94 Mo. App. 490, 68 S. W. 222. A kidnev disease con- tracted by an employee in handling infected rags is an "injury accidentally suffered," Columbia Paper Stock Co. v. Fidelity & Cas. Co., 104 Mo. App. 157. The term "accident" was broadly rather than narrowly construed in Chi. Sugar Refining Co. v. Am. Steam Boiler Co., 48 Fed. 198, aff'd 57 Fed. 294, 6 C. C. A. 336, 21 L. R. A. 572.. Under a clause insuring "all opera- tions connected with the business of iron and steel works," an injury to an employee, caused by the fall of a girder which was being raised by an independent crew of workmen, was held to be within the policy, Hoven V. Emp. Liab. Assur. Corp., 93 Wis. 201, 67 N. W. 46, 32 L. R. A. 388. And see Phillipsburg Horse Car Co. V. Fidelity & Cas. Co., 160 Pa. St. 350, 28 Atl. 823. Losses were insured resulting from injuries to employees while engaged in the ice business; held, that injuries sustained by an em- ployee of the assured by the fall of an ice house, while in process of con- struction by the assured, though not in the season for cutting ice, were within the policy, People's Ice Co. v. Emp. Liab., etc.. Co., 161 Mass. 122, 36 N. E. 754. Where, however, the policy names a partnership for loss by injuries to its employees by the firm's negligence, it is not liable for the negligence of a member of the firm when not engaged in the part- nership business, Kelley v. London Guar. & Ace. Co., 97 Mo. App. 623, 71 S. W. 711. Exception of injuries to '><>H KMFLOYEKS' LIABILITY INSURANCE 8ince, in general, the same doctrines of law apply as in other branches of insurance law, it is obvious that the insured must noi deliberatel}^ enhance the risk during the term of the policy. In a Missouri case the policy insured against common law or statutory liability to employees, and described the business of the injured as wholesale dry goods and general merchandise. After the is.'^uance of the policy and without consent of the insurers, the in- sui-ed employer introduced into his business machiner}- for polish- ing rusted cutlery, which was unusual in establishments of that character. In connection with its use one of the employees received injuries for which he recovered judgment against the employer, who in turn brought action on the policy to recoup from the in- surers the amount of his loss. The court held that he could not recover on the policy.^ § 476. The Employer, not the Injured Person, Is Insured. — The policy may name both employer and employees as beneficiaries.^ In that event the injured employee in most jurisdictions may have a right of action against the insurer on the policy, if he has not already been indemnified for his loss.'"' And if, in such a case, the employer collects the insurance money on account of the injury, the fund will be impressed with a trust in favor of the employee, of which the employee cannot be deprived by agreement between the employer and the insurer.'' Usually, however, in procuring this class of insurance, and iR paying the premium for it, the employer is looking out for his own protection solely, and is alone named in the policy as the insured. In that event there is no privity of contract between the injured person and the insurer; the employer alone is entitled to sue on the policy and no trust is impressed on the insurance moneys in favor of the injured person, since the latter is altogether a stranger to the contract.^ children under statutory age construed 87 Mo. App. 677. What is commonly in Goodinlli v. London Guar. & Ace. understood by the term "general Co., 108 Wis. 207, 84 N. W. 164. An woodwork" may present a question pmployer's liability policy provided for the jury, Fidelity & Cas. Co. v. for cancellation "upon notice;" held, Phoenix Mfg. Co., 100 Fed. 604, 40 no cancellation where the company C. C. A. 614. threatened immediate cancellation un- 2 Statutes expressly authorize this, less a certain employee was discharged, N. Y. L. 1892, c. 690, § 55. London Guar. & Ace. Co. v. Horn, 206 3 Embler v. Hartford Steam Boiler 111. 493, 69 N. E. 526, 99 Am. St. R. Ins. Co., 158 N. Y. 431, 53 N. E. 212. 185. As to cancellation of such a 44 L. R. A. 512. policy and suit for the premium * Dearborn v. Refining Co., 7 Misc. earned, see Mnedonell v. Keeler Mfg. 513, 28 N. Y. Su)-»p 493 Co., 90 Minn. 321, 96 N. W. 785. s Hawkins v. McCalla, 95 Ga 192, ^Wallmann v. Fidelity & Cas. Co., 22 S. E. 141; Frye v. Bath Gas di- THE EMPLOYER, NOT THE INJURED PERSON, IS INSURED (367 Accordingly the employer, when so insured, may, at any time, make settlement with his insurers and give them an effective dis- charge, without the consent of the injured claimant, and without notice to him, although the latter may have procured a final and unsatisfied judgment against the employer for negligence or breach of duty.^ Nor can such a claimant, in his own right, whether a judgment creditor or otherwise, have recourse to an equitable action to enforce the policy.^ If he have an unsatisfied judgment against the insured, he may, of course, as such judgment creditor, pursue the appropriate statu- tory remedies, by attachment, garnishment, or otherwise, to reach the insurance fund as property belonging to his debtor.^ But in any such proceeding he is likely to come into competition with the other creditors of the insured. We have had occasion to observe that there is usually no privity of contract between the original insured and a company issuing a contract of reinsurance, and that, therefore, if the direct insurer is insolvent it may, after a loss, collect the reinsurance for its creditors generally, while the original insured, the owmer of the insured prop- erty, is left without indemnity or largely so.'* Likewise it is obvious, for the same reason, that an insolvent employer may, under certain forms of liability policies, collect for injuries to his employees or to outsiders, while the injured claimants themselves; whether judg- ment creditors or not, may receive no compensation for the losses which they have sustained. For this and other reasons the em- ployers' liability policy is now generally confined to' an indemnity, in whole or in part, against 'paid losses. An interesting and perhaps novel litigation is reported in Illinois in which the employee succeeded in recovering damages in an action EUc. Co., 97 Me. 241, 54 Atl. 395, 59 this does not prevent an assignee of a L. R. A. 444, 94 Am. St. R. 500; claim by assignment made after loss Bain v. Atkins, 181 Mass. 240, 63 from bringing action, Marrland Cas. N. E. 414, 57 L. R. A. 791, 92 Am. St. Co. v. Omaha Electric L. & P. Co., 157 R. 411. "An injured employee has Fed. 514. no rights against a liability company ' Bain v. Atkins, 181 Mass. 240, 63 which has an indemnity contract or N. E. 414, 57 L. R. A. 791, 92 Am. St. policy with his employer," Kinnian v. R. 411. Fidelity dfc Cas. Co., 107 111. App. 406; ^ Cushman v. Carhondale Fuel Co., Bvrke v. London (hiarantee & Ace. Co., 122 Iowa, 656, 98 N. W. 509 (statutes 47 Misc. (N. Y.) 171 (Gaynor, J., citing allowing actions to be brought by the cases). The policy may, and usually real party in interest will not aid such does, expressly provide that the em- a claimant); Beyer v. International ployer alone can bring action, Beyer v. Alnwinum Co., 115 App. Div. 853. International Aluminum Co., 115 App. ^ Fritchie v. Miller's Pa. Extract Co., Div. (N. Y.) 853; Munro v. Maryland 197 Pa. St. 401, 47 Atl. 351. Cas. Co., 48 Misc. (N. Y.) 183. ' But * See § 319, supra. 668 EMl'LOVEHs? LJAIUUTY INSURANCE of tort against the guarantee company for inducing the insured employer to discharge the injured employee because the latter would not release his claim. One Horn, foreman in the bicycle factory of Arnold, Schwinn & Co., of Chicago, lost two fingers in attempting to operate a milling machine. For this injury he re- covered judgment for $3,500 against his employers. Thereafter Horn was discharged solely because the guarantee company threat- ened that otherwise it would cancel the policy for the unexpired term, which it had the right to do under a five-day cancellation clause. Horn's employment was terminable at the will of his em- ployers. Prior to his recovery of judgment against them, Bloom- ingston, claim agent and attorney for the guarantee company, offered Horn .S75.00 in settlement of his claim and said that if it were not accepted, he would see to it that Horn was not re-employed by Arnold, Schwinn & Co., and also that he did not get work any- where else. Horn Avas awarded damages against the guarantee company by a jury in the sum of $800, and on appeal, the majority of the court affirmed the judgment, concluding that there was evi- dence of a willful and unjustifiable interference on the part of the defendant with the known rights of the plaintiff.' § 477. Period of Risk. — If the casualty causing the personal in- jury, liability for which is insured against, occurs during the term specified in the policy, it is covered by the policy though the liability of the insured may not be actually determined by judgment or otherwise until long after the term of insurance has expired.' § 478. Whether the Policy Is Indemnity Against Liability or Satis- fied Liability. — In construing the meaning of the employers' lia- bility policy the practical inquiry arises whether, to make out his cause of action against the insurer, it is enough for the employer to show that he is liable to pay an employee or outsider for a personal injury, or whether besides the liability he must show an actual payment or satisfaction of the liability. The answer to this inquiry turns upon the phraseology of the policy. It is a question of the character of the risk as defined by the particular contract. If the insurer's promise is to pay "all losses with which the in- sured may be legally charged or for which he may become legally liable," it is obvious that as soon as the employer's liability to the 1 London Guar. & Ace. Co. v. Horn, 2 Southern Rv. News Co. v. Fidelitv 206 111. 493, 69 N. E. .526 (citing many & Cos. Co. (Ky., 1904), 83 S. W. cases). 620. WHETHER THE POLICY IS INDEMNITY AGAINST LIABILITY (J69 third party is fixed, his right to sue in turn upon his pohcy is per- fected. The question whether the employer has actually paid, or ever does pay, or is pecuniarily able to pay, the judgment procured against him or the liability without judgment is of no concern to the insurer and is not germane to the issues in the trial of the action on the policy.^ If, on the other hand, as is now customary, the insurer obligates himself to indemnify the insured within certain limits, "for loss actually sustained and paid by him," or, as in some policies, "for loss actually sustained and paid by him in satisfaction of a judg- ment after trial of the issue," it needs no argument to show that the insured cannot recover on his liability policy until he has proved a payment or satisfaction of the liability.- Accordingly, under a polic}' of the last-mentioned class, the New Jersey court held that not the amount of the employee's judgment against the employer, but the amount actually paid by the em- ployer thereon measured the liability of the insurer. Nevertheless, the court concluded that a transfer by the insolvent employer to a trustee in bankruptcy would take the place of actual payment to the employee, and the master in Ijankruptcy was allowed to recover on the policy. In view of the insolvency of the employer, however, the recovery was reduced in amount, and the judgment was held payable in part, to wit, in the ratio which the insolvent's assets, excluding the insurance claim, bore to all his debts, excluding the judgment.^ Consistently with a general doctrine of insurance law,^ all these three kinds of obligations, evidenced by the three forms of policies i American Emp. L. Ins. Co. v. Carter v. /Etna Life Ins. Co. (Kan., Fordfjee, 62 Ark. 562; Frije v. Bath 1907), 91 Pac. 178; O'Connell v. R. R. Gas & Electric Co., 97 Me. 241, 54 Co., 187 Mass. 272, 72 N. E. 979; All. 395, 59 L. R. A. 444; Stephens v. Connolhi v. Bolster, 187 Mass. 266, Penn. Cas. Co., 135 Mich. 189; Anoka 72 N. E. 981 (payment of the judg- Lwnber Co. v. Fidelitv & Cas. Co., ment is a condition precedent); Frye 63 Minn. 286, 65 N. W. 353, 30 L, R. A. v. Bath Gas & Electric Co., 97 Me. 241 , 689; Ross v. Am. Emp. Liability Ins. 54 Atl. 395, 59 L. R. A. 444, 94 Am. Co., 56 N. J. Eq. 41, 38 Atl. 22; Fen- St. R. 500. The New York court says: ton V. Casualty Co., 36 Ore. 283, 56 "There was no loss or damage sus- Pac. 1096, 48 'L. R. A. 770; Fritchie tained by the defendant within the V. Miller's, etc., Co., 197 Pa. St. 401; terms of this poHcy until the insured PicHtt V. Casvalty Co., 60 S. C. 477. had been compelled to pay the claims 38 S. E. 160; Hovenv. Assvr. Corp. ,93 of the owners of the vessels, the con- Wis. 201, 67 N. W. 46,32 L. R. A. tract of insurance being simply for 388. indemnity," McWilliams v. Home Ins. 2 Allen V. /Etna Life Ins. Co., 145 Co., 40 App. Div. 400, 404. Fed. 881 (until judgment is paid, in- 3 Moses v. Travelers' Ins. Co., 63 surer cannot be gamisheed); Cushman N. J. Eq. 260, 49 Atl. 720, 92 Am. St. V. Carbondale, etc., Co., 122 Iowa, 656 R. 663. (payment is a condition precedent); ^ See § 24, supra. 670 EMPLOYEIIS' LlAlilUTY INSURANCE above described in this section, may well be classified as contracts of indemnity. The first class is an indemnity against liability. The other two are an indemnity against satisfied liabilities; the one, regardless of judgments; the other, only if established by a judg- ment rendered after trial of the issue. The usual rule of construction, however, is clear, that in case of ambiguous phraseology, employed by the insurer in its contract, the insured will be favored by the court. ^ Accordingly, if the lan- guage of the policy permits, the court will construe the instrument as an insurance against liability, and not against a satisfied or dis- charged liability only. A New Hampshire case furnishes a good illustration, although the conclusions of the court have not met with general approval. ^ Here the employer's liability policy provided that the policy should be liable only for losses actually sustained and paid by the insured in satisfaction of judgments. By another clause of the policy, however, the court concluded that the insurer obligated itself to pay, or secure the discharge of the insured from, any claim in a suit by an employee against the employer where the insurer took con- trol of the defense. The obligation "to defend" was thus construed as meaning "to successfully defend." The insurer had in fact taken control of a litigation for the defendant, the insured, and judgment had been obtained in that action by the plaintiff, the employee. This judgment the employer had not paid and could not pay be- cause he had become insolvent. The court, nevertheless, taking advantage of provisions of the policy, which it considered incon- sistent, decided that equity had jurisdiction to compel a satisfaction of the judgment by the insurer.^ A litigation instituted by an employer named Kennedy, against his insurer, illustrates a further point involved in this subject. Kennedy's policy provided, "no action shall lie against the com- pany .... unless it shall be brought by the assured himself to reimburse him for loss actually sustained and paid by him in satis- faction of a judgment," etc. One of the employees in his steam laundry, Kathryn Carlin, received bodily injuries during the term of the policy and, based thereon, recovered judgment against Ken- nedy for nearly $8,000. In the following month payment of the ^ Fideliti & Cas. Co. v. Lone Oak Maryland Cas. Co., 48 Misc 183 96 Cotton, etc., Co. (Tex. Civ. App.), 80 N. Y. Supp. 705. S. W. 541. i Sanders v. Fran' j or t Marine Ace. 2 bt. Lams, etc., Co. v. Marvland Cas. & Plate Glass Ins. Co., 72 N H 485, Co., 201 IT. S. 173, 182; Connolly v. 57 Atl. 655, 101 Am. St. R 688 Bolster, 187 Mass. 266; Munro v IMMEDIATE NOTICE OF INJURY WITH FULL PARTICULARS 671 judgment was accepted by Kathryn in the form of a series of promis- sory notes made by Kennedy in her favor and payable at various times during the following four years. The judgment was there- upon satisfied. An action was brought by Kennedy on his policy for reimbursement and was tried prior to the actual payment of the notes. The court held that a payment of the judgment in good faith by means of promissory notes was a sufficient payment to satisfy the terms of the policy.^ § 479. Immediate Notice of Injury with Full Particulars Re- quired. — To aid the insurer in making prompt compromise of claims or suitable preparation for defense, the policy usually provides in substance that the insured must give to the insurer immediate or prompt notice with full information on the occurrence of any injury or accident. This provision when properly construed is reasonable,^ and compliance with it is a condition precedent to a right of re- covery on the policy.^ "Immediate notice," however, as already more than once ob- served, means notice given with such promptness as is reasonable under all the circumstances of the case.'' The obligation to give immediate notice in this connection involves only the duty to exercise due diligence, and what is due diligence is often a question of fact for the jury to pass upon.^ But where the court concludes that only one inference is deducible from the facts, it will decide the question as one of law.^ 1 Kennedy v. Fidelity & Cas. Co. of an accident and upon notice of any (Minn., 1907), 110 N. W. 97 (some claim," etc., it was held that notice policies now require payment in cash). need not be given until the claim for 2 Columbia Paper Stock Co. v. Fi- damages had been made, Grand Rap- delit't & Cas. Co., 104 Mo. App. 571, ids Elec. L. & P. Co. v. FidcUty & 78 S. W. .320. Cas. Co., Ill Mich. 148. 69 N. W. 249; 3 London Guarantee & Ace. Co. v. Anoka Lumber Co. v. Fidelity & Cas. Livy (Ind. App.), 66 N. E. 481. Co., 63 Minn. 286, 65 N. W. 353, 30 i Columbia Paper Stock Co. v. Fi- L. R. A. 689. delitv & Cas. Co., 104 Mo. App. 157, ^Ward v. Maryland Cas. Co., 71 78 S. W. 320; Emplorers' Liability N. H. 262, 51 Atl.'900, 93 Am. St. R. Assiir. Corp. v. Liqht, Heat & P. Co., 514. 28 Ind. App. 437, 63 N. E. 54 (no- « Travelers' Ins. Co. v. Myers, 57 tice. among other things, was aimed N. E. 4.58, 49 L. R. A. 760; Rooney v. at "immediate medical attendance")- Maryland Cas. Co., 184 Mass. 26, 67 Similarly, when the policy specified N. E. 882 (3 months, too late); Nat. alimit of ten days, the court concluded Covt. Co. v. Travelers' Ins. Co., 176 that the time would not begin to run Mass. 121, 57 N. E. 350 (7 months, until the important facts and partic- too late); Smith, etc., Co. v. Travelers' ulars had been ascertained, Trivpe v. Ins. Co., 171 Mass. 357, 50 N. E. 516 Provident Fund Soc, 140 N. Y. 23, (notice after 26 days is not "imme- 35 N. E. 316, 22 L. R. A. 432, 37 Am. diate"); Underwood Veneer Co. v. St. R. 529. Where the policy required London Guaranty & Ace. Co., 100 Wis. immediate notice, "upon occurrence 378, 75 N. W. 996 (9 months, too 672 employers' liability insurance To govern the rights of parties under this important provision, the New York Court of Appeals has laid down the following set of rules: Under a clause in an employers' liability insurance policy, providing that, "The assured, upon the occurrence of an accident and also upon receiving information of a claim on account of an accident, shall give immediate notice in writing of such accident or claim, with full particulars, to the company at its office in New York City, or to the agent, if any, who shall have countersigned this policy," the assured is not bound to give notice of an accident immediately after the occurrence thereof, but as soon as he has become apprised of the accident, provided, however, he exercises reasonable diligence to acquire information. It is his duty, there- fore, to use reasonable care in the regulation of his business so that he may be apprised with reasonable celerity of any accident that may occur in its conduct. If, despite the exercise of reasonable care, the insured fails to acquire the information till after a lapse of time, but on its acquisition gives prompt notice to the insurance company, he complies with the obligation of the policy. Where, however, the assured employs many servants and the duty of ac- quiring information of accidents as they occur is necessarily com- mitted to servants or agents, he is liable for their negligence or fault, in the discharge of this duty, to the same extent as he would be responsible for their negligence or misconduct on any other obli- gation to third persons, and the assured is not relieved from such responsibility by the promulgation of rules adapted to apprise him of accidents, whether the servants complied with the rules or not; but his liability for the negligence of his servants or agents in failing to apprise him of an accident must be confined to those agents whose duty it was, either by his express regulation, or by their supervision and control in the natural and proper conduct of business over the subordinate servants by whom the accident had been caused, to transmit such knowledge to their superiors or the assured, and the assured is not chargeable with the knowledge of the servant causing the accident or with the knowledge or information of a coservant of the same rank as the one causing the accident.' late). A notice of accident after a driver informed foreman of trucking year was held insufficient though company. Latter neglected to give meanwhile the insured did not know prompt notice to superintendent that injury had resulted, X orthvestern Held, that it was for the jury' to deter- Tel. Exch. Co. v. Mnri/land Cas. Co., mine whether in ordinary course it was 86 Mmn. 467, 90 N. W. 1110. the foreman's dutv to report to super- 1 WoolveHon v. FideliU^ & Casualty intendent. If so", notice to foreman Co., 190 N. Y. 41,82 N. E. 745 (truck was notice to the plaintiff) Com- IMMEDIATE NOTICE OF INJURY WITH FULL PARTICULARS 673 South Carolina furnishes an illustration. The Edgefield Manu- facturing Company, proprietor of a mill, had obtained a policy to protect it against claims for accidents to its employees, the insur- ance being limited to $1,500 for the death or injury of any one person. An accident causing personal injuries to an employee occurred October 21st. At that time the plaintiff's officer, Price, in charge of the mill was sick with the smallpox. The rest of the office force were mostly ill with the same disease. Price died of the attack in February of the following year. The next month, Tomp- kins, the successor of Price, first learned of the casualty insurance. Thereupon he immediately gave to the insurance company a notice of the accident and of the pendency of the negligence suit, which had been instituted in consequence the preceding January. In that action the employee ultimately recovered jvidgment against the employer for $3,500. Thereafter this action was begun for $1,5C0. The court on appeal decided that the "jury could not reasonably reach any other conclusion than that the delay was excusable and the notice given and the summons sent with all promptness to be fairly expected and exacted." The judgment of the mill owner against the insurer was affirmed.^ In another case, an employer's liability policy was procured for the benefit of a copartnership by one of two partners, without the knowledge of the other. The latter, while ignorant of the existence of the insurance, knew about an accident which subsequently hap- pened to one of the employees of the firm. The other partner, though cognizant of the policy, knew nothing of the accident. In consequence of this situation the notice of claim, stipulated to be immediate, was not given to the agent of the insurance company until eight months after the occurrence of the injury. The court held that the notice was too late, and that the neglect of one partner to inform the other of the insurance offered no adequate excuse for the delay.' As to the character and extent of the information, which must be furnished to the insurer with the notice, the New Hampshire court holds that the particulars required are only such as are sufficient pare Manddl v. Fidelity & Cos. Co., edge); McShane v. Houard Bank, 73 170 Mass. 173, 49 N. E. 110, 64 Am. Md. 135, 20 Atl. 776, 10 L. R. A. 5^:2; St. R. 291 (employer not chargeable Pittsburg Ft. W. & C. Ry. Co. v. ■with servant's knovledge); Saint v. Shaeffer, 59 Pa. 350. M/gr. Co., 95 Ala. 362, 10 So. 539, 36 ^ Edgefield Mfq. Co. v. Maryland Am. St. R. 210; Fidelity & Cas. Co. v. Cas. Co. (S. C, 1907), 58 S. E. 969. Bank, 97 Ga. 634, 25' S. E. 392, 33 ^ Deer Trail, etc., Mining Co. v. L. R. A. 821, 54 Am. St. R. 440 (bank Maryland Cas. Co., 36 Wash. 46, 78 not chargeable with cashier's knowl- Pac. 135, 67 L. R. A. 275. 43 674 employers' liahiljtv insurance to enable the insurance company to judge of the probability of a claim, and that it has no right to expect the results of an exhaustive investigation such as might be called for to determine the facts upon a consideration of conflicting evidence.^ § 480. The Employer Must not Settle Claims, Without Insurer's Consent. — If the employer purposes to enforce his liability policy, it is obvious that he must not, without his insurer's consent, settle or compromise claims made upon him by his employees or by the public, which fall within the reach of the insurance,^ unless, indeed, he is coerced into taking such precautionary measures by the improper attitude of the insurer.^ § 481. The Employer Must Show a Liability Insured Against. — ^To make out his case on the policy, the insured employer must not only show a liability, but a liability on account of an injury covered by the policy. Thus it was held that his action against his insurers must fail, because though he offered in evidence a judgment for damages obtained against him by an employee, yet it did not ap- pear whether the judgment related to an injury sustained during the term of the policy or to another injury sustained after expiration of the policy.'* Where the policy provided that the amount of the employer's liability must first be "determined," before the insurer would be obligated to pay, the court held that such amount was not "deter- mined" so long as an appeal from the judgment against the insured employer was pending in court. ^ § 482. The Insurer Conducts Compromise or Defense in Accident Suit. — Unless the insurance company repudiates liability under ^Ward V. Maryland Cas. Co., 71 ^Fidelity & Cas. Co. v. Fordyce, 64 N. H. 262, .51 Atl. 900, 93 Am. St. R. Ark. 174, 41 S. W. 420. The insurance 514; Moran Bros. v. Pac. Coast Cas. was against liability for personal in- Co. (Wash., 1908), 94 Pac. 106. A juries sustained by employees or by 30 days' limitation for beginning ac- the public "caused by the assured or tion has been held void, Travelers' Ins. by the assured's workmen but not Co. V. Henderson Cotton Mills (Ky., caused by a subcontractor or subcon- 1905), 85 S. W. 1090, and will be con- tractor's 'workmen." The court held sidered waived by pending negotia- that the burden was on the insured tions for settlement, Lynchburg Cotton employer to prove that the injury was Mill Co. V. Travelers' Ins. Co., 149 not caused by a subcontractor' or a Fed. 954. subcontractor's workmen, Tobnie v. 2 Pickett V. Fidelity & Cas. Co., 60 Fidelitu d- Cas. Co., 95 App. Div. 352, S. C. 477, 38 S. E. 160. 88 N. Y. Supp. 717, aff'd as to extent 3 See § 484, infra. of liability, 183 N. Y. 581. * Reigler v. Sherlock, 66 Ark. 215, 49 S. W. 1080. JUDGMENT IN ACCIDENT SUIT CONCLUSIVE 675 the policy in respect to the claim, it properly should control the con- duct of the defense in the action against the employer for negligence, or breach of statutory duty, inasmuch as the ultimate responsibility to the extent of the policy will rest upon the insurer.^ Indeed, even though the policy be silent on the subject, the employer must, for his own proper protection, tender this privilege to his insurer, other- wise the insurer may repudiate the binding force of any judgment which is obtained by the injured person; ' but usually the terms of the policy expressly obligate the insurer to defend against claims which are not repudiated, or else secure to it the option through its own counsel, and at its own expense to take charge of the litigations against the insured based upon them/"* While the policy usually reserves to the insurers the right to compromise such an action, they may not credit on the judgment therein the amount of a compromise of a claim not in suit made without consent of the insured.'* § 483. Judgment in Accident Suit Conclusive. — ^The insurer, hav- ing received proper notice of the accident suit and opportunity to conduct the defense, is concluded by the judgment therein ren- dered, which naturally is offered in evidence in the suit on the policy, to establish the fact of the employer's liability to the injured person, and the amount of that liability/^ But the estoppel of the judgment does not extend beyond the issues which were litigated in the prior action in which it was rendered.^ 1 Washington Gas Co. v. Dist. of S. W. 794, 38 Am. St. R. 626. The Columbia, 161 U. S. 316, 16 S. Ct. 564, United States Supreme Court says: 40 L. Ed. 712. By taking charge of "When a person is responsible over the defense of the accident suit, it to another either by operation of law has been held, that the insurer waives or by express contract, and he is duly the policy exception to liability for notified of the pendency of the suit, injuries caused by failure of assured to and requested to take upon himself observe statutes affecting the safety the defense of it, he is no longer re- of persons, Royle Min. Co. v. Fidelity garded as a stranger, because he had (fcCas. Co. (Mo. App., 1907), 103 S. W. the right to appear and defend the 1098. See Chicago-CovlterviUe Coal action, and has the same means and Co. V. Fidelity & Cas. Co., 130 Fed. advantages of controverting the claim 957. as if he were the real and nominal 2 Glens Falls Portland Cewent Co. v. party upon the record. In every Ins. Co., 162 N. Y. 399, 56 N. E. 897. such case, if due notice is given to 3 Ano!a Lumber Co. v. Fidelity & such person, the judgment, if obtained Cas. Co., 63 Minn. 286, 65 N. W. '353, without fraud or collusion, will be 30 L. R. A. 689. conclusive against him whether he * New Orleans & C. R. Co. v. Mary- has appeared or not," Washington land Cas. Co. (La.), 38 So. 89. Gas Co. v. Dist. of Columbia, 161 U. S. 5 B. Roth Tool Co. V. New Amster- 316, 16 S. Ct. 564, 40 L. Ed. 712. dam Cas. Co., 161 Fed. 709; City of ^ B. Roth Tool Co. v. New Amster- St. Joseph v, Ry. Co., 116 Mo, 636, 22 dam Cas. Co., 161 Fed, 709, 676 employers' liability insurance It has been held, however, that the insurer, by taking dominion over the conduct of the defense in the accident suit and depriving the employer of control, estops itself from denying liability on the alleged ground that the case is one to which the policy is not ap- plicable.' § 484. Effect of Insurer's Breach of Agreement to Defend.— The insurer, erroneously contending that the particular accident or injury does not come within the reach of the policy, often declines to have anything to do with the defense in the accident suit. It then becomes of moment to determine the practical effect of a breach by the insurer of its agreement in this particular. If the insurance company declines to take charge of the defense in the action against the insured, it has been held that a compromise made by the insured and the injured person, in good faith and with reasonable prudence, can properly be taken into consideration as evidence of the actual loss sustained.^ It has also been held that where, after due notice of the pendency of an accident suit, the in- surance company refused to defend, the judgment entered therein upon a bona fide compromise was conclusive evidence of the em- ployer's liability and prima facie evidence of its amount.^ In a New York case the insurer was obligated to defend actions brought by employees against the insured and founded on personal injuries. The defense in such an action the insurer had actually conducted to the very eve of trial, but then it had withdrawn, leaving the employer no reasonable opportunity to make its own preparation for trial. The employee accordingly obtained judgment by default. In the subsequent action by the employer against the insurance company, the defendant was held estopped from denying the effect of the employee's judgment as conclusively establishing negligence and violation of the Factory Law on the part of the employer, defenses set up in the first action by the insurer's counsel himself.** The St. Louis Dressed Beef and Provision Company had a teams liability policy, issued by the defendant, which therein agreed to defend any suit for damages brought against the assured, the latter not to make any settlement without the company's consent. One of 1 Employers' Liahilitv Assur. Corp. Nev^s Co., 151 Mo. 373, 52 S. W. 205, V. CMcano, etc., Coal & C. Co., 141 Fed. 45 L. R. A. 380, 74 Am. St. R. 545. 962, 73 C. C. A. 278. And see Conner v. Reeves, 103 N. Y. 2 Southern Ry. News Co. v. Fidelity 527, 9 N. E. 439. & Cas. Co. (Ky., 1904), 83 S. W. 620. ^ Glens Falls, etc., Co. v. Travelers' ^Kansas City M. .DAKD FIRE POLICY 749 Sect. 12. The insured may bring his action in the county of his residence, notwithstanding anything to the contrary contained in the poHcy. Sect. 13. If upon trial the insured recovers more than the amount deter- mined by the insurers, he shall have judgment and execution immediately therefor, with interest and costs. If he recovers no more than such amount, the court may allow interest thereon, and such costs to either party as may be just; but execution shall not issue against the company within three months, unless by special order of court. Sect. 14. A person having a claim against an insurance company not organ- ized under the laws of the state, arising from a transaction with an agent of the company in the state, may sue therefor in the courts of the state. Service of any process pertaining to such action upon the insurance commissioner shall have the same effect as if the company were a domestic corporation and the service were lawfully made within the state upon its officers. Sect. 15. If in such action the plaintiff shall recover a judgment, and the company does not pay it w^ithin thirty days after notice of it is given to the insurance commissioner, the commissioner may suspend the authority of the company to do business in the state. If the company or any of its agents shall issue a policy during such suspension, the company and agents shall each forfeit two hundred dollars for each policy so issued, but the policies shall be valid and binding, nevertheless. Sect. 16. If a policy has been transferred or assigned by the assured to a pei'son to hold absolutely or as collateral security, with the assent of the insurer, the assignee may bring an action thereon in his own name or in that of the assignor, and may recover the full amount due upon the policy for the benefit of whom it may concern. Sect. 17. Copies of charters, by-laws, certificates, appointments, and other papers required by law to be filed in the office of the insurance commissioner, and certified by him, shall be competent evidence in the courts of this state. Sect. 18. This chapter shall be a part of every contract of insurance to which it is applicable and shall be plainly printed in every such contract. No waiver of any part of it shall be set up by the insurer, and every stipulation in the con- tract in conflict with it shall be void. 44 The South Dakota Standard Fire Policy. See § 227 In consideration of dollars to it paid by insured, hereinafter named, the receipt whereof is hereby acknowledged, does insure and legal representatives and assigns against loss or damage by fire, to the amount of dollars to the following described property: Bills of exchange, notes, accounts, evidence and securities of property of every kind, books, wearing apparel, plate, money, jewels, medals, patterns, models, scientific cabinets and collections, paintings, sculpture and curiosities are not included in said insured property, unless specifically mentioned. Said property is insured for the term beginning the day of , in the year 19. . , at noon, and continuing until the day of , in the year 19. . , at noon, against all loss or damage by fire originating from any cause except invasion, foreign enemies, civil commotions, riots or any 750 APPENDIX OF FORMS [CHAP. II military or usurped power whatever; the amount of said loss or damage to be estimated according to tlie actual value of the insured property at the time when such loss or damage happens, except that the amount of insurance written herein upon any real property, including structures on land owned by another than the insured, shall be taken conclusively to be the true value of such prop- erty and the amount of loss sustained by, and the measure of damages of, the insured, in case the same is wholly destroyed without criminal fault on the part of the insured or his assigns. This policy shall be void if any material fact or circumstance concerning the risk has been, or the amount of loss shall be, fraudulently concealed or mis- represented by the insured, or if the insured now has or shall hereafter obtain any other insurance on said property without the assent of the company, or if without such assent the property shall be removed, except that if such removal shall be necessary for the preservation of the property from fire or water, this policy shall be valid without such assent for five days thereafter, or if without such assent the situation or conditions affecting the insured property shall be altered so as to materially increase the hazard, if such increase in hazard be occasioned by the act or agency of the insured, or if without such assent the insured shall sell and dispose of all insurable interests in the insured property, or if the premises hereby insured shall remain vacant and unoccupied for more than thirty days without the assent of the company, or if the subject of the insurance be a manufacturing 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 twenty consecutive days without permission in writing endorsed hereon, or if this policy be assigned before a loss without the assent of the insurer, or without such assent illuminating gas or vapor be generated in the described building (or adjacent thereto) for use therein, or if without the assent of the insurer there be kept on the above-described premises dynamite, gunpowder exceeding twenty- five pounds in quantity, naphtha, nitro-glycerine or other explosives, or pe- troleum or any of its products of greater inflammability than gasoline or kero- sene oil of lawful fire test (which gasoline and kerosene may be kept and used for lights and usual domestic purposes) and kerosene may be kept for sale ac- cording to law, but in quantities not exceeding five barrels, provided it be drawn and lights filled by daylight or at a distance not less than ten feet from artificial light. If 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. In case of any loss or damage under this policy the insured shall promptly give notice of such loss, and within sixty days from the time of the oceurrenco of the fire he shall make a statement in writing, sign and swear to the same, and render it to the company, setting forth substantially the property destroyed or damaged and a statement or estimate of the amount of his loss (except in case of total loss on buildings where the fire occurs without criminal fault on the part of the insured, or his assigns, in which case the value on the buildings need not be stated), the interest of the insured therein, all other insurance thereon, the purpose for which the building insured or containing the property insured was used, and bj' whom occupied, and the time and manner in which the fire originated as far as known to the insured. The company may also examine the vouchers, books and accounts of the insured and make extracts from tht. Bame. Should proof of loss not be furnished within six months from the date CHAP. II ] THE SOUTH DAKOTA STANDARD FIRE POLICY 751 of loss this policy shall be void, unless such proof of loss snail have been ■waived. In case of any loss or damage the company, within sixty days after the in- sured shall have submitted the statement as hereinbefore provided, shall either pay the amount for which it shall be liable, which amount, if not agreed upon or determined by the provisions of the policy, shall be ascertained by award of appraisers as hereafter provided, or sliall replace the property with other of the same kind and quality (except in case of total loss of buildings as afore- said where the amount of loss is fixed), or it may within fifteen days after such statement is submitted notify the insured of its intention to repair the premises or any portion thereof separately insured by this policy and shall thereupon enter upon said premises and proceed to repair the same with reasonable ex- pedition. It is moreover understood that there can be no abandonment of the property insured to the company, and that the company shall not in any case be liable for more than the sum insured, with interest thereon from the time when the loss shall become payable as above provided. It shall be optional, however, with the company to take all or any part of the articles of personal property injured or damaged at the actual or appraised sound value thereof without deduction for damage. If there be any other insurance on the property insured, whether prior or subsequent, the insured shall recover on this policy no greater proportion of loss sustained (except in case of total loss on buildings) than the sum hereby insured bears to the whole amount of insurance thereon. Except in cases of loss where the amount thereof is fixed, as hereinbefore provided, in the event of disagreement as to the amount of loss, the same shall, as above provided, be ascertained by two competent and disinterested ap- praisers, the insured and this company each selecting one, and the two chosen shall 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 difference to the umpire; and the award in writing of any tw^o shall determine the amount of such loss; the parties thereto shall pay the appraisers respectively selected by them and shall bear equally the expenses of the appraisal and umpire. If this company shall claim that the fire was caused by the act or neglect of any third person or corporation, private or municipal, this company shall, on payment of the loss, be subrogated to the extent of such payment to all right of recovery by the insured for loss resulting therefrom, and such right shall be assigned to this company by the insured on receiving such payment. Whenever in this policy the word "insured" occurs, it shall be held to include the legal representative of the insured, and whenever the word "loss" occurs, it shall be deemed the equivalent of "loss or damage." If this policy shall be made payable to a mortgagee or trustee of the insured real estate, no act or default of any person other than such mortgagee or his agents, or those claiming under him, shall affect such mortgagee's or trustee's rights to recover in case of loss on such real estate. Provided, that such mort- gagee or trustee shall, on demand, pay according to the customary scale of vates for any increase of risk not paid for by the insured. And in case this policy shall have been issued to the owner of the insured property with the loss pay- able to a mortgagee, and the owner shall have done any act voiding the policy as herein provided, or the policy shall have been cancelled so that the com- pany is not liable to him in any event, then the mortgagee, upon payment to "752 APPENDIX OF FORMS [CHAP. II him of the full amount secured by such mortgage, shall assign to the company or companies making such payment the mortgage, together with the note or debt secured thereby. , , . . u This policy may be cancelled at any time at the request of the msured, who shall thereupon be entitled to a return of the portion of the above premium re- maining after deducting the customaiy short rates for the time this policy shall have been in force. The company also reserves the right to cancel this policy as to all risks subse- quent to the expiration of five days after the giving of such notice in writing to the insured and to any mortgagee or trustee to wliom this policy is made payable, and tendering to the insured the ratable proportion of the premium. Any person who solicits insurance or issues policies of insurance, or procures applications therefor, shall be held to be, and considered, the general agent of the insurer issuing the policy or making a renewal thereof, except as to proof of loss and adjustment thereof, and neither the application of the insured nor the by-laws of the company shall be considered as a warranty or a part of the contract of insurance. It shall be the duty of the insurer, in order to avail himself of any provision in this policy rendering it void, to promptly cancel the policy as provided herein upon having or obtaining notice or knowledge of the existence of any facts or circumstances which would, according to the terms of the policy, render it void; otherwise it will be deemed to have waived such provision or provisions void- ing the policy. Provided, that if the grounds for cancellation under the last clause shall be distinctly specified in the written notice, such cancellation may be effected upon twenty-four hours' notice to the insured; and actual notice to, or the knowledge of, any agent of the company as above mentioned shall be deemed notice to, and knowledge of, the company. In witness whereof, etc. 45 The Wisconsin Standard Fire Policy. See § SS7 In consideration of the stipulations herein named and of dollars premium does insure for the term of from the day of , 19. . , at noon, to the day of , 19. . , at noon, against all direct loss or damage by fire except as hereinafter provided, to an amount not exceeding dollars, to the following described property while located and contained as described herein, and not elsewhere, to wit: This policy is made and accepted subject to the following stipulations and conditions, together with such other provisions, agreements, or conditions as may be endorsed hereon or added hereto, and no officer, agent, or other repre- sentative of the company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement endorsed hereon or added hereto, and as to such provisions and con- ditions no officer, agent, or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured un- leaR so written or attachpd. Up to the time of the delivery of the policy to as* CHAP. II ] THE WISCONSIN STANDARD FIRE POLICY 753 sured. in all transactions relating to this policy or to the property herein insured, between the assured and any agent of the company, knowledge of the agent shall be knowledge of the company; and in all transactions relating to the subject of insurance, between the insured and any agent of the company after loss, knowl- edge of the agent shall be knowledge of the company. In witness whereof, etc. Except when otherwise provided by statute, this company shall not be liable beyond the actual cash value of the property at the time any loss or damage occurs, and the loss or damage shall be ascertained or estimated according to such actual cash value, with proper deduction for depreciation however caused, and shall in no event exceed what it would then cost the insured to repair oi- replace the same with material of like kind and quality; said ascertainment or estimate shall be made by the insured and this company, or, if they differ, theii by appraisers, as hereinafter provided; and, the amount of loss or damage having been thus determined, the sum for which this company is liable pursuant to this policy shall be payable sixty days after due notice and proof of the loss have been received by this company in accordance with the terms of this policy. It shall be optional, however, with this company to take all, or any part, of the articles at such ascertained or appraised value, and also to repair, rebuild, or replace the property lost or damaged with other of like kind and quality within a reasonable time on giving notice, within thirty days after the receipt of the proof herein required, of its intention so to do; but there can be no abandon- ment to this company of the property described. This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insur- ance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss. This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property cov- ered in whole or in part by this policy, or if the subject of insurance be a manu- facturing 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; or if the hazard be increased by any means within the control or knowledge of the insured, or if mechanics be employed in building, altering, or repairing the within described premises for more than fifteen days at any one time; or if the interest of the insured be other than unconditional and sole ownership; or if the subject of insurance be a building on ground not owned by the insured in fee-simple; or if the subject of insurance be personal property and be or become encumbered by a chattel mortgage; or if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property covered by this policy by virtue of any mortgage or trust deed; or if any change other than by the death of an insured, take place in the interest, title, or posses- sion of the subject of insurance (except change of occupants without increase of hazard) whether by legal process or judgment or by voluntary act of the insured, or otherwise; or if this policy be assigned before a loss; or if illuminating gas or vapor be generated in the described building (or adjacent thereto) for use therein; or if (any usage or custom of trade or manufacture to the contrary 48 754 APPENDIX OF FORMS [CHAP. H notwithstanding) there be kept, used, or allowed on the above described prem- ises, benzine, benzole, dynamite, ether, fireworks, gasoline, Greek fire, gun- powder exceeding twenty-five pounds in quantity, naphtha, nitro-glycerine or other explosives, phosphorus, or petroleum or any of its products of greater inflammability than kerosene oil of the Wisconsin standard (which last may be used for lights and kept for sale according to law but in qua,ntities not ex- ceeding five barrels, provided it be drawn and lamps filled by daylight or at a distance not less than ten feet from artificial light); or if a building herein de- scribed, whether intended for occupancy by owner or tenant, be or become vacant or unoccupied and so remain for ten days and continuing until the time of the fire. This company shall not be liable for loss caused, directly or indirectly, by invasion, commotion, riot, insurrection, civil war, or military or usurped power, or by order of any civil authority; or by theft; or by neglect of the insured to use all reasonable means to save and preserve the property at and after a fire or when the property is endangered by fire in neighboring premises; or (unless fire ensue, and, in that event, for the damage by fire only) by explosion of any kind. This policy shall cover any direct loss or damage caused by lightning (meaning thereby the commonly accepted use of the term lightning, and in no case to include loss or damage by cyclone, tornado, or windstorm), not exceed- ing the sum insured, nor the interest of the insured in the property and subject in all other respects to the terms and conditions of this policy. If there shall be any other insurance on said property this company shall be liable only pro rata with such other insurance for any direct loss by lightning, whether such other insurance be against direct loss by lightning or not. If a building or any part thereof fall, except as a result of fire, all insurance by this policy on such building or its contents shall immediately cease. This company shall not be liable for loss to accounts, bills, currency, deeds, evidences of debt, money, notes, or securities; nor, unless liability is specifically assumed hereon, for loss to awnings, bullion, casts, curiosities, drawings, dies, implements, jewels, manuscripts, medals, models, patterns, pictures, scientific apparatus, signs, store or office furniture or fixtures, sculpture, tools, or prop- erty held on storage or for repairs; nor, beyond the actual value destroyed by fire, for loss occasioned by ordinance or law regulating construction or repair of buildings, or by interruption of business, manufacturing processes, or other- wise; nor for any greater proportion of the value of plate glass, frescoes, and decorations than that which this policy shall bear to the whole insurance on the building described. If an application, survey, plan or description of property be referred to in this policy it shall be a part of this contract and a warranty by the insured. This policy may by a renewal be continued under the original stipulations, in consideration of premium for the renewed term, provided that any increase of hazard must be made kno'WTi to this company at the time of renewal or this policy shall be void. This policy shall be cancelled at any time at the request of the insured; or by the company by giving five days' notice of such cancellation. Unless during a time in which the hazard shall be increased solely by the act of God, and in euch case and during such time of such increase of hazard the company shall not cancel this policy except upon sixty days' notice of such cancellation without the consent of the assured. If this policy sh.nll bp cincelled as hereinbefore CHAP. II ] THE WISCONSIN STANDARD FIRE POLICY 755 provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate; except that when this policy is cancelled by this company by giving notice it shall retain only the pro rata premium. If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto. If property covered by this policy is so endangered by fire as to require re- moval to a place of safety, and is so removed, that part of this policy in excess of its proportion of any loss and of the value of property remaining in the original location, shall, for the ensuing five days only, cover the property so removed in the new location; if removed to more than one location, such excess of this policy shall cover therein for such five days in the proportion that the value in any one such new location bears to the value in all such new locations; but this company shall not, in any case of removal, whether to one or more locations, be liable beyond the proportion that the amount hereby insured shall bear to the total insurance on the whole property at the time of fire, whether the same cover in new location or not. If fire occur the insured shall give immediate notice of any loss thereby in writing to this company, protect the property from further damage, forthwith separate the damaged and undamaged personal property, put it in the best possible order, make a complete inventory of the same, stating the quantity and cost of each article and the amount claimed thereon; and, within sixty days after the fire, unless such time is extended by agreement with the com- pany through the local agent, or any other authorized agent or any adjuster acting for such company concerning such loss, shall render a statement to this company, signed and sworn to by said insured, stating the knowledge and belief of the insured as to the time and origin of the fire; the interest of the insured and of all others in the property; the cash value of each item thereof and the amount of loss thereon; all encumbrances thereon; all other insurance, whether valid or not, covering any of said property; and a copy of all the descriptions and schedules in all policies, any changes in the title, use, occupation, location, possession, or exposures of said property since the issuing of this policy, by whom and for what purpose any building herein described and the several parts thereof were occupied at the time of fire; and shall furnish, if required, verified plans and specifications of any building, fixtures, or machinery destroyed or damaged; and shall also, if required, furnish a certificate of a magistrate or notary public residing in the county where the insured property is located (not interested in the claim as a creditor or otherwise nor related to the insured) stating that he has examined the circumstances and believes the insured has honestly sustained loss to the amount that such magistrate or notary public shall certify. The insured, as often as required, shall exhibit to any person designated by this company all that remains of any property herein described, and submit to examinations, all under oath, by any person named by this company, and sub- scribe the same; and as often as required, shall produce for examination aU 756 APPENDIX OF FORMS [cHAP. II books of account, bills, invoices, and other vouchers, or certified copies thereof if originals be lost, at such reasonable place as may be designated by this com- pany or its representative, and shall permit extracts and copies thereof to be made. In the event of disagreement in the amount of loss the same shall, as above provided, be ascertained by two competent and disinterested api; raisers, who shall be residents of this state unless otherwise agreed by the parties thereto; the insured and this company each selecting one, within thirty-five days after the mailing of proof of loss to said company, as herein stated, and in case either party fails to select an appraiser within such time the other appraiser and the umpire selected, as herein provided, may act as a board of appraisers, and what- ever award they shall find snail be as binding as though the two appraisers had been chosen; and the two so chosen shall first select a competent and disin- terested umpire, provided that if after five days the two appraisers cannot agree on such an umpire, the presiding judge of the circuit court of the county wherein the loss occurs may appoint such an umpire, upon application of either party in writing by giving five days' notice thereof in writing to the other party. Unless within thirty days after proof of the loss has been mailed to the company, either party, the assured or the company, shall have notified the other in writing that such party demands an appraisal, such right of an appraisal shall be waived; the appraisers together shall then estimate and appraise the loss, stating sepa- rately sound value and damage, and, failing to agree, shall submit their differ- ences to the umpire; and the award in writing of any two shall determine the amount of such loss; the parties thereto shall pay the appraiser respectively selected by them and shall bear equally the expenses of the appraisal and um- pire. This company shall not be held to have waived, except as above expressly provided for, any provision or condition of this policy or any forfeiture thereof by any requirement, act, or proceeding on its part relating to the appraisal or to any examination herein provided for; and the loss shall become payable sixty days after the notice and proof of the loss herein required have been received by this company. This company shall not be liable under this policy 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 such property, and the extent of the application of the insurance under this policy or of the contribution to be made by this company in case of loss, may be provided for by agreement or condition written hereon or attached or appended hereto. Liability for re-insurance shall be as specifically agreed hereon. If this company shall claim that the fire was caused by the act or neglect of any person or corpoiation, private or municipal, this company shall, on pay- ment of the loss, be subrogated to the extent of such payment to all right of recovery by the insured for ths loss resulting therefrom, and .such right shall be assigned to this company by the insured on receiving such payment. Wherever in this policy the word "insured" occurs, it shall be held to in- clude the legal representative of the insured, and wherever the word "loss" occurs, it shall be deemed the equivalent of "loss or damage." If this policy be made by a mutual or other company having special regula- tions lawfully applicable to its organization, membership, policies or contracts CHAP. II ] APPLICATION FOR LIFE INSURANCE 757 of insurance, such regulations shall apply to and form a part of this policy as the same may be written or printed upon, attached, or appended hereto. 46 A Form of Application for Life Insurance. See § 77 I hereby apply for an assurance of $ on the plan, premiums payable with the Life Insurance Company, on the life of , born at , on , 18. . , at present and for years resident of I hereby warrant that he is not intemperate in the use of stimulants or narcotics. I agree that the answers given herewith to the questions of the Agent and Examiner, which I declare and warrant to be true, shall be the basis of my contract with the company, and that such contract shall at all times and places be held and construed to have been made in the City of I also agree that if within two years from this date, the Insured shall, without the written consent of the company, reside or travel elsewhere than in or to the United States, Canada, or Europe; or shall within such period and without such consent, be personally engaged in blasting, mining, submarine operations, or in the making of explosives, or in service on any railway train, or on a steam or sailing vessel, or in naval or army service in times of war; the policy hereby applied for shall thereupon cease and determine. Dated at this day of , 18. . . Witness Signature Questions to be asked by the Agent, and answered by the person to be insured: 1. A What is your full name? b Are you married? 2. What is your occupation? (Give kind of business and position held.) 3. Are you in good health? 4. A For whose benefit is the proposed insurance? b How related to you? 5. What is the total insurance now on your life? 6. In what companies and for what amounts? 7. Have you any application for insurance now pending? In what companies? 8. A Have you ever applied to any agent or sought insurance in any company which either postponed or refused to issue a Policy? b State companies and cause. 9. Are you engaged in or connected with the manufacture or sale of Malt or Spirituous Liquors? The answers to the following questions must be written by one of the Com- pany's Examiners: 10. Have you now any disease or disorder? If so, what? 11. A For what have you sought medical advice during the past seven years? B Dates? c Duration? d Physicians consulted? 12. A Have you had any personal injury or accident? b What? c When? D Result? 13. A Have you had Rheumatism? b Number of attacks? c Dates? D Dura- tion? E Severity? 14. A Are you or have you been subject to Dyspepsia? b Dates? c Dura- tion? D Severity? 15. Have you ever had any of the following? 758 APPENDIX OF FORMS [chap. II Calculus or gravel, . . Difficulty in urinating, . . Swelling of feet or face, . Dropsy, Palpitation, Disease of heart or brain, . Loss of consciousness, . . Habitual or chronic cough, Consumption, Bronchitis, Asthma, Spitting of blood, . , . Bleeding piles, .... Pleurisy, Varicose veins, . . . . Paralysis or palsy, . . . Apoplexy, Nervous exhaustion, . . Fits, Sunstroke, 16. Family record. Dizziness or short breath. Pneumonia, .... Diabetes, Delirium Tremens, . . Vertigo, Insanity, . . .- i . Liver complaint, . . . Jaundice, CoUc Dysentery, Diarrhoea (chronic), . . Disease of spine, . . . Gout, Tumors of any kind, . Swelling of glands, . . Ulcers or open sores, . Fistula, Discharge from the ear, Rupture, Difficulty in swallowing, Is your father living?. . Is your mother living?. How many brothers living?. (If none, so state.) How many sisters living?. (If none, so state.) Father's father living?. . . . Father's mother living?. . . Mother's father living?. . . Mother's mother living?. . Age Condition of Health Age Disease which Caused Death Duration Previous Health Is your father dead? Is your mother dead? How many brothers dead? J (If none, so state.) ( How many sisters dead?. . J (If none, so state.) ( Father's father dead? Father's mother dead? Mother's father dead? Mother's mother dead? CHAP. II ] A FORAI OF POLICY OF LIFE INSURANCE 759 17. Have any two members of the family, grandparents included, had con- sumption, cancer, paralysis or apoplexy, disease of heart, disease of kidneys? Signed this day of , 19. . . {Party to be insured sign here) 47 A Form of Policy of Life Insurance. See § SS5 This policy witnesseth that the Life Insurance Company, in con- sideration of the statements and agreements in the application for this Policy which are herebj-^ made a part of this contract and of the sum of dol- lars to it in hand paid by and of the annual premium of dollars to be paid at or before twelve o'clock, u., on the day of in every year during the continuance of this policy, does insure the life of in the amount of dollars, for the term of life, payable to .his executors, administrators or assigns, at its office in the City of , upon due and satisfactory proof of interest and of the death of the said insured, de- ducting therefrom all indebtedness of the party to the company, together with the balance, if any, of the then current year's premium. Provided, that in case the said premiums shall not be paid on or before the several days hereinbefore mentioned for the payment thereof, at the office of the company in the City of , or to agents when they produce receipts signed by the President or Treasurer, then, and in every such case, this policy shall cease and determine, subject to the provisions of the company's non- forfeiture SYSTEM as indorsed hereon, with accompanying table. This policy does not take effect until the first premium shall have been actually paid; nor are agents authorized to make, alter or discharge this or any other contract in relation to the matter of this insurance, or to waive any forfeiture hereof, or to grant permits, or to receive for the cash due for premiums arv- thing but cash. Any error made in understating the age of the insured will be adjusted by paying such amount as the premiums paid would purchase at the table rate. No assignment of this policy shall take effect until written notice thereof shall be given to the company. This policy, after two years, will be incontestable, except for fraud or non- payment of premium. In Witness Whereof, the said Life Insurance Company has, by its President and Secretary, signed and delivered this contract, at the City of , this day of , one thousand nine hundred and , , Secretary. , President. non-forfeiture provisions When after two full annual premiums shall have been paid on this policy it shall cease or become void solely by the non-payment of any premium when due, its entire net reserve by the American Experience Mortality and interest at four per cent, yearly, less any indebtedness to the company on this pohcy, shall be applied by the company as a single premium at the company's rates pub- lished and in force at this date, either, first, to the purchase of non-participating 700 APPENDIX OF FORMS [chap. II term insurance for the full amount insured by this policy, or, second, upon the written application by the owner of this policy and the surrender thereof to the company at within three months from such non-payment of premium, to the purchase of a non-participating paid-up policy payable at the time this policy would be payable if continued in force. Both kinds of insur- ance aforesaid will be subject to the same conditions, except as to payment of premiums, as those of this policy. No part, however, of such term insurance shall bo due or payable unless satisfactory proofs of death be furnished to the company Avithin one year after death; and if death shall occur within three years after such non-payment of premium, and during such term of insurance, there shall be deducted from the amount payable the sum of all the premiums that would have become due on this policy if it had continued in force. The following table shows the amount that the company agrees to loan (being one-half of the reserA-e) upon a satisfactory assignment of the policy as collateral security; also the additional time for which the insurance will be continued in full force after lapse by non-payment of premium; or the value of the policy in paid-up insurance upon surrender within three months from date of lapse. The figures given are based upon the assumption that the premiums (less current dividends) have been fully paid in cash. If there be any indebtedness upon the policy, the values as stated in the table would have to be reduced proportionally upon the principles stated in the policy. The indebtedness, if any, may be paid off in cash, in which case the figures in the table will apply: Company will Loan In Case of Lapse of Policy Number of Years' Premi- Extended Insurance Paid-up Policy Years Days $ $ 48 New York Standard Life Insurance Polio/ ORDINARY LIFE Amount $ Age Premiums $ In consideration of the annual premium of dollars, and of the payment of a like amount upon each day of hereafter until the death of the Insured, Promises to pay at the Home Office of the Company in upon receipt at said Home Office of due proof of the death of of , County of , State of herein called the insured, dollars, less any indebtedness hereon to the Company and any unpaid portion of the premium for the then current policy year upon surrender of this Policy, properly receipted, to beneficiary with right of revocation. Change of Beneficiary. — When the right of revocation has been reserved, or in case of the death of any beneficiary under either a revocable or irrevocable CHAP. Jl j NEW YORK ISTA.NDAKD UFE INSURANCE POLICY 701 designation, the Insured, if there be no existing assignment of the Policy made as herein provided, may, while the Policy is in force, designate a new beneficiary with or without reserving right of revocation by filing written notice thereof at the Home Office of the Company, accompanied by the Policy for suitable endorse- ment thereon. Such change shall take effect upon the endorsement of the same on the Policy by the Company. If any beneficiary shall die before the Insured the interest of such beneficiary shall vest in the Insured. Payment of Premiums. — The Company will accept pajTnent of premiums at other times than as stated above, as follows: Except as herein provided the payment of a premium or instalment thereoi, shall not maintain the Policy in force beyond the date when the next premium or instalment thereof is payable. All premiums are payable in advance at said Home Office or to any agent of the Company upon delivery, on or before date due, of a receipt signed by an Executive Officer (the Company must here recite the titles of the several Execu- tive Officers) of the Company and countersigned by said agent. A grace of thirty days subject to an interest charge at the rate of per centum per annum shall be granted for the payment of every premium after the first year during which time the insurance shall continue in force. If death occur within the days of grace the unpaid portion of the premium for the then current Policy year shall be deducted from the amount payable hereunder. Conditions. — (The policy may here jDrovide for restrictions of liability by reason of travel, occupation, change of residence and suicide. These restrictions must be applicable only to cases where the act of the Insured provided against occurs within one year after the issuance of the Policy.) Incontestability. — (The Policy shall here provide that it shall be incontestable, except for non-payment of premiums, either from its date or after one or two years in the following form) : This Policy shall be incontestable, except for non-payment of premiums, from its date. If the age of the Insured has been misstated, the amount payable hereimder shall be such as the premium paid would have purchased at the correct age. Participation. — The proportion of the surplus accruing upon this Policy shall be ascertained and distributed annually and not otherwise. Dividends. — Dividends at the option of the owner of this Policy shall on the day of of each year be either — 1. Paid in cash; or, 2. Applied toward the payment of any premium or premiums; or, 3. Applied to the purchase of paid-up additions to the Policy; or, [Amount of insurance payable at death Premiums payable DURING life Annual dividend period.] 4. Left to accumulate to the credit of the Policy with interest at per centum per annum and payable at the, maturity of the Policy, but withdrawable on any anniversary of the Policy. Unless the owner of this Policy shall elect otherwise within three months after the mailing by the Company of a written notice requiring such election, the div- idends shall be applied to purchase paid-up additions to the Policy. Loans. — The Company at any time will advance upon the sole security of this Policy, at a rate of interest not greater than per centum per annum, a sum not exceeding the amount specified in the table of loan values herein set 7(32 APPENDIX OF FORMS [chap. H forth, deducting therefrom all other indebtedness hereon to the Company. Fail- ure to repay any such advance or interest shall not avoid this Policy unless thfe total indebtedness hereon to the Company shall equal or exceed the aggregate of all unpaid dividends and accumulations and of per centum (not less than eighty per centum) of the net value of the Policy and all additions thereto, ;md thirty days' notice shall have been given by the Company. Assignment. — No assignment of this Policy shall be binding upon the Company unless it be filed with the Company at its said Home Office. The Company as- mmes no responsibility as to the validity of any assignment. Options on Surrender or Lapse— Aiter this Policy shall have been in force three full years it may be surrendered by the owner at any time prior to any default or within three months after any default. Thereupon, 1. If there be no indebtedness hereon to the Company, the owner may elect either (a) to continue the insurance in force for its face amount and any outstand- ing dividend additions, but without future participation, and without the right to loans; or, (b) to purchase non-participating paid-up life insurance payable at the same time and on the same conditions as this Policy. The periods for which the insurance will be continued and the amounts of paid-up life insurance which will be allowed, exclusive of the application of dividend additions, are shown in the table of surrender values herein set forth. TABLE OF LOAN AND SURRENDER VALUES (At the option of the Company the following clause may be inserted) : The loan and paid-up insurance values stated in the following table apply to a Policy for $1,000. As this contract is for $ , the loan or paid-up in- surance available in any year will be , the amount stated in the table for that year. The period of paid-up continued insurance remains the same for a Policy of any amount. After Policy Has Been in Force Loan Value Paid-up Life In- surance Paid-up Continued In- surance Years Months Days 3 $ $ Values for later years will be computed on the same basis and be furnished upon request. 2. If there be an indebtedness hereon to the Company, it shall be deducted from the amount which otherwise would be applicable as a surrender value to the purchase of temporary insurance for the period aforesaid, and the owner may elect either to have the remainder applied (a) to continue the insurance in force without participation and without the right to loans for the face amount of this Policy and dividend additions, less the indebtedness, or (b) to purchase a pro- portionate amount of non-participating paid-up life insurance. If in the event of any default in the payment of premium or otherwise, after the Policy shall have been in force three full years, the owner shall not exercise CHAP. II] NEW YORK STANDARD LIFE INSURANCE POLICY 763 either of said options within three months after such default, the insurance shall be continued as provided by option (a) in either paragraph (1) or (2). In any case of continued temporary insurance under any of the above pro- visions this Policy upon evidence satisfactory to the Company of insurability may be reinstated within the first three years of the term for which the insurance is continued by payment of arrears of premiums and of whatever indebtedness hereon to the Company existed at the date of surrender or default, with interest at a rate not exceeding per centum per annum. Modes of Settlement. — The Insured or the owner, or the beneficiary after the Insured's death, in case the Insured shall have no made election, may by written notice to the Company at its Home Office, elect to have the net sum payable under this Policy upon the death of the Insured paid either in cash or as follows: 1. By the payment of an annuity equal to per centum of such net sum payable at the end of each year during the lifetime of the beneficiary, and by the payment upon the death of the beneficiary of the said net sum, together with any accrued portion of the annuity for the year then current, unless otherwise directed in said notice, to the beneficiary's legal representatives or assigns. 2. By the pajonent of equal annual instalments for a specified number of years, the first instalment being payable immediately, in accordance with the following table for each one thousand dollars of said net sum. 3. By the payment of equal annual instalments payable at the beginning of each year for a fixed period of twenty years and for so many years longer as the beneficiary shall survive, in accordance with the following table for each one thousand dollars of said net sum. Any instalments payable under (2) or (3) which shall not have been paid prior to the death of the beneficiary shall be paid, unless otherwise directed in said notice, to the beneficiary's legal representatives or assigns. When any option calling for annual payments is elected, this Policy shall be surrendered upon its maturity and a supplementary non-participating contract shall be issued for the option elected. Unless otherwise specified by the owner or by the beneficiary in making such election, the beneficiary may at any time surrender the contract guaranteeing the payment of instalments, for the commuted value of the payments yet to be made, computed upon the same basis as option (2) in the following table; pro- vided that no such surrender and commutation will be made under option (3) except after the death of the beneficiary occurring within the aforesaid twenty years: TABLE OF INSTALMENTS FOR EACH $ 1 ,000 Option (2) ! Option (3) Number of Annual Instal- ments Amount of Each Instal- ment Number of Annual Instal- ments Amount of Each Instal- ment Age of Benefi- ciary at Death of Insured Amount of Each Instal- ment Age of Benefi- ciary at Death of Insured Amount of Each Instal- ment 1 764 APPENDIX (JF FORMS [CHAP. II No person except an Executive Officer of the Company as aforesaid has power to modify or in event of lapse to reinstate this Policy or to extend the time for paying a premium. In Witness Whereof, the Company has caused this PoUcy to be executed this day of 49 A Form of Policy of Accident Insurance. See § 38^ The Insurance Company, in consideration of the warranties in the application for this policy and of dollars, does hereby insure under classification (being a by occupation) for the term of months from noon of , 189.- . , in the sum of dollars per week against loss of time not exceeding consecutive weeks, resulting from bodily injuries effected during the term of this insurance, through external, violent, and accidental means, which shall, independently of all other causes, immediately and wholly disable him from transacting any and every kind of business pertaining to his occupation above stated. Or if loss by severance of one entire hand or foot results from such injuries alone within ninety days, will pay insured one-third the principal sum herein named, in lieu of said weekly indemnity, and on such payment this policy shall cease and be surrendered to said company, or in event of loss by severance of two entire hands or feet, or one entire hand and one entire foot, or lo.ss of entire sight of both eyes, solely through injuries aforesaid within ninety days, will pay insured the full principal sum aforesaid, provided he survives said ninety days. Or if death results from such injuries alone within ninety days, will pay dollars to if surviving; in event of his prior death, to the legal representatives or assigns of insured, provided — 1. If insured is injured in any occupation or exposure classed by this com- pany as more hazardous than that here given, his insurance shall be only for such sums as the premium paid by him will purchase at the rates fixed for such increased hazard. 2. This policy shall not take effect unless the premium is paid previous to any accident under which claim is made; and the company may cancel it at any time by refunding said premium, less a pro rata share for the time it has been in force. 3. The company's total liability hereon in any policy year shall not exceed the principal sum hereby insured; therefore, in case of claim for full principal sum, any sums paid as indemnity within such policy year shall be deducted therefrom. 4. Immediate written notice, with full particulars and full name and address of insured, is to be given said company at of any accident and injury for which claim is made. Unless affirmative proof of death, loss of limb or sight, or duration of disability, and of their being the proximate result of external, violent and accidental means, is so furnished within seven months from time of such accident, all claims based thereon shall be forfeited to the company. No legal proceedings for recovery hereunder shall be brought within three months after receipt of proof at this office, nor at all, unless begun within one year from date of alleged accident. 5. This insurance does not cover disappearances; nor suicide, sane or insane; CHAP. II ] HEALTH CLAUai:: L\ ACCIUEMT POLICY 7t)5 nor injuries of which there is no visible mark on the body (the body itself in case of death not being deemed such mark); nor accident, nor death, nor loss of limb or sight, nor disability, resulting wholly or partly, directly or indirectly from any of the following causes, or while so engaged or affected: Disease or bodily infirmity, hernia, fits, vertigo, sleep-walking; medical or surgical treat- ment, except amputations necessitated solely by injuries and matle within ninety days after accident; intoxication or narcotics; voluntary or involuntary taking of poison or contact with poisonous substances or inhaling of any gas or vapor; sunstroke or freezing; dueling or fighting, war or riot; intentional in- juries (inflicted by the insured or any other person); voluntary over-exertion; violating law; violating rules ol a corporation; voluntary exposure to unneces- sary danger; expeditions into wild or uncivilized countries; entering or trying to enter or leave a moving conveyance using steam as a motive power (except cable cars), riding in or on any such conveyance not provided for transporta- tion of passengers, walking or being on a railway bridge or roadbed (railway employees excepted). 6. No claim shall be valid in excess of $10,000 with $50 weekly indemnity under accident policies, nor for indemnity in excess of money value of insured's time. All premiums paid for such excess shall be returned, on demand, to in- sured or his legal representative. 7. Any medical adviser of the company shall be allowed, as often as he re- quires, to examine the person or body of insured in respect to alleged injury or cause of death. 8. Any claim hereunder shall be subject to proof of interest. A copy of any assignment shall be given within thirty days to the company, which shall not be responsible for its validity. The company may cancel this policy at any time by refunding the unearned premium thereon. No agent has power to waive any condition of this policy. In witness whereof, etc. 50 A Health Clause in an Accident Policy For the period during which the Insured shall independently of all other causes be necessarily confined to the house and wholly disabled, and prevented by bodily disease not hereinafter excepted, from performing any and every duty pertaining to his occupation, the Company will pay a weekly indemnity of S , and if following such a period of total disabihty and confinement in the house, he shall be wholly disabled and prevented from performing any and every kind of duty pertaining to his occupation, but shall not be necessarily confined to the house, one-half of said amount per week will be paid to the In- sured ; but no payment shall be made for disability of less than seven consecutive days' or in excess of twenty-six consecutive weeks' duration. Upon satisfactory proof to the Company that he has, as the result of disease, contracted during the term of this Policy, and not hereinafter excepted, entirely and irrecoverably lost the sight of both eyes, or permanently and entirely lost the use of both hands or both feet, or of one hand and one foot, and also that he has been for one year, and will thereafter, and during his life, by reason thereof be permanently disabled from engaging in any work or occupation for wages or profit, the Company will pay to him $..... 7QQ APPENDIX OF FORMS [CHAP. II 51 Marine Policy Established by Statute of Florence, January 2S, 1523 Be it known and made manifest to all persons, that of makes assurance on , merchandise belonging to him or his friends, or to whomsoever the same may belong, laden or to be laden for [such or such a part or roadstead in such a place] by the hands of , or his agent, or although others have laden it in the name of the aforesaid , or m some other name designated or not designated on board the ship named , or howsoever named, commanded by We begin the said insurance from the time when the said goods shall be, or shall have been, laden on board the said ship in [such a place], to continue until the said merchandise shall be discharged on land or in safety at [such a place], with liberty for the ship to touch at any other place, and to navigate forwards or backwards, to the right hand or the left, at the pleasure of the captain, and as he may require: The said assurers taking upon themselves in respect of the said goods the risk of all perils of the seas, fire, jettison, reprisals, robbery by friend or foe, and every other chance, peril, misfortune, disaster, hindrance, misadventure, though such as could not be imagined or supposed to have occurred, or be likely to occur, to the said goods, and barratry by the master, except as to stowage or customhouse. All the said risks the said insurers are to run and take on themselves until the said goods shall be safely discharged on shore at [such a place]; and if they are not laden, the insurers are entitled to retain one and a half per cent. And if the said goods shall sustain, or have sustained, any disaster (which God forbid), the insurers shall pay to the said the sum insured, within two months from the news reaching the city. And if within six months there shall have been no true news, the insurers shall pay to the said the sum insured; and in case of subsequent arrival and safe discharge at the said place, the aforesaid shall pay back to each the sum he has received. In the event of shipwreck, it is allowed to make recovery without authority from the insurers, it being stipulated that the said insurers are not responsible for theft by the captain of the said ship. And the insurers are bound first to pay to the aforesaid the sums insured, and to litigate afterwards. And these are to bind themselves by sufficient sureties (one or more as directed by the fire official deputies on insurance) to pay back to each insurer the sums they have received, with damages of twenty per cent. The time allowed to the insurers for proving is eighteen months. To the observance of this the insurers bind themselves to the said , themselves, their heirs, and goods present and future, submitting themselves to the office aforesaid, and to every other judgment and court, whither the said shall please to summon them. 52 A Form of Marine Binding Slip. See § 76 Insurance is wanted by for account of loss, if any, payabli in funds current in the United States, or in the City of New York, to CHAP. II ] A POLICY OF MARINE INSURANCE 767 Amount of Invoice or Bill, $ per cent, advance Sum Insured $ ^On. on board the , Master, and to be insured at and from Bill of Lading dated ) _ y Premium, per cent $ Time of Sailing: ) r President. ) Binding. ^ New York, , 190. .. ( Applicant. 53 A Form of Policy of Marine Insurance: Cargo. See § 4IO By the Insurance Company on account of In case of loss, to be paid in funds current in the United States, or in the City of New York, to , do make insurance, and cause to be insured, lost or not lost, at and from upon laden or to be laden on board the good , whereof «is master for this present voyage , or whoever else shall go for master in said vessel, or by whatever other name or names the said A^essel, or the master thereof, is or shall be named or called. Beginning the adventure upon the said goods and merchandises from and immediately following the loading thereof on board of the said vessel, at as aforesaid, and so shall continue and endure until the said goods and mer- chandise shall be safely landed at as aforesaid. And it shall and may be lawful for the said vessel, in her voyage, to proceed and sail to, touch and Btay at, any ports or places, if thereunto obliged by stress of weather, or other unavoidable accident, without prejudice to this insurance. The said goods and merchandises, hereby insured, are valued (premium included) at dollars. Touching the adventures and perils which the said Insurance Com- pany is contented to bear, and takes upon itself in this voyage, they are of the seas, men-of-irar, fires, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, reprisals, taJdngs at sea, arrests, restraints and detainments of all kings, princes or people, of what nation, condition or quality soever, barratry of the master and mariners, and all other perils, losses and misfortunes that have or shall come to the hurt, detriment or damage of the said goods and merchan- dises, or any part thereof. And in case of any loss or misfortune, it shall be lawful and necessary to and for the assured, his factors, servants and assigns, to sue, labor, and travel for, in and about the defense, safeguard and recovery of the said goods and merchandises, or any part thereof, without prejudice to this insurance; nor shall the acts of the insured or insurers, in recovering, saving and preserving the property insured, in case of disaster, be considered a waiver or an acceptance of an abandonment; to the charges whereof the said Insurance' Company will contribute according to the rate and quantity of the sum herein insured; having been paid the consideration for this insurance, by the assured, or his assigns, at and after the rate of per cent. And in case of loss, such loss to be paid in thirty days after proof of loss, and proof of interest in the said (the amount of the note given for the pre- 768 APPENDIX OF FORMS [CHAP. II miiim, if unpaid, being first deducted), but no partial loss or particular average Kb.ail in any case be paid, unless amounting to five per cent. Provided always, ;'kI it is hereby further agreed, That if the said assured shall have made any ( !ijr assurance upon the premises aforesaid, prior in day of date to this policy, /.,>:! the said Insurance Company shall be answerable only for so much ; , the amount of such prior assurance may be deficient towards fully covering t'.:> premises hereby assured; and the said Insurance Company shall I ;turn premium upon so much of the sum by them assured, as they shall be by \ch prior assurance exonerated from. And in case of any assurance upon the •id premises, subsequent in day of date to this policy, the said Insur- nce Company shall nevertheless be answerable for the full extent of the sum by them subscribed hereto, without right to claim contribution from such subse- quent assurers, and shall accordingly be entitled to retain the premium by them received, in the same manner as if no such subsequent assurance had been made. Other assurance upon the premises aforesaid, of date the same day as this policy, shall be deemed simultaneous herewith; and the said Insurance Com- pany shall not be liable for more than a ratable contribution in the proportion of the sum by them insured to the aggregate of such simultaneous assurance. It is ALSO AGREED, that the property be warranted by the assured free from any charge, damage or loss, which may arise in consequence of a seizure or detention, for or on account of any illicit or prohibited trade or any trade in articles con- traband of war. Warranted not to abandon in case of capture, seizure, or detention, until after condemnation of the property insured; nor until ninety days after notice of said condemnation is given to this company. Also warranted not to abandon in case of blockade, and free from any expense in consequence of capture, seizure, detention or blockade, but in the event of blockade, to be at liberty to proceed to an open port and there end the voyage. In Witness Whereof, the President or Vice-President of the said Insurance Company hath hereunto subscribed his name, and the sum insured, and caused the same to be attested by their Secretary, in , the day of , 19. .. Memorandum. It is also agreed, that bar, bundle, rod, hoop and sheet iron, wire of ail kinds, tin plates, steel, madder, sumac, wicker-ware and willow (manu- factured or otherwise), salt, grain of all kinds, tobacco, Indian meal, fruits (whether preserved or otherwise), cheese, dry fish, hay, vegetables and roots, rags, hempen yarn, bags, cotton bagging, and other articles used for bags or bagging, pleasure carriages, household furniture, skins and hides, musical in- struments, looking-glasses, and all other articles that are perishable in their own nature, are warranted by the assured free from average, unless general; hemp, tobacco stems, matting and cassia, except in boxes, free from average under twenty per cent, unless general; and sugar, flax, flax-seed and bread, are warranted by the assured free from average under seven per cent, unless general; and coffee, in bags or bulk, pepper in bags or bulk, and rice, free from average under ten per cent, unless general. Warranted by the insured free from damage or injury, from dampness, change of flavor, or being spotted, discolored, musty or mouldy, except caused by actual contact of sea water with the articles damaged, occasioned by sea perils. In case of partial loss by sea damage to dry goods, cutlery or other hardware, the loss shall be ascertained by a separation and sale of the portion only of the CHAP. II ] INCHMAREE CLAUSE 759 contents of the packages so damaged and not otherwise, and the same practice shall obtain as to all other merchandise as far as practicable. Not liable for leakage on molasses or other liquids, unless occasioned by stranding or collision with unother vessel. If the voyage aforesaid shall have been begun and shall have terminated before the date of this policy, then there shall be no return of premium on ac- count of such termination of the voyage. In all cases of return of premium, in whole or in part, one-half per cent, upon the sum insured is to be retained by the assurers. $ , dollars. , Secretary , President. 54 A Form of Collision Clause. See § 4^8 And it is further agreed, that if the vessel hereby insured shall come in collision with another vessel, and the assured become liable to pay, and shall pay, any sum or sums for damages resulting therefrom to said other vessel, "her freight or her cargo, in such case this company will contribute towards the payment of three-fourths part of the total amount of said damages, in the proportion that the sum insured under this policy bears to the total valuation of the vessel as stated herein, provided, that this company shall not in any event be held liable under this agreement for a greater sum than three-fourths part of the amount insured under this policy. And it is also agreed that this insurance company will bear a like proportionate share of any costs and expenses that may be incurred in contesting the liability resulting from said collision, provided, the written consent of the company to such contest be first obtained. But under no circumstances shall this company be held liable for any con- tribution in respect of any sum that the insured may be held liable to pay by reason of loss of life or personal injury t9 individuals from any cause whatso- ever, nor for any claim for demurrage or loss of the use of any vessel, nor for wages or provisions or expenses of master, officers or crews. It is further agreed to, that in no event shall this insurance company be liable under this policy for more than the sum insured in any case, either for claims for loss and damage and or charges to hull of the vessel hereby insured and or for claims of any and all kinds arising under this collision clause, or the policy to which it is attached, and all payments made under this policy shall reduce this policy by the amounts so paid, unless restored by a new premium. 55 Inchmaree Clause. See § 44^ This insurance also specially to cover (subject to the free of average warranty) loss of or damage to hull or machinery through the negligence of master, mariners, engineers, or pilots, or through explosions, bursting of boilers, breakage of shafts, or through any latent defect in the machinery or hull, provided such loss or damage has not resulted from want of due diligence by the owners of the ship or any of them or by the manager. 49 770 APPENDIX OF FORMS [CHAP. II 56 A Negligence Clause. See § 4^4 Including negligence and errors of navigation; including all risk of negligence, default, or error in judgment of the pilot, master, mariners, engineers, or others of the crew, 57 A Deviation Clause. See § 4^i It is hereby agreed to hold the assured covered should the vessel deviate from the terms and conditions of this policy, at a premium to be arranged as soon as the deviation is known. 58 A Craft Clause. See §§ 419, 4^2 Including all risk of craft, boats, lighters, to or from the vessel upon whatever terms as to liability or otherwise the lighterman may be employed: such craft, boat or lighter being deemed a separate insurance, and loss in boat, craft, or lighter is to be settled under this policy without reference to the liability or non-hability of the lighterman under special agreement between assured and lighterman or otherwise, the assured transferring all rights against the lighter- man to the underwriters. 59 A Clause as to Loading. See § 455 Warranted by the assured not to be loaded in tons of 2,240 lbs. more than the registered capacity under tonnage deck, with lead, marble, stone, coal, sand or iron; also warranted not to be loaded with lime under deck. Also if loaded with grain, warranted to be loaded under the inspection of the Surveyor of the Board of Underwriters, and his certificate as to the proper loading and sea-worthiness obtained. 60 A Form of Fidelity Bond. See § 468 This bond, made this day of , 190. . , witnesseth: Whereas, (hereinafter called the Employer) has appointed (hereinafter called the Employee) to the position of in the service of the Employer, now, therefore, in consideration of the premium paid or to be paid and the statements made by the Employer, which are warranted to be true, The Empire State Surety Company, a corporation organized under the laws of the State of New York (hereinafter called the Surety), hereby agrees that it will, at the expiration of three months after receipt of proof of loss satisfactory to the Surety, reimburse the Employer for pecuniary loss not exceeding Dollars, sus- tained by the Employer by reason of dishonesty of the Employee, constituting larceny or embezzlement, in connection with the said position, during the term beginning on the day of , 190. . , and ending on the CHAP. II ] A FIDELITY BOND 771 day of , 190. . , at noon, and which loss shall be discovered during said term, or the sooner termination hereof, or within six months thereafter. This Bond is executed and accepted upon the conditions printed below. In witness whereof, etc. CONDITIONS ON WHICH WITHIN BOND IS EXECUTED AND ACCEPTED 1. The Surety shall not be liable for any sum which the Employee may, at the commencement of the term hereof, owe the Employer. 2. The Surety shall not be liable to the Employer under any previous Bond executed in behalf of the Employee, and upon the execution by the Surety of any new Bond to the Employer on behalf of the Employee, this Bond and all liability thereunder shall cease, it being the intention that only the last Bond shall be in force; provided, That the Employer shall have the right, within six months after the termination of any Bond, to make claim for any loss occurring thereunder. The liability of the Surety, however, shall not be cumulative. 3. If at any time during the term of this Bond the Employer learn or be in- formed that the Employee is unreliable, dishonest, intemperate, gambling or indulging in other vices, the Employer shall immediately notify the Surety. 4. Upon the discovery by the Employer that loss has been sustained, or of facts indicating that a loss has probably been sustained, the Employer shall immediately notify the Surety, and shall within thirty days after such discovery furnish to the Surety in writing, proof of loss sustained in detail under oath. 5. The business of the Employer shall continue to be conducted, and the duties of the Employee shall remain, in accordance with the written statements made by the Employer to the Surety relative thereto and the Surety may at any time either before or after loss inspect the Employer's books, papers and accounts. 6. The Employer will in every way aid in the apprehension and prosecution of the Employee for any criminal offense committed by the Employee involving liability to the Surety. 7. The term "Employer," as used in this Bond, shall include any officer, or other representative of the Employer, whose duty it may be to supervise the work, or to examine the books or audit the accounts of others in the Em- ployer's service, or to count or examine the cash or securities for which such others are responsible. 8. If the Employer hold any other security in behalf of the Employee, and the amount of loss be less than the aggregate amount of all such securities, the Surety shall be liable for only such proportion of the loss as the amount for which the Surety shall have become surety hereunder, bears to the total security held by the Employer, whether such other security be available or not. 9. The Surety may at any time terminate this Bond by mailing to the Em- ployer written notice of its election so to do at the last address given it and the Surety shall not be liable for any act of the Employee thereafter committed. If the Company subsequently pay any loss hereunder the whole premium paid shall be held to have been fully earned, otherwise, the Surety shall, upon de- mand and the execution and delivery by the Employer of a full release from this bond, refund the premium paid, less a pro rata part thereof for the time this obligation shall have been in force. 10. No action, suit or proceeding at law or in equity shall be had or main- 772 APPENDIX OF FORMS [CHAP. II tained upon this Bond unless commenced within one year from the time of the first discovery of any loss hereunder. • u j v n k 11 None of the conditions or provisions contained in this Bond shall be deemed to have been waived by or on behalf of the Surety, unless the waiver be clearly expressed in writing over the signature of its President, or any of its Vice-Presidents. , • • x 12. All notices and proofs of loss to the Surety shall be given m wntmg to its executive office, 34 Pine Street, New York City, New York. 61 A Form of General Liability Policy. See § 476 In consideration of the premium as determined in clause G of this Policy and of the statements herein made, the London Guarantee and Accident Com- pany, Limited, hereinafter caUed the Company, subject to the terms of this policy as herein set forth, agrees to indemnify of State of hereinafter called the Assured, against loss from the liability im- posed by' law upon the Assured for damages on account of bodily injuries, in- cluding death resulting at any time therefrom, accidentally suffered by any person or persons while within the premises of the Assured as described in the Schedule herein, or on the premises or ways adjacent thereto, when such injuries or death are suffered as the result of accidents occurring within the period be- ginning the day of , 190. . , and ending on the day of , 190. . , at 12 o'oclock noon. LIMITS OP LIABILITY A. The Company's liability on account of an accident resulting in bodily injuries or death to one person is hmited to Dollars ($ ), and, subject to the same limit for each person, the Company's total liability on ac- count of any one accident resulting in bodily injuries or death to more than one person is limited to Dollars ($ ). EXTRA BENEFITS AND SXJBGICAL AID B. In addition to these limits the Company will pay for the providing at the time of accident of such immediate surgical aid as is imperative, and also will pay all cost and expense attendant upon its investigation, adjustment and settlement of claims. NOTICE OF ACCIDENT AND CLAIM C. Upon the occurrence of an accident the Assured shall give immediate written notice thereof, with the fullest information obtainable at the time, to the Company's Head Office, or to the agent who has countersigned this Policy. If a claim is made on account of such accident, the Assured shall give like notice thereof, with full particulars. The Assured shall render to the Company all co- operation and assistance in his power in the protection of his interests. WHEN ASSURED IS SUED D. If thereafter any suit, even if groundless, is brought against the Assured to recover damages on account of such injuries or deaths as are covered by this Policy, the Assured shall immediately fo^^vard to the Company every summons CHAP. II ] A GENERAL LIABILITY POLICY 773 or other process served upon him, whereupon the Company will, at its own expense, defend against such suit in the name and on behalf of the Assured, unless the Company shall eiect to settle the same or pay to the Assured the indemnity as provided for in Clause A of this Policy. EXCEPTIONS E. This Policy does not cover loss from liability for injuries or death caused to or by 1. Any person engaged in the making of additions or alterations of a structural character, unless a written permit therefor is granted by the Company specifically describing the work and an additional premium paid. 2. Any person employed by the Assured contrary to law, or any person em- ployed under fourteen years of age where no statute restricts the age of employ- ment. 3. Any person in or about any elevator while in charge of any person under the age fixed by law for elevator attendants, or under the age of sixteen years where no such age is fixed by law. 4. Any person before the premises have been fully completed, ready for oc- cupancy, unless a written permit is granted by the Company permitting same. SETTLEMENTS F. The Assured may settle any case at the Assured's own expense, giving immediate notice thereof in writing to the Company, and the Assured may fcettle any case at the Company's expense, if the Company shall have previously given its consent in writing. PREMIUM G. The premium of this Policy, calculated at the rate or rates specified herein in the Schedule, is based on the information contained therein, and if at the end of the Policy period the entire compensation earned by all employees is greater or less than the sum set forth in the Schedule, or the data otherwise given is erroneous, the premium charge shall be subject to adjustment on the basis of the rates set forth in said Schedule; but the Company shall retain not less than Dollars ($ ) it being agreed that this sum shall be the minimum earned premium. The adjustment shall be made as soon as the correct premium has been ascertained. CANCELLATION H. This Policy may be cancelled by the Company at any time by giving five days' written notice to the Assured, stating when the cancellation shall be ef- fective. It may be cancelled by the Assured by like notice to the Company. If cancelled by the Company the Company shall be entitled to the earned pre- mium pro rata when determined. If cancelled by the Assured, the Company shall be entitled to the earned premium calculated at the customary short rates. In either case the earned premium shall be computed on the basis of the frontage, area, number of elevators and the actual compensation earned by the employees of the Assured during the time the Policy shall have been in force, but shall not be less than the aforesaid minimum premium. The Company's check mailed to the address of the Assured as given herein shall be a sufficient tender of any unearned premium. 774 APPENDIX OF FORMS [CHAP. II AUDIT /. TIk Company shall by its authorized representatives have the right and opportunity to examine the books and records of the Assured as respects com- pensation earned by the employees of the Assured, and the Assured shall render reasonable assistance; but the Company waives no right by failing to make such examination. The rendering of any estimate or statement, or the making of any previous settlement, shall not bar the examination herein provided for nor the Company's right to additional premiums. Such examination, however, shall be made within one year of the expiration of the Policy. WHEN COMPANY MAY BE SUED J. No action shall lie against the Company to recover for any loss or expense under this Policy unless it shall be brought bythe Assured for loss or expense actually sustained and paid in money by the Assured, nor unless such action be brought within ninety days after the payment of such loss or expense. SUBROGATION K. In case of payment of loss or expense under this Policy the Company shall be subrogated to the amount of such payment to all rights of the Assured against any person, firm or corporation as respects such loss or expense, and the Assured shall do everything which may be necessary to secure to the Company such rights. CO-INSURANCE L. If the Assured carry a Policy of another insurer against a loss covered by this Policy, the Assured shall not be entitled to recover from the Company a larger proportion of the entire loss than the amount hereby insured bears to the total amount of valid insurance applicable thereto. INSPECTION M. Any of the Company's authorized inspectors shall have the right and opportunity whenever the Company so desires to inspect at any reasonable time the plants, works, machinery and appliances of the Assured. ALTERATIONS IN POLICY N. No change, waiver or extension of any of the terms or conditions of this Policy shall be valid, unless endorsed hereon and signed by the General Manager of the Company for the United States; nor shall notice to any agent, nor shall knowledge possessed by any agent or any other person, be held to effect a waiver or change in any part of the Policy. SCHEDULE 0. The hereinafter Schedule of statements and warranties is made by the Assured, and by acceptance of this Policy the Assured warrants the same to be true, except such as are matters of estimate only. Item 1. The name of Assured Item 2. The address of the Assured is (SUt« street, town and st»te where office is located.) CHAP. II A GENERAL LIABILITY POLICY 775 Item 3. The Assured is (State whether individual, copartnership, corporation, estate or trustee.) Item 4. The location of the building or buildings, the number and kind of elevators, the wages paid employees, the floor areas and frontages are as follows: LOCATIOX ELEVATORS Esti- mated Wages GliOU.VD Floor No. OF S-rn. Street Front- STREET No. No. De.scription Power AKEA I RIES age If there is more than one build- ing, give location of each. State whether Passenger or Freight, Side- wal k, One Story, Pri- vate House, Hand Hoist, Moving Plat- form o r E s - calator. State wheth- er Hy- draulic, Elec- tric, Steam or Plun- ger. State sepa- rately es- tim a t ed wages of office men and those of all other em- ployes en- gaged on the prem- ises. State area of ground floor, in- cl u d i n g all parts enclosed. If base- ment is used as sales- room, include it in num- ber. If there is front- age on more than one street, state each s epa- rately, naming streets. Item 5. ANALYSIS OF PREMIUM Number Kind Elevators Elevators Estimated wages of office men, at $ for each, S. at $ for each, $. at cents per $100 $. Estimated wages of all other employees engaged on prem- ises, $ at . . cents per $100 $ Total floor area, all floors included, square feet at cents per 100 square feet $ Street frontage, all frontages included, running feet at cents per running foot $ Total Premium $ Item 6. The kind of business done on the premises is as follows: Item 7. The Assured manages the premises, except as follows: Item 8. The Assured occupies the premises, except as follows: Item 9. There is no elevator, escalator or moving platform on the premises, except as follows: Item 10. All elevators, escalators and moving platforms have been accepted from the builders as satisfactory, except as follows: 776 APPENDIX Of FORMS [CHAP. II Item 11. No Company has cancelled liability insurance on this risk during the past three years, except as follows: Item 12. No Company has insured this risk during the past two years, except as follows : Item 13. There is no other elevator or general liability insurance carried by the Assured on the premises, except as follows: Item 14. Inspection reports and other notices and correspondence are to be mailed to the Assured at the address given above, or to at If to the latter, it is by request of the Assured, who acknowledges such person as the proper agent for this purpose. Item 15. The minimum premium for this Policy is $ In witness whereof, etc. CBAP. in] EXAMPLES OPERATION OF COINSURANCE CLAUSES 777 CHAPTER III Relating to Adjustment 1 Examples of the Operation of Coinsurance Clauses Prepared for This Book by Willis 0. Robb, Esq., Secretary of the Loss Committee of the New York Board of Fire Underwriters. See § S4S Companies Pay Under 80% Clause Under 100% Clause 1. Value $10,0001 Ins. 6,000 I $ 4,500 $ 3,600 Loss 6,000 J 2. Value 10,0001 Ins. 6,000^ 6,000 4,800 Loss 8,000 J 3. Value $10,000] Ins. 6,000^ 6,000 6,000 Loss 10,000 J 4. Value 10,0001 Ins. 8,000^ 6,000 4,800 Loss 6,000 J 5. Value 10,0001 Ins. 8,000^ 8,000 6,400 Loss 8,000 J 6. Value 10,0001 Ins. 8,000 >■ 8,000 8,000 Loss 10,000 J 7. Value 10,0001 Ins. 10,000^ 6,000 6,000 Loss 6,000 J 8. Value 10,0001 Ins. 10,000 [- 8,000 8,000 Loss 8,000 J 9. Value 10,000 1 Ins. 10,000^ 10,000 10,000 Loss 10,000 J 778 RELATING TO ADJUSTMENT [CHAP. lU 10. Value 10,0001 Ins. 12,000^ 6,000 6,000 Loss 6,000 J 11. Value 10,1 Ins. 12,000 }" 8,000 8,000 Loss 12. Value 10,000 "I Ins. 12,000 y 10,000 10,000 Loss 10,000 J , , „^ , 6000= (the insurance) - Thus in the first example, under the 80% clause 3Q(jy= (gQcv of value) '^ ^' °'" ... ,. „ .1 . ,2000= (the deficit) , , _„„ , „ 4500, of the loss falls on the insurers, and g(j(jo= (SU'f of value) ^ *' °'" ' on the insm-ed. Under the 100% clause ^, or 3600, falls on the insurers, and ^, or 2400, on the insured. York Antwerp Rules, Adopted by the Association for the Reform and Codification of the Law of Nations, at Antwerp, in 1877, and Amended at Their Liverpool Conference in 1890. See § S^6 Rule I. Jettison op Deck Cargo. — No jettison of deck cargo shall be made good as general average. Every structure not built in with the frame of the vessel shall be considered to be a part of the deck of the vessel. Rule U. Damage by Jettison and Sacrifice for the Common Safety. — Damage done to a ship and cargo, or either of them, by or in consequence of a sacrifice made for the common safety, and by water which goes down a ship's hatches opened, or other opening made for the purpose of making a jettison for the common safety, shall be made good as general average. Rule in. Extinguishing Fire on Shipboard. — Damage done to a ship and cargo, or either of them, by water or otherwise, including damage by beach- ing or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made good as general average; except that no compensation shall be made for damage to such portions of the ship and bulk cargo, or to such separate packages of cargo, as have been on fire. Rule IV. Cutting away Wreck. — Loss or damage caused by cutting away the wreck or remains of spars, or of other things which have previously been carried away by sea peril, shall not be made good as general average. Rule V. Voluntary Stranding.— When a ship is intentionally rim on shore, and the circumstances are such that if that course were not adopted she would inevitably sink, or drive on shore or on rocks, no loss or damage caused to the ship, cargo, and freight, or any of them, by such intentional running on shore shall be made good as general average. But in all other cases where a ship is intentionally run on shore for the common safety, the consequent loss or damage shall be allowed as general average. Rule VI. Carrying Press of Sail; Damage to or Loss »f Sails. — Damage to or loss of sails and spars, or either of them, caused by forcing a ship ofif the CHAP. Ill] YORK ANTWERP RULES 779 ground or by driving her higher up the ground, for the common safety, shall be made good as general average; but where a ship is afloat, no loss or damage caused to the ship, cargo, and freight, or any of them, by carrying a press of sail, shall be made good as general average. Rule VII. Damage to Engines in Refloating a Ship. — Damage caused to machinery and boilers of a ship, which is ashore and in a position of peril, in endeavoring to refloat, shall be allowed in general average, when shown to have arisen from an actual intention to float the ship for the common safety at the risk of such damage. Rule VIII. Expenses Lightening a Ship when Ashore, and Consequent Damage. — When a ship is ashore and, in order to float her, cargo, bunker coals, and ship's stores, or any of them, are discharged, the extra cost of lightening, lighter hire, and reshipping (if incurred), and the loss or damage sustained thereby, shall be admitted as general average. Rule IX. Cargo, Ship's Materials, and Stores Burnt for Fuel. — Cargo, ship's materials, and stores, or any of them, necessarily burnt for fuel for the common safety at a time of peril, shall be admitted as general average, when and only when an ample supply of fuel had been provided; but the estimated quantity of coals that would have been consumed, calculated at the price current at the ship's last port of departure at the date of her leaving, shall be charged to the shipowner and credited to the general average. Rule X. Expenses at Port of Refuge, etc. — (a) When a ship shall have entered a port or place of refuge, or shall have returned to her port or place of loading, in consequence of accident, sacrifice, or other extraordinary circum- stances, which render that necessary for the common safety, the expenses of entering such port or place shall be admitted as general average; and when she shall have sailed thence with her original cargo, or a part of it, the corresponding expenses of leaving such port or place, consequent upon such entry or return, shall likewise be admitted as general average. (6) The cost of discharging cargo from a ship, whether at a port or place of loading, call, or refuge, shall be admitted as general average, when the discharge was necessary for the common safety or to enable damage to the ship, caused by sacrifice or accident during the voyage, to be repaired, if the repairs were necessary for the safe prosecution of the voyage. (c) Whenever the cost of discharging cargo from a ship is admissible as gen- eral average, the cost of reloading and storing such cargo on board the said ship, together with all storage charges on such cargo, shall hkewise be so admitted. But when the ship is condemned or does not proceed on her original voyage, no storage expenses incurred after the date of the ship's condemnation or of the abandonment of the voyage shall be admitted as general average. (d) If a ship under average be in a port or place at which it is practicable to repair her, so as to enable her to carry on the whole cargo, and if, in order to save expenses, either she is towed thence to some other port or place of repair or to her destination, or the cargo or a portion of it is transhipped by another ship, or otherwise forwarded, then the extra cost of such towage, transshipment, and forwarding, or any of them (up to the amount of the extra expense saved), shall be payable by the several parties to the adventure in proportion to the extraordinary expense saved. Rule XI. Wages and Maintenance of Crew in Port of Refuge, etc. — When a ship shall have entered or been detained in an,y port or place under the 780 RELATING TO ADJUSTMENT [chap. IU circumstances, or for the purposes of the repairs, mentioned in Rule VII, the wages payable to the master, officers, and crew, together with the cost of main- tenance of the same, during the extra period of detention in such port or place vintil the ship shall or should have been made ready to proceed upon her voyage, shall be admitted as general average. But when the ship is condemned or does not proceed on her original voyage, the wages and maintenance of the master, officers, and crew, incurred after the date of the ship's condemnation or of the abandonment of the voyage, shall not be admitted as general average. Rule XII. Damage to Cargo in Discharging, etc. — Damage done to or loss of cargo necessarily caused in the act of discharging, storing, reloading, and stowing, shall be made good as general average, when and only when the cost of those measures respectively is admitted as general average. Rule XIII. Deductions from Cost of Repairs. — In adjusting claims for general average, repairs to be allowed in general average shall be subject to the following deductions in respect of "new for old," viz.: In the case of iron or steel ships, from date of original register to the date of accident, — Up to 1 year old (A). All repairs to be allowed in full, except painting or coating of bottom, from which one-third is to be deducted. Between 1 and 8 years ■< (B). Between One-third to be deducted off repairs to and renewals of wood- work of hull, masts and spars, furniture, upholstery, crockery, metal and glassware, also sails, rigging, ropes, sheets, and hawsers (other than wire and chain), awnings, covers, and painting. One-sixth to be deducted off wire rigging, wire ropes and wire hawsers, chain cables and chains, donkey engines, steam winches and connections, steam cranes and connections; other ~ repairs in full. C Deductions as above under Clause B, except that one-sixth 3 and 6 years 4 be deducted off iron-work of masts and spars, and machinery (C.) I (inclusive of boilers and their mountings). r Deductions as above imder Clause C, except that one-third , J be deducted off iron-work of masts and spars, repairs to and _^. I renewal of all machinery (inclusive of boilers and their mount- Mngs), and all hawsers, ropes, sheets, and rigging. Between r One-third to be deducted off all repairs and renewals, except 10 & 15 years-^ iron-work of hull and cementing and chain cables, from which (E).' Over tchors to be allowed in full. One-sixth to be deducted off chain cables. The deductions (except as to provisions and stores, ma- chinery, and boilers) to be regulated by the age of the ship, and not the age of the particular part of her to which they apply. No painting bottom to be allowed if the bottom has not been painted within six months previous to the date of accident. No deduction to be made in respect of old material which is repaired without being replaced by new, and provisions and .stores which have not been in use. 15 years (F). Generally (G). ,^ . v.. O...V. Lone-sixth to be deducted. Anchors to be allowed in full. r One-third to be deducted off all repairs and renewals. An- CHAP. Ill] CUSTOMARY DEDUCTIONS 781 In the case of wooden or composite ships: When a ship is under one year old from date of original register, at the time of accident, no deduction new for old shall be made. Alter that period a deduction of one-third shall be made, with the following exceptions: Anchors shall be allowed in full. Chain cables shall be subject to a deduction of one-sixth only. No deduction shall be made in respect of provisions and stores which had not been in use. Metal sheathing shall be dealt with, by allowing in full the cost of a weight equal to the gross weight of metal sheathing stripped off, minus the pro- ceeds of the old metal. Nails, felt, and labor metaling are subject to a deduction of one-third. In the case of ships generally: In the case of all ships, the expense of straightening bent iron-work, including labor of taking out and replacing it, shall be allowed in full. Graving dock dues, including expenses of removals, cartages, use of shears, stages, and graving dock materials, shall be allowed in full. Rule XIV. Temporary Repairs. — No deductions "new for old" shall be made from the cost of temporary repairs of damage allowable as general average. Rule XV. Loss of Freight. — Loss of freight arising from damage to or loss of cargo shall be made good as general average, either when caused by a general average act, or when the damage to or loss of cargo is so made good. Rule XVI. Amount to Be Made Good for Cargo Lost or Damaged by Sacrifice. — The amount to be made good as general average for damage or loss of goods sacrihced shall be the loss which the owner of the goods has sus- tained thereby, based on the market values at the date of the arrival of the vessel or at the termination of the adventure. Rule XVII. Contributory Values. — The contribution to a general average shall be made upon the actual values of the property at the termination of the adventure, to which shall be added the amount made good as general average for property sacrificed; deduction being made from the shipowner's freight and passage-money at risk, of such port charges and crew's wages as would not have been incurred had the ship and cargo been totally lost at the date of the general average act or sacrifice, and have not been allowed as general average; deduc- tion being also made from the value of the property of all charges incurred in respect thereof subsequently to the general average act, except such charges as are allowed in general average. Passengers' luggage and personal effects, not shipped under bill of lading, shall not contribute to general average. Rule XVIII. Adjustment.— Except as provided in the foregoing rules, the adjustment shall be drawn up in accordance with the law and practice that would have governed the adjustment had the contract of affreightment not contained a clause to pay general average according to these rules. 3 Customary Deductions: England. See § S09 In the adjustment of claims for particular average in a policy on ship, in the absence of any special provisioiis in the policy, the following items for repairing 782 RELATING TO ADJUSTMENT [CHAP. Ill damage or making good losses are recoverable from the insurer without deduc- tion new for old: — Graving dock expenses. Cost of removals. Use of shears, stages, and graving dock appliances, ana cost of cartage and carriage. Cost of anchors and of provisions and stores which have not been in use. Cost of temporary repairs. Cost of straightening bent iron-work. All repairs of damage sustained by a vessel on her first voyage. Chain cables are subject to a deduction of one-sixth. All other repairs of damage sustained after the first voyage are subject to a deduction of one-third. Metal sheathing must be dealt with by allowing in full the cost of a weight equal to the gross weight of metal sheathing stripped off, minus proceeds of the old metal. Nails, felt, and labor metaling, are subject to one-third, also the cost of replacing metal lost. Chalmers & Owen, Ins. (1907), p. 154. Illustrative Statement of General Average Prepared for This Book by Harrington Putnam, Esq., of the New York Bar, assisted by Messrs. Johnson & Higgins, average adjusters, in Case of the British Steamer " Vesper." See § 2^4 This Vessel sailed from Hamburg, November 18th, 1906, with a cargo of sugar bound to New York via Cardiff, Wales. On November 22d, while proceeding up the Bristol Channel, she was run into by the steamer Exeter sustaining such damage as required entry of port of refuge, dry docking, temporary repairs with partial discharge of cargo, after which the cargo was replaced and the voyage resumed, so that she arrived in New York, January 15th, 1907. Under the terms of the contract of affreightment, the general average is stated in accordance with York- Antwerp Rules, 1890. The eighteenth of these Rules provides that, as to matters not covered specifically in the York-Antwerp Rules, the adjustment shall be drawn up "in accordance with the law and practice which would otherwise have governed the adjustment," which refers to the law of the place of destination. The average, therefore, is stated in accordance with the York- Antwerp Rules, supplemented by the law and usages of the port of New York. These charges are borne by the common interests, without recourse against the Exeter for the reason that although the fault of the Exeter was clearly es- tablished, she became a total loss. While by British law the owners might still be liable at the rate of £8 a ton,* yet as this steamer was owned by a "single-ship" limited company, no prop- erty was left to answer for any judgment that might be recovered against the Exeter or its incorporated owner. 1 Mer. Ship. Act, 1894, § 503. CHAP. Ill ] ILLUSTRATIVE STATEMENT OF GENERAL AVERAGE 783 CHARGES AND EXPENSES Disbursements at Cardiff [For brevity, some items charged to owners are omitted.j Gilbert Robertson For fees for noting and extending protest Lloyd's Register of British and Foreign Shipping For fees for special damage survey held on the Steamer Vesper, 3,896 tons John Bovey & Co. For our time and services reporting steamer's arrival, surveying before and after repairs, watching and superintending handling of cargo, otherwise looking after cargo in- terests, including Survey Report, examination of accounts, etc., ten guineas Telegrams, cablegrams and petties Rea Transport Co., Ltd. For assistance in Roads, 3 tugs Note: — All extra towages John & Frank Davies For tending hues and mooring ship in Roath Basin Extra boat, do., do. The Bute Shipbuilding, Engineering and Dry Dock Co., Ltd. This charge includes various repairs to the vessel and other items not general average, from which the adjusters have separated as gen- eral average charges, the cost of cargo-boxes made for hoisting out the sugar, expense of removing the cargo and replacing and re- Btowing the same after the com- pletion of repairs, also for hire of Forward £3 64 1818 General Average £364 6 6 10 10 1 26 11 12 6 21 15 15 1 10 1112 6 21 110 £43 14 101 784 RELATING TO ADJUSTMENT [chap. Ill Disbursementa at Cardiff, cont'd Brought forward watchman, and other Uke common charges, which, less credits, are £ 72 15 11 Balance of % 5,016 14 1 5,089 10 The Bute Shipbuilding, Engineering and Dry Dock Co., Ltd. For vessel dry docked with full cargo and specially shored, cradled, etc., including the first 24 hours' dock dues, as agreed ^ 50 extra tides @ £24 7 Ship's bottom painted from keel to light line with owner's material iVofe.-— Charge to G. A. for extra cost of dry docking vessel, and dock dues on accoimt of cargo on board. Sydney D. Jenkins & Son For making fore and main trysails, 336 yds. @ i For making bridge and forecastle awnings, 342 yds. @ i Remainder of account Less Discount Note.— Charge to G. A. for replacing sails and awnings, used over the bows to stop leak, and damaged. The item of £3 18 2 was for re- placing new ropes sacrificed. Forward 200 1,217 10 10 10 1,428 General Average §Off £43 14 lU 721511 28 GO 28 10 133 5 4 189 15 4 5 01 184 15 3 5610 02 Net £ 12 12 5,016 14 1 169 608 15 £56100 Owners 31 608 15 10 10 318 2 124 7 1 898 3 11 5,803 18 2 ilf the Vesper had had no cargo on board, the cost of docking her and the first 24 hours' dues would have been but £31. The extra expense of £169, due to having cargo on board, is treated as general average. The vessel was at Car- diff and needed repairs to enable her to resume the voyage. The master waa confronted with the alternative, either of discharging and storing the cargo while the vessel was being repaired, and then reloading it after the repairs were completed, or of dry-docking the vessel with her cargo on board, which in fact was done. Had her cargo been discharged, the cost of discharging, and the ex- pense of warehousing and reloading it, would have been treated as general average. 'The Vesper being between one and three years old, one-third is deducted from her sails, etc., under G. A. Rule XIII. CHAP. Ill ] ILLUSTRATIVE STATEMENT OF GENERAL AVERAGE 786 Disbursements at Cardiff, cont'd Brougiit torward William Jeremy For night watching Hugh Evans & Co. For laborers employed in removing all stores and gear from fore peak, boatswains and sail lockers and landing and stowing same in the stores on the quay; assisting in clearing out, etc. Note: — Charge to G. A. for labor, covering and securing with sails and tarpaulins, cargo in way of repairs, and afterwards replacing same. >er Rea Transport Co. For agency fee per steamer Vespi at Cardiff Telegrams, telephones, stamps, etc. Josiah Thomas For professional attendance re the above steamer: Proceeding to Cardiff as per instruc- tions, arranging to dry dock the steamer, consulting Lloyd's Regis- try and Salvage Association as to docking with cargo on board, call- ing surveys on ship and cargo, arranging docking terms, superin- tending all interests during re- pairs, collecting survey reports and examining all accounts for adjustment, etc. 30 days @ £2. 2s. Od. per day Hotel, personal and traveling ex- penses Fon" coti of telegrams, etc. 50 Forward 56 10 £ 6 19 6 54 9 15 15 10 6 16 5 6 General Average iOff 63 31 10 94 10 4 16 5 Net Owners 898 3 11 6 19 6 5,803 18 2 5 10 17 49 9 5 8 6 £56 10 31 10 3 4 3 955 14 8 63 112 2 5,923 7 10 786 RELATING TO ADJUSTMENT [chap. Ill Disbursements at Cardiff, cont'd Brought forward The Salvage Association For services of the Cardiff staff, sur- veying damage and supervising repairs, etc., including checking accounts and reporting Capt. E. Hall, for surveying cargo and supervising handling and shifting and restowage of sugar in the holds during repairs Expenses Photographs F. H. Smith ', 619. independent intermediate cause may break the chain, 619. illustrative cases, 619, 620. joint action of peril insured against and peril excepted, 620. difficult questions presented, note, 620. mere natural incident or concomitants not to be accounted cause, 620. many illustrative cases, 620-623. hostile agency first in operation gives character to the whole, 623. stranding not insured followed by capture, 616. hole gnawed by rats followed by sea water, 616. unseaworthiness and stress of weather, time policy, 616. stranding not insured followed by fire, 617. negligent navigation followed by sea peril, 617. fire followed by loss from sinking, 618. fire in other premises followed by explosion and concussion loss, 618. collision, subsequent loss in handling goods for reshipment, 620. animals insured "free from mortality" injured by storm, 620. ventilators closed for storm, injury from lack of ventilation, 621. stranding followed by ice detention, ice clause, 621. explosion followed by in-rushing sea, 622. derangement of machinery, delay and sea peril, 622. 58 914 INDEX [References are to pages.] PROXIMATE CAVSE— Continued. fire followed by destructive acts of mob, plate glass insurance, note, 622. explosion followed by fire extending through intermediate building, note, 623. capture and subsequent wreck, 638. wreck and subsequent capture, 638. independent cause producing distinguishable damages, 623. light in lighthouse extinguished in war, vessel striking on reef, 624. damages by fire and collision apportionable, note, 624. the rule as limiting marine insurers' liability, 624. loss of freight from delay, 624. loss for wages and food during delay, 624. loss of perishable articles from delay, 624. loss of profit, 625. PROXIMATE AND SOLE CAUSE, independently of all other causes; accident policy, 544-548. PUBLIC POLICY, ousting courts oi jurisdiction, note, 9, 420. valued policy laws whether against, note, 31. doctrine of insurable interest based upon, 32. prevents recovery by assignee of policy of insured murderer, 82. as related to the doctrine of waiver and estoppel, 163-166, 213, 214. as related to the warranty of seaworthiness, 222. RAILWAY BRIDGE, walking or being on; accident policy, 579. RAILWAY RELIEF DEPARTMENT, not insurance company, nor contract an insurance contract, 5. RATIFICATION, of agent's unauthorized acts; completion of contract, note, 100. even after loss, under clause, "held in trust," 294. after loss under clause, for whom it may concern, note, 296, 584. RATING, as affecting issue of increase of risk, note, 334. RANSOM, covered by marine policy, 609. allowed in general average, 267. RATS, direct damage by rats or vermin not covered, notes, 600, 602, 626. damage by sea water rushing in through rat hole covered, 616, note, 626, READING RULE, apportionment, note, 441. REAL PROPERTY, and personal, embraced by alienation clause, 344, INDEX 915 [References are to pages.] REBUILDING, increased cost of; "indemnity," 298. reinstatement clause of fire policies, 302-305. valued policy laws as affecting the clause, note, 303. election to rebuild once made is final, 303. makes new contract, 304. measure of damages for default, 304. jury decides reasonable performance, 304. insured cannot maintain action where he refuses to permit replacing prop- erty; fire, 304. improperly done, or not done in reasonable time; fire, 304. prevented by public authorities, 304. property again burned during, 304. clause does not apply to full mortgagee clause, 305. increase of risk; permits, 333. RECEIVERS, cannot take interest on deposited securities; insurance department, note, 8. change of; alienation clause, note, 348. holds other interests than insured's; interest or ownership clause, note, 338. appointment of partner as, of firm; alienation clause, 352. insurance as; new appointment does not avoid, 352. oath of; not a substitute for that of assured's personal examination under oath; loss by fire, 416. RECOVERY, by beneficiary; vested rights, See Beneficiaky. under fire policies; amount of, 72. See Adjustment; Apportionment; Loss; Measure of Indemnity. REFORMATION, See Equity. REGISTERED CAPACITY, of vessel; warranty as to loading, 640. REGULATION AND CONTROL, every state has system of statutory law for organization and government of insurance companies, 7. New York general insurance law, note, 7. insurance departments and prerogatives, 8, 9. deposits of assets, annual reports, etc., 8. insolvent corporations, 8. Congress has no authority to manage business, note, 8. issuing policy to citizen of another state not interstate commerce, note, 8. as to investments, expenses, commissions, amount at risk, reserve, etc , 9. representative of foreign company for service of papers, 9. state cannot prevent its citizen from making valid contract outside the state, note, 9. 916 INDEX [References are to pages.] REGULATION AND CONTROL— Continued. prohibiting removal of causes to federal courts, 9. courts cannot be ousted of jurisdiction, note, 9. but revocation of license may be imposed as penalty, note, 9 state may capriciously exclude foreign corporation or impose conditions of admission, 10. foreign corporation if admitted must have equitable treatment, note, 10 ousting for violating anti-trust laws, note, 10. restrictions upon Lloyd's whether constitutional, 10. non-resident individuals must procure license, note, 10. laws prohibiting rebates, note, 10. underwriters' associations whether in restraint of trade, note, 10. legislature has power to prescribe form of insurance policy, 278. See Statutes. REGULATIONS, of mutual companies as part of policy, 458. REINSTATEMENT, or rebuilding, increased cost of; "indemnity," 298. of assured on lapse for non-payment of premium; life, 503. See Rebuilding. REINSTATEMENT CLAUSE, 302-305. REINSURANCE, what is, 24, 25. special contracts of, 448. running contracts called "treaties" described, 449. clause; meaning and legal effect, 441-446. usual rider; pro rata and retainer clauses, 446-448. origin of new reinsurance clause, 447. what provisions of policies or rules are and are not applicable, 444, 445. " lost or not lost " applicable to, 585. statute of frauds inapplicable to contract of, 102, 444. time hmitation for suing clause inapplicable to, 454. when avoided by representation as to amount retained, 132. must not be confounded with a renewal, 443. adjustments by original insurer and effect of, 445. liability as specifically agreed upon, 449. actions between insured, insurer, and reinsurer, 446. when original insurer can and cannot sue reinsurer, 445. defenses available to original insurer available to reinsurer, 445. judgment in favor of owner against original insurer binds reinsurer, note, 446. REINSURANCE CLAUSE, FORM OF, 736. REINSURED, recovery by; fire, 75. See Reinsurance. REJECTION, by other companies; false statement as to, 478. INDEX 917 [References are to pages.] RELATIONSHIP, statements as to, of family, 354. RELEASE, of party primarily liable; subrogation, 71. of liability of lighterman; non-disclosure of; policy avoided, note, 354. RELIEF DEPARTMENT, of railway; held not insurance company, 5. REMEDIES, of insurer under doctrine of subrogation, 61 et seq., 399. proceeding in equity may reach insurance money, 89, 90. by suit for specific performance, or for damages for breach, note, 104, 105. in equity to compel insurer to live up to contract, note, 103. in equity to compel issuance of paid up life policy, note, 105. in equity in case of mistake or fraud, 106, 107, 213. reformation of contract to correspond with real agreement, 107. court must not use its discretion to modify contract or to make new terms, 108. whether right of action suspended by war, 145. insurer cannot insist on breach where conduct amounts to confirmation or estoppel, 159. usually on contract not for rescission or reformation, 161. power of equity to grant relief for fraud or deceit of agent, or mutual mis- take, 213. when insured may recover back premium; fire, 283, note, 651. no remedy by action on policy when insured refuses to allow insurer to replace; fire, 304. rescinding cancellation when both parties ignorant of loss; fire, note, 392. subrogation by contract; fire, 399. when original insurer can and cannot sue reinsurer; fire, 445. between insured, insurer, and reinsurer; fire, 446. insured has option between two forms of remedy; subrogation, 449. may sue wrongdoer or insurer, 449. limitation of time to sue; fire, 453. anticipatory breach, what remedies available; life, 470. relief in case of breach where policy provides for non-payment of premium; life, note, 496. collection of note or other instrument given in payment of life premium, 499. where officers refuse approval of application for reinstatement, 503. of insurer where default in payment of premium on regular life policy, 503. insured no claim in case of non-payment of premium; life, 504. equity may compel levy of mortuary assessment; suit for damages, 506-508. power of equity to order exhumation of body of deceased member, 558. where contract is void for fraud of insured premium not recoverable, note, 651. where insurer guilty of fraud, insured may rescind and recover premiums, note, 651. where both parties in pari delicto, court will not assist, note, 651. injured employee cannot enforce policy of employer, 667. See Accounting; Actions; Defenses; Equity; Injunction. 918 INDEX [References are to pages.] REMOTE CAUSE, See Proximate Cause. REMOVAL, of causes to federal court, 9. of property deprives it of protection of policy, 292-293. under permit for new location not protected in transit, 292. of property to new location; increase of risk; question for jury, 334. of property for safety; fire, 401. clause; not in Massachusetts policy, 401. See Location. RENEWAL, of policy; agent's authority as to, note, 101. contract; statute of frauds not applicable, 102. description of "forms;" phrases in "as per plan on file" or "as per survey on file;" effect, .379. waivers and estoppels when carried by successive, 383. clause providing for, fire policies, 382, 383. constitutes new contract, unless, 382. modification of contract, 382, 383. by parol, 382. by renewal receipt, 382. reformation in equity for failure to comply with agreement for, 382. clause not in Massachusetts poUcy, 383. RENEWAL CERTIFICATES, construction as to losses; credit insurance, note, 663. RENEWAL RECEIPT, sometimes used for renewal, 382. RENT CLAUSE, FORM OF, 735. RENT POLICY, what is a, 22. recovery by lessor under; fire, 74. REPAIRS, clause as to additions, alterations and, 289-291. permit to make, 290. permit to make ordinary alterations or, 335. by tenant, doctrine of indemnity enforced in England against landlord in favor of insurer, note, 297. provision as to, as affecting measure of recover^', 300. on building prevented by public authorities, note, 300, 304. election by in.surer as to, on giving notice, 302-305. valued policy laws not necessarily inconsistent with election to, in standard policy, note, 303. improperly made or not made in reasonable time, 304. property again burned during, 304. insured cannot maintain suit where he refuses to permit replacing property, 304. INDEX 919 [References are to pages.] REPAlRS~Co7itinued. value increased by, effect as to increase of risk, note, 327. making ordinary and necessary, not within prohibition as to increase of risk, note, 331. express privilege to make, immaterial whether or not risk increased, note, 333. may be made under sprinkler clause, note, 333. not fatal increase of risk to discontinue for necessary repairs use of sprinkler, note, 333. allowing repairing to continue for more than specified time without permit, avoids policy, 335. under Massachusetts policy, 335. special privilege to make, note, 335. express privilege for allows them to be made in reasonable, proper, and usual way, 359. gasoline or naphtha used in making, 358, 359. property held for; memorandum articles, 375. loss occasioned by ordinance or law regulating; memorandum clause, 375. selecting nearest port; deviation, note, 233. sale of ship; total loss, note, 242. general average contribution, 243. constructive total loss, 243, 244. election to make, and not abandon; insurer's non-liability for salvage and general average expenses, note, 252. indemnity, where ship repaired, partially repaired or not repaired, 254, 255. bids for and survey of damage; marine loss, note, 650. REPORTS, to insurance department, 8. REPRESENTATIONS, introductory, 117-120. law founded upon peculiar character of the business, 117-120. what constitutes a representation, 128, 145. extrinsic matters as representations, notes, 106, 139. strictly speaking relates to collateral matter of inducement, 128, 145. sometimes statements in contract are construed as, note, 128. material misrepresentations of fact avoid policy, 128, 129. if not too remotely connected in time, 129. must be both material and untrue to avoid, note, 129. fraud need not be pleaded in the answer, note, 129. representations need be only substantially correct, 129. distinction between warranties and representations, 129. illustrative cases, 129, 130. effect of had faith, 131. promissory representations are merged in contract, 105, 172. whether fraudulent promissory representations admissible for rescis- sion, note, 130. effect of failure to answer questions, 123, 151. rule as to misrepresentations more strict in marine insurance, note, 130. 920 INDEX [References are to pages.] REPRESENTATIONS— Continued. misrepresentation that property was owned by successful business man instead of woman, note, 130. misrepresentation as to amount of other insurance, 130. misrepresentation no rejection by other life companies, 130. statements of opinion or belief not generally fatal, 131. as to expected date of sailing, 131. as to good health, note, 131. as to physical condition, note, 131. as to cause of death of relatives, note, 131. as to values, note, 131. as to age of building, note, 131. whether obscure diseases are matters of fact or opinion, 149, 150, 478, 482. test and definition of materiality, 131. influence on prudent insurer in fixing rate and deciding whether risk be taken, 131. relation of the misrepresentation to cause of loss not decisive, 132. immaterial that loss is unconnected with fact misrepresented, 132. representations refer to time of closing contract, 132. changes in facts pending negotiations must be communicated, 132. date of closing orally or by binder controls, 132. but compare dictum in federal court case, note, 133. representations may be withdrawn or qualified until completion of contract, 133. materiality and substantial truth questions of fact for jury, 133, note, 131. when issue one of law, 115, 116, 133. whether expert testimony as to materiality is admis.sible, notes, 131, 133. statements in papers merely referred to are not warranties, 139. some courts construe certain warranties as representations, note, 140. court determines whether representation or warranty, 115, note, 141. warranties contrasted with, 145, 146. statements in policies sometimes construed as, 147, 149. sprinkler clause construed a mere representation, 147. express inquiry is evidence of materiality, note, 147. representation of present use; if true when made, 150. statutes convert warranties into representations. 1.56, 157. such statutes valid and controlling, 157. they are constitutional, 157. question of materiality thus relegated to jury, note, 156. terms of policy cannot prevent this, note, 156. cannot avoid statute by stipulating other place of contract, note, 156. statements in application representations unless expressly incorporated, fire policy, 377-380. court construes as representation rather th.an warranty, 473, note, 377. statements as to title, liens, etc., 146. 153, 1.54, note, 378 as to fear of incendiarism, 1.54. burden of proof on insurer, note, 155. statement as to artist of painting, note, 378. statements in application usually incorporated, life policy, 471, 476 INDEX 921 [References are to pages.] REPRESENTATIONS— Confmued. statement of fact a mere representation unless warranted, note, 471. rule otherwise in marine insurance, note, 471. matter of surplusage is representation rather than warranty, 474. incomplete answer as to rheumatism, 474. misstatement as to convulsions held mere representation, 475. liberal statutes making warranties representations, 476-478. list of references to statutes, 683, 706. issue under statutes when for court, when for jury, 477, 478. statutes apply to fidelity insurance, note, 657. doctrine of applies to credit insurance, note, 662. See Statutes; Warranties. REPRESENTATIVES, See Legal Representatives. REPRISALS, perils of war, etc., 607, 608. RESCISSION, when allowed, 108. a form of relief usually misatisfactory, 108. insured seeking, liable for premium until time of, note, 282. for fraud of insurance, note, 651. RESERVATION, of right to change beneficiary, 86. RESERVE, what is the, 20. RESHIPPING OR TRANSSHIPMENT, whether liability of insurer continues, 245, 246, note, 593. expenses of, under sue and labor clause, 633, 634. RESIDENCE, and travel; statements or requirements as to, 492. RESTRAINT OF KINGS, 610. RETAINER CLAUSE, when added to reinsurance rider, 446, 448. form of, 736. RETURN OF PREMIUM, See Premium. REVIVAL OF CONTRACT, occurs only by grace of insurer after forfeiture, 142. contract is voidable for breach, 154. breach may be waived and contract revived, 154. reinstatement of life policy after forfeiture, 503. statutory or policy provisions allowing reinstatement, 502, 503. options allowed on surrentlei or lapse of life policy, 502, 762. See Forfeitures. 922 INDEX [References are to pagesj REVOCATION, by assurer of contract prior to date of performance, See Anticipatory Breach. RHEUMATISM, duration of; requirement as to answer not complied with; no fatal breach, 474. RICE RULE, apportionments, note, 441. RIDER, closing of contract; fire, note, 95. part of contract, notes, 106, 109. when prevails over general terms of contract, 109. clause as to additions, alterations, and repairs, 290, 291. standard mortgagee clause, 396. usual reinsurance, 446^48. for many special purposes attached to fire policy, 459 and note, to marine policy, 648. RIGGING, damages to, 265, 605, 607, 778. RIOT, excepted loss; fire policy, 368. a peril; marine policy, 608. RIOTERS, attacking ship are "pirates," note, 608. RISK, of real loss essential to insurance, 2. different meanings of the term, 326. classification of risks, 18, 19. mixed risks, sea and land, 24. as requisite of complete contract, 98. persons of unsound health sometimes insured, 18. temporary suspension of, 151, 152. decrea.se of; evidence competent, note, 327. period of; fire insurance, 283. period of; fidelity, etc., insurance, 658. period of; employers' liability insurance, 668. See Builder's Risk; Clauses; Increase of Risk; Perils. RISKS, classification of, 18, 19, ROADBED, of railway; walking or being on; accident policy, 679. ROBBERY, death in violation of law; life policy, 522. INDEX 923 [References are to pages.] RULES, of beneficiary association as part of contract, note, 4. apportionment, where non-concurrence double or complex, 439, 440. "gradual reduction," note, 441. Giese and Morristown, note, 443. Reading Rule; apportionments, note, 441. Finn; Griswold; Kinne; Rice; apportionments, note, 441. RUNNING DOWN OR COLLISION CLAUSE, FORM OF, 769. RUNNING OR OPEN POLICY, FORM OF, 734. RUNNING POLICY, what is a, 22. marine; shipments; declarations under, 591. RUPTLTIE, statements as to; life policy, 479. from jumping; accident policy, 542. caused by exertion or over-exertion; accident policy, note, 540. of blood vessel by violent exertion; accident policy, 540. of blood vessel, while exercising with Indian clubs; accident policy, 539. when due to disease and not accident; accident policy, 54.3- contributing to the injury or death; accident policy, 565, s SAFETY, removal of property for; fire, 401. See Good Safety. SACRIFICE, See General Average. SAILING, defined, note, 648. warranty to sail on or before certain date, 648 SAILS, damage to xmder marine policy, 605, 607. damage to in general average, 263, 778. SALE, of ship; repairs; total loss, note, 242. master may sell ship or cargo in case of necessity, 245. of ship or cargo; total loss, note, 245. of ship in damaged state; indemnity, note, 255. of cargo; port of refuge; general average; communication with owner, 267. or transfer of insured's interest without insurer's consent, 76. or alienation of part of property; severable contract, note, 152, 153, 305-309. of damaged property may forfeit insurance; fire, 303. under judgment not within foreclosure clause, note, 342. under foreclosure unconsummated by dehvery of deed not within alienation clause, note, 343. change in interest, title, or possession under fire policies, 343-352. 924 INDEX [References are to pages.] SALES, See Alienation; Conditional Sale; Foreclosure; Sheriff's Sale. SALOON, use of dwelling house for; increase of risk, note, 330. SALVAGE, operations; constructive total loss, 243. effect of abandonment, note, 249. share of; insured own insurer, uninsured balance, 250, 635. share of; disbursement policy, note, 250. charges; contradistinction; particular average, 251. charges recoverable, 252. charges; sue and labor clauses, note, 252. charges; English marine code, 642. services; assured, when liable, note, 252. loss on goods and particular average loss; important to discriminate, 256, 257. charges and general average contribution, 257. expenses or charges; general average, 267. realized; fire policy, 305. under sue and labor clause, 628-635. SALVORS, "SANE OR INSANE," in suicide clause. See Salvage. See Suicide. SAVING PROPERTY, neglect of insured to use reasonable means for, 368. SAWMILL, vacancy clause, 367. SCHOOLHOUSE, vacancy clause, 368. SEAMEN. requirements as to seaworthiness, 222, 226, 227. acts of; seaworthiness, 231. SEAWORTHINESS, the implied warranty of, 221-231. what constitutes, note, 222, 225-231. standard of, not uniform, 229. warranty of, affirmative, 137. condition procodcmt, nolo, 225. whether warranty of, is implied in time policies, 224, 225. custom or statute affecting, 226. requirements as to equipment, etc., 222, 226, 227, 229. as between shipowner and insurer; between shipowner and shipper, note, 222. when warranty extends to refrigerating apparatus, note, 224. aa to compass, 226. INDEX 926 [References are to pages.] SEAWORTHINESS— Continued, as to pilot, 226. ship's cargo must be properly stowed, etc., 227, 228. no warranty that vessel shall continue seaworthy, 227. steam vessels, note, 227. that cargo stowed on deck can be readily jettisoned; as defense, 228. breach of warranty; ignorance or innocence of assured not available, 228. latent defect; temporary defect, 228. warranty does not extend to lighters employed by insured ship, 228. no warranty that goods are seaworthy, 229. voyage performed in different stages, 229. different degrees of; "at and from," 229. coaling; renewing consumable stores, 229. where voyage partly river, partly sea, navigation, 229. insurance out and home, 230. may have relation to character of ship insured, 230. vessel constructed for river service; voyage also by sea, 230. as affected by character of voyage, 230. nationality or neutrality; necessary documents required, 231. warranty of; negligence of insured or agent, 59. burden of proof on issue of unseaworthiness, 222, note 223. question for jury, note, 115. SEIZURE, as a marine peril, 608. warranted free from expense in consequence of, 646. SELF-DEFENSE, shooting in; not violation of law, or duelling, 572. justifiable; voluntary exposure to unnecessarj-^ danger; accident policy, 573. SELF-DESTRUCTION, See Suicide. SEMI-TONTINE POLICY, what is a, 24. SERVICE, of papers; requirement that company have representative in state upon whom service may be made, 9. of notice of abandonment, 249. of papers; effect of, under foreclosure clause, note, 342. of cancellation notice; fire, 386-392. of proofs of loss, 407-413. of proofs of loss; where served, 412. of statutory notice before premiums due, 500, 501. of assessment notice; life policy, 508. of notice of assignment; life policy, 527. of process; injury sustained in; intentional injury clause; accident policy, 570. of notice of accident; reasonable time; delay; illustrations, 555-557. of notice of employee's dishonesty, 659. of notice of injury to employee, 671. 926 INDEX [References are to pages.] SET-OFF, of risks; when not allowed; illustration, 330. against premiums of cost of carrying risk not permitted where rescission for insurer's fraud, note, 471. of earnings not declared as dividends cannot be claimed by insured; life, 496, SETTLEMENT, final unless procured by fraud, 650. of claims; employers' liability insurance, 674. See Adjustment. SEVERABLE OR DIVISIBLE CONTRACT, See Entirety of Contract. "SHEDS," includes those adjacent and also more distant, note, 288. SHERIFF, insurable interest in goods seized, note, 39. levy by; alienation clau.se, 352. SHERIFF'S SALE, purchaser at; interest or ownership clause, note, 337. SHIP, policy on, usually valued, 21. insurable value of, under open policy, 254. partial loss of, how estimated, 254. when considered unoccupied, note, 368. description covers what; marine risk, 587. name of; marine policy, 585. insurance upon body, tackle, apparel, or other furniture of, 586. commencement of risk, 588, 589. what is breaking ground to sail, note, 589. duration and termination of risk, 593-595. privilege to touch and stay, 598. sinking; loss of cargo by fire, proximate cause, 618. warranty as to loading; capacity, 640. warranty of neutrality, nationality, papers, etc., 647, 648. warranty of condition or location on specified date, 648. See Deductions; Waruanties. SHIP OR SHIPS, goods insured per, 586. SHIPPING GAZETTE, See Lloyd's Lists. SICKNESS, no excuse for violation of conditions; warranties, 145. no excu-se for non-payment of premium, 496. See Health. SLEEPWALKING, as contributing cause of accident, 562, 565. INDEX 927 [References are to pages.] SLIP, See Binding Sup. SMOKE, results of, under clause as to loss by fire, 284. damage by; proximate cause, 617. SMOKING, representation that, not allowed; statement as to present use, effect of; fire, 150. SMUGGLING, or other illegal conduct; marine, notes, 238, 239. SOLD BUT NOT DELIVERED, meaning and legal effect of, 293. SOLE CAUSE, See Promixate Cause. SOLE OWNERSHIP, See Ownership. SOLICITING AGENTS, knowledge of facts; waiver by, 525. See Agents; Solicitor's Premium. SOLICITORS, authority of, as to contract, 198. no apparent authority to conclude contract, notes, 100, 101. limited authority of, life, 198-205. notice of restriction on authority of, 202. mere knowledge of, works no estoppel, 202. limited authority of; fire, 219. SPECIAL CLAUSES, See Forms; Words and Phrases. SPECIFICATIONS, of building, etc., to be furnished; proofs of loss, 413. SPITTING OF BLOOD, 481. SPONTANEOUS COMBUSTION, 606. SPRAIN, when accident, 539. SPREAD OF FIRE, whether loss by, is proximate, 284, 451. SPRINKLER CLAUSE, as representation and not a warranty, 147. repairs; increase of risk, note, 333. STAMP, required on slip; British revenue law; marine, note, 97. 928 INDEX [References are to pages, || STANDARD LIFE POLICIES, list of states adopting, forms of, New York, 701, 760. See Life Policy and Clauses. STANDARD FIRE POLICIES, history of adoption, 277-280. prime purpose to secure "uniform policy," 214. whether statutory law as well as contract, 279. use of, obligatory within state, 279. statutes constitutional, 278. when unconstitutional, notes, 278, 279. company liable though policy inconsistent with statute, 279. rules of construction, 279. insurer must not add clauses inconsistent with, note, 279. which states follow New York, which, Massachusetts, notes, 280. certain features of, general comments, note, 280. general comments on the clauses of the New York policy, note, 141. classification affirmative and promissory, 137. contrast between fire and marine policies, 582, notes 140, 141. reasons for contrast in attitude of courts, 582, 583. forms of all standard fire policies given in full, 719 et seq. list of state statutes adopting, 691. See Fire Policy and Clauses. STATE, STATEMENT, proofs of loss. See Regulation and Control. See Notice of Loss; Proofs of Loss. STATEMENTS, See Representations. STATUTE OF FRAUDS, not applicable to insurance, reinsurance, or renewal contract, 102, 444. STATUTE OF LIMITATIONS, creditor's insurable interest in life of debtor, 45. STATUTES, 1. General Provisions. state has right to control or regulate insurance, 9, 10. state may impose conditions upon foreign corporations, lO. statutory safeguards, 7. confining insurance business to corporations, are constitutional, note, 3. impracticable for individual underwriters to observe, note, 3 licensing procuring risks from non-admitted companies, 12. affecting contracts with unlicensed corporations, 10, 11. against wagering contracts, note, 32. generallj have no extraterritorial effect, 114. codes giving right of rescission for concealment, note 124, 684. making warranties representations and providing against forfeiture, 136, 156, 157. INDEX 929 [References are to pages.] STATUTES— Continued. such statutes valid and controlling, 157. making soliciting agent insurer's agent, 194, 381, 686. 2. Fire Insurance. as to system of patrol, 9. failure of company to comply with does not disturb subrogation, 63, 64. standard policy held in Wisconsin to be a statutory law, 279. against forfeiture for misstatement unless in matters material to risk, 156, 157, 706. against forfeiture for breach of conditions unless loss occurs during or by reason of it or risks materially increased, 156, 157, 692. that no statements of assured shall affect forfeiture not evaded by agree- ment that different law apply, note, 156. where tender back of unearned premium required by, note, 282. coinsurance and other restrictive clauses when inconsistent with statutes and eiTect thereof, 301. relieving from forfeiture in case of temporaiy breach of warranties, 310. controlling effect of violation of vacancy clause, note, 364. requiring sworn statement of particulars of loss before action, 180, 697. allowing counsel fee to successful plaintiff where total loss, constitutional, 10, 300. 3. Life Insurance. extensive legislation in New York, following investigation of committee, 18. appointment of beneficiaries and assignments subject to, 53. domestic relations law; policy for benefit of married women assignable, note, 80. as to assignment by wife of life policy, note, 80. provisions of, requiring that policy contain entire contract, 476. provisions converting warranties into representations, 476-478. requiring notice of premium due before forfeiture for non-payment, 500. foreign company issuing policy in New York subject to New York statute, 501. New York company making contract in another state not subject to New York statute, unless, 501. express promise to pay assessments deduced from, 505. options given assured on surrender or lapse of statutory policy, 502. 4. Accident Insurance. applicable to life apply to accident insurance, note, 537. 5. Marine Insurance. special act of Parliament incorporating Lloyd's, note, 14. stamp required on slip by British revenue act, 97. affecting question of seaworthiness, 226. non-compliance with law of Congress as to stowing water; voyage not illegal, note, 238. insurance prohibited by revenue law is void, 239. regulating trade and navigation; policies contravening, void, 240. sailing without clearance certificate that cargo below deck, note, 240. English act as to constructive total loss, 243. 59 930 INDEX [References are to pages.] BTATUTESt— Continued. as to general average, note, 260. as to suing and laboring clause, note, 629, 642. 6. Fidelity and Guaranty Insurance. making warranties representations apply to, 657. 7. American Statutes Affecting Contract Classified, 681-717. in general, 681-691. civil codes treating of insurance law, 681. subject of insurance; contingent or unknown event, 681. what policy must specify, 681. corporate seal not required on policy, 681 , 682. requiring application to be annexed to policy, 682, requiring provisions of application or by-laws to be set forth in policy, 682, 683. statements to be deemed representations and not warranties, 683. when contract of insurance subject to laws of state, 683. what matters should be disclosed or communicated, 684. rescinding contract for concealment, 684. rescinding contract for false representations, 684, 685. rescinding contract for omission to communicate matters tending to show falsity of warranty, 685. requiring that express warranties must be contained in policy, 685. rescinding policy for violation of material warranty or provisions, 685. as to breach of warranty without fraud, 685. agreement before loss not to transfer claim void, 685. that insured shall not be deprived by policy provision of right of trial by jury, 686. making gaming or wagering policy void, 686. making soliciting agent the agent of insurer, 686, 687. when insurer entitled to payment of premium, 687. effect of acknowledgment in policy of receipt of premium, 687. providing when insured is entitled to a return of premium, 687. where loss occurs from a specially excepted peril, 688. what representations must be communicated where insurer obtains rein- surance, 688. forbidding reinsurance with companies not authorized to do business iu state, 688. that policy shall not be invalidated by war, 689. forbidding certain limitations of time for suit, 688. designating where suit against company may be instituted, 689, 690. anti-compact laws, 090. forbidding combinations of insurers to control rates, 690. general statutes against pools, trusts, or combinations to fix prices or restrain trade, 690,691. A. Fire Insurance, 691-700. statutes providing for standard form t»f policy, 691. requiring that conditions be inserted in policies, 691. forbidding discrimination in premiums, 692. return of unearned premium, 692. INDEX 9Zt [References are to pages.] STATUTES— Continued. that breach of condition shall not avoid unless loss occurs during or by reason of it, risk being materially increased, 692, 693. temporary breach, 692, 693. that temporary vacancy shall not avoid, 693. that insurer may rescind contract for alteration in use or condition, 693. that increase of risk by act subsequent to execution of policy shall not avoid, 693. change in interest proportionately suspends insurance, 7U9. that insurer shall examine premises and insert description in policy, 693, 694. what is a sufficient description of property or premises, 693, 694. non-forfeiture for non-payment of premium, 694. requiring notice and return of unearned premium before cancellation of policy, 694. giving insured right to cancel policy, 695. valued policy; that amount stated in shall be taken as true value of real property, 695, 696. as to effect of acts of mortgagor where policy payable or assigned to mort- gagee, 696, 697. notice of loss without unnecessary delay, 697. as to sufficiency of preliminary proofs, 697. as to waiver of defects in notice of loss or of delay, 697. dispensing with certificate or testimony of person other than insured as preliminary proof, 697. forbidding conditions requiring notice of loss within certain period, 697, 698. forbidding conditions requiring magistrate's certificate, 697, 698. providing for appraisal in case of disagreement as to amount of loss, 698. providing for selection of umpire where appraisers have not agreed upon one, 698. providing for protection of mortgagee, 699. anti-coinsurance laws, 699, 700. exempting money derived from policy on homestead improvements, 700. B. Life Insurance, 701-713. statutes providing for standard form of policy, 701. that policy shall contain the entire contract, 701. provisions as to what policy must and must not contain, 701, 702 prohibiting insurance without consent of the insured, 702. to whom the policy may issue, 702, 703. that policy in favor of person convicted of felonious homicide is void, 703. giving days of grace for payment of premium, 703. forbidding discrimination in premium or rates or agreements or rebates, 703-705. forbidding discrimination against colored persons as to premium or rates, rebates, etc., 705. against forfeiture of policy without notice, 705, 706. that misrepresentations and breaches of policy shall not avoid unless in material matters, 706, 707. technical forfeitures; warranties converted into representations, 706. as to effect of misstatements as to age, 707. 932 INDEX [References are to pages.] STATUTES— Continued. as to waiver of right to claim forfeiture where no medical examination, 708. that notice to agent is notice to company as to health, habits, or occupation of insured, 708. forbidding misrepresentations by company as to terms of policy or benefits promised thereby, 708, 709. change of interest proportionately suspends insurance, 709. giving right to insured to change beneficiary, 709. as to notice of transfer of policy, 710. when suicide not a defense, 710. when intemperate habits or habitual intoxication not a defense, 710. that policy shall contain an incontestable clause, 710, 711. that sum fixed in policy measures indemnity, 711. for protection of wife and children against creditors, etc., 711, 712. for protection of all beneficiaries generally, 712, 713. as to voting for directors of mutual life insurance companies and effect of mailing ballot to policy holder, 713. c. Accident Insur.vnce, 714, 715. what policies against accident or disease must state, 714. prohibiting limitation of time for service of notice of injury, 714. what notice of injury is sufficient, 714. that benefit not liable to attachment or other process, 71.5. that when policy for which premium note given is canceled insured shall pay proportion of all losses, 715. cancellation; mutual companies; accidents to employees, 715. D. M.\RiNE Insurance, 715-717. forbidding gaming or wagering policies, 715. what information must be communicated or disclosures made in marine risks, 715. what concealments or misrepresentations do not vitiate, 715. as to effect of agreement that thing insured shall be free from particular average, 716. as to effect of insurance confined in terms to actual total loss, 716. as to requisite and sufficiency of notice of abandonment, 716. as to effect of abandonment, 716. as to acceptance of abandonment and effect of, 717. when valuation of policy is conclusive, 717. right of insurer to rescind for fraudulent valuation in policy, 717. in cases where profits are valued and insured, 717. See Beneficiary; Constitutionality; English Marine Code; Regulation AND Control; Standard Policy. STATUTORY LIABILITY, insurable interest by reason of; railroads, note, 38. STATUTORY LIEN, foreclosure not within foreclosure clause, note, 342. STEAM, loss by explosion, 286, 369. INDEX 933 [References are to pages.] STEAM BOILER EXPLOSIONS, insurance, note, 652. STEAM CARS, See Cars. "STEAM SAWMILL," includes machinery, note, 289. STENOGRAPHERS, fees as "cost;" employers' liability insurance, 678. STOCK, of goods; sales; purchases and fluctuations in; alienation clause, 347. "usually kept in country store, allows use of benzine and fireworks," note, 357. of fancy goods; privilege to keep firecrackers; memorandum clause, 358. " of drugs " covers gasoline, benzine, and ether, note, 358. "such as is usually kept for sale in a drug store;" when covers benzine, note, 358. and materials; policy covers all used in photographer's business, note, 358. of railroad contractors held not to cover dynamite, note, 360. " of cloth . . . and all other articles usual in merchant tailor's establish- ment;" no recovery for patterns, 360. See Merchandise. STOCK COMPANIES, corporations classified, 6. STORAGE, of explosives, etc.; increase of risk, 334. property held on, meaning of phrase, 376. warehouse clause, form of, 726. STORE, fluctuating stock; alienation clause, 347, 348. "retail hardware store" covers dynamite, note, 358. vacancy clause, note, 368. and dwelling; vacancy clause, note, 366. See Department Store; Stock. STOREHOUSE, vacancy clause, note, 368. form of warehouse clause, 726 STORING, oils without written consent; fire policy, note, 142. STOVE, use of imsafe; increase of risk, 334. STOVE PIPE, warranty, as to being well secured, construed, note, 379. 934 INDEX [References are to pages.] STOWAGE, as affecting seaworthiness, 226-228. See Cargo. STRANDING, voluntary, whether a general average act, 266, 645, 646. illustrations of, 267-270. " free of average unless general or the ship be stranded," 644, 645. what constitutes stranding within the meaning of this warranty, 645. entry of, not disclosed, whether fatal concealment, note, 121. whether proximate or remote cause of loss, 605, 606, 616, 617, note, 620, 621, and note, 623. STRESS OF WEATHER, under head of sea perils, 605. SUBJECT OF INSURANCE, under fire policy, 288-292. xinder marine policy, 586-588. profits, use, and occupation, 57. the subject of the contract is a chance or hazard, 118. SUBROGATION, fire and marine, 61 et seq. definitions of the rule, note, 62. is based on the doctrine of indemnity, 61. insurer must first make payment, 63. life insurance, why doctrine does not apply, 65. must not prevent indemnity to insured, 64 et seq. applies whether pohcy open or valued, note, 63. basis of right; insured need not show negligence, 63. extent of insurer's rights generally, 63 et seq. unlicensed insurer entitled to, note, 11. when insurer member of trust in violation of statute, 64. marine; insured, if a coinsurer, shares in salvage, note, 64, 635. mortgagee, mortgagor, 65. other contract rights, 66. where a tenant of the insured repairs the loss, 66. where executory vendee subsequent to the loss pays full purchase price, 67, 68. other instances, 68, 69. stipulation in bill of lading for benefit of insurance, 69. special clause in policj' to preserve, 70. release of party primarily liable, 71. right of; how prosecuted, 71. provisions in lease excluding right of; concealment, note, 127. non-disclosure of provision in lease depriving of ; policy not avoided, note, 354. doctrine as preventing recovery of more than insurable value from whole body of insurers, note, 295. under standard mortgagee clause, 399. under clause of standard fire policie8, 449-4.'i'2. INDEX 936. [References are to pages.] SUBROGATION— Continued. tortious fires, spread of, proximate results, 451. negligence of water company, 452. order of civil authority; blowing up buildings to stay conflagration, 453. title insurance, note, 654. applies in favor of insurer who has paid on guaranty bond, note, 657. SUBSTANDARD RISKS, substandard or unhealthy lives are sometimes accepted, note, 18. SUCCESSION BY DEATH, whether a change of interest, 348. SUE AXD LABOR CLAUSE, is an independent engagement, 629. object of the provision, 631. obligation under, may exceed the face of the policy, 629. salvage rewards are not recoverable under, 630, 631. general average losses, not recoverable under, in England, 630. rule otherwise in this country, 630. conditions requisite to constitute valid claim, 631. instances of the operation of the clause, 633-635. insured, when coinsurer, pays his share of expenses, and takes share of salvage, 635. expenses under; English marine code, note 629, 642. smciDE, effect of, irrespective of contract provisions, 81, 120, 511, 512. effect of, on rights of beneficiaries, 81, 82, 512, 513. self-destruction and other equivalent phrases, 509, 510. differing provisions in application and certificate; ambiguity; incontestable clause, 149. statute excluding as defense is controlling, 157. e.xemption in life policy from liability for, 509. degree of insanity required to save insurance, 514. exemption from liability for, sane or insane, 511, 514-517. burden of proof, suicide, in.sanity, 517-520. within one year; New York policy limitation, 514. \inder incontestable clause; life, 535. sane or insane; accident policy, 559. while insane; accident policy, 539. See Statutes. SUIT, See Actions; Equity; Remedies. SUMMONS, delivery of to sheriff for service; commencement of action, 456. SUNDAY, premium falling due on; life, note, 496. SUNSTROKE, whether a disease, is for jury, unless attack too slight, 480. as disease rather than accident, 541. 936 INDEX [References are to pages.] SUPERINTENDENT OF AGENCIES, authority of; waiver; payment of premiums, 626. SUPERINTENDENT OF INSURANCE, functions of, 8. compelled by mandamus to license or to file certificate, note, 8. SURETIES, obligation of individual, and bond of surety company; difference, 665, 656. suretyship contrasted vi'ith insurance, note, 5. See Fidelity Insurance. SURGICAL TREATMENT, or medical as contributing cause of accident, 562. SURRENDER OF POLICY, cancellation, 385, 387. "SURRENDER VALUE," 20. SURROUNDINGS, See Exposures. SURVEY, reference to as representation or warranty, note, 139. referred to in policy as a part of contract, 377. warranty when referred to in policy, 377. See "Binder for Survey." SURVEY CLAUSE, FORM OF, 727. SURVIVORS, insurance payable to; life, 466. SURVIVORSHIP POLICY, what is a, 23. SWITCHMAN, occupation of added by subsequent by-laws to extra hazards, note, 4. SWORN STATEMENT, or proofs of loss, 407. TANNERY, vacancy clause, note, 368. TAX LIENS, not a change of interest, 348. not an increase of risk, 331. TEAMS LIABILITY POLICY, employers' liability, 664, 665. TELEGRAPH, consent by, to other insurance, 322. INDEX 937 [References are to pages.] TEMPERATE HABITS, warranty as to, 489, 566. TEMPORARY REPAIRS, See Repairs. TENANT, amount of recovery by under his fire policy, 74. for life; not sole and unconditional owner, note, 338. act of, when avoids policy although insured without knowledge of breach, 142, 144. "occupied by; " statement of present use; fire, note, 161. and owner; the clause, as interest may appear; fire, 294. repairs by; doctrine of indemnity enforced against landlord in favor of insurer, note, 297. violation by, of memorandum clause; fire policy, 356. of insured; acts of; increase of risk, notes, 327, 335. breach by, of vacancy clause, 361. TENDER, of premium before action, note, 282. back of unearned premium unnecessary, unless; defense, note, 282. of unearned premium under cancellation clause, 387, 388, 392. of premium refused; subsequent tenders unnecessary; Ufe, note, 495. TERM, of one year often understood by usage, fire, 97. or duration of insurance as essential to complete contract, 98, 99. or duration of marine risk, 593-598. fidelity insurance, 658. employers' liability insurance, 668. TERM CLAUSE, meaning of, in fire policy, 283. meaning of noon, 283. fractions of day, note, 283. TERM POLICY, wKat is a life, 23. TEST OF SOLVENCY, of insurer, 8, 21. THEFT, during fire, loss by, 285. excepted loss, fire policy, 368, 309. as a peril under marine policy, 611. THEIR OWN OR HELD IN TRUST, meaning of the phrase, 293, 294. double insurance, 320, 321. THIEVES, fire policy, 369. marine policy, 611. loss by; conflagrations; proximate cause, 285, 618. 938 iVijEX [References are to pages.] THREE-FOURTHS VALUE CLAUSE, FORM OF, 733. TIME, is of essence of insurance contract, 100. meaning of " noon " in term clause, 283. limit in factory clause, 324. limit in mechanics' clause, 335. limit in cancellation clause, 387. limit for proof of loss, 407. limit for notice of injury, 671. computation of; notice of cancellation by insurer, 388. computation of; day of mailing notice excluded, note, 501. See Limitation. TIME OF SAILING, statements as to, 143, 648. meaning of warranty, note, 648. TIME POLICY, what is a; marine, 21. marine risk; commencement and termination of risk, 595. See Deviation; Seaworthiness. TITLE, interest of assured, extent of obligation to state it; fire, 312, 313. change of interest, title, or possession; fire policies, 343-352. See Alienation; Assignment; Chattel Mortgage; Fee Simple; Incum- brances; Lien; Mortgage; Ownership. TITLE INSURANCE, 653. purport of the policy, 653. its meaning and legal effect, 653, 654. contrasted with other kinds of insurance, note, 653, rule of liberal construction, note, 654. doctrine of waiver, 654. subrogation, note, 654. doctrine of warranty applies, note, 654. TONSILITIS, statements as to, 480, 481. TONTINE ACCUMULATIONS, payable to insured, when subject to wife's debts, note, 90. TONTINE DIVIDEND, what is a, 24. TONTINE POLICY, what is a, 24. no debt from company until assured selects option, note, 90. TOOLS, covers "patterns," note, 360 TORNADO, insurance, note, 652. INDEX 939 [References are to pages.] TORT, tortious fires, right of subrogation, 451. liability of water company for insufficient supply; subrogation, 452. See Negligence. TOTAL LOSS, 1. Marine Insurance. divided into actual and constructive, 241. actual defined, 241. illustrations of actual, 241. whether a foundered ship is, note, 241. goods incapable of use for the purpose intended, 241. underwriters taking possession may convert into actual, note, 241. total loss of value though repairable, note, 241. a mere congeries of materials not a ship, note, 241. perishable goods justifiably sold at port of distress, 242. no notice of abandonment necessary when total loss actual, 242. presumption of loss of missing ship, 242. whether total loss where part of goods arrive in specie without net value, note, 242. sale because of lack of funds not a total loss, note, 242. may sue for total and recover partial loss, note, 242. constructive total loss, what constitutes, 243. rule in England as to constructive total loss, 243. constructive total loss rule in United States, 244. cost of repairs, etc., exceeding fifty per cent of value when repaired, 244. the real repaired value not the policy valuation governs, 244. many instances of constructive total loss, 244, 246. when master has right to sell vessel and convert into total loss, 245. constructive total loss of freight, 245. loss of more than half a cargo of coal in specie, note, 245. constructive total loss of profits, note, 245. when duty of master to transship cargo or other movables, 246. whether liability of insurer continues during landing and transshipment, 246. as giving right to abandonment, 246-251. under warranty "free from average unless general," 640. English test whether ship is constructive total loss, note, 641. rule under English code seems otherwise, note, 641. by federal rule loss must be actually total to satisfy the warranty, 642. rule of New York, Massachusetts, etc., allows constructive total loss, 642. total loss of part whether a partial or total loss, 643, notes, 254, 641. measure of indemnity in case of, 253, 254. 2. Fire Insurance. what constitutes under valued policy laws, 298-300. stoppage of business held total loss, use and occupancy policy on hotel, note, 300. repair of building prevented by city ordinance, note, 300. permissible to allege partial and recover total loss, note, 300. certain standard policies contain valuation provisions, note, 300. 940 INDEX [References are to pages.] TOTAL LOSS— Continued. definition of total loss by Minnesota court, 300. doctrine of constructive, excluded by fire policy, 305. See Abandonment; Measure op Indemnity; Valued Polict. TOTALLY DISABLED, accident policy, 549. TOUCH AND STAY, marine policy, 598. TRADE, with foreign country; war; illegality; marine, note, 238. laws; foreign; insurance against breach of, legal, note, 239. with enemy, unlicensed; illegality; marine, 239. statutes regulating; legality of insurance; marine, 240. ship fitted for special; insurable value; indemnity, note, 254. general understanding in, may be shown as to property covered by policy, 289. TRADE USAGE OR CUSTOM, See Usage. TRANSSHIPMENT, See Reshipping; Total Loss. TRAVEL AND RESIDENCE, statements or requireipents as to, 492. TRAVELING, insurance against injuries while, 581. "TREATIES," reinsurance, 449. TRIP-HAMMER SHOP, vacancy clause, 367. "TRUST," relation of, does not exist between insurer and insured, 88. meaning of; in clause held in trust, etc.; fire, 294. TRUST DEED, foreclosure clause; sale, 341. when construed as chattel mortgage, note, 341. TRUST FUND, deposit with insurance department is a, note, 8. TRUSTEE, balance recovered over value of property, held by insured as, 73. insurance money held as for vendee, 75. in insolvency; conveyance to, by wife for husband; alienation clause, 352. of syndicate, not unconditional or sole owner, note, 338. when insured holds proceeds of policy as; fire, note, 296. INDEX 941 [References are to pages.] TRUSTEE— Continued. insurance on children's interest; prior policy by child when not void; fire, note, 319. double insurance, 320, 321. See Assignee. TRUSTS, whether associations of underwriters which incidentally fix rates are, note, 10. ouster of insurance companies for violation of statutes against, note, 10. pooling of profits held not to avoid use and occupancy policy, 345. TUBERCULOSIS, of brain is "local disease," note, 480. TUMOR, as contributing cause of accident, 564. TYPE, fine-print conditions and legible type considered, notes, 140, 141, 277. TYPHOID FEVER, severe attack avoids policy under warranty "no serious illness," note, 482. u ULTRA VIRES, estoppel to set up as to unauthorized note for premium, 159. consideration of subject under waiver and estoppel, 168, 169. beneficiary outside permitted class, 463, 464. whether association alone may rely on, note, 464. UNCONDITIONAL AND SOLE OWNERSHIP, See Ownership. UNDAMAGED PROPERTY, See Loss. UNDERVALUATION, of what is saved, etc. ; fire, 313. UNDERWRITERS, right of individuals to become, note, 3. marine insurers why called, note, 14. See Insurer; Statutes. UNOCCUPIED, in vacancy clause, 361. UNSEAWORTHINESS, return of premium, note, 77. effect, when temporary, 221, 228, note, 152. See SEAWORTmNESs. USAGE OR CUSTOM, as the foundation of marine insurance law, 12-14. affecting contract provisions, 97. 942 INDEX [References are to pages.] USAGE OF CUSTOM— Continued. as aid to arrive at meaning of contract, 109. to explain meaning of technical words or phrases, 110. of place where contract made as affecting construction of contract, 113. of trade, each party bound to know, note, 125. as to credit for premium; fire, 205. well known, effect upon term clause; fire, note, 283. to clarify meaning of descriptive words; fire, 289. "any usage or custom of trade to the contrary;" memorandum clause; fire, 356-358. cannot disturb time limit in vacancy clause by evidence of, 365. effect of as to notice that premium due; life, 496. "usages of Lloyd's," 13, 14. as to deviation from usual voyage, 14. as to use of binding slip by marine broker, 97. marine broker liable for premium, England, note, 96. trade usage; marine. 111. effect of as to policy conditions; marine, notes, 140, 141. as affecting policy on ocean transit, 141. as affecting seaworthiness, 226. as affecting deviation, 232-234. inadmissible to disturb description of prohibited waters, note, 232. as to meaning of term "harbor of New York," 596. as to goods on lighters, 596. as to reasonable time in landing goods, 597. of steamers or sailing vessels to follow habitual route or to stop at certain port, 598. as to liberty to call at certain port; landing and loading cargo, 598. cannot control plain description in policy; prohibited waters, note, 599, USE AND OCCUPANCY, description of insurance upon, 23, 76. loss of, must be specifically insured, 57. illustrative cases, 346, note, 300. See Condition of Property; Increase of Risk. USE AND OCCUPANCY CLAUSE, FORM OF, 734. VACANCY, not per se increase of risk, 331 . meaning and effect of the clause against, in fire policy, 361-368. breach of the condition by u tenant is fatal, 361 , note, 362. breach operates also again.st insured contents of building, note, 362. temporary' absence, effect of, 301. temporary cessation of operations, effect of, note, 366. distinction between "vacant" and "unoccupied," 361. character and use of building govern rule of construction, 362. doctrine of divisibility how applied to avoid forfeiture, 163, 154, 363, 364, INDEX 943 [References are to pages.] YACA'NCY— Continued. occupancy of one building does not excuse vacancy in another, 364. breach avoids, not merely suspends, 364. provision otherwise in policies of Iowa, Michigan, New Hampshire, Wisconsin, note, 364. Sse Statutes. unoccupancy e.xcused by fire, note, 364. experts may not testify as to increase of risk, 365. the clause as related to dwelling houses, 365. definition of occupancy, 365. whether person sleeping at night is essential, 365-367. knowledge of insurer of vacancy, note, 366. the clause as related to other kinds of buildings, 367. factory, mill, church, schoolhouse, vessel, storehouse, store, etc., 367, 368. permits for vacancy to be liberally construed, note, 362, 366. clause; privilege to employ mechanics for fifteen days does not impliedly al- low unoccupancy for same period, note, 364. clause; Massachusetts form, 366. clause; "vacant by removal" Massachusetts and New Hampshire forms; " absence " and " removal " distinguished, 366, 367. "VALID OR INVALID," clause against other insurance, 322. words not in Massachusetts policy, 323. in contribution clause, 435. VALUATION, See Apportionment; Measure of Indemnity. VALUE, estimate of in application, as matter of opinion, note, 378. surrender value of policy, 502. VALUED POLICY, what is a, 21. the basis of adjustment if no fraud, 30, 31. laws not to be commended, note, ol. whether laws are contrary to public policy, note, 31. laws not unconstitutional, note, 31. life insurance as, 31. on profit is, note, 58. not necessary in United States to prove there would have been profits, note, 31. in England, otherwise, note, 31. or open; subrogation appUes, note, 63. fire; measure of damages, 298-300. provisions are in several standard policies, 300. accepting different form of policy is no waiver, 299. laws; "total loss" of building; means what, 299, 300. laws where loss not total, 300. g^ INDEX [References are to pages.] VALUED POLICY— Continued. laws as affecting coinsurance clauses, note, 301. laws, when misstatements as to value will not forfeit, note, 316. law may make contribution clause inoperative, note, 437. list of valued policy laws, 695. VAPOR, or gas; inhaling; accident policy exception, 568. VENDEE, no right to vendor's policy, 76. whether fire gives vendee right to cancel executory contract of sale, notes, 67, 68. at what point of time should insure, 76, 349. when sole and unconditional owner; when not, 336, 337. agreement of, to resell; interest or ownership clause, note, 337. recovery by, under his own policy; fire, 74. VENDOR, whether fire gives vendee right to cancel executory contract of sale, notes, 67, 68. and vendee, under clause as interest may appear; fire, 296. when ceases to be sole and unconditional owner; executory contract for purchase, 336. at what point of time loses his insurance, 349. recovery by; fire, 74, 75. VENDOR'S LIEN, foreclosure not within foreclosure clause, note, 342. VERTIGO, slight attack not a disease, 480. as contributing cause of accident, 562, 564. VESSEL, See Ship. VESTED RIGHTS, See Beneficiaries. VIOLATION OF LAW, death in; Ufe policy, 520, 523, 524. VISIBLE MARK OF INJURY, 560-562. VOLCANO CLAUSE, 375, 734. VOLUivTARY EXPOSURE TO UNNECESSARY DANGER, 572-578. VOLUNTARY OVEREXERTION, accident policy, 571. VOLUNTARY STRANDING, in general a.vera|;e, 266-270. INDEX 94o [References are to pages.} VOUCHERS, production of, or of certified copies, as required by the policies; loss by fire, 417. meaning and effect of the clause, 4'17, 418. Massachusetts policy, 418. VOYAGE, description of; marine, 591. three ways of describing, 592. commencement of, 590-593. sailing defined, note, 648. how to be pursued, 592, 231-238. termination of, 593-598. what constitutes change of voyage and its effect, 233, 234, 590. change of voyage to be distinguished from deviation, 233. performed in different stages; seaworthiness, 229. character of, as affecting seaworthiness, 230. illegality of, 238-240. See Deviation; Illegality VOYAGE, FIRST, 259. VOYAGE POLICY, what is, 22. duration and termination of risk, 593. See Warranties. w WAGERS, pure wagers void, against public policy, 27-31. insurable interest required, 27-32. contracts once tolerated but forbidden by statutes, note, 32. necessity of requiring insurable interest to prevent fraud and disorganization in business of insurance, notes, 40, 52. insurable interest in life, note, 41. insurable interest of beneficiary; life policy, 50, 51. assignee and appointee of life policy, 52-54. policies; non-return of premium, note, 76, 77. or gambling, note, 652. WAGES OF CREW, during mere delay, do not fall on underwriters, 624. unless crew retained to work on repairs, 624. and maintenance of crew whether allowable in general average, 267. whether allowable under sue and labor clause, 633, 634. do not contribute; general average adjustment, note, 271. WAIVER AND ESTOPPEL, nature of, in general, 158. what constitutes a waiver, 158. what constitutes an estoppel in pais, 158. 60 946 INDEX [References are to pages.] WAIVER AND ESTOPPEL— Continued, words often used interchangeably, 158. insurer generally waives or is estopped, but doctrine applies against as- sured, 159. insured cannot claim, if guilty of fraud or collusion, 201. waiver of one breach does not necessarily extend to future ones, note, 159. estoppel by parol testimony, doctrine as peculiar to insurance, 159-163. operates in favor of privies in blood or estate, note, 159. doctrine of implied waiver and estoppel moderates common-law rules as to concealment, misrepresentation, and warranty, 159. election to waive once made i^ final, 159. whether new consideration is required, 159. permits written and delivered require no consideration, note, 160, such permits are irrevocable, note, 160. such permits may be attached at any time, note, 160. action usually upon contract; not for rescission or reformation, 161. disturbance of contract by parol; illustrations, 161, 162. effect on common-law rules of evidence, 162. considerations favoring doctrine of parol waivers, 163. considerations opposed to the doctrine; 164. practical operation of the doctrine, 164. diflBculty in applying doctrine, 166, 167. paucity of English cases upon, in striking contrast, note, 165. what cannot be waived, 168. what can be waived; stock companies, 170. antecedent consent or promise is merged in contract, cannot be shown for waiver, 172. thus, that premium need not be paid at maturity, 172. oral consent for other insurance, 172. waiver; mutual companies, 170. new subject not to be introduced by waiver, 170. what amounts to; doctrine amplified, 171, 172. acceptance of premium, 172, 173. receipt of overdue premiums, 173. consent to assignment of policy, 173. renewal of policy, 173. effect of prior course of dealing, 173. subsequent parol consents of waiver, 174, 175. knowledge of breach; when a waiver, 175, 176. parol evidence; rule in federal courts; Massachusetts and New Jersey, 178. whether mere silence or inaction is ground for, 177, 178. failure to cancel no sufficient ground for; fire, 177, note, 178. failure to answer letter, when not a waiver, 177. proofs of loss; technicalities are more readily held to be waived, 178. denial of all liability; proofs of loss, etc., 179. rule not clear on principle, notes, 179, 180. demanding proofs of loss is of itself not a, 180-182. demanding additional proofs of loss; rule stated and criticised, 182, 183. whpre policy provides that such acts shall not be a waiver, 183. INDEX 947 [References are to pages.] WAIVER AND ESTOPPEL— Continued. non-waiver agreement after loss, effect of, 184. construed liberally in favor of assured, note, 184. effect of trying to negotiate an adjustment of the loss, 184. adjustment and agreement to pay, a waiver, unless fraud, notes, 184. company may defend on other grounds than those first named, exceptions, 185, 186. claimant not precluded by statements in proofs of loss, 186. retention of proofs waives defects that might have been remedied, 186. whether facts constituting waiver or estoppel must be pleaded, 187, note, 454. Waiver and Estoppel by Agents. insurance companies can act only by agents, 189. to appoint an agent is to clothe him with a measure of authority, 189. actual authority rather than policy restriction controls, 189. ostensible or apparent authority means what, 189, 190. vmdisclosed instructions not binding on insured, 190. agency determined by facts of each case, 191. whatever policy provides principal has certain responsibilities by law, 191. neither policy nor by-law can abrogate rule of law, 191. a leading federal court case, 191. policy stipulations as to who are and are not agents; fire, life, 192, 380. effect of such stipulations, 192-194. effect of stipulations in earlier forms of policies restricting to written waivers, 194, 195. restriction on agents' power to waive, standard fire policies, 195-197, 458- 460. some standard policies differ in form, note, 206, 324. trend of later decisions, note, 196. policy restrictions when operative, 197. distinction where notice of restriction is in application, 197. authority of officers of company, 197, 198. of managers, 198. of superintendent of agencies, 526. authority of life insurance solicitors, 198. giving credit for first premium, 198, 199. erroneously writing into application answers correctly given, 199, 201. misinterpreting to applicant meaning of the application or contract, 201. in dealing with illiterate applicants, 203-205. restriction upon solicitor's authority contained in application, 202, 203. authority of commissioned or coimtersigning agents imder standard fire policies, 205, 206. certain standard policies differ, note, 206, 324. form of written commission to agent, note, 205. knowledge by agent of facts constituting forfeiture when policy issues 206-212. the leading federal case, knowledge of "other insurance," 207, 208. interesting sequel to the leading federal case, note, 213 948 INDEX ^References are to pages.] WAIVER AND ESTOFFEL— Continued. the rule of the federal court sometimes favors the insured, note, 213. divergent views of the state courts, 206-212. federal, state, and English decisions on the one side and the other tabulated, 206-212 and notes, conclusion to be arrived at, 213, 214. considerations of public policy, 214. present knowledge by agent of facts which shortly will forfeit, 215. parol waivers subsequent to the issuance of standard policy, 215-217. authorized acts of agent contrasted with mere declarations or promises, 217, 218. as to provisions relating to proceedings after loss, 218. authority of fire insurance solicitors, 219. authority of adjusters and other agents; fire, 219, 220. authority of clerks of agents, 220. the restriction of the standard fire policies upon agents' authority, 458, note, 206. decisions under the clause, 458-460. the restriction of the life policies upon agents' authority, 525. decisions under the clause, 525-526. waiver of breach of warranty; seaworthiness, note, 223. when no, of abandonment, note, 247. no waiver of forfeiture to retain premium, note, 282. no waiver of benefit of law by accepting policy with provision repugnant to law, 299. whether omission to inquire about title and ownership nullifies express warranties, 339, notes, 175, 312, 341. waiver clause; standard policies which do not mention written agreement for company's assent, 324. operation of factory after certain hours, note, 326. foreclosure clause; waiver, note, 342. cancellation after loss and return of unearned premium no waiver of known forfeiture, note, 365. when waiver carried over to sustain renewals, 383. no waiver by requirement as to appraisal, etc., 431. waiver of time limitation for suing; payment to mortgagee not, as to as- sured, note, 454. waiver of limitation of time to sue, 457. when oral statements as to health, made to medical examiner and agent, are not waiver, 472. waiver by accepting application with incomplete answers; warranties, 151, 474. waiver of warranty as to age, 48H. waiver of informality in mode of payment of premium and also of breaches of policy, 498. waiver of prompt payment, and of forfeiture, by agreement, note, 499. waiver of statutory requirement as to notice that premium due; insured cannot waive, note, 501. waiver of time* limit for demand: extended or paid-up insxirance, note, 502. INDEX 94d^ [References are to pages.] WAIVER AND ESTOFPEL— Continued. waiver; forfeiture; conviction of felony; subsequent collection of dues, 571. waiver; title insurance, note, 654. knowledge of solicitor no waiver, credit insurance, note, 663. waiver; doctrine applies; employers' liability insurance, note, 665. See Agents; Solicitor; Statutes. WALKING, or being on railway bridge or roadbed; accident policy, 579. WALLS, falling whether loss by fire, 285. falling several days after fire, note, 286. falling before fire, 374. misdescription of division, note, 378. See Decorations. WAR, as excuse for violation of conditions; warranties, 145. prohibitions; illicit voyages, marine, note, 238, 239. "for whom it may concern;" when covers belligerent property, note, 240. civil war; excepted loss, 368. perils of, a marine risk, 607-610. seizure and sinking of vessel, note, 607. contraband of war, note, 238, 239, 638. persons are not contraband, note, 638. See Enemy; Representations. WAREHOUSEMAN, insurable interest, 36. insurable interest; indemnity, 73. goods held by; clause as to; fire, 293—296. double insurance, 320, 321. WAREHOUSE CLAUSE, FORM OF, 726. WARRANTIES, EXPRESS, how doctrine of, came to be adopted, 134, 135. insurance contrasted with other contracts, 135. breach of, at common law discha^g<^s insurer from date of breach, 135. warranties, either express or implied, 136. express do not exclude implied, note, 136. definition of express warranty, 136. distinguished from warranties in other contracts, note, 136. mere exceptions are sometimes in form warranties, note, 136, examples of exceptions, 137, 138. gometimes classified as affirmative and promissory, 136. examples of each class in standard fire policy, 137. different classification, English marine insurance code, note, 137. no particular form of words necessary to constitute, 137. any statement of fact or stipulation on face of policy or incorporated especially in marine, 138. 950 INDEX [References are to pages.J WARRANTIES, EXTKESS— Continued. modification of rule, fire and life, 138, note, 471. must be part of the contract, 138. descriptive phrases, whether warranties, note, 138. riders, indorsements on margin, etc., note, 139. indorsement on back not enough, note, 139. what reference is sufficient to incorporate as warranties, 139. applications, etc., whether incorporated, 139. application as related to standard fire policy, 377. application as related to life policy, 471. statutes that policy shall contain the entire contract, note, 140, 476, 691, 701. statutes that application must be attached, 476, 682. origin and nature of warranties, 140. must be literally true or .strictly complied with, 136, 141. marine policy contrasted with fire, note, 140. questions of materiality and good faith are eliminated, note, 141, 142-144. immaterial that breach did not contribute to loss, 142, 472. whether affirmative or promissory', are conditions precedent to right of re- covery, 142, notes, 145, 222, 309. whether any distinction in promissory- warranties, note, 140. many illustrative cases, 142-145. the clauses of all the policies furnish illustrations, 145. doctrine applies to title insurance, note, 654. doctrine applies to credit insurance, note, 663. breach of affirmative, prevents policy attaching, 142. breach of promissorv, prevents continuance of contract, 142. promissory warranty, change in circumstances, note, 378. breach by tenant of insured is fatal, 142, 144. inability to fulfill is no excuse, 145. sickness, insanity, death, war, 145. as to provisions applying after loss the rule is modified, 178, 402, 410, 414,415,418. contrasted with representations, 129, 145. substantial truth or materiality of representation for jury, 133, 146. many illustrations, 146, 147. specific inquiry in application, e. g., as to incumbrances, or date of sail- ing bears on materiality, note, 147. list of rules offsetting rigorous doctrine of warranties, 148. court determines whether representation or warranty, 115. ambiguities resolved in favor of insured. 111, 112, 148, 320. rules of construction given, note, 475. illustrations, 149. court construes as representation rather than warranty, note, 148. rule applies to application, notes, 149, 377, 473. illustrations, fire policy, 377-380. illustrations, life policy. 471-494. statements of opinion, expectation or belief, 149. as to latent diseases, notes, 149, 150, 471, 482. INDEX 951 [References are to pages.] WARRANTIES, EXPRESS— Continued. estimates of value, note, 378. statement of present use does not warrant continuance, 150. questions unanswered or partially answered, 1.51, 380, 474. good faith is required, 151. answer a warranty only so far as responsive, 474. does temporary breach avoid or suspend at common law, 151. temporary unoccupancy, note, 151. temporary change of use, note, 152. temporary- unseaworthiness, note, 152. temporary deviation, etc., note, 152. temporary breach, construction under fire policies, 309, 310. to avoid forfeiture as to part, contract made severable or divisible, 152-154. divergent views, 152-154. construction under standard fire policies, 305-309. fraud as to part defeats all recovery^ 154. burden in pleading and proof, 154-156, note, 472. statutes making warranties representations or relieving from technical for- feiture, 156, 683, 706. See Statutes. such enactments valid and controlling^, 157. such enactments constitutional, note, 157. cases construing such statutes, fire, note, 378; life, 476-478. statutes apply to fidelity insurance, 657. WARRANTIES, IMPLIED, seaworthiness, voyage policy, 221. what constitutes, 225-231. a condition precedent, note, 222. burden of proof, 222, note, 223. warranty extends to insurance on freight, cargo, or other interest, 221. seaworthiness, time policy, 224. against deviation, 231-234. by delay, 234. what justifies deviation, 235-238. against illegality in the adventure, 238. none as to nationality of ship, note, 221. See Accident Policy and Clauses; Application; Clauses; Fire Policy and Clauses; Life Policy and Clauses; Marine Policy and Clauses; Waiver. WATCHMAN, clause as to, 326. WATER, damages by, under marine policy, 605. explosion followed by influx of, proximate cause, 622. damage by, in general average, 264, note, 265, 778. See Fire Loss. WATERS, See Prohibited Waters. 952 INDEX [References are to pages.] WATER COMPANY, negligence of; subrogation, 452. WEAR AND TEAR, loss from ordinary action of wind and wave not covered by the policy, 625, note, 600. instances of wear and tear, 601, note, 625. WET, free from loss by; cargo on deck, 646. WHALING TACKLE, and stores not part of ship, note, 587. "WHOLLY DESTROYED," meaning of, note, 299. WHOM IT MAY CONCERN, meaning of clause, 295, 584. WIFE, insurance payable to; life, 465. rights of, as beneficiary not affected by divorce, note, 80. rights of, as beneficiary against husband's creditors, 90-92. premium paid out of separate estate of; insured's creditors no claim, note, 9L conveyance by, to trustee in insolvency for husband; alienation clause, note, 352. may, in absence of statute prohibiting, assign her interest in pohcy; life, 80, 81, 528, 529. statutory provisions as to assignment by; life, 529. See HusB.^.ND. WILLFUL EXPOSURE, 572-578. WITNESSES, See Evidence; Experts. WOODHOUSE, insvu-ed as such; effect when only such in part, 378. WORKMEN, See Mechanics. WORMS, damage by, note, 602, 626. WRITING, contract need not be in, 102. constitutes the best evidence, 105. prevails over the formal printed conditions, 108. WRITTEN CONSENT, See Consent. WORDS AND PHRASES, abandonment, different meanings of, note, 243, 250. "absence" and "removal;" distinction; vacancy clause, 367. INDEX 953 [References are to pages.] WORDS AND PHRASES— Continued. "absorbed" in poison clause in accident policy; meaning of, note, 667. "accident;" meaning of, 538. "accidental injury," 540. " act or neglect " in standard mortgagee clause, 398. "additions, alterations and repairs," 289 et seq. " adopted children " may include illegitimate children, note, 466. "affianced wife" not a "wife;" payment of insurance, 465. "agent;" "representative" does not mean, note, 457. aleatory, 28. "all other perils, losses and misfortunes;" marine risk, note, 600, 602, 607, 614. "allowed" construed, under memorandum clause; "use" of gasohne, note, 357. " all risk of craft whilst loading," 590. appraisers " competent and disinterested," 422. "arrests, restraints, and detainments of all kings, princes, or people;" marine policy, note, 600, 610. "as interest may appear," 295. "as now or hereafter may be constituted; " insertion of words in partnership policy, note, 351. "as per plan on file," used in description or "forms"; effect of, 379. "as per survey on file," used in description or "forms, " 379. "as soon as practicable after he ascertains the fact;" written notice of loss, 406. "at and from; " marine policy, 229, 588. " automobile policy; " employers' liability, 664. "autopsy" carries right to "dissect," "examination" does not; accident policy, note, 558. "average;" marine policy, note, 641. "average unless general;" marine, 640. "barratry," 611. "becoming aware" and "knowing" of gambling operations; distinction; fidelity, etc., insurance, 660. binder; closing contract; fire, 95-97. binding slip; marine, 97. "bodily infirmity" or "disease;" accident policy; excepted risks, 563. "breathing gas" involuntarily is not "inhaling gas," note, 568. "building occupied as tannery" does not include engine, etc., note, 289. "burnt" when ship is, note, 645. " called the American Ship President " not warranty of nationality, note, 138. "capture, seizure, and detention;" marine policy, 608. causa ■proxima non remota spedatur, 603, note, GIG, G17. "causes" disease, etc., as in exception of risks; accident policy, 565. cestui que trust, of company; policy holder is not a, 88. " chemicals " includes benzine, note, 289. "child" includes adopted child, 465. "children;" "orphans" held to mean, 465. "children" does not ordinarily include grandchildren, 466. 954 INDEX [References are to pages.] WORDS AND PHRASES— Continued. , " collision, marine, 603. "concurrent" insurance not construed as "identical," note, 324. "confined to the inland waters of New Jersey, New York, and Long Island; " warranty, 599. "confined to waters of New Haven Harbor;" warranty, note, 599. "consequences resulting from derangement of machinery;" proximate cause, 622. constructive total loss, 242. "contained in;" description of property, 292. "continuing or permanent disability;" accident policy, note, 550. "cost" not limited to statutory costs; employers' liability insurance, 678. covering notes, 97. "daily report," 96. "declare " the interest by indorsement; marine risk, 586. " decorations to wall and ceilings " does not cover outside walls, note, 289. "departure" and "sailing" distinguished; marine risk, note, 596. "dependent;" beneficiaries, 467. "detached at least one hundred feet," 148. deviation, 2.31. "disbursement;" marine policy, note, 22. "disbursement" policy; entitled to share with ordinary insurance; subroga- tion, note, 63. "disease;" temporary ailment not a, note, 478. "drugs" include benzine, note, 289. "dwelling house" insured as such; effect when only such in part, or when a hotel, 377. "dwelling house" not a "hotel," note, 289. dynamite held not covered by stock of railroad contractors, note, 360. "earnings" or "profits" and "use and occupancy" not synonymous, 346. "embezzlement or larceny;" fidelity bond; surety company, 655. "enemies;" marine risk, 608. "excess, " meaning of, as to use of liquor, note, 489. "expectation of life," 20. "extende.l insurance, 502. "external and violent means;" accident policy, meaning of, 541. "failure;" credit insurance, note, 663. "family" includes whom; life beneficiaries, 466. "farm implements" covers mowing machines and binders subsequently ac- quired, 319. "F. C. S." warranty; marine, 637. "floating policy," note, 22. "forms" closing contract, note, 95. "free from all consequences of hostilities; " marine policy, 624. "free from average imloss general;" marine, 640. "free from average unless general or the ship be burnt," note, 606. "free from capture, seizure and detention," 638. "free from mortality and jettison; " marine policy on animals, 620. "free of mortality and jettison," 639. INDEX '^SS [References are to pages.] WORDS AND PHRASES— Continued, "freight" means what; marine, 588. "from" and "at and from;" difference between; marine, 588. "from the loading thereof" excludes goods not actually loaded; freight policy, 598. general average, 260 et seq. "general liability policy;" employers, 664. "general woodwork;" employers' liability insiu-ance, note, 666. " good American ship the Rodman;" warranty of nationality, note, 138. " good safety; " moored twenty-four hours in; marine risk, 593-598. " goods " or " merchandise " covers what; marine policy, 587. "gradual reduction" rule, note, 441. " grain and seed " covers flaxseed, note, 288. " grain " includes broom corn, note, 288. "granite building," note, 289. "gross proceeds," note, 256. "gross value," note, 256. "having" construed as habitual use as applied to benzine, note, 357. "headache — severe, protracted, or frequent;" efTect of warranty that as- sured not subject to, 481. "health" is relative term, etc., 478. "heirs" includes widow; beneficiaries, note, 463. "heirs" construed, 464. "heirs at law" meaning of, 464. "heirs at law" includes widow; life note, 465. held in trust or on commission, or sold and not deUvered, 293. "hotel" is not a "dweUing house," note, 289. "ice clause;" marine pohcy, 621. " identical; " " concurrent " insurance not construed as, note, 324. "immediate family" includes wife and child in place of father, 467. "immediate medical attendance;" employers' liability policy, note, 671. "immediate notice; " accident policy, 555. "immediate notice" of injury; employers' liability policy, 671. "immediate notice" of loss, 404. "immediate written notice;" fidelity, etc., insurance, 659. "immediately and wholly disable;" accident policy, 548. "immediately, continuously, and wholly;" accident policy, note, 549. "immediately notify the surety;" fidelity, etc., insurance, note, 659. "indemnity" indicates rule of liability, 298. "independently of all other causes;" proximate and sole cause; accident policy, 545. " in good safety; " arrival in; marine policy, 589. "inhaling gas;" accident policy, 568. "injuries" in intentional injuries clause; accident policy; held to mean non- fatal injuries, 569. "injuries or bodily infirmities, " statements about; life risk, 493. illustrations, 494 and note, "injury caused by poison; " accident policy, 567. "in port;" marine risk, 595. 956 INDEX [References are to pages.] WORDS AND PRRASES— Continued. "in port" on certain date, 143. "in specie;" arrival of cargo; memorandum articles, note, 643. "wife," insurance payable to, 465. "insured" includes legal representatives, 4.57. " insolvent " credit insurance, 663. "invasion;" excepted loss, 368. "iron" in warranty; when includes steel, note, 143. "irrecoverable loss of both eyes " resulting "from such injuries within ninety days, independently of all other causes," 548. "its own ... or in storage, or for repairs" implies property of others, note, 376. " keeping, using, and allowing " explosives, 359. "kept, used or allowed on . . . premises . . . fireworks," etc., 144. "king's enemies;" marine risk, note, 608. "knowing" and "becoming aware" of gambling operations; distinction; fidelity, etc., insurance, 660. "lawful heirs" when includes widow, 464. " legal heirs " us including all distributees under statute of distributions, 465. " legal representatives " as meaning executors, administrators, and assigns, 465. "legal representatives;" construed life risk, note, 463. "legal representatives; " meaning of, note, 457. "letters of mart " and "countermart;" marine risk, 608. Lloyds, 13-15. "loading," Ufe insurance, 20. "local disease, " tuberculosis of brain is, note, 480. "loss by severance of one entire hand," note, 551. "loss" equivalent to "loss or damage," 457. "lost or not lost; " marine, 19, 584, 585. "machinery kept for sale," note. 289. "machinery used," note, 289. manufacturing estabhshment. note, 325. "margin," life insurance, 20. "maritime perils," 603. "mechanics;" whether painters are; use of gasoline; memorandum clause, 359. "men-of-war; " marine risk, 608. "merchandise," note, 289. "merchandise" cover what; marine policy, 587. "moored twenty-four hours in good safety;" duration and termination of marine ri.sk, 593-598. "mortality;" marine perils, 639. "neutral," ship warranted, 647. " New York harbor; " marine policy, note, 589, 596. occupation; meaning of, note, 491. "occupied as dwelling," note, 138. "occupied as hotel," note, 138. " occupied " in vacancy clause, note, 362. INDEX 957 [References are to pages.] WORDS AND PHRASES— Continued. " old metal " meaning extended by trade custom, note, 289. "on account of whom it may concern," marine, 584. one-third off new for old, 259. "open policy," 22. "orphans" held to mean "children," 465. " other insurance ; " interests must be same or in part the same, to con- stitute, 319, 320. "our children;" beneficiaries, note, 466. paid up insurance, 502. "partially concurrent apportionments," 437-440. "particular average," 251. "particular charges;" marine policy, note, 640, 642. "patterns" covered by "tools," notes, 289, 360. " patterns; " when excluded as part of tailor's stock, 360, note, 376. "pecuniary interest" of insured, note 29. " perils of the seas; " marine risk, 600-606. "pirates;" marine risk, 608. " pirates " includes passengers or crew who mutiny, also rioters from shore, note, 608. "poison, or anything accidentally, or otherwise, taken, administered, ab- sorbed, or inhaled," note, 567. policies, definitions of various, 21-24. "port;" "ports," 232. "port risk;" marine, note, 589. " port " what are limits of, note, 589. "P. P. I." clauses, 649. "premises" meaning of, in memorandima clause; fire policy, 356. "premises;" meaning of; vacancy clause, note, 362. pretium affedionis excluded by clause as to liability, 296. pretium affedionis; indemnity, 57. " profits " or " earnings " and " use and occupancy " not synonymous, 346. " property " covers articles kept for u.se, note, 289. pro rata itineris, 250. "pro-rated;" credit insurance, note, 663. "rags" meaning extended by trade custom, note, 289. "removal" and "absence;" distinction; vacancy clause, 367. " renewal " does not mean reinsurance, 443. "representations," meaning of, 128. "representative" does not mean "agent," note, 457. "reserve" fund, 20. " retail hardware store " covers dynamite, note, 357. riders; marine insurance, 648. fire insurance, 459. "riskof craft," 121. "risk to continue until arrival of the goods at a market at their final port of discharge;" marine risk, 597. "roadbed" in clause as to walking or being on railway roadbed; accident policy, 579. 958 INDEX [References are to pages.] WORDS AND PHRASES— Continued. "robbery" what is, as exception from intentional injuries clause; accident policy, 570, 571. "rovers;" marine policy, 608. "running policy," 22. "safely moored," note, 589. "sailing" defined, note, 648. " sailing on or after " certain date, note, 143. "sane or insane" in suicide clause, 511, 514-517. "satisfactory proof" of loss, 412. "seaworthiness," 221-230. "seizure;" marine risk, 607. " serious illness " means what, 479. "settled Umits of United States; " statements as to residence or travel, 493. " sovmd health " means what, 479. " steam saw-mill " includes machinery, note, 289. "stock in trade" of furniture dealer covers paints and varnish, note, 289. " stock in trade " of jeweler does not cover blankets hung upon building to stay fire, note, 289. "stock of cloth . . . and all other articles usual" in tailor's estabhshment; value of "patterns" not recoverable, 360. "stock of drugs" covers gasoline, benzine, and ether, note, 358. stock when held not to cover dynamite, note, 360. "stock usually kept in country store" permits use of benzine and fireworks, note, 357. "storage" meaning of; memorandum articles clause, 376. " substandard risks, note, 18. "sunk or burnt;" marine, note, 645. "sunstroke" means what, 541. "surrender value," 20. "survivor;" beneficiaries, 467. "taking poison;" accident policy, 567. "takings at sea; " marine policy, 607. "teams liability policy;" employers' liability, 664, 665. temporary insurance, note, 502. "tenancy of present occupants" construed; title insurance, note, 654. "thieves;" marine policy, 608, 611. "to depart from; ' warranty; marine, note, 648. " tools" covered by " patterns," notes, 2S9, 360. tortfeasor; subrogation, 63. "to sail from;" warranty; marine, 648. "total inability to labor;" accident policy, note, 549. " total lo.ss " of building, 300. " total loss only; " marine; no recovery for partial loss, except, o43. totally blind; accident policy, 551. 'totally disabled;" accident policy, 549. "to the best of my belief;" application, 150. " to the best of my knowledge and belief; " effect, as qualifying answers and determining breach, 482. INDEX 959 [References are to pages.] WORDS AND inaRASE&— Continued. "touch and stay at; " marine policy, 598. "transacting business;" sending unlicensed agent to adjust loss is not, note, 10. "treaties;" reinsurance, 449. "trust;" "held in trust," 294. "two entire feet; loss of; accident policy, 551. uberrimcE fidei; insurance contract is one, 14, 120. idtra vires doctrine, 168, 169. "unoccupied" in vacancy clause, 361. "usages of Lloyds," 13. "use and occupancy" and "earnings" or "profits" not synonymous, 346. "use and occupancy insurance," 20, 345. "use" means habit, custom; use of liquors, note, 489. "used" construction of, in memorandum clause; fire policy, 357. " used for the storage of ice," 145. " usually kept in a country store " whether includes benzine, note, 289. "vacant " in vacancy clau.se, 361. " violation of law " what is under provision as to death in; life policy, 522. "warranted free from average," etc.; marine, 640-642. "warranted no iron in excess of;" "iron" includes steel, note, 143. "warranted not to proceed east of" a certain place; marine, 143, 640. "warranted Swedish property;" marine policy, note, 648. "warranted to be American property; " marine policy, note, 648. "warranted to navigate only inland waters," etc., note, 143. "watches, watch trimmings," etc., covers silver and plated ware, note, 289. " whole insurance " in apportionment clause, 436, 438. "wife" does not include "affianced wife;" payment of insurance, 465. " wife Mary and children " includes child by former wife, 466. "wilful misstatements or suppressions;" fidelity, etc., insurance, note, 658. See Definitions. YARDS, loss of, under marine policy, 605. YORK-ANTWERP RULES, adjustment; general average, 273. given in full, 778 et seq. UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. AUG 1 6 1986 UC SOUTHtRN HtGIUNAL LIBRARY I- ACUITY AA 000 785 599