T THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW HORNBOOK CASE SERIES ILLUSTRATIVE CASES ON INSURANCE By ROGER W. COOLEY Professor of Law, University of North Dakota Author of "Briefs on the Law of Insurance;" "Illustrative Cases on Damages;" " Illustrative Cases on Persons and Domestic Relations ' A COMPANION BOOK TO VANCE ON INSURANCE St. Paul, Minn. WEST PUBLISHING CO. 1912 Copyright, 1912 BY WEST PUBLISHING COMPANY (CooLEY Ins.) T THE HORNBOOK CASE SERIES It is the purpose of the publishers to supply a set of Illustrative Casebooks to accompany the various volumes of the Hornbook Series, to be used in connection with the Hornbooks for instruction in the classroom. The object of these Casebooks is* to illustrate the prin- ciples of law as set forth and discussed in the volumes of the Horn- book Series. The text-book sets forth in a clear and concise manner the principles of the subject; the Casebook shows how these princi- ples have been applied by the courts, and embodied in the case law. With instruction and study along these lines, the student should se- cure a fundamental knowledge and grasp of the subject. The cases on a particular subject are sufficiently numerous and varied to cover the main underlying principles and essentials. Unlike casebooks prepared for the "Case Method" of instruction, no attempt has been made to supply a comprehensive knowledge of the subject from the cases alone. It should be remembered that the basis of the instruc- tion is the text-book, and that the purpose of these Casebooks is to illustrate the practical application of the principles of the law. West Publishing Company. (iii)* 729227 TABLE OF CONTENTS THE NATURE AND REQUISITES OF THE CONTRACT Page I. The Nature of the Insurance Contract In General 1 II. A Personal Contract Uberrimge Fidei 10 1. In General 10 2. Contracts of Fire Insurance Not Ordinarily Assignable 15 III. A Contract Essentially of Indemnity 1'^ IV. The Nature of the Contract of Life Insurance 19 V. The Nature of Mutual Benefit Insurance -- VI. The Contract of Reinsurance 2.5 VII. When the Contract is Divisible 36 PARTIES I. Contracts Made by Insurers Not Complying with Statutory Re- quirements ^4 II. Infants as Parties Insured 60 INSURABLE INTEREST I. General Theory of Insurable Interest CS II. Insurable Interest in Property — What Constitutes 71 III. Duration of Interest "7 IV. Insurable Interest in Lives 78 V. Interest of Creditor in Life of Debtor 01 VI. Interest of Assignee of a Life Policy 95 THE MAKING OF THE CONTRACT I. In General — Offer and Acceptance 90 II. The Form Required — Oral Contracts 101 III. Delivery 112 IV. Payment of First Premium 115 V. What Papers Form the Written Contract 127 VI. Same — Mutual Benefit Insurance 130 THE CONSIDERATION— PREMIUMS AND ASSESSMENTS I. In General — Nature of the Obligation 13S II. When the Premium is a Debt 115 III. Payment of Premiums US 1. To Whom Paid 148 2. Time and Mode of Payment 151 IV. Forfeiture 1G3 V. Excuses for Nonpayment 16G VI. Notice of Premiums Due 172 VII. Paid-up Policies and Extended Insurance 17S VIII. Dues and Assessments in Mutual Benefit Societies 181 CooLEY Ins. (v) vi TABLE OF CONTENTS THE CONSENT OF THE PARTIES— CONCEALMENT Page I. Wbat Must be Disclosed 190 II. When Facts Concealed are to be Deemed Material 197 THE CONSENT OF THE PARTIES— REPRESENTATIONS AND WARRANTIES I. The Nature and Effect of Representations 199 II. Promissory Representations 202 III. Construction of Representations 205 IV. Warranties— In General 214 "V. Affirmative and Promissory Warranties 218 VI. Warranties Distinguished from Representations 223 INSURANCE AGENTS AND THEIR POWERS I. The Doctrine of Agency in Insurance Law 232 1. In General 232 2. Apparent Powers 234 II. Classes of Agents and Their Powers 237 III. Limitations upon the Powers of Ag:ents 243 1. Improper Limitations in General 243 2. Stipulation that Agent Taking Application is Agent of In- sured 246 3. Stipulation that Insurer Shall Not be Charged with Knowl- edge of Agent 248 WAIVER AND ESTOPPEL I. General Principles 254 II. Prior Parol Waivers 257 III. Subsequent Parol Waivers 261 IV. Contemporaneous Parol Waivers 272 V. What Constitutes a Waiver 279 RIGHTS UNDER THE POLICY I. Vested Rights of the Beneficiary 282 1. In General 282 2. Effect of Murder of Insured by Beneficiary 284 II. Beneficiaries in Mutual Benefit Associations 286 1. In General 28G 2. Change of Beneficiary 288 HI. Policy Payable to a Third Person 293 IV. The Rights of the Assignee 301 V. Rights of Mortgagor and Mortgagee 303 VI. Subrogation 306 r THE STANDARD FIRE POLICY I. The General Rule of Construction 314 II. Effect of Temporary Breach of Condition 321 III. The Subject of Insurance — Location 325 TABLE OF CONTENTS Vll Page IV. The Interest of the Insured 327 V. Change of Interest, Title, or Possession 337 VI. Other Insurance 343 VII. Increase of Risli 3^0 VIII. Assignments 3u4 IX. Explosive and Inflammable Substances 356 X. Vacant or Unoccupied Buildings 358 XI. Collapse of Building 361 XII. Liability of the Insurer 3G1 XIII. Measure of Insurer's Liability 3G9 XIV. Cancellation of Policy 373 XV. Notice and Proofs of Loss 379 TERMS OF THE LIFE POLICY I. Designation of Beneficiary 384 II, Suicide — When Not Excepted in the Policy 387 III. Suicide — When Excepted in the Policy 391 IV. Death in Violation of Law 394 V. Incontestable Clause 401 MARINE INSURANCE I, Implied Exceptions 408 1. Seaworthiness 408 2. Deviation 409 11. Perils of the Sea 413 III. Particular and General Average Losses 420 1. In General 420 2. General Average 422 3. Particular Average 426 IV. The Insurer's Liability — Total Loss 432 V. Abandonment 442 ACCIDENT INSURANCE I. Accidental Injuries — External, Violent, and Accidental Causes... 443 II. External and Visible Signs of Injury 450 III. Poison or Contact with Poisonous Substances 453 IV. Inhaling Gas 454 V. A^oluntary and Unnecessary Exposure to Injury 458 VI. Occupation and Employment 462 VII. Liability of the Insurer— Total Disability 466 GUARANTY, CREDIT, AND LIABILITY INSURANCE I. Fidelity and Guaranty Insurance 470 II. Credit Insurance 474 III. Employer's Liability Insurance 47& IV. Rights of Injured Person in Insurance Fund 482 TABLE OF CASES Page Alabama State Mut. Assur. Co. v. Long Clothing & Shoe Co 255 American Employers' Liability Ins. Co. V. Barr 239 American Fire Ins. Co. v. Brooks 148 Anderson v. Life Ins. Co. of Vir- ginia 284 Bain v. Atkins 482 Baldwin v. Connecticut Mut. Life Ins. Co 232 Bassett v. Farmers' & Merchants' Ins. Co 72 Bigelow V. Berkshire Life Ins. Co. 391 Breeyear v. Rockingham Farm- ers' Mut. Fire Ins. Co 354 Calmenson v. Equitable Mut. Fire Ins. Co 257 Cannon v. Phoenix Ins. Co. of Hartford, Conn 361 Carpenter v. German-American Ins. Co 71 Central Nat. Bank v. Hume 293 Chamberlain v. Butler 95 Chambers v. Northwestern ^lut. Life Ins. Co 216 Champion Ice Mfg. & Cold Stor- age Co. V. American Bonding & Trust Co 470 Chickasaw County Farmers' Mut. Fire Ins. Co. v. Weller IS, 307 Clark V. Schromyer 145 Clay V. Phoenix Ins. Co 314 Clinton v. Norfolk Mut. Fire Ins. Co 68 Coleman v. New Orleans Ins. Co. 39 Collins V. Metropolitan Life Ins. Co 394 Commercial Fire Ins. Co. v. IMor- ris 109 Connecticut Mut. Life Ins. Co. v. Luchs 87 Coster V. Phoenix Ins. Co 420 Cronin v. Vermont Life Ins. Co . . 85 Daniher v. Grand Lodge A. O. U. W 22 CooLEY Ins. (ix) Page Davis & Co. V. Insurance Co. of North America 315, 361 Dibble v. Northern Assur. Co. of London 112 Dickerman v. Vermont Mut. Fire Ins. Co 77 Diddle v. Continental Casualty Co. 458 Dilling V. Draemel 306 Dodge V. Boston Marine Ins. Co.. 408 Eddy V. London Assur. Corp 345 Farmers' Feed Co. of New Jersey V. Scottish Union & Nat. Ins. Co. of Edinburgh 369 Farnum v. Phenix Ins. Co 121 First Congregational Church of Rockland v. Holyoke Mut. Fire Ins. Co 350 Forward v. Continental Ins. Co.. 274 Freedman v. Fire Ass'n of Phila- delphia 199 Fuller V. Metropolitan Life Ins. Co 138 Gaines v. Fidelity & Casualty Co. of New York 214 German-American Ins. Co. v. Humphrey 261 Germania Ins. Co. v. Bromwell. . 258 Goodrich, Appeal of 25 Grubbs r. North Carolina Home Ins. Co 264 Guilfoyle v. National Life Ass'n.. 155 Gurnett v. Atlas Mut. Ins. Co. . . 272 Haider v. St. Paul Fire & Marine Ins. Co 334 Hayes v, ]Milford Mut. Fire Ins. Co 349 Hearn v. New England Mut. Ma- rine Ins. Co 409 Hicks V, British American Assur. Co 101 Hinckley v. Germania Fire Ins. Co 321 TABLE OF CASES Page Hoeft V. Supreme Lodge Knights of Honor 286 Ilogan, In re 1 Home Fire Ins. Co. v. Peyson . . . 358 Home Ins. Co. v, Marshall 303 Horton v. Home Ins. Co 316 Johannes v. Phoenix Ins. Co. of Brooklyn, N. Y 28 Johannes v. Standard Fire Office of London 331 John Davis & Co. v. Insurance Co. of North America 315, 361 Johnson v. Northwestern Mut. Life Ins. Co 60 Jones V. Western Assur. Co 432 Kausel v. Minnesota Farmers' Mut. Fire Ins. Ass'n 246 Kase V. Hartford Fire Ins. Co. . . 17 Kenyon v. Knights Templar & Masonic Mut. Aid Ass'n 151 Kimball v. 2Etna Ins. Co 202 Knapp V. Homoeopathic Mut. Life Ins. Co 178 Kneeht v. Mutual Life Ins. Co. of New York 218 Lamberton v. Connecticut Fire Ins. Co 243 Lane v. Parsons, Rich & Co 327 Life Ins. Clearing Co. v. O'Neill.. 81 Lobdill V. Laboring Men's Mut. Aid Ass'n of Chatfield, Minn. . . 466 Loudon Assur. Corp. v. Thomp- son 32 Lynch v. Prudential Ins. Co. of America 226 Lyons v. Yerex 384 McGowan v. Supreme Court I. O. O. F 290 Maryland Casualty Co. v. Hud- gins 443. 453 Mascott V. First Nat. Fire Ins. Co 197 Mason v. St. Paul Fire & Ma- rine Ins. Co 380 Massachusetts ]\Iut. Ben. Life Ass'n V. Robinson 401 Menneilley v. Employers' Liabili- ty Assur. Corp 454 Metcalf V. Phenix Ins. Co 254 Pago Michigan Mut. Life Ins. Co. v. Bowes 161 Miller v. California Ins. Co 417 Morris v. Georgia Loan, Savings & Banking Co 301 Moulor V, American Life Ins. Co 205 Murray v. Great Western Ins. Co 436, 442 Mutual Life Ins. Co. v. Cohen... 172 Mutual Life Ins. Co. of New York V. Blodgett 90 Mutual Life Ins. Co. of New York V. Mullen 211 Mutual Safety Ins. Co. v. Cargo of the George 422 New V. German Ins. Co. of Free- port 15 New York Life Ins. Co. v. Stat- ham 140 Norwich Union Fire Ins. Soc. v. Standard Oil Co 310 Nye V. Grand Lodge A. O. U. W., . 19 O'Brien v. New Zealand Ins. Co. 241 O'Connor v. Queen Ins. Co. of America 364 Penn Mut. Life Ins. Co. v. Me- chanics' Sav. Bank & Trust Co 190 Pennypacker v. Capital Ins. Co. . . 54 Perry v. Bankers' Life Ins. Co. . . 163 Perry v. Cobb 413 Phoenix Ins. Co. of Hartford, Conn., V. Ireland 106 Port Blakely Mill Co. v. Spring- field Fire & Marine Ins. Co 220 Quarles v. Clayton 10 Reynolds v. Atlas Ace. Ins. Co. of Boston 127 Reynolds v. Supreme Council of Royal Arcanum 132 Ricker v. Charter Oak Life Ins. Co 282 Riggs V. Commercial Mut. Ins. Co 74 Rittler V. Smith 91 Ruggles V. American Cent. Ins. Co. of St. Louis 234 Rnpp V. Western Life Indemnity Co 78 TABLE OF CASES Page Salisbury v. Hekla Fire Ins. Co. of Madison, Wis Ill Sanborn v. Black 28S Seal V. Farmers' & Merchants' Ins. Co 200 Seamans v. Christian Bros. Mill Co 57 Seller v. Economic Life Ass'n of Clinton 387 Sergent v. London & Liverpool & Globe Ins. Co 379 Shakman v. United States Credit System Co 474 Shimp V. Cedar Rapids Ins. Co.. . 279 Simpson v. Prudential Ins. Co. of America 66 Southern Fire Ins. Co. v. Knight.. 36 Stage V. Home Ins. Co. of City of New York 343 State V. Beardsley 5 State V. Towle ^ Stephens v. Pennsylvania Casual- ty Co 479 Sternaman v. Metropolitan Life Ins. Co 248 Stinchcombe v. New York Life Ins. Co 157 Supreme Lodge Knights of Pythi- as V. Withers 181 Supreme Lodge of Sons & 'Daugh- ters of Protection v. Under- wood 130 Taylor v. Anchor Mut. Fire Ins. Co 49 Taylor v. Insurance Co. of North America 373 Page Thompson v. Knickerbocker Life Ins. Co 166 Tomsecek v. Travelers' Ins. Co. . . 116 Trabue v. Dwelling House Ins. Co 44 Union Casualty & Surety Co. v. Mondy 450 Union Cent. Life Ins. Co. v. Tag- gart 115 Union Mut. Ace. Ass'n v. Fro- hard 462 Village of L'Anse v. Fire Ass'n of Philadelphia 325 Yivar v. Supreme Lodge Knights of Pythias 223 Washburn & Moen ^Ifg. Co. v. Reliance Marine Ins. Co 426 Western Commercial Travelers' Ass'n V. Smith 446 Western Home Ins. Co. v. Hogue. . 237 Wiebeler v. Milwaukee Mechan- ics' Mut. Ins. Co 108 Wild Rice Lumber Co. v. Royal Ins. Co. of Liverpool 317 Williams v. Maine State Relief Ass'n 267 Wolf V. Theresa Village Mut. Fire Ins. Co 337 Wood V. American Fire Ins. Co. of Philadelphia, Pa 339 Yoch V. Home Mut. Ins. Co. 356 Zimmermann v. Dwelling House Ins. Co. of Boston 99 1 HORNBOOK CASES ON THE LAW OF INSURANCE THE NATURE AND REQUISITES OF THE CONTRACT I. The Nature of the Insurance Contract In General ^ In re HOGAN. (Supreme Court of North Dakota, 1S99. 8 N. D. 301, 78 N. W. 1051, 45 L. R. A. 166, 73 Am. St. Rep. 759.) Bartholomew, C. J.^ One C. N. Hogan presented to this court his petition for a writ of habeas corpus, alleging that he was un- lawfully restrained of his liberty by the sheriff of Foster county^ in this state. His petition sets forth that he was arrested upon a warrant issued by a justice of the peace of said county, which said warrant was based upon a complaint duly laid before said justice by one Ferguson, wherein said petitioner was accused of having acted as agent for an insurance company without having procured the certificate required by section 3124, Rev. Codes of this state, that a preHminary hearing was duly had before said justice, and that upon such hearing said justice adjudged that the petitioner be held to answer to said charge before the district court of said county, and fixed his appearance bond at the sum of $500, which the petitioner failed to give, whereupon he was duly committed to the custody of said sheriff, and was by him restrained. * * * No point is made by petitioner as to the regularity of any of the proceedings that led up to his incarceration. They are concededly regular. It is admitted, also, that petitioner was soliciting business as agent for a corporation known as the Realty Revenue Guaranty 1 For discussion of principles, see Vance on Insurance, §§ 22, 23. See, also, Cooley, Briefs on the Law of Insurance, vol. 1, pp. 2-38. 2 Part of the opinion is omitted. Cooley Ins. — 1 i THE NATURE AND REQUISITES OF THE CONTRACT Company, of Minneapolis, Minn. It is admitted that petitioner never procured the certificate of authority specified in said section 3124, and that he took an application from the complaining witness in form as set forth in the evidence, and procured for said witness the contract of said company as set out in the evidence, and took the promissory note of the witness, secured by chattel mortgage, for the consideration mentioned in said contract. These admissions leave but one question for our determination: Is or is not the Realty Revenue Guaranty Company, in fact or in efifect, an insurance com- pany? If it be, then clearly the petitioner was properly held; other- wise, he should be discharged. While the attorneys representing l.he state claim that the oral evidence in the record strengthens their claim that said corporation is in fact an insurance company, yet we shall rest our conclusions on this point upon the documentary evi- dence. Our statute (section 4441, Rev. Cod°s) defines insurance as fol- lows: "Insurance is a contract whereby one undertakes to indemnify another against loss, damage or liability arising from an unknown or contingent event." Necessarily, in defining insurance in a single sentence, only the most general terms can be used, and any general definition must be extended to cover the ever-changing phases in which the subject is presented to the public. Fifty years ago it was thought that a single chapter in any work on contracts could exhaust the law of insurance. Now Mr. Joyce presents the subject in four elaborate volumes, showing the immense development of that branch of the law. Mr. Joyce expressly defines one line of insurance as guaranty insurance. See 1 Joyce, Ins. §§ 12, 13. True, guaranty insurance, as there defined, relates more particularly to guaranty against loss by reason of breaches of contract, such as "fidelity guaranty" and "credit guaranty." But we have real estate title guaranty insurance; and, while perhaps this is the first instance where an attempt has been made to guaranty a realty revenue, yet as the revenue arising from that class of realty here involved, i. e. farming lands, is affected by so many contingencies, such as winds, hail, frost, drought, ravages of insects, etc. — contingencies which, while not likely to happen, yet such as may occur — it would seem that inherently it would be a proper subject for insurance, perhaps even an inviting field. In this record we find a copy of the articles of incorporation of the Realty Revenue Guaranty Company. The second article sets forth the general business of the corporation, naming a number of things that it is organized for the purpose of doing, and, among others, "to guaranty certain rental and produce income from lands and tenements." The petitioner, as agent for said company, took from Peter Fergu- son an application for a contract. The application was upon a printed form, headed, in bold type, "Realty Revenue Guaranty Com- pany, of Minneapolis, Minn. Capital stock, $100,000." Then fol- THE NATURE OF THE INSURANCE CONTRACT IN GENERAL 3 lows the printed portion, which reads : "I, , of P. O., county of , state of , do hereby apply to the Reahy Revenue Guaranty Company for an option-sale contract of $ per acre, which is hereby referred to and made a part hereof, sub- ject to all conditions therein contained upon all crops raised on the following described lands." Then follows a description of the land, and various questions to be answered by the applicant as to whether he is owner or tenant of the land, and what interest he has in the crop, what the land yielded per acre the year before, nature of the soil, etc. — all to be signed by the applicant. Upon this application, Ferguson received a contract, w'hich we copy in full : "This agreement, made by and between the Realty Revenue Guaranty Company, of Minneapolis, Minnesota, and Peter Ferguson, of Carrington P. O., county of Foster, and state of North Dakota, party of the second part, witnesseth that, in consideration of an application for this contract, which is hereby referred to and made a part hereof, and the payment of the sum of $55, according to the conditions of a certain promissory note for said amount, by said party of the second part, the above-named Realty Revenue Guaranty Company agrees to purchase the entire crop of small grain, consisting of wheat, oats, flax, barley, corn, or rye, from said party of the second part, at the rate of $5.00 per acre, grown during the season of 1899 ; all of said crops being on the following described lands, to wit, 160 acres southeast quarter Sec. 20, T. 146, R. 65 ; 60 acres northwest quarter Sec. 26, T, 146, R. 65. It is further agreed that said party of the second part is in no manner bound to sell said crops to the said Realty Revenue Guaranty Company, except at his own option. It is further agreed that said party of the second part shall cultivate said crops in a husbandlike manner, sow, plant, garner, gather, harvest, thresh, and otherwise care for said crops in due season and in an economical manner. Said party of the second part agrees to notify said Realty Revenue Guaranty Company in case of any damage to said crops within five days thereafter, and of his intention to avail himself of his option to sell before said crops are harvested, and shall, within five days after threshing the same, give notice to the company of his election to sell under this contract. After said election to sell, said party of the second part agrees to deliver said crops at the nearest market, if directed so to do by said Realty Revenue Guaranty Company. Should the party of the second part fail to perform any of the con- ditions herein by him to be performed, time being the essence hereof, or if any of the warranties or statements made by him are untrue, the said option shall terminate. Nor shall said guaranty company be liable under this contract should any damage or loss accrue to said crops after September 15 of this year, or after said crops are harvested, nor in any manner, except as herein stipulated. This contract shall terminate December 1st following date hereof. In 4 THE NATURE AND REQUISITES OF THE CONTRACT witness whereof, the said Realty Revenue Guaranty Company has caused these presents to be executed and signed by its president and secretary, and caused its corporate seal to be hereto attached, this seventh day of April, 1899. Realty Revenue Guaranty Co., by L. E. Utley, President. A. L. Brice, Secretary. [Corporate Seal.]" What was the object of this contract and what was its legal effect? The petitioner says it was an option contract of sale of a crop. We cannot conceive that the farmer's primary object was to sell his crop. Ordinarily a man does not pay a premium for the privilege of sell- ing his produce. Nor was it the primary purpose of the company to purchase the crop. From the very terms of the contract, it is cer- tain that it must lose money upon all the grain it buys under the con- tract. Moreover, grain is bought and sold by the bushel, and not by the acre. We think the contract was the identical contract which the articles of incorporation authorize the company to enter into. It was a contract by which the guarantor undertook to guaranty or as- sure to the farmer a certain revenue from his land. How did the parties proceed to execute such a contract? It was well known to both parties that an acre of land in this state, farmed as the farmer contracts to farm it in this case, will produce a crop of a value far in excess of five dollars, and the value can be reduced to or below that figure only by the happening of one or more of the contingencies hereinbefore mentioned. But such contingencies may happen, and to be absolutely assured that his land will yield him at least five dollars per acre the farmer is willing to pay something; and the corporation, expecting to do business over a wide scope of country, believes that it can with profit to itself assure the farmer a crop worth five dol- lars per acre for the compensation which the farmer is willing to pay therefor. But what is this in substance except a contract to indem- nify the farmer against loss arising from the happening of a con- tingent event, and that is our statutory definition of insurance. The farmer was seeking and paying for protection, and the corporation was seeking to make a profit by extending this protection for the consideration paid by the farmer. True, it is not all loss that is in- sured against. The contingencies named may reduce the value of a crop from twenty dollars per acre until, in the judgment of the owner, it barely exceeds five dollars per acre, and there is no liability under the contract. It is the loss below five dollars per acre that is insured against. The effect of the contract is very like that of a val- ued policy of insurance. When the contingency happens that creates a liability under the policy, then the full amount of the policy must be paid, but the insured is entitled to all the salvage. In Claflin v. System Co., 165 Mass. 501, 43 N. E. 293, 52 Am. St. Rep. 528, the defendant was held to be an insurance company. The contract is thus stated by the court: 'Tt was made on April 6, 1891, and purports to bind the defendant, in consideration of a sum paid, to purchase at a fixed price the accounts which during one year a THE NATURE OF THE INSURANCE CONTRACT IN GENERAL 5 certain business firm should have against ascertained insolvent debt- ors, or judgment debtors against whom execution should be returned unsatisfied." A contract to purchase bad accounts and judgments at a fixed price, irrespective of value, cannot be distinguished in princi- ple from a contract to purchase damaged crops at a fixed price, ir- respective of value. That same company was held to be an insurance company in Shakman v. Same, 92 Wis. 366, 66 N. W. 528, 32 L. R. A. 383, 53 x\m. St. Rep. 920, and the reasoning of the court is very pertinent to this case. It is doubtless true that there has been a studied effort to keep this corporation outside the operation of our insurance laws ; but the purpose and effects of its contracts are too clear to admit of doubt. They exactly meet the requirements of an insurance contract, and the corporation for which petitioner acted as agent is an insurance company. The act charged in the complaint is a crime under our statutes, and there is reasonable and probable cause to believe the petitioner guilty of committing the act. He is therefore properly held. The writ issued in this case is discharged, and petitioner remanded to the custody of the sheriff of Foster county. All concur. STATE V. BEARDSLEY. (Supreme Court of Minnesota, 1902. 88 Minn. 20, 92 N. W. 472.) Earl D. Beardsley was convicted of acting as an insurance agent without having complied with the requirements of the insurance act of 1895 (Gen. Laws 1895, c. 175), and appeals. Collins, J.^ The defendant was indicted and convicted under sec- tion 101, c. 175, Gen. Laws 1895, of the offense of assuming to act as the agent of an insurance company without first having procured a license or certificate of authority to so act. That he solicited! and secured the person named in the indictment to enter into a contract, a copy of which was made a part thereof, and that, as agent, he de- livered it to the same person, is not disputed, so the principal ques- tion at issue is whether this contract was one for insurance, within the meaning of the insurance code, above mentioned. Upon this question it is contended by defendant's counsel that this particular instrument is not a contract of insurance, as such a contract is de- fined by either section 3 or section 63 of chapter 175, or within any of the provisions of chapter 175. * * * It appears from the contract that the Home Co-operative Company, for which defendant was acting, and whose contract he delivered as its agent, is a copartnership organized in the state of Kansas. It consists of a number of citizens of that state, and under that name 8 Part of tlie opinion is omitted. 6 THE NATURE AND REQUISITES OF THE CONTRACT enters into its contracts as party of the first part; the party of the second part being the holders of the contracts. The latter are not in any sense members of the copartnership or company. The com- pany is entitled to all profits which may arise in carrying out its con- tracts, and must bear all losses, if there be any. A stipulated amount is paid monthly by each contract holder as a premium, and there is no provision for levying assessments upon such holders to cover losses or shortages. The company assumes the only obligation there is in the contract, aside from the holder's promise to pay his monthly pre- mium, and therefore it is not co-operative; nor is it a benevolent as- sociation, except as it may, through its plan of operations, be ben- eficial to a contract holder or to his family, precisely as is a life insurance company to a beneficiary in case of the death of the as- sured. Contract holders co-operate v^^ith each other to the same and to no greater extent than do policy holders in ordinary life insurance companies. Each holder of a contract — all contracts being numbered in consecutive order — promises to pay a membership fee of $3, and the sum of $1.35 each month, up to and prior to what is designated as the maturity day of his contract. Of this $1.35, $1 is credited to the account of the contract holder, and is to be applied to the pur- chase of a home for him, according to a somewhat mystifying plan previously formulated. Ten cents of the payment is kept as a reserve fund to meet "contingent liabilities" of the company when perform- ing its contracts, and the balance, 25 cents, is taken to defray the company expenses, including compensation for services. What is done with the membership fee, does not appear. The monthly payments of $1.35 are made by a contract holder un- til $50 have been accumulated from payments upon his contract, and from payments upon like, but subsequently made and numbered, con- tracts with other persons ; and then this particular contract is deemed to have matured, and its holder entitled to receive installments of $50 per month, to be applied on the payment for his home until the full sum of $1,000 is paid; and, when this sum is paid in monthly install- ments, the contract is fully performed by the company. If the holder of a matured contract avails himself of his installment privilege, and prepares to build a house, on which the company is to have security, he must then and thereafter pay to the company $5.35 each month, instead of $1.35. Five dollars of this amount is placed to his credit, and the balance, 35 cents, is disposed of precisely as it had been be- fore his contract matured. When the monthly payments, of $5 each, aggregate the sum of $1,000, less the amount the holder had to his credit on account of $1 payments per month before his contract ma- tured, the lien of the company for the money advanced expires, the debt is discharged, and a clear title to the property is vested in the contract holder. This is the plan of operations through which the latter is supposed to finally secure his home, fully paid for, and free of all liens. I THE NATURE OF THE INSURANCE CONTRACT IN GENERAL 7 It seems to be admitted that, were it not for subsequent provisions, this contract would not be one for insurance, but the state relies upon another clause; the disability referred to being that of the contract holder, which is as follows: "Should his disability be total, perma- nent, and determined by satisfactory evidence, the unpaid balance of one thousand dollars provided for in this contract shall be paid to clear the home of the party of the second part, and his indebtedness to the parties of the first part shall be discharged, and the title to the property, if held by the parties of the first part, shall be conveyed as he may direct. In the event of his death before all advance pay- ments to him shall have been returned to the first parties, the par- ties of the first part shall pay the balance, if any, of the one thousand dollars contracted for, and shall cancel his indebtedness to the first parties, and, if the title to the property purchased is in the first par- ties, they shall convey the same to his wife, if any; if there shall be no wife, then to his heirs. If the second party is over fifty years of age at the signing of this contract, the provisions to give his wife or heirs a clear title in case of his death, unless accidental, do not ap- ply. In case of his death, unless accidental, his wife or heirs must continue the payments according to the obligations of the second party." It is contended in behalf of the state that this provision constitutes the contract one for insurance, and subjects the defendant to the li- cense clause of chapter 175. By this provision, if the contract holder's disability becomes total and permanent, the company agrees to pay the unpaid balance of the $1,000 which the holder has obligated him- self to pay to it in $5 installments, and for which payment the com- pany has a lien upon the property, for the purpose of clearing and discharging the lien; and, if this agreement is performed, the en- tire indebtedness is canceled, and the title to the property vested as the holder may direct. In the event of the holder's death before all monthly payments have been made by him, and his obligation to the company discharged in full, the latter agrees to pay the balance of his indebtedness, and to cancel the amount remaining unpaid, and, if it holds title to the property, to convey the same to his wife, if there be one, and, if not, to his heirs. The precaution is taken by the com- pany to exclude from the operation of this last provision contract holders over the age of 50 years, unless death shall be accidental. This promise becomes effective only in the case of disability or death, and, if either occur, the company is obliged to release its claim for further payments, and to remit the remaining debt. This is a valuable promise made to the contract holder for a con- sideration, namely, his monthly payments. If he becomes disabled, the company promises to do an act of value to him. If he dies, the promise is to do an act of value to his widow or to his heirs ; that is, an act equivalent to, and actually involving, the payment of money, conditioned upon the cessation of human life. The real character of 8 THE NATURE AND REQUISITES OF THE CONTRACT this promise, or of the act to be performed, cannot be concealed or changed by the use or absence of words in the contract itself; and it is wholly immaterial that on its face this contract does not ex- pressly purport to be one of insurance, and that this word nowhere appears in it. Its nature is to be determined by an examination of its contents, and not by the terms used. The performance of the con- tract may be enforced by the holder in case of disability, or by his widow or heirs in case of his decease. If it does not come within the definition of an insurance contract, as found in section 3 (that is, if it is not an agreement by which one party, for a consideration, promises to pay money or its equivalent, or to do some act of value to the assured, upon the destruction or injury of something in which the other party has an interest), it involves the payment of money or something else of value to the family or representatives of the holder, conditioned upon the continuance or cessation of human life, and is covered by the definition found in section 63. It is an agreement in- volving and providing, in effect, for the indirect payment of money by the relinquishment of a debt; and there is no substantial distinc- tion between such an agreement or obligation and the ordinary life insurance policy. The obligation in each case is conditioned upon the cessation of human life. * * * Judgment affirmed.* STATE v. TOWLE. (Supreme Judicial Court of Maine, 1S88. SO Me. 287, 14 Atl. 195.) Peters, C. J. The state sues to recover a penalty of the defendant for acting as a soliciting agent for the Single Men's Endowment As- sociation, a company having its home in the state of Minnesota, and doing business in this state without a license from the insurance com- missioner. The question is whether or not this association in an in- surance company, under the provisions of Rev. St. c. 49, § 73. The contract between the company and its patrons declares the du- ties which must be assumed by the single man who becomes privileged to an endowment in the association. He pays $10 as an initiation fee; $2 as annual dues each year for nine years, and as much longer as he remains single; $1.25 on the marriage of any associate; and he promises, on the pain of forfeiture of all rights accruing to him, that 4 Compare Trust Co. v. Krumseig, 77 Fed. 41, 23 C. C. A. 1 (1896). As illustrating the discordant views taken by the courts of one and the same kind of contract, compare Physicians' Defense Co. v. O'Brien, 100 Minn. 490, 111 N. W. 396 (1907), and State ex rel. Physicians' Defense Co. V. Laylin, 73 Ohio St. 90, 76 N. E. 567 (1905). The corporation involved in these cases issued a contract by which, in consideration of a stipulated amount, it agreed to defend physicians against all suits for damages for mal- practice at its own expense, not exceeding a certain amount, but did not assume or agree to assume or pay any judgment rendered. The supreme court of Minnesota held this to be an insurance contract, while the supreme court of Ohio regarded it as a contract for services only. THE NATURE OF THE INSURANCE CONTRACT IN GENERAL, 9 he will not himself marry within two years from the date of his admis- sion to the association. For the performance by him of these imder- takings, the company promises to pay to his wife, if married to him after the expiration of the two years, the sum of as many dollars as there are associates in the order, not exceeding- $1,000, provided that there be that amount of money in the treasury at the time, or it can be collected by an assessment upon the associates. No word is spoken of insurance. That it is a wagering or gambling contract, and void upon grounds of public policy, because in restraint of marriage, there is no room for doubt. The same or similar contract has been held to be void in White v. Benefit Union, 76 Ala. 251, 52 Am. Rep. 325, and in Chalfant v. Payton, 91 Ind. 202, 46 Am. Rep. 586. The counsel for both parties agree that the contract, for one reason or another, is illegal, but the counsel for the state contends that, whether the contract be legal or illegal, it is a contract of insurance, and that, as such, it falls under the supervision of the commissioner. It is not to be conceded, we think, that this contract, in the sense of any modern use of the term, is an insurance policy. No loss or casualty or peril is named for which any indemnity is promised. It is more of a betting contract on a future event. It is true that there was formerly a class of betting contracts styled "insurances," and that a narrow line once existed between gambling and betting con- tracts and those then denominated contracts of insurance; and the case of Paterson v. Powell, 9 Bing. 320, relied on by the state, shows how far a court was induced to go to determine that a contract sim- ilar in principle to the present was an insurance policy, in order to declare it void. The statute (4 Geo. III. c. 48) rendered speculative insurance contracts void, and, strange to say, allowed all contracts founded on mere bettings and gamblings to be valid. At this day, the contract in that case, with all its imitations of the thing, would hardly receive the appellation of an insurance policy. It does not seem probable that the Legislature intended to commit to the care of the commissioner the business of illegal or illegitimate in- surance companies. It would be tolerating, instead of condemning, them. He has the power to issue and suspend licenses. But there must be cause for either act. Rev. St. c. 49, •§§ 7Z, 75. His business is to deal with such companies as can, when licensed, issue legal pol- icies. His act cannot confer legality upon companies doing illegal busi- ness. The state seeks to recover a penalty of $50, because the defendant acted without an official license, while the policy, if to be called such. issued by him, would be unlawful and void, whether he was acting with or without a license. It would be inconsistent to collect a penalty of an agent for not doing business under a void license. Plaintiff non- suit.^ 5 A contract to furnish burial expenses construed as an insurance con- tract, see State v. Willett, 171 lud. 296, 86 N. E. 68, 23 L. R. A. (N. S.) 197 (1908). 10 THE NATURE AND REQUISITES OF THE CONTRACT II. A Personal Contract Uberrimae Fidei • 1. In Generai, QUARLES V. CLAYTON. (Supreme Court of Tennessee, 1SS9. 87 Tenn. 308, 10 S. W. 505, 3 L. R. A. 170.) Agreed case between Nancy M. Quarles and J. A. Clayton, adminis- trator of her deceased husband's estate, to determine the rights of the parties to the proceeds of a poHcy of fire insurance issued to the deceased. Decree for the administrator, and Mrs. Quarles appeals. LuRTON, J. The deceased husband of appellant took out a policy of fire insurance upon his dwelling; loss payable to the assured, his exe- cutors or administrators. Before the expiration of the policy by time, but after the death of the assured, the house was accidentally burned. The insurance company, by consent of the claimants, paid the loss into tlie hands of the defendant, under an agreement that the fund should be held subject to the legal rights of complainant, if any she had, to be thereafter determined by the courts. An agreed case was made up, and submitted to the chancery court, and from the decree of the chancellor Mrs. Quarles has appealed. Appellant is the widow of the assured, and claims a life estate in the fund, upon the following state of facts: Before her marriage to the assured, a marriage contract was entered into, and duly executed, and registered in the county of their residence, by which, among other things not material to be here mentioned, it was agreed "that all the property and estate, both real and personal, now owned or hereafter acquired by said John W. Quarles, shall con- tinue to be his, and shall remain wholly unaffected by said contem- plated marriage with said Mrs. Nancy M. Kirk, in favor of whom no marital or other rights on his said property and estate shall attach or inure by reason of said contemplated marriage relation, further, or otherwise, than is expressed and provided in this instrument; and he hereby reserves the right and privilege of making such suitable pro- vision for her out of his estate as he may at any time desire, either by deed of gift, last will and testament, or otherwise. If he die with- out making any such provision for her, then she shall out of his real estate, if she survive him, have a comfortable home, to consist of, say, about one hundred and forty acres of his land's, in which will be in- cluded his dwelling and outhouses; the same to be surveyed and laid 6 For discussion of principles, see Vance on Insurance. §§ 26, 27. See, also, Cooley, Briefs on the Law of Insurance, vol. I, pp. 78-85. A PERSONAL CONTRACT UBERRIMCE FIDEl 11 off to her by proper metes and bounds, and in such manner as will be most useful and convenient to her, and with least injury to his es- tate. This home, so laid off to her, to be and remain to her own proper use, support, and benefit for and during the term of her natural life, and, after her death, to take such directions as he may give to it by his last will and testament, or other proper mode of disposing of real estate ; and if he die without any will, and without disposing of the remainder interest in said 'Home,' as above provided for and de- scribed, then the same shall descend to his proper heirs and distributees according to the laws of the state of Tennessee." After the marriage, the dwelling house above described, which was then and after the residence of Mr. Ouarles and his wife, was insured under a contract, as before stated, that the loss should be paid to the assured, the husband of appellant, his executors or administrators. Mr. Quarles died intestate, and without having, by deed or other- wise, made any provision for his widow other than that contained in the marriage contract. The widow continued to occupy the dwelling as her residence until it was destroyed by fire. The portion of the farm of the decedent which was to be assigned to her under the mar- riage agreement had not, at the time of the fire, been laid off by metes and bounds ; but it was subsequently done to the satisfaction of all concerned. This estate was so laid off, as required by the contract, as to include the outhouses of the assured, and likewise the site of the burned mansion house. The insurance policy was not taken out upon any agreement or contract, express or implied, with appellant, that she was to have any interest whatever therein. Under this state of facts, has appellant any equitable or legal inter- est in the proceeds of this fire policy? That the precise boundaries of the 140 acres to be laid off to her had not been ascertained by survey at the time of the fire can cut no figure, because it was to be laid oft', in all events, so as to include the mansion house and the outhouses. It seems equally clear that she cannot hold the estate of her husband responsible for the value of the house, because, at his death, her con- tingent right to the house for her life ripened, and became a vested interest for her life ; and at the moment her husband died intestate, and without having made any other provision for her, the house was standing, and her right to the use and possession at once accrued. Her interest became at once an insurable interest; and the destruction of the house by any means after her husband's death was not an injury for which his estate or his heirs would be responsible. Whatever right she has to any interest in this fund must arise from the contract of insurance. The person assured against loss in the policy issued upon the premises of Mr. Ouarles was the owner him- self. By all the authorities, a contract of fire insurance is a personal contract, and assures the interest alone of the assured! in the property, in the absence of some agreement or trust to the contrary. The policy taken out by ]\Ir. Ouarles contained the usual provision 12 THE NATURE AND REQUISITES OF THE CONTRACT prohibiting any assignment of the policy without the consent of the insurer. It also contained the further stipulation that the policy should become void "in case any change shall take place in title or possession, except by succession by reason of the death of the assured." These provisions have been upheld by the courts as reasonable conditions, limiting and restricting the liability of the insured. That they are reasonable is obvious, when we consider that the contract is one for the personal indemnity of the assured against a loss affecting his in- terest in the property covered by the policy. The insurer contracts with reference to the character of the assured for integrity and pru- dence. He might be very willing to agree to make good the loss of one, by the destruction of property owned by him, while he would be altogether unwilling to insure the same property if owned by an- other. Again, the contract undertakes to make good any loss which the assured may sustain ; and from this it follows that, if the assured has parted with his interest before the loss, he cannot ask to be indem- nified, because he has sustained no loss. The provision against the change of title is therefore in precise harmony with the personal char- acter of the contract. In some fire insurance contracts the stipula- tion against change of title extends so far as to make the policy void should such change of title be brought about by the death of the assured. The title, in such case, is no longer in the assured, but has by law passed! to his heirs, or by will to his devisees ; and a change of title so occurring has been held to defeat an action for a loss occurring after the death of the assured. Sherwood v. Insurance Co., 73 N. Y. 447, 29 Am. Rep. 180; Hine v. Woolworth, 93 N. Y. 75, 45 Am. Rep. 176. The contract is not, therefore, one which attaches to or follows the property, being one for the personal indemnity of the assured; and, where the insurer does not assent to the assignment of the policy to a grantee of the property, neither the assured nor his assignee of the property can recover upon the policy. Hobbs v. Insurance Co., 1 Sneed, 444. But this policy was not avoided by the death of the assured. It ex- pressly provides that a change of title shall defeat the policy, except when it occurs "by succession by reason of the death of the assured." The legal effect of this exception is to continue and extend the policy notwithstanding the change of title by death of the assured. In whose favor is this continuance? It has been ably argued that the effect of this continuance is in favor of those who by "succession" take the property covered by the risk, and that, though it may be payable to the executor or administrator of the assured, yet he will, in case the risk was upon real estate, take and hold in trust for those who by "succession" have taken the property, and who are therefore the per- sons damnified by the loss. This word "succession," in the connection in which it appears, is a word of technical meaning, and refers to A PERSONAL CONTRACT UBERRIMCE FIDBI 13 those who by descent or will take the property of a decedent. It is a word which clearly excludes those who take by deed, grant, gift, or any form of purchase or contract. This meaning is made most obvious when we consider that the contract provided against any change of title except by "succession ;" and, to more directly affix a limited and technical meaning, the explanatory words are added, "by reason of the death of the assured." There is much plausibility in the argument that, inasmuch as the policy is continued notwithstanding a change of title has occurred, in case the risk is upon real estate, the extension is by intendment of the contract, to operate as an indemnity to those who by "succession" have become the owners of the property. In such a case, neither the administrator nor the distributee would have any interest to be insured, while the heir or devisee upon whom the title has been cast would be the legal and ecjuitable owner, and the person to suffer by the loss. The root principle of insurance, that the loss is payable only to the extent that the assured has an insurable interest, W'ould seem to preclude the administrator in such a case from any recovery, or make him a trustee for the heir of what he should recover when the loss occurred after the property had passed by "succession" to the heir. This seems to be the holding of the courts, when the question has aris- en, although the text-book writers seem not to have seized upon the distinction. Wyman v. Wyman, 26 N. Y. 253 ; Culbertson v. Cox, 29 Minn. 309, 13 N. W. 177, 43 Am. Rep. 204. But does the appellant take any interest in the insured property by succession? If she had taken as devisee or under the homestead law, she would be within the principle just discussed, and would be within the express holding of the two cases last cited. Unfortunately for her, appellant takes whatever interest she has in the property under the fire policy by virtue of her marriage contract. She is not entitled to homestead or dower, for she expressly agreed to take, in lieu of all right which the law- would have given her, the provision wdiich she covenanted for by mar- riage contract. This interest was a contingent one. It depended upon two events : First, that she should survive her husband ; and, second, that he should not by deed or will make any other provision for her. Both of these events occurred ; and, instantly upon the death of hei husband, she became seised of an estate for her life in the insured premises. She therefore took this mansion-house as the grantee of her husband, and did not take it by "succession." But it is insisted that, however she acquired the estate, she has an equitable interest in a life estate in this fund, because it represents the premises which she had a right to occupy and enjoy during her life. This presents a strong case in morals, but her legal rights are not so clear. The rule is well settled that no equity attaches upon the proceeds of a fire policy in favor of third persons who, in the character of grantee, mortgagee, or creditor, may have sustained loss, in the absence of some trust or contract to that effect. May, Ins. § 14 THE NATURE AND REQUISITES OF THE CONTRACT 456; 3 Kent, Comm. (10th Ed.) 499. This rule appHes as well to vendors and Henors of every class as to mortgagees who may have had their security impaired by a loss by fire. This court, in a well- considered case, held that the holder of a mechanic's lien upon a build- ing had no equitable lien in a fire policy effected) by the owner, and assigned to a mortgagee. Galyon v. Ketchen, 85 Tenn. 55, 1 S. W. 508. An equity will attach when the vendee or mortgagor was, by cove- nant or otherwise, bound to insure the property, for the better security of the creditor or vendor. In such a case the latter would have, to the extent of their interest in the property destroyed, an equitable lien upon the money due on a policy taken by the mortgagor or vendee or other debtor who had given a security upon the insured property ; and this would be so, even though the policy stand in the name of the debtor, vendee, or mortgagor. But, in the absence of some such agree- ment, the mortgagor or vendee or grantor, having an insurable interest, might insure such interest for his own benefit ; and no lien would at- tach thereto in favor of his creditor, secured by lien or mortgage or otherwise upon the insured property. Carter v. Rockett, 8 Paige ( N. Y.) 437; Wheeler v. Insurance Co., 101 U. S. 439, 25 L. Ed. 1055; Nordyke v. Gery, 112 Ind. 535, 13 N. E. 683, 2 Am. St. Rep. 219; Sheld. Subr. §•§ 233, 235. The agreed state of facts upon which this case is submitted fails to show any covenant, contract, agreement, or understanding that Mr. Quarles should insure this property for the benefit of appellant. The interest of appellant, after the death of her husband, was an insurable one ; so was the remainder interest of the heirs. The decedent hav- ing left no debts, and the distributees being the same persons who take the real estate as heirs, no controversy arises as between the admin- istrator and the remainder-men. That the insurance company had the option to rebuild is urged as a reason why the insurer's election to pay, instead of rebuilding, ought not to operate to the disadvantage of complainant. This option is one common to all contracts of fire insurance ; and the argument, if good in this case, would operate to overturn the well-settled rule that no equity attaches to the proceeds of a fire policy in favor of third per- sons who have suffered loss, in the absence of some agreement to that effect. If this option to pay or rebuild should be regarded as sufficient to found an equity upon in favor of third persons disappointed by the election of the insurer, the law of insurance would have to be rewrit- ten. There is no privity between appellant and the insurer, and no ac- tion of his can be ground to give her an interest which she would not otherwise have. The decree of the chancellor will be affirmed. a personal contract uberrima fidei 15 2. Contracts of Fire Insurance Not Ordinarily Assignable NEW V. GERMAN INS. CO. OF FREEPORT. (Appellate Court of Indiana, 1S92. 5 Ind. App. 82, 31 N. E. 375.) Action by John W. New against the German Insurance Company of Freeport, 111. Judgment for defendant. Plaintiff appeals. Crumpacker, J. This action was brought by New against the in- surance company upon a policy of fire insurance issued by the de- fendant to one Pierson, covering certain buildings in the state of Mis- souri. The policy contained the following provision respecting the as- signment thereof, and the change of title to the property insured: "If the property, or any part thereof, shall be sold, conveyed, incumbered by mortgage or otherwise, or any change takes place in the title, use, occupation, or possession thereof, whatever, or if foreclosure proceed- ings shall be commenced, or if the interest of the insured in said property, or any part thereof, now is or shall become any other than a perfect legal and equitable title and ownership, free from all liens whatever, except as stated in writing hereon, * * * or if the pol- icy shall be assigned without written consent hereon, then, and in every such case, this policy shall be absolutely void." It is alleged in the complaint that plaintiff" became the owner of the property after the execution of the policy, by purchase, and the title was transferred to him by said Pierson by deed ; that said Pier- son transferred the policy to plaintiff by an assignment in due form indorsed thereon, and plaintiff then sent it to an agent of the defend- ant at Hopkins, Mo., to procure the defendant's consent to such as- signment, but such agent returned the policy with notice that he had no authority to give the necessary consent, and suggested that plain- tiff send it to the defendant's general agents, then residents of Mary- ville, Mo., who would, without any trouble, consent to said transfer in writing; that thereupon the plaintiff caused said policy to be for- warded to the said agents, who issued the said policy or caused the same to be issued, and who received the same by due course of mail; that they retained it some considerable time, and then returned it to the plaintiff by mail without any word of explanation, without any disapproval thereof, without any expression or word in regard to the same, and without returning or offering to return to him or the said Pierson any part of the unearned premium received on "said policy" ; that plaintiff', on receiving said policy from said agents, supposed, and in good faith believed, that the necessary written consent had been indorsed thereon, and, so believing, omitted to examine the same, but laid it away in his safe until after the loss occurred, something over a year thereafter; that he was led to believe that consent had been 16 THE NATURE AND REQUISITES OF THE CONTRACT indorsed upon the policy by the representations of the defendant's agent at Hopkins, Mo., that the general agents would undoubtedly do so. It was also alleged that proof of loss had been made, and all conditions complied with, on the part of plaintiff. A demurrer was sustained to the complaint, and the plaintiff de- clined to amend, whereupon judgment was rendered against him. The question for decision arises upon the ruling of the court upon the demurrer. Appellant's counsel insist that the assignment of the policy without the company's consent did not ipso facto operate a for- feiture, but, having received notice of the assignment, some act or declaration upon the part of the company was necessary to produce that result; and, having remained silent, the breach of condition was waived. It is argued that the word "void" should be construed as "voidable." In many instances after an insurance company has notice of the breach of a condition which, according to the terms of the policy, would result in a forfeiture, it must in some affirmative man- ner manifest its avoidance of the policy, or the condition will be taken as waived. Association v. Beck, 77 Ind. 206, 40 Am. Rep. 295 ; Ha- vens V. Insurance Co., Ill Ind. 90, 12 N. E. 137, 60 Am. Rep. 689; Insurance Co. v. Marple, 1 Ind. App. 411, 27 N. E. 633. A void contract is incapable of being inspired with legal vitality except by some act equivalent in effect to a new execution. Hence it follows that the breach of any condition that can be waived renders the contract voidable only. But a different principle applies to the question involved in this appeal. Insurance policies are contracts of indemnity, and are essentially personal in their nature. They relate to the insured, rather than the subject-matter of insurance, and at common law were nonassignable. There is no statutory provision changing the common-law rule, but after a loss has occurred the pol- icy becomes a chose in action, and is assignable as other choses in ac- tion are. Courts know, as a matter of general knowledge, that the character of the insured is taken into account, as affecting the moral hazard of a risk; and this is an additional reason why a change of indemnitee should not occur without consent of the indemnitor. An insured must have an interest in the subject of insurance, or the pol- icy will be held a wager contract, and void as against public pol- icy. Having obtained valid insurance, if the interest of the policy holder ceases in the property covered, the policy at once becomes in- operative. There is, then, no possibility of a loss; consequently, no basis for indemnity. The contract being one of indemnity, and per- sonal to the insured, it follows that any assignment by him, with a transfer of the title to the property, transfers no right in the insur- ance to the assignee, without the consent of the insurer. Such con- sent is equivalent to the creation of a new contract between the as- signee and the insurer, according to the terms of the policy assigned. It is not strictly an assignment, but the making of a new contract. Insurance Co. v. Munns, 120 Ind. 30, 22 N. E. 78, 5 L. R. A. 430. A PERSONAL CONTRACT UBERRIMCE FIDEI 17 This being the case, there never was any contract between the ap- pellant and appellee, and consequently no conditions that could be waived. After the transfer of title, Pierson had no insurance, be- cause he had nothing to insure. Hence, no right passed by the as- signment of the policy. Appellant had no right to rely upon the sug- gestion of the first agent to whom he sent the policy that the gen- eral agents would indorse the company's consent to the transfer. Conditions may be waived by silence, under some circumstances, but it is rare that entirely new indemnity contracts may be created in that manner. Judgment affirmed. KASE v. HARTFORD FIRE INS. CO. (Supreme Court of New Jersey, 1895. 58 N. J. Law, 34, 32 Atl. 1057.) Action by John H. Kase, for the use of Albert O. Headley, against the Hartford Fire Insurance Company. Judgment for defendant, and plaintiff brings error. GuMMERE, J. This is an action brought by the plaintiff, for the benefit of Albert O. Headley, upon a policy of insurance issued by the defendant corporation. The principal facts in the case are undis- puted, and briefly these: The Hartford Fire Insurance Company on the 8th day of May, 1890, issued to G. Schwab & Bros, a policy of insurance upon certain property in the city of Newark, which was covered by a mortgage held by John H. Kase, the plaintiff in this suit. The policy contained this clause : "Loss, if any, payable to John H. Kase, mortgagee, as interest may appear." It also contained the ordinary provision that the interest of the mortgagee should not be invalidated by any act or neglect of the mortgagor, nor by any change in the ownership of the property. On the 10th day of November, 1891, Kase assigned to Headley the mortgage which covered the in- sured property, together with the bond which it was given to secure, but did not assign to him the policy of insurance, or his interest in it. Nor did the insurance company consent to the transfer to Head- ley, or agree that he should stand in the place of Kase, so far as the payment of any loss was concerned. A short time after the mort- gage was assigned, and on the 28th of November of the same year, the mortgaged premises were partially destroyed by fire. Before this occurred, however, the policy of insurance had become invalidated, as against the owners of the premises, by reason of their violation of certain of its conditions, and had ceased to be an obligation of the company, so far as they were concerned. After the fire occurred, Kase delivered the policy of insurance to Headley, and then brought this suit, in his own name, for the use of Headley. The question to be determined is whether such a suit can be main- CooLET Ins. — 2 18 THE NATURE AND REQUISITES OF THE CONTRACT tained, and damages recovered from the company, by reason of the partial destruction by fire of the mortgaged premises, notwithstand- ing that at the time of the fire the poHcy had become invalidated, as against the owners of the premises, and that Kase, although he had assigned his mortgage to Headley before the fire occurred, failed to transfer to him his interest, as mortgagee, in the policy of insurance. It seems clear that, in the condition of affairs above narrated, this action cannot be maintained. So far as Kase is concerned, he has not suffered any loss by reason of the injury to the mortgaged premises,, for he had no interest in them when the fire occurred. So far as Headley, the assignee of the mortgage, is concerned, although it is true that the fire depreciated his mortgage security, and thereby in- flicted pecuniary loss upon him, yet, as he had no interest in the pol- icy of insurance at the time of the fire, he has no right to call upon the defendant company to make good the loss which he has sustained. A policy of insurance is a contract of indemnity, personal to the party to whom it is issued, or for whose interest the insurer undertakes to be responsible in case of loss, and cannot be transferred to a third person, so as to be valid in his hands against the insurer, without the insurer's consent. Wilson v. Hill, 3 Mete. (Mass.) 69; Flanagan V. Insurance Co., 25 N. J. Law, 506; Rayner v. Preston, 18 Ch. Div. 1. Not only was no such consent given in this case, but no attempt was made by the mortgagee to transfer to his assignee his interest in the policy of insurance until after the risk which it insured had de- termined. The judgment of the court below should be affirmed. III. A Contract Essentially of Indemnity ' CHICKASAW COUNTY FARMERS' MUT. FIRE INS. CO. v. WELLER. (Supreme Court of Iowa, 1896. 98 Iowa, 731, 68 N. W. 443.) See post, p. 307, for a report of the case. 7 For a discussion of principles, see Vance on Insurance, § 28. THE NATURE OF THE CONTRACT OF LIFE INSURANCE 19 IV. The Nature of the Contract of Life Insurance ' NYE V. GRAND LODGE A. O. U. W. (Appellate Court of Indiana, 1S94. 9 Ind. App. 131, 36 N. E. 429.) Action by Nancy J. Nye against the Grand Lodge Ancient Order of United Workmen and Joseph H. Clark and others. Plaintiff's husband held a certificate of membership in the order for $2,000. This he sold and assigned to Clark for $300. Clark surrendered the cer- tificate and procured the issuance of a new certificate naming himself as beneficiary. Before the death of plaintiff's husband Clark paid in dues and assessments to keep the certificate alive $135. This action was brought by the widow of the insured to recover the amount due on the certificate. The defendant association interpleaded and paid the sum due into court. From a judgment awarding the fund to the defendant Clark, plaintiff appeals. LoTz, j,9 * * * There is a marked conflict between the adjudi- cated cases bearing upon some of the propositions here involved. Owing' to this conflict, the questions here presented are not free from difficulty. In considering them we may be materially aided by a brief recurrence to the origin and growth of the business of insurance and of the principles which underlie it. Nearly every kind of property is exposed to injury or destruction. Of those causes which produce disaster, the most common are fire, shipwreck, and premature death. A person in good health, in the full possession of all his faculties, has the power to earn and accumulate property. These future earn- ings may be of great value to those dependent upon him, or to his creditors. These earnings may be destroyed by his premature death. Life insurance has for its object the protection of these future earn- ings. In the complexity of modern society, property may also be exposed to certain artificial losses, such as insolvencies, failure of title, and the like. The exposure of property to these various hazards may be very common, but loss actually occurs in comparatively few instances. It is difficult or impossible to predict or prevent the happening of the events which produce the loss, but it is frequently of the greatest mo- ment to those most deeply concerned to guard against the loss which their occurrence entails. This end may be accomplished by means of a general fund obtained by imposing a small contribution upon the many who are exposed to the common peril, from which the few 8 For discussion of principles, see Vance on Insurance, § 29. See, also, Cooley, Briefs on the Iawv of Insurance, vol. 1, pp. 85-97. 9 Part of the opinion is omitted and the statement of facts is rewritten. 20 THE NATURE AND REQUISITES OF THE CONTRACT who actually suffer may be made whole. To secure this indemnity against loss gave rise to, and lies at the foundation of, the business of insurance. As a business, it is the system of distributing losses upon the many who are exposed to the common hazard. Its importance has grown with the extension of trade and commerce and the necessities of civil- ized life. Marine underwriting lays claim to high antiquity. Traces of its existence are found under the early Roman emperors. It came into prominence among the Lombards of northern Italy during the revival of commerce in the twelfth and thirteenth centuries. The principles and methods of marine insurance were easily and readily extended to the hazards which surrounded like property upon land. The controlling principle in a contract of fire or marine insurance has ever been that of indemnity. The insurer contracts to indemnify the assured for what he may actually lose by the happening of the events upon which that insurer's liability is to arise. Under no circumstance is the assured, in theory, permitted to make a profit of his loss. If this were not so, the two parties to the contract would not have a common interest in the preservation of the thing insured, and the contract would create a desire for the happening of the event insured against. When the insured can only receive compensation for the loss which he may actually sustain, the temptation to defraud, and carelessness in exposing the property, are removed. Life insurance, according to the authorities, is of later origin than fire and marine insurance, but the same general principles which un- derlie them govern life insurance. The indemnity feature in life in- surance is not always apparent. Indeed, the great weight of au- thority is to the effect that the element of indemnity is not neces- sary to support a contract of life insurance. Dalby v. Assurance Co., 15 C. B. 365; Insurance Co. v. Bailey, 13 Wall. 616, 20 L. Ed. 501 ; Loomis V. Insurance Co., 6 Gray (Mass.) 396 ; Lord v. Dall, 12 Mass. 118, 7 Am. Dec. 38; Insurance Co. v. Johnson, 24 N. J. Law, 576. In Biddle on Insurance (section 185) it is said that "it may be laid down as nearly the universal rule that at the present time, either by statute or judicial decision, an interest is necessary to support a life policy ; and it may be asserted with the same universality that the courts have decided that a life policy is not a contract of indemnity." The interest which one has in his own life, or in the life of another, (unless it be a debtor,) is difficult to estimate in dollars and cents ; hence it is said that strict indemnity finds no place in life insurance. Mr. May, in his excellent work on Insurance (section 7), takes issue with the current authorities, and logically shows that there is no difference between valued policies in fire and marine insurance and a policy of life insurance. In each case the value of the interest is agreed upon in advance, and the purpose of the contract is to indem- nify the insured to the extent of the agreed value. Life insurance has been defined to be a contract in which one party agrees to pay a THE NATURE OF THE CONTRACT OF LIFE INSURANCE 21 given sum upon the happening of a particular event contingent upon the duration of human life, in consideration of the immediate pay- ment of a smaller sum, or certain equivalent periodical payments, by another. Buny. Ins. 1 ; Dalby v. Assurance Co., supra. Life insurance and fire and marine insurance have much in com- mon, and yet there are essential differences between it and them. In the latter, the loss may or may not occur, and, should it occur, it may be total or partial ; while in the ordinary life insurance the event insured against is certain to occur, and the time of the happening is the only contingent element. The person for whose benefit the insur- ance is written, his heirs or assigns, is certain to realize the sum named in the contract. As the expectancy of life decreases, the value of the policy increases. The reverse of this is true in fire and marine insurance. As the time for which the policy was written grows shorter, its value de- creases. Insurance is sometimes spoken of as an aleatory contract, or one involving risk or speculation ; and it certainly is a contract of mutual risk, wherein the premium is risked against the chance of loss. But it is not ordinarily a wagering or gambling contract. Although risk is of the essence of the contract, it exists before the contract is executed, and the assured is moved to effect the contract by reason of the existence of the risk, while in a purely wagering contract the risk is created by the contract itself. If the assured have no interest whatever in the thing or life insured, he sustains no risk. The thing or the life which may be the subject of insurance, it is true, is ex- posed to the hazard of loss; still the person who has no interest therein does not bear the risk. If one take out a policy of insurance upon the life of a person in whom he has no interest whatever, his risk is created by the contract itself, and it falls within the category of wagering or gambling contracts. It has become a fixed rule in life insurance that the assured must have an interest of some kind in the life of the person insured in or- der to take the policy out of the category of wagering contracts. An- other reason sometimes given for this rule is that it is against public policy, and has a demoralizing influence for one person to be inter- ested in the death, rather than the life, of another. This latter rea- son is based upon the supposition that the temptation on the part of the assured to destroy the life of the insured must be counterbalanced by the existence of an insurable interest in the life of the insured. This doctrine that the assured must have an interest in the life of the person insured is expressly condemned by Mr. Cook on Life In- surance (section 58). He characterizes it as a false, artificial, and confusing restriction as to the class of persons who may obtain the benefit ; and concerning the last reason he says : "But the theory that it is contrary to public policy that one person should have an expectation of a benefit conditioned on the happening of the death of another finds little, if any, support from the rules applied to analogous 22 THE NATURE AND REQUISITES OF THE CONTRACT cases, for it is just this expectation that exists in case of a devise or legacy, or in case of dower or other life tenancies ; yet it never seems to have been seriously suggested that, on that ground, devises, leg- acies, or life tenancies are invalid or contrary to public policy." The view maintained by Mr. Cook is supported by the adjudication of Ireland, New Jersey, Rhode Island, and perhaps some other states. The rule adopted by the courts of England and of the United States generally, and by the supreme court of this state, is that the assured must have an insurable interest in the life of the person insured. In- surance Co. v. Hazzard, 41 Ind. 116, 13 Am. Rep. 313; Insurance Co. v. Sefton, 53 Ind. 380 ; Insurance Co. v. Volger, 89 Ind. 572, 46 Am. Rep. 185. * * * Judgment affirmed/" V. The Nature of Mutual Benefit Insurance** DANIHER v. GRAND LODGE A. O. U. W. (Supreme Court of Utah, 1894. 10 Utah, 110, 37 Pac. 245.) Action by Dennis Daniher against the Grand Lodge Ancient Order of United Workmen, Jurisdiction of Nevada, and all individual mem- bers of all lodges within said jurisdiction subordinate to and under the control of said Grand Lodge A. O. U. W. of Nevada. Bartch, J.^^ The plaintiff brought this action to recover $2,000, the amount of a beneficiary certificate issued by the defendants to Jerry T. Daniher, who designated the plaintiff, his father, as his ben- eficiary, to whom payment should be made after his death. Jerry T. Daniher died November 18, 1888, and thereafter demand was made and payment refused. Upon the trial of the cause the court entered judgment in favor of the plaintiff, and thereupon the defendants ap- pealed. The first material question to be determined is whether there ex- isted, between the deceased and the appellants, a contract of insur- ance, which includes the question whether the Ancient Order of United Workmen is in any sense to be classed as a mutual life in- 10 The court held that the assigument was valid, and not a mere wagering contract, and affirmed the judgment awarding the fund to the assignee. For a discussion of the nature of life insurance contracts as contracts of indemnity when issued to secure a creditor, see Exchange Bank v. Loh, 104 Ga. 44G.' 31 S. E. 450. 44 L. R. A. 372 (1898). Assigimient of life policies, see post, p. 301. 11 For discussion of principles, see Vance on Insurance, § 30. See, also, Cooley, Briefs on the Law of Insurance, vol. 1, pp. 25-38. 12 Part of the opinion is omitted. THE NATURE OF MUTUAL BENEFIT INSURANCE 23 surance company. It is shown by the record that the association is a voluntary, unincorporated, beneficial and benevolent society. Under its constitution and by-laws, it is designed to promote the welfare of its members, and protect those dependent upon them. One, if not its principal, object, is to provide for the payment of a stipulated sum to the beneficiaries of its deceased members. Its governing bodies consist of a supreme lodge, of grand lodges, and of subordinate lodges. It is the province of the supreme lodge to prescribe and de- termine the rights, privileges, and duties of the members of the so- ciety and of the beneficiaries of deceased members. Grand lodges are organized and exist under its authority, and subject to the constitu- tion and general laws of the order, in such countries, states, terri- tories, and districts as the supreme lodge may determine. A grand lodge has original jurisdiction, within its territory, over all matters pertaining to the welfare of the order, and, for the government of itself and its subordinate lodges, may adopt constitutions, by-laws, rules, and regulations, and may alter and amend the same. It exer- cises control and supervision over the subordinate lodges within its jurisdiction. The defendant grand lodge, jurisdiction of Nevada, has control over and supervision of all the subordinate lodges in the states of Nevada, Idaho, Wyoming, Montana, and in the territory of Utah. Under the constitution and by-laws of the order, there is estab- lished a beneficiary fund for the benefit of all members in good stand- ing, and each member who complies with the rules and regulations of the order is entitled to a benefit certificate in the sum of $2,000, pay- able, at the death of the member, to the person designated by him as his beneficiary. These certificates are issued by virtue of the power vested in the grand lodge, in the nature of mutual benefit insurance, of which the members of the order may avail themselves. The ben- eficiary fund is maintained by assessments upon the individual mem- bers. Under the rules and by-laws of the lodge, all assessments are dated on the 1st day of the month, and the sum of one dollar is levied upon each member for each death which occurred during the preced- ing month. Notice of assessments must be served personally or by mail, on or before the 8th day of the month in which the assessments were made. Then it is incumbent upon each member to pay the same on or before the 28th day of the month, and, if he fails to do so, he shall stand suspended from all the rights, benefits, and privileges of the order. Any member thus suspended may be reinstated at any time within 30 days from the date of suspension by paying all as- sessments then remaining unpaid, and, after 30 days, but within 3 months, by paying all assessments in arrear and pending, and furnish- ing a certificate of good health. Any suspended member, after the ex- piration of three months from the date of his suspension, can only be reinstated upon examination and recommendation of the medical examiner, as in the original instance, and at the expiration of six 24 THE NATURE AND REQUISITES OF THE CONTRACT months from the date of his suspension his beneficiary certificate shall be annulled. * * * Thus, from an examination of the record, it is clear that the or- der has assumed the characteristics of a fraternal organization, but it is also equally clear that it has embodied within its constitution and by-laws many of the incidents of a mutual life insurance company, and these apparently predominate. The controlling object of the or- der seems to be the providing a beneficiary fund, out of which a certain stipulated sum is to be paid to the beneficiary of each member in good standing, upon the happening of a contingency. Good health is a requisite to become a member, and every application for member- ship must be accompanied by a physician's certificate to that effect. That an applicant is insurable is one of the qualifications for admis- sion, and when he is admitted into full membership a certificate in the nature of an insurance policy is issued to him, and he cannot main- tain his membership without keeping such certificate in force by the payment of his assessments and dues. The assessments are, in their nature, premiums, the nonpayment of which works a forfeiture of the insurance. Very ample and exacting provisions are contained in the constitu- tion and by-laws in relation to the beneficiary fund, to enforce pay- ment of assessments upon the death of a member, while the other declared objects of the association seem to be almost without provi- sion for enforcement. It is evident from these provisions and re- quirements that the main object of the order is protection to the ben- eficiaries of its deceased members by insurance, and that its fraternal charter is merely incidental. The contract made between this associ- ation and each of its members by issuing a beneficiary certificate, as shown by the record in this case, does not essentially differ from an ordinary contract of mutual life insurance. The life of the member is the subject insured, and the risk is death. The sum to be paid is certain, and so also are the assessments to be paid during the continu- ance of the risk. There is an absolute undertaking to pay the ben- eficiary designated, upon the happening of the contingency, unless forfeiture has resulted by nonpayment of dues or assessments. The conclusion is inevitable that it is an insurance contract, and that the association is, in effect, a mutual life insurance company. The rights of the parties to this suit must therefore be determined by the law applicable to mutual life insurance corporations. Bac. Ben. Soc. § 52 ; State v. Miller, 66 Iowa, 26, 23 N. W. 241 ; Comm.onwealth V. Wetherbee, 105 Mass. 149; State v. Bankers' & M. Mut. Ben. Ass'n, 23 Kan. 499 ; McCorkle v. Association, 71 Tex. 149, 8 S. W. 516. * * * Judgment affirmed. THE CONTRACT OF REINSURANCE 25 VI. The Contract of Reinsurance 13 Appeal of GOODRICH. (Supreme Court of Pennsylvania, 1885. 109 Pa. 523, 2 Atl. 200.) On January 31, 1876, a petition was presented by the insurance com- missioner to wind up the Penn Fire Insurance Company, for being fraudulently conducted and insolvent. Proceedings were suspended to allow it to execute a contract with La Caisse Generale des Assur- ances Agricole et des Assurances contre I'lncendie, whereby it was agreed that in consideration of $10,000, the receipt of which was ac- knowledged, "a policy of insurance is to be issued by La Caisse Gen- erale," etc., "reinsuring the outstanding risks of the said Penn Fire Insurance Co. ;" the amount over and above $10,000 necessary to reinsure its outstanding risks to be paid on or before 60 days. In a more formal contract made a day or two later, it was also agreed that "the policy of reinsurance to be issued to the Penn Fire Insurance Company shall be on the following conditions, viz. :" That the rein- surance should extend to 40 days; and if then a certain portion of the balance of the premiums should not be paid, the Hability of the Caisse Generale should cease ; that the Penn Company will turn over all books, reports, registers, etc.; and that the Caisse Generale will assume the care of the adjustment of all losses which may occur un- der the policies of the said Penn Company, which are thereby to be reinsured. Within the 40 days the steamer Mary Bell, owned by Ralph Hicks, Richard Sinnot, and Alfred Grissom, Jr., and property be- longing to Henry C. Goodrich and William B. Nevins, trading as Good- rich & Nevins, was totally destroyed by fire. The Caisse Generale paid the amount of the losses which occurred during the 40 days on suit by receiver of the Penn Company. This fund is claimed by the owners above, the appellants, and also by the general creditors of the Penn Company. The auditor reported in favor of the general cred- itors. Complainants excepted to the report, but it was confirmed by the court, whereupon this appeal was taken. Clark, J.^* The only question raised by the several assignments of error in this case is whether or not, in the distribution of the assets of the Penn Fire Insurance Company of Philadelphia in the hands of an assignee, the appellants are entitled to any preference over the general creditors of the company. * * * 13 For discussion of principles, see Vance on Insurance, § 31. See, also, Cooley, Briefs on the Law of Insurance, vol. 4, p. 3932 et seq. i*Part of the opinion is omitted. 26 THE NATURE AND REQUISITES OF THE CONTRACT "Reinsurance" is properly applied to an insurance effected by one underwriter with another, the latter wholly or partially indemnifying the former against the risks which he has assumed ; that is to say, after an insurance has been effected the insurer may have the subject of insurance reinsured to him by some other. There is in such case, however, no privity between the original insured and the reinsurer ; the latter is in no respect liable to the former as a surety or otherwise ; the contract of insurance and of reinsurance being totally distinct and disconnected. But while the contract is one of indemnity simply, in which the insurer is to be protected to the extent of his loss, when the loss is incurred and ascertained, the reinsurer must pay the amount. The insurer may at once, without payment to the original assured, re- sort to his action. Fame Ins. Co.'s Appeal, 83 Pa. 396. Even if the insurer fail, or become insolvent, so that his insured receives only a dividend, however small, the reinsurer can gain nothing by this, but must pay the amount of the loss to the first insurer. Hastie v. De Peyster, 3 Caines (N. Y.) 190; Hone v. Mutual Safety Ins. Co., 1 Sandf. (N. Y.) 137, affirmed in court of appeals sub nom. Mutual Safety Co. v. Hone, 2 N. Y. 235 ; 3 Kent, Comm. 279 ; Marsh. Ins. 143. So, in Herckenrath v. American Ins. Co., 3 Barb. Ch. (N. Y.) 63, Chancellor Walworth decided that "where an insurance company has underwritten a policy, and afterwards causes itself to be reinsured, and after the loss of the property insured such company becomes in- solvent, the person originally insured has no equitable lien upon the sum of money due on the contract of reinsurance ; but that fund be- longs to all the creditors of the insolvent company ratably." These are familiar principles of insurance law, and are not now anywhere doubted. If, therefore, the contract between La Caisse Gen- erale, etc., and the Penn Fire Insurance Company was for a policy of reinsurance, properly so called, the appellants could have no pref- erable claim or lien upon the fund in question although the Penn Company was admittedly and hopelessly insolvent. It is contended, however, by the appellants that the contract in ques- tion, when read in the light of the facts attending its execution, can- not, in any strict sense, be considered a contract for reinsurance ; that it was not intended to provide indemnity to the company, but to the individual policy holders, and that the policy holders can claim the advantage of this so-called reinsurance for themselves directly and exclusively ; that the term "reinsurance" was not used in its legal or technical sense, but in a different sense, defined by the particular facts which induced the creation of the contract, and that the reinsurance by the Caisse Generale, etc., was in fact, although not so expressed, a conditional assumption of the business of the Penn Company. It was competent, we think, for the Penn Company, acting in the interest of its general policy holders, with or without authority, in view of insolvency, and without fraud, to effect an indemnity for their in- dividual protection in case of loss (Glen v. Hope Mut. Ins. Co., 56 N. THE CONTRACT OF REINSURANCE 27 Y. 379; Fischer v. Same, 69 N. Y. 161), which, even after loss, they might ratify and approve (Flemming v. Marine Ins. Co., 4 Whart. 59, 33 Am. Dec. 33 ; Stillwell v. Staples, 19 N. Y. 405 ; 1 Am. Lead. Cas. 344) ; and if the insurance was in their interest, directly for their benefit, and free from any additional burden or obligation on their part, ratification might be presumed. But we fail to find anything in the words of the contract, in the special circumstances attending its creation, in the nature of the transaction itself, or in any rule of public policy, that would justify us in saying that the contract was any other than a contract of reinsurance, in the proper sense of that term. The contract was written by and between persons on both sides actually engaged in the business of insurance — persons conversant, doubtless, with the meaning of terms employed in the practice of in- surance — and the presumption is a fair and reasonable one that words of technical or special import were by them properly applied. The words "reinsure" and "reinsurance" would therefore seem, in the first instance at least, to characterize the contract, and to point out the ob- ject and purpose of the parties. The proper signification of these terms would, of course, vary with the clearly manifested intention of the par- ties. But the contract is with the Penn Company, for a consideration moving from it, providing for a policy to the Penn Company to rein- sure its risks. There is no provision whatever expressed in the con- tract for the individual indemnity of the policy holders, nor for the insurance of their property for them. The reinsurance is expressly upon the "outstanding risks" of the company. The contract of rein- surance, in some sense, perhaps, operates upon the property itself rath- er than the risk, but the fact that the policy was to be upon the "risks" indicates that it was the company's insurable interests in the property which formed the basis of the insurance. It is true that, except for the appellants' losses by fire, the fund of $6,000 would not have been realized, but this is incident to all cases" of reinsurance. It is true, also, that the reinsurance was of all the out- standing risks of the company, and not, as is usually the case, of any particular part of them; but whether a company shall reinsure the whole, or only a part, of its risks is a question of policy for the com- pany, dependent upon its purposes for the future or its circumstances. If the underwriter wishes to change his business, or to quit the country, or to avert insolvency, he may choose to reinsure the whole. Under different circumstances he may choose to indemnify himself as to part only. The provision that the Penn Company "will turn over to the Caisse Generale its original registers, books, reports, and other papers in any way relating to the policies thereby insured," and "that the Caisse Generale will assume the care and expense of the adjustment of all losses which may occur under the policies of the said Penn Fire Insurance Company, which are thereby to be reinsured," are con- sistent, we think, with either theory of the case— as consistent with one as with the other— and they, therefore, prove nothing either way. Such 28 THE NATURE AND REQUISITES OF THE CONTRACT a course of proceeding may be rare, but cases are rare, perhaps, when the reinsurance is upon the whole list of the underwriter's risks, and where this is the case there can certainly be nothing unreasonable in the provision. We think there is nothing on the face of the contract itself to give it the effect claimed for it, and we can discover nothing in the facts which led up to its execution which would evidence any intention of the parties different from what is plainly expressed. * >|: * The case of Glen v. Hope Mut. Ins. Co., supra, is greatly relied on by the appellants, but that case is materially different from this. By a contract duly executed, the Hope agreed to reinsure the Craftsman Company on all risks for which its policies were outstanding, and also to assume all such policies, and to pay the holders thereof all such sums as the Craftsman might, by force of such policies, become liable to pay. The engagement to the policy holders was direct and express, and the liability was therefore direct and exclusive. This case was followed by Fischer v. Hope Mut. Ins. Co., supra, which was another action on the same contract, and the rulings in the former case were in the latter recognized and approved. The decree of the court of common pleas is affirmed, and the appeal is dismissed at the costs of the appellant.^ ^ JOHANNES V. PHCENIX INS. CO. OF BROOKLYN, N. Y. (Supreme Court of Wisconsin, 1886. 66 Wis. 50, 27 N. W. 414, 57 Am. St. Rep. 249.) This is an appeal from an order overruling a demurrer to the com- plaint for insufficiency, as against the appellant. The complaint alleges that July 1, 1883, the defendant the Standard Fire Office of London, Limited, insured the plaintiff's property against loss or damage by fire to the amount of $1,650 from July 1, 1883, to July 1, 1886. And the plaintiff further alleges that subsequent to the making and issuing of said policy the defendant the Phoenix Insurance Company being desir- ous of acquiring and purchasing the business and good will of its co- defendant herein, and the defendant the Standard Fire Office of Lon- don, Limited, aforesaid, being desirous of reinsuring its risks upon property in the United States, and having withdrawn from business in the United States, the said defendant corporation, on or about the 2d day of January, 1884, made and entered into an agreement in writing, whereby the Phoenix Insurance Company, aforesaid, reinsured all the risks of the Standard Fire Office upon property situated in the L^nited States from 12 o'clock noon, in New York, on the 1st day of January, A. D. 1884, and agreed that all losses arising under the policies 15 Compare Barnes v. Helda Fire Ins. Co., 56 Minn. 38, 57 N. W. 314, 45 Am. St. Kep. 438 (1893). THE CONTRACT OF REINSURANCE 29 of the Standard Fire Office upon property situated in the United States should, after that time, be borne by the said Phoenix Insurance Com- pany, and should be paid, satisfied, and discharged by it, and thereby reinsured the risk upon the property mentioned in the policy herein- before described, and agreed that the loss of this plaintifif arising there- under should be borne, paid, satisfied, and discharged by said Phoenix Insurance Company, which thereupon became owner of the good will, original documents, and books of its codefendant herein, relating to the risks aforesaid, and assumed control of the same, and of the busi- ness pertaining to said risks, policies, and losses. The complaint fur- ther alleges, in effect, that July 4, 1884, and while said policy was still in force, the assured property was destroyed and lost by fire, etc. * * * Cassoday, J.^® a policy of fire insurance is a contract of indemnity. Darrell v. Tibbitts, 5 Q. B. Div. 560. By such contract the insurer agrees to compensate the assured for loss by fire of certain property, for a given time. The existence of such contract gives the insurer an insurable interest in the property insured, coextensive with its lia- bility. Delaware Ins. Co. v. Quaker City Ins. Co., 3 Grant, Cas. (Pa.) 71 ; New York Bowery Fire Ins. Co. v. New York Fire Ins. Co., 17 Wend. (N. Y.) 359. Here the Standard Fire Office of London in- sured the plaintifl:''s property for three years from July 1, 1883. After doing so it became desirous of reinsuring its risks upon property in the United States, and withdrawing from business in the United States. The Phoenix Insurance Company of Brooklyn was at the same time desirous of acquiring and purchasing the business and good will of the Standard Company. Accordingly the two companies made the agreement set forth in the statement of facts, on January 2, 1884. At that time the plaintiff's policy had two years and a half more to run. Of course the Standard Company had an insurable interest in the plaintiff's property commensurate with its liability. The agreement between the two companies, as alleged, was based upon a sufficient consideration. Its validity is not assailed. The contention is that the contract between the two companies is confined strictly to them, and that the plaintifif under his policy issued by the Standard has no privity in the contract made by the Phoenix, and can maintain no action thereon against the Phoenix. In other words, that it was strictly a contract of reinsurance by the Standard Company, solely for its own benefit, and not for the benefit of any of its then existing policy holders in the United States. In support of such contention the learned counsel for the appellant cites several cases. * * * Some of the cases cited were upon con- tracts of strict reinsurance, as above defined, and clearly sustain the position of counsel, if the contract here is to be so restricted. Hastie v. De Peyster, 3 Caines (N. Y.) 190; Herckenrath v. American M. 16 Part of the opinion is omitted and the statement of facts is rewritten. 30 THE NATURE AND REQUISITES OF THE CONTRACT Ins. Co., 3 Barb. Ch. (N. Y.) 63; New York Bowery Fire Ins. Co. V. New York Fire Ins. Co., supra ; Hone v. Mutual Safety Ins. Co., 1 Sandf. (N. Y.) 137; s. c, 2 N. Y. 235; Carrington v. Commercial F. & M. Ins. Co., 1 Bosw. (N. Y.) 152; Blackstone v. Alemannia Fire Ins. Co., 56 N. Y. 104; Strong v. Phoenix Ins. Co., 62 Mo. 289, 21 Am. Rep. 417; Gantt v. American Cent. Ins. Co., 68 Mo. 503; Dela- ware Ins. Co. V. Quaker City Ins. Co., supra. Thus, in Hone v. Mutual Safety Ins. Co., supra, the defendant, by the policy of reinsurance, "promised and agreed to make good to the American Mutual Insurance Company all such loss or damage," etc. So, in the case cited in Bosworth the agreement was to "reinsure the American Mutual Insurance Company of Amsterdam upon the fol- lowing policies issued by them, loss, if any, payable to the assured upon the same terms and conditions, and at the same time, as are contained in the original policies." A description of the several policies is then given. The court, at general term, said: "If the word 'assured,' as used in this contract, means the party reassured, the present plaintiffs have no interest in the contract, and no right to maintain an action upon it ; * * * " but "if the word 'assured' does not mean the party 'reinsured,' and that party only, then it includes and embraces, not only the plaintiffs, but also nineteen other individuals and firms. By the contract of reinsurance the defendants took upon themselves the risks which the corporation reinsured had incurred by insuring twenty separate and distinct policies." The court then determined that the word "assured," as used, meant the company issuing the original pol- icies and obtaining the reinsurance, and not any of such policy holders. In Blackstone v. Insurance Co., supra, the agreement was simply to reinsure the company, and the principal contention was whether the insurance was double under the peculiar wording of the policy. The same is true of Owens v. Sturges, 67 111. 366, and Insurance Co. v. In- surance Co., 38 Ohio St. 11, 43 Am. Rep. 413, cited. But in the case before us the contract between the defendant com- panies was, as it seems to us, something more than a mere reinsurance. By that contract the Standard Company sold and turned over to the Phoenix its entire business, and the good will of that business, in the United States, together with a large amount of bonds and other prop- erty, in consideration of which the Phoenix thereby "reinsured all the risks" of the Standard Company "upon property situated in the United States, * * * and agreed that all losses arising under the policies of the said defendant the Standard Fire Office, Limited, upon property situated in the United States of America, should after that time (Jan- uary 1, 1884) be borne by the said Phoenix Insurance Company, andl should be paid, satisfied, and discharged by it, * * * and agreed that the loss of this plaintiff arising thereunder should be borne, paid, satisfied, and discharged by said Phoenix Insurance Company; which thereupon became owner of the good will, original documents, and books of its codefendant herein [the Standard Company] relating to THE CONTRACT OF REINSURANCE 31 the risks aforesaid, and assumed control of the same, and of the busi- ness pertaining to said risks, policies, and losses." Such are the alleged terms of the contract we are required to con- strue. The losses thus arising under the policies could only "be borne, paid, satisfied, andl discharged" by the Phoenix in a direct transaction with the policy holders. Even a payment by it of the amount of the loss to the Standard Company would not satisfy or discharge the plain- tiff's claim for such loss on his policy. That could only be done on payment to the plaintiff. It seems to us that by the terms of the con- tract, as alleged, the Phoenix, in effect, thereby assumed the risk cov- ered by each policy, and agreed to pay any loss arising under each policy. The mere fact that the plaintiff was not named in the contract does not preclude him from maintaining an action upon the contract. * * * In Glen v. Hope Mut. Life Ins. Co., 1 Thomp. & C. (N. Y.) 463, afifirmedl 56 N. Y. 379, the defendant had agreed with the Craftsmen's Assurance Company to reinsure the latter company on all its risks "for which policies o^f the said party of the second part [Craftsmen's Assurance Company] are outstanding at this date, and hereby agree to assure all such policies, and to pay the holders thereof all such sums as the party of the second part may, by force of such policies, become liable to pay, * * * the liability for death losses to be limited to such deaths as may occur on and after this date ;" and it was held that the defendant was liable on the contract of reinsur- ance directly to the several holders of policies for the whole amount insured thereby. The same doctrine, upon the same reinsurance con- tract, was reaffirmed in Fischer v. Hope Mut. Life Ins. Co., 40 N. Y. Super. Ct. 291, affirmed 69 N. Y. 161. It seems to us that the con- tract of reinsurance in those two cases was substantially like the one at bar. Those actions in favor of such policy holders, upon such con- tract of reinsurance, were sustained upon the authority of Lawrence V. Fox, 20 N. Y. 268, and similar cases. That case has been expressly followed by this court. Gray v. McDonald, 19 Wis. 217. The same principle has frequently been reiterated by this court. Putney v. Farnham, 27 Wis. 187, 9 Am. Rep. 459 ; McDowell v. Laev, 35 Wis. 171; Bassett v. Hughes, 43 Wis. 319; Kollock v. Parcher, 52 Wis. 399, 9 N. W. 67; Hoile v. Bailey, 58 Wis. 450-452, 17 N. W. Z22; Town of Platteville v. Plooper, 63 Wis. 383, 23 N. W. 581. The principle thus sanctioned in these cases is to the effect that if, on the receipt of a good and sufficient consideration, A. agrees with B. to assume and pay a debt of the latter to C, then C. may maintain an action directly upon such contract against A., notwithstanding C. is not privy to the consideration received by A. We think the case at bar comes within the principle. The order of the circuit court is affirmed. ^^ 17 For a collection of authorities respectine; the right of a third person for whose benefit a contract is made to maintain action thereon, see Win- ninghoff v. Wittig, 64 Wis. ISO, 24 N. W. 912 (1SS5). 32 THE NATURE AND REQUISITES OF THE CONTRACT LONDON ASSUR. CORP. v. THOMPSON. (Court of Appeals of New York, 1902. 170 N. Y. 94, 62 N. E. 1066.) Action by the London Assurance Corporation against Joseph W. Thompson. From a judgment of the appellate division (54 App. Div. 637, 67 N. Y. Supp. 1138) affirming a judgment for defendant on report of a referee, plaintiff appeals. Vann, J.^* This is a controversy between insurers, which turns upon the construction of a policy of reinsurance. The plaintiff is a foreign insurance corporation, and the defendant is one of several individual underwriters, who issue what are known as "Lloyd's pol- icies," and do business under the name of the New Jersey State Fire Association. The policy of the plaintiff, issued to Patterson, Down- ing & Co., covered "all risks by railroads a°Vor other inland convey- ances, and in warehouses, yards, or elsewhere, from the time bills of lading are signed for the goods until the same shall have been laden on board vessels or lighter at such ports for shipment ; on rosin, tur- pentine, and other goods commonly known as 'naval stores.' * * * This policy also to cover goods as herein described, the property of the Downing Co., or in which said company may be interested as owner or agent." There was also a marine risk, which is not here important. The policy of the defendant was of the New York standard form, whereby the underwriters agreed to "reinsure the London Assurance Corporation * * * against all direct loss or damage by fire * * * to the following described property while located and contained as described herein and not elsewhere, to wit, on the fire risk on naval stores, i. e., rosin, turpentine, etc., in barrels, while waiting shipment, in or on the warehouses, ^^'^/or sheds of Dozening & Co. at Brwns- ziHck, Georgia, and insured under policies issued by the London As- surance Corporation, marine branch. The same being naval stores of other parties intended for foreign or domestic shipment for which the London Assurance Corporation is liable under the terms of its marine policies issued to shippers. It is the true intent and meaning of this policy to fully indemnify the London Assurance Corporation for each and every loss by fire, within the limits above named, to the full ex- tent of its interests as herein described, * * * j^ consideration of which, and the indemnity hereby guarantied, the Londbn Assur- ance Corporation hereby covenants and agrees to report to this associa- tion at the end of each month the total amount of insurance on naval stores that has been written by said corporation in the ahove-descrihed -warehouses, &c., and to pay to this association its proportionate part of a premium at and after the rate of five cents for every one hundred dollars so insured. This policy is subject to the same fire risks, con- is Part of this opinion and all of the dissenting opinion of Haight, J., are omitted. THE CONTRACT OF KEINSURANCK 33 ditions, interpretations, valuations, indorsements, and assignments as are or may be assumed or adopted by the London Assurance Corpora- tion, and loss, if any, payable at the same time and in the same man- ner as they pay. * * * This policy shall continue to protect all merchandise already accepted by the London Assurance Corporation, or for which they may be liable, until the same has passed beyond the limits of this policy." Of the part thus quoted from the policy the words in italics are in manuscript, and, with this exception, all before the words "to wit" is part of the printed form, and all after is typewritten. The italicized words, " in the above-described warehouse, &c.," are interlined in man- uscript in the typewritten part. After a loss had occurred, the plaintiff paid Patterson, Downing & Co. the amount called for by their policy, and then brought this action to recover from the defendant his proportion thereof, according to the contract of reinsurance, without making any effort to reform it. The defendant, however, by a counterclaim, sought to reform it in his in- terest, but was defeated, and the attempt is now immaterial. The referee adopted the short form of decision, but found specific- ally that "a typewritten paper purporting to set forth the terms upon which said reinsurance was made was prepared by the plaintiff, and furnished to the said New Jersey State Fire Association, and is at- tached to and forms part of the said policy of reinsurance ; that said reinsurance is thereby declared to be" (quoting the part above set forth, describing the risk.) The referee further found that "a fire occurred at said yards of Downing & Co., in Brunswick, by which a large quantity of turpentine and rosin covered by the policy issued by the plaintiff to said Patterson, Downing & Co. was destroyed. * * * None of the rosin which was destroyed or damaged by said fire was in or on the warehouses, ^'^'^/or sheds of Downing & Co., at Bruns- wick, but the whole thereof was deposited or stored, while waiting shipment, in the open yard of Downing & Co." He held that the rosin was not covered by the policy of reinsurance, and gave judgment for the loss on the turpentine only. It appeared from the evidence that the yard of Downing & Co. was 540 feet long by 190 feet wide, and was bounded on the east by the tracks of a railroad, and on the west by navigable water connected with the Atlantic Ocean. In the center of the yard was a shed 300 feet long by 50 feet wide, and contiguous thereto a storehouse of the same width, and 100 feet in length. The plaintiff claims that, as the contract was one of reinsurance, it was an insurance of the plaintiff's identical risk, and not an independent insurance of specific property in a defined lo- cality ; that the intention was that the reinsurance should cover the plaintiff's terminal risk, whatever it was, and that the words "in or on the warehouses ^"Vor sheds" should yield to an intention spring- ing conclusively from the fact that the plaintiff's undertaking was to reinsure. CooLEY Ins. — 3 34 THE NATURE AND REQUISITES OF THE CONTRACT While the insurable interest of the plaintiff depended upon the pol- icy issued by it to Patterson, Downing, & Co., it does not follow that the contract of reinsurance covered all the risks thus assumed, for the policy was valid if it covered only a part thereof. Thus, while the policy issued by the plaintiff covered three general risks,— inland, ter- minal, and marine, — the policy issued to it related to only one risk, which was the terminal. It was not essential that the contract of rein- surance should cover even the entire terminal risk assumed by the plaintiff, for it was within the power of the parties to agree that it should cover a part of that risk only, and to limit it to the property in question while it was in a certain place at the terminal port. "When the insurer for some reason finds it convenient that another shall bear, either in whole or in part, the liability to the insured which he has assumed, and agrees with another insurer to assume the whole or a part of his liability as regards the insured, it is termed a 'contract of reinsurance.' " 1 Bid. Ins. § 378 ; Insurance Co. of North America V. Hibernia Ins. Co., 140 U. S. 565, 11 Sup. Ct. 909, 35 h. Ed. 517. While a contract of reinsurance implies the same subject-matter of insurance as the original policy, and runs against perils of the same kind, it need not be for the identical hazard insured against in the first policy, but may be for a less, though not for a greater, risk. Phil- adelphia Ins. Co. V. Washington Ins. Co., 23 Pa. 250, 253; 1 May, Ins. §§ 9, 11. In a case relied upon by the plaintiff, one company rein- sured another company on "their interest as insured under their policy" issued to the owner of the property, and hence both policies necessarily covered the same risk by express description. Jackson v. Insurance Co., 99 N. Y. 124, 1 N. E. 539. Reinsurance, like any other contract, depends upon the intention of the parties, to be gathered from the words used, taking into account, when the meaning is doubtful, the surrounding circumstances. * * * The general rule is that, as insurance policies are unilateral contracts prepared by the insurers, they are responsible for any ambiguity aris- ing out of the language used by them, and hence, in construing that language, all doubt is resolved against them, because they created it. Kratzenstein v. Assurance Co., 116 N. Y. 54, 22 N. E. 221, 5 L. R. A. 799. Ordinarily an ambiguity in the policy as to whether the rosin was covered, although it was not in the sheds or warehouses, but in the yard adjacent thereto, would be determined against the insurer, by apply- ing the rule already referred to. This case, however, is peculiar, in that the words of the policy describing the risk were those of the in- sured, and not of the insurer; for, as the referee found, the former presented a typewritten slip to the latter, and asked for reinsurance according to the terms therein stated, and the defendant, without see- ing the policies issued by the plaintiff, issued the policy in suit to the plaintiff, using the exact language which it had itself prepared.^ During the negotiations which led to the policy under considera- tion there was no discussion as to the nature or extent of the risk. THE CONTRACT OF REINSURANCE 35 which was treated by both parties as accurately described in the type- written slip subsequently attached to the policy as a part thereof. There was discussion in relation to the premium to be charged and other matters, but none as to the risk to be assumed ; and the defend- ant had no means of knowing, if such was the fact, that the plaintiff wished to have any risk covered, other than that described in the slip. The risk thus described by the plaintiff was against loss or damage by fire to naval stores "while located and contained as described herein, and not elsewhere." The next clause is definite and specific, for it limits the risk to "rosin, turpentine, etc., in barrels, while waiting ship- ment, in or on the warehouses ^°'^/or sheds of Downing & Co.," and insured under policies issued by the plaintiff. "Within the limits above named," reinsurance was made "to the full extent of" the interests of the plaintiff, "as herein described." Finally a monthly report was required from the plaintiff of the total amount of insurance written by it on naval stores "in the above-described warehouses, &c." ; the latter part, as if to avoid all possible doubt, having been interlined by the plaintiff with a pen. The risk did not cover all rosin belonging to Patterson, Downing & Co., nor all insured by the plaintiff, but was confined to rosin while stored in a certain manner and in a certain place. No rosin was cov- ered unless it was "in or on the warehouses ^^^/ot sheds of Downing & Co." These words in an application for insurance would ordinarily constitute a warranty that the property insured was thus situated, and would prevent a recovery for the loss of any situated elsewhere. Bryce V. Insurance Co., 55 N. Y. 240, 14 Am. Rep. 249. While the original policy embraced "all risks by railroads ^^<^/or other inland convey- ances, and in warehouses, yards or elsewhere," the policy of reinsur- ance makes no mention of property in yards, or in any place except warehouses and sheds. Therefore, unless the rosin destroyed was in or on the warehouses or sheds, it was not covered. The referee found that it was not so located, but he also found that it was deposited in the open yard, so that the unanimous affirmance does not make the former finding conclusive, because the latter presents a question of law as to the meaning of the policy. Clearly the property was in neither of the places named in the policy of reinsurance, for it was in a large, uncovered inclosure surrounding the warehouses and sheds, and known as the "yards." While the meaning of the word "in," as used in the reinsurance contract, is free from doubt, that of the word "on" is not clear. The function which the parties intended it to perform is uncertain. It does not appear in the sentence requiring a monthly report of insurance written by the plaintiff, for that is limited to the naval stores "in the above-described warehouses, &c." This is significant, for both pol- icies were open, on a fluctuating stock, and the quantity on hand, not exceeding $80,000 in value, was the measure of the defendant's liabil- ity. Why should the report be limited to stock in the warehouses, 36 THE NATURE AND REQUISITES OF THE CONTRACT if the defendant was also liable for stock in the yards? The parties may have meant that the barrels of rosin were to be on the inside floors or the outside platforms of the buildings, or that they were to be near or about the buildings. * * * The plaintiff may have understood it in one way, and the defendant in another, without doing violence to reason. In other words, an ambiguity has arisen as to the mean- ing of the policy, which the courts must settle. As the terms of insurance, including the description of the risk, were wholly prepared by the plaintiff, an insurer of wide experience — for it has done business since 1720— and the defendant had no in- formation upon the subject, except the typewritten slip furnished by the plaintiff, we think that the responsibility for the ambiguity should be borne by the party who caused it. Janneck v. Insurance Co., 162 N. Y. 574, 57 N. E. 182 ; Herrman v. Insurance Co., 81 N. Y. 184, 37 Am. Rep. 488; Kratzenstein v. Assurance Co., supra. While the defendant adopted the plaintiff's words when he pasted the slip in the policy, he could not do otherwise if he made any contract whatever. They were still the words of the plaintiff, the doubt caused thereby was caused by the plaintiff, and the defendant should not be required to father its offspring. The principle of resolving doubts in a uni- lateral contract by throwing the burden upon the one who caused them applies with the same force to this case, under its peculiar circum- stances, as to the cases cited, and, as we think, furnishes the proper solution of the controversy. The judgment should be affirmed, with costs. VII. When the Contract Is Divisible^' SOUTHERN FIRE INS. CO. v. KNIGHT. (Supreme Court of Georgia, 1900. Ill Ga. 622. 36 S. E. 821, 52 L. R. A. 70, 78 Am. St. Rep. 216.) CoBB, J.-*^ M. A. & L. L. Knight brought suit against the South- ern Fire Insurance Company upon a policy of fire insurance. The case came on for trial, and at the conclusion of the testimony for the plaintiffs the defendant made a motion for a nonsuit, which the court overruled. The case proceeded to trial, and resulted in a verdict for the plaintiffs. The defendant brings the case here upon a bill of ex- 19 For discussion of principles, see Vance on Insurance, § 32. See, also, Cooley, Briefs on the Law of Insurance, vol. 2, p. 1894 et seq. 20 Part of the opinion is omitted. WHEN THE CONTRACT IS DIVISIBLE 37 ceptions assigning error upon the refusal of the court to grant a non- suit. * * * The poHcy sued on in the present case insured both the stock of goods and the building in which it was contained. The premium due upon the policy was a gross sum. The question arises, therefore, whether the breach of a warranty relating solely to the goods, and which precludes a recovery for this loss, would also bar a recovery for the loss of the building. The stipulation prescribing that the in- sured must take an inventory of his stock provides that in case of failure so to do "this policy shall be null and void." What was the intention of the parties with respect to the question just above stated? If this intention is to be derived from the language used, and it must be, it would seem to be clear that the contract was entire and indivisi- ble, and that the breach of a condition which would work a forfeiture would avoid the entire policy, and not simply a portion thereof. The parties contracted that "the policy" should be void in case of failure to comply with the iron-safe clause. The policy embraces insurance upon both the building and its contents, and the premium is payable in a gross sum. "If the consideration to be paid is single and entire, the contract must be held to be entire, although the subject of the contract may consist of several distinct and wholly independent items." 2 Pars. Cont. *519. It was competent for the parties to make two separate and distinct contracts, one covering the goods, and the other the building, but they did not see proper to do this. They combined the two, and made the consideration moving towards the insurer a gross sum. They further provided that the contract, not a part of it, should be void under certain conditions. It may perhaps seein to be unreasonable that, simply for a failure to take an inventory of the stock of goods, the plaintiff's should be precluded from recovering the value of the building. But this does not affect the question. The question is, what have they agreed upon? If there was any room to doubt as to the intention of the parties, that construction which is most reasonable and most consonant with justice would be applied. But there is none. The parties have deliberately chosen to enter into an agreement whereby the policy shall be forfeited if the insured fails to do certain things, and he has failed to comply with his agreement. In such a case there is but one thing for the courts to do, and that is to enforce the agreement as made. The question as to whether a policy of insurance such as is involved in the present case constitutes a separable or an entire contract is no new question. It has been the subject of numerous decisions by the courts in this country, and they are in hopeless and irreconcilable conflict. The weight of authority is to the effect that the contract is entire, and that the breach of a warranty which relates solely to one class of property will avoid the entire policy, if the contract so provides. Text writers of great learning and ability have, after re- 38 THE NATURE AND REQUISITES OP THE CONTRACT viewing the decisions on both sides of this question, reached the con- clusion that the contract is indivisible. We quote the following from 1 Wood, Fire Ins. p. 384: "It is difficuh to understand how it can be held that these contracts are several, when a gross premium is paid for the entire insurance. The court cannot say, as a matter of law, neither can the fact be shown, that the insurer would have been sat- isfied to take the risk separately at the same premium. By consent- ing to pay a gross premium for the insurance, the assured has signi- fied his willingness to let the policy stand as an entire contract, sub- ject in all its parts to the conditions imposed by the insurer; and there is neither reason nor equity in permitting the assured, after he has violated one of the conditions of the policy as to a part of the risk, to turn around and say that this condition only affected that portion of the risk to which the breach related." Mr. Ostrander, after an elaborate review of the decisions, reaches the conclusion that those which hold the contract to be entire announce the sounder and bet- ter rule. Ostr. Fire Ins. § 23 et seq. See, also, 2 Joyce, Ins. § 1931 ; 1 May, Ins. § 277. In support of the views herein announced, we find the courts of last resort of Maine, Wisconsin, Maryland, Minnesota, Virginia, New Hampshire, Massachusetts, Vermont, Pennsylvania, New Jersey, Michigan, Indiana, Arkansas, Iowa, Alabama, and Connecticut. It would not be profitable here to do more than cite the decisions of these courts. Reduced to their last analysis, they simply hold that the premium being for a gross sum evidences an intention on the part of the parties that the contract should be treated as entire, and that the intention of the parties, when ascertained, must be enforced. See Richardson v. Insurance Co., 46 Me. 394, 74 Am. Dec. 459; Barnes V. Insurance Co., 51 Me. 110, 81 Am. Dec. 562; Hinman v. Insur- ance Co., 36 Wis. 159 (Syl., point 7); Burr v. Insurance Co., 84 Wis. 76, 54 N. W. 22, 36 Am. St. Rep. 905 ; Insurance Co. v. Assum, 5 Md. 165; Bowman v. Insurance Co., 40 Md. 620; Plath v. Insurance Co., 23 Minn. 479, 23 Am. Rep. 697; Moore v. Insurance Co., 69 Va. 508, 26 Am. Rep. 373 ; Baldwin v. Insurance Co., 60 N. H. 422, 49 Am. Rep. 324; Friesmuth v. Insurance Co., 10 Cush. (Mass.) 587; Lee V. Insurance Co., 3 Gray (Mass.) 583 ; Kimball v. Insurance Co., 8 Gray (Mass.) 33; McGowan v. Insurance Co., 54 Vt. 211, 41 Am. Rep. 843; Gottsman v. Insurance Co., 56 Pa. 210, 94 Am. Dec. 55; Trustees of Fire Ass'n v. Williamson, 26 Pa. 196; Martin v. Insur- ance Co., 57 N. J. Law, 623, 31 Atl. 213; Insurance Co. v. Resh, 44 Mich 55, 6 N. W. 114, 38 Am. Rep. 228; McQueeny v. Insur- ance Co., 52 Ark. 257, 12 S. W. 498, 5 L. R. A. 744, 20 Am. St. Rep. 179;Garver v. Insurance Co., 69 Iowa. 202, 28 N. W. 555; Assur- ance Co. V. Stoddard, 88 Ala. 606, 7 South. 379 (Syl., point 5) ; Es- sex Sav. Bank v. Meriden Fire Ins. Co., 57 Conn. 335, 17 Atl. 930, 18 Atl. 324, 4 L. R. A. 759. WHEN THE CONTRACT IS DIVISIBLE 39 It is true that none of the cases above cited dealt with a breach of the iron-safe clause, but in many of them the condition in the policy which was violated had no more connection with the property for which a recovery was souj^ht than does the iron-safe clause to the building insured by the policy herein involved. In principle the cases are exactly in point. Opposed to this view are decisions of the court of last resort of Nebraska, Colorado, Kansas, and Missouri. See In- surance Co. V. Schreck, 27 Neb. 527, 43 N. W. 340, 6 L. R. A. 524, 20 Am. St. Rep. 696; Insurance Co. v. Fairbank, 32 Neb. 750, 49 N. W. 711, 29 Am. St. Rep. 459; Insurance Co. v. Barker, 6 Colo. App. 535, 41 Pac. 513; Insurance Co. v. York, 48 Kan. 488, 29 Pac. 586 ; Insurance Co. v. Saindon, 53 Kan. 623, 36 Pac. 983 ; Loehner V. Insurance Co., 17 Mo. 247; Trabue v. Insurance Co., 121 Mo. 75, 25 S. W. 848, 23 h. R. A. 719, 42 Am. St. Rep. 523. The courts of New York and Indiana seem to have been at different times on both sides of the question now under consideration. Smith v. In- surance Co., 25 Barb. (N. Y.) 497; Kiernan v. Insurance Co., 81 Hun, 373, 30 N. Y. Supp. 892; Merrill v. Insurance Co., 73 N. Y. 452, 29 Am. Rep. 184; Pratt v. Insurance Co., 130 N. Y. 206, 29 N. E. 117; Havens v. Insurance Co., Ill Ind. 90, 12 N. E. 137, 60 Am. Rep. 689; Insurance Co. v. Pickel, 119 Ind. 155, 21 N. E. 546, 12 Am. St. Rep. 393. Our conclusion is that where an insurance policy is issued in con- sideration of a gross premium, and provides that the policy shall be void in the event of a breach of a certain condition therein named, and this condition is broken, no recovery can be had on the policy, though separate classes of property are therein insured, and though the stipulation violated relates solely to a matter which could have connection with but one of these classes, * * * Judgment re- versed. COLEMAN v. NEW ORLEANS INS. CO. (Supreme Court of Ohio. 1892. 49 Ohio St. 310, ?,1 N. E. 279, 16 L. R. A. 174, 34 Am. St. Rep. 565.) The New Orleans Insurance Company, on the 17th day of Novem- ber, 1882, issued to H. Coleman & Co. a policy of fire insurance, whereby the company insured Coleman & Co. against loss or damage by fire for the period of one year from the date of the policy, to the amount of four thousand dollars, as follows : "$200, on their one- story frame shingle-roof storehouse; $3,800 on the general stock of merchandise, consisting principally of dry goods, groceries, clothing, boots and shoes, hats and caps, queensware, glassware, cutlery, and such other articles as are usually kept for sale in a country store ; all contained in their one-story frame shingle-roof storehouse, situated in Pike county, Kentucky." On the 11th day of April, 1883, the prop- 40 THE NATURE AND REQUISITES OF THE CONTRACT erty was totally destroyed by fire; and thereafter proof of the loss was made out and forwarded to the company. The loss not having been paid, Coleman & Co. commenced an action against the insurance company in the court of common pleas of Scioto county, to recover the amount of the policy; the loss exceeding that sum. From a judg- ment for defendant, plaintiffs bring error. Williams, J.^^ The policy of insurance contains the provisions that, "if the assured is not the sole and unconditional owner of the property, or if any building intended to be insured stands on ground not owned in fee simple by the assured," the policy "shall become void, unless consent in writing by the company be indorsed thereon." * * * The principal ground of contention is that the contract of insurance evidenced by the policy is so far severable as to entitle the plaintiffs to recover for the loss of the goods, though they may not be entitled to recover for the loss of the building, by reason of the state of the title to the land on which it stood. Whether such a contract is so severable is a question upon which the adjudications of courts of the highest respectability are in direct conflict. The following are some of the cases which hold the con- tract to be entire: Barnes v. Insurance Co., 51 Me. 110, 81 Am. Dec. 562; Havens v. Insurance Co., Ill Ind. 90, 12 N. E. 137, 60 Am. Rep. 689 ; Cuthbertson v. Insurance Co., 96 N. C. 480. 2 S. E. 258 ; Essex Sav. Bank v. Meriden Fire Ins. Co., 57 Conn. 335, 17 Atl. 930, and 18 Atl. 324, 4 E. R. A. 759. On the other hand, such contracts are held severable in the follow- ing, and other cases : Insurance Co. v. Spankneble, 52 111. 53, 4 Am. Rep. 582; Insurance Co. v. Walsh, 54 111. 164, 5 Am. Rep. 115; Loeli- ner v. Insurance Co., 17 Mo. 247; Koontz v. Insurance Co., 42 Mo. 126, 97 Am. Dec. 325; Insurance Co. v. Lawrence, 4 Mete. (Ky.) 9, 81 Am. Dec. 521 ; Merrill v. Insurance Co., 72> N. Y. 452. 29 Am. Rep. 184; Schuster v. Insurance Co., 102 N. Y. 260, 6 N. E. 406. And such we understand to be the effect of the decision in Clark v. Insurance Co., 6 Cush. (Mass.) 342, 53 Am. Dec. 44. There the policy, for a gross premium, insured the plaintiff's "tavern house," to the amount of $2,200, and his shop, valued at $300. The act of incorporation of the defendant provided "that, when any property insured by this company shall in any way be alienated, the policy shall thereupon be void, and should be surrendered to the directors, to be canceled." The shop was alienated by the assured, and the "tavern house" was after- wards destroyed by fire. It was held that the alienation of the shop did not prevent a recovery for the loss of the tavern. The court say : "The next ground taken by the defendants is that the shop, which was insured in the same policy, had been alienated by the plaintiff, and that this is such an alienation as will avoid the policy. But the shop was valued separately, and was insured separately, as a separate, 21 Part of the opinion is omitted and the statement of facts is rewritten. WHEN THE CONTRACT IS DIVISIBLE 41 distinct, independent subject of insurance, though insured in the same policy. The alienation of the shop would no doubt avoid the policy pro tanto, and only pro tanto. The tavern house and the shop being- insured separately, the alienation of one would no more affect the in- surance on the other than if they had been insured in separate policies." In the case of Insurance Co. v. Walsh, cited above, two houses were embraced in the same policy, and insured for different sums for a gross premium paid, the policy providing that, if the insured premises should remain vacant for a certain time without notice to the com- pany, the policy should become void ; and it was held that the fact that one of the buildings remained thus vacant without notice to the insurer would not invalidate the policy as to the other. The action in Loehner v. Insurance Co., 17 Mo. 247, was upon a fire policy covering a dwelling house and furniture therein. It was held : "A policy may be void in part and valid in part, if the subject-matter is capable of being separated ; and, although a failure to disclose an incumbrance would avoid the policy as to the house insured, it would not avoid it as to furniture insured in the same policy, but separately appraised, unless the fact concealed was material to the risk." Koontz V. Insurance Co., 42 Mo. 126. 97 Am. Dec. 325, was a case where a policy of insurance upon a certain livery stable was made to cover both personal and real property, and the application of the as- sured contained a false warranty touching incumbrances upon the real estate ; and where it further appeared that the personal property was separately appraised, and nothing showed that the representations as to the incumbrances upon the stable formed any inducement to the execution of the policy covering the personal property. The court held that the assured might recover the value of the latter, although the policy was rendered void as to the real estate by reason of such false warranty. The case of Insurance Co. v. Lawrence, 4 Mete. (Ky.) 9, 81 Am. Dec. 521, is much like the one before us. There, the appellant, (com- pany,) for a premium of $14, insured J. B. Lawrence & Co. against loss by fire from the 25th of May, 1858, to the 25th of May, 1859, "to the amount of $200 on their frame storehouse, situated on the Ohio river, in Gallatin county, Kentucky, known as 'Jackson's Landing,' and $1,200 on the stock of goods in said storehouse." The premises and goods were destroyed by fire on the 5th of April 1859, and suit was brought on the policy for the value of the goods, but not for the loss of the building. One defense was that Lawrence & Co., when they obtained the insurance, represented themselves to be the owners of the house, when in fact they were not, which, by the terms of the policy, rendered it void. But the court held, "in the absence of proof that the plaintiffs procured the insurance upon the house for a fraudu- lent purpose, or that their supposed interest in the house induced the defendant to insure the goods, that this does not vitiate the insurance on the goods;" and the plaintiffs had judgment. 42 THE NATURE AND REQUISITES OF THE CONTRACT In the case of Merrill v. Insurance Co., 73 N. Y. 452, 29 Am. Rep. 184, the policy, for one premium, insured the plaintiff against loss or damage by fire to the amount of $6,000, as follows: "$1,000 on dwell- ing house and wood house, if attached ; $300 on household furniture therein; $200 on provisions, etc., therein," and various other items of property described in the policy, each having a sepecific valuation therein set forth. The policy contained a condition that, if the prop- erty insured was incumbered by mortgage or otherwise, unless so rep- resented in the application, the policy should be void ; also, that if it should become incumbered by mortgage, judgment, or otherwise, policy should be void until the written consent of the company was obtained. The real estate was incumbered, and that fact was set up in defense of the action on the policy ; and it was claimed by the defendant that it not only avoided the policy as to the building insured, but also as to the chattel property ; and whether it did or not it was conceded depended upon whether the contract was entire or severable. In a well-consid- ered opinion Judge Folger, after commenting upon various decisions on the subject, discusses the question on principle, and in the course of the discussion says : "It is plain from the fact of a separate valuation having been put by the parties upon the different subjects of the insurance that they looked upon them as distinct matters of contract. The eft'ect of a sep- arate valuation was to make them so. No matter how much value there might have been in any one of those subjects, even to the whole amount of the policy, had it been totally destroyed, the defendants could not have been made liable to an amount greater than that named in the poHcy as the valuation of it. Thus it was, at the inception of the contract, distinguished from the other subjects of insurance, and the contracts so made as to be capable of application to it alone. So, too, if but one of the subjects of insurance had been burned, the de- fendants (ceteris paribus) could not have avoided liability to pay for that up to the value put upon it ; and, if not wholly destroyed, but so far damaged as to reach in deterioration the value put upon it in the policy, the defendants would have to pay that damage ; and that sub- ject would no longer form a part of the general matter insured), and hence not a part of the continuing contract. Thus there would of necessity be a severance of the contract worked out by the operation of its own terms. Again, the principle, in the case of a contract about several things, but with a single consideration in gross, is this : that we are not able to say that the party would have agreed for one, or for more than one, yet less than all of them, without he could at the same time acquire a right to have them all. But our daily experience and observation shows that an insurance company is as ready to in- sure buildings without insuring the contents, and the contents without insuring the buildings, as to insure them together; so that the prin- ciple does not press so hard in considering such a contract as that be- fore us. Besides, it is the rule that an agreement embracing several WHEN THE CONTRACT IS DIVISIBLE 43 particulars, though made at one time, and about one affair, may yet have the nature and operation of several different contracts; as, when they admit of being- separately executed and closed, as we have in- stanced just above, where the contract may be taken distributively, each subject being considered as forming the matter of a separate agreement after it is so closed. Per Washington, J., Perkins v. Hart, 11 Wheat. 237-251 (6 L. Ed. 463), Rodemer v. Hazlehurst, 9 Gill (Md.) 294. In our judgment, this rule applies fitly to the contract in hand. It admits of being separately executed and closed as to each of the separate subjects of insurance. When one species of the property insured is burned, a contract to insure as to that may be performed as to that alone. The insured has paid the premium. A lire doing damage to that subject, the damage may be paid for by the insurer, and that subject be thus put out of the contract, while it remains in fieri as to all the other subjects named in it. When there are several subjects of insurance (as there are fourteen here) separately valued, on which a gross sum is insured not exceeding the aggregate of that valuation, for the insurance of which a premium in gross is paid, it is easy to see what is the rate of premium on the whole valuation, and what is the amount of premium on each subject insured. This being so, it seems fanciful to say that, if the facts thus easily reached were stated in detail in the contract, it would be severable, while, not being specifically spread out, it is entire. If there were anything in the terms or nature of the particular contract, or in the circumstances of the case, or in the nature of the different subjects of the insurance, from which it was to be inferred that the insurer would not have been likely to have assumed the risk on one of several of them, unless induced by the advantage and profit of having a risk on all, that would be a rational cause for deeming the contract entire. But when, for aught that appears, it is indeed as likely that the insurer would have taken a risk upon any one or any few of the subjects insured, at the sanie rate of premium as upon the whole, and has in the policy so separated the subjects, and so singled them out by a specific valuation, as that there is no difficulty in distinguishing the subject from the rest, and closing the contract as to that separately, and carrying forward the contract as to the rest, it does result that the contract is separable in practical operation, and hence, in law. And so, also, that, though there may have been some conduct of the insured as to some of the property, not evil in itself, but working a breach of a condition in its letter, the effect of that breach may be confined to the insurance upon that property, the contract as to that be held avoided, and as to the other subjects be held valid." Forfeitures do not readily find favor in the law, and courts are reluctant to declare and enforce them, if by reasonable interpretation it can be avoided. It is not likely that in this case the small amount of insurance on the storehouse constituted anv inducement for the 44 THE NATURE AND REQUISITES OF THE CONTRACT insurance placed upon the stock of goods ; and it does not appear that the rates upon these classes of property were different, nor how it could make any difference if they were, since the only effect, in this respect, of holding the contract severable, is that the insurance company is enabled to retain the whole of the premium, which it ac- cepted as the consideration for the insurance of all of the property, for the lesser risk on part of the property only; and it is not to be presumed that the premium for the insurance of part only of the property would exceed that accepted for the risk on all of it. It was not shown at the trial that the plaintiffs were guilty of any misrepre- sentation or intentional concealment concerning the title to the land on which the storehouse stood. No inquiry was made of them about it. The subject was not a matter of negotiation between the parties in effecting the insurance, and the plaintiffs were ignorant of the condition, for the breach of which the company claims the right to forfeit the whole policy. If the position taken by the company be correct, the condition was broken when the policy issued, and there was, therefore, no consideration for the premium that was paid, for no risk attached; and yet the company, while asserting the invalidity of the contract, holds onto its fruits. This is not a very consistent position, nor a very just one. A just result is reached, and, as we think, the lawful one, by holding, as we do, that the contract of in- surance in this case is severable, and the breach of the condition as to the title of the land does not defeat the plaintiff''s right to recover for the loss of the stock of goods insured by the policy in suit. It follows that, in our view of the case, the court erred in the instructions we have referred to, for which error the judgment is reversed. TRABUE V. DWELLING HOUSE INS. CO. (Supreme Court of Missouri, 1894. 121 Mo. 75, 25 S. W. 848, 23 L. R. A. 719, 42 Am. St. Rep. 523.) Gantt, p. J." * * * flig defendant company, by the policy of insurance on which this suit is based, insured Anthony E. Trabue against loss by fire or lightning for a" term of five years, beginning at noon on the 20th day of April, 1888, in the sum of $800, on the dwell- ing house occupied at the time by said Trabue, and the sum of $250 on the contents of said dwelling house, and also $200 on other prop- erty which escaped the fire. The insured was the owner of the in- sured property. On the 1st day of February, 1889, said insured died at his place of residence. * * * f j^g insured left a will, by which he devised to his wife, Christiana Trabue, one-third of his estate dur- ing her widowhood, and the residue and remainder he devised to his 22 Part of the opinion is omitted. WHEN THE CONTRACT IS DIVISIBLB 45 lour children, his only descendants, plaintiffs herein, in equal parts. * * * The property was destroyed by fire October 16, 1890. At the time of the loss the plaintiff Christiana Trabue was occupying the house as a dwelling house. Three of her children — the plaintiffs Tay- lor J. Trabue, Kitty R. Trabue, and INIary G. Trabue— were living with her as a part of her family. Prior to said loss the plaintiffs, in an ex parte proceeding in the Ralls circuit court, had the real estate devised to them by said Trabue partitioned among them, and that portion on which said dwelling house stood, including said house, was set oft' to said Christiana Trabue dur- ing her natural life or widowhood. Notice and proof of loss were given, and the property was worth the amount claimed. The per- sonal property insured was in said house in the possession of Chris- tiana Trabue at the time of the loss. * * * The policy contained this clause: "This entire policy shall be void if any change (other than by death of the insured) takes place in the interest, title, or pos- session of the subject of insurance, whether by legal possession or judgment or by voluntary act of the insured or otherwise." The circuit court gave judgment for plaintiffs for the whole amount of the policy, and defendant appealed to the St. Louis court of ap- peals, where the judgment was reversed without remanding, but, the decision being in conflict with the decision of the Kansas City court of appeals in Crook v. Insurance Co., 38 j\Io. App. 582, the cause was certified to this court under the mandate of section 6 of the constitu- tional amendment of 1884. The St. Louis court of appeals held the policy was avoided as to the dwelling house by the transfer of the title thereto by the partition proceedings and judgment therein between the devisees of Anthony E. Trabue, the loss having occurred after that decree. * * * As this judgment, on its face, only affected the real estate covered by said policy, the plaintiffs insist they are entitled to recover the in- surance on the personal property, as to which there was no breach of any condition in the policy; but the defendant insists that by the use of the terms "entire policy" in said clause the whole policy is avoided for a breach in any respect. If defendant's contention be correct, it is a most appropriate subject for legislative correction at the earliest opportunity. But is this clause properly construed by the court of appeals? As early as the case of Loehner v. Insurance Co., 17 Mo. 247, it was held by this court that where a firm obtained insurance upon a storehouse and a stock of goods therein in separate amounts, and the insurance on the house was avoided because the interest in the house was incorrectly described in the application, the policy was not vitiated as to the goods ; in other words, this court then held that such a con- tract was divisible. Afterwards, in Koontz v. Insurance Co., 42 Mo. 126, 97 Am. Dec. 325, the action was on a policy by defendant on a livery stable, the live stock, and personal property, each separately 46 THE NATURE AND REQUISITES OF THE CONTRACT Stated and appraised. In that case Judge Wagner reviewed the cases, and admitted there was a conflict between the decisions, but held that Loehner v. Insurance Co., 17 ^lo. 247. was a binding authority, and "cheerfully followed it, because this court regarded it as in consonance with justice." These two cases have never been overruled, or their authority questioned, until the decision of Insurance Co. v. Barnett, 1Z Mo. 364, 39 Am. Rep. 517. The very able and learned judge of the St. Louis court of appeals who prepared the opinion in Hollo way v. Insurance Co., 48 Wo. App. 1, considered Insurance Co. v. Barnett as the controlling decision, and followed it, as recjuired by the constitution of his court; and in this case Thompson, J., treated the point as decided by the HoUoway Case, and as clear of all difficulty. Since then the Kansas City court of appeals, in Shoup v. Insurance Co., 51 Mo. App. 286, has followed Judge Rombauer's decision in the Holloway Case ; so that it becomes very important to determine the effect of the Barnett Case. An examination of that case will show that the remarks of the learned judge who delivered that opinion were entirely "obiter dicta" as to this question of the divisibility of the contract. He says, "if such a stipulation was in fact in the policy," the plaintiff would be en- titled to the full relief prayed; so that it is clear no such clause was before the court; and, while his opinion is entitled to respect on the supposed case, it is equally clear that the court did not over- rule the decision in Loehner's Case or Koontz's Case, but, on the contrary, on the only point that was in fact before the court, those cases were treated as binding authority. Our conclusion is that so much of Judge Norton's opinion as referred to the entirety of the policy in the Barnett Case was obiter, and did not overrule the Koontz and Loehner Cases. But, independent of the binding authority of those cases, we think they were correctly decided. In both of those cases "the policy" was to be void upon certain conditions. Here it is said "the entire policy" shall be avoided. "The policy" includes all and every part of it, and the insertion of the word "entire" cannot add anything more to it, so that this mere verbal addition has not, in our opinion, changed the law of the case. The cases cited by Judge Norton from Pennsylvania, Maine, Maryland, and other states are based upon the case of Friesmuth v. Insurance Co., 10 Cush. (Mass.) 587. By the laws of Massachusetts the policy in that case was a lien on the in- terest of the assured in both the building and personal property in- sured. In holding that such a policy was an indivisible contract, Judge Bigelow put it upon the ground "that the consideration was regarded as an entirety, for which the deposit note was given, and the liability of the assured to assessments on that amount in case of losses." He said: "They [the company] had a right to look to their lien on each and all of different kinds of property insured by them for the security of the whole amount of the note;" and so WHEN THE CONTRACT IS DIVISIBLE 47 that policy said on its face. Upon the facts of that case no ques- tion can be made of its correctness. The lien was given on all the property. A false representation afifected all of the lien. On the same principle stand the subsequent cases of Brown v. Insurance Co., 11 Cush. (Mass.) 281; Gould v. Insurance Co., 47 Me. 403, 74 Am. Dec. 494. In Gottsman v. Insurance Co., 56 Pa. 210, 94 Am. Dec. 55, Judge Thompson cites the Friesmuth Case, and those based on that case, without, however, adverting to the statutory lien. That other courts have adopted this construction of the entirety of the contract is not questioned, but, entertaining for them, as we do, all due respect, we see no reason for departing from our own de- cisions when they are based upon what appears to us the soundest reason. When one applies for distinct and separate insurance, a part on real estate, a part on personal property, he can require two separate policies. The accidental circumstance that for convenience merely they are included in one policy does not merge them into one. If the goods alone were destroyed, the terms of the policy applying to them alone could be made the basis of recovery. The supposed danger of making a contract for the parties is not in the case. The question is whether, according to legal principles, the contract made is severable or entire. There is nothing to indicate the company would not have assumed the risk on the house without taking one also on the goods, nor vice versa. The contract as to each admitted of being separately executed as to the separate subjects of insurance. The application is for separate insurance, and it is kept distinct in the policy. Nor are the Cases of Koontz and Loehner, supra, unsupported by authorities in other states. In Insurance Co. v. Lawrence, 4 Mete. (Ky.) 9, 81 Am. Dec. 521, the supreme court of Kentucky held that when insurance was obtained upon a storehouse and stock of goods, in an action for loss on the goods the fact that the insurance on the house was void because the interest on the insured was incorrectly stated did not vitiate the policy on the goods, but it would be treated as a separate policy; citing Loehner v. Insurance Co., 17 Mo. 247, with approval. In Clark v. Insurance Co., 6 Cush. (Mass.) 342, 53 Am. Dec. 44, a policy made separate insurance on two buildings, with a clause declaring it void if the insured should alienate the property. It was held that alienation of one building did not avoid it as to the other. In Merrill v. Insurance Co., 7Z N. Y. 452, 29 Am. Rep. 184, the policy was upon several separate and distinct classes and species of property, each, as in the case at bar, separately valued ; the sum total of the valuation was insured for a premium in gross ; the con- tract was held severable. Judge Folger reviewed all the cases, in- cluding the two cases of Loehner and Koontz, supra, decided by this court, and in a most satisfactory manner sustained the reasoning of those cases upon the analogies of the law and the proper construction of the contract. Johnson v. Johnson, 3 Bos. & P. 162; Mayfield v. 48 THE NATURE AND REQUISITES OF THE CONTRACT Wadsley, 3 Barn. & C. 327; Goring v. Insurance Co., 10 Ont. 236; Insurance Co. v. Walsh, 54 111. 164, 5 Am. Rep. 115; Date v. In- surance Co., 14 U. C. C. P. 548; Deidericks v. Insurance Co., 10 Johns. (N. Y.) 234; Trench v. Insurance Co., 7 Hill (N. Y.) 122; Phillips V. Insurance Co., 46 U. C. Q. B. 334; Heacock v. Insurance Co. (unreported), referred to in Merrill v. Insurance Co., 73 N. Y. 462, 29 Am. Rep. 184; Moore v. Insurance Co., 69 Va. 508, 26 Am. Rep. 373. The Merrill Case came under review in 1886 in Schuster v. In- surance Co., 102 N. Y. 260, 6 N. E. 406, and was unanimously sus- tained. In 1891, in Pratt v. Insurance Co., 130 N. Y. 206, 29 N. E. 117, the question again recurring, the court of appeals says: "Whatever may be the rule elsewhere, it is settled in this state that where insurance is made on different kinds of property, each sep- arately valued, the contract is severable, even if but one premium is paid, and the amount insured- is the sum total of the valuations." See, also. Smith v. Insurance Co., 47 Hun (N. Y.) 30; Woodward V. Insurance Co.. 32 Hun (N. Y.) 365; Insurance Co. v. Fairbank, 32 Neb. 750, 49 N. W. 711, 29 Am. St. Rep. 459. In the very recent case of Coleman v. Insurance Co., 49 Ohio St. 310, 31 N. E. 279, 16 L. R. A. 174, 34 Am. St. Rep. 565, the supreme court of Ohio aligns itself in this conflict of authority on the side taken by this court in Loehner v. Insurance Co., 17 Mo. 247, and Koontz v. Insurance Co., 42 Mo. 126, 97 Am. Dec. 325, holding such contracts as this severable. Vide, also, Rogers v. Insurance Co., 121 Ind. 570, 23 N. E. 498; Insurance Co. v. Spankneble, 52 111. 53, 4 Am. Rep. 582; Quarrier v. Insurance Co., 10 W. Va. 530, 27 Am. Rep. 582; Insurance Co. v. Schreck, 27 Neb. 527, 43 N. W. 340, 6 L. R. A. 524, 20 Am. St. Rep. 696. When this contract was made, then, it was the settled rule of decision in this state that such a contract as this was divisible or severable, although the policy had a clause which would avoid the whole contract. The addition of the word "entire," given its utmost latitude, could not avoid any more than the whole policy; hence it added nothing to the policy. Forfeitures are not favored in the law, and will not be enforced if any reasonable interpretation can be made which will prevent one. No reason is given here why a forfeiture should be enforced, except the insertion of the word "entire" into the policy. The risk was not increased. The premiums were taken, kept, and enjoyed for insurance on the personal property. The policy as to the house was avoided, doubtless, through the ignorance of the insured ; but they have violated no condition as to this personal prop- erty. Holding, then, as we do, that this was a divisible contract, it results that the legal effect is the same as if two distinct and separate policies were issued, and, so reading the contract, we do not reject the word "entire" at all, but apply it to that policy, or portion of this policy, which the insured has forfeited by the change of title WHEN THE CONTRACT IS DIVISIBLK 49 to which alone this clause refers; and it avoids that "entire" policy, and not the policy in which no condition or warranty has been broken. This construction logically follows from the divisibility of the con- tract, and best accords with fair dealing and the presumed intention of the parties. Our conclusion is that neither the law nor common honesty will permit the defendant to avoid paying the loss as to this personal property. The judgment of the St. Louis court of appeals is af- firmed in so far as it adjudged the policy on the dwelling house avoided, and reversed in so far as it avoids the insurance on the per- sonal property, and the cause is remanded to that court with directions to affirm the judgment of the circuit court to the amount of $250, the amount of insurance on personal property and piano, and reverse it as to the remainder of said judgment. The costs of the appeal to this court are adjudged to plaintiffs, and the costs of the appeal to the St. Louis court of appeals are adjudged to defendant, as also the costs in the circuit court, after the offer of judgment was made; the other costs to plaintiffs. All concur. TAYLOR v. ANCHOR MUT. FIRE INS. CO. (Supreme Court of Iowa, 1902. 116 Iowa, 625, 88 N. W. 807, 57 L. R. A. 328, 93 Am. St. Rep. 261.) Action to recover for a loss within the terms of a policy of fire insurance. There was a judgment on a verdict for plaintiff, from which defendant appeals. McClain, J.^^ The application on which the policy was issued represented that insured owned 93 acres of land, "on which the prop- erty to be insured is located," of the value of $35 per acre; that there was $900 incumbrance thereon; that he had a fee-simple title to the land "on which the above-described property to be insured is situated" ; and that his title was undisputed to the property proposed for insurance ; and these representations were, in the policy, war- ranted to be correct. The policy specifies the risk assumed as fol- lows : "$250 on frame dwelling house ; $250 on household furniture, beds, and bedding while therein; $50 on family wearing apparel therein; $25 on sewing machines while therein; $50 on silver and plated ware while therein, and family jewelry, books, pictures, picture frames; $100 on work horses, mules, and colts on premises, and against loss by lightning, at large or in use, not to exceed $75 on each; $100 on cattle on premises; $100 on grain in building; $25 on wagons, carriages, and harness." It is provided in the policy not only that it shall be void in case of false representations in the 23 Part of the opinion is omitted and the statement of facts is rewritten. CooLET Ins. — 4 50 THE NATURE AND REQUISITES OF THE CONTRACT application, or in case of change in title or possession, but also that it shall be void after any sale, conveyance, or incumbrance of the property insured, without the consent of the company. * * =^ Subsequently to the issuance of the policy the insured gave a chattel mortgage on some of the cows and horses covered by the policy, and this is relied on by defendant as a breach of condition, avoiding the entire policy, and therefore preventing recovery for the loss, which was of the dwelling house and furniture therein. We may concede that the giving of the chattel mortgage was a breach of the condition of the policy as to the property covered by the mort- gage, and we are therefore at once confronted with the question whether a breach of condition as to a part of the property covered by the policy will avoid the policy as to other property enumerated, and covered by a separate stipulation thereof, as to the amount of the risk assumed on such piK^perty. It will be seen at once that if the house and furniture had been included in one policy, and the animals in another, a breach of the condition of the policy covering the animals would not prevent recovery under the policy covering the dwelling house and furniture; but it is contended that, where an insurance on different classes of property is effected by a policy which states a gross premium, the contract is entire, although the risks assumed on the different classes of property are distinct and separate. On this question the authorities are in hopeless confusion, and there are cases holding, without qualification, to the rule that the entirety of the premium is conclusive as to the entirety of the con- tract, so that a breach of condition as to one class of property will avoid the policy as to all, notwithstanding the two classes are in- cluded in separate clauses, as to the amount of loss to be paid. On the other hand, there are cases in which it is held that if the risks are separately enumerated the policy is divisible, notwithstanding the entirety of the premium. We think, however, the great weight of authority at the present time is to the effect that the question is one of the intention of the parties, and that, if the condition of the property is such that the risk as to one class of property would be affected by the destruction of the other, then it must be presumed that the breach of condition as to one class is a violation of the con- tract, also, as to the other class, because the company would not have insured the one except upon the condition imposed as to the other, while, if the loss of the one class of property could not affect the risk as to the other, then it must be presumed that there was no intention that the conditions as to one should apply to the risk as to the other. In support of this construction we find the following pertinent lan- guage used by the supreme court of New York in the case of Merrill V. Insurance Co., 73 N. Y. 452, 29 Am. Rep. 184: "When there are several subjects of insurance (as there are fourteen here), sep- WHEN THE CONTRACT IS DIVISIBLE 61 arately valued, on which a gross sum is insured, not exceeding the aggregate of that valuation, for the insurance of which a premium in gross is paid, it is easy to see what is the rate of premium on the whole valuation, and what is the amount of premium on each subject insured. This being so, it seems fanciful to say that, if the facts thus easily reached were stated in detail in the contract, it would be severable, while, not being specifically spread out, it is entire. If there were anything in the terms or nature of the particular contract, or in the circumstances of the case, or in the nature of the dilTerent subjects of insurance, from which it was to be inferred that the in- surer w^ould not have been likely to have assumed the risk on one or several of them unless induced by the advantage and profit of having a risk on all, that would be a rational cause for deeming the contract entire. But when, for aught that appears — when, in- deed, it is as likely that — the insurer would have taken a risk upon any one or any few of the subjects insured at the same rate of pre- mium as upon the whole, and has in the policy so separated the sub- jects, and so singled them out by a specific valuation, as that there is no difficulty in distinguishing one of the subjects from the rest, and closing the contract as to that separately, and carrying forward the contract as to the rest, it does result that the contract is severable in practical operation, and hence in law. And so. also, that, though there may have been some conduct of the insured as to some of the property, not evil in itself, but working a breach of a condition in its letter, the efifect of that breach may be confined to the insurance upon that property, the contract as to that may be held avoided, and as to the other subjects held valid. There is another rule — that in con- struing the consideration, as entire or distributed, the law will be guided by a respect to general convenience and equity, and by the good sense and reasonableness of the particular case ; for it must be supposed that it was the intention of the parties that such a con- struction should take place, in the occurrence of contingencies not contemplated and provided for at the making of the contract." In Insurance Co. v. Pickel, 119 Ind. 155, 21 N. E. 546. 12 Am. St. Rep. 393, the court uses this language : "In this case we are unable to see how the risk on the house named in the second and third paragraphs of the answer could affect the risk on the barn or the personal property, for the destruction of which the suit was pros- ecuted. The risks on the different items of property named in this policy are many of them separate and distinct. It is true that the risk on the household goods in the house would be affected by what- ever w^ould affect the risk on the house; so the risk on the grain in the barn would be affected by whatever would affect the risk on the barn ; but we think it impossible to conceive how the risk on the barn could affect the risk on the house, or vice versa." And it was accordingly held in another action between the same parties (Pickel v. Insurance Co., 119 Ind. 291, 21 N. E. 898) that while, under the 52 THE NATURE AND REQUISITES OF THE CONIRACT former case, the policy should be treated as several with reference to the different buildings, it was indivisible with reference to the risk on the house, and personal property contained therein, although they were enumerated under separate clauses in describing the loss to be paid ; and the doctrine of these cases is reiterated by the same court in Geiss v. Insurance Co., 123 Ind. 172, 24 N. E. 99, 18 Am. St. Rep. 324, where it was held that although different classes of personal property, involving the same risk, were separately enumer- ated, a breach of condition as to one would be a breach as to all. To the same effect, it was held in Loomis v. Insurance Co., 17 Wis. 87, 45 N. W. 813, 8 L. R. A. 834, 20 Am. St. Rep. 96, that, "although the insurance is distributed to the different items of insured property, the contract is indivisible if the breach of contract as to an item of the property affects, or may reasonably be supposed to affect, the other items by increasing the risk thereon." In support of the same general proposition, see Loehner v. Insurance Co., 17 Mo. 247; Koontz V. Insurance Co., 42 Mo. 126, 97 Am. Dec. 325; Insurance Co. V. Lawrence, 4 Aletc. (Ky.) 9, 81 Am. Dec. 521 ; Insurance Co. V. Crawford, 121 Ala. 258, 25 South. 912, 17 Am. St. Rep. 55; As- surance Co. V. Glenn, 13 Ind. App. 365, 40 N. E. 926, 41 N. E. 847, 55 x\m. St. Rep. 225. A recent case strongly supporting the proposi- tion that the contract is indivisible, and a breach of condition as to one class of property will avoid it as to all the property covered, is Insurance Co. v. Knight, 111 Ga. 622, 36 S. E. 821, 52 L. R. A. 70, 78 Am. St. Rep. 216. But it is unnecessary to elaborate by quotations from or citations of the many cases in which this question has been considered. The citations found in several of the recent cases above referred to cover the whole ground. It may be said, further, that several cases in which the courts have announced the unqualified rule that a breach of condition as to one class or item of property covered by the policy will constitute a breach of the contract as to all the property covered are cases where the dift'erent classes or items of property were so situated with reference to each other that the risk as to one con- stituted a risk as to all, and in these cases the same result might have been reached by adopting the rule which we have above an- nounced as supported by the weight of authority. See, as illustra- tions, Lee V. Insurance Co., 3 Gray (^lass.) 583; Association v. Williamson, 26 Pa. 196; Insurance Co. v. Hamilton, 82 Md. 88, 33 Atl. 429. 30 L. R. A. 633, 51 Am. St. Rep. 457; Cuthbertson v. In- surance Co., 96 N. C. 480, 2 S. E. 258. It may be noticed, also, that the North Carolina court, in a later case than that last cited, although not involving the same question, has held that where the policy classifies and specifies numerous items of property, and the sums of money for which they are severally insured, the contract is not single, but severable. Pioneer Mfg. Co. v. Phoenix Assur. Co., 110 N. C. 176, 14 S. E. 731, 28 Am. St. Rep. 673. WHEN THE CONTRACT IS DIVISIBLE 53 The question has not been fully discussed in any cases which have been decided by this court. In Garver v. Insurance Co., 69 Iowa, 202, 28 N. W. 555, the proposition is broadly laid down that where the premium is in gross the contract is not divisible, and a breach of warranty as to a part of the property will vitiate the policy as to the whole. But it is to be noticed that there the policy covered a barn and certain horses, and the court might well have held that the risk, so far as the horses were concerned, was involved in any risk affecting the barn; and the conclusion was therefore in accordance with the rule which we think to be the proper one, although we do not regard the reason given as satisfactory. In Kahler v. Insurance Co., 106 Iowa, 380, 76 N. W. 734, the view expressed in the Garver Case was qualified so as to leave the way open for adopting the position which we now take. We therefore hold on this question, as involved in the case before us, that entirety of premium does not necessarily prove that the contract is indivisible, and that where it appears from the terms of the policy that distinct items or classes of property were separately insured the policy may be valid as to one item or class, although it is invalid as to another item or class by reason of breach of conditions of the policy with reference thereto, provided it appears, also, that the risk which it was intended to exclude by the condition which is broken does not apply to the other items or classes of property. In this case a chattel mortgage on the cows and horses could not in any way affect the nature of the risk as to the dwelling house and contents, and therefore we find that a breach of a condition in the policy as to the one class of property did not invalidate the insurance as to the other. * * * Affirmed.^* ■ 2 4 As to entirety or divisibility of rislv. see, also. Havens v. Home Ins. Co.. Ill Tnd. 90, 12 N. B. 137. 60 Am. Rep. 689 (1887); Plicenix Ins. Co. v. Pickel, 119 ind. 155. 21 N. E. 546, 12 Am. St. Rep. 393 (1889). Compare, Clinton v. Norfolk Mutual Fire Ins. Co., post, p. 68. 54 PARTIES PARTIES I. Contracts Made by Insurers Not Complying with Statutory Requirements ^ PENNYPACKER v. CAPITAL INS. CO. (Supreme Court of Iowa, 1890. 80 Iowa, 56, 45 N. W. 408, 8 L. R. A. 236, 20 Am. St. Rep. 395.) Action on a policy of fire insurance on property situated in Penn- sylvania. The defendant answered alleging that the policy was void because the company, an Iowa corporation, had not complied with the laws of Pennsylvania in relation to foreign insurance companies. The requirements of the laws of Pennsylvania are "that, before any insurance company not of that state shall be permitted to transact any insurance business within the state of Pennsylvania, or to issue any policies of insurance upon property within said state, either by itself or agents, a certificate must be obtained of the insurance com- missioner of said state certifying that it has so complied with the laws of Pennsylvania, and is authorized to transact such business within the state ; that any company, not of said state, that shall do an insurance business within said state without having first qualified itself as provided, and without first receiving the certificate required, shall pay a fine and penalty for such offense to said state." The plaintiff demurred to the answer on the following grounds : (1) The defendant is estopped from alleging its want of authority to do business in the state of Pennsylvania; (2) the statute of Pennsyl- vania does not render the contract of insurance referred to void ; (3) the said count shows that the defendant is liable to a penalty for doing an unauthorized business in the state of Pennsylvania, but shows no defense to the claim of the plaintiff herein ; (4) it does not appear that the alleged contract of insurance was made in the state of Pennsyl- vania, and therefore the laws of Pennsylvania regarding insurance would have no effect ; (5) the defendant having issued to the plaintiff its policy of insurance, cannot now allege a violation of law on its part to avoid its liability under said policy. This demurrer was sustained, and defendant excepted. There was a judgment for plaintiff and defendant appeals. Given, J.^ The questions raised and argued on the demurrer may be resolved into the single inquiry, is the contract of insurance sued 1 For disaission of principles, see Vance on r,]surance, § 39. See, also. Cooley. Briefs on the Law of Insurance, vol. 1, pp. 5S1-594. 2 Part of the opinion is omitted and the statement of facts is rewritten. CONTRACTS NOT COMPLYING WITH STATUTES 55 Upon void? It is alleged that it is void because the defendant had not and was not entitled to qualify, under the laws of Pennsylvania, to contract insurance upon property in that state at the time this policy was issued, and because the plaintiff received it knowing that fact. For the purposes of the demurrer these allegations are to be taken as true, and we are to say whether, being true, they render the policy void. Appellant's contention is that the contract was made, and policy issued and accepted, in violation of the laws of Penn- sylvania, as set out in the answer, and that, the plaintiff having re- ceived the policy knowing that fact, the parties are in pari delicto, and the law will not enforce the contract at the suit of either. Ap- pellee contends that the policy was issued and is payable in Iowa, and its validity is therefore to be determined by the laws of Iowa, and that the statute set out did not forbid the issuing the policy in suit, nor make the same void, but simply declares the company liable to a fine for issuing it. It does not appear from the answer, nor from it and the petition, where the contract was made, premium paid, or policy delivered, nor where it is payable. From the facts that the company is of Iowa, and the insured property in Pennsylvania, we may infer the contract to have been made in either state as readily as the other. Such being the state of the pleadings, we are not called upon to deter- mine v/hat effect the law of Pennsylvania would have upon this policy as an Iowa contract. The principle that contracts made in violation of law are void is too well established to require citations. "The well-settled general rule is that, when a statute prohibits or attaches a penalty to the doing of an act, the act is void, and will not be enforced, nor will the law assist one to recover money or property which he has ex- pended in the unlawful execution of it. Or, in other words, a penalty implies a prohibition though there are no prohibitory words in the statute, and the prohibition makes the act illegal and void. * * * But, notwithstanding this general rule, it must be apparent to every legal mind that, when a statute annexes a penalty for the doing of an act, it does not always imply such a prohibition as will render the act void." Pangborn v. Westlake, 36 Iowa, 548. The law of Penn- sylvania, as set out, provides that no insurance company not of that state shall insure property therein unless it has a certain amount of capital stock, has complied with certain requirements, and has ob- tained a certificate from the insurance commissioner that it is qualified to do business in that state, and that any such company that shall do business in that state without having first qualified itself, and without first having received a certificate, as prescribed, from the insurance commissioner, "shall pay a fine and penalty for such of- fense." The evident purpose of such a law is the protection of those paying for insurance upon property in that state. The prohibition and penalty is against the company only. No duty is required of 56 PARTIES the insured, and no act upon his part expressly prohibited. There is nothing in the law declaring what effect it shall have upon policies issued and accepted as this is alleged to have been. A number of cases are cited by appellant where, in actions brought by the insurance company to enforce rights under the contract of insurance, it was held that statutes similar to that set out were pro- hibitory and the contracts void; but in none of those cases is it held that they are void as to the assured. The Manistee, 5 Biss. 382, Fed. Cas. No. 9,027, is a case wherein the statute of Illinois was under consideration. That statute required foreign insurance companies to produce certain statements, and to procure authority from the auditor of state to transact business within the state, and declare it unlawful for any agent to do business without having first complied wuth those laws. It was provided that, upon conviction for violating these re- quirements, punishment by fine or imprisonment, or both, may be imposed. The court says: "Those statute laws do not declare void policies issued by foreign companies, through a local agent, in dis- regard or violation of them. The object of these statutes was for the security of citizens doing business with such companies, by bringing them as near as possible to local corporations, and also as a provision for revenue. Where a statute prohibits or annexes a penalty to its commission, the act is made unlawful; but it does not follow that the unlawfulness of the act was meant by the leg- islature to avoid a contract made in contravention of it. Where a statute is silent, and contains nothing from which the contrary can properly be inferred, a contract in contravention of it is void. But the whole statute must be examined in order to decide whether or not it does contain anything from which the contrary can be prop- erly inferred. There is no penalty pronounced against a person for obtaining a policy from, or doing business with, the company that has not complied with the requirements of those statutes." Insurance Co. v. Mc^Millen, 24 Ohio St. 67, is somewhat in point. That was an action upon a policy of life insurance issued by the plain- tiff in error. The company claimed that its failure to comply with a statute similar to that under consideration rendered the policy void. The court says: "Whether the statute was meant to invalidate poli- cies issued by companies in contravention of its provisions is to be determined from a consideration of the statute as a whole. The object of the act is not to make the business of life insurance unlawful. The statute is designed for the protection of policy-holders and others dealing with insurance companies. To this end, it is made unlawful for persons to act on behalf of such companies until the provisions of the statute have been complied with. But we do not think it was intended to devolve on persons dealing with the com- panies the duty and risk of ascertaining whether they had complied with the statute. On the contrary, it seems to have been the in- CONTRACTS NOT COMPLYING WITH STATUTES 57 tention of the legislature to rely on the penalties imposed as suffi- cient to insure such compliance." In Pangborn v. Westlake, supra, the question was whether a contract for the sale of a lot in a plat that had not been recorded was void because of the statute providing that any person who shall dispose of, or offer for sale, any lot in any town or addition until the plat, was acknowledged and recorded, shall forfeit $50 for each lot sold or disposed of. This statute is similar in several respects to that in question. It is quite as prohibitory. It is addressed to the seller alone. It is for the protection of the purchasers, and im- poses no duty upon or prohibition against them. In passing upon the question, this court said: "We are, therefore, brought to the true test, which is that while, as a general rule, a penalty implies a pro- hibition, yet the courts will always look to the language of the statute, the subject-matter of it, the wrong or evil which it seeks to remedy or prevent, and the purpose sought to be accomplished in its enactment; and if, from all these, it is manifest that it was not in- tended to imply a prohibition, or to render the prohibited act void, the courts will so hold, and construe the statute accordingly." See, also, Hill V. Smith, Morris, 70; Tootle v. Taylor, 64 Iowa, 629. 21 N. W. 115. It is argued that to hold this contract not prohibited is to defeat the purposes of the law" ; that it will admit foreign companies to do business subject only to such fines as may be assessed. In view of the language of the law as stated, the absence of express pro- hibition, and the evident purpose to protect the insured, we are clearly of the opinion that it was not intended to render contracts such as that in suit void. To so hold does not necessarily admit foreign companies to do business in that state in disregard of its laws. The power of the courts is ample to compel, by fine and otherwise, com- pliance with the law of the state. The contract being valid, the mat- ter demurred to is no defense, and the question of estoppel does not arise. We think the demurrer was properly sustained. * * * Affirmed.^ SEAMANS V. CHRISTIAN BROS. MILL CO (Supreme Court of Minnesota, 1896. 66 Minn. 205, 68 N. W. 1065.) Action by S. H. Seamans, receiver of the Wisconsin Mutual Fire Insurance Company, against the Christian Bros. Mill Company, for an insurance premium. From a judgment for defendant, plaintiff ap- peals. 3 See, also. Ganser v. Fireman's Fund Ins. Co., 34 Minn. 372. 25 N. W. 943 (1885), wherein it is said tliat plaintiff need not allege in his complaint that the company has complied with the laws of the state regulating foreign insurance companies. 58 PARTIES Canty, J.* The Wisconsin Mutual Life Insurance Company is, as its name indicates, a corporation organized under the laws of the state of Wisconsin to carry on a mutual life insurance business. It became insolvent, and plaintiff was appointed receiver for it by the courts of that state. Defendant, a corporation organized under the laws of this state and doing business therein, procured from said in- surance company a policy of insurance on its property situated in Minneapolis, in this state. This suit is brought to recover a balance of unpaid premium claimed to be due on the policy. One of the de- fenses alleged by defendant, and sustained by the court below, is that said insurance company never complied in any respect with the statutes of this state. Judgment was ordered for defendant, and from the judgment entered accordingly, plaintiff appeals. The contract of insurance was made by correspondence between the two corporations. The trial court found as a fact that this con- tract was made in this state. Appellant assails this finding as not supported by the evidence, but, from the view we take of it, the point is not material; and we are of the opinion that even if the contract was made in Wisconsin, as contended by appellant, we would still refuse to enforce it, as being contrary to the policy of our laws, and an attempt to evade those laws. Among the statutory pro- visions material here are the following sections of the General Stat- utes of 1894: "Sec. 3157. It shall be unlawful for insurers or their agents to make, negotiate or solicit within this state any contract of insurance except as authorized by this act. * * * " * * * Section 3167 provides that on complying with certain conditions the insurance commissioner may issue a license or certifi- cate to foreign companies, authorizing them to transact business in this state; and section 3199 provides that no foreign mutual fire insurance company shall do business in this state unless it has an actual cash surplus of $200,000 over all liabilities, which the court found this insurance company did not have. Many other restrictions on such companies may be found in the sections immediately preced- ing and those following the ones above mentioned. These statutory provisions are police regulations intended to pro- tect people and property in this state against spurious and irresponsible insurance companies. It is plainly the intent of these statutory pro- visions to compel all such insurers doing business in, or taking risks on property in, this state to comply with our local laws and submit to our local courts. Neither can there be any doubt about the au- thority of the legislature to pass such laws. Paul v. Virginia, 8 Wall. 168, 19 L. Ed. 357; Hooper v. California, 155 U. S. 648, 15 Sup. Ct. 207, 39 L. Ed. 297. It is a general rule that a contract made in one state will be enforced in another state, though contrary 4 Part of the opinion is omitted. CONTRACTS NOT COMPLYING WITH STATUTES 59 to the laws or public policy of the latter state. 3 Am. & Eng. Enc. Law, 543. This rule is more especially applicable when no particular Iilace of performance is contemplated by the contract, but the place of performance may be anywhere. It is also a general rule that where a contract is entered into in one state, to be performed in a certain other state, the validity of the contract will be determined by the law of the latter state. Id. 542, 544; Whart. Confl. Laws, §§ 398, 486. We will not attempt to discuss the many and complex distinctions that have arisen where these two rules came in conflict. Usually, in such a case of conflict of laws, it is little more than a question of determining the intention of the parties to the contract, — whether they intended to be governed by the one law or the other. But cases arise where the parties are not thus at liberty to select which law they choose. See Whart. Confl. Laws, §§ 490-494. The laws or public policy of a state may prohibit the making of a certain contract, but it does not follow that if the contract is made elsewhere such state may not, within its borders, enforce the same by extending to it the comity which exists between states. But. again, the laws and public policy of the state may be such as to completely stamp out this comity, and prohibit within the jurisdic- tion of the state the enforcement of the contract. Especially is this so if, though the contract was made elsewhere, it was to be per- formed within the state. There are many cases extending this doc- trine of comity to contracts of insurance made elsewhere, and in- suring property in the state in which the contract was enforced. See Whart. Confl. Laws, §§ 465-467. But, as before stated, it depends on the laws and public policy of such state whether or not it will thus enforce the contract. The laws and public policy may be such as to destroy this comity and prohibit such enforcement of the con- tract. We are of the opinion that the laws and public policy of this state in reference to the insuring of property are of this character. The restrictions in our statutes are so many, and the repressive char- acter of the legislation such, that we must hold this to be the public policy of this state. This seems also to be the character of the in- surance legislation in Iowa and Michigan, as appears by the cases of Seamans v. Zimmerman, 91 Iowa, 363, 59 N. W. 290, and Sea- mans V. Temple Co., 105 Mich. 400, 63 N. W. 408, 28 L. R. A. 430, 55 Am. St. Rep. 457, where this same receiver was defeated in at- tempts to collect unpaid premiums from citizens of those states. Nei- ther does it make any difference that the insurer is a mutual company or that it is, as appellant claims, unincorporated. Neither is this de- cision in conflict with Ganser v. Insurance Co., 34 Minn. 372, 25 N. W. 943, where it was held that the insured can recover the loss even though the insurer has not complied with the statutory requirements so as to be authorized to do business in this state. The very object of these statutory provisions is the protection of the insured, and the no PARTIES parties are not in pari delicto. This disposes of the case, and renders it unnecessary to consider the other questions raised. Judgment af- firmed. II. Infants as Parties Insured^ JOHNSON V. NORTHWESTERN MUT. LIFE INS. CO. (Supreme Court of Minnesota, 1£94. 56 Minn. 365. 57 N. W. 934, 59 N. W. 992, 26 L. R. A. 187, 45 Am. St. Rep. 473.) Action by Martin C. Johnson against the Northwestern Mutual Life Insurance Company to rescind a policy of insurance and recover the amount paid as premiums. From an order overruling a demurrer to the complaint, defendant appeals. Buck, J. On the 25th day of October, 1888, the plaintiff, Johnson, who was then a minor, 17 years old, obtained a policy of insurance on his own life in the Northwestern Mutual Life Insurance Company, this defendant, for the sum of $1,000, in consideration of the payment by him of the premium of $23.29, and the semiannual payment of a like sum to defendant on or before noon of the 25th days of October and April thereafter in each and every year during the continuance of the policy, viz. for 20 years. He made eight semiannual payments amounting to the total sum of $186.32, and immediately thereafter plaintiff attained his majority, or full age of 21 years; and thereupon, on the 21st day of December, 1892, he duly served upon said defend- ant his notice in writing that he had arrived at his majority, and that he elected to avoid the contract of insurance between the defendant and himself, and offered to return said policy to the defendant, and demanded of the defendant that it return to him the moneys which he had paid to said company, amounting to the sum above named, which the defendant refused to do, whereupon he brought this ac- tion to recover of the defendant the amount so paid, upon the ground that he was an infant at the time of the execution of the said con- tract and during the times when he made the semiannual payments, as herein stated. The defendant interposed a demurrer to the plaintiff's complaint upon the ground that the complaint did not state facts sufficient to constitute a cause of action. The court below overruled the demur- rer, and the defendant appealed to this court. In its memorandum the court below gave as its reason for over- ruling the demurrer that "this contract of insurance was not bene- ficial to the insured; it was for the benefit of third persons." We B For discussion of principles, see Vance on Insurance, § 41. See, also,. Cooley, Briefs on the Law of Insurance, vol. 1. pp. 72-77. INFANTS AS PARTIES INSURED 61 do not see how the court fell into such an error, for the plain pro- visions of the policy show clearly that it was for the benefit of the plaintiff, for it expressly provides that at the end of 20 years the policy is payable to himself if living, and after 10 years he could share in the company's surplus, according to usage, at each distribution, un- til all contributions to the surplus funds, found in the course of mak- ing such contributions to have arisen from the policy, should have been returned. After three or more annual premiums were paid in cash, if he made default in the payment of any premium on the day it became due, he was entitled to a paid-up nonparticipating policy for as many twentieth parts of the original sum insured as there were complete annual premiums so paid. There were also other benefits which he would receive, which we need not further specify particu- larly. But, notwithstanding the wrong reason given by the trial court for its decision, if the decision was correct, it must stand. The question of the proper construction of contracts between an infant and an adult is frequently one of great difficulty. The power which exists upon the part of an infant to insist upon the perform- ance of a contract which is for his benefit and to repudiate one which is against his interest necessarily results in this condition of affairs, and the only method for courts to deal with such questions is to ap- ply so far as possible the legal or equitable rules to each case as it may present itself for judicial determination. The infirmities which are always attendant upon infancy are so many, and present them- selves in so many different phases, that the law must necessarily throw its protection around them, and allow them to avoid acts which are obviously injurious, and which are brought about by their own im- prudent conduct, or by the evil designs of others. But there are con- tracts made by infants which are valid and binding upon them, such as contracts for necessaries. It is conceded, however, that this con- tract is not one coming within the term "necessaries," and it must also be conceded that there was no fraud on the part of the defend- ant whereby the plaintiff was induced to enter into this contract of insurance. Nor does the question of delay on the part of plaintiff" in disaffirming this contract enter into the case for discussion or for determination. If he had a right to disaffirm the contract at all, it was done promptly, and without delay, after he attained his majority. Was this contract void or voidable? We are of the opinion that it was not void. It was for the benefit of the infant. That is to say, construing it in accordance with the well-understood business princi- ples and practical experience of the age, it should be deemed one beneficial to him. Like all business ventures, even among adults, it might prove disastrous or it might be of benefit to the plaintiff". It was the ordinary policy of insurance upon the usual terms, and in a solvent company. At least no suggestion is made to the contrary. Was the policy voidable, and, if so, was it of that character which would not only permit the plaintiff" to defend against the collection of 62 PARTIES anything further on the policy, but, by reason of his infancy, enti- tle him, when arrivng at his majority, to collect back whatever he had paid while an infant? We are of the opinion that the contract was voidable. Even if the contract was beneficial to him while he was an infant, in the sense that if he retained it there might be cer- tain contingencies which would arise whereby he would be entitled to receive the actual benefits mentioned in the policy, yet he does not seek to retain the policy, or claim any actual benefits under its terms, either at present or in the future. All that he could return or surren- der up he offered to do at the very earliest opportunity after arriv- ing at full age. He has secured no money or property under it or by virtue of its terms, and no consideration other than the contingent one which we have mentioned. He has not squandered anything which he has received from defendant. He retains nothing either of actual value or any right. In no way has he appropriated any of the fruits of the contract to his own advantage, nor does he seek to do so. The defendant has had the use of the money paid it for several years. As between the two parties, the defendant so far has profited by the contract, li the plaintiff succeeds in this action, the defendant suf- fers no loss or damage except to return to plaintiff just what it got of him while an infant. It did not obtain the money of the plantiff, it is true, through de- ceit, fraud, or concealment of any fact, nor in any way impose upon the infant, but it did obtain and receive a fund belonging to him which it was not necessary for him to part with. This was done at a time when the law adjudges him incapable of determining whether it was for his benefit or not. To leave this question of making con- tracts to the immature judgment of infants who are easily influenced or misled, and frequently to their great injury, and then have the courts continually called upon to decide whether the contract was of such a beneficial nature to the infant that it might be enforced against him, would lead to an endless variety of decisions. The interest of the infant will be best subserved by holding such contracts voidable. It is a rule which can be appropriately applied in this case, for the plaintiff has performed all that can be reasonably asked of him to do. We have examined many of the authorities cited by the counsel for the appellant in their brief, but we are of the opinion that the rule heretofore laid down in this court is the correct one to follow, and is applicable to this case. Miller v. Smith, 26 Minn. 248, 2 N. W. 942, 37 Am. Rep. 407 ; Conrad v. Lane, 26 Minn. 389, 4 N. W. 696, 37 Am. Rep. 412. The order appealed from is affirmed. On Rehearing. AliTCHELL, J.° This case was argued and decided at the last term of this court. 56 Minn. 365, 57 N. W. 934, 26 L. R. A. 187, 45 Am. 6 Part of the opinion of Mitchell, J., on rehearing, is omitted. INFANTS AS PARTIES INSURED C3 St. Rep. 473. A reargument was granted for the reasons that al- though the amount was small the legal principles involved were very important; the time permitted for argument under our rules was brief; the case was decided near the end of the term, without, per- haps, the degree of consideration that its importance demanded ; and, on further reflection, we are not satisfied that our decision was correct. The former opinion laid down the following propositions, to which we still adhere: (1) That the contract of insurance was of benefit to the infant himself, and was not a contract for the benefit of third parties. (2) The contract, so far as appears on its face, was the usual and ordinary one for life insurance, on the customary terms, and was a fair and reasonable one, and free from any fraud, unfairness, or undue influence on part of the defendant, unless the contrary is to be presumed from the fact that it was made with the infant. It is not correct, however, to say that the plaintiff has received no benefit from the contract, or that the defendant has parted with noth- ing of value under it. True, the plaintiff has received no money, and the defendant has paid none to the plaintiff ; but the life of the former was insured for four years, and if he died during that time the de- fendant would have had to pay the amount of the policy to his estate. The defendant carried the risk all that time, and this is the essence of the contract of insurance. Neither does it follow that the risk has cost the defendant nothing in money because plaintiff himself was not one of those insured who died. The case is therefore one of a voidable or rescindable contract of an infant, partly performed on both sides, the benefits of which the infant has enjoyed, but which he cannot return, and where there is no charge of fraud, unfairness, or undue influence on the part of the other party, unless, as already suggested, it is to be presumed from the fact that the contract was made with an infant. The question is, can the plaintiff recover back what he has paid, assuming that the contract was in all respects fair and reasonable? The opinion heretofore filed held that he can. Without taking time to cite or discuss any of our former decisions, it is sufficient to say that none of them commit this court to such a doctrine. That such a rule goes further than is necessary for the protection of the infant, and would often work gross injustice to those dealing with him, is, to our minds, clear. Suppose a minor engaged in agriculture should hire a man to work on his farm, and pay him reasonable wages for his services. According to this rule the minor might recover back what he paid, although retaining and enjoying the fruits of the other man's labor. Or, again, suppose a man engaged in mercantile business, with a capital of $5,000, should, from time to time, buy and pay for $100,- 000 worth of goods, in the aggregate, which he had sold, and got his pay. According to this doctrine, he could recover back the $100,000 which he had paid to the various parties from whom he had bought the goods. Not only would such a rule work great injustice to others. 64 PARTIES but it would be positively injurious to the infant himself. The policy of the law is to shield or protect the infant, and not to debar him from the privilege of contracting-. But, if the rule suggested is to obtain, there is no footing on which an adult can deal with him, except for necessaries. Nobody could or would do any business with him. He could not get his life insured. He could not insure his property against fire. He could not hire servants to till his farm. He could not improve or keep up his land or buildings. In short, however advantageous other contracts might be to him, or however much capital he might have, he could do ab- solutely nothing, except to buy necessaries, because nobody would dare to contract with him for anything else. It cannot be that this is the law. Certainly, it ought not to be. The following propositions are well settled, everywhere, as to the rescindable contracts of an infant, and in that category we include all contracts except for necessaries : First. That, in so far as a contract is executory on part of an in- fant, he may always interpose his infancy as a defense to an action for its enforcement. He can always use his infancy as a shield. Second. If the contract has been wholly or partly performed on his part, but is wholly executory on part of the other party, the minor therefore having received no benefits from it, he may recover back what he has paid or parted with. Third. Where the contract has been wholly or partly performed on both sides, the infant may always rescind, and recover back what he has paid, upon restoring what he has received. Fourth. A minor, on arriving at full age, may avoid a conveyance of his real estate without being required to place the grantee in statu quo, although a dififerent rule has sometimes been adopted by courts of equity when the former infant has applied to them for aid in avoid- ing his deeds. Whether this distinction between conveyances of real property and personal contracts is founded on a technical rule, or upon considerations of policy growing out of the difiference between real and personal property, it is not necessary here to consider. Fifth. Where the contract has been wholly or partly performed on both sides, the infant, if he sues to recover back what he has paid, must always restore what he has received, in so far as he still re- tains it in specie. Sixth. The courts will always grant an infant relief where the other party has been guilty of fraud or undue influence. As to what would constitute a sufficient ground for relief under this head, and what relief the courts would grant in such cases, we will refer to hereafter. But suppose that the contract is free from all elements of fraud, unfairness, or overreaching, and the infant has enjoyed the benefits of it, but has spent or disposed of what he has received, or the bene- fits received are, as in this case, of such a nature that they cannot INFANTS AS PARTIES INSURED G5 be restored. Can he recover back what he has paid ? It is well settled in England that he cannot. * * * At least a respectable minority of the American decisions are in full accord with what we have termed the "English rule." See, among others, Rilev v. Mallory, 33 Conn. 206 ; Adams v. Beall, 67 Md. 53, 8 Atl. 664, 1 Am. St. Rep. 379; Breed v. Judd, 1 Gray (Mass.) 455. But many — perhaps a majority — of the American decisions, appar- ently thinking that the English rule does not sufificiently protect the infant, have moditied it; and some of them seem to have wholly re- pudiated it, and to hold that although the contract was in all respects fair and reasonable, and the infant had enjoyed the benefits of it, yet if the infant had spent or parted with what he had received, or if the benefits of it were of such a nature that they could not be re- stored, still he might recover back what he had paid. The problem with the courts seems to have been, on the one hand, to protect the infant from the improvidence incident to his youth and inexperience, and how, on the other hand, to compel him to conform to the prin- ciples of common honesty. The result is that the American authorities — at least the later ones — have fallen into such a condition of con- flict and confusion that it is difficult to draw from them any definite or uniform rule. * * * Our conclusion is that where the personal contract of an infant, beneficial to himself, has been wholly or partly executed on both sides, but the infant has disposed of what he has received, or the bene- fits recovered by him are such that they cannot be restored, he can- not recover back what he has paid, if the contract was a fair and reasonable one, and free from any fraud or bad faith on part of the other party, but that the burden is on the other party to prove that such was the character of the contract ; that, if the contract involved the element of actual fraud or bad faith, the infant may recover all he paid or parted with, but if the contract involved no such elements, and was otherwise reasonable and fair, except that what the infant paid was in excess of the value of what he received, his recovery should be limited to such excess. It seems to us that this will suffi- ciently protect the infant, and at the same time do justice to the other party. Of course, in speaking, of contracts beneficial to the infant, we refer to those that are deemed such in contemplation of law. Applying these rules to the case in hand, we add that life insurance in a solvent company, at the ordinary and usual rates, for an amount reasonably commensurate with the infant's estate, or his financial ability to carry it. is a provident, fair, and reasonable contract, and one which it is entirely proper for an insurance company to make with him, assuming that it practices no fraud or other unlawful means to secure it; and if such should appear to be the character of this con- tract the plaintiff could not recover the premiums which he has paid in, so far as they were intended to cover the current annual risk assumed by the company under its policy. CooLEY Ins. — 5 66 PARTIES But it appears from the face of the policy that these premiums covered something more than this. The pohcy provides that after payment of three or more annual premiums the insured will be en- titled to a paid-up, nonparticipating policy for as many twentieths of the original sum insured ($1,000) as there have been annual premiums so paid. The complaint alleges the payment of four annual premiums. Hence, the plaintiff was entitled, upon surrender of the original policy, to a paid-up, nonparticipating policy for $200 ; and it therefore seems to us that, having elected to rescind, he was entitled to recover back, in any event, the present cash "surrender" value of such a policy. For this reason, as well as that the burden was on the defendant to prove the fair and honest character of the contract, the demurrer to the complaint was properly overruled. The result arrived at in the former opinion was therefore correct, and is adhered to, although on some- what different grounds. Order affirmed^ SIMPSON v. PRUDENTIAL INS. CO. OF AMERICA. (Supreme Judicial Court of Massachusetts, 1903. 184 Mass. 348, 68 N. E. 673, 63 L. R. A. 741, 100 Am. St. Rep. 560.) Action by one Simpson, by her next friend, against the Prudential Insurance Company of America. From a judgment for defendant, plaintiff appeals. Morton, J.* The plaintiff in this case is a minor, and brings this action, by her next friend, to recover the premiums paid by her on a life insurance policy issued to her by the defendant. The case was heard upon agreed facts, and judgment was ordered for the defend- ant, and the plaintiff appealed. The policy was what is termed a 20-year endowment policy, for $500; and the agreed facts state that there was no fraud or undue influence practiced upon the plaintiff by the defendant or its agents, and that the contract was a reasonable and prudent one for a person in the plaintiff's situation and condition in life. Before the action was brought, the plaintiff, through her attorney, had notified the de- fendant that she repudiated the policy and the contract contained in it, and demanded a return of the sums she had paid as premiums. The premiums paid amounted to $54, and it is agreed that the expense to the defendant of keeping the policy in force was $28.72. The defend- ant contends that this should be deducted from, or set off against, the premiums, if the plaintiff is allowed to recover for them. It is manifest, we think, that, however reasonable and prudent it 7 The proper measure of recovery is the reserve value of the policy — not the "surrender" value. The surrender value is usually fixed by the in- surer at an amount less than the real value of the policy. 8 Part of the opinion is omitted. INFANTS AS PARTIES INSURED G7 may be for an infant to take out a policy of life insurance, it does not come within the class of necessaries, or within the class of con- tracts which have been held, as matter of law, to be beneficial to. and therefore binding upon, an infant. It is only when the contract comes within the class of contracts which, as matter of law, are bind- ing upon an infant, that the question of its reasonableness and pru- dence is material. Tupper v. Cadwell, 12 Mete. 559, 46 Am. Dec. 704. The defendant contends that this contract having been executed, in part, at least, the plaintiff cannot recover without making the de- fendant whole for the expense to which it has been subjected. But that would be compelling the plaintiff to carry out, to that extent, a contract which is not binding on her. and which she may avoid. IMorse v. Ely, 154 Mass. 458, 28 N. E. 'z^77 , 26 Am. St. Rep. 263. It is well settled in this commonwealth, whatever may be the law elsewhere, that, in order to avoid a contract, an infant is not obliged to put the other party in statu quo. Gillis v. Goodwin, 180 Mass. 140, 61 N. E. 813, 91 Am. St. Rep. 265, and cases cited; White v. New Bedford Cot. Waste Corp., 178 Mass. 20, 59 N. E. 642. * * * Judgment reversed, and judgment for the plaintiff.® , 9 That a contract of fire insurance is not a contract for necessaries, see New Hampshire Mut. Fire Ins. Co. v. Xoyes, 32 N. H. 345 (1S55). Compare Monaghan v. Insurance Co., 53 Mich. 238, IS N. W. 797 (1884). See. also, O'Kourke v. John Hancock Mut. Life Ins. Co., 23 K. I. 457. 50 Atl. 834, 57 L. R. A. 496, 91 Am. St. Rep. 643 (1902). wherein it is held that a breach of warranty is no defense to an action on a policy of insurance granted to an infant. 08 INSURABLE INTEREST INSURABLE INTEREST I. General Theory of Insurable Interest* CLINTON V. NORFOLK MUT. FIRE INS. CO. (Supreme Judicial Court of Massachusetts, 1900. 176 Mass. 486, 57 N. E. 995. 50 L. R. A. 833, 79 Am. St. Rep. 325.) Action by one Clinton against the Norfolk Mutual Fire Insurance Company on a poHcy of insurance. There was a judgment for de- fendant on agreed facts, and plaintiff appeals. Hammond, J.^ By his deed to Forbes the plaintiff conveyed all his interest in the buildings insured, except an estate for his life in the house. This life estate was carved out of the fee previously owned by him, and was held by the same title as before the conveyance. He sold his entire interest in the barn, but only part of his interest in the house. The only question is whether the policy was thereby avoided as to his remaining interest in the house. The defendant contends that the policy is thus avoided, and relies upon the clauses which provide that it shall be void if, without the consent of the defendant, "the situation or circumstances affecting the risk shall, by or with the knowledge, advice, agency, or consent of the insured, be so altered as to cause an increase of such risks," or "the said property shall be sold." So far as respects the change of circumstances or situation nothing appears except the deed to Forbes. The burden of proof to show a breach of condition of a policy which has once attached is on the defendant (Orrell v. Insurance Co., 13 Gray, 431); and, even if the clause has reference to what are sometimes called the moral elements of the risk, we cannot say, upon the facts appearing before us, that the risk was increased by the sale, or that the clause was intended to embrace the changes made by a sale, especially when there is an express provision in the policy relating to that subject. Powers v. Insurance Co., 136 Mass. 108, 49 Am. Rep. 20. Compare, also, Oakes v. Insurance Co., 131 Mass. 164. The defense must, therefore, rest upon the clause as to alienation. Many of the earlier policies of fire insurance contained no condition against alienation. Inasmuch, however, as the contract of insurance is one of indemnity, and not a wager, it is manifest that where, be- 1 For discussion 'of principles, see Vance on Insurance, § 46. See, also, Gooley, Briefs on the Law of Insurance, vol. 1, pp. 132-243. 2 Part of the opinion is omitted. GENERAL THEORY OF INSURABLE INTEREST 69 fore the fire, the insured had parted with his entire interest in the property insured, he suffered no loss by its destruction, and needed no indemnity. A total transfer of his interest, therefore, defeated the policy. But any change short of a complete transfer of his entire in- terest did not have that effect. The general rule was and is that, in the absence of any provision to the contrary in the policy, any change in the insurable interest of the insured, whether by a com- plete sale of only a part of the property or a change in the title to a part or the whole of the property, does not avoid the policy which has once attached, provided that at the time of the loss the insured has an insurable interest. It is necessary that there should be an insurable interest at the time of the contract and at the time of the loss ; but if, at the time of the loss, the insured has parted with only a part of his interest, the policy is valid as to the part retained. Laz- arus V. Insurance Co., 5 Pick. 76; Scanlon v. Insurance Co., 4 Biss. 511, Fed. Cas. No. 12,436; Cowan v. Insurance Co., 40 Iowa, 551, 20 Am. Rep. 583; Stetson v. Insurance Co., 4 Alass. 330, 3 Am. Dec. 217; Ayers v. Insurance Co., \7 Iowa, 176, 85 Am. Dec. 553; Hitchcock V. Insurance Co., 26 N. Y. 68. And see, further, the cases cited in 13 Am. & Eng. Enc. Law (2d Ed.) p. 240, and notes. And even a total alienation does not avoid, but only suspends, the policy; so that, if the insured regains his interest, or any part of it, and holds it at the time of the loss, he may recover. May, Ins, 101 ; Worth- ington V. Bearse, 12 Allen, 382, 90 Am. Dec. 152. In this state of the law, insurers began to insert in the policies clauses relating to alienation. These clauses vary in language, and in the examination of the cases on this subject considerable care must be exercised in order to discriminate properly between those cases applicable and those not applicable to the clause which may be under consideration. The clause in this policy is, "if the said property be sold." Con- ditions of this kind are strictly construed against the insured, and the general rule is that such a condition refers only to an absolute transfer of the entire interest of the insured, completely devesting him of his insurable interest. Any sale or transfer short of this is not within the scope of the condition. See, in addition to the cases above cited, Bryan v. Insurance Co., 145 IMass. 389, 14 N. E. 454; Holbrook v. Insurance Co., 1 Curt. 193, Fed. Cas. No. 6,589; Power V. Insurance Co., 19 La, 28, 36 Am. Dec. 665 ; and the cases collected in 13 Am. & Eng. Enc. Law (2d Ed.) p. 241, and notes. If it be the intention of the insurers that the contract should be avoided by any partial sale, or by any change short of an absolute sale, of the entire interest, there is no difficulty in expressing that in- tent in plain and explicit language ; and in many policies such an in- tention is thus expressed. See Oakes v. Insurance Co., ubi supra, where the condition was that the policy should be void if the property insured should be sold or conveyed in whole or in part. 70 INSURABLE INTEREST As an illustration of the dififerent results arising from the differ- ence in the language of the clauses as to alienation, compare the case of Foote V. Insurance Co., 119 Mass. 259, and Bryan v. Insurance Co., ubi supra. In the former case, where the condition was that the policy should be void if any change should take place in the title or possession of the property insured, whether by sale, transfer, or con- veyance, legal process, or judicial decree, it was held that a mortgage by way of an absolute deed, and an unrecorded instrument of de- feasance back, was a violation of the condition ; while in the latter case it was held that such a mortgage did not avoid the policy where the condition was that the policy should be avoided "if the property should be sold." If, therefore, the house had been the only building named in the policy, or if the policy can be regarded as containing two separate and independent contracts, one applicable to the house alone and one applicable to the barn alone, there was no breach of the condition of alienation so far as respects the house, and the policy was valid as to the Hfe estate of the plaintiff therein at the time of the loss. Clark V. Insurance Co., 6 Cush. 342, 53 Am. Dec. 44. But it is contended by the defendant that the contract was entire, and that, being void as to the barn, it is void as to the house. And the counsel for the defendant argues that, in so far as the case of Clark V. Insurance Co., ubi supra, seems to support the doctrine that, where the different articles are separately valued in a policy, it is to be regarded as containing a separate, distinct, and independent con- tract as to each such article, as though each was insured in a separate policy, it is inconsistent with Brown v. Insurance Co., 11 Cush. 280, and Thomas v. Assurance Co., 162 Mass. 29, Z7 N. E. 672, 44 Am. St. Rep. 323, and other similar cases decided here and elsewhere. We have not found it necessary, however, to consider whether or not the contract in this case is an entire contract, since we are of the opinion that, even if it be entire, there has been no breach of the condition. If the contract was entire, then the house and barn were insured as one entire risk, and the same considerations which lead to the conclusion that, where the house is the only building insured, there is no sale, within the condition named in the policy, when the insured retains an insurable interest in the house, leads also to the conclusion that, where the house and barn are insured as one entire risk, there is no sale of the property within the condition when the insured retains an insurable interest in either building. In either case there has not been an absolute sale of the entire interest in the whole property, and consequently no breach of the condition. And the rea- son the plaintiff cannot recover for the destruction of the barn is not because there has been a breach of the condition as to alienation, and the policy has, therefore, become void, but because he had no in- surable interest in the barn when it was burned, and has. therefore, suffered no loss by its destruction. The result would be the same INSURABLE INTEREST IN PROPERTY — WHAT CONSTITUTES 71 even if there was no condition whatever as to ahenation, or if the plaintiff had lost his interest in some other way not covered by the condition. * * * Judgment for plaintiff.* II. Insurable Interest in Property — What Constitutes * CARPENTER v. GERMAN-AMERICAN INS. CO. (Court of Appeals of New York, 1892. 135 N. Y. 298, 31 N. E. 1015.) Action by George C. Carpenter and another against the German- American Insurance Company. A judgment for plaintiff's was affirmed by the General Term (61 Hun, 624, 17 N. Y. Supp. 603, mem.), and defendant appeals. Andrews, j.s * * * fhe remaining question relates to the claim that the plaintiff, at the time of the insurance and of the fire, had no insurable interest in the building wdiich was in part the sub- ject of the insurance. It is doubtless true that the State Bank of Elizabeth, the vendor in the contract of sale to the plaintiffs, had no legal title to the property embraced therein. It was, however, the ben- eficial owner. The bank owned the mortgage and bid off the property on the foreclosure in 1877, but its agent at the sale, under advice of its attorney, directed the conveyance to be made to 'Sir. Kean, the president of the bank, because of the statute of Pennsylvania which prohibited any foreign corporation from acquiring and holding any real estate within the commonwealth, "directly in the corporate name, or by or through any trustee or other devise whatever, unless specially authorized to hold such property by the laws of the commonwealth." Purd. Dig. (Pa.) § 56, p. 292. Mr. Kean paid nothing for the prop- erty, and acknowledged that it belonged to the bank, and never made any claim to it w'hatever. He knew of the negotiation between the bank and Carpenter for the sale and purchase of the property, and advised and consented to the contract by the bank, and was fully ac- quainted with the fact that Carpenter was paying the purchase money of the land, in reliance, upon the ownership of the property by the bank. The bank. Carpenter, and Kean acted in good faith, suppos- ing that the bank held the legal title to the land. The officers of the bank had forgotten that the title had been taken in Kean's name, and 3 Duratiou of interest, see post, p. 77. As to divisibility of contract, see ante, p. 3(5. * For discussion of pviiK iples, see Vance on Insurance, § 47. 6 Part of the opinion is omitted. 72 INSURABLE INTEREST for this reason the contract with Carpenter was made in the name of the corporation. We deem it unnecessary to go into the abstruse questions which have been argued at the bar as to the legal and equitable right to the land, as between the bank and Kean, growing out of the convey- ance to the latter of the legal title on the foreclosure sale. Assuming (but without deciding) that the bank could not, in view of the Penn- sylvania statute, have established a trust in its favor, enforceable against Kean, or compelled him to convey the legal title to the cor- poration, yet it is, we think, very plain that, as between Carpenter on the one side, and the bank and Kean on the other, Carpenter, on the performance of his contract, could have maintained a suit in equity to compel the bank and Kean to convey the land. Kean would be bound by the plainest principles of equity and justice to make the contract good, which was entered into with his advice, and upon which Carpenter had advanced his money. It would be no answer that Kean did not act mala fide, but supposed that the legal title was in the bank. He stood by and encouraged the sale, and knew of the payment of the purchase money by Carpenter in reliance upon the right of the bank to sell the property. Storrs v. Barker, 6 Johns. Ch. 166, 10 Am. Dec. 316; Continental Nat. Bank v. National Bank of Commonwealth, 50 N. Y. 576; Thompson v. Simpson, 128 N. Y. 270, 28 N. E. 627. His mistake prejudiced no real right or equity in the land. He asserted none therein, and now acknowledges that the bank is entitled to the benefit of the policy. The principle of equitable estoppel applies with persuasive force against Kean, preventing him from asserting, as against Carpenter, any right in the land; and a court of equity would require him to convey, so that the just expecta- tions of Carpenter should not be disappointed. Carpenter had, there- fore, an insurable interest in the property. The questions decided dispose of all the material points in the ap- peal. The result is that the judgment should be affirmed, with costs. All concur. BASSETT V. FARMERS' & MERCHANTS' INS. CO. (Supreme Court of Nebraska, 1909. 85 Neb. 85. 122 N. W. 703.) Action by John W. Bassett against the Farmers' & Merchants' In- surance Company. Judgment for plaintiff, and defendant appeals. Root, J.« In 1902 John W. Bassett, plaintiff herein, purchased a farm in Otoe county, and procured the conveyance therefor to be made to his wife. In 1904 defendant insured plaintiff for five years against loss by fire of the dwelling house on said farm. In 1906 the house was totally destroyed by fire. Defendant denied liability upon its policy, and returned the premium received by it from plaintiff, which 6 Part of the opinion is omitted. INSURABLE INTEREST IN PROPERTY — WHAT CONSTITUTES 73 he retained some months, and then sent back to defendant. Defend- ant tenders plaintiff the amount of said premium. The most important question raised by the defense is that under the facts plaintiff did not have an insurable interest in the property de- .stroyed, and for that reason cannot recover. Without an insurable interest, plaintiff ought not to prevail. Stanisics v. Hartford Fire Ins. Co., 83 Xeb. 768, 120 N. W. 435. At the time the policy was issued excepting only her homestead, a married woman in Nebraska could dispose of her real estate without her husband's assent, and by her sole deed convey title thereto freed from his interest inchoate or otherwise therein. The farm under consideration was not a home- stead. Not only may the wife thus convey her real estate, but dur- ing, her lifetime the husband has no right to its possession or control nor to any part of the rents and profits issuing therefrom. Cases may be cited to sustain the proposition that the husband's estate by the curtesy initiate is an insurable interest ; but an examination of those cases will disclose that they are based upon laws giving the husband more than a mere expectancy in the wife's land. In jurisdictions where the lawmaking power has completely emancipated a married woman's property from the control of her husband, the possibility that he will receive a benefit from the real estate of which she may die seised is not considered an insurable interest during her lifetime. Clark V. Insurance Co., 81 Me. 373, 17 Atl. 303 ; Traders' Insurance Co. V. Newman, 120 Ind. 554, 22 N. E. 428; Planters' Ins. Co. v. Loyd, 71 Ark. 292, 75 S. W. 725. Plaintiff argues that, if the holder of the property insured will suffer a loss by its destruction, he has an insurable interest therein. An examination of the cases cited upon that point will disclose that the assured in each instance had some substantial interest in the sub- ject insured, an interest that would be recognized and protected by the courts. If plaintiff were enjoying the possession of a house rent free without any contract with the owner and under such circumstanc- es that the latter might dispossess the former any time, it would hardly be contended that he had an insurable interest in the dwelling. So far as the proof goes, plaintiff holds possession of the farm by suf- ferance of his wife, and not by force of any lawful or equitable right. Counsel argue that Mrs. Bassett has only a dry, naked, legal title to the farm, and that the beneficial one is in plaintiff, but tlie difficulty is that the proof does not sustain that assumption. Mrs. Bassett did not testify, nor has plaintiff stated, that there was any arrangement between himself and wife, oral or otherwise, by which he was to have a life estate in the farm. Nor is there any proof that the deed to Mrs. Bassett does not convey the title in just such form as plaintiff desired. In Redfield v. Holland Purchase Ins. Co., 56 N. Y. 354, 15 Am. Rep. 424, cited as in point, the wife had agreed orally that her hus- band should have the use during his natural life of the property con- 74 INSURABLE INTEREST veyed to her at his instance. He was in possession of the land, and the court held that there had been complete performance by the hus- band of the oral agreement so as to take it out of the statute of frauds, and that he had an equitable title to the real estate. But in the case at bar the proof merely discloses that plaintiff purchased the land and directed the vendor to convey direct to his wife, and, in conformity with his instructions, she received a warranty deed therefor. He tes- tified that he desired her to have the land without administration if she survived him, and, should she predecease him, he would inherit from her. It may be that the facts will justify a court finding that there was an arrangement between the husband and wife entered into before the deed was made to her that he could have the use of the land during his lifetime, but there is no evidence in the record of those facts. Upon the proof plaintiff is in the same situation as though he had taken possession of his wife's separate property and leased it for his own benefit. The wife could oust him any time she saw fit. In the state of the record there is a failure of proof upon a vital fact in issue. Pope v. Glenns Falls Ins. Co., 136 Ala. 670, 34 South. 29. * * * Judement reversed. RIGGS V. CO:\IMERCIAL MUT. INS. CO. (Court of Appeals of New York, 1890. 125 N. Y. 7, 25 N. E. 1058, 10 L. R. A. 684, 21 Am. St. Rep. 716.) Action by John S. Riggs against the Commercial Mutual Insurance Company. Plaintiff sues as assignee of a policy of insurance issued by the defendant to J. L. Tobias on the steamer Falcon. Tobias was at the time of issuance of the policy a stockholder in the Merchants' Steamship Company, a corporation which owned the vessel insured. A judgment for plaintiff being affirmed by the superior court of New York City, general term (5 N. Y. Supp. 183), the defendant appeals. Andrews, J.^ * * * The question whether a stockholder in a corporation, as such, has an insurable interest in the corporate prop- erty, which he may protect by an insurance of specific, tangible prop- erty of the corporation, is the question now presented. The policy does not disclose the nature of the interest of Tobias in the vessel insured; but this was not necessary, unless required by some condi- tion in the policy. Lawrence v. Van Home, 1 Caines, 276 ; Tyler v. Insurance Co., 12 Wend. 507. The policy, if otherwise valid, attached to whatever insurable interest he had, whether as owner or otherwise. What constitutes an insurable interest has been the subject of much discussion in the cases, and is often a question of great difficulty. It is quite apparent that the tendency of decisions in recent times is in the direction of a more liberal doctrine upon this subject than formerly prevailed. May, Ins. § 76. 7 Part of the opinion is omitted and the statement of facts is rewritten. INSURABLE INTEREST IN PROPERTY — WHAT CONSTITUTES 75 Contracts of insurance where the insured had no interest were per- mitted at common law (Craufurd v. Hunter, 8 Term R. 13) ; but the manifest evils attending such contracts, and the temptation which they afforded for fraud and crime, led to the enactment in England of the statute 19 Geo. II. c. ZT , prohibiting wager policies, and this was fol- lowed by the enactment in this state of a similar statute ( 1 Rev. St. [1st Ed.] p. 662) prohibiting wagers. But to prevent the application of the statute to cases of insurance by way of security and indemnity it was provided that it should "not be extended so as to prohibit or in any way affect any insurances made in good faith for the security or indemnity of the party insured, and which are not otherwise pro- hibited by law." Section 10. It w'ould seem, therefore, that whenever there is a real interest to protect, and a person is so situated with re- spect to the subject of insurance that its destruction would or might reasonably be expected to impair the value of that interest, an in- surance on such interest would not be a wager within the statute, w'hether the interest was an ownership in or a right to the possession of the property, or simply an advantage of a pecuniary character, having a legal basis, but dependent upon the continued existence of the subject. It is well settled that a mere hope or expectation, which may be frustrated by the happening of some event, is not an insurable interest. The stockholder in a corporation has no legal title to the corporate assets or property, nor any equitable title which he can convert into a legal title. The corporation itself is the legal owner, and can deal with corporate property as owner, subject only to the restrictions of the charter. Plimpton v. Bigelow, 93 N. Y. 593 ; Van Allen v. As- sessors, 3 Wall, zilli, 18 L. Ed. 229. But stockholders in a corpora- tion have equitable rights of a pecuniary nature, growing out of their situation as stockholders, which may be prejudiced by the destruction of the corporate property. The object of business corporations is to make profits through the exercise of the corporate franchises, and gains so made are distributable among the stockholders according to their respec- tive interests, although the time of the division is ordinarily in the dis- cretion of the managing body. It is this right to share in the profits which constitutes the inducement to become stockholders. So, also, on the winding up of the corporation, the assets, after payment of debts, are divisible among the stockholders. It is very plain that both these rights of stockholders — viz., the right to dividends and the right to share in' the final distribution of the corporate property — may be prejudiced by its destruction. In this case the ships were the means by which profits were to be earned, and their loss would) naturally, in the ordinary course of things, diminish the capacity of the corpora- tion to pay dividends, and consequently impair the value of the stock. The same would be true in other cases which might be mentioned ; as. for example, where buildings producing rent, owned by a corporation, should be burned. It is not necessary, to constitute an insurable in- 76 INSURABLE INTEREST terest, that the interest is such that the event insured against would necessarily subject the insured to loss. It is sufificient that it might do so, and that pecuniary injury would be the natural consequence. Cone V. Insurance Co., 60 N. Y. 619. The question now before us was considered by the supreme court of Iowa in the case of Warren v. Insurance Co., 31 Iowa, 464, 7 Am. Rep. 160. The court, in a careful opinion, reached the conclusion that a stockholder in a corporation had an insurable interest in the corpo- rate property. In Philips v. Insurance Co., 20 Ohio, 174, there is an adverse dictum, but the decision went on another ground. In Wilson V. Jones, L. R. 2 Exch. 139, the action was upon a policy in favor of the plaintiff, a shareholder in the Atlantic Telegraph Company, a company organized to lay the Atlantic cable. The court construed the contract as an insurance of the plaintiff in respect to the adventure undertaken by the company to lay the cable, and it was held that his interest as shareholder was an insurable interest, and likened it to an insurance on profits. See, also, Paterson v. Harres, 1 Best & S. 336. It is difficult to perceive any good reason why, if a stockholder could be insured on his shares in a corporation against a loss happen- ing in the prosecution of a corporate enterprise, he could not insure specifically the corporate property itself embraced in the adventure,, and prove his interest by showing that he was a shareholder. The question here is, did the plaintiff have an insurable interest covered by the policy? The amount of damages is not in question. Except that the parties have taken that question out of the contro- versy, the extent of the loss would be a question of fact to be ascer- tained by proof, and the recovery up to the amount insured would be measured by the actual loss. We are of opinion that the view that a stockholder in a corporation may insure specific corporate property by reason of his situation as stockholder, stands upon the better rea- son, and also that it is in consonance with the current of authority defining insurable interests in our courts. The cases of Herkimer v. Rice, 27 N. Y. 163, Rohrback v. Insurance Co., 62 N. Y. 47, 20 Am. Rep. 451, and National Filtering Oil Co. v. Citizens' Ins. Co., 106 N. Y. 535, 13 N. E. 2)Z7, 60 Am. Rep. 473, sustained policies upon interests quite as remote as the interest now in question. It would be useless reiteration to restate the particular facts and grounds of the decisions in these cases. It is sufficient to refer to them, and to say in conclusion that it seems to us, both upon authority and reason, that the insurance now in question is not a wager policy, but is a fair and reasonable contract of indemnity, founded upon a real interest, though not amounting to an estate, legal or equitable, in the property insured. The judgment should therefore be affirmed. All concur.^ s Accord: Warren v. Davenport Fire Ins. Co., 31 Iowa, 464, 7 Am. Rep. 160 (ISTl); Blake Opera House Co. v. Home Ins. Co., 73 ^Yls. 667, 41 N. W.. 968 (1889) ; ^Etna Ins. Co. v. Kennedy, 161 Ala. 600, 50 South. 73, 135 Am.. St. Rep. 160 (1909). DURATION OF INTEREST 77 III. Duration of Interest* DICKERMAN v. VERMONT MUT. EIRE INS. CO. (Supreme Court of Vermont, 1894. 67 Vt. 99, 30 Atl. 808.) Assumpsit by Lewis Dickerman and another against the Vermont Mutual Fire Insurance Company and against the Union Mutual Fire Insurance Company to recover on a policy of fire insurance. Defend- ants demurred to plaintiffs' declarations. Demurrers overruled, and defendants except. RowELL, J. The questions in these cases being the same, they were heard together. The statement in the counts demurred! to, that the policies and applications are referred to and made a part thereof, does not, as is conceded, make those instruments a part of the counts. It is essential to the sufficiency of the counts that they should allege an insurable interest in the plaintiffs at the time the policies were issued, and also at the time of loss. In respect to the time of issuing, the policies, it is alleged that the defendants promised the plaintiffs to pay them certain sums of money named if their buildings, situate, etc., were destroyed by fire between certain dates. It is doubtful whether this is a sufficiently definite and positive allegation of insurable interest. The authorities differ about it, and it is not necessary to decide the question ; for the counts are bad for not alleging such interest at the time of loss, concerning which they contain no allegation whatever. It is also doubtful, to say the least, whether it appears from either count that the money was due and payable when the suits were com- menced. It is true that the promises as laid are to pay if the build- ings were destroyed, but it is not alleged that payment was to be made on the happening of that event, nor on notice of its happening, nor within a reasonable or other time thereafter, and one of the counts alleges no notices. But it is unnecessary to consider this point further, as the pleader can easily obviate this objection when he repleads. Judgment reversed, demurrers sustained, the counts adjudged in- sufficient, and causes remanded.^'' « For discussion of principles, see Vance on Insurance, § 48. 10 As to effect of change or termination of interest, see, also, Quarles v. Clayton, ante, p. 10, New v. German Ins. Co., ante, p. 15, and Clinton v. Nor- folk Mutual Fire Ins. Co., ante, p. 68. 78 INSURABLE INTEREST IV. Insurable Interest in Lives ** RUPP V. WESTERN LIFE INDEMNITY CO. (Court of Appeals of Kentucky, 1910. 138 Ky. IS. 127 S. W. 490, 29 "L. R. A. [N. S.] 675.) NuNN, J. Appellant, Clarence Rupp, brought this suit against ap- pellee, Western Life Indemnity Company, on two policies of insur- ance alleged to have been issued upon the life of his uncle, Geo. Mc- Cormack, appellant being named in both policies as the beneficiary. The petition is in two paragraphs, in each of which it is sought to recover $1,000, the amount of each of the policies, and is in the form usually employed in bringing such actions, except it is alleged that, "by the directions and under the instructions of the assured, Geo. McCormack, the defendant issued the policies payable to this plain- tiff, and this without this plaintiff's instance, request or knowledge." Appellee's answer was composed of five paragraphs ; to some of \vhich a demurrer was filed, but never acted upon as to the answer, but was carried back to and sustained as to the petition. Plaintiff declined to amend his petition, and the court dismissed it upon the ground that appellant, a nephew of McCormack, had no insurable in- terest in his uncle's life; that such a contract partook of the nature of a wager, and was void as being against public policy. And this is the only question necessary or proper to be considered upon this ap- peal. This court has held in several cases that a person could not take out an insurance policy on the life of another, pay the premiums, and become himself the beneficiary, unless he had an insurable interest in the life of the person insured, for the reason that such would be a wagering contract, and violative of public policy. The court did not hold such contract of insurance void, but only held that the person who had no insurable interest and obtained the policy, and paid the premiums thereon, could not collect it. This, however, is not the question before us. The point is : Has a person a right to obtain a policy, pay the premiums, and name any person he wishes as benefi- ciary? This is the first time this question has been brought directly before this court. Appellee's counsel contend that such a policy can- not be enforced, even though the beneficiary named in the policy had nothing to do w^ith procuring it, and was ignorant of its issual, and cite the following Kentucky cases, which they claim support their po- sition : Caudell v. Woodward, 96 Ky. 646, 29'S. W. 614, Leaf v. Leaf, 11 For discussion of principles, see Vance on Insurance, §§ 49-52. See, also, Cooley, Briefs on the Law of Insurance, vol. 1, pp. 244-329. INSURABLE INTEREST IN LIVES 79 92 Ky. 166, 17 S. W. 354, 854, 13 Ky. Law Rep. 486. Embry's Adm'r V. Harris, 107 Ky. 65, 52 S. W. 958, 21 Ky. Law Rep. 714, Griffin's Adm'r v. Equitable Assurance Society, 119 Ky. 856, 84 S. W. 1164, 27 Ky. Law Rep. 313, and Schlamp v. Berner's Adm'r, 51 S. W. 312, 21 Ky. Law Rep. 324. The question before us was not in issue in any of the cases cited, and was not considered, except by a slight reference in the first-styled case. The opinions in the first two cases referred to construe con- tracts of insurance issued by what are known as "assessment or be- nevolent associations," and the court decided them upon the construc- tion of the organic law governing these associations. In the case of Embry's Adm'r v. Harris, supra, Harris as the surety of Embry to a bank for nearly $4,000, obtained a policy on the life of Embry, pay- able to his (Embry's) estate for the sum of $5,000, and the policy was placed in the hands of Harris to indemnify him against loss as such surety. The court upheld that contract. In the case of Schlamp. etc., V. Berner's Adm'r, supra, ]\Iary Berner took out a policy on her life which was made payable to her administrator. She afterwards as- signed the policy to her cousin. Barbara Schlamp. The court held that Barbara Schlamp had no insurable interest in the life of Mary Berner. and took no interest in the policy by reason of the assign- ment of the policy to her. It will be observed that these opinions do not touch the question before us. except the Caudell Case, which we will refer to hereafter. The exact question before us was thoroughly considered in the case of Hess' Adm'r v. Segenfelter, etc.. 127 Ky. 348. 105 S. W. 476, 32 Ky. Law Rep. 225, 14 L. R. A. (N. S.) 1172, 128 Am. St. Rep. 343. The policy in that case was issued by a benevolent association, and the opinion was based upon and controlled by sections 678 and 680 of the Kentucky Statutes (Russell's St. §§ 4399, 4401) ; but the ques- tion at bar was thoroughly considered, and the following conclusion announced: "All the courts of last resort, with possibly one excep- tion, and the text-writers on insurance generally, are agreed that a person may take out insurance on his own life and designate whom he pleases as the beneficiary. This doctrine is based upon the sound and sensible theory that it is not reasonable to suppose that a person will insure his own life for the purposes of speculation, or be tempted to take his own life, in order to secure the payment of money to an- other, or designate as the beneficiary a person interested in the de- struction and not in the continuance of his own life. \'ance on In- surance, § 49 ; Heinlein v. Imperial Insurance Co., 101 Mich. 250, 59 N. W. 615, 25 L. R. A. 627, 45 Am. St. Rep. 409: Morrell v. Trenton Mutual Life Ins. Co., 10 Cush. (Mass.) 282, 57 Am. Dec. 92 ; Connect- icut ^lutual Life Insurance Co. v. Schaefer, 94 U. S. 457, 24 L. Ed. 251; May on Insurance, § 112: Bliss on Insurance, § 76; Bacon on Insurance, § 729; Beach on Insurance, § 861; Joyce on Insurance, § 729; Bloomington Mutual Benefit Association v. Blue, 120 111. 121, 11 80 INSURABLE INTEREST N. E. 331, 60 Am. Rep. 558; Union Fraternal League v. Walton, 109 Ga. 1, 34 S. E. 317, 46 L. R. A. 424, 77 Am. St. Rep. 350; Prudential Ins. Co. V. Hunn, 21 Ind. App. 525, 52 N. E. 772, 69 Am. St. Rep. 380; N. W. Masonic Aid Ass'n v. Jones, 154 Pa. 99, 26 Atl. 253. 35 Am. St. Rep. 810; Albert v. Mutual Life Ins. Co., 122 N. C. 92, 30 S. E. 127. 65 x^m. St. Rep. 693. On the other hand, what is known as 'wagering or gambling insurance' is universally condemned, and our court, in harmony with the doctrine generally prevailing, is strongly committed to the principle that a person cannot himself procure insurance upon a life in which he has no insurable interest, growing out of kinship, dependency, or the relation of debtor and creditor, nor obtain an as- signment of such insurance; nor will a person be permitted to insure his own life for the benefit of another, if that other induces him to procure the insurance and pays the premiums thereon, or there is any evidence tending to show that the insurance was obtained with a view to avoid or evade the law against speculative insurance." This is a sound and reasonable rule, and if it were otherwise it would be in conflict with the universal doctrine that a person who is compos mentis can give away his property to any person he pleases; it would operate to render invalid all devises to persons not closely enough related to have an insurable interest in the life of the testa- tor. What reason can be given warranting the declaring of an in- surance policy void when a friend, a stranger in blood, is made the beneficiary by the assured, that would not apply with the same force to a testator devising property to a person not having an insurable interest in the life of the testator? Yet such devises have been uni- versally upheld. Is it possible that a beneficiary in an insurance pol- icy, such as is alleged in the case at bar, would have a greater desire for the premature death of the assured and take steps to produce it, than a creditor would, especially Harris, who was only the surety of Embry in the case, supra, and in which case the policy was upheld and declared not to be a wagering contract? In the cases of Hill v. United Life Ins. Association, 154 Pa. 29, 25 Atl. 771, 35 Am. St. Rep. 807, and N. W. Masonic Aid Association v. Jones, 154 Pa. 99, 26 Atl. 253, 35 Am. St. Rep. 810, the Supreme Court of Pennsylvania said : "A man may insure his own life, paying the premium himself, for the benefit of another, who has no insurable interest, and that such a transaction is not a wagering policy. This results from the right which a man has to dispose of his own property." The follow- ing cases also sustain this principle: Prudential Ins. Co. v. Hunn, 21 Ind. App. 525, 52 N. E. 772, 69 Am. St. Rep. 380, and Scott v. Dick- son, 108 Pa. 6, 56 Am. Rep. 192. In the last-named case the identical question involved in this case was considered, and the court said : "Policies of this nature are in no sense wagering. It would be deny- ing a man's right to do what he will with his own to say that he could not in any form insure his life for the benefit of an indigent relative, or a friend to whom he felt under obligations. And the fact INSURABLE INTEREST IN LIVES 81 that he continues to pay the premium himself, and retains the con- trol of the policy up to the time of his death, leaves no room for spec- ulation or the improper practice which a few years ago brought such a scandal upon the life insurance business in this state." It is claimed that the case of Caudell v. Woodward, supra, estab- lishes a different principle. That case was decided upon the organic law of a fraternal order, but language is used in the opinion which, seemingly, sustains appellee's contention. However, the conclusion reached in the case at bar is also announced in that opinion ; that is, one who obtains a policy of insurance on the life of another must have an insurable interest in the life of that other. The opinion in that case also announced the doctrine that one is prohibited from in- ducing another to take out insurance, or become the owner of such insurance by assignment, unless he has an insurable interest in the life of that other; and that Mrs. Woodward, a stranger, could not recover on the policy, because it is well settled that one obtaining a policy of insurance on the life of another, or who induced another to take out a policy for his benefit, must have an insurable interest. All these propositions are fundamental- and sound in law. There is nowhere, however, any reason given in the Caudell Case why a person cannot take out insurance on his own life, pay the premiums, and make a person who is not related to him the beneficiary; nor could there have been presented any reason against it that would not have applied with equal force to a gift of the same amount by will as well. For these reasons, the judgment of the lower court is reversed and remanded for further proceedings consistent herewith. LIFE INS. CLEARING CO. v. O'NEILL. (Circuit Court of Appeals of United States, Third Circuit, 1901. 106 Fed. 800, 45 C. C. A. 641, 54 L. R. A. 225.) In Error to the Circuit Court of the United States for the Western District of Pennsylvania. Before Dallas and Gray, Circuit Judges, and McPherson, Dis- trict Judge. J. B. ]\IcPnERSON, District Judge. ^- This is an action on a policy of insurance taken out and maintained by an adult son for his own benefit upon the life of his father, and the question for decision is whether, under the facts in evidence, the son had an insurable inter- est sufficient to support the policy. * * * The uncontradicted evidence established the facts that the son was an adult, married, and having a home and family of his own apart from his father ; that he was not supported by, and did not support, his father, but that each maintained himself by his own exertions. 12 Part of tbe opinion is omitted. CooLEY Ins. — 6 82 INSURABLE INTEREST There is nothing, to show that the relation of debtor and! creditor ex- isted between them. It will be observed, therefore, that the precise question is * * * whether the bare fact of relationship is suffi- cient to give an adult son an insurable interest in his father's life. Upon this point, all the decisions, so far as we have been able to discover, declare that no such interest exists, although dicta to the opposite effect are no doubt to be found, and, in our opinion, this declaration is not only supported by the weight of authority, but is also in harmony with the principles upon which the doctrine of insur- able interest rests. The sum of the decisions and of text-book discussion upon the sub- ject of insurable interest may, we think, be fairly stated thus: No person has an insurable interest in the life of another unless he would in reasonable probability suffer a pecuniary loss, or fail to make a pecuniary gain, by the other's death; or (in some jurisdictions) un- less, in the discharge of some undertaking, he has spent money, or is about to spend money, for the other's support or advantage. The extent of the insurable interest — the amount for which a policy may be taken out, or for which recovery may be had — is not now under consideration. What is often called "relationship insurance" must be governed by this rule. It must rest upon the foundation of a pecuniary interest, although the interest may be contingent, and need not be capable of exact estimation in dollars and cents. Senti- ment or aft'ection is not sufficient of itself, although it may often be influential in persuading a court or jury to reach the conclusion that a beneficiary had a reasonable expectation of pecuniary advantage from the continued life of the insured. In one relation only — the re- lation of husband and wife — is the actual existence of such a pecuniary interest unimportant ; the reason being that a real pecuniary inter- est is found in so great a majority of cases that the courts conclusive- ly presume it to exist in every case, whatever the fact may be, and therefore will not inquire into the true state of a few exceptional in- stances. This, we think, is essentially what is meant by the declaration of courts and text-book writers that the mere relationship of husband and wife is sufficient to give an insurable interest. The supreme court of Vermont — alone, we think, among judicial tribunals — seems dis- posed to hold the presumption to be rebuttable. * * * In all other relationships there is no presumption of interest, and no insurable interest exists, unless the reasonable likelihood of pe- cuniary loss or gain is present in actual fact. No doubt, judicial language is to be found supporting the view that the mere relation- ship of parent and child is sufficient to give an insurable interest. The dictum in Warnock v. Davis, 104 U. S. 775, 26 L. Ed. 924, is perhaps more often referred to than any other similar declaration. * * * We think it cannot be doubted that the tendency of the recent de- cisions is to insist upon an actual or presumed pecuniary interest in INSURABLE INTEREST IN LIVES 83 every case (although such interest may no dovibt be contingent, and to some extent undefined), and to give relationship its proper place by regarding it merely as an important factor in the inquiry, whether such an interest does in reality exist. If, then, the test of pecuniary interest is to be applied to the facts of the present case, it is clear that the son had no insurable interest in his father's life. Again laying aside the effect of the poor law of Pennsylvania, it is plain that the son would lose nothing by his father's death, and would gain noth- ing by his father's continuance in life. His father did not support him, and he himself had not spent, nor was he about to spend, any money in his father's behalf or support. Upon principle, therefore, we think that the policy cannot be supported. If we turn to the decided cases, the weight of authority leads to the same conclusion. We have not been referred to any case in which it is held that the mere fact of relationship between a father and his adult son is sufficient. As already stated, dicta to this eft'ect are certainly to be found, notably in Loomis v. Insurance Co., 6 Gray (Mass.) 396; Warnock v. Davis, supra; and Corson's Appeal, 113 Pa. 446, 6 Atl. 213, 57 Am. Rep. 479. But, while these expressions of opinion are entitled to much respect because of the sources from which they come, it is also true that the point was not presented for deci- sion in these cases, and was therefore, presumably, neither argued nor specially considered. For this reason, we cannot give to such ex- pressions the same weight that is properly given to a decision upon the very question. The following cases deal with the insurable interest growing out of the relation of parent and child. Other citations may be found in the note to 57 Am. Dec. 96, and in May, Ins. (4th Ed.) §§ 10+-107. In Illinois, the case of Insurance Co. v. Hogan, 80 111. 35, 22 Am. Rep. 180, decides that the mere relation of father and son does not give to the son an insurable interest in the life of the father, the court saying that the son must also have a well-founded or visible expecta- tion of some pecuniary advantage to be derived from the continuance of his father's life ; and the recent case of Society v. Dyon, 79 111. App. 100, repeats the ruling, that the mere relationship of father and adult son is not sufficient to give the son an insurable interest in the fa- ther's life. The point decided in Mitchell v. Insurance Co., 45 Me. 105, 71 Am. Dec. 529, was that a father has an insurable interest in the life of his minor son, but the court added the dictum — which may be cited in connection with opposing expressions of opinion — that "a father, as such, has no insurable interest, resulting merely from that relation, in the life of a child of full age." The supreme court of Indiana in Insurance Co. v. Volger, 89 Ind. 572, 46 Am. Rep. 185, held that a daughter has no insurable interest in the life of her mother, saying that the insurable interest in the life of another must be a pecuniary interest, and adding: "Some of the authorities tend in the direction that mere relationship, as between parent and child, is a suf- 84 INSURABLE INTEREST ficient foundation upon which to rest an insurable interest, but this view is not substantiated by the weight of authority." Wakeman v. Insurance Co., 30 Ont. 705, decided that a parent has a vaHd insur- able interest in the life of a minor child. Insurance Co. v. Brant, 47 Mo. 419, 4 Am. Rep. 328, which was an action on a policy in favor of a wife upon the death of her husband, contains a dictum that "at common law the insurable interest in the life of another person must be a direct and definite pecuniary interest, and a person has not such an interest in the life of his wife or child merely in the character of husband or parent." In Association v. Teewalt, 79 Va. 423, decided in 1884, it does not appear whether the son was a minor or an adult, nor whether the son had taken out the policy on his father's life, or was merely the beneficiary in a policy taken out and maintained by the father himself. But, assuming, the facts to have been as they are in the case now being considered, we cannot agree with the assertion of the supreme court of appeals of Virginia that "it is now well settled that a father has an insurable interest in the life of his child, whether a minor or of full age, and the child in the life of his father." Two cases are cited in support of this assertion, the first being Warnock v. Davis, 104 U. S. 7T:>, 26 L. Ed. 924, in which the validity of an assignment of a life policy, made to a person having no insurable in- terest, was the point at issue, — the declaration concerning the interest between parent and child being merely a dictum, — and the second case being Insurance Co. v. Luchs, 108 U. S. 498, 2 Sup. Ct. 949, 27 L. Ed. 800. in which the point decided was that one partner had an in- surable interest in the life of his co-partner. We think, therefore, it may be safely said that the Virginia court was perhaps overconfident in declaring the proposition just quoted to be well settled. In the English courts it has been distinctly decided that a father has no pe- cuniary interest in the life even of his minor son (Halfordi v. Kymer, 10 Barn. & C. 725) ; and in Worthington v. Curtis, 1 Ch. Div. 419, the court assumed, as a proposition that did not need discussion, that a father has no insurable interest in the life of his adult son. The cases thus cited and referred to are, with few exceptions, the only cases in which the question now before us has been passed upon, and they certainly justify the conclusion that there is a conflict of opinion, if not of decision, upon the question now before the court. But, while this is true, the weight of authority is, in our opinion, against the position that an adult son has an insurable interest in the life of his father merely by virtue of kinship. The current of the recent decisions shows a clear tendency to insist upon the existence of a pecuniary interest, actual or contingent, upon the part of the son before he can take out a valid policy upon his father's life. * * * Reversed. ^^ 13 See, also, New York Life Ins. Co. v. Greenlee, 42 Intl. App. 82, 84 N. E. 1101 (1908). INSURABLE INTEREST IN LIVES 85 CRONIN V. VERMONT LIFE INS. CO. (Supreme Court of Rhode Island, 1S98. 20 R. I. 570, 40 Atl. 497.) Action by Catherine Cronin against the Vermont Life Insurance Company. On demurrer to the declaration. StinESS, J. This action is brought to recover insurance on the life of the plaintiff's niece, and the main question raised by the demurrer to the declaration is whether the plaintiff had an insurable interest in the life of her niece. The English act of 1774 (14 Geo. III. c. 48, § 1) prohibited insurance on the life of a person in which the bene- ficiary shall have no interest, or by way of gaming or wagering. Al- though the statute has never been taken as a part of our law, its rule was generally followed in this country, as declaratory of the common law. But, in defining the term "interest," the tendency of the decisions both in England and in this country has been inclusive, rather than ex- clusive. There has even been some question whether insurance with- out interest should be held to be void on the ground of public policy ; but, in this state, we think it has been understood! to be settled, since Mowry v. Insurance Co., 9 R. I. 346, that some insurable interest must exist. This, too, is the generally accepted rule. In Clark v. Allen, 1 1 R. I. 439, 23 Am. Rep. 496, it was held that a policy valid in its inception could be transferred to a bona fide pur- chaser, even though he had no interest in the life ; and some of the objections to such insurance, on the ground of public policy, were con- sidered, and shown to be fanciful, and not applied to other branches of law. For example, the element of chance enters into annuities ; and the temptation to shorten life, in order to hasten the possession of a remainder-man after a life estate in real property, is as strong as in the case of a beneficiary under a life policy. But these things have never been considered to be contrary to public policy. Still, upon principle, a purely speculative contract on the life of another is as objectionable on the grounds of public policy as a like contract in regard to grain or stocks. In fact, it is more so, and such a contract may properly be held to be void. But the case is quite different when one, by his own contract, or even in the name of another, upon the ground of debt, affection, or mutual interest, procures insurance for the benefit of another, which is really to stand in the place of a testamentary gift. And so kinship and debt have come to be recognized as sufficient grounds of interest. BHss, Ins. (2d Ed.) •§§ 12, 13; 1 May, Ins. (3d Ed.) § 102a. Recent decisions have gone further, looking more to the situation of the parties than to these relations alone. In Warnock v. Davis, 104 U. S. 77':>, 26 L. Ed. 924, Field, J., said : "It is not easy to define with precision what will constitute an insur- able interest, so as to take the contract out of the class of wager 86 INSURABLE INTEREST policies. It may be stated generally, however, to be such an interest, arising from the relations of the party obtaining the insurance, either as creditor of or surety for the assured, or from the ties of blood or marriage to him, as will justify a reasonable expectation of ad- vantage or benefit from the continuance of his life." We think that this states a reasonable rule, and that it is now substantially the ac- cepted rule. The demurrer in this case being to the whole declaration, we need not examine the counts in detail. The important facts are that the niece lived with the aunt from early childhood at different times, amounting to years ; that their relations were as those of mother and daughter ; that the plaintiff supported her niece, the insured ; and that a debt, both of affection and of money, was due to the plaintiff", for which she expected, and had a right to expect, return from the insured. Does this set out an insurable interest? We do not under- stand the word "debt," as here used, to mean a debt recoverable at law, but a moral obligation, from which the plaintiff had the right to expect care and kindness from the niece in case of need. Taken in this view, we think it shows an insurable interest, under the principles above laid down. In Lord v. Dall, 12 Mass. 115, 7 Am. Dec. 38, it was held that a sister had an insurable interest in the life of a brother, who stood to her in loco parentis. The court said, "In common understanding, no one would hesitate to say that in the life of such a brother the sis- ter had an interest." The later case of Loomis v. Insurance Co., 6 Gray (Mass.) 396, involved the question of the interest of a father in the life of a minor son; but Shaw, C. J., said that, upon broader and larger grounds, independently of the fact that the son was a minor, and that the assured had a pecuniary interest in his earnings, the court was of opinion that the father had an insurable interest. These broader grounds appeared further on to be "consideration of strong: morals, and the force of natural affection between near kin- dred, operating often more efficaciously than those of positive law." In Insurance Co. v. France, 94 U. S. 561, 24 L. Ed. 287, a case be- tween brother and a married sister, not dependent, Bradley, J., goes so far as to say: "Any person has a right to procure insurance on his own life, and to assign it to another, provided it be not done by way of cover for a wager policy ; and where the relationship between the parties, as in this case, is such as to constitute a good and valid consideration in law for any gift or grant, the transaction is entirely free from such imputation. The direction of payment in the policy it- self is equivalent to such an assignment." In Elkhart Mut. Aid B. & R. Ass'n V. Houghton, 103 Ind. 286, 2 N. E. 763, 53 Am. Rep. 514, the insurable interest of a grandson in the life of a grandfather, with whom he lived, was upheld. It has also been sustained where there was no kinship, as in the case of a woman who was engaged to be married to a man (Chisholm v. Insurance Co., 52 Mo. 213, 14 Am. Rep. 414), and in the case of a widow and her son-in-law, who lived together INSURABLE INTEREST IN LIVES 87 (Adams V. Reed, 38 S. W. 420, 18 Ky. Law Rep. 858, 35 L. R. A. 692). The principle of these and other Hke cases is that the interest does not depend upon any HabiHty for support, nor upon any pecuniary consideration, nor even upon kinship. It may be for the benefit of the old or the young, where the relation between the parties is such as to show a mutual interest, and to rebut the presumption of a mere wager. The contract is complete and legal in itself, and, when con- siderations of public policy do not prohibit its enforcement, there is no reason why it should not be carried out. The declaration in this case shows that the plaintiff's claim is not objectionable on the grounds of public policy. It shows that the re- lation of the plaintiff and her niece had been of such a character that each had reason to rely upon the other in case of need. Should the younger die first, the help and care which might have been expect- ed from her in the declining years of the aunt could only be supplied by insurance on her life. This is no more speculation than a hus- band's provision for his wife in the same way. It is natural and rea- sonable, and in accordance with modern business methods. In short, it is security for an insurable interest. We therefore think that the contract set out in the declaration is valid, since it falls within the proper line of distinction between valid contracts, where there is mutual interest, and invalid contracts, which are evidently mere speculation. The demurrer to the declaration is overruled.^* CONNECTICUT MUT. LIFE INS. CO. v. LUCHS. (Supreme Court of United States, 1883. 108 U. S. 498, 2 Sup. Ct. 919, 27 L. Ed. 800.) In Error to the Supreme Court of the District of Columbia. Field, J.^^ This was an action by Leopold Luchs on a policy of insurance upon the life of Levi Dillenberg, issued by the Connecticut Life Insurance Company in June, 1869. Luchs and Dillenberg were partners at the time in the business of buying and selling tobacco in the city of Washington. Their partnership was formed in October, 1866, each agreeing to contribute his services and one-half of the capital. It was understood that the money of Dillenberg was then invested in mining stocks, and could not at once be obtained. Luchs accordingly furnished the entire capital, which was over $10,000. Dil- lenberg never contributed his portion, and, about two years after the partnership was formed, his failure in this respect caused dissatisfac- tion and complaint. It was thereupon suggested by one Myers, who 14 For a discussion of insurable interest based ou relationship, see Cooley, Briefs on the Law of Insurance, vol. 1, p. 281. 13 Part of the opinion is omitted. 88 INSURABLE INTEREST was employed by an agent of the insurance company, and who had been called in as an accountant to examine the books of the concern, that, as a means of "adjusting the dispute or misunderstanding be- tween the partners," a policy of insurance should be obtained upon the life of Dillenberg for the benefit of Luchs, and that Dillenberg should retire from the firm within a year afterwards. Nothing, how- ever, was then done upon this suggestion, but in the following year the policy in suit was procured. * * * The second question presented for our determination is whether Luchs had an insurable interest in the life of Dillenberg. Upon this we have no doubt. Dillenberg was his partner and had not paid his promised proportion of the capital of the concern, x^t the time the pol- icy was applied for he was still in default, and although it might have turned out that the actual amount due, upon a settlement of accounts, was less than the promised proportion, it was not a matter definitely ascertained at the time. Besides what was thus due to him, Luchs was interested in having Dillenberg continue in the partnership. He had such an interest, therefore, as took from the policy anything of a wagering character. As this court said in Warnock v. Davis, recently decided: "It is not easy to define with precision what will, in all cases, constitute an insurable interest, so as to take the contract out of the class of wager policies. It may be stated generally, however, to be such an interest arising from the relations of the party obtaining the insurance, either as creditor of or surety for the assured, or from the ties of blood or marriage to him, as will justify a reasonable expectation of advantage or benefit from the continuance of his life. It is not necessary that the expectation of advantage or benefit should be always capable of pecuniary estimation. * * * But in all cases there must be a rea- sonable ground, founded upon the relations of the parties to each oth- er, either pecuniary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured." 104 U. S. 779, 26 L. Ed. 924. Certainly Lvichs had a pecuniary interest in the life of Dillenberg on two grounds : because he was his creditor and because he was his partner. The continuance of the partnership, and, of course, a con- tinuance of Dillenberg's life, furnished a reasonable expectation of advantage to himself. It was in the expectation of such advantage that the partnership was formed, and, of course, for the life expecta- tion, was continued. In Morrell v. Trenton Mut. Life & Fire Ins. Co., 10 Cush. (Mass.) 282, 57 Am. Dec. 92, a policy was taken out by the plaintiff upon the life of his brother, who was about going to California, on an agreement that the latter should pay to him one-fourth of his earn- ings for the following year. In an action on the policy it was con- tended that the plaintiff had no insurable interest upon the life of the insured, but the court, after deciding that he had such an interest INSURABLE INTEREST IN LIVES 89 from the fact that he held a promissory note signed by the firm of which the insured was a partner, also said that it was strongly in- clined to the opinion that the plaintiff had another interest in the life of the person insured. "He had," said the court, "a subsisting con- tract with that person, made on a valuable consideration, by which he was to receive one-quarter part of his earnings in the mines of California for one year. Such an interest cannot, from its nature, be valued or apportioned. It was an interest upon which the policy at- tached. By the loss of his life within the year, the person whose life was insured lost the means of earning anything more, and the plaintiff was deprived of receiving his share of such earnings to an uncertain and indefinite amount." In Trenton Mutual Life & Fire Ins. Co. v. Johnson, 24 N. J. Law, 576, a policy was taken out by the plaintiff on the life of one A^an Aliddlesworth for $1,000. one-half payable to the plaintiff and the other half to Van Middlesworth. They belonged to an association called the New Brunswick & California Mining & Trading Company, the capital stock of which consisted of 45 shares of $600 each. The company consisted partly of shareholding members and partly of ac- tive members, the shareholders being each required to furnish a sub- stitute to proceed to the mines of the company. The plaintiff owned one share, advanced $600 of capital, and procured Van Middlesworth to go out as his substitute, which he did, and acted as his agent and substitute; and the assets of the company having been divided in California, he received the plaintiff's share, and afterwards died, not having paid it over. By one of the articles of the association all treas- ures and all the proceeds of the labor of each member, and all profits, were to go into a general fund for the benefit of the association. To the action brought on the policy it was objected that the plaintiff had no insurable interest in the life of the deceased. On this question the court said: "In the present case Johnson had a direct interest in the life of his substitute, whose earnings were to constitute a part of the joint funds, of which he was entitled to his share, an interest fully equivalent to the interests of a wife in the life of her husband, of a child in that of a parent, or a sister in that of a brother. And at Van Middlesworth's death, although prior to that time the company had been virtually dissolved, he had an interest in him as his creditor to the extent of his share of the assets in his hands." In Bevin v. Conn. Mut, Life Ins. Co., 23 Conn. 244, the plaintiff' had obtained a policy of insurance for $1,000 on the life of one Bar- stow, to whom he had advanced $350, besides articles of personal property, to enable him to go to California and there labor for one year, on an agreement that he would account to the plaintiff for one- half of his gains. The court said that Barstow was the plaintiff's debtor and partner, giving to the plaintiff an interest in the continu- ance of his life, as by that means, through his skill and efforts, the plaintiff might expect, not only to get back what he had advanced, but 90 INSURABLE INTEREST to acquire great gains and profits in the enterprise. "All the books," the court added, ''hold this to be a sufficient interest to sustain a pol- icy of insurance. As to the value of this interest, we think it must be held to be what the parties agreed to consider it in the policy. This was the sum asked for by the plaintiff, and which the defendants agreed to pay in case of death, and for which they were paid in the premiums given by the insured. The policy must, we think, be held to be a valued policy." And, after referring to a policy of insurance obtained by a sister on her brother's life, where no question seemed to have been made as to the amount, but only whether it was an in- terest which the law would recognize, the court said: "So, in every case, where a person on his own account insures the life of a rela- tive, if the sum named in the policy is not to be the rule of damages, we inquire what is? The impossibility of satisfactorily going into the question in most cases, and especially where there is nothing to guide the inquiry, and everything is uncertain, would lead us to hold that a policy like this is a valued policy as most consistent with the under- standing of the parties and the principles of law." * * * is MUTUAL LIFE INS. CO. OF NEW YORK v. BLODGETT. (Court of Civil Appeals of Texas, 18&4. 8 Tex. Civ. App. 45, 27 S. W. 286.) FiNLEY, J.^'' This is a suit upon a life insurance policy, showing upon its face to have been taken out by Airs. Lucinda J. Downey, upon her life, in favor of her grandson, J. A. Blodgett, the plaintiff in the court below. The defendant answered * * * setting up a want of insurable interest in plaintiff. * * * 'j^j^g ^j-j^j resulted in a verdict and judgment for plaintiff for amount of policy, attorney's fees, and 12 per cent, damages. From this judgment the insurance company appealed, and assigned errors. * * * It is urged by appellant that the policy is void, for the reason that the beneficiary named in the policy had no insurable interest in the life of the insured, and the policy was speculative and wagering on the part of plaintiff. The policy recited that it was issued upon the application of Mrs. Lucinda J. Downey. J. A. Blodgett was named as the beneficiary, and his relation as grandson to the assured was therein disclosed. It is not shown that any fraud or deception was practiced upon the insurance company by which it was deceived as to the real party to the contract of insurance. It was proven that the beneficiary was to pay the premiums. This was known to the company. Indeed, his note was taken for the first premium, and the policy was issued by the company with full knowledge of the facts as to the relation of the parties, and of their respective interests and 16 For further discussion, reference may be made to Cooley, Briefs on the Law of Insurance, vol. 1, p. 296. 1" Part of the opinion is omitted. INTEREST OF CREDITOR IN LIFE OF DEBTOR 01 undertakings under the contract. Under this state of fact, the com- pany should not be permitted to deny that the poHcy speaks the truth as to the party who made the appHcation and with whom the con- tract of insurance was made. Mrs. Downey had an insurable interest in her own life, and had the right, as between herself and the company, when a policy was issued on her application, to name the person to whom the policy should be paid, regardless of insurable interest in her life being pos- sessed by such person. The fact that the premium was paid by the beneficiary does not give to the contract the character of a wagering contract; nor does the fact that the beneficiary has no insurable in- terest in the life of the assured render the policy void as against pub- lic policy. The courts will treat the person named as beneficiary, hav- ing no insurable interest, as a trustee appointed to collect the policy for the benefit of those legally entitled, thereby enforcing the contract by which the company has solemnly bound itself, and at the same time conserving public policy, by preventing the stranger from gambling in the life of his fellow or profiting by his death. Insurance Co. v. Williams, 79 Tex. 633, 15 S. W. 478; Insurance Co. v. Hazlewood. 75 Tex. 351, 12 S. W. 621, 7 L. R. A. 217, 16 Am. St. Rep. 893; Investment Co. v. Baum, 29 Ind. 236; Langdon v. Insurance Co. (C. C.) 14 Fed. 272; Curtiss v. Insurance Co., 90 Cal. 245, 27 Pac. 211, 25 Am. St. Rep. 114; Mayher v. Insurance Co. (decided by this court at present term) 87 Tex. 169, 27 S. W. 124. Under this view, the question whether the beneficiary had an in- surable interest in the life of his grandmother becomes abstract and its consideration unnecessary. So far as the insurance company's lia- bility is concerned, it cannot avoid the payment of the policy upon this ground. * * * is V. Interest of Creditor in Life of Debtor ^* RITTLER V. SMITH.