' THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW V. THE LAW OF INSURANCE A TREATISE ON THE LAW OF INSURANCE INCLUDING FIRE, LIFE, ACCIDENT, CASUALTY, TITLE, CREDIT AND GUARANTY INSURANCE IN EVERY FORM BY CHARLES B. ELLIOTT, PH. D., LL D., Ol Judge of the District Court of Minnesota Author of " Public Corporations " and " Private Corporations " INDIANAPOLIS THE BOWEN-MERRILL COMPANY 1902 COPYRIGHT 1902 BY CHARLES B. ELLIOTT T THE HOLLENBECK PRE33 INDIANAPOLIS TABLE OF CONTENTS. PART I. OF THE CONTRACT OF INSURANCE, AND THE PRIN- CIPLES BY WHICH IT IS GOVERNED. CHAPTER I. INTRODUCTORY. SECTION PAGE 1. Sources of the law of insurance 1 2. Insurance in Roman law 4 3. Its development on the Continent 7 4. Its growth in England 7 5. Growth of insurance other than marine. . 11 CHAPTER II. DEFINITION, NATURE OF CONTRACT, AND MANNER OF MAKING. SECTION PAGE 6. Definition 14 7. Different kinds of insurance 15 8. What constitutes insurance 16 9. Reinsurance 18 10. Parties 19 11. The insured 20 12. The insurer Foreign corporations State control 21 13. Mutual companies and benevolent societies 22 14. The risk 24 15. A personal contract 26 16-. A conditional contract 26 17. An aleatory contract 27 18. Indemnity 27 19. Life insurance not a contract of indemnity 27 20. Indemnity in accident insurance 29 21. Subrogation 29 729438 iv CONTENTS. SECTION PAGE 22. Loss caused by negligence 29 23. Form of the contract 30 24. Statutory form Conditions implied in oral contract 31 25. Statute of frauds 32 26. Renewal by parol 32 27. Effect of charter provisions 32 28. Revenue stamps 33 29. Enforcement of oral contract 34 30. Kinds of policies 34 31. Completion of contract Delivery of the policy 35 32. Countersigning by agent 36 33. Contracts made by correspondence 36 PART II. OF THE SUBJECT-MATTER OF INSURANCE AND THE INTEREST NECESSARY TO SUPPORT THE CONTRACT. CHAPTER III. INSURABLE INTEREST IN PROPERTY. SECTION PAGE 40. The subject-matter 38 41. Insurable interest 38 42. Definition 40 43. Nature of insurable interest 40 44. Different interests 41 45. Time of interest 41 46. Continuity of interest 42 47. Nature of interest 43 48. Illustrations 45 CHAPTER IT. INSURABLE INTEREST IN LIVES. SECTION PAGE 55. The rule at common law 50 56. The English statute Not in force in this country 51 57. The modern rule 52 58. The amount of a creditor's insurable interest 53 59. Mere form disregarded 54 CONTEXTS. V SECTION PAGE 60. Continuance of interest in life 55 61. Interest of beneficiary designated by insured 56 62. Interest of the assignee 57 63. Interest of the assignee, continued 59 64. Interest based upon relationship 61 65. Interest based upon relationship, continued 63 66. Illustrations of insurable interest in life 64 67. Right of assignee without interest to recover premiums paid .... 67 68. Want of interest as a defense under incontestable clause 69 70. Description of interest 70 PART III. OF MATTERS THAT RENDER THE CONTRACT VOID OR UNAVAILABLE. CHAPTER V. NON-DISCLOSURE OF MATERIAL FACTS. SECTION PAGE 78. In general 71 79. Duty of applicant 72 80. Concealment Definition 72 81. Rule as affected by the character of the insurance 72 82. Modern rule in the United States 74 83. What must be communicated 75 84. Where specific inquiries are made 76 85. Basis of the rule 77 86. Where no written application is made 78 87. Incomplete answers to inquiries 79 88. Answers calculated to mislead Irresponsive answers 80 89. Time of concealment 80 90. Materiality 80 91. Concealment through inadvertence or negligence 81 92. Concealment or misrepresentation by agent 82 93. Knowledge of the agent, continued 83 CHAPTER VI. REPRESENTATIONS AND WARRANTIES. SECTION PAGE 100. Statutory definitions 86 101. Representations Definition 87 VI CONTENTS. SECTION PAGE 102. Warranties distinguished from representations 87 103. Affirmative and promissory warranties 88 104. Effect of breach of warranty 89 105. Construction of statements in the application 90 106. Application made part of the policy 90 107. Construction 91 108. Oral representations 93 108a. Mistake Good faith answer 93 109. Statement of expectation or belief 94 110. Affirmative and promissory representations Continuing war- ranties 95 111. Oral promissory representations 96 112. Conclusion 98 113. Misrepresentation by agent 99 114. Effect of misrepresentation 100 115. Substantial truth required 100 116. Test of materiality 100 117. Materiality Opinion of experts .. 101 118. Burden of proof 102 119. Statutory provisions 104 120. The Massachusetts statute 105 121. The Pennsylvania statute 105 122. Similar provisions in other states 106 123. Controlling force of such statutes . 107 PART IV. OF THE CONSIDERATION. CHAPTEK VII. THE PEEMIUM. SECTION PAGE 125. In general 109 /. The Premium in Ordinary Insurance. 126. Nature of premium 110 127. Obligation to pay premium Ill 128. Payment Condition precedent Forfeiture 112 129. Manner, time and place of payment 114 130. The giving of a promissory note 115 131. Payment after loss or death 117 132. Paid-up policies 118 133. Premium notes . 118 CONTENTS. Vll SECTION PAGE 134. Notice of time when premium is due 119 135. Right to recover premiums paid 121 //. Assessments in Mutual Companies and Benevolent Societies. 136. Dues and assessments 122 137. Liability to assessment 123 138. Effect of non-payment of assessment 123 139. Withdrawal of member 124 140. Insolvency of company 124 141. Death during period of suspension 125 142. Reinstatement 125 143. Waiver Estoppel 126 PART V. AGENCY, WAIVER AND ESTOPPEL. CHAPTER VIII. INSURANCE AGENTS AND THE GENERAL RULES OF AGENCY. SECTION PAGE 150. In general 128 151. Statutory provisions relating to insurance agents 129 152. Construction of such statutes 130 153. Evidence of agency 131 154. Character of the agency 131 155. Various special agents 133 156. Subagents and clerks 134 157. Insurance brokers 135 158. Powers of agents 137 159. Restrictions in application or policy 138 160. Limitations on authority of agent 139 160a. Limitations on authority Continued 140 161. Limitations contained in application Constructive notice 142 162. Preparation of application 143 163. Provisions restricting power of officers and general agents 143 164. Notice 144 165. Notice of loss to local agent 146 166. Rights and liabilities of agent 146 Till CONTENTS. CHAPTER IX. RULES OF WAIVER AND ESTOPPEL AS APPLIED TO CONTRACTS OF INSURANCE. SECTION PAGE 175. In general 148 176. Definition 148 177. Knowledge and intent 149 178. Basis of waiver 149 179. Effect of mere silence 150 180. What may be waived 150 181. Waiver of certain defenses 151 182. Power of agent to waive 152 183. Waiver by agent Continued 152 184. Prepayment of premium 153 185. Waiver in writing only 154 186. Limitations in policy Prepayment of premium 154 187. Estoppel by act of agent 156 188. Facts known to company when policy issued 157 189. Oral testimony to show actual statements 161 190. Bad faith Collusion between applicant and agent 163 PART VI. THE STANDARD POLICY AND ITS PROVISIONS. CHAPTER X. PROVISIONS OF THE STANDARD POLICY. SECTION PAGE 200. In general 165 201. The Massachusetts standard policy 165 202. The New York standard 166 203. The binding clause 167 204. 'Construction of the standard policy 168 205. Effect of a breach of condition 170 A. PROVISIONS RELATING TO MATTERS BEFORE Loss. /. Formal Part of Contract, 112. 206. Parties 172 207. The premium 174 208. Term of insurance.. . 174 CONTENTS. IX SECTION PAGE 209. The amount 175 210. Description of the property In general 175 211. Goods held in trust 175 212. May cover shifting stock 176 213. Ambiguous descriptions Reformation 176 214. Presumption as to nature of business 178 215. Descriptions, when warranties 179 216. Description of merchandise What included in the description. . 179 217. Description of buildings 183 218. Location of property In general 186 219. Location material 187 220. Illustrations 190 221. Risks insured against 193 222. Proximate cause Electric wires 197 II. Authorization of Agent, 199. 223. Agency 199 777. Application and Survey, 200. 224. Application a part of the policy 201 IV. Misconduct of Insured in Procuring Policy, 201. 225. Entirety of contract 201 226. Concealment and misrepresentation 204 227. Statement of interest 204 228. Fraud and false swearing 204 V. Excluded Risks, 206. 229. Invasion, riot, etc 207 230. Theft 209 231. Neglect to protect property 210 232. Explosion 210 233. Lightning 213 234. Fall of building 213 235. City ordinances 215 VI. Excluded Property, 215. 236. Exceptions and limitations 215 237. Plate glass, frescoes and decorations 217 ii ELLIOTT INS. X CONTENTS. CHAPTEK XI. PROVISIONS OF THE STANDARD POLICY, CONTINUED. VII. Provisions Relating to Interest in and Care of Property, 219. SECTION PAGE 245. Other insurance 219 246. Definition Different interests 221 247. Whether valid or invalid 222 248. Where the words "valid or invalid" do not appear 223 249. Consent of the company Waiver 226 250. Policy covering a part of the property 227 251. Operation of manufacturing establishment 229 252. Running after hours 232 253. Increase of risk 233 254. Changes in adjoining property 236 255. Effect of increase of hazard 237 256. Repairs Employment of mechanics 238 257. Ownership 241 258. Incumbrances 244 259. Illustrations 246 260. Illustrations of breach of condition 249 261. Building on leased ground 251 262. Incumbrance by chattel mortgage 252 263. Foreclosure proceedings 255 264. Generation of illuminating gas 258 VIII. Change in Interest, Title or Possession, 258. 265. Scope of provision 259 266. Transfer of part interest 260 267. Executory contract of sale 261 268. Incumbrances 263 269. Defeasible conveyances 265 270. Invalid conveyances 265 271. Sale with purchase-money mortgage 266 272. Conveyance to the wife of insured 266 273. Transfers by and between partners 266 274. Transfers between joint owners 269 275. Legal process or judgment 269 276. By judgment 271 277. By partition 272 278. Assignment and bankruptcy proceedings 272 279. Transfer by death 273 280. Change of possession 273 281. Lease of the property . 274 CONTENTS. XI IX. Assignment, 274- SECTION PAGE 282. Assignment of policy 275 X. Prohibited Articles, 278. 283. Use of property Prohibited articles 279 284. Prohibited articles Continued 283 285. Exception in favor of kerosene oil 284 XL Vacancy, 285. 286. In general 285 287. Construction 286 288. "Vacant" and "unoccupied" not synonymous 287 289. Construction when applied to dwelling house 288 290. Building Contents Vacancy 290 291. Illustrations of construction of this provision 291 XII. Authorized Change of Location, 293. 292. In general 293 XIII. Renewal of Contract, 298. 293. In general 294 294. Illustrations 297 295. Reformation of the policy 298 XIV. Cancellation of Policy, 298. 296. In general 299 297. The time 300 298. Authority of agent to cancel 300 299. Return of premium 302 300. What amounts to a cancellation 303 XV. Waiver, 805. 301. Limitations upon power to waive 306 CHAPTEE XII. PROVISIONS OF THE STANDARD POLICY, CONTINUED. B. PROVISIONS EELATING TO MATTERS SUBSEQUENT TO A Loss. SECTION PAGE 302. In general . 308 Xii CONTENTS. XVI. Notice and Proof of Loss, 309. SECTION PAGE 303. Definition Compliance 309 304. "Immediate" notice 311 305. Separation of goods "forthwith" 313 306. Excuses for failure to furnish proofs 314 307. When a condition precedent 315 308. What is a compliance with this provision 317 309. Certificate of magistrate 319 310. Plans and specifications 320 311. Waiver 320 312. To whom notice must be given 322 XVII. Exhibition of Property and Records Examination of Party, 823. 313. Examination of party 324 314. Failure to produce books 326 315. The iron safe clause 327 XVIII. Arbitration of the Amount of Loss, 330. 316. Disagreement 331 317. Validity of provision 332 318. Where there is a total loss 334 319. Demand for arbitration 335 320. Condition precedent 338 321. Revocation 342 322. Invalidity of the award 342 323. Waiver 347 324. Second arbitration Resnbmission 348 325. Demand for arbitration as admission of liability 352 326. Right of mortgagee 353 XIX. Right to Repair, Rebuild, or Replace, 353. 327. An option reserved 354 XX. Time Within Which Loss is Payable, 357. 328. In general 358 XXL Time of Bringing Suit, 359. 329. Validity 359 330. Time when limitation begins to run 360 CONTENTS. Xlll CHAPTER XIII. CERTAIN GENERAL PROVISIONS OF THE STANDARD POLICY. XXII. Measure of Damages, 362. SECTION PAGE 332. In general 363 333. Valued policy legislation 363 334. Constitutionality of valued policy laws 365 335. Meaning of total loss 366 336. Total loss to frame building within fire limits 368 337. Amount of recovery Illustrations 369 XXIII. Prorating Loss with Other Insurers., 70. 338. The pro rata clause 371 XXIV. Subrogation, 372. 339. The general principle 373 XXV. Reinsurance, 876. 340. The reinsurance contract 376 XXVI. Conditions Affecting Mortgagees, 378. 341. Special provisions 378 XXVII. Construction of Terms Mutual Companies, 381. 342. In general 381 XXVIII. Indorsement of Other Conditions, 381. PART VII. LIFE, ACCIDENT, AND INDEMNITY INSURANCE. CHAPTER XIV. STIPULATIONS OF LIFE INSURANCE POLICY. SECTION PAGE 350. General statement . .382 XIV CONTENTS. /. Formal Part of Contract, 883. SECTION PAGE 351. Parties 383 352. The beneficiary Manner of designation Right to fund 383 353. Transmission of interest of beneficiary 387 354. Rights of beneficiary 389 355. Reservation of a right to change beneficiary 391 356. Manner of changing beneficiary 394 357. Right to proceeds Bankruptcy 395 II. Payment of Premium a Condition Precedent, 395. 358. Payment of premium Illustrations 396 359. Time when premium is due Construction by agent Estoppel . . 399 ///. Powers of Agent, 401. 360. Agents 401 IV. Statement of Age, 402. 361. Age 402 V. Assignment of Policy, 403. 362. Assignability 403 363. Notice to company 405 364. Manner of making assignment 407 365. Assignment of policy by assignee 408 VI. Incontestable Clause, 409. 366. Incontestable 409 VII. Special Privileges, 411- 367. Special privileges 411 VIII. Application a Part of Contract, 411- 367a. Provisions in the application 411 (a) Excepted Risks, 411. 368. Suicide Sane or insane 412 369. Where there is no provision as to the effect of suicide 413 370. Suicide Construction 414 371. Presumption Burden of proof 416 372. Residence and occupation 417 373. Death in violation of law or at the hands of justice 418 CONTENTS. XV (b) Statements with Reference to Habits, Physical Condition, etc., 420. SECTION PAGE 374. Habits 420 375. Health and freedom from disease 421 376. Bodily injuries 424 377. Medical attendance 424 378. Family relationship 425 379. Other insurance 426 380. Rejection of former application 427 CHAPTEE XV. ACCIDENT INSURANCE. SECTION PAGE 390. In general 429 391. Definition of accident 429 I. Construction of Provisions of Policy. 392. External, violent, or accidental injuries 430 393. Risks of travel 432 394. Inhaling gas Poison 433 395. Occupation or employment 435 396. External signs 436 II. Excepted Risks. 397. Effect of negligence 437 398. Voluntary exposure to unnecessary dangers 437 399. Bodily infirmity or disease 440 400. Injuries intentionally inflicted by others 441 401. Injuries received while engaged in violation of law 443 402. Injuries received while intoxicated * 446 III. General Provisions. 403. Amount of recovery Disability 447 404. Construction Effect of existing judicial decisions 449 XVi CONTENTS. CHAPTER XVI. EMPLOYERS' LIABILITY, GUARANTY, AND TITLE INSURANCE. 7. Employers' Liability Insurance. SECTION PAGE 410. In general 451 411. Injuries while engaged in designated business 452 412. Violation of statute by insured 454 413. When liability accrues 455 414. Effect of judgment against insured 457 415. Notice of injury or claim 458 II. Fidelity Insurance. 416. In general 459 417. Manner of proof 462 418. Constructive notice 463 419. Supervision of employe 463 777. Credit Insurance. 420. In general 465 421. Construction of policy Amount of recovery 466 422. Identity of the insured 469 IV. Title Insurance. 423. Insurance of titles Construction . 469 TABLE OF CASES. [.References are to Pages.] Abbott v. Hampden, etc., Ins. Co., 49, 253 Accident Ins. Co. v. Bennett, 417, 442, 445 v. Crandall, 93, 415 Adair v. Southern, etc., Ins. Co., 234 Adams v. Lindsell, 37 v. Manufacturers', etc., Ins. Co., 300 v. New York, etc., Ins. Co., 182 v. Reed, 66 v. Rockingham, etc., Ins. Co., 265, 273 ^Etna, etc., Ins. Co. v. Clough, 384 v. Mason, 390 v. Olmstead, 156 .<33tna P. Ins. Co. v. Boon, 207, 208, 209 v. Davis, 332, 347 v. Tyler, 43, 221, 242 ..Etna Ins. Co. v. Grube, 87, 88 v. Jackson, 181 v. Maguire, 302 v. Meyers, 171, 286 v. Shryer, 134 v. Simmons, 324, 325, 348 ,an agreement with the owner to pay for the in- surance, may, as agent, insure for the owner's benefit: Schaeffer v. Anchor, etc., Ins. Co. (Iowa), 85 N. W. 985 (1901). 40 German Fire Ins. Co. v. Thomp- son, 43 Kan. 567, 23 Pac. 608 (1890). 41 In Foley v. Manufacturers' & B. F. Ins. Co., 152 N. Y. 131, 43 L. R. A. 665 (1897), it was held that the owner had an insurable interest to the extent of the value of a building being erected upon his land, under a contract requiring it to be com- pleted within a certain time, not yet expired, although the loss, in the ab- sence of insurance, would fall on the contractor. "The fact that the im- provements on the land may have cost the owner nothing, or that if destroyed by fire he may compel an- other to replace them, or that he may recoup his loss by resort to a contract liability of a third person, in no way affects the liability of the insurer, in the absence of an exemp- tion in the policy." In Santa Clara, etc., Academy v. Northwestern, etc., Ins. Co., 98 Wis. 257, 67 Am. St. 805 (1898), the court said: "It is well settled that, in the absence of fraud or mistake, unless otherwise provided in the contract of insur- ance, if the insured has some insur- able interest in the property covered by such contract, the whole amount of damages to the property, not ex- ceeding that named in the policy, is recoverable by such person if the damages thereto reach that sum, or if, by the contract itself and the law governing the subject, the face value of the policy must be taken as liquidated damages." 42 Looney v. Looney, 116 Mass. 283 (1874). 43 Ins. Co. v. Stinson, 103 U. S. 25 (1880); Bell v. Western, etc., Ins. Co., 5 Rob. (La.) 423, 39 Am. Dec. 542 (1843); Longhurst v. Star Ins. Co., 19 Iowa 364 (1865). 44 Stout v. City F. Ins. Co., 12 Iowa 371, 79 Am. Dec. 539 (1861). 45 Carpenter v. Providence, etc., Ins. Co., 16 Pet. (U. S.) 495 (1842); Manson v. Phoenix Ins. Co., 64 Wis. 26 (1885); Traders' Ins. Co. v. Robert, 9 Wend. (N. Y.) 405 (1832); King v. State, etc., Ins. Co., 7 Gush. (Mass.) 1, 54 Am. Dec. 683 (1851); Hanover, etc., Ins. Co. v. Bohn, 48 Neb. 743, 58 Am. St. 719 (1896). 47 IXSURABLE INTEREST IX PROPERTY. 48 gagor, although the mortgage debt is the full value of the property ; 4tl a mortgagor of personal property; 47 a husband in the community property; 48 an administrator in the property of the estate; 49 com- mission merchants in property sold, but not removed; 50 a common carrier in goods in his care; 51 a warehouseman in goods stored with him; 52 a cotton compress company in cotton received to press; 53 agents, commission merchants and others having the custody of and responsibility for property; 54 the trustee and the cestui que trust in the trust property; 55 the assignee in insolvency in the assigned property; 50 the surety on a distiller's bond required by the revenue law, in whisky in store; 57 a partner in the entire property of the 48 Owner of equity of redemption: Ins. Co. v. Stinson, 103 U. S. 25 (1880). 47 Kronk v. Birmingham F. Ins. Co., 91 Pa. St. 300. As to the amount for which a mortgagee or mortgagor may insure, see Guest v. New Hampshire F. Ins. Co., 66 Mich. 9s (1887); French v. Rogers, 16 N. H. 177 (1844); Smith v. Columbia Ins. Co., 17 Pa. St. 253, 55 Am. Dec. 546 (1851); Excelsior F. Ins. Co. v. Royal Ins. Co., 55 N. Y. 343 (1873). Each of several mortgagees has an insurable interest to the extent of his interest: Fox v. Phenix F. Ins. Co., 52 Me. 333 (1864). Where the destruction of the property would leave the debt unpaid, the debtor in possession of the pledged property has an insurable interest to the extent of the value of the property which would have gone to pay the debt: Nussbaum v. Northern As- sur. Co., 37 Fed. 524, 1 L. R. A. 706 (1889). 48 Hanover Fire Ins. Co. v. Shra- der, 11 Tex. Civ. App. 255, 31 S. W. 1100 (1895). 49 Sheppard v. Peabody Ins. Co., 21 W. Va. 368 (1883). 60 One may in his own name in- sure the property of another for the benefit of the owner without . his previous authority or sanction, and it will inure to the benefit of the owner upon the subsequent adoption of it, even after a loss has occurred: Waring v. Indemnity F. Ins. Co., 45 N. Y. 606 (1871). 51 Phoenix Ins. Co. v. Erie, etc., Trans. Co., 117 U. S. 312 (1885). 02 Pelzer Mfg. Co. v. St. Paul, etc., Ins. Co., 41 Fed. 271 (1890); Pelzer Mfg. Co. v. Sun Fire Office, 36 S. C. 213, 15 S. E. 562 (Isyl). 53 California Ins. Co. v. Union Com- press Co., 133 U. S. 387 (1890). 54 Waring v. Indemnity Ins. Co., 45 N. Y. 606 (1871); Western, etc., Pipe Lines v. Home Ins. Co., 145 Pa. St. 346, 27 Am. St. 703 (1891); Roberts v. Firemen's Ins. Co., 165 Pa. St. 55, 44 Am. St. 642 (1894). 55 Ex parte Houghton, 17 Ves. Jr. 251 (1809); Carpenter v. Provi- dence, etc., Ins. Co., 16 Pet. (U. S.) 495 (1842); Hartford F. Ins. Co. v. Keating, 86 Md. 130, 63 Am. St. 499 (1897); Young v. Union Ins. Co., 24 Fed. 279 (1885). 66 Herkimer y. Rice, 27 N. Y. 163 (1863). 67 Ins. Cos. v. Thompson, 95 U. S. 547 (1877). 48 SUBJECT-MATTER AND INSURABLE INTEREST. 48 firm; 58 a creditor in goods which he has sold under a contract by which he is to receive his pay out of the proceeds of the goods when sold by the vendee; 59 a simple contract creditor in the specific prop- erty in the estate of the deceased debtor where the estate may be sub- jected to a proceeding in rem for the payment of the debts and is in- sufficient for that purpose; 60 an attaching creditor in the property attached or levied upon under an execution, but such creditor must insure his own interest, and can not avail himself of the debtor's insurance; 61 a judgment creditor upon the property of the debtor upon which his judgment is a lien, 62 but a general judgment creditor, under ordinary circumstances, has no insurable interest in the specific property of his debtor; 63 the owner in goods concealed from his creditor; 6 * the owner in goods which have been levied upon by his creditor and sold under execution, so long as the right to redeem remains; 65 an insolvent debtor in goods which have passed to the assignee; 66 a lessor in leased property; 67 a lessee in property leased; 68 a landlord in the goods of his tenant which are liable to distress; 69 an officer in goods held by him under an attachment or levy; 70 a life tenant in the property in his possession; 71 a re- mainder-man in the property in the possession of the life tenant; 72 M Manhattan Ins. Co. v. Webster, ** Imperial F. Ins. Co. v. Murray, 59 Pa. St. 227 (1868). 73 Pa. St. 13 (1873). As to the 68 Roos v. Merchants' Mut. Ins. amount of the interest of the les- Co., 27 La. An. 409 (1875). see, see Home Ins. Co. v. Gibson, 72 60 Creed v. Sun Fire Office, 101 Miss. 58, 17 So. ^ ^6^4). A ten- Ala. 522, 23 L. R. A. 177 (1893). ant who has verbally agreed to keep 81 Donnell v. Donnell, 86 Me. 518, the property insured has an insur- 30 Atl. 67 (1894). able interest: Berry v. American, o:! Rohrbach v. Germania, etc., Ins. etc., Ins. Co., 132 N. \. 49, 28 Am. Co., 62 N. Y. 47 (1875). St. 548, and note, (1892). ""Grevemeyer v. Southern, etc., Columbia Ins. Co. v. Cooper, 50 Ins. Co., 62 Pa. St. 340, 1 Am. Rep. Pa. St. 331 (1865). 420 (1869). White v. Madison, 26 N. Y. 117 "Goulstone v. Royal Ins. Co., 1 (1862). The officer can not effect Fost. & F. 276 (1858). insurance on property held by him 65 Cone v. Niagara F. Ins. Co., 60 ' at the expense of the parties: N. Y. 619 (1875). Burke v. Brig M. P. Rich, 1 Cliff. 60 Marks v. Hamilton, 16 Jur. 152 (C. C.) 509 (1860). (I 852 )- "See Cross v. National F. Ins. 07 Philadelphia Tool Co. v. British- Co., 132 N. Y. 133, 30 N. E. 390 Amer. Assur. Co., 132 Pa. St. 236 (1892). (1890); Sherwood v. Harral, 39 72 Redfield v. Holland Purchase Conn. 338 (1872). Ins. Co., 56 N. Y. 354, 15 Am. Dec. 424 (1874). 49 INSURABLE INTEREST IN PROPERTY. 48 a tenant in common in the property; 73 a husband in the property in which he is a tenant by curtesy ; 74 a husband in the buildings on land purchased and paid for by him but conveyed to his wife, where he has in fact possession and the beneficial use of the premises. 76 By the weight of authority a stockholder in a private corporation has an insurable interest in the corporate property. 76 "Annely v. De Saussure, 26 S. C. R. A. 684 (1890); Warren v. Daven- .97 (1886). port F. Ins. Co., 31 la. 464, 7 Am. "Abbott v. Hampden, etc., Ins. Rep. 160 (1871); Seaman v. Enter- Co., 30 Me. 414 (1849). prise, etc., Ins. Co., 18 Fed. 250 75 Horsch v. Dwelling-House Ins. (1883). Contra, Dictum in Philips Co., 77 Wis. 4, 8 L. R. A. 806 (1890). v. Knox County Mut Ins. Co., 20 "Riggs v. Commercial, etc., Ins. Ohio 174 (1851). Co., 125 N. Y. 7, 25 N. E. 1058, 10 L. 4 ELLIOTT INS. CHAPTER IV. IXSURABLE INTEREST IX LIVES. SEC. 55. The rule at common law. 56. The English statute Not in force in this country. 57. The modern rule. 58. The amount of a creditor's in- surable interest. 59. Mere form disregarded. 60. Continuance of interest in life. 61. Interest of beneficiary desig- nated by insured. 62. Interest of the assignee. 63. Interest of the assignee, contin- ued. SEC. 64. Interest based upon relation- ship. 65. Interest based upon relationship, continued. 66. Illustrations of insurable inter- est in life. 67. Right of assignee without inter- est to recover premiums paid. 68. Want of interest as a defense under incontestable clause. 69. Fact of insurable interest must be pleaded. 70. Description of interest. 55. The rule at common law. At common law a contract of life insurance was admittedly a wager, and hence required no interest to support it, but the statute 14 Geo. Ill, chap. 48, made an interest in the life essential. Some courts have held that this statute was merely declaratory of the common law, but the better opinion is otherwise, and it is certain that many such contracts were held valid before the statute was enacted. 1 Baron Parke says: 2 "As to insur- ance upon lives, it is perfectly clear that all contracts for wager policies, and wagers which were not contrary to the policy of the law, were legal contracts." In some of the early cases in this country it was said that life insurance contracts do not require an insurable in- terest in the absence of a statute such as had been enacted in England. In an early case in Missouri it was held that no interest was required ; 3 1 Emerigon Ins. 159; Assievedo v. Cambridge, 10 Mod. 77 (1710); Depaba v. Ludlow, 1 Comyn 361 (1721); Dean v. Dicker, 2 Strange 1250 (1746). - Dalby v. India, etc., Assur. Co., ID C. B. 365 (1854). 3 Chisholm v. National, etc., Ins. Co., 52 Mo. 213, 14 Am. Rep. 414 (1873); but see Whitmore v. Su- preme Lodge, 100 Mo. 36 (1889); Trenton, etc., Ins. Co. v. John- son, 24 N. J. L. 577 (1854). At least the interest need only exist (50) 51 INSURABLE INTEREST IN LIVES. 56 and the courts of New Jersey and Ehode Island are notably liberal in sustaining life insurance policies, although in Rhode Island some insurable interest is required. 4 Thus, in that state it was recently said: "A policy on another's life is just as dangerous and tempting to crime where there is an interest as where there is not." But the rule was early settled/ as stated by Chancellor Kent, that "a wager contract is void if it be against the principles of public policy equally as if it contravened a positive law." 5 So, in an early Pennsylvania case, 6 it was said that "a policy made without interest is a wager policy, and has nothing in common with insurance but name and form. It is not subservient to the true interest of fair trade and commerce, but is pregnant with as much mischief, both public and private, as can proceed from any species of gaming, which the legis- lature has hitherto found it necessary to suppress." 56. The English statute Not in force in this country. In a re- cent case in Wisconsin, the court, after stating the rule that an interest in life is required, said 7 that the theory upon which the decisions are based is that such a contract is nothing more than a wagering or gambling contract, and hence is against public policy, and therefore void. It is very questionable whether such a policy was void by the common law of England prior to 1774. In the year named, the stat- ute of 14 Geo. Ill, chap. 48, was enacted, which is to the effect that thereafter "no insurance shall be made by any person or persons, bodies politic or corporate, on the life or lives of any person or per- sons, or on any other event whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies when the policy is taken out: Mow- to recover the premiums paid]; ry v. Home L. Ins. Co., 9 R. I. 346 Lord v. Ball, 12 Mass. 115, 7 Am. (1869). Dec. 38 (1815) [sister in the life of * See Cronin v. Vermont L. Ins. brother. This is the first American Co., 20 R. I. 570 (1898). life insurance case]; Ruse v. Mu- B See the following early cases: tual Ben. L. Ins. Co., 23 N. Y. 516 Amory v. Oilman, 2 Mass. 1 (1806) (1861). [marine case discussing wager pol- Pritchet v. Ins. Co., 3 Yeates icies]; Mount v. Waite, 7 John. (N. (Pa.) 458 (1803). Y.) 434 (1811) [insurance on lottery 7 Hurd v. Doty, 86 Wis. 1, 56 N. tickets. The contract was held void W. 371, 21 L. R. A. 746 (1893). As as against public policy; but as the to what is a wagering policy, see plaintiff had not violated any stat- Metropolitan L. Ins. Co. v. O'Brien, ute, and was hence not in pari de- 92 Mich. 584, 52 N. W. 1012 (1892). licto, Chancellor Kent allowed him 57 SUBJECT-MATTER AND INSURABLE INTEREST. 52 shall be made, shall have no interest, or by way of gambling or wager- ing, and that every assurance made contrary to the true intent and meaning hereof shall be null and void, to all intents and purposes whatsoever*." The court further said that this statute was never in force in Wisconsin and was never received and acted upon in this country. 57. The modern rule. It is now the settled rule that an interest in the continuance of the life of the insured is necessary to support a contract of life insurance. 8 The only difficulty is in denning this interest. As said by Mr. Justice Field: 9 "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 ex- pectation of advantage or benefit should be always capable of pecu- niary estimation, for a parent has an insurable interest in the life of his child, and a child in the life of his parent, a husband in the life of his wife, and a wife in the life of her husband. The natural affec- tion in cases of this kind is considered more powerful as operating more efficaciously to protect the life of the insured than any other consideration. But in all cases there must be a reasonable ground, founded upon the relations of the parties to each other, either pecu- niary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured. Otherwise, the contract is a mere wager, by which the party taking the policy is directly in- terested in the early death of the assured. Such policies have a ten- dency to create a desire for the event. They are, therefore, inde- pendently of any statute on the subject, condemned, as being against public policy." Holmes v. Oilman, 138 N. Y. 369, preme Lodge, 100 Mo. 36, 13 S. W. 34 Am. St. 463, and notes (1893); 495 (1889); Amick v. Butler, 111 Grotty v. Union, etc., Ins. Co., 144 ind. 578 (1887); Trinity College v. U. S. 621 (1892); Ulrich v. Rein- Travelers' Ins. Co., 113 N. C. 244 oehl, 143 Pa. St. 238, 22 Atl. 862. (1893). See note to 57 Am. Dec. (1896) [involving the question to 93-105. what extent creditor may insure life " Warnock v. Davis, 104 U. S. 775 of his debtor]; Whitmore v. Su- (1881). 53 INSURABLE INTEREST IN LIVES. 58 58. The amount of a creditor's insurable interest. In all cases the interest must be of such a nature as to take the contract out of the class of wagers. Hence, the amount of the insurance, where the interest is of a pecuniary nature, must bear some proper relation to the value of the interest. 10 If the amount which a creditor takes upon the life of his debtor is grossly disproportionate as compared with the debt, the contract will be treated as a wager, and, therefore, void. 11 In the jurisdictions which permit the assignment of a valid existing policy to a person without interest, the assignee may recover the entire amount of the policy. 12 But in a comparatively recent case in Pennsylvania 13 the court laid down the rule for determining the amount of a creditor's insurable interest as follows : "A creditor may lawfully take out a policy of insurance on the life of his debtor in an amount sufficient to cover the debt, with interest on the cost of such insurance, with interest thereon during the period of the debtor's expectancy of life according to the 'Carlisle tables. If such amount be exceeded the policy may be a wagering transaction." Where the policy is taken out by the debtor or assigned as security for his creditor, the former paying the premium, the personal rep- 10 Grant v. Kline, 115 Pa. St. 618, 9 Atl. 150 (1887) ["creditors, how- ever, hold only what is necessary for their indemnity for the debt, and the representatives of the in- sured will be entitled to the bal- ance"] ; Metropolitan L. Ins. Co. v. O'Brien, 92 Mich. 584 (1892); Page v. Burnstine, 102 U. S. 664 (1880); Downey v. Hoffer, 110 Pa. St. 109, 20 Atl. 655 (1885). See note on "Insurable Interest in the Life of Another,"- 57 Am. Dec. 93-105. A moral claim does not constitute an insurable interest on behalf of one as a creditor: Guardian, etc., Ins. Co. v. Hogan, 80 111. 35, 22 Am. Rep. 180 (1875). 11 In Cammock v. Lewis, 15 Wall. (U. S.) 643 (1872), a policy for $3,000 was taken out to secure a debt of $70 owed by L to C. The latter paid the premiums for one year. L then gave C his note for $3,000 without consideration, with an agreement back that in case of the death of L, C would pay L's widow one-third of the policy. It was held that C could retain only the amount of his debt with such sums as he had advanced. See Givens v. Veeder, 9 N. Mex. 256 (1897). 12 See Wright v. Mutual, etc., Ass'n, 118 N. Y. 237, 16 Am. St. 749 (1890). "Ulrica v. Reinoehl, 143 Pa. St. 238, 24 Am. St. 534, 22 Atl. 862 (1891); Wheeland v. Atwood, 192 Pa. St. 237, 73 Am. St. 803 (1899). 'See also Hays v. Lapeyre, 48 La. An. 749, 35 L. R. A. 647 (1895); Ex- change Bank v. Loh, 104 Ga. 446, 44 L. R. A. 372 (1898); Fisher v. Dono- van, 57 Neb. 361, 44 L. R. A. 383 (1899); Roberts v. Winton, 100 Tenn. 484, 41 L. R. A. 275 (1898); Carson v. Vicksburg Bank, 75 Miss. 167, 37 L. R. A. 559 (1897). 59 SUBJECT-MATTER AND INSURABLE INTEREST. 54 resentatives of the insured are entitled to the balance after the cred- itor's debt is paid. 14 59. Mere form disregarded. The courts will not permit the mere form of a policy to cover and protect a wager contract. 15 Thus, where the contract recited that the insured had himself paid the first premium, the insurer was allowed to show that the premium was in fact paid by the beneficiary, who had no insurable interest. 16 So where it appeared that the person insured was only a nominal party to the contract, and that the beneficiary named in the policy had in reality procured the insurance and paid the premiums, it was held that, "in order that the transaction may be taken out of the cate- gory of wager contracts, the beneficiary must have had an insurable interest of a pecuniary character, or of that nature, either present or prospective, at the time the policy had its inception/' 17 The essential thing is that the policy shall be obtained in good faith, and not for the purpose of speculating upon the hazard of a life in which the in- surer has no interest. 18 The manner of the payment of the premium is of much importance in determining whether the policy is speculative, and the tendency is to condemn contracts where the premium is paid by the beneficiary who has no insurable interest, although the policy was taken out by the insured. Thus, a policy was held invalid, although the insured himself made the application, where it appeared that the beneficiary paid the premiums. 19 "Morris v. Georgia Loan, etc., gan, 80 111. 35, 22 Am. Rep. 180 Ass'n, 109 Ga. 12, 46 L. R. A. 506 (1875); Whitmore v. Supreme (1899), and note; Amick v. Butler, Lodge, 100 Mo. 36 (1889). Ill Ind. 578 (1887). See Hale v. 10 United Brethren, etc., Soc. v. Life Indem., etc., Co., 65 Minn. 548 McDonald, 122 Pa. St. 324, 1 L. R. A. (1897). In Rittler v. Smith, 70 Md. 238 (1888). 261, 2 L. R. A. 844 (1889), it was "Amick v. Butler, 111 Ind. 578, 60 held that a creditor could insure the Am. Rep. 722 (1887). life of his debtor and collect the "Connecticut M. L.. Ins. Co. v. amount, although his debt had been Schaefer, 94 U. S. 457 (1876). paid before the death of the debtor; 19 Trinity College v. Travelers' Ins. but the relation between the debt Co., 113 N. C. 244, 22 L. R. A. 291 and the policy must not be grossly (1893). See Burton v. Connecticut disproportionate. As to who are M. L. Ins. Co., 119 Ind. 207 (1889); legal representatives within the Rawls v. American M. L. Ins. Co., meaning of a life insurance policy, 27 N. Y. 282, 84 Am. Dec. 280 (1863); see note to Rose v. Wortham, 95 Burke v. Prudential Ins. Co., 155 Tenn. 505, 30 L. R. A. 609. Pa. St. 295 (1893). u Guardian, etc., Ins. Co. v. Ho- 55 INSURABLE INTEREST IN LIVES. 60 60. Continuance of interest in life. We have found that life insurance is not a contract of indemnity and that the requirement of interest is necessary merely to prevent condemnation by the statute or common-law rule against wager contracts. In fire and marine in- surance contracts the insured is indemnified for the loss of interest existing at the time of the loss. But in life insurance it is only necessary that an interest exist at the time the contract is made. It seems to be the prevailing rule that if the contract is originally valid it is not affected by the loss of interest unless such is the necessary result of the provisions of the policy. 20 Thus, where a married woman is named as the beneficiary in an ordinary policy of insurance on the life of her husband, the policy remains in force although she obtains a divorce before his death. 21 But where the insurance is in a mutual benefit association, the relation of husband and wife must, by the ordinary terms of the contract, exist at the time of the death. 22 There is, however, a line of cases which holds that the assignee of a life in- surance policy must have an insurable interest notwithstanding the fact that it was valid when issued. 23 It is said by the supreme court of the United States that "if the policy of insurance be taken out by a debtor on his own life, naming a creditor as beneficiary, or with a subsequent assignment to a creditor, the general doctrine is that on payment of the debt the creditor loses all interest therein, and the policy becomes one for the benefit of the insured and collectible by his executors or administrators." 24 10 Ins. Co. v. Bailey, 13 Wall. (U. the policy. But this case was over- S.) 616 (1871); Connecticut M. L. ruled: Mowry v. Home L,. Ins. Co., Ins. Co. v. Schaefer, 94 U. S. 457 9 R. I. 346 (1869); Loomis v. Eagle, (1876); Sides v. Knickerbocker L. etc., Ins. Co., 6 Gray (Mass.) 396 Ins. Co., 16 Fed. 650 (1883); Appeal (1856); Rawls v. American M. L,. of Corson, 113 Pa. St. 438, 6 Atl. 213 Ins. Co., 27 N. Y. 282 (1863). (1886); Scott v. Dickson, 108 Pa. 21 Connecticut, etc., Ins. Co. v. St. 6 (1884); Rittler v. Smith, 70 Schaefer, 94 U. S. 457 (1876); Over- Md. 261 (1889) [creditor after pay- hiser v. Overhiser, 63 Ohio St. 77, ment of debt]. The well-known 50 L. R. A. 552 (1890), annotated, case of Godsall v. Boldero, 9 East 22 Tyler v. Odd Fellows', etc., Ass'n, 72 (1807), grew out of a policy is- 145 Mass. 134 (1887); Schonfield v. sued on the life of England's great Turner, 75 Tex. 324, 7 L. R. A. 189 prime minister, William Pitt, taken (1889). out by a creditor. After Pitt's . - J See 62, infra. death his debts were paid by the 24 Grotty v. Union, etc., Ins. Co., nation, and it was held that as life 144 U. S. 621 (1892). In Manhat- insurance was a contract of indem- tan L. Ins. Co. v. Hennessy, 39 C. nity there could be no recovery on C. A. 625, it was said that this case 61 SUBJECT-MATTER AND INSUEABLE INTEREST. 56 61. Interest of beneficiary designated by insured. Wager pol- icies are held void because it is thought contrary to public policy "that one person should have an expectation of a benefit conditioned upon the happening of the death of another." It is therefore thought necessary that the temptation to destroy the life of the other in order to obtain such benefit must be balanced or counteracted by an insur- able interest in the life. A person has an insurable interest in his own life, and the rule is assumed to have no application where the original contract is made by the insured. We therefore find the rule that one who takes an insurance upon his own life and pays the pre- miums may make the insurance payable to any person he may name in the policy, and that such person need have no interest in the life of the insured. 25 As said in South Carolina, 26 "It is firmly established that insurance procured by one person on the life of another in which the party effecting the insurance has no interest is void as a wager contract, against public policy which condemns gambling speculations upon human life. But it is also well settled that a person may insure his own life and make the policy payable to whomsoever he chooses, even a beneficiary who has no insurable interest in his life, provided that is not in its results in conflict with (1887); Mutual L. Ins. Co. v. Allen, the previous statements of the 138 Mass. 24, 52 Am. Rep. 848 court; that it is not necessary that (1884); Fitzgerald v. Hartford, etc., the interest continue to the time of Ins. Co., 56 Conn. 116, 7 Am. St. the death. 288 (1888); Eckel v. Renner, 41 * Albert v. Mutual L. Ins. Co., 122 Ohio St. 232 (1884). Contra, Mis- N. C. 92, 30 S. E. 327, 65 Am. St. souri Valley L. Ins. Co. v. Sturges, 693 (1898); Union, etc., League v. 18 Kan. 93, 26 Am. Rep. 761 (1877); Walton, 109 Ga. 1, 52 L. R. A. 442 Helmetag v. Miller, 76 Ala. 183, 52 (1899); Olmsted v. Keyes, 85 N. Y. Am. Rep. 316 (1884); Roller v. 593 (1881); Sabin v. Phinney, 134 Moore, 86 Va. 512, 6 L. R. A. 136 N. Y. 423 (1892); Vivar v. Supreme (1889); Basye v. Adams, 81 Ky. 368 Lodge, 52 N. J. L. 455, 20 Atl. 36 (18*d). See note to 16 Am. St. (1890); Northwestern Masonic Aid 906. A mere friend has not an in- Ass'n v. Jones, 154 Pa. St. 99, 35 surable interest, and can not be the Am. St. 810 (1893); Martin v. Stub- beneficiary of a life insurance pol- bings, 126 111. 387, 9 Am. St. 620 icy, although the insured volun- (1889); Heinlein v. Imperial L. Ins. tarily makes it payable to him: Co., 101 Mich. 250, 45 Am. St. 409, 25 Caudell v. Woodward, 96 Ky. 646, L. R. A. 627 (1894); Clark v. Allen, 29 S. W. 614 (1895). 11 R. I. 439, 23 Am. Rep. 496 (1878) ; Crosswell v. Connecticut Indem- Amick v. Butler, 111 Ind. 578, 60 nity Ass'n, 51 S. C. 103, 28 S. E. Am. Rep. 723 (1887); Murphy v. 200 (1897). Red, 64 Miss. 614, 60 Am. Rep. 68 57 INSURABLE INTEREST IN LIVES. 62 the transaction is bona fide and not a mere cover to evade the law against wager policies. In such a case the interest which the insured has in his own life supports the policy and prevents it from being condemned as a wager contract." So, in Georgia it was said: 27 "Beyond all controversy a man has an insurable interest in his own life, and we fail to see when, having that interest, he entered into a contract with an insurer by which, for a stipulated sum, which he periodically pays, the insurer becomes liable to pay a given sum of money at the death of the insured, why he who is most interested, whether actuated by ties of relationship, motives of friendship, gratitude, sympathy or love, may not make the object of his consid- eration the recipient of his bounty. If it be replied that a temptation is extended to the beneficiary by improper means to hasten the time when he should receive the amount of the policy and it is for this reason that such contracts will only be upheld when the idea of temptation is rebutted by the natural ties of blood or affinity we might well ask ourselves why executory devises, bequests, provisions for support and maintenance provided for friends and even strangers, are not subject to the same inhibition as being against public policy. But while, as we have before said, many adjudicated cases, frequently contrary to natural justice, clearly hold that, unless the beneficiary or assignee has an insurable interest in the life of the insured, the policy or assignment is void, we shall undertake to show by authority that such is not the law/' In nearly all the cases in which this rule has been applied the insured paid the premiums, but it has been held to apply even where the premiums were paid by the beneficiary. 27a 62. Interest of the assignee. The question whether a policy valid at its inception may afterwards, before the death of the insured, be assigned to one who has no insurable interest in the life of the in- sured, has been much discussed, and the authorities are in hopeless conflict. 28 It is universally admitted that wager policies are void, and that it is necessary to show that the contract is supported by an interest of some character sufficient to remove the objection that on grounds of public policy it is not well that it should be to the finan- cial interest of A that B should cease to live. If no interest appears 27 Union Fraternal League v. Wai- 28 See notes to Morrell v. Trenton ton, 109 Ga. 1, 46 L. R. A. 424 (1899). Ins. Co., 57 Am. Dec. 103, and Cur- 27 a Fidelity, etc., Ass'n v. Jeffords, rier v. Continental L. Ins. Co., 52 107 Fed. 402, 46 C. C. A. 377 (1901), Am. Rep. 143. and cases cited. 62 SUBJECT-MATTER AND INSURABLE INTEREST. 58 the law will presume that the policy was taken out for a speculative purpose. 29 In ordinary property insurance the principle of indem- nity makes the question easy of solution, but this does not apply to life insurance. There it must appear that the beneficiary has an interest in the continuance of the life resulting from some relation of con- tract, affinity, consanguinity or dependence supported by a moral ob- ligation, or a reasonable expectation of benefit. Thus, if it appears that the beneficiary has such an interest as to remove the suspicion that the contract is a gambling or speculative transaction, the courts will not, as a general rule, investigate very carefully into the exact nature or value of the interest. Some courts are less liberal than others. Thus, it is held that the interest that exists when the con- tract is made must continue to the death of the insured, or, at least, must exist at that time, and that the assignee of a valid policy must also have an insurable interest in the life of the insured. It must be admitted that this doctrine is strictly logical and in accord with the reason of the rule which requires the existence of an interest. As said by Mr. Justice Field: 30 "If there be any sound reason for holding a policy invalid when taken out by a party who has no interest in the life of the assured, it is difficult to see why that interest is not as cogent and operative against a party taking out an assignment of a policy upon the life of a person in which he has no interest. The same ground which invalidates the one should invalidate the other so far at least as to restrict the right of the assignee to the sums actually advanced by him." This rule prevails in Alabama, 31 Kansas, 32 Kentucky, 33 North Carolina, 3 * Pennsylvania, 35 United Brethren Mut. Aid Soc. (1887); Missouri Valley L. Ins. Co. v. McDonald, 122 Pa. St. 324 (1888). v. Sturges, 18 Kan. 93, 26 Am. Rep. "Warnock v. Davis, 104 U. S. 775 761 (1877). (1881). That this is still the doc- ^Basye v. Adams, 81 Ky. 368 trine of the supreme court, see Man- (1883). An assignment is valid only hattan L. Ins. Co. v. Hennessy, 39 in so far as necessary to secure ad- C. C. A. 625, 99 Fed. 64 (1900). vances made by the assignee: 31 Stoelker v. Thornton, 88 Ala. Beard v. Sharp, 100 Ky. 606, 38 S. 241, 6 So. 680 (1889). The dispo- W. 1057 (1897). sitlon may be made by will: Ala- ** Powell v. Dewey, 123 N. C. 103, bama G. L. Ins. Co. v. Mobile Mut. 31 S. E. 381 (1898). Ins. Co., 81 Ala. 329, 1 So. 561 M Hoffman v. Hoke, 122 Pa. St. (1886); Helmetag v. Miller, 76 Ala. 377, 15 Atl. 437 (1883). The orig- 183 (1884). inal beneficiary who assigned to "Missouri Valley L. Ins. Co. v. one without interest can recover: McCrum, 36 Kan. 146, 12 Pac. 517 Carpenter v. U. S. Life Ins. Co., 161 59 IXSURABLE INTEREST IN LIVES. 63 Texas/ 6 Tennessee, 37 and the United States courts. 38 It is not, how- ever, always followed to its logical conclusion, as all the reasons which forbid the assignment of a policy to a person without interest apply where there is a loss of interest. But an assignee without interest will be protected to the extent of the money advanced by him for the pay- ment of premiums. 39 It is held in Texas that the beneficiary named in the policy, who has no interest^ will hold the proceeds of the policy as trustee for the legal representatives of the insured, and that the assignee without interest will only hold it to the extent of his debt. 40 Mere want of interest in the assignee of a valid policy does not in this jurisdiction invalidate the policy. The insurer must perform his contract and leave it to the court to determine to whom the money belongs. 41 63. Interest of the assignee, continued. The tendency in busi- ness life has been to liberalize the rules governing life insurance and thus to broaden its scope. It was found desirable that life insurance policies should pass freely by transfer and assignment, and so long as this was with the consent of the parties it was felt that the objec- tions on the ground of public policy were largely illusory. Thus a more liberal rule has been adopted in many states, where it is held Pa. St. 9, 32 L. R. A. 571 (1894); Co., 101 Tenn. 22, 46 S. W. 561 Keystone Mut. Ben. Ass'n v. Norris, (1898) [notwithstanding incontest- 115 Pa. St. 446, 8 Atl. 638 (1886). able clause]. A took out a policy on her life and as Connecticut, etc., Ins. Co. v. assigned it to her husband, who, Schaefer, 94 U. S. 457 (1876.) See being subsequently unable to pay New York, etc., Ins. Co. v. Arm- the premiums, assigned it absolutely strong, 117 U. S. 591 (1886); Cur- to C to pay a debt, which, had A rier v. Continental L. Ins. Co., 52 lived out her life expectancy, would Am. Rep. 134 (1885), annotated, have amounted to about the amount 39 Page v. Burnstine, 102 U. S. of the policy. This was held not a 664 (1880); Warnock v. Davis, 104 wagering policy: Wheeland v. At- U. S. 775 (1881). See 67, infra. wood, 192 Pa. St. 237, 43 Atl. 946, 4U The policy is valid and collect- 73 Am. St. 803 (1899). ible; but the proceeds go to the par- ^Schonfield v. Turner, 75 Tex. ties legally entitled thereto: Equi- 324, 12 S. W. 626 (1889); Price v. table Life Ins. Co. v. Hazlewood, 75 Supreme Lodge, 68 Texas 361 Tex. 338, 16 Am. St. 893 (1889); (1887). The policy in such case is Schonfield v. Turner, 75 Tex. 324, 7 for the benefit of the original bene- L. R. A. 189 (1889). flciary. 41 Cheeves v. Anders, 87 Tex. 287, "Clement v. New York L. Ins. 47 Am. St. 107 (1894). 63 SUBJECT-MATTER AND INSURABLE INTEREST. 60 that a policy supported by an interest at its inception is a mere chose in action, which may be assigned to a person who has no insurable interest in the life. 42 Such an assignment does not create a new contract, but merely continues the old contract in force. A person may thus insure his own life and either name or assign the policy to whomsoever he chooses without reference to the interest of such beneficiary in his life. The rule that the assignee of a valid policy need not have an insurable interest in the life prevails in California, 43 Colorado, 44 Georgia, 45 Illinois, 46 Indiana, 47 Maryland, 48 Massachu- setts/ 9 Mississippi, 50 New York, 51 Ohio, 52 Ehode Island, 53 Ver- 42 See notes to 26 Am. St. 23; also, Hogue v. Minnesota Pack., etc., Co., 59 Minn. 39 (1894). 43 Deering's Civil Code Cal., 2764. See Curtiss v. JEtna, etc., Ins. Co., 90 Cal. 245, 25 Am. St. 114 (1891). "Sheets v. Sheets, 4 Colo. App. 450, 36 Pac. 310 (1894). " Union Fraternal League v. Wal- ton, 109 Ga. 1, 46 L. R. A. 424 (1899). "Martin v. Stubbings, 126 111. 387, 9 Am. St. 625 (1888); Bloom- ington Mut. B. Ass'n v. Blue, 120 111. 121, 60 Am. Rep. 558, 11 N. B. 331 (1887). 47 State v. Tomlinson, 16 Ind. App. 662, 59 Am. St. 335 (1897); Amick v. Butler, 111 Ind. 578 (1887). In Prudential Ins. Co. v. Hunn, 21 Ind. App. 525, 52 N. E. 772 (1899), it was held that a policy issued to one upon the life of another who has no insurable interest, is a wagering contract and void. In Franklin L. Ins. Co. v. Hazzard, 41 Ind. 116, 13 Am. Rep. 313 (1872), the court said: "In our opinion, no one should hold a policy upon the life of another, in whose life he has no insurable in- terest at the time he acquired the policy, whether the policy be issued to him directly from the insurer or whether he acquire the policy by purchase and assignment from an- other." In Continental L. Ins. Co. v. Volger, 89 Ind. 572 (1883), it was held that the interest must be a pe- cuniary one, and hence a mother had not an insurable interest in the life of her son. ** Souder v. Home, etc., Soc., 72 Md. 511, 20 Atl. 137 (1890). See Clogg v. McDaniel, 89 Md. 416, 43 Atl. 795 (1899). 48 Dixon v. National L.. Ins. Co., 168 Mass. 48, 46 N. B. 430 (1897); Mutual L. Ins. Co. v. Allen, 138 Mass. 31 (1884). 80 Murphy v. Red, 64 Miss. 614, 1 So. 761 (1887). "Olmsted v. Keyes, 85 N. Y. 593 (1881); Valton v. National F. L. Ass'n, 20 N. Y. 32 (1859); Rawls v. American M. L. Ins. Co., 27 N. Y. 282 (1863); St. John v. American M. L. Ins. Co., 13 N. Y. 31, 64 Am. Dec. 529; Sabin v. Phinney, 134 N. Y. 423 (1892) [mutual benefit so- ciety certificate]. "Eckel v. Renner, 41 Ohio St: 232 (1884). "Clark v. Allen, 11 R. I. 439; Cronin v. Vermont L. Ins. Co., 20 R. I. 570, 40 Atl. 497 (1898). 61 INCURABLE INTEREST IN LIVES. 64 mont, 54 Wisconsin, 63 South Carolina, 56 and in England 57 and Can- ada. 58 This doctrine seems to be supported by the weight of authority, but it must be noted that under either rule the essential fact is that the transaction must be bona fide, and not a mere cover for a wager- ing or speculative insurance or a device to evade the law. In fact, many of the cases which hold an assignment without interest void will, upon close examination, be found to rest upon the fact that the transaction in question was merely colorable and an attempt to obtain speculative insurance. 59 64. Interest based upon relationship. Where no ties of blood or marriage exist, a person has an insurable interest in a life only when he is a creditor of, or surety for such party. Where there are ties of blood or marriage there must be a reasonable expectation of ad- vantage from the continuance of the life. There is some conflict among the decisions as to the nature of the interest which grows out of the relationship which will support a policy of insurance. Where it is pecuniary, and the amount of the insurance bears some reasonable proportion to the interest, the contract is, of course, not a wager policy. If the reason for requiring an interest be as stated in many cases, that it is against public policy to tempt one person to deprive another of his life, it is apparent that certain ties of relationship are an ample protection. Hence, we find some decisions, and in our opinion the better ones, holding that near relationship, without any element of dependence, creates an insurable interest. A father has no direct pecuniary interest in the continuance of the life of a demented or crippled son, but it is little less than nonsense to say that public policy forbids such a father to insure the life of his child be- cause of the danger that he will be tempted to take the life of the child. The common-sense rule is that there is an insurable interest sufficient to prevent the policy being a speculative contract where there is either a pecuniary interest, the relation of dependency, or any re- 54 Fair-child v. Northeastern M. L. Ass'n, 51 S. C. 103, 28 S. E. 200 Ass'n, 51 Vt. 613 (1879). (1897). 85 Strike v. Wisconsin, etc., Ins. " Ashley v. Ashley, 3 Sim. 149 Co., 95 Wis. 583, 70 N. W. 819 (1829). (1897); Bursinger v. Bank, etc., 67 M North American L. Assur. Co. v. Wis. 75, 58 Am. Rep. 848 (1886); Craigen, 13 Can. S. C. 278 (1886). Hurd v. Doty, 86 Wis. 1, 21 L. R. A. See Clark v. Allen, 11 R. I. 439, 746 (1893). 23 Am. Rep. 496 (1877). 84 Crosswell v. Connecticut Ind. 64 SUBJECT-MATTER AND INSURABLE INTEREST. 62 lationship from which ordinary observation teaches that there is no real danger of placing temptation in the way of the beneficiary. All statements of this character must, however, be taken subject to the rule that where it is apparent that the transaction is merely a cover for a wager it will not be sustained by the courts. 60 In one case the supreme court of the United States, which is very strict in requiring an insurable interest, said : 61 "The better opinion is that the decided cases which proceed upon the ground that the in- sured must necessarily have some pecuniary interest in the life of the cestui que vie are founded upon -an erroneous view of the nature of the contract, that the contract of life insurance is not necessarily one merely of indemnity for a pecuniary loss, as in marine or fire policies, that it is sufficient to show that the policy is not invalid as a wager policy, if it appears that the relation, whether of affinity or con- sanguinity, was such between the person whose life was insured and the beneficiary named in the policy, as warrants the conclusion that the beneficiary had an interest, whether pecuniary or arising from dependence or mutual affection, in the life of the person insured." Mr. Joyce says: 62 "The general rule, as deduced from a majority of the cases, would seem to be, however, that the interest must rest iipon a purely pecuniary basis, or, in case of consanguinity or affinity, there is a sufficient interest where they involve a reasonable claim to support or some benefit or advantage to be derived from the continu- ance of the life insured." A much narrower view is adopted in many cases. Thus, in North Carolina it was said: 63 "Except in a case where there are ties of blood or marriage, the expectation of advan- tage from the continuance of the life insured, in order to be reason- able, as the law counts reasonableness, must be founded in the exist- ence of some contract between the person whose life is insured and the beneficiary, the fulfillment of which the death will prevent; it must appear that by the death there may come damage which can be esti- mated under some rule of law, for which loss or damage the insurance company has undertaken to indemnify the beneficiary under its pol- 00 That insurable interest is not 2 Joyce Ins., 899. See United confined to any particular class of Brethren, etc., Soc. v. McDonald, 122 persons or relationship, see Ken- Pa. St. 324, 1 L. R. A. 238 (1888). tucky, etc., Ins. Co. v. Hamilton, 63 Uj Trinity College v. Travelers' Fed. 93, 11 C. C. A. 42. (1894). Ins. Co., 113 N. C. 244, 18 S. E. 175 "Ins. Co. v. Bailey, 13 Wall. (U. (1893). S.) 616 (1871). 63 IXSURABLE INTEREST IX LIVES. 65 icy. When this contractual relation does not exist, and there are no ties of blood or marriage, an insurance policy becomes what the law denominates a wagering contract, and under its rules, made and en- forced in the interest of the best public policy, all such contracts must be declared illegal and void, no matter what good object the parties may have had in view. The end will not, in the eyes of the law, jus- tify the means." 65. Interest based upon relationship, continued. The circuit court of appeals recently held that the mere relation of father and son is not enough to give an adult son an insurable interest in the life of his father. 64 After reviewing the decisions the court said : "The sum of the decisions and of text-book discussions upon the subject 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 pecu- niary interest, although the interest may be contingent, and need not be capable of exact estimation in dollars and cents. Sentiment or affection is not sufficient of itself, although it may often be influential in persuading a court or jury to reach the conclusion that a bene- ficiary had a reasonable expectation of pecuniary advantage from the continued life of the insured. In one relation only the relation of husband and wife is the actual existence of such a pecuniary interest unimportant ; the reason being that a real pecuniary interest is found in so great a majority of cases that the courts conclusively 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 instances. 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 Ver- 04 Life Ins. Clearing Co. v. O'Neill, 106 Fed. 800, 45 C. C. A. 641, 54 L. R. A. 225, annotated (1901). 66 SUBJECT-MATTER AND INSURABLE INTEREST. 64 rnont 05 alone, we think, among judicial tribunals seems disposed 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 pecu- niary loss or gain is present in actual fact. No doubt, judicial lan- guage is to be found supporting the view that the mere relationship of parent and child is sufficient to give an insurable interest. "We think it can not be doubted that the tendency of the recent decisions is to insist upon an actual or presumed pecuniary interest in every case (although such interest may no doubt 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, lay- ing 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 nothing 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 can not be supported." 66. Illustrations of insurable interest in life. The following instances will illustrate the extent and nature of the interest which will sustain a contract of life insurance. A creditor has an insurable interest in the life of his debtor, at least for the amount of his debt. 68 In states which permit the assignment of a valid policy to an as- signee without interest the creditor is allowed to hold the entire in- surance, 67 but where the stricter rule prevails, the creditor, whether named as the original beneficiary or one to whom the policy has been assigned, has no further interest after the payment of his debt, and the policy thus becomes one for the benefit of the insured, to be collected by his personal representatives. 68 This certainly is the rule where "Currier v. Continental L. Ins. 749 (1890), it was held that the as- Co., 57 Vt. 496 (1885). signee of the creditor payee could " See 58, supra; Rittler v. Smith, recover the whole amount, although 70 Md. 261, 2 L. R. A. 844 (1889); the debt was less. Walker v. Larkin, 127 Ind. 100, 26 < *Ulrich v. Reinoehl, 143 Pa. St. N. E. 684 (1890). 238, 13 L. R. A. 433 (1891); Cooper 41 In Wright v. Mutual Ben. L. v. Shaeffer (Pa.), 11 Atl. 548 (1887). Ass'n, 118 N. Y. 237, 16 Am. Rep. 65 INSURABLE INTEREST IN LIVES. 66 the policy is merely assigned the creditor as a security for his debt. He should be permitted to retain out of the proceeds of the policy what is necessary to pay his debt, and be required to account for the balance to the representatives of the deceased. 69 In all cases a finan- cial interest, however slight, will sustain the policy. A creditor has no insurable interest in the life of his debtor's wife. 70 A corpora- tion has no insurable interest in the life of one of its stockholders who is not indebted to it. 71 A woman has an insurable interest in the life of the man to whom she is engaged to be married, although he has at the time a wife living, when he represented himself to her as a single man and she believed he was legally competent to marry her. 72 A husband has an insurable interest in the life of his wife. 73 A re- ligious society supported largely through voluntary contributions has no insurable interest in the life of one of its members. 74 A man may take a policy on his own life and make it payable to one to whom he is engaged to be married. 75 This applies to the certificate of a benevo- lent society when not prohibited by the statutes or rules of the so- ciety. 76 One partner has an insurable interest in the life of the other partner, 77 but some cases hold that the interest ceases when the latter retires unindebted from the firm. 78 A woman to whom a man is " Harbour v. Larue, 21 Ky. L. 94, National Capitol L. Ins. Co., 52 Mo. 51 S. W. 5; Roller v. Moore, 86 Va. 213 (1873). 512, 6 L. R. A. 136 (1889); Ex- 70 In the absence of anything to change Bank v. Loh, 104 Ga. 446, 44 the contrary in the charter or by- L. R. A. 372 (1898). laws or certificate, a mutual benefit 70 Wheeland v. Atwood, 192 Pa. St. society contract will be controlled 237, 42 W. N. C. 178. by the ordinary principles govern- 71 Tate v. Commercial, etc., Ass'n, ing other insurance: Union Fra- 97 Va. 74, 33 S. E. 382 (1899). ternal League v. Walton, 109 Ga. 1, "Taylor v. Travelers' Ins. Co., 15 46 L. R. A. 424 (1899). Tex. Civ. App. 254, 39 S. W. 185 " Ins. Co. v. Luchs, 108 U. S. 498 (1897); Bogart v. Thompson, 24 (1882). See notes in 57 Am. Dec. Misc. (N. Y.) 581 (1898) [a benevo- 98, 52 Am. Rep. 140, 46 Am. Rep. lent society certificate payable "to 190. In Powell v. Dewey, 123 N. C. his wife"]. 103, 31 S. E. 381 (1898), it was 73 Currier v. Continental L. Ins. held that where the partners have Co., 57 Vt. 496, 52 Am. Dec. 134. See no money invested, and neither is 65, supra. indebted to the other, neither part- 74 Trinity College v. Travelers' Ins. ner has an insurable interest in the Co., 113 N. C. 244, 22 L. R. A. 291 life of his copartner. (1893). 78 Cheeves v. Anders, 87 Tex. 287, 76 > Lemon v. Phrenix, etc., Ins. Co., 25 S. W. 324, 47 Am. St. 107 (1894). 38 Conn. 294 (1871); Chisholm v. 5 ELLIOTT INS. 66 SUBJECT-MATTER AND INSURABLE INTEREST. 66 engaged to be married does not come within the meaning of a rule permitting a mutual benefit certificate to be made payable to a person "dependent" upon the deceased. "Dependence for favor, or for af- fection, or for companionship, or as servant or retainer, is excluded." 79 A sister has an insurable interest in the life of her brother who stands in loco parentis. 80 A child is presumed to have an insurable interest in the life of its parent, 81 a sister in the life of her brother, 82 and a father in the life of a minor son. 83 It is said that where the rela- tionship of brother and sister appears it is incumbent upon the com- pany to show that notwithstanding silch fact the policy is a wager contract. 8 * A niece has an insurable interest in the life of an uncle who has reared her and continued to contribute to her support after her marriage. 85 A grandson has an insurable interest in the life of his grandfather. 86 A son-in-law has no insurable interest in the life of his mother-in-law, who lives with him and is dependent upon him for support. 87 But a mother-in-law has been held to have an in- surable interest in the life of her son-in-law. 88 A stepson has no insurable interest in the life of his stepfather, 89 but a stepfather is a "relative" who may be made the beneficiary of a benefit certificate. 90 A grandfather has an insurable interest in the life of his grandson. 91 A mere assumption of parental relations, without any legal obligation, by a man toward a girl whom he has educated will sustain a policy which he procures and assigns to her. The court stated that the test was whether the circumstances were such as to justify the belief that "Alexander v. Parker (111.), 19 McDonald, 122 Pa. St. 324 (1888); L. R. A. 187, note. Contra, Me- Equitable L. Ins. Co. v. Hazlewood, Carthy v. Supreme Lodge, 153 Mass. 75 Tex. 338, 7 L. R. A. 217 (1889). 314, 11 L. R. A. 144 (1891). ^McGraw v. Metropolitan L. Ins. 80 Lord v. Ball, 12 Mass. 115 Co., 41 W. N. C. (Pa.) 62 (1897). (1815). <*> Blkhart, etc., Ass'n v. Houghton. 81 Crosswell v. Connecticut Indem- 103 Ind. 286 (1885). nity Ass'n, 51 S. C. 103, 28 S/E. 200 sr Stambaugh v. Blake (Pa.), 15 (1897). Atl. 705 (1888). 83 Hosmer v. Welch, 107 Mich. 470, *> Adams v. Reed, 18 Ky. L. 858, 65 N. W. 280, 67 N. W. 504 (1895). 38 S. W. 420 (1896). 83 Loomis v. Eagle, etc., Ins. Co., 6 * United Brethren, etc., Soc. v. Gray (Mass.) 396 (1856). So by McDonald, 122 Pa. St. 324, 11 L. R. statute: C. L. Mass., 7212 (1897). A. 238 (1888). "^Etna L. Ins. Co. v. France, 94 " Simcoke v. Grand Lodge, 84 U. S. 561 (1876); Crosswell v. Con- Iowa 383, 15 L. R. A. 114 (1892). necticut Indemnity Ass'n, 51 S. C. " Hilliard v. Sanford, 4 Ohio N. 103; United Brethren, etc., Soc. v. P. 363. 67 INSURABLE INTEREST IN LIVES. 67 his death would result in a pecuniary loss to her. 92 In a recent case, where the rule was applied with much liberality, it was held that an aunt had an insurable interest in the life of her niece, who had lived with her from earliest childhood and been supported by her. After reviewing the cases, the court said: 93 "The principle of these and other like cases is that the interest does not depend upon any liability 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 mutual interest and to rebut the presumption of a mere wager. The contract is com- plete and legal in itself, and when considerations 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 an objectionable one on the grounds of public policy. It shows that the relation 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 expected from her in the declining years of the aunt could only be supplied by insurance upon her life. This is no more specu- lation than a husband's provision for his wife in the same way." A woman living with a man as his wife, although not such, has an insurable interest in his life: 94 In many states the right of a wife to insure her husband's life and hold the proceeds free from the claims of his creditors is secured by statute. 94 * 67. Right of assignee without interest to recover premiums paid. Where the assignee of a policy has no insurable interest and is free from fraud, he will ordinarily be protected to the extent of the money actually paid out by him. 95 But he can retain only enough of the proceeds of the policy to reimburse him for premiums paid and expenses incurred and interest thereon. He can only properly col- lect this amount from the company, and if the full amount of the policy is paid to him he must account for the balance to the repre- 92 Carpenter v. U. S. L. Ins. Co., interest in the man's life:" Lamp- 161 Pa. St. 9, 25 L. R. A. 571 (1894). kin v. Travelers' Ins. Co., 11 Colo. "'Cronin v. Vermont L. Ins. Co., App. 249, 52 Pac. 1040 (1898). 20 R. I. 570, 40 Atl. 497 (1898). M a See note to Metropolitan L. Ins. M "A woman illegally married be- Co. v. Smith (Ky.), 53 L. R. A. 817 cause the husband has a lawful (1900), citing many cases, wife, or living unlawfully with a 85 Helmetag v. Miller, 76 Ala. 183, man as his wife, has an insurable 52 Am. Rep. 316 (1884). 67 SUBJECT-MATTER AND INSURABLE INTEREST. 68 sentatives of the insured. It is immaterial whether the policy is made payable directly to him or to the assured and afterwards as- signed. 96 In a recent case in Kentucky a benefit certificate, valid at its inception, was thereafter assigned in part to one who had no in- surable interest, but who agreed to pay the future assessments in con- sideration of receiving one-half of the proceeds of the policy upon the death of the insured. The full amount of the policy was paid to the assignee, and it was held that the legal beneficiary could col- lect from him all the money so paid less the amount of the assess- ments actually paid. The court said: 97 "It seems to us that the appellee in this case could have legally held the benefit certificate for no other purpose than as security to indemnify him for moneys advanced to pay the premiums and to be advanced ; and to this extent his claim to said policy was just; but all overplus of said fund he holds as trustee for the benefit of the appellant in this action, and under an implied obligation to pay over the same." Where the rules of the policy provide that no policy shall be issued upon the life of a person without the consent of such person indorsed upon the application, and a policy is issued in violation of such rules, a beneficiary who was a party to the procurement of the contract which was a fraud upon the company can not recover the premiums paid. 98 But where the plaintiff was induced to procure such a policy by the fraudulent statement of the agent of the company he was per- mitted to recover the money paid as premiums. In this case the plaintiff had taken out the insurance for the benefit of his daughter. The court said: 99 "The plaintiff, therefore, would be entitled to recover unless he made a wagering contract or was a party to the fraud of the defendant's agent. There is nothing in the case to show that the plaintiff derived any benefit either direct or indirect, so that it could not be ruled as a matter of law that the transaction was a wager or was other than a gift for the benefit of his daughter." "Tate v. Commercial Bldg. Ass'n, Ky. 646 (1895), See Mutual L. Ins. 97 Va. 74, 33 S. E. 382 (1889); New Co. v. Blodgett, 8 Tex. Civ. App. 45, York L. Ins. Co. v. Davis, 96 Va. 27 S. W. 286 (1894). 737, 44 L. R. A. 305 (1899); Stam- "* Fisher v. Metropolitan L. Ins. baugh v. Blake (Pa.), 15 Atl. 705 Co., 160 Mass. 386 (1894). (1888); Riner v. Riner, 166 Pa. St. " McCann v. Metropolitan L. Ins. 617 (1895). Co., 177 Mass. 280, 58 N. E. 1026 "Beard v. Sharp, 100 Ky. 606 (1901). (1897); Caudell v. Woodward, 96 69 INSURABLE INTEREST IN LIVES. 68 68. Want of interest as a defense under incontestable clause. A clause in a policy making it incontestable on any ground after the lapse of a specified time does not prevent the insured from defending an action to recover after loss upon the ground that the policy was a wager contract. Where this was attempted the court said 100 that "the clause by which the company stipulated that this policy should not be disputed after one year does not help the respondent's case. Private interest must give way before public interests. The stipula- tion itself is contrary to law and order. The company's defense in this case is certainly not a deserving one, but a defense like theirs to an action of this nature is allowed not for the sake of the defendant, but of the law itself. There can be no waiver of such an objection." This seems to be about the only defense that is not covered by such a clause. Where the assignee of a policy is required to have an in- surable interest he is not enabled to recover by reason of the policy containing such a clause. 101 By the weight of authority an incon- testable clause prevents the company from interposing the defense of fraud after the expiration of the prescribed period. It is not an agreement to condone fraud, which would be void on the grounds of public policy, but is in the nature of a statute of limitations. There is no objection to an agreement upon the part of the company that after the expiration of a reasonable time in which to investigate the facts it will thereafter waive even the defense of fraud. 102 69. Fact of insurable interest must be pleaded. In an action on an insurance contract the burden of showing an insurable interest in the beneficiary is on the plaintiff. Hence, a complaint which fails to allege such interest is bad on demurrer. 103 An insurable interest 100 Manufacturers' L. Ins. Co. v. 256, 42 L. R. A. 261, note (1898); Anctil, 28 Can. S. C. 103 (1897). Patterson v. Natural Prem. Mut. L. 101 Clement v. New York L. Ins. Ins. Co., 100 Wis. 118, 42 L. R. A. 253 Co., 101 Tenn. 22, 46 S. W. 561, 42 (1898). See article in 45 Cent. L. L. R. A. 247 (1889). J. 425. In Welch v. Union Cent. L. 102 Murray v. Mutual, etc., L. Ass'n Ins. Co., 108 Iowa 224, 50 L. R. A. (R. L), 53 L. R. A. 742 (1901); 774 (1899), it was held that an in- Clement v. New York L. Ins. Co., contestable clause in a policy does 101 Tenn. 22, 46 S. W. 561 (1889); not prevent the insurance company Wright v. Mutual Ben. L. Ass'n, from availing itself of the defense 118 N. Y. 237, 6 L. R. A. 731 of fraud even after the time limit (1890) [limiting time to sue]; has passed. Brady v. Prudential Ins. Co., 168 103 Western Assur. Co. v. McCarty, Pa. St. 645 (1895); Massachusetts 18 Ind. App. 449, 48 N. B. 265 (1897), Ben. L. Ass'n v. Robinson, 104 Ga. citing other cases. 70 SUBJECT-MATTER AND INSURABLE INTEREST. 70 is a question of law dependent upon the facts, and if the pleading states the facts from which the conclusion of an insurable interest may be drawn, it is sufficient. 104 70. Description of interest. If the subject in which the interest exists is correctly described, it is not necessary that the particular interest of the insured be stated in the policy unless it is called for by the company. Thus, an applicant for insurance is not required to show the exact condition of his title unless requested so to do. 105 This is the general rule, but where the interest is of such a nature as to affect the character of the risk it should be fully disclosed. Thus, profits should be insured as such. 106 Where the question was whether the applicant had correctly described his title, Chief Justice Marshall said: 107 "The description was insufficient, as a precarious title de- pending for its continuance on events which might or might not hap- pen is not such a title as is generally described in the offer for insur- ance construing the words of the offer as they are fairly to be under- stood." 101 Prudential Ins. Co. v. Hunn, 21 Am. St. 745 (1895); Kenton Ins. Co. Ind. App. 525, 52 N. E. 772 (1899); v. Wigginton, 89 Ky. 330, 7 L. R. A. Northwestern, etc., Ins. Co. v. Wood- 81; Mackenzie v. Whitworth, L. R. ward, 18 Tex. Civ. App. 496, 45 S. 1 Ex. Div. 36, 13 Eng. R. Cas. 322 W. 185 (1898). and notes (1875). 105 Prudential Ins. Co. v. Hunn, 21 1WJ Niblo v. North American F. Ind. App. 525, 52 N. E. 772 (1899), Ins. Co., 1 Sandf. (N. Y. Super.) 551 and cases cited; Hall v. Niagara F. (1848). Ins. Co., 93 Mich. 184, 32 Am. St. 107 Columbian Ins. Co. v. Law- 497 (1892); Riggs v. Commercial M. rence, 2 Pet. (U. S.) 25 (1829); Ins. Co., 125 N. Y. 7, 21 Am. St. 717 Morrison v. Tennessee, etc., Ins. (1890); Rochester Loan & B. Co. v. Co., 18 Mo. 262, 59 Am. Dec. 299 Liberty Ins. Co., 44 Neb. 537, 48 (1853). PART III. OF MATTERS THAT RENDER THE CONTRACT VOID OR UNAVAILABLE. CHAPTER V. NON-DISCLOSURE OF MATERIAL FACTS. 78. In general. 86. Where no written application is 79. Duty of applicant. made. 80. Concealment Definition. 87. Incomplete answers to inquiries. 81. Rule as affected by the charac- 88. Answers calculated to mislead ter of the insurance. Irresponsive answers. 82. Modern rule in the United 89. Time of concealment. States. 90. Materiality. 83. What must be communicated. 91. Concealment through inadvert- 84. Where specific inquiries are ence or negligence. made. 92. Concealment or misrepresenta- 85. Basis of the rule. tion by agent. 93. Knowledge of agent, continued. 78. In general. The first step toward effecting a contract of insurance is the application. It may be oral, but it is usually made upon a printed form prepared and furnished by the insurance com- pany. The written application is always used when applying for insurance other than against loss by fire. This application, which the applicant is required to sign, contains numerous inquiries calling for specific information with reference to matters deemed material by the company. They are directed to things of which the applicant is presumed to have knowledge, and of which the company should be informed in order to determine whether it will accept the risk, and, if so, upon what terms and conditions. This application, when duly filled out and signed by the applicant, is forwarded to the company, (71) 79 MATTERS VOIDING CONTRACT. 72 and contains the information upon which the company relies in ac- cepting the risk and issuing its written policy. 1 79. Duty of applicant. The person applying for insurance owes a duty to the proposed insurer, which requires that he shall put him in possession of all facts which are within his knowledge, or which it is his duty to know, and which it is material that the insurer should know. The concealment or misstatement of material matters may justify the insurer in repudiating the obligation of the contract, even after there has been a loss. This subject is commonly discussed under the heads of concealment and misrepresentation and relates simply to those matters which induce the contract. Those statements which are warranted are inserted in the contract and constitute one of the provisions or conditions of the printed pol- icy. 80. Concealment Definition. In the law of insurance, the in- tentional withholding from the insurer of facts which are material and prejudicial to the risk, and which ought in good faith to be known to the insurer, is called concealment. It has been said that "every fact and circumstance which, can possibly influence the mind of the insurer in determining whether he will underwrite the policy, and at what premium, is material to be disclosed, and concealment thereof will vitiate the policy." 2 81. Rule as affected by the character of the insurance. The English courts recognize but one rule and apply it to all insurance contracts. "I am not prepared," said Sir George Jessel, 3 "to lay down the law as making any difference in substance between one con- tract of insurance and another. Whether it is life, or fire, or marine l As to the requirement that the 3 London Assurance v. Mansel, L. application must be signed by the R. 11 Ch. Div. 363, 367 (1879); applicant, see Somers v. Kansas Lindenau v. Desborough, 8 Barn. & Prot. Union, 42 Kan. 619, 22 Pac. C. 586 (1828). In the leading case 702 (1889). The statements may of Carter v. Boehm, 2 Burr. 1905 be adopted by an applicant who does (1766), the rule in marine insurance not sign the application: Pruden- is stated as it now prevails in En- tial Ins. Co. v. Fredericks, 41 111. gland and the United States. See App. 419 (1891). Sun Mut. Ins. Co. v. Ocean Ins. Co., 'Ely v. Hallett, 2 Caines (N. Y.) 107 U. S. 485 (1882). 57 (1804), note. 73 NONDISCLOSURE OF MATERIAL FACTS. 81 insurance, I take it, good faith is required in all cases, and, although there may be certain circumstances from the peculiar nature of ma- rine insurance which require to be disclosed, and do not apply to other contracts of insurance, that is rather, in my opinion, an illus- tration of the application of the principle than a distinction in prin- cipled This rule was recently applied in the house of lords to a contract involving the solvency of a guarantor on a promissory note. It ap- peared that there were facts known to the applicant affecting the financial condition of the maker of the note and the guarantor, which were not known to the company ; and it was held that the concealment of such facts prevented a recovery on the policy. 4 This strict rule of the English courts is applied to marine insur- ance in this country, but by the weight of authority it does not gov- ern other kinds of insurance contracts. The unusual conditions which surround the contract of marine insurance are not present when an application is made for life or fire insurance, and much impor- tance has been given to the general practice of insurance companies, which require applicants to sign written applications containing an- swers to a great number of specific inquiries. In such cases the in- ference is that the company has made inquiry for the purpose of eliciting information with reference to all the facts of which it de- sires information, and the applicant is thus excused from volunteer- ing any statement with reference to other matters, unless of some ex- traordinary character, or the suppression of which is fraudulent. 5 In some of the earlier cases the rule of marine insurance was applied to fire insurance contracts. Thus, Mr. Justice Story said : 6 "The rules as to misrepresentations and concealments, or omissions to state facts material to the risk, are more strict in cases of marine than in fire insurance. But the differences are founded on the difference in the character of the property and of the greater facilities insurers possess for obtaining information as to conditions and surrounding circum- stances in cases of insurance on buildings, etc., than on vessels which are often insured when absent or afloat, and the distinctions are ap- plied ordinarily in cases where the insurer sets up the omission of the 4 Seaton v. Heath, 68 L. J. Q. B. 798 (1891); Wytheville Ins. Co. v. (N. S.) 631 (1899). Stultz, 87 Va. 629, 13 S. E. 77 (1891). 5 Phoenix Ins. Co. v. Raddin, 120 " Carpenter v. American Ins. Co., U. S. 183 (1886); Vankirk v. Citi- 1 Story (C. C.) 57 (1839). zens' Ins. Co., 79 Wis. 627, 48 N. W. 82 MATTERS VOIDING CONTRACT. 74 insured to state material facts. In these cases there is a difference between the rules applicable to marine and fire insurance. But where the defense is a material affirmative misrepresentation as to a matter which is presumably within the knowledge of the party apply- ing for the insurance, and as to which the insurer has not the same means of knowledge, there is no ground for any distinction between cases of fire and marine insurance." 82. Modern rule in the United States. The question was re- cently given elaborate consideration in the circuit court of appeals, and the conclusion reached that, by the weight of authority in this country, the strict rules which govern the contract of marine insur- ance do not apply to other insurance contracts. 7 After noting the practice of making full inquiry by specific questions, and the different nature of the conditions and circumstances surrounding the parties and the risk, the court said that the insured "can only be said to fail in his duty to the insurer when he withholds from him some fact, which, though not made the subject of inquiry, he nevertheless believes to be material to the risk, and actually is so, for fear it would induce a rejection of the risk, or, what is the same thing, with fraudulent intent. * * * Nor does this rule result in practical hardship to the insurer, for in every case where the undisclosed fact is palpably material to the risk, the mere non-disclosure is itself strong evidence of fraudulent intent. Thus, if a man about to fight a duel should obtain life insurance without disclosing his intention, it would seem that no argument or additional evidence would be needed to show the fraudulent character of the non-disclosure. On the other hand, where men may reasonably differ as to the materiality of a fact con- cerning which the insurer might have elicited further information, and did not do so, the insurer occupies no such position of disadvan- tage in judging of the risk as to make it unjust to require that before the policy is avoided it shall appear not only that the undisclosed fact was material, but also that it was withheld in bad faith. To hold that good faith is immaterial in such a case is to apply the harsh, rigorous rule of marine insurance to a class of insurance contracts differing so materially from marine policies in the circumstances under which the contracting parties agree that the reason for the rule ceases. The au- 7 Penn Mut. Life Ins. Co. v. Mechanics', etc., Co., 72 Fed. 413, 19 C. C. A. 286 (1896). 75 NON-DISCLOSURE OF MATERIAL FACTS. 83 thorities are not uniform, and we are able to take that view which is more clearly founded in reason and justice." After referring to certain cases the court further said: "We think the modern ten- dency, even of Massachusetts decisions, is to require that a non-disclos- ure of a fact not inquired about shall be fraudulent before vitiating the policy, and, as already stated, this view is founded upon the better reason. The subject is by no means as clear upon the authorities as could be wished." 83. What must be communicated. The recognized rule is that each party to a contract of insurance must communicate to the other in good faith all facts within his knowledge which are, or he believes to be, material to the risk, and which the other has not the means of ascertaining and as to which no warranty is made. If specific in- formation is required by the insurer on any point he deems material it must be fully and correctly communicated. 8 On the other hand, neither party is required to communicate information except in an- swer to inquiries of (1) Matters which the other, or his duly authorized agent, knows. (2) Matters of which, in the exercise of ordinary care, the other, or his duly authorized agent, ought to know, and of which the appli- cant has no reason to believe he is ignorant. 9 8 Valton v. National Fund L. As- policy is made, either as to taking sur. Co., 20 N. Y. 32 (1859); Nor- the contract of insurance, or as to wich F. Ins. Co. v. Boomer, 52 111. the premium on which he would 442 (1869). The applicant is not take it. The materiality of the fact bound to disclose the nature of his depends upon whether or no a pru- interest, unless interrogated with dent underwriter would take the reference thereto: See 70, supra, facts into consideration in estimat- In Tate v. Hyslop, L. R. 15 Q. B. D. ing the premium or in undervaluing 368 (1885), Lord Justice Bowen the policy." See 84, infra. said: "It is established law that a 9 Carter v. Boehm, 2 Burr. 1905 person dealing with underwriters (1766), Lord Mansfield; Green v. must disclose to them all the ma- Merchants' Ins. Co., 10 Pick. (Mass.) terial facts which are known to himr 402 (1830); Richards v. Washing- self and not to them, or at all events ton F. & M. Ins. Co., 60 Mich. 420 all facts which they are not bound (1886). The innocent concealment to know. What are material facts of matters which may be discovered has been denned by authority. It by an examination of the property is the duty of the assured to commu- has no effect: Continental Ins. Co. nicate all facts within his knowl- v. Kasey, 25 Gratt. (Va.) 268 (1874); edge which would anect the mind of same rule under statute: Insur- the underwriters at the time the ance Co. v. Leslie, 47 Ohio St. 409 8-i MATTERS VOIDING CONTRACT. 76 (3) Matters of which information is waived. (4) Matters which prove or tend to prove the existence of a risk excluded by a warranty, and which are not otherwise material. 10 (5) Matters which relate to a risk excepted from the policy and not otherwise material. (6) Mere matters of opinion or belief. 84. Where specific inquiries are made. As already stated, the strict rule governing concealment in cases of marine insurance is somewhat relaxed in the case of fire and life insurance. From the nature of the risk the insurer may fairly be presumed to have a better knowledge of the circumstances, and the practice of making specific inquiries with reference to matters of which the insurer desires in- formation may well suggest the conclusion that all material facts are called for. It has therefore been held that where there is a writ- ten application containing answers to specific questions, an innocent failure by an applicant for fire insurance to communicate facts about which he is not asked, will not avoid the policy, 11 and the same rule undoubtedly applies to life insurance. But this must be taken in connection with the statement that actual fraud always vitiates the contract, and subject to the provision that the insured must commu- nicate all knowledge which he has, or is by law required to have, of unusual or extraordinary circumstances of peril to which the property is exposed, when the same could not with reasonable diligence be known by the insurer or reasonably anticipated by him as the founda- tion of suitable inquiries. 12 This is illustrated by a case where the applicant knew that an attempt had been made to burn the building which was the subject-matter of the insurance. 13 The rule is not (1890). As to constructive knowl- Penn Mut. L. Ins. Co. v. Wiler, 100 edge of facts where the insurance Ind. 92 (1884); Sibley v. Prescott company is required by its charter Ins. Co., 57 Mich. 14 (1885); Carson or by-laws to make a survey, see v. Jersey City Ins. Co., 43 N. J. L. Satterthwaite v. Mutual Ben. Ins. 300, 39 Am. Rep. 584, 44 N. J. L. Ass'n, 14 Pa. St. 393 (1850). 210 (1881); Campbell v. American 10 DeWolf v. New York, etc., Ins. P. Ins. Co., 73 Wis. 100 (1888); Co., 20 John. (N. Y.) 214 (1822) Hosford v. Germania F. Ins. Co., 127 [marine case]. U. S. 399 (1887). "Washington Mins Mfg. Co. v. "Hartford, etc., Ins. Co. v. Har- Weymouth Ins. Co., 135 Mass. 503 mer, 2 Ohio St. 452, 59 Am. Dec. 684 (1883); Browning v. Home Ins. Co., (1853); North American, etc., Ins. 71 N. Y. 508 (1887); Boggs v. Co. v. Throop, 22 Mich. 146 (1871). America Ins. Co., 30 Mo. 63 (1860); "Walden v. Louisiana Ins. Co., 12 77 NON-DISCLOSURE OF MATERIAL FACTS. 85 changed by a provision in the policy that full disclosure must be made concerning the matters to which the specific questions relate. 14 85. Basis of the rule. Language will be found in some of the books which suggests that fraud, actual or constructive, is the founda- tion of the concealment which will prevent the enforcement of a con- tract of insurance. Arnould says that the doctrine in the English courts is that, although no pretext exists for anything like actual fraud, yet the policy is to be considered void on the ground of con- structive or legal fraud. His reason for adhering to this phraseology is that, as a representation, through mistake or inadvertence, has the same effect as an intentional and literally false representation or concealment that is, it induces the insurer to enter into a contract which he would otherwise have declined, or to take a less premium than he would otherwise have demanded it is at least excusable to apply the word fraud; and this brings the doctrine upon a subject nominally within the acknowledged general principles applicable to other contracts. 15 But it is somewhat misleading, and it is much bet- ter to state the doctrine in direct terms that it is an implied condi- tion of the contract of insurance that it is free from misrepresenta- tion or concealment, whether fraudulent or through mistake. 16 Lord Esher thus stated the rule: 17 "The freedom from misrepresentation or concealment is a condition precedent to the right of the insured to insist on the performance of the contract, so that on a failure of the performance of the condition, the assured can not enforce the con- tract." In the same case, Lord Justice Lindley said that in his opin- ion Duer and Phillips are right in concluding that fraud on the part of the assured is not essential to discharge the insurer on the ground of misrepresentation or concealment. This principle governs all cases of marine insurance in the United States as well as in England, and has been applied to many cases of other kinds of insurance. But it is inconsistent with the principle of those cases which hold that an innocent misrepresentation will not avoid the policy. La. 134, 32 Am. Dec. 116 (1838); by a refusal to answer a question: Bebee v. Hartford County M. F. American L. Ins. Co. v. Mahone, 56 Ins. Co., 25 Conn. 56, 65 Am. Dec. Miss. 180 (1878),. 553 (1856). But see German-Amer. "Arnould Mar. Ins. 514. Ins. Co. v. Norris, 100 Ky. 29, 66 16 Phillips Ins., 287, 537. Am. St. 324 (1896). "Blackburn v. Vigors, 55 L. J. Q. "Dunbar v. Phenix^Ins. Co., 72 B. (N. S.) 347, L. R. 17 Q. B. D. 578 Wis. 492, 40 N. W. 386* (1888). Or (1886). 86 MATTERS VOIDING CONTRACT. 78 86. Where no written application is made. Where the insurer asks no questions and the applicant makes no representations, and there is no written application, there are cases which relieve the ap- plicant from any duty to make a disclosure unless the concealment is fraudulent. Under this rule, where no inquiries are made, the in- tention of the party becomes very material. It is said that where there is no written application for fire insurance, and no representa- tions are made "concerning the situation, value or risk of the prop- erty insured, and there is no fraudulent suppression of a material fact, or in case a printed slip is furnished describing the property in the most general terms, and the insurers issue the policy upon their own examination, they can not, after a loss, avail themselves of their own negligence in failing to make proper inquiries to defeat the pol- icy." 18 This is sometimes carried so far as to practically destroy the rule of concealment and release the applicant from any duty except to answer questions. In the supreme court of the United States it was said: 19 "But the relation of the parties seems entirely changed if the insurer asks no information and the insured makes no representa- tions. That is the chief novelty of this question, as hypothetically stated in the bill of exceptions. We think that the governing test is this: It must be presumed that the insurer has in person or by agent in such a case obtained all the information desired as to the premises insured, or ventures to take the risk without it, and that the insured, being asked nothing, has a right to presume that nothing on the risk is desired from him." This was recently followed in Washington, 20 where it appeared that no questions were asked and no representations made, but that the policy contained a pro- vision requiring a full disclosure of certain matters. "There having been no written application," said the court, "in which questions were asked and answered concerning the status of the property, we think, under the authorities and as a question of right, that this condition which is injected into the policy among numerous other conditions, more or less technical, and hard to understand by the ordinary mind, 18 Joyce Ins., 1871; Pelzer Mfg. tock Ins. Co. v. Rodefer, 92 Va. 747, Co. v. Sun Fire Office, 36 S. C. 213, 53 Am. St. 846 (1896). 15 S. E. 562 (1891); Gristock v. 19 Clark v. Manufacturers' Ins. Co., Royal Ins. Co., 87 Mich. 428, 49 N. 8 How. (U. S.) 235 (1850). W. 634 (1891); Western, etc., Pipe ""Dooly v. Hanover Fire Ins. Co., Lines v. Home Ins. Co., 145 Pa. St. 16 Wash. 155, 58 Am. St. 26 (1896), 346, 22 Atl. 665 (1891). See Moro- citing cases. 79 NON-DISCLOSURE OF MATERIAL FACTS. 87 ought not to prevent a recovery in the absence of any misrepresenta- tion on the part of the assured. The insured, as a matter of fact, ordinarily knows nothing about the policy until it is made out and returned to h^m after the payments for the same have been made to the agent at the time the contract was made, and the insurer, having failed to obtain the information, must be held to have done so at his peril." . 87. Incomplete answers to inquiries. It is the duty of the ap- plicant to answer fully and fairly all inquiries made with reference to the risk, but if such questions are not answered, or are incom- pletely answered, and the insurer, without further inquiry or inves- tigation, issues the policy, he will be held to have waived his right to a more complete answer and elected to accept the risk with the in- formation actually given. As said by Mr. Justice Gray: 21 "Where upon the face of the application a question appears to be not answered at all, or to be imperfectly answered, and the insurers issue a policy without further inquiry, they have waived the want or imperfection in the answer and rendered the omission to answer more fully im- material." The English courts apply a contrary rule, and in com- menting upon one of the leading cases, 22 Justice Gray says that so much of the language as "implies that an insurance company is not bound to look with the greatest attention at the answers of the appli- cant, to the great number of questions framed by the company or its agents, and that the intentional omission of the insured to answer a question put to him is a concealment which will void the policy issued without further inquiry, can hardly be reconciled with the uniform current of American authorities." J1 Phoenix L. Ins. Co. v. Raddin, not issue to him the policy as it 120 U. S. 183 (1887). See also Hig- pleased on such facts as the corn- gins v. Phoenix M. L. Ins. Co., 74 N. pany had." No breach of warranty Y. 9 (1878). In Parker v. Otsego can be based upon such an answer, County, etc., F. Ins. Co., 47 N. Y. as a breach of warranty must be App. Div. 204 (1900), the court said: based upon the affirmation of some- "The failure to answer the ques- thing not true: Dilleber v. Home L. tion implied in the paragraph re- Ins. Co., 69 N. Y. 256, 25 Am. Rep. ferred to, or answering it to a cer- 182 (1877); Penn Mut. L. Ins. Co. tain point and not completing the v. Wiler, 100 Ind. 92 (1884). answer, was notice to the company 22 London Assur. v. Mansel, L. R. simply that he declined to divulge, 11 Ch. Div. 363 (1879). and the company might or might 88 MATTERS VOIDING CONTRACT. 80 88. Answers calculated to mislead Irresponsive answers. Where the matters in question are open to general observation the ap- plicant need not go into details, but may make general statements and leave the insurer to make other inquiries if he desires further information. 23 Although a failure to answer a question or an ap- parently incomplete answer will not avoid a policy issued without further inquiry, it is the duty of the applicant to give answers which are clear and specific, and not evasive and calculated to mislead. 24 Where a disclosure is required it should be full and complete, not partial, evasive or calculated to deceive, omitting matters of impor- tance or materiality which, if disclosed, would make the answer full. 25 An irresponsive answer can not constitute a warranty, although it may be a representation, and thus invalidate the policy if material and also false. "The answer to a material question may be in itself wholly imma- terial and of no effect. An answer so irresponsive as to leave the fact of inquiry wholly undisclosed, the question unanswered, will not avoid the contract in the absence of fraud." 26 89. Time of concealment. The concealment which will invali- date a contract of insurance refers to the time of making the con- tract, and not to the event itself. It can not be made to depend upon a subsequent event or upon facts learned by the insured after the risk has attached. 27 90. Materiality. A fact is material within the meaning of this rule when it would influence the mind of the insurer in determining whether he would accept the risk, or the amount of the premium charged. 28 It has been said that only such facts as are material to the 23 Fowler v. JEtna P. Ins. Co., 6 K American L. Ins. Co. v. Mahone, Cow. (N. Y.) 673, 16 Am. Dec. 460 56 Miss. 180 (1878). See Sladden v. (1827). New York L. Ins. Co., 86 Fed. 102, 24 Phoenix Ins. Co. v. Raddin, 120 M C. C. A. 596 (1898). U. S. 183 (1887); Moulor v. Amer- K Ferine v. Grand Lodge, 51 Minn. ican L. Ins. Co., Ill U. S. 335 (1884). 224, 53 N. W. 367 (1892). A mere check-mark placed after a " Lynch v. Dunsford, 14 East 494 question can not be deemed a nega- (1811). tive answer when the same kind of ^ Daniels v. Hudson River F. Ins. marks appear after other questions Co., 12 Cush. (Mass.) 416, 59 Am. not answered and deemed imma- Dec. 192 (1853); Clark v. Union terial: Manhattan L. Ins. Co. v. Mut. F. Ins. Co., 40 N. H. 333, 77 Willis, 60 Fed. 236, 8 C. C. A. 594. Am. Dec. 721 (1860); Waterbury v. 81 NON-DISCLOSURE OF MATERIAL FACTS. 91 risk may be availed of ; but the better rule is that any fact, the knowl- edge or ignorance of which would materially influence the judgment of the underwriter in making the contract or in determining the pre- mium, is material, and, subject to the limitations already stated, should be disclosed. 29 Matters with reference to which inquiry has been made are always treated as material. In other cases the question of materiality is for the jury to determine. 30 91. Concealment through inadvertence or negligence. While the decisions are not uniform, there is high authority for the view that under modern conditions the concealment of a material fact through inadvertence or mistake, and without fraudulent intent, will not invalidate a contract of insurance. 31 This tendency also appears by the enactment of statutes providing that false representations shall not invalidate the contract unless they increase the risk or are fraudu- lently made. We have found that the concealment which will au- thorize the rescinding of a contract of insurance is not necessarily fraudulent, 32 and there are many cases which hold that a false state- ment of a material fact is sufficient to avoid a policy written on the faith thereof, although it was made through inadvertence or mistake. 33 Dakota F. & M. Ins. Co., 6 Dak. 468, 32 If the concealment of a ma- 43 N. W. 697 (1889). terial fact is intentional, it is a case 29 Boggs v. American Ins. Co., 30 of actual fraud and avoids the con- Mo. 63 (1860). tract: Daniels v. Hudson River F. ^Penn Mut. L. Ins. Co. v. Me- Ins. Co., 12 Gush. (Mass.) 416, 59 chanics', etc., Co., 19 C. C. A. 286, Am. Dec. 192 (1853). See 85, stir 305 (1896) [disapproving statement pra. in Provident, etc., Soc. v. Llewellyn, 33 Carpenter v. American Ins. Co., 7 C. C. A. 579 (1893), to the effect 1 Story (C. C.) 57 (1839). A party that the materiality of insured's is not excused from the conse- having had delirium tremens is a quences of concealment of material matter of law for the court in any facts by the mere fact that it was case where inquiry is not foreclosed due to his ignorance or mistake, by express or implied stipulations]; He must disclose facts not only of Fidelity & Gas. Co. v. Alpert, 14 C. which he has actual knowledge, but C. A. 474, 67 Fed. 460 (1895). In those of which the law requires Reynolds v. Atlas Ace. Ins. Co., 69 him to have knowledge. Hence, if Minn. 93, the question of materiality the fact is one which comes within was taken from the jury and deter- the scope of this rule, and is not mined as a question of law. disclosed to the insurer, the policy 31 See 82, supra; Penn Mut. L. can not be enforced, although the Ins. Co. v. Mechanics', etc., Co., 72 failure to disclose it was due to his Fed. 413, 19 C. C. A. 286 (1896). negligence or mistake, or was a 6 ELLIOTT INS. 92 MATTERS VOIDING CONTRACT. 82 The logical rule, that which is consistent with the doctrine upon which the law of concealment rests that of an implied condition, is that even an innocent non-disclosure of a material fact will vitiate the policy unless there are specific inquiries under circumstances from which it will be presumed that the insured has waived further in- formation. 92. Concealment or misrepresentation by agent. Every prin- ciple of good faith and fair dealing forbids even an innocent principal from taking advantage of the fraud of his agent. An agent for ef- fecting insurance must, therefore, be held to bind his principal by the consequences of his misrepresentation or concealment. 34 The same principle requires that the knowledge of the agent acquired in the course of the transaction shall be treated as the knowledge of the principal. 35 This rule, with its limitations, is well illustrated by certain English cases dealing with marine insurance. In an early case 36 an agent of the insured was employed to ship a cargo of oats, and to communicate the fact of shipment to another agent, who was to effect an insurance on the cargo. The former neglected to notify the latter of the loss of the ship, and the insurance was held invali- dated. Ashhurst, J., said: "On general principles of policy the act of the agent ought to bind the principal, because it must be taken for granted that the principal knows whatever the agent knows; and there is no hardship on the plaintiff, for, if the fact had been known the policy could not have been effected." In another case 37 it appeared that the master did not notify the owner that the ship had been lost; and the owner, in ignorance of the fact, effected an insurance on the ship by a policy "lost or not lost." It was held that the captain was bound to communicate the fact to the owner and that there could be no recovery on the policy, mere accident: Weigle v. Cascade 3o (1813). The loss resulted from F. & M. Ins. Co., 12 Wash. 449, 41 the fact thus concealed. The pol- Pac. 53 (1895). icy was not void, as the insured 34 National L. Ins. Co. v. Minch, 53 was allowed to recover back the N. Y. 144 (1873). premium. See comments on this "Clement v. Phenix Ins. Co., 6 case in Stribley v. Imperial Mar. Blatchf. (C. C.) 481 (1869). Ins. Co., L. R. 1 Q. B. Div. 507 "Fitzherbert v. Mather, 1 Term (1876). The case is criticised in R. 12 (1785). Blackburn v. Vigors, L. R. 12 App. ""Gladstone v. King, 1 Maule & S. Cas. 531 (1887). 83 NON-DISCLOSURE OF MATERIAL PACTS. 93 although there was no fraud. In a case where it appeared that at the time of the insurance the agent of the owner knew that the ship had been lost, the court said: 38 "The question arises whether the plaint- iff, the assured, is so far affected hy the knowledge of the agent of the loss of the vessel or damage to the cargoes that the fraud thus committed on the underwriters through the intentional concealment of the agent, though innocently committed, so far as the plaintiff is concerned, will afford a defense to the underwriter on a claim to en- force the policy." Chief Justice Cockburn said that "if an agent whose duty it is, in the ordinary course of business, to communicate information to his principal as to the state of the ship or cargo, omits, to discharge such duty, or the owner, in the absence of information as to any fact material to be communicated to the underwriter, effects an insurance, such insurance will be void, on the ground of conceal- ment or misrepresentation. The insurer is entitled to assume as the basis of the contract between him and the assured that the latter will communicate to him every material fact of which the assured has or in the ordinary course of business ought to have knowledge ; and that the latter will take the necessary measures, by the employment of competent and honest agents, to obtain, through the ordinary channels of intelligence in use in the commercial world, all due information as to the subject-matter of the insurance. This condition is not com- plied with where, by the fraud or negligence of the agent, the party proposing the insurance is kept in ignorance of a material fact which ought to have been made known to the underwriter, and through such ignorance fails to disclose it/' 93. Knowledge of the agent, continued. In a well-known case 89 it appeared that the owner of an overdue vessel instructed A to procure insurance, but he was unable to do so and so informed the owner. The same instructions were then given to B, with the same results. Another agent then secured the insurance. The vessel had been al- ready lost, and the fact was known to B while he was attempting to secure the insurance. He did not communicate the fact to the owner or to C, and both were ignorant of the loss when the insurance was effected. The court of appeals held that there could be no recovery upon the policy, as the knowledge of the agent B must be imputed to M Proudfoot v. Montefiore, L. R. 2 30 Blackburn v. Vigors, L. R. 17 Q. B. 511 (1867). Q. B. D. 553, 55 L. J. Q. B. (N. S.) 347 (1886). 93 MATTERS VOIDING CONTRACT. 84 the owner. The court below had ordered judgment for the plaintiff on the theory that as B, who had acquired the knowledge, was not the agent through whom the insurance was effected, his knowledge could not be imputed to the owner. This view was adopted by the master of the rolls in the court of appeals, who said: "I am prepared to decide this case upon the old, simple, recognized and easily justified rule that a contract of insurance is rendered void by an innocent mis- representation or concealment of a material fact known to the assured, or to an agent of his, by or through whom the contract is made, and which fact the underwriter neither knows nor is bound to know; but is not rendered abortive by the misrepresentation or concealment of any other person or agent, whether innocent or fraudulent." The majority of the court held that it was the duty of the agent who acquired the information to communicate it to his principal. Lord Justice Lindley said: "It appears to me to be established that in order to prevent fraud and willful ignorance on the part of per- sons effecting insurance, no policy can be enforced by an assured who has been deliberately kept in ignorance of material facts by soine one whose moral, if not legal, duty it was to inform him of them ; and he has been kept in such ignorance purposely in order that he might be able to effect the insurance without disclosing these facts. * * * It is a condition of the contract that there is no misrepresentation or concealment either by the assured or by any one who ought, as a mat- ter of business or fair dealing, to have stated or disclosed the facts to him or to the underwriter for him." But the house of lords reversed this decision, and permitted the plaintiff to recover. 40 Lord Watson said that "the responsibility of an innocent insured for the non-communication of facts which happen to be within the private knowledge of persons whom he merely employs to obtain an insurance upon a particular risk ought not to be carried beyond the person who actually makes the contract on his behalf. There is no authority whatever for enlarging his respon- sibility beyond that limit, unless it is to be found in the decisions which relate to captains and ship agents; and these do not appear to me to have any analogy to the case of agents employed to effect a policy. There is a material difference in the relations of these two classes of agents to their employers. The one class is specially em- ployed for the purpose of communicating to him the very facts which 40 Blackburn v. Vigors, L. R. 12 App. Gas. 531 (1887). 85 NON-DISCLOSURE OF MATERIAL FACTS. 93 the law requires him to divulge to his insurer; the other is employed, not to procure or furnish information concerning the ship, but to effect an insurance. * * * It can not be reasonably suggested that the insurer relies to any extent upon the private information possessed by persons of whose existence he presumably knows noth- ing." Lord Macnaughton said that it would "be a dangerous extension of the doctrine of constructive notice to hold that persons who are themselves absolutely innocent of any concealment or misrepresenta- tion, and who have not willfully shut their eyes or closed their ears to any means of information, are to be affected with the knowledge of matters which other persons may be morally, though not legally, bound to communicate to them/' A distinction is here made between an agent to insure and an agent as the master of a ship. Mr. Justice Story held that when the owner, at the time of procuring the insurance, had no knowledge of the loss, but acted with entire good faith, he was not precluded from recover- ing, and that the policy was not rendered void by the omission of the master to communicate intelligence of the loss, although such omis- sion was willful and fraudulent. 41 "Ruggles v. General Interest Ins. Co., 4 Mason (C. C.) 74 (1825). CHAPTER VI. REPRESENTATIONS AND WARRANTIES. SEC. 100. Statutory modifications. 101. Representations Definition. 102. Warranties distinguished from representations. 103. Affirmative and promissory warranties. 104. Effect of breach of warranty. 105. Construction of statements in the application. 106. Application made part of the policy. 107. Construction. 108. Oral representations. 108a. Mistake Good faith answer. 109. Statement of expectation or be- lief. 110. Affirmative and promissory rep- resentations Continuing warranties. SEC. 111. Oral promissory representa- tions. 112. Conclusion. 113. Misrepresentation by agent. 114. Effect of misrepresentation. 115. Substantial truth required. 116. Test of materiality. 117. Materiality Opinion of ex- perts. 118. Burden of proof. 119. Statutory provisions. 120. The Massachusetts statute. 121. The Pennsylvania statute. 122. Similar provisions in other states. 123. Controlling force of such stat- utes. 100. Statutory modifications. The importance of technical war- ranties has been considerably diminished by the enactment of statutes that require them to be construed for all practical purposes as though they were common-law representations. Thus, in a number of states it is provided that no oral or written misrepresentation made in the negotiation of a contract or policy of insurance by the insured, or in his behalf, shall be deemed material or defeat or render void the policy or prevent its attaching unless such representation is made with actual intent to deceive, or unless such misrepresentation in- creases the risk of loss. Although such statutes in terms refer only to misrepresentations, they apply to all contracts of insurance, and to warranties as well as representations. 1 1 See 119, infra. (86) 87 REPRESENTATIONS AND WARRANTIES. 101 101. Representations Definition. A statement made by the ap- plicant for insurance pending the negotiations relative to some fact having reference thereto, and upon the faith of which the contract is entered into, is called a representation. It may be verbal or written, and is made before the issuance of the policy with reference to some fact which, by apparently diminishing the risk, may tend to induce the insurer to more readily assume the risk, or to assume it at a lesser rate of premium. Such representations are not, strictly speak- ing, a part of the contract of insurance or of the essence of it, but are something collateral or preliminary thereto or in the nature of an inducement. 2 102. Warranties distinguished from representations. When a representation made by an applicant for insurance is carried into the contract and made a part thereof, it becomes a warranty, and the question of its materiality is thus settled by the contract of the par- ties. A warranty at common law is defined as a stipulation or state- ment inserted or referred to in, and made a part of the insurance contract, upon the truth or performance of which the validity of the contract depends. 3 A representation is never a part of the contract of insurance, while a warranty must be inserted in the written contract in such a manner as to make it a part thereof. 4 It may be written upon the margin of the policy, 5 but a mere reference therein to an- other paper, unless such paper is referred to and made a part of the policy, is not sufficient. 6 'Alabama Gold L. Ins. Co. v. 376, 33 N. E. 105 (1892). As to Johnston, 80 Ala. 467 (1886); Paw- what language amounts to a war- son v. Watson, 2 Cowp. 785, 13 Eng. ranty, see Daniels v. Hudson River, Rul. Gas. 540 (1778). Duer (Vol. 2 etc., Ins. Co., 12 Gush. (Mass.) 416, (ed. 1846), p. 644) claims that a 59 Am. Dec. 192 (1853). positive representation is not col- B Patch v. Phoenix, etc., Ins. Co., lateral to but a part of the contract. 44 Vt. 481 (1872); McLaughlin v. In line with this view is Ellis In- Atlantic Mut. Ins. Co., 57 Me. 170 surance 29. (1869). 8 Ripley v. ^Etna Ins. Co., 30 N. Y. 8 Houghton v. Manufacturers', etc., 136 (1864). Ins. Co., 8 Mete. (Mass.) 114 (1844); * Lord Mansfield in Pawson v. ^Etna Ins. Co. v. Grube, 6 Minn. 82, Watson, 2 Cowp. 785, 13 Eng. Rul. Gil. 32 (1861). As to meaning of Cas. 540 (1778); Wheaton v. North "indorsed," etc., see Reynolds v. At- British, etc., Ins. Co., 76 Cal. 415, 9 las, etc., Ins. Co., 69 Minn. 93, 71 N. Am. St. 216 (1888); Standard L. & W. 831 (1897). Ace. Ins. Co. v. Martin, 133 Ind. 103 MATTERS VOIDING CONTRACT. 88 The supreme court of Minnesota, in an early case, thus stated the distinction between warranties and representations: 7 "'An ex- press warranty in the law of insurance is a stipulation inserted in writing upon the face of the policy, on the literal truth or fulfillment of which the validity of the entire contract depends. The stipula- tion is considered to be on the face of the policy, although it may be written in the margin or transversely, or on a subjoined paper re- ferred to in the policy.' 73 - A representation, as distinguished from a warranty in the law of insurance, is 'a. verbal or written statement made by the assured to the underwriter, before the subscription of the policy, as to the existence of some fact or state of facts tending to induce the underwriter more readily to assume the risk by dimin- ishing the estimate he would otherwise have formed of it.' 7b In the law of insurance a warranty is always a part of the contract a con- dition precedent upon the fulfillment of which its validity depends. A representation, on the other hand, is not a part of the contract, but is collateral to it. 8 The essential, difference between a warranty and a representation is that in the former it must be literally fulfilled, or there is no contract, the parties having stipulated that the subject of the warranty is material and closed all inquiry concerning it; while in the latter, if the representation prove to be untrue, still, if it is not material to the risk, the contract is not avoided." 9 103. Affirmative and promissory warranties. A warranty may be either affirmative or promissory, the former affirming the existence of certain facts at the time of the insurance, and the latter requiring the performance or the omission of certain things after the taking out of the insurance. 10 This is illustrated by a recent case in the circuit court of appeals. 11 A policy insuring against loss through Ins. Co. v. Grube, 6 Minn. 21 Conn. 19, 54 Am. Dec. 309 (1851), 82, Gil. 32 (18t>i). it was said: "The former precedes 'a Quoting Angell Ins., 140, note, and is no part of the contract of in- 7 b Quoting Angell Ins., 147. surance, and need to be only ma- 8 Missouri, etc., Trust Co. v. Ger- terially true; the latter is a part of man Nat'l Bank, 77 Fed 117, 23 C. the contract and policy, and must C. A. 65 (1896). be exactly and literally fulfilled, or See Mutual Ben. L. Ins. Co. v. else the contract is broken and the Robison, 58 Fed. 723, 7 C. C. A. 444, policy becomes void." 22 L. R. A. 325 (1893); Cobb v. I0 Blumer v. Phoenix Ins. Co., 45 Covenant, etc., Ass'n, 153 Mass. 176, \Vis. 622 (1878). 25 Am. St. 619 (1891). In Glendale "Hunt v. Fidelity, etc., Co., 99 Woolen Co. v. Protection Ins. Co., Fed. 242, 30 C. C. A. 496 (1900). 89 REPRESENTATIONS AND WARRANTIES. 104 the embezzlement of an agent was issued upon an application signed by the applicant which contained answers to questions rela- tive to the subject-matter of the policy. These statements were, by the terms of the policy, "to constitute an essential part and form the basis of the contract." The declaration also stated that the answers were true to the best of the knowledge and belief of the assured, and were to be taken as the basis of the contract between the parties. It was also stated that monthly comparisons were made of the money in the hands of the agent, with the accounts and vouchers. It was held that this was a warranty, and that the statement was not qualified by the statement that the answers were true "to the best of the knowledge and belief" of the applicant. Judge Wallace said: "This, at all events, is a promise that either at the New York office, or at its general office, or at some other place, the assured would at- tempt to make a monthly examination in order to ascertain whether the money in its agent's hands corresponded with the balance which should be there, according to his accounts. The promissory state- ment, having been made part of the contract between the parties, by the terms both of the policy and the declaration, was in effect a war- ranty, which the insured was bound to fulfill in substance and ac- cording to its meaning. 12 It is quite immaterial that the statement is not called a warranty. It is a stipulation embodied in the contract, by the words of the policy, for the performance of future acts, and as such is an express warranty." 104. Effect of breach of warranty. At common law the effect of a warranty is to make void the policy if the statements are not literally true, or if the stipulations are not fully observed without reference to their materiality or the willfulness of the non-observance or cause of the loss. 13 The rule was thus stated by Chief Justice Shaw: 14 "If any statement of fact, however unimportant it may 12 Jeffries v. Life Ins. Co., 22 Wall. Mass. 176, 10 L. R. A. 666 (1891); (U. S.) 47, 53 (1874); Brady v. Price v. Phoenix Mut. Ins. Co., 17 United L. Ins. Ass'n, 60 Fed. 727, 9 Minn. 497, Gil. 473 (1871); ^tna C. C. A. 252 (1894); Missouri, etc., L. Ins. Co. v. France, 91 U. S. 510 Trust Co. v. German Nat'l Bank, 77 (lo,). As to modifications by Fed. 117, 23 C. C. A. 65 (1896). statute, see 119, infra. 14 Campbell v. New England, etc., 14 Daniels v. Hudson River F. Ins. Ins. Co., 98 Mass. 381 (1867); Cobb Co., 12 Gush. (Mass.) 416 (1853). v. Covenant Mut. Ben. Ass'n, 153 105 MATTERS VOIDING CONTRACT. 90 have been regarded by both parties to the contract, is a warranty, and it happens to be untrue, it avoids the policy ; if it be construed a rep- resentation, and is untrue, it does not avoid the contract if not willful, or if not material. To illustrate this: The application, in answer to an interrogatory, states, 'Ashes are taken up and removed in iron hods/ Whereas, it should turn out in evidence that ashes are re- moved and taken up in copper hods, perhaps a set recently obtained, and unknown to the owner. If this was a warranty, the policy is gone, but, if a representation, it would not, we presume, affect the policy, because not willful or designed to deceive ; but more especially because it would be utterly immaterial, and would not have influenced the mind of either party in making the contract or fixing its terms." 105. Construction of statements in the application. The state- ments contained in the application for insurance will be regarded as representations unless they are in express terms made a part of the contract of insurance and warranted to be true. Where the ap- plication contains certain statements which are certified to be true, but are not referred to in the contract, they are considered as rep- resentations, and invalidate the contract only when false and ma- terial. 15 106. Application made part of the policy. An insurance com- pany, in taking risks upon lives or property, has the right to deter- mine the conditions upon which it will issue a policy and to insist upon their literal fulfillment. When these conditions are expressed in, and made a part of the written contract, their materiality is not open to question. In such cases the intention of the parties is to be gathered from the terms of the contract. The statements of the in- sured may be thus incorporated as the conditions on which the insur- v ance is undertaken, and when thus made the basis of the contract, if untrue, will render it invalid. 16 Statements made in the applica- tion are primarily representations unless made warranties by being incorporated into the contract. The modern practice, made com- pulsory by statute in some states, 168 - is to attach a copy of the applica- tion to the policy and to refer thereto by appropriate language in the 15 Fidelity & Cas. Co. v. Alpert, 67 18 Standard, etc., Ins. Co. v. Mar- Fed. 460, 14 C. C. A. 474 (1895); tin, 133 Ind. 376 (1892). McVey v. Grand Lodge, 53 N. J. L. 16 a See Corson v. Anchor, etc., Ins. 17, 20 Atl. 873 (1890). Co. (Iowa), 85 N. W. 806 (1901). 91 REPRESENTATIONS AND WARRANTIES. 107 policy. The two papers thereupon constitute the written agreement of insurance, and must be construed together as containing the condi- tions, clauses and stipulations upon which the insurance is made. This rule was applied where the application provided that the an- swers and statements in the application were warranted to be "full, complete and true," and if there not so, the policy issued thereon shall be "null and void," and that the answers are a part of the pol- icy. In this case the application was not attached to the policy, but the policy contained a clause to the effect that, "in consideration of the answers, statements and agreements contained in the application for this policy of insurance, which are hereby made a part of this contract." 17 But a mere general reference in a policy to the applica- tion will not give its statements the effect of warranties. 18 Warran- ties will not be created by implication, and if it is the intention that statements shall be warranties, there must be no ambiguity or uncertainty in the language used to express such intention. 19 It has been held that a mere provision in a policy whereby the application is made a part of the policy is not sufficient to make its statements and representations warranties. 20 107. Construction. The courts do not look with favor upon a strict technical warranty, and, while recognizing the right of the parties to say that matters immaterial in fact shall be regarded as material for the purpose of a particular contract, will not assume that such was their intention unless it is made clearly to appear by the terms of the contract. 21 The rules governing representations are 17 Fidelity & Cas. Co. v. Alpert, 67 truth would be for the jury to de- Fed. 460, 14 C. C. A. 474 (1895); termine, although specific inquiries Alabama Gold L. Ins. Co. v. Garner, had been made. 77 Ala. 215 (1885); National Bank 21 Daniels v. Hudson River F. Ins. v. Ins. Co., 95 U. S. 673 (1877). Co., 12 Gush. (Mass.) 416 (1853); 18 Jefferson Ins. Co. v. Cotheal, 7 National Bank v. Insurance Co., 95 Wend. (N. Y.) 72, 22 Am. Dec. 567 U. S. 673 (1877); Commonwealth (1831). Mut. F. Ins. Co. v. Huntzinger, 98 "Moulor v. American L. Ins. Co., Pa. St. 41 (1881); Fitch v. Amer- 111 U. S. 335 (1883); Supreme ican, etc., Ins. Co., 59 N. Y. 557, 17 Council v. Brashears, 89 Md. 624, 73 Am. Rep. 372 (1875). For a state- Am. St. 244 (1899). ment of the rules of construction of 20 Supreme Council v. Brashears, insurance contracts, see Alabama G. 89 Md. 624, 73 Am. St. 244 (1899). L. Ins. Co. v. Johnston, 80 Ala. 467, In this case the court said that the 2 So. 125 (1886). question of materiality as well as 107 MATTERS VOIDING CONTRACT. fair and equitable, and in all cases of ambiguity it will be presumed that the parties intended that the questions of good faith and ma^ teriality shall be determined as questions of fact. Even stipulations in the policy in the form of a warranty are often given no greater effect than representations. A technical representation can not be a part of the contract, but there is no rule of law which will prevent the parties from inserting statements in the contract which shall be given the force and effect only of a representation. 22 The mere use of the word warranty with reference to the statements made by the insured is not conclusive that such statements are to be treated as warranties in the strict legal sense. It is said by the supreme court of Michigan: 23 "In construing warranties contained in policies of insurance it may be asserted that the prime object to be reached is the intention of the parties, and if that can be found, such intention must control. The rules in the interpretation of such warranties are the same as those which apply to the interpretation of other mercantile contracts. All written instruments, where the provisions are clear and unambiguous, are entitled to a literal interpretation; and wher- ever in a contract of insurance there is a clear breach of a warranty 22 National Bank v. Union Ins. Co., 88 Cal. 497, 26 Pac. 509 (1891). 23 Hoose v. Prescott Ins. Co., 84 Mich. 309, 47 N. W. 587 (1890). Warranties are never created by construction: Jefferson Ins. Co. v. Cotheal, 7 Wend. (N. Y.) 72, 22 Am. Dec. 571 (1831); Duncan v. Sun Fire Ins. Co., 6 Wend. (N. Y.) 494 (1831). In McGannon v. Michigan, etc., Ins. Co. (Mich.), 87 N. W. 61 (1901), it was said: "On the part of the plaintiff it is said the agree- ment to keep a watchman is a prom- issory agreement, and not a war- ranty, the literal observance of which is necessary to keep the pol- icy in force, inasmuch as there is no express provision in the policy that a failure to keep a watchman at all times shall make the policy void. The authorities upon these several propositions are very conflicting. The old rule as to warranties fully sustains the contention of counsel for defendant, but there has been a tendency of late years to hold that the substantial fulfillment of an agreement like that contained in the application is sufficient. In May Ins., 156, it is said, after the language before quoted: 'A learned judge and author declares it to be unfor- tunate that so strict a rule has been established, and intimates what is no doubt entirely true that courts are not at all inclined to go beyond the precedents to support a war- ranty. There are even authorities to the effect that in dealing with warranties common sense is not to be lost sight of, and that the fair, practical intent of the parties is to be sought, not the hair-splitting of a college of wit crackers, and that substantial fulfillment of a warranty is enough.' " 93 REPRESENTATIONS AND WARRANTIES. 108 contained therein, however immaterial it may be, the policy will be avoided. It may be said that the warranties contained in the policy are somewhat different from representations made, in this, that while a representation may be satisfied with a substantial or even an equi- table compliance, a warranty requires a strict and literal fulfillment." The language must be given a reasonable construction in view of the purposes of the provision under consideration. 24 A statement by the applicant, in answer to a question that he understands that untrue answers will render the contract void, will not control the construc- tion. "The statements expressing his understanding of what will be the effect of the insurance are statements, not of fact, but of law, and can not control the legal construction of the policy afterwards issued and accepted." 25 108. Oral representations. A representation may be either verbal or written, but where a written application is made, it will be presumed to contain all representations which were made as an in- ducement to the contract. 26 108a. Mistake Good faith answer. There are a number of cases which hold that the element of good faith enters so far into the construction of statements made in the form of warranties that it is enough if they are substantially true. In a well-known case in the supreme court of the United States the insured had warranted "that the above are fair and true answers/' In fact, the application con- tained the untrue statement that the applicant had not been afflicted with a certain disease. The court, Mr. Justice Harlan, said : 27 "The entire argument on behalf of the company proceeds upon the too literal interpretation of those clauses in the policy and application which declare the contract null and void if the answers of the insured 14 See note to Fowler v. ^Etna P. Mowry, 96 U. S. 544 (1887). Ex- Ins. Co., 6 Cow. (N. Y.) 673, 16 Am. ecutory verbal contract made at Dec. 466 (1827). the time written policy is issued 15 Accident Ins. Co. v. Crandal, 120 with reference to the future can U. S. 527 (1886). not be shown: Hartford P. Ins. 18 Where a written application is Co. v. Davenport, 37 Mich. 609 made the company has no right to (1877). But see McMaster v. New rely upon a verbal representation York L. Ins. Co. (U. S.), 22 Sup. Ct. made to its agent: Dolliver v. St. 10 (1901). Joseph, etc., Ins. Co., 131 Mass. 39 CT Moulor v. American L. Ins. Co., (1880). Previous verbal statements 111 U. S. 335 (1883). merged in the policy: Ins. Co. v. 109 MATTERS VOIDING CONTRACT. 94 to the questions propounded to him were in any respect untrue. What was meant by 'true' and 'untrue' answers? In one sense, that only is true which is conformable with the actual state of things. In that sense a statement is untrue which does not express things exactly as they are, but in another and broader sense the word 'true' is often used as a synonym of honest, sincere, not fraudulent. Looking at all the clauses in the application in connection with the policy, it is rea- sonably clear certainly the contrary can not be confidently asserted that what the company required of the applicant as a condition pre- cedent to any binding contract was that he would observe the utmost good faith toward it, and to make fair, direct and honest answers to all questions without evasion or fraud and without suppression, mis- representation or concealment of facts with which the company ought to be made acquainted, and that by so doing, and only by so doing, would he be deemed to have made 'fair and true' answers." The effect of this reasoning was to make the answers to the questions merely representations. In a recent Illinois case 28 it was held that a statement by an appli- cant for insurance that none of his brothers were dead will not, al- though false, avoid the policy, unless he knew it to be false, under a policy warranting the statements to be true, and that they shall form the basis of any contract entered into. In commenting upon the Moulor case, the court said: "In that case the untrue statements were held to be representations, and not warranties, and we think, on the same reasoning, the answer herein to the questiqn should be so held, in the absence of proof by the com- pany of fraud or intentional misstatement on the part of the insured. The policy was not rendered invalid merely because the answer proved to be false." 109. Statement of expectation or belief. A statement of ex- pectation or belief, unless fraudulently made, will not avoid a policy. 29 Where the statement amounts merely to an expression of opinion or 28 Globe, etc., Ins. Ass'n v. Wag- tains no such belief or expectation, ner, 188 111. 133, 58 N. E. 970 (1901). a representation so as to avoid the To the same effect, see Fidelity, etc., policy; and a statement as to a Ass'n v. Jeffords, 107 Fed. 402, 46 future event made by a person who C. C. A. 377 (1901). has obviously no control over the ** "The mere statement of belief event is regarded as a mere state- or expectation, which is not borne ment of an expectation." Rule as out by the event, is not, unless made stated in 13 Eng. Rul. Gas. 531. mala fide by a person who enter- 95 REPRESENTATIONS AND WARRANTIES. 110 belief, and there is no actual fraud in inducing the insurer to enter into the contract, it will not avoid the policy. But there is a clear distinction between a case of this character and one where the insured intentionally and fraudulently states, as a matter of expectation or be- lief, that which he then knows to be actually untrue, 30 or where the facts within his knowledge show to him that it is impossible that the matter stated by him as one of belief or expectation can exist or hap- pen. 31 Here the intent to deceive the insurer is apparent, and there is actual fraud, which vitiates the contract where the insurer is misled or deceived in acting to his injury when he otherwise would not have so acted. 32 A positive statement will bind the applicant, although it was based upon information obtained from other parties. If he does not wish to vouch for the truth of a statement it is his duty to make it in a qualified form, and disclose the fact that the information is derived from others, and that he does not vouch for its accuracy. 33 110. Affirmative and promissory representations Continuing warranties. A representation is ordinarily of an existing fact. If an existing condition is required by the insurer to be continued during the life of the contract he should insert it in the contract and make it a condition in the nature of a warranty. But a mere statement that a certain condition exists at the time a representation is made as that smoking is not allowed on the premises is not a stipulation that it will continue to exist. 34 So a representation by an applicant for ac- cident insurance that he is a switchman does not require him to re- main in that occupation when the policy contains no provision against a change of occupation. 35 A representation that a force pump and an abundance of water exist for the extinguishing of fire is not an agree- ment that the pump shall be kept in good condition for such use. 36 So, a statement in an application that a house is occupied is descriptive 30 Hunt v. Fidelity & Cas. Co., 39 Union, etc., Ins. Co., 48 Me. 558, 77 C. C. A. 496 (1900); Bryant v. Am. Dec. 244 (1860). Ocean Ins. Co., 22 Pick. (Mass.) 200 OT Tidmarsh v. Washington, etc., (1839). Ins. Co., 4 Mason (C. C.) 439 (1827), 81 Barber v. Fletcher, 1 Doug. 305, Story, J.; Williams v. Delafield, 2 13 Eng. Rul. Cas. 532 (1779); Bow- Caines (N. Y.) 329 (1805). den v. Vaughan, 10 Bast 415, 10 34 Hosford v. Germania F. Ins. Co., Rev. Rep. 340, 13 Eng. Rul. Cas. 127 U. S. 399 (1888). 533 (1808); Anderson v. Pacific F. s5 Provident L. Ins. Co. v. Fen- & M. Ins. Co., L. R. 7 C. P. 65 (1872). nell, 49 111. 180 (1868). 88 Joyce Ins., 1904; Herrick v. ^Gilliat v. Pawtucket, etc., Ins. 111 MATTERS VOIDING CONTRACT. 96 only and is not a warranty that it will be occupied during the existence of the risk. 37 A representation that the property insured is a private dwelling-house is not a promise that it will not be used for other pur- poses. 38 A statement that a building would be occupied by a tenant is a mere statement of expectation. 39 The words, "no stoves used/' do not create a continuing warranty that stoves will not be used in the future. 40 So, "ashes are thrown out," is not a continuing war- ranty. 41 But a statement that a watchman is kept on the premises when a mill is not in operation has been construed as a promise that the practice will be continued. 42 But a policy may contain an ex- press covenant as to the future, the breach of which will invalidate the contract. 43 Where an applicant for life insurance stated that he had not or would not practice any pernicious habits tending to shorten life, but there was no stipulation that a violation of this statement would void the policy, it was held to apply only to an existing state of facts, and that the statement as to the future was a mere expres- sion of intention. 44 The correctness of this decision is very doubtful, and a contrary decision was reached by the federal court in considering the same contract. 111. Oral promissory representations. The distinction between affirmative and promissory representations is generally recognized by the courts and text writers. The question has been much dis- cussed and the authorities are somewhat conflicting. Co., 8 R. I. 282, 91 Am. Dec. 229 N. W. 61, 54 L. R. A. 739 (1901); (1866). Hart v. Niagara, etc., Ins. Co. 37 Cumberland Valley, etc., Protec- (Wash.), 27 L. R. A. 86. tion Co. v. Douglas, 58 Pa. St. 419, 43 Houghton v. Manufacturers', 98 Am. Dec. 298 (1868). etc., Ins. Co., 8 Met. (Mass.) 114 38 Rafferty v. New Brunswick F. (1844). Ins. Co., 3 Harr. (N. J. L.) 480, 38 "Knecht v. Mutual L. Ins. Co., 90 Am. Dec. 525 (1842). Pa. St. 118, 35 Am. Rep. 641 (1871). 39 Herrick v. Union M. F. Ins. Co., The policy contained a provision to 48 Me. 558, 77 Am. Dec. 244 (1860). the effect that it should be void if 40 Aurora F. Ins. Co. v. Eddy, 55 any of the statements and declara- 111. 213 (1870). tions made in the application, upon "Hartford Prot. Ins. Co. v. Har- the faith of which the policy was mer, 2 Ohio St. 452, 59 Am. Dec. 684 issued, should be- found in any re- (1853). spect untrue. But see contra, on "Blumer v. Phoenix Ins. Co., 45 the same policy, Schultz v. Mutual Wis. 622 (1878). See McGannon v. L. Ins. Co., 6 Fed. 672 (1881). Michigan, etc., Ins. Co. (Mich.), 87 97 REPRESENTATIONS AND WARRANTIES. Ill An ordinary representation is not a part of the contract between the insurer and the insured, and if a statement with reference to a future fact is to have force it should be inserted in the policy, or in the ap- plication and referred to in the policy, in such a manner as to make it a part thereof. To permit an oral promissory representation, made before the contract is closed, to be received for the purpose of in- validating the contract after it has gone into effect, violates well- established rules of evidence. Chancellor Walworth, after an ex- haustive review of the authorities, arrived at the conclusion that there could be no such thing as a promissory warranty** The fed- eral court held 46 "that an actual promise, if oral, can not be given in evidence to defeat a policy which has once attached. * * * I have seen no case which holds that an oral statement of a fact could be construed into a continuing warranty or promise when the contract is in writing." Mr. Justice Gray, in a leading Massachusetts case, 47 makes a clear distinction between oral and written promises, and holds that the latter are binding, but that a breach of an oral promise will not avoid the policy unless fraud is shown. The learned judge says: "The word representation has not always been confined in " Alston v. Mechanics', etc., Ins. Co., 4 Hill (N. Y.) 329 (1842). See note to Bowden v. Vaughan, 13 Eng. Rul. Gas. 534 (1808). 48 In Albion Lead vv^orks v. Wil- liamsburg City F. Ins. Co., 2 Fed. 479 (1880), the court said: "It is impossible to reconcile the decisions upon this question of a continuing warranty. When an underwriter asks about the particulars of a risk he probably takes it for granted that things will continue as they are, but when the courts are asked to construe this impression into a covenant, and make words in the present tense operate as a stipula- tion for the future, there is a diffi- culty, and the authorities are doubt- ful and divided. The result, as far as I can gather it, is that when the fact appears to the court to be a very important one, such as the em- 7 ELLIOTT INS. ployment of a watchman, a majority of them have said that this ought to be considered a part of a continu- ing agreement. When the fact does not appear to be so important, as that a dwelling-house is occupied, or that a clerk sleeps in the store, it is not of that character." As said by May: "It is obvious that the test here given is no test at all, and it is to be regretted that there has been any departure from the salutary rule that the courts will not set up warranties where the par- ties have not clearly made them. It would have been fortunate if they had found more difficulty con- verting impressions or expectations into covenants." * T Kimball v. ^Etna Ins. Co., 9 Al- len (Mass.) 540, 85 Am. Dec. 786 (1865). 112 MATTERS VOIDING CONTRACT. 98 use to representations of facts existing at the time of making the pol- icy, but has been sometimes extended to statements made by the as- sured concerning what is to happen during the term of the insurance ; in other words, not to the present, but to the future ; not to facts which any human being knows or can know, but to matters of expectation or belief, or of promise or contract. Such statements, when not ex- pressed in the form of a distinct and explicit warranty which must be strictly complied with, are sometimes called promissory repre- sentations, to distinguish them frpm those relating to facts or affirma- tive representations; and these words express the distinction: the one is an affirmation of a fact existing when the contract begins; the other is a promise to be performed after the contract has come into existence. Falsehood in the affirmation prevents the contract from ever having any life; breach of the promise could only bring it to a premature end. A promissory representation may be inserted in the policy itself; or it may be in the form of a written application for the insurance, referred to in the policy in such a manner as to make it in law a part thereof ; and in either case the whole instrument must be construed together. But this written instrument is the expression and the only evidence of the duties, obligations and promises to be per- formed by each party while the insurance continues. To make the continuance or termination of a written contract which has once taken effect dependent upon the performance or breach of an oral agree- ment would be to violate a fundamental rule of evidence. A rep- resentation that a fact now exists may be either oral or written, for, if it does not exist, there is nothing to which the contract can apply. But an oral representation as to a future fact, honestly made, can have no effect ; for, if it is a mere statement of an expectation, subse- quent disappointment will not prove that it was untrue; and if it is a mere promise that a certain state of facts shall exist, or continue during the term of the policy, it ought to be embodied in the written contract." 48 112. Conclusion. The rule deducible from the authorities is that while promissory representations are recognized and enforced, 49 "As to promissory representa- 120 (1844); Prudential Assur. Co. tions, see further: Prudential As- v. ^tna L. Ins. Co., 52 Conn. 576 sur. Co. v. ^Etna L. Ins. Co., 23 (1885); Wytheville Ins. Co. v. Blatch. (C. C.) 223, 23 Fed. 438 Stultz, 87 Va. 629, 13 S. E. 77 (1891). (1885); Houghton v. Manufac- 4 " Straker v. Phenix Ins. Co., 101 turers', etc., Ins. Co., 8 Met. (Mass.) Wis. 413, 77 N. W. 752 (1898); Phil- 99 REPRESENTATIONS AND WARRANTIES. 113 it is only those that are reduced to writing and made a part of the contract in the nature of a warranty that are available. 50 An oral promissory representation made in good faith, without an intention to mislead or deceive, can not be shown for the purpose of destroying a written contract which has already attached. But when such prom- ises are made in bad faith, with the intent to deceive and mislead the insurer, it will be given the same effect as an affirmative repre- sentation. The fraud, and npt the agreement, is the basis of the right of the insurer. 113. Misrepresentation by agent. An agent who represents his principal in a certain transaction of course binds the principal by his statements in relation thereto. The question always is as to the character of the agency. 51 lips Ins. (3d ed.), 553; Duer Mar. Ins. (ed. 1845) 647, 749; Joyce Ins., 1917, note. 60 The California Code (section 2574) provides that "a representa- tion as to the future is to be deemed a promise, unless it appears that it was merely a statement of a be- lief or expectation," and that "a rep- resentation can not be allowed to qualify an express provision of a contract of insurance, but it may qualify an implied provision." Mr. May (Ins., 1820) says: "Upon this distinction follows the impor- tant consequence that while a ma- terial falsity of an affirmative rep- resentation will be a complete de- fense to an action on a policy of in- surance, the material falsity of an oral promissory representation without fraud is no defense what- ever. And the reason of the dis- tinction is this: the falsehood of the representation of a material fact misleads the insured into a contract which he does not intend to make. He may therefore set up the fact that he was misled or deceived as proof that no agreement was ever made since there was no concur- rence of consent upon the same facts. But an oral promissory rep- resentation being an agreement prior in date to the actual contract of insurance, and in its nature such that it can not be performed until after the contract of insurance had taken effect, can not be set up to defeat the latter contract; for this would be to violate a fundamental rule of evidence, and to make the continuance or maintenance of a written contract dependent upon the performance or breach of an earlier oral agreement. If the oral agree- ment be made mala fide, and with the intention to mislead and de- ceive, the fraud will have the same effect as the material falsity of an affirmative representation. But if made bona fide, and without the in- tention to deceive, it can not be set up to avoid the contract. Only those promissory representations are available for such a purpose which are reduced to writing and made a part of the contract, thus becoming, substantially, if not formally, warranties." 31 See 92, supra; Brown v. Met- ropolitan L. Ins. Co., 65 Mich 306, 8 114 MATTERS VOIDING CONTRACT. 100 114. Effect of misrepresentation. A representation, if false and material, avoids the policy. It is immaterial whether it was fraudu- lently or innocently made. 52 It will be observed that a representa- tion, to avoid the contract, must be both false and material. 53 If the fact is actually material and untrue, it is not necessary to show that the representation was fraudulent, 54 but where actual fraud exists that is, where it clearly appears that the insurer was induced to issue the policy by the intentionally false statements of the insured the materiality is conclusively presumed and need not be proven. 55 Thus, where the applicant fraudulently represented that he was the moneyed man of the firm, and thereby induced the insurer to take the risk, the policy was avoided, although the fact was immaterial to the risk. 56 But there are cases that hold that undesigned and unintentional mis- statements will not avoid the policy unless made under circumstances of gross negligence. 57 115. Substantial truth required. Where a representation is made with reference to a material fact it must be substantially true or it will avoid the contract. In this respect representations are con- strued less strictly than warranties. 58 116. Test of materiality. The materiality of a representation is determined by the same rules which we found applicable in the case of concealment. 59 If the representation is of such a nature as would probably induce the insurer, being governed by the rules which Am. St. 356 (1887); Grattan v. Met- " Pawson v. Watson, 2 Cowp. 785, ropolitan L. Ins. Co., 80 N. Y. 293, 36 13 Eng. Rul. Cas. 540 (1778). Am. St. 617 (1880). ""Valton v. National, etc., Assur. 82 Armour v. Transatlantic F. Ins. Co., 20 N. Y. 32 (1859). Co., 90 N. Y. 450 (1882); Provident OT See Penn Mut. L. Ins. Co. v. Sav., etc., Soc. v. Llewellyn, 58 Fed. Mechanics', etc., Co., 72 Fed. 413, 940, 7 C. C. A. 579 (1893). 19 C. C. A. 286 (1896); Columbia "Clason v. Smith, 3 Wash.(C. C.) Ins. Co. v. Cooper, 50 Pa. St. 331 156 (1812); Vivar v. Supreme (1865). Lodge, 52 N. J. L. 455, 20 Atl. 36 "Phoenix L. Ins. Co. v. Raddin, (1890). 120 U. S. 183 (1887); Missouri, etc., M Lewis v. Eagle Ins. Co., 10 Gray Trust Co. v. German Nat. Bank, 77 (Mass.) 508 (1858). See Wood v. Fed. 117, 40 U. S. App. 710 (1896). Firemen's F. Ins. Co., 126 Mass. 316 M 90, supra. See Civil Code Cal., (1879). 2581. 101 REPRESENTATIONS AND WARRANTIES. 117 ordinarily control intelligent, prudent underwriters, to take the risk, or to accept it at a lower premium than he otherwise would, it is ma- terial. The test is the probable effect which the statement might naturally and reasonably be expected to produce on the mind of the insurer, 60 and not the fact that it actually increased the risk. 61 But the parties may by express stipulation preclude inquiry into the ques- tion of materiality, 62 as where a representation is made in the form of an answer to a specific question. The parties may thus, unless re- strained by statute, make material a fact which would otherwise be immaterial. 63 The question of materiality, when not thus deter- mined, is for the jury. 64 117. Materiality Opinion of experts. The cases which deal with the question of the right of an expert to testify as to whether a certain fact is material or not are in a bewildering state of confusion. Judge Taft, after an elaborate review of the authorities, recently held that the question of materiality is always for the jury, unless the answers in the application are expressly made the basis of the con- tract; and even then, where the statute provides that innocent mis- representations in matters not material to the risk shall constitute no defense ; that by the weight of authority in this country an insurance expert can not be asked his opinion whether an undisclosed or mis- 80 Columbia Ins. Co. v. Lawrence, 63 84, supra; Phoenix Life Ins. 10 Pet. (U. S.) 507 (1836); Ferine v. Co. v. Raddin, 120 U. S. 183 (1887); Grand Lodge, 51 Minn. 224 (1892); Miller v. Mut. Ben. L. Ins. Co., 31 Waterbury v. Dakota F. & M. Ins. Iowa 216 (1871). Under such cir- Co., 6 Dak. 468, 43 N. W. 697 (1889). cumstances the court must rule If the circumstances show that the whether the matter is material, and insurer did not rely upon the mis- the jury then determines its truth, representation, and that it did not Of course, the answer may be so induce him to make the contract, it irresponsive as to leave the ques- 1s immaterial: Flinn v. Headlam, tion unanswered. In the absence 9 Barn. & C. 693 (1829). of fraud, such an answer is imma- M Valton v. National, etc., Assur. terial: Ferine v. Grand Lodge, 51 Co., 20 N. Y. 32 (1859). Minn. 224 (1892). 82 Stensgaard v. St. Paul, etc., Ins. M 90, supra; Caplis v. American Co., 50 Minn. 429 (1892); Cerys v. F. Ins. Co., 60 Minn. 376, 62 N. W. State Ins. Co., 71 Minn. 338 (1898). 440 (1895); Manufacturers', etc., See language of Lord Chancellor Ins. Co. v. Zeitinger, 168 111. 286, 61 Cranworth in Anderson v. Fitzger- Am. St. 105 (1897). aid, 4 H. of L. Gas. 513 (1853). 118 MATTERS VOIDING CONTRACT. 102 represented fact is or is not material to the risk ; but he may be asked concerning the usages of insurance companies generally in respect to rejecting risks or charging a higher rate of premium when made aware of the fact in question. 65 118. Burden of proof. The burden of proof to establish the materiality of the concealment or misrepresentation, as well as the fraudulent intent, where that is necessary, is upon the defendant. 86 - This burden is not shifted where it is admitted that the insured made an untrue answer concerning other insurance, for if there is a pre- sumption that his failure to mention it is intentional, there is also a presumption that a person does not make a fraudulent misstatement, and the question is for the jury upon all the evidence. 67 But the rule is generally held to be otherwise in case of a warranty, which is in the nature of a condition precedent. The plaintiff must aver and prove the strict performance of such conditions. 68 But this rule is said not to be applicable to "representations amounting to warranties which are contained in the application only." A defendant who re- lies upon such a warranty must allege it and assume the burden of proof. In one case Judge Wallace said: 69 "The rule requiring the performance of warranties to be averred and proved was engrafted into the law of insurance before it was customary for underwriters to inquire of the insured the full and detailed applications which are a feature of so much prominence in the modern contract, especially in the contract of life insurance. The policy is the evidence deliv- ered to the insured of the contract of the insurer, and, ordinarily, of ""Penn Mut. L. Ins. Co. v. Me- Wood, 73 Fed. 81, 19 C. C. A. 264 chanics', etc., Co., 72 Fed. 413, 19 (1896); McLoon v. Commercial Ins. C. C. A. 286, 38 L. R. A. 233 (1896). Co., 100 Mass. 472 (1868). As to * Penn Mut. L. Ins. Co. v. Me- manner of pleading performance, chanics', etc., Co., 72 Fed. 413, 19 C. see Hart v. National Masonic, etc., C. A. 286 (1896); Piedmont, etc., Ins. Ass'n, 105 Iowa 717, 75 N. W. 508 Co. v. Ewing, 92 U. S. 377 (1875); (1898). A waiver or estoppel can Grangers' L. Ins. Co. v. Brown, 57 not be shown unless pleaded: Mc- Miss. 308 (1879); Jones v. Brooklyn Coy v. Iowa State Ins. Co., 107 Iowa L. Ins. Co., 61 N. Y. 79 (1874). 80, 77 N. W. 529 (1898). "Penn Mut. L. Ins. Co. v. Me- American Credit, etc., Co. v. chanics', etc., Co., 72 Fed. 413, 19 Wood, 73 Fed. 81, 19 C. C. A. 264 C. C. A. 286 (1896). (1896). * American Credit, etc., Co. v. 103 REPRESENTATIONS AND WARRANTIES. 1 18 itself constitutes complete evidence of the contract, while the appli- cation, although it may modify the contract, is in the nature of de- fensive evidence entrusted to the insurer for his protection. As a matter of pleading, if the policy is set forth, and compliance with all conditions precedent recited in it is averred, there is no necessity for referring to the application, and the complaint or declaration is suffi- cient upon its face. Nothing is required to be proved which does not support some necessary allegation in the complaint, and there seems to be no good reason which requires the plaintiff to assume the bur- den of proving affirmatively the truth of the statements in an applica- tion not challenged by the defendant." In Minnesota it is held that a warranty is not a condition precedent, and that the burden of alleging and proving its falsity is upon the insurer. 70 Mr. Justice Mitchell said: "A condition precedent is known in the law of insurance as one which is to be performed before the agreement of the parties be- comes operative; a condition subsequent calls for the performance of some act or happening of some fact after the contract is entered into, and upon the performance or happening of which its obligation is made to depend. In case of a mere warranty, the contract takes effect and becomes operative immediately. It is true that, where a policy of insurance so provides, if there is a breach of a warranty, the policy is void ab mitio. But this does not change a warranty into a condition precedent, as understood in the law. It lacks the essential element of a condition precedent, in that it contains no stipulation that an event shall happen or an act shall be performed in the future, before the policy shall become effectual. It is more in the nature of a defeasance, where the insured contracts that, if the representations made by him are not true, the policy shall be defeated and avoided. But, even if these warranties are to be deemed conditions precedent, it has become settled in insurance law, for practical reasons, that the burden is on the insurer to plead and prove the breach of the war- ranties. Not only so, but he must, in his pleading, single out the answers whose truth he proposes to contest, and show the facts on which his contention is founded. Otherwise, the insured would enter the trial ignorant as to which of his numerous answers would be as- 70 Chambers v. Northwestern, etc., etc., Ins. Co., 17 Minn. 479, Gil. 473 Ins. Co., 64 Minn. 495, 67 N. W. 367 (1871); Malicki v. Chicago, etc., (1896); Hale v. Life Indemnity, etc., Life Soc., 119 Mich. 151, 77 N. W. Co., 65 Minn. 548, 68 N. W. 182 690 (1899); Coburn v. Travelers' (1896), overruling Price v. Phoenix, Ins. Co., 145 Mass. 226, 13 N. B. 604. 119 MATTERS VOIDING CONTRACT. 104 sailed as false. The number of questions in these applications is usually very great, relating to the habits and health of ancestors, the personal habits and condition of the applicant, etc., the truth of many of which it would be impossible to prove affirmatively after the death of the insured. To require such proof on the part of the beneficiary would defeat more than half of the life policies ever issued. On the other hand, it is no harship to require of the insurer, if he believes that any of these answers were false, that he specifically allege which ones he claims to be false, and produce evidence of the truth of his claim. * * * We therefore hold that it was no part of the plaint- iff's case to either allege or prove the truth of the answers in the application, that the burden of alleging and proving their falsity was on the defendant, that it was bound to specify in its defense the par- ticular answers which -it claimed were false, and that on the trial it was properly limited in its proof to those answers which it had specifically alleged to be false." A condition subsequent in the policy, as an agreement to use diligence and care for the preservation of the property, need not be pleaded, as it is matter of defense. 71 119. Statutory provisions. The manifest unfairness and injus- tice which result from making statements, whether material or not, strict warranties, has resulted in the enactment of statutes in a number of states which restrict the liberty of contract in this respect and provide a rule of construction for such provisions in insurance contracts. These statutes are remedial and are sustained as proper regulations of the business of insurance. The Ohio statute was re- cently before the supreme court of the United States, and the court said : 72 "It was for the legislature of Ohio to define the public pol- icy of that state in respect of life insurance, and to impose such con- ditions on the transaction of business by life insurance companies within the state as was deemed best. We do not perceive any ar- bitrary classifications or unlawful discrimination in the legislation, but, at all events, we can not say that the federal constitution has been violated in the exercise in this regard by the state of its undoubted power over corporations." "Johnston v. Northwestern, etc., "John Hancock, etc., Ins. Co. v. Ins. Co., 94 Wis. 117, 68 N. W. 868 Warren, 181 U. S. 73 (1901), re- (1896). ferring to 3625, Ohio Rev. Stat. 105 REPRESENTATIONS AND WARRANTIES. 120 120. The Massachusetts statute. The Massachusetts statute contains the following provisions: "No oral or written misrepre- sentation made in the negotiation of a contract or policy of insur- ance by the assured or in his behalf shall be deemed material or de- feat or avoid the policy, or prevent its attaching, unless such mis- representation is made with actual intent to deceive, or unless the matter misrepresented or made a warranty increased the risk of loss." 73 This act applies to all contracts of insurance and affects strict warranties as well as representations. In a case decided before the words "or made a warranty" in the last line were inserted, the court said: 7 * "As to mere representations, the statute may well be held to be only declaratory, but as to warranties it made a new rule. In the opinion of the majority of the court, it speaks in terms neither of warranties nor of representations, technically so called, but deals with all representations made in negotiating the contract or policy. Misstatements of fact, whether the statement is said to be by the par- ties either a warranty or a representation, are equally representations, and are placed in each case upon the same footing by the statute which applies to them if the statements are called warranties by the parties, no less than if they are mere representations." 121. The Pennsylvania statute. In this state it is provided that "whenever the application for a policy of insurance contains a war- ranty of the truth of the answers therein contained, no misrepre- sentation or untrue statement in such application, made in good faith by the applicant, shall effect a forfeiture or be a ground of defense in any suit brought upon any policy issued upon the faith of such appli- cation, unless such misrepresentation or untrue statement relates to some matter material to the risk/' 75 This legislation was intended to strike down literal warranties so far as they might be resorted to for the purpose of enforcing a forfeiture based on matters actually immaterial. It provides a rule of construction for the purpose of 78 P. S. 119, 181 (1895), ch. 271. (1895). See further, Ring v. Phoenix The Minnesota statute (Laws 1895, Assur. Co., 145 Mass. 426, 14 N. E. ch. 175, 20) is a copy of the Massa- 525; Durkee v. India Mut. Ins. Co., chusetts act, omitting the words "or 159 Mass. 514, 34 N. E. 1133; Levie made a warranty," which were add- v. Metropolitan L. Ins. Co., 163 ed in Massachusetts in 1895. Mass. 117, 39 N. E. 792. T * White v. Provident Sav., etc. 7B Pa. Laws 1885, p. 134, 1. Soc., 163 Mass. 108, 39 N. E. 771 122 MATTERS VOIDING CONTRACT. 106 preventing injustice, and "it is as much the duty of courts to enforce such rules as it is to administer the statute of frauds and perjuries." 76 The effect is to leave open to judicial investigation in the ordinary way the question whether any fact concerning which inquiry was made, and an untrue answer given, was material to the risk. If found to be material, the policy will be avoided, whether the untrue answer was made in good faith or not. If not material, the breach of war- ranty will work no prejudice to the insured if the answer was given in good faith, but if in bad faith, and for the purpose of misleading the company, the policy will be avoided, notwithstanding the imma- teriality of the fact. Bad faith in this connection means with an actual intent to mislead or deceive, and does not include a misstate- ment honestly made through inadvertence, or even gross forgetful- ness or carelessness. 77 122. Similar provisions in other states. Similar statutes are found in other states. Thus, in Michigan, a breach of a condition in a fire policy will not render it void if the company has not been in- jured by such breach or a loss has not occurred during such breach or by reason thereof. The standard form of policy is required to contain a provision that "provided a loss shall occur on the property insured while such breach of condition continues or such breach of condition is the primary or continuing cause of the loss." 78 In Mary- land, where the application for a policy of life insurance contains a warranty of the truth of the answers, "no representation or untrue statement in such application made in good faith by the applicant shall effect a forfeiture or be a ground of defense in any suit brought upon any policy of insurance issued upon the faith of such applica- tion, unless such misrepresentation or untrue statement relates to some matter material to the risk." In Kentucky "all statements or descrip- tions in any application for a policy of insurance shall be deemed and held representations and not warranties; nor shall any misrepresenta- tions, unless material or fraudulent, prevent a recovery on the pol- 74 Hermany v. Fidelity, etc., Ass'n, 78 Mich. Laws 1897, p. 214, act 167, 151 Pa. St. 17, 24 Atl. 1064. Comp. Laws 1897, 5180, applies to 77 Perm Mut. L. Ins. Co. v. Median- all policies issued after its passage, ics', etc., Co., 72 Fed. 413, 19 C. C. A. whether Michigan standard policies 286 (1896); Penn Mut. L. Ins. Co. v. or not: McGannon v. Michigan, Mechanics', etc., Co., 73 Fed. 653, 19 etc., F. Ins. Co. (Mich.), 87 N. W. 62, C. C. A. 316. 54 L. R. A. 739 (1901). 107 REPRESENTATIONS AND WARRANTIES. 123 icy." 79 In Maine "all statements of descriptions or value in an ap- plication or policy of insurance are representations and not warran- ties; erroneous descriptions or statements of value or title by the insured do not prevent his recovering on his policy unless the jury find that the difference between the property as described and as it really exists contributed to the loss or materially increased the risk; a change in the property insured or in its use or occupation, or a breach of any of the terms of the policy by the insured, do not affect the policy unless they increase the risk; nor shall any misrepresenta- tion of the title or interest of the insured, in the whole or any part of the property insured, real or personal, unless material or fraudulent, prevent his recovering on his policy to the extent of his insurable in- terest." 80 In Iowa, subject to certain exceptions, "any condition or stipulation in any application, policy or contract of insurance making the policy void before the loss occurs shall not prevent recovery there- on by the insured, if it shall be shown by the plaintiff that the failure to observe such provision, or the violation thereof, did not contribute to the loss." 81 Similar provisions are found in Virginia, 82 Ohio, 83 New Hampshire, 84 Missouri, 85 Georgia, 86 and possibly in other states. Such statutes enter into and form a part of every contract of insur- ance made while they are in force. 87 123. Controlling force of such statutes. Where such statutes are in force the parties can not contract as to what statements are material, as the question is to be judicially determined in each case by the court, if the materiality is obvious, or by the jury, if it depends upon disputed facts. 88 In Kentucky it was at first held that the par- 79 Maryland Laws 1894, ch. 662; B. 82 Va. Laws 1900, ch. 515, p. 550. & C. Ky. Stat, ch. 32, 639. See 83 Ohio Rev. St. 1890, 3625. Germania Ins. Co. v. Rudwjg, 80 Ky. " New Hampshire Laws 1885, ch. 223 (1882), overruling Farmers' 73. etc., Ins. Co. v. Curry, 13 Bush (Ky.) Mo. Rev. St. 1889, 5849. 312 (1877); Imperial F. Ins. Co. v. * Georgia Code 1882, 2803, 2804. Kiernan, 83 Ky. 468 (1885); Kenton See Southern L. Ins. Co. v. Wilkin- Ins. Co. v. Wigginton, 89 Ky. 330 son, 53 Ga. 535 (1873); Mobile, etc., (1889). Ins. Co. v. Coleman, 58 Ga. 251 80 Rev. St. Me., ch. 49, 20. See (1876). also provision in Maine standard w Klostermann v. Germania L. Ins. form of policy, construed in Lin- Co., 6 Mo. App. 582 (1879). scott v. Orient Ins. Co., 88 Me. 497 M Fidelity Mut. L. Ass'n v. Miller, (1895); Bigelow v. Granite, etc., Ins. 92 Fed. 63, 34 C. C. A. 211 (1899); Co., 94 Me. 39 (1900). Hermany v. Fidelity, etc., Ass'n, 151 " McClain's Iowa Code, 1743. 123 MATTERS VOIDING CONTRACT. 108 ties could waive the benefits of the statute and by express contract de- termine the question of materiality, 89 but this was so manifestly con- trary to the object of the law that the decision was reversed, and it is now held that only such statements as are material or fraudulent will avoid the policy. 80 Pa. St. 17 (1888); Lutz v. Metropol- "Germania Ins. Co. v. Rudwig, 80 itan L. Ins. Co., 186 Pa. St. 527, 40 Ky. 223 (1882). For construction Atl. 1104 (1898). of such statutes, see also National "Farmers', etc., Ins. Co. v. Curry, Bank v. Union Ins. Co., 88 Cal. 497, 13 Bush (Ky.) 312, 26 Am. Rep. 194 26 Pac. 509 (1891); Fidelity, etc., (1877). Ass'n v. Ficklin, 74 Md. 172 (1891). PART IV. OF THE CONSIDERATION. CHAPTER VII. THE PREMIUM. SEC. 125. In general. I. The Premium in Ordinary In- surance. 126. Nature of premium. 127. Obligation to pay premium. 128. Payment Condition precedent Forfeiture. 129. Manner, time and place of pay- ment. 130. The giving of a promissory note. 131. Payment after loss or death. 132. Paid-up policies. 133. Premium notes. 134. Notice of time when premium is due. SEC. 135. Right to recover premiums paid. II. Assessments in Mutual Com- panies and Benevolent So- cieties. 136. Dues and assessments. 137. Liability to assessment. 138. Effect of non-payment of assess- ment. 139. Withdrawal of member. 140. Insolvency of company. 141. Death during period of suspen- sion. 142. Reinstatement. 143. Waiver Estoppel. 125. In general. The insurance company, for an agreed con- sideration, and upon condition that certain facts exist, binds itself upon a certain contingency to pay to the insured a fixed sum, or a sum to be determined by the amount of the loss. The amount to be paid by the insured, as a consideration therefor, is called the pre- mium in ordinary insurance, and dues or assessments in mutual in- surance and benevolent societies. It is payable according to stipula- tion which determines the amount and time of such payment. In the case of fire insurance, the premium is a stipulated sum for an insur- ance for a certain specified period, at the end of which the contract (109) 126 THE CONSIDERATION. 110 terminates. Life insurance contracts may be for fixed periods, as for one year, or for life, with a provision for payment of premiums at stated annual or semi-annual intervals, under conditions which pro- vide for forfeiture or termination of the contract if such premiums are not paid in advance upon a stipulated date. 1 Life insurance policies are also issued for a certain number of years, with a provision for termination at that time by payment to the insured of a certain amount in cash or the issuance to him of a paid-up policy. The con- sideration in what is known as mutual insurance and mutual benefit associations is payable at short intervals, and is known as assess- ments and dues. These amounts may be definitely fixed, or they may be left to be determined by the necessities of the case and sub- ject to increase as the insured increases in age. /. The Premium in Ordinary Insurance. 126. Nature of premium. The agreed consideration for assum- ing and carrying the risk is called the premium. 2 It is a stipulated sum in consideration of which the underwriter agrees to take upon himself the risk of loss and to indemnify the assured against it. 8 The amount or rate is generally agreed upon and inserted in the pol- icy, but it may be determined by custom and usage. 4 The contract may provide for an increase or reduction in the rate of premium as certain risks are added to or eliminated from the contract. The pay- ment of the premium and the assumption of the risk are correlative; hence if the premium is not paid the insurance does not attach; if the risk does not attach the premium paid may be recovered. 3 A clause in the policy of an assessment company providing that the rate of assessment may be changed each five years to correspond with the actual mortality experience of the company authorizes it to change the rates at different ages as required by the results of its experience. 6 1 See 358, infra. As to the dis- in tontine insurance, see Uhlman v. tinction between a policy for a short New York L. Ins. Co., 109 N. Y. 421 term and one for life, see McDougall (1888); Thompson v. Thorne, 83 Mo. v. Provident, etc., Soc., 135 N. Y. 551, App. 241 (1899). 32 N. B. 251 (1892); McMaster v. 4 Pollock v. Donaldson, 3 Dall. (U. New York L. Ins. Co. (U. S.), 22 S.) 510 (1799). Sup. Ct. 10 (1901). '- Waller v. Northern Assur. Co., 'Emerigon Ins. (Meredith's ed.), 64 Iowa 101 (1884). See 135, oh. 3, 1. infra. * As to the nature of the premium Mutual Res. Fund L. Ass'n v. Ill THE PREMIUM. 127 In many states there are statutes which forbid discriminating against colored persons in the rates of premiums, and which require uniform rates for all persons of the same class and equal expectancy of life. 7 These statutes, which make it a criminal offense for an agent to re- bate a premium, do not unduly interfere with the right to contract, and are constitutional. 8 127. Obligation to pay premium. Whether the amount of the stipulated premium becomes a debt due from the insured to the in- surer depends entirely upon the contract and the circumstances. Taylor (Va.), 37 S. E. 854 (1901). An insurance policy contained a table of ages from 25 to 60 years, showing a gradual increase in the premium from the first age named to the last. It also contained a pro- vision that the company agreed to renew insurance during each suc- cessive year of the life of the in- sured, "from date hereof," on pay- ment on or before a certain date in each successive year of the annual premium rate for the age attained, in accordance with the table men- tioned. No figures were given be- yond the age of sixty, but the pre- miums thereafter, it was held, were to be determined by calculation on the rule of progression shown by the table, and do not continue the same as that provided for the age of sixty: Nail v. Provident Sav. L. As- sur. Soc. (Tenn. Ch.), 54 S. W. 109. 7 See note to Joyce Ins., 1091, where the statutes are collected. In Key v. National L. Ins. Co., 107 Iowa 446, 78 N. W. 68 (1899), it was held that the statute would not pre- vent a person who consented to take out a policy of insurance on the representation that the company could make her a loan, from recov- ering the premium after the loan was refused. The court said: "It is insisted that the making of the loan was a condition subsequent to the acceptance of the policy; that the contract of insurance went into force, and the plaintiff's liability ac- crued thereon, before any obligation was incurred to make the loan; therefore, that the plaintiff's in- debtedness for the premium was entirely independent of any right she may have to insist on her other claim. This is not the contract disclosed by the testimony. As a matter of fact, the taking out of the insurance was but an inci- dent; the making of the loan was the principal subject-matter of the agreement. The contract, as already said, was entire, and it was distinct- ly understood and agreed that the plaintiff was not to accept the policy unless she could secure the loan. She received the policy into her pos- session upon a condition that the company refused to perform, and be- cause of this failure she refused to accept it. This she had a right to do. Upon this proposition the case of Harnickell v. New York L. Ins. Co., Ill N. Y. 390, 18 N. E. 362, is directly in point, and supports our holding." As to the right of an in- surance agent under such a statute to contribute his commission, see Quigg v. Coffy, 18 R. I. 757, 36 Atl. 704 (1894). 8 People v. Formosa, 131 N. Y. 478, 30 N. E. 492 (1892). 128 THE CONSIDERATION. 112 Where the payment is made a condition precedent to the attaching of the risk, and it is not made, the insured assumes no further liability ; but if the contract goes into effect and the insured has had the benefit of the insurance, the premium becomes a debt, which may be collected in an action at law. A premium which is to become due annually or semi-annually, and is payable in advance on a contract which con- tains a stipulation that the policy shall lapse if the premium is not paid when due, is not a debt. So, an insurance contract with a benevolent association which provides for a forfeiture of all benefits if a member fails to pay his assessment at a specified time does not create an obligation which is enforceable by the association or by its receiver. 9 ' The payment in such case is optional with the insured, but if the policy attaches and the premium is earned under an agree- ment of credit, as where a note is given for the premium, a debt is created which may be recovered even after the policy has been for- feited. 10 128. Payment Condition precedent Forfeiture. The actual payment of the premium before the risk attaches is not necessary un- less such payment is made a condition precedent by the terms of the contract. 11 This is not ordinarily done in cases of marine and fire insurance, but is customary in cases of life insurance. 12 When it is "Vick v. Clark, 77 111. App. 599 Co., 83 Iowa 647, 14 L. R. A. 248 (1897). (1891). See Continental Ins. Co. v. 10 Goodwin v. Massachusetts, etc., Hulman, 92 111. 145, 34 Am. Rep. 122. Ins. Co., 73 N. Y. 480 (1878). A "Newark Mach. Co. v. Kenton mortgagee may, by the terms of the Ins. Co., 50 Ohio St. 549, 22 L. R. A. policy, become liable for the pre- 768 (1893); Campbell v. American mium: See St. Paul, etc., Ins. Co. P. Ins. Co., 73 Wis. 100, 40 N. W. 661 v. Upton, 2 N. Dak. 229, 50 N. W. 702 (1888). Where an application for a (1891). Sending a policy to the as- life insurance policy states on its sured on his promise to remit the face that payment of its premium is premium does not estop the com- a condition precedent to the issuing pany from denying its validity for of the policy, the policy is not in non-payment of the premium as force until it is actually paid: Or- against a mortgagee, "to whom loss, mond v. Fidelity L. Ass'n, 96 N. C. if any, is payable," although such 158 (1887). See Tomsecek v. Trav- mortgagee received the policy which elers' Ins. Co. (Wis.), 88 N. W. 1013 acknowledged the receipt of the pre- (1902). mium from the assured with notice u Howell v. Knickerbocker L. Ins. that the premium was not paid. Co., 44 N. Y. 276 (1871). Where Such a policy is not an insurance payment of the premium on or upon the interest of the mortgagee: before a certain date is made a con- Union Bldg. Ass'n v. Rockford Ins. dition precedent to the contract re- 113 THE PEEMIUM. 128 expressly provided that the premium on a life insurance policy shall be paid on or before a certain date, and in default thereof the policy shall be void, the non-payment of the premium on the date named works a forfeiture of the contract. 13 In such cases time is of the essence of the contract, and payment on the following day will not do. Where the policy so provides, the prompt payment of the note which has been given for the premium is necessary to save the contract. 1 * Equity will not release from such a forfeiture. 15 Of course, the com- pany may extend the time of payment by an agreement express or implied, or it may be estopped by its conduct from asserting a for- feiture, or the contract may be suspended, as by the operation of war. 16 A fraternal society doing a life insurance business may waive the provisions of the law in regard to the forfeiture of the insurance by failure to require payment of premiums as required by its by-laws. 17 It is not necessary that the insurance company expressly waive its right to insist upon a forfeiture, as a waiver may be implied from the circumstances. 18 Part payment of a premium will not prevent a forfeiture. 19 The contract sometimes provides that it shall be merely suspended during the period of non-payment of the premium, and subject to revival when the payment is actually made. 20 In such cases the contract ordinarily contemplates that payment must be made before a loss occurs. 21 In some states it is provided that there can be no forfeiture of a policy until after the company has notified the insured of the time when his premium is due. 21a maining in force, non-payment is " McMahon v. Supreme Tent, etc., not excused by the fact that pay- 151 Mo. 522, 52 S. W. 384 (1899). ment is prevented by conditions 18 Jones v. Preferred Bankers' L. over which the insured has no con- Assur. Co., 120 Mich. 211, 79 N. W. trol, as by act of God. 204 (1899). 13 Fowler v. Metropolitan L. Ins. 19 Willcuts v. Northwestern, etc., Co., 116 N. Y. 389, 22 N. B. 576, 5 L. Ins. Co., 81 Ind. 300 (1882). R. A. 805 (1889) and note; Bos- * Joliffe v. Madison Mut. Ins. Co., worth v. Western, etc., Soc., 75 Iowa 39 Wis. Ill, 20 Am. Rep. 35 (1875). 582, 39 N. W. 903 (1888). 21 Matthews v. Ins. Co., 40 Ohio St. "Robert v. New England, etc., 135 (1883); Miller v. Union, etc., Ins. Co., 1 Disn. (Ohio) 355 (1857), Ins. Co., 110 111. 102 (1884). 2 Disn. 106. '"a See Mutual L. Ins. Co. v. Hath- 16 Klein v. Ins. Co., 104 U. S. 88 away, 106 Fed. 816 (1901); Mutual (1881); Attorney-General v. Conti- L. Ins. Co. v. Cohen, 179 U. S. 262 nental L. Ins. Co., 93 N. Y. 70 (1883). (1900). 19 Mutual, etc., Ins. Co. v. Hillyard, 37 N. J. L. 444 (1874). 8 ELLIOTT INS. 129 THE CONSIDERATION. 114 129. Manner, time and place of payment. The premium may be paid to the company or its duly authorized agent, 22 and may be in cash or in any other commodity which the insurer is willing to ac- cept. 23 Presumably it is payable in cash, but if credit is given it is equally as effective as cash. If there is no provision making the pre- payment of the premium a condition precedent, the agent who ne- gotiated the insurance may give credit for the premiums, 24 and even where a provision in the policy calls for the actual payment of the pre- mium as a condition precedent to its going into effect, such provision may be waived by a general agent of the company. Upon this the authorities are in substantial accord. 25 Where a policy recites that it is issued in consideration of an an- nual premium, "to be paid in advance to the company," the bene- ficiary must show that the premium was paid, and it is not sufficient to show merely the execution of a promissory note for the amount, which recites that it is accepted on condition that if it is not paid at maturity the policy shall be void. 26 The acceptance of an order on a third person is a payment if such was the intention of the parties. 27 Payment may be by check when the custom and course of dealing have been such as to justify the insured in believing that it would be ac- cepted as cash. 28 The payment of the premium with misappropriated funds is good as agamst the insurer, although the fund arising from the payment of the policy may belong to the person whose money was 22 Pennsylvania Ins. Co. v. Carter pany, pays or undertakes to become (Pa.), 11 Atl. 102 (1887). responsible to the company for the 23 See Anchor L. Ins. Co. v. Pease, premium, in order that credit may 44 How. Pr. (N. Y.) 385 (1873). An be extended to the insured: Fire- agent can not without express au- man's Fund Ins. Co. v. Pekor, 106 thority accept payment in personal Ga. 1, 31 S. E. 779 (1898). property: Hoffman v. Hancock, etc., w McDonald v. Provident, etc., L. Ins. Co., 92 U. S. 164 (1895). Assur. Soc., 108 Wis. 213, 84 N. W. 24 But an agent without authority 154 (1900). See Tomsecek v. Trav- to issue a policy can not bind the elers' Ins. Co. (Wis.), 88 N. W. 1013 company by an agreement to extend (1902). the time of payment: Critchett v. w Manhattan L. Ins. Co. v. Myers American Ins. Co., 53 Iowa 404 (Ky.), 59 S. W. 30 (1900). (1880). It is not essential to the 27 Lyon-v. Travelers' Ins. Co., 55 validity of a fire insurance policy, Mich. 141, 54 Am. Rep. 354 (1884); issued in renewal of a previous one, National Ben. Ass'n v. Jackson, 114 that the insured should pay the re- 111. 533 (1885); McMahon v. Trav- newal premium in cash, provided elers' Ins. Co., 77 Iowa 229 (1899). the insurance agent, with the ex- 28 Kenyon v. Knights, etc., Ass'n, press or implied assent of the com- 122 N. Y. 247, 25 N. E. 299 (1890). 115 THE PREMIUM. 130 illegally used. 29 Payment may be made by any one 30 to the company or its authorized agent 31 at the time 32 and place provided by the policy, or determined by special agreement or custom. 33 The date when the premium is paid, and not that written in the policy for the payment of the premium, is the time from which to reckon the period when further premiums are due. The mere acceptance of an insurance policy will not imply assent by the insured to a clause interpolated in the policy making future premiums payable in less time than is provided in the original con- tract between the parties, unless the attention of the insured was called to such provision. 34 Where the course of dealing has been such as to warrant it, payment of the premium may be made by mail, and it is sufficient if the check was mailed on the last day of payment. 35 When the insured is directed to send the money by express, delivery to the express agent is payment, although the money is embezzled by such agent. 36 Premiums may be paid in part or in whole by dividends accruing according to the terms of the policy, 37 but undeclared divi- dends can not be treated as funds applicable to such use. 38 130. The giving of a promissory note. The insurance company may accept a promissory note in payment of the premium, although the contract expressly provides for the payment in cash. 39 A pro- 28 Holmes v. Oilman, 138 N. Y. 369 v. Continental Ins. Co., 83 Ky. 574 (1893). (1886). 30 Leslie v. French, L. R. 23 Ch. M McMaster v. New York L. Ins. Div. 552 (1883). Co., 99 Fed. 856 (1899). See s. c. "Critchett v. American Ins. Co., in 22 S. Ct. Rep. 10 (1901). 53 Iowa 404, 36 Am. Rep. 230 (1880). 3B Taylor v. Merchants' F. Ins. Co., 88 In determining the time of the 9 How. (U. S.) 390 (1850). notice that a premium will fall due 38 JWhitley v. Piedmont, etc., Ins. under the New York statute provid- Co., 71 N. C. 480 (1874). ing for a notice at least thirty days, 3T Hull v. Northwestern, etc., Ins. and not more than sixty days, prior Co., 39 Wis. 397 (1876). Equity will to the day when the premium is compel the application of dividends payable, the premium is to be earned to prevent a forfeiture: deemed payable on the day of its Franklin L. Ins. Co. v. Wallace, 93 maturity, and not the date to which Ind. 7 (1883), and cases cited, an extension of the time of payment ^ Mutual L. Ins. Co. v. Girard L. is allowed by the policy: Trimble Ins. Co., 100 Pa. St. 172, 10 Ins. Law v. New York L. Ins. Co., 20 Wash. Jour. 273-275 (1882), annotated. 386, 55 Pac. 429 (1898). 33 Krause v. Equitable L. Assur. 83 Williams v. Washington L. Ins. Co., 99 Mich. 461, 58 N. W. 496 Co., 31 Iowa 541 (1871); Blackerby (1894); Pitt v. Berkshire Ins. Co., 100 Mass. 500 (1868). 130 THE CONSIDERATION. 116 vision in a policy that it shall not be in force until the first payment is made in cash during the life-time and good health of the insured is complied with by the execution of a note to the insurance com- pany's agent for an amount greater than the premium, where the agent indorsed and discounted the note, gave the insured the com- pany's receipt for the amount of the premium, reported it to the com- pany as paid, and received from the company and delivered to the insured the policy, which recited that it was given in consideration of the application and "of the first premium paid on or before the de- livery hereof." 40 The delivery of the policy is a sufficient consideration for the note. 41 Such a note may be taken as payment, 42 or as an extension of the time of payment, under the provision that the insurance shall terminate if the note is not paid at maturity, or it may be accepted as a condi- tional payment. 43 If neither the policy nor the note contains a pro- vision for the forfeiture or suspension of the risk upon the non-pay- ment of the note, the policy continues in force although the note is not paid at maturity. 44 The rights of the parties are governed by the terms of the agreement. It is common to provide that the policy shall be merely suspended while the note is overdue and that the company shall not be liable for loss occurring during such suspension. 45 There is a conflict of authority as to whether a note given for the premium, and containing a provision to the effect that the policy shall be for- feited if the note is not paid at maturity, must be presented for pay- ment and demand made before the policy can be declared void. 40 It is said that "when the condition as to forfeiture for the non-payment at maturity of a note given for the premium is contained only in the "Jacobs v. Omaha L. Ass'n, 146 Phenix Ins. Co. v. Bachelder, 32 Mo. 523, 48 S. W. 462 (1898). Neb. 490, 29 Am. St. 443 (1891). " Marskey v. Turner, 81 Mich. 62, 4fl That notice and demand are nec- 45 N. W. 644 (1890). essary, see Pendleton v. Knicker- Michigan Mut. L. Ins. Co. v. bocker L. Ins. Co., 5 Fed. 238 Bowes, 42 Mich. 19 (1879). (1881); Travelers' Ins. Co. v. Pull- ** Knickerbocker L. Ins. Co. v. ing, 159 111. 603 (1896). Contra, Pendleton, 112 U. S. 696 (1884). Roehner v. Knickerbocker L. Ins. "McAllister v. New England, etc., Co., 63 N. Y. 160 (1875); Mclntyre Ins. Co., 101 Mass. 558 (1869). The v. Michigan, etc., Ins. Co., 52 Mich, forfeiture clause was construed to 188 (1883). Protest of the note is apply to future premium payments not necessary: Knickerbocker L. onl y- Ins. Co. v. Pendleton, 112 U. S. 696 "Robinson v. Continental Ins. Co., (1884). 76 Mich. 641, 43 N. W. 647 (1889); 117 THE PREMIUM. 131 note, the mere fact that the note is not paid at maturity does not of itself avoid the policy. Such a provision is a condition subsequent of which the company must avail itself by clear and unequivocal acts. It must demand payment at the proper time, and if no payment is made must declare the policy forfeited or void." 47 Such a provision in a note has been held of no effect whatever. 48 The company or its general agent may accept the note of a third party in payment of the premium. 49 131. f Payment after loss or death. If credit is given or the time to pay the premium is extended by an agreement under which the policy remains in force, there can be a recovery if the loss or death occurs within such period of 'extension. 50 The company is under no obligation to accept a premium tendered after the time fixed for its payment, but it may by a course of dealing, which will justify the insured in relying thereon, deprive itself of the right to refuse to accept payment and insist upon the strict adherence to the terms of the original contract. But in order to establish au- thority in an agent to receive an overdue premium after the death of the insured, an express authority to do so conferred upon him by the company must be shown. 61 The death or loss for which there can be a recovery must have oc- curred before the premium was due by the express terms of the con- tract, or within the period of extension created by the conduct of the insurer and while the policy was in force and not suspended. 52 It is not uncommon for insurance companies to provide for a certain period known as days of grace within which they will accept pre- miums. Ordinarily the contract provides that during such days of grace the premium will be accepted upon a certificate that the in- sured is in good health at that time. Before the company can be 47 See Mutual L. Ins. Co. v. French, 110 111. 102 (1884). A premium sent 30 Ohio St. 240, 27 Am. St. 443 after a loss is presumed to be too (1876), and cases there cited. late, and the burden of proving its 48 Dwelling-House Ins. Co. v. Har- acceptance is on the insured: Moore die, 37 Kan. 674, 16 Pac. 92 (1887). v. Rockford Ins. Co., 90 Iowa 636, 57 See Hastings v. Brooklyn L. Ins. N. W. 597 (1894). Co., 138 N. Y. 473 (1893); Union, B1 Lantz v. Vermont L. Ins. Co., etc., Ins. Co. v. Buxer, 62 Ohio St. 139 Pa. St. 546, 10 L. R. A. 577 385, 57 N. B. 66 (1900). (1891), and cases therein cited. 48 Franklin L. Ins. Co. v. Wallace, "Farnum v. Phoenix Ins. Co., 83 93 Ind. 7 (1883). Cal. 246, 23 Pac. 869 (1890). 60 Miller v. Union Cent. L. Ins. Co., 132 THE CONSIDERATION. 118 required to accept payment after the death of the insured it must very clearly appear that such was the intention of the parties. 53 It is not to be presumed that an insurer intended to accept an over- due premium after the death of the insured, unless such intention clearly appears from the terms of the contract. 54 132. Paid-up policies. Many life insurance contracts provide that upon the payment of a specified number of premiums, the in- sured shall, upon certain conditions, be entitled to a paid-up policy. The rights of the parties under such policies are determined^ entirely by the provisions of the contract and the statutes in force when the policy is issued. 55 It is generally provided that the insured shall surrender the old policy within a specified time and receive a new policy, although this is sometimes effected by a mere indorsement upon the old policy. 56 By the weight of authority the right must be exercised within the time specified, 57 although it has been held that it is sufficient if this is done within a reasonable time. 58 A paid-up policy may be subject to the same conditions as the old, or it may be absolutely non-forfeitable, depending entirely upon its terms. 133. Premium notes. Under some statutes premium notes are given as a part of the capital stock of the corporation. These must be distinguished from promissory notes given by the insured as a part of the premium. In some mutual companies premiums are paid partly in cash and partly in notes upon which dividends earned by the company are credited and assessments made from time to time as losses occur. ]STotes given as a part of the capital stock of a mu- tual company, in the absence of a statutory provision to the con- trary, are payable absolutely without reference to losses, and may be "See Howell v. Knickerbocker L. (1886); McQuitty v. Continental L. Ins. Co., 44 N. Y. 276 (1871); Trus- Ins. Co., 15 R. I. 573, 10 All. 635 tees v. Brooklyn F. Ins. Co., 19 N. Y. (1887). 305 (1859); Mutual Ben. L. Ins. Co. 57 Knapp v. Homeopathic, etc., Ins. v. Ruse, 8 Ga. 534 (1850); Pritchard Co., 117 U. S. 411 (1885). v. Merchants', etc., Assur. Soc., 3 C. "* Bruce v. Continental L. Ins. Co., B. (N. S.) 622 (1858). 58 Vt. 253 (1885). As to the right " Mobile, etc., Ins. Co. v. Pruett, 74 to a paid-up policy without paying Ala. 487 (1883). outstanding premium note, see Van 55 Mound City, etc., Ins. Co. v. Norman v. Northwestern, etc., Ins. Twining, 12 Kan. 475 (1872); Han- Co., 51 Minn. 57 (1892); Holman v. ley v. Life Ass'n, 69 Mo. 380 (1879). Continental L. Ins. Co., 54 Conn. " Holman v. Continental L. Ins. 195, 1 Am. St. 97 (1886). Co., 54 Conn. 195, 1 Am. St. 97 119 THE PEEMIUM. 134 transferred and negotiated so as to pass a good title to the transferee free from equities existing between the original makers. 59 But the ordinary premium notes, which are payable only upon a contingency, are not negotiable. 60 Where the contract so provides, the maker of a premium note may terminate his liability thereon for future losses by rescinding his insurance contract. After his policy is canceled no liability exists except for losses which had already occurred. 61 134. Notice of time when premium is due. In the absence of a statute requiring notice to the insured that a premium will become due at a certain time, the company is under no obligation to give such notice, unless it has by a course of dealing established a custom upon which the insured is entitled to rely. In such a case the usage enters into and forms a part of the contract between the parties, 62 and it is generally held that the company can not suddenly cease its es- tablished practice and claim a forfeiture of the policy. But the cases are not all in harmony. In some states it is held that the company may discontinue the practice of sending notice, and that a failure to give the usual notice will not prevent a forfeiture unless it is done for the purpose of misleading the insured and avoiding the policy. 63 Where a statute requires notice to be given, the burden is on the com- pany to show that it has complied with the statute. 64 Such a re- 69 White v. Haight, 16 N. Y. 310 face value would subject some of (1867). them to more than the extreme limit 80 Hope, etc., Ins. Co. v. Weed, 28 of liability, which is fixed by N. H. Conn. 50 (1859). Laws 1847, ch. 501, at the amount of 01 Langworthy v. Washburn, etc., the deposit note : New Boston F. Co., 77 Minn. 256 (1899); Amer- Ins. Co. v. Saunders, 67 N. H. 249, ican Ins. Co. v. Garrett, 71 Iowa 243, 34 Atl. 670 (1892). 32 N. W. 356 (1887). The assess- 62 Manhattan L. Ins. Co. v. Smith, ment should be made upon the bal- 44 Ohio St. 156 (1886); Attorney- ance of the premium note remaining General v. Continental L. Ins. Co., unpaid: Davis v. Oshkosh, etc., Co., 33 Hun (N. Y.) 138 (1884); Grant 82 Wis. 488, 52 N. W. 771 (1892). v. Alabama, etc., Ins. Co., 76 Ga. 575 An assessment by a mutual insur- (1886). ance company may be based on the " Smith v. National L. Ins. Co., balance due on the premium notes 103 Pa. St. 177 (1883); Girard Life after the payment of previous as- Ins., etc., Co. v. Mutual L. Ins. Co., sessments, where the different 97 Pa. St. 15 (1881). See also Mu- classes of notes constituting the as- tual, etc., Ass'n v. Essender, 59 Md. sets of the company have previously 463 (1882). paid assessments varying in amount, "* Baxter v. Brooklyn L. Ins. Co., and another assessment upon the 44 Hun (N. Y.) 184 (1887). 134 THE CONSIDERATION. 120 quirement must be strictly complied with. Thus, in New York, where the statute provides that the notice shall contain a statement that "prompt payment is necessary to keep the policy in force," it is not sufficient to give a notice to the effect that in default of payment the policy will "become forfeited and void." 05 The day upon which the notice was mailed should be excluded in the computation of the thirty days for which notice must be given under the New York statute. 68 Where the requisite notice was not given, and the policy contained a provision for forfeiture, the court said: "The notice given before the premium fell due was insufficient, and no notice whatever was given after the non-payment of that premium. The effect of the prohibition against declaring a forfeiture of the interest of the as- sured under the contract was to keep the policy alive as a valid sub- sisting insurance, notwithstanding the stipulations of the parties to the contrary. The duration of the policy, so long as it was domi- 68 Phelan v. Northwestern, etc., Ins. Co., 113 N. Y. 147 (1889). The New York statute provides that "no life insurance company doing busi- ness in the state of New York shall have power to declare forfeited or lapsed any policy hereafter issued or renewed by reason of non-pay- ment of any annual premium or in- terest, or any portion thereof, ex- cept as hereinafter provided. When- ever any premium or interest due upon any such policy shall remain unpaid when due, a written or print- ed notice stating the "amount of such premium or interest due on such policy, the place where said premium or interest should be paid, and the person to whom the same is payable, shall be duly addressed and mailed to the person whose life is assured." Omitting the description of the part of the notice for the pay- ment of an unpaid premium, and declaring a forfeiture if the notice is not complied with, the final pro- viso reads: "Provided, however, that a notice stating when the pre- mium will fall due, and that if not paid the policy and all payments thereon will become forfeited and void, served in the manner herein- before provided, at least thirty and not more than sixty days prior to the day when the premium is pay- able, shall have the same effect as the service of the notice hereinbe- fore provided for." 66 Rosenplanter v. Provident, etc., Soc., 96 Fed. 721, 37 C. C. A. 566 (1899). The notice is complete on mailing a registered letter properly addressed to the insured: McKenna v. State Ins. Co., 73 Iowa 453 (1887). The "date" of a notice, served by mail, of an assessment in a mutual insurance association, when the amount of the assessment is, by the rules of the association, to be paid within a certain number of days from the "date of the notice," is not the date printed in the notice itself, but is the day on which the notice is mailed, or is or should be received by the member in due and regular course of mail: Bridges v. Nat Union (Minn.), 77 N. W. 411 (1898). 121 THE PREMIUM. 135 nated by the statute, was not dependent upon the payment of pre- miums on the day named therein, but upon payment within thirty days after the statutory notice should be given. The only way in which the policy could be terminated under the statute was by the failure of the insured to pay his premium upon notice "mailed" thirty days before the premium was due, or by a notice of default and demand for payment within thirty days after mailing such no+iee." 67 Where the statute requires certain notice before the maturity life insurance premium as a condition of forfeiting the policy non-payment, notwithstanding stipulations to the contrary in iae contract, it does not become a part of a policy issued while the statute is in force so as to be operative after the statute is repealed. The repeal simply permits the enforcement of the conditions of the contract according to its own terms and conditions. 68 135. Right to recover premiums paid. The insurance company has no right to the consideration until the contract is consummated by the assumption of the risk. But where the risk has attached, and the contract is subsequently forfeited by the breach of a condition, the premiums which have been paid can not be recovered back. 69 If the policy was void ab initio, the premiums paid may be recovered, and a premium note is not enforceable. 70 Assessments paid for a series of years to a mutual insurance association by a member can not be re- covered back simply because he failed to inform himself of the pro- visions of the contract. 71 The provision in an application for a policy of life insurance that the statements and promises of the agent shall not affect the rights of the company, unless reduced to writing and presented with the application, does not entitle the company to re- tain money received in consequence of fraud practiced by the agent after its knowledge of the fraud. As the agent had practiced fraud on both parties, the contract was held voidable at the instance of either n Baxter v. Brooklyn L. Ins. Co., 70 Ford v. Buckeye State Ins. Co., 119 N. Y. 450, 7 L. R. A. 293 (1890). 6 Bush (Ky.) 133, 99 Am. Dec. 663 88 Rosenplanter v. Provident, etc., (1869); York County, etc., Ins. Co. Soc., 96 Fed. 721, 37 C. C. A. 566 v. Turner, 53 Me. 225 (1865); Home (1899), and cases cited. Ins. Co. v. Daubenspeck, 115 Ind. 69 Home Fire Ins. Co. v. Kuhlman, 306, 17 N. B. 601 (1888). 58 Neb. 488, 78 N. W. 936 (1899), "Condon v. Mutual, etc., Ass'n, and cases cited; United States L. 89 Md. 99, 42 Atl. 944 (1899). Ins. Co. v. Smith, 92 Fed. 503, 34 C. C. A. 506 (1899). 136 THE CONSIDERATION. 122 party. 72 Premiums paid upon a void policy may be recovered, un- less the insured has been guilty of fraud. 73 Thus, where a daughter paid the premiums on the life of her father, with his knowledge, with the understanding that she had an insurable interest in his life, she was permitted to recover the premiums as money paid under a mis- take of law. 74 So, where a wife, without the consent of her husband, procured insurance upon his life, and paid the premiums out of money furnished by him for household expenses, the husband was permitted to recover the premiums, although the company did not know that the money belonged to him. 75 II. Assessments in Mutual Companies and Benevolent Societies. 136. Dues and assessments. Many questions which have been before the courts relating to dues and assessments in mutual insur- ance companies and benevolent societies can not be discussed here. These organizations are generally regarded as insurance companies. 76 They are organized under special statutes, which provide in great de- tail for their methods of doing business, and these statutes, in connec- tion with their by-laws and certificates, govern the rights of the par- ties. The insured becomes a member of the organization, and, as a consideration for the insurance and other benefits, he agrees to pay certain dues and assessments, to be levied and collected in accordance with the terms of his contract. In mutual companies upon the as- sessment plan the insured is required to pay from time to time to the proper authorities such sum as shall be assessed under the by-laws for the purpose of paying losses and expenses. 77 If a premium note 71 McKay v. New York L. Ins. Co., 76 See Penn Mut., etc., Co. v. Me- 124 Cal. 270, 56 Pac. 1112 (1899). chanics', etc., Co., 19 C. C. A. 286, 72 73 Jones v. Insurance Co., 90 Tenn. Fed. 413 (1896). 604, 18 S. W. 260 (1891). 7T Ellerbe v. Barney, 119 Mo. 632, 74 Metropolitan L. Ins. Co. v. 25 S. W. 384 (1893). As to the vari- Blesch (Ky.), 58 S. W. 436 (1900). ous plans, see Crossman v. Massa- See also Mutual I.. Ins. Co. v. El- chusetts Ben. Ass'n, 143 Mass. 435, 9 liott, 93 Tex. 144, 53 S. W. 1014 N. E. 753 (1887); In re La Solidar- (1899); Stilwell v. Covenant, etc., ite, etc., Ass'n, 68 Cal. 392 (1886). Ins. Co., 83 Mo. App. 215 (1900). As to the distinction between a pre- 75 Metropolitan L. Ins. Co. v. mium and an assessment, see State Smith (Ky.), 59 S. W. 24, 53 L. R. A. v. Monitor F. Ass'n, 42 Ohio St. 555 817 (1900). (1885). 123 THE PREMIUM. 137 is given, the assessment is made upon the note, and can not exceed the maximum liability as expressed thereby. 78 The rate of assess- ment may be determined by the proper authorities according to the losses and expenses, or it may be previously determined and inserted in the contract. It may be subject to increase by vote of the stock- holders, and a member who assents to an increase in his assessment by voting therefor in a stockholders' meeting can not thereafter complain that it is unreasonable. 79 137. Liability to assessment. The liability for assessments rests upon those who, by becoming members of the company, assume the contractual obligation imposed by its by-laws. 80 Such liability must grow out of the contract or statute, 81 and where the statute fixes it at a certain amount it can not be limited to a less amount by a special agreement. If the liability is absolute and certain, an action may be maintained against a member for its enforcement, but the rule is otherwise if the liability terminates with the forfeiture of the rights of the member. 82 138. Effect of non-payment of assessment. The non-payment of an assessment may result, ipso facto, in the forfeiture of the rights of the member as a beneficiary, or merely in his suspension from the rights and privileges of membership. Where it is expressly provided that such non-payment shall result in suspension or forfeiture, no 78 Davis v. Oshkosh, etc., Co., 82 company and under whom the in- Wis. 488, 52 N. W. 771 (1892). sured does not claim any right, title, 79 Mutual, etc., Ass'n v. Taylor or interest in the property where (Va.), 37 S. E. 854 (1901). the liability for assessments is pure- 80 Com. v. Massachusetts, etc., Ins. ly personal: Monger v. Rocking- Co., 112 Mass. 116 (1873); Tolford v. ham, etc., Ins. Co., 96 Va. 442, 31 Church, 66 Mich. 431, 33 N. W. 913 S. E. 609 (1898). It is no defense (1887). to an action on a premium note 81 Com. v. Massachusetts, etc., Ins. given by the insured, that an agent Co., 112 Mass. 116 (1873). of the company, who had no author- 83 Tolford v. Church, 66 Mich. 431, ity to bind it to pay the cash sur- 33 N. W. 913 (1887); Ellerbe v. Bar- render value of an old policy, told ney, 119 Mo. 632, 25 S. W. 384 the insured that there would be "no (1893). One to whom a certificate trouble" about getting such cash of fire insurance is issued is not surrender value, as it is the mere liable for assessments theretofore expression of an opinion: Garber made against a person in control of v. Bresee, 96 Va. 644, 32 S. E. 39 the property, who held a separate (1899). certificate of membership in the 139 THE CONSIDERATION. 12 1 affirmative action on the part of the association or lodge is necessary. 83 But where the fundamental law provides that upon non-payment a member shall be suspended by the proper authorities, his membership is not affected until the power thus conferred is exercised. 84 When the annual assessment is required to be paid on a day certain, but the assured does not know the exact amount because of dividends which he is entitled to have, applied, there can not be a forfeiture until no- tice has been given him. 85 ' 139. Withdrawal of member. A member of a mutual or benevo- lent insurance company may generally withdraw at pleasure, and thus relieve himself from liability for assessments for further losses, but he remains liable for assessments thereafter made for the pur- pose of paying losses which had occurred while he was a member. 86 140. Insolvency of company. Upon the insolvency of the com- pany, any receiver may levy assessments upon such as under the con- tract are absolutely liable for losses of the company, but not upon such as are relieved from further liability by forfeiture of their rights. 87 The obligation upon a premium note is not affected by the insolvency of the company, and the receiver may, under the authority of the court, within the terms of the contract, make such assessments ^Mandego v. Centennial, etc., Harker (N. Dak.), 84 N. W. 369 Ass'n, 64 Iowa 134 (1884); Mueller (1900). v. Grand Grove, etc., 69 Minn. 236, M Scheufler v. Grand Lodge, 45 72 N. W. 48 (1897); Goodman v. Minn. 256, 47 N. W. 799 (1881). Jedidjah Lodge, 67 Md. 117 (1887); Effect of suspension of subordinate Hansen v. Supreme Lodge, 140 111. lodge: Young v. Grand Lodge, 173 301 (1897); Burdon v. Massachu- Pa. St. 302, 33 Atl. 1038 (1896). setts, etc., Ass'n, 147 Mass. 360 Phoenix Ins. Co. v. Doster, 106 (1888). Where a member of a mu- U. S. 30 (1882). tual insurance company has obli- * Langworthy v. Washburn, etc., gated himself to pay such annual Co., 77 Minn. 256 (1899); Ionia, etc., assessments as shall be made, not to Ins. Co. v. Otto, 96 Mich. 558, 56 N. exceed a specified sum each year, W. 88 (1893); Detroit, etc., Ins. Co. and in anticipation of an annual as- v. Merrill, 101 Mich. 393, 59 N. W. sessment pays to the treasurer the 661 (1894). Upon the termination amount of an annual assessment in of the contract for insurance the advance, and such assessment is not premium note becomes void: Mound in fact made, the sum so paid stands City, etc., Ins. Co. v. Curran, 42 Mo. to his credit, and he has a right to 374 (1868). apply the same on an assessment for 87 Bacon v. Clyne, 70 Mich. 183, 38 a succeeding year: Montgomery v. N. W. 207 (1888). 125 THE PREMIUM. 141 as are necessary to meet the losses and expenses. 88 The facts neces- sary to authorize the assessment must be determined, and this must be made to appear affirmatively in an action brought by the receiver to enforce the assessment. 89 Such an assessmfent may include the amount necessary to cover the expenses of the receivership. 90 141. Death during period of suspension. There can be no re- covery for a loss which occurs during a period of suspension from membership, 91 but a member is protected during the period allowed by the contract for the payment of the assessment. 92 A payment after the death of the insured, which is accepted by the association without knowledge of the death, is of no effect. 93 But if such payment is ac- cepted with full knowledge of all facts, it may render the association liable. 94 142. Reinstatement. Contracts which provide for forfeiture or suspension for non-payment of dues generally contain a condition for reinstatement upon making payment and complying with certain re- quirements, 95 such as producing a certificate of good health. 96 The 83 Tolford v. Church, 66 Mich. 431, 33 N. W. 913 (1887); In re Minneap- olis, etc., Ins. Co., 49 Minn. 291, 51 N. W. 921 (1892). In this case the premium notes which constituted the "contingent fund" were a part of the capital of the company re- quired by act of 1885. 8a See Seamans v. Millers' Mut. Ins. Co., 90 Wis. 490, 63 N. W. 1059 (1895); In re Equitable, etc., Ass'n, 131 N. Y. 354 (1892). 90 Davis v. Shearer, 90 Wis. 250, 62 N. W. 1050 (1895); Seamans v. Mil- lers' Mut. Ins. Co., 90 Wis. 490, 63 N. W. 1059 (1895). For a statement of the general principles which must govern assessments on pre- mium notes, see Swing v. H. C. Ake- ley L. Co., 62 Minn. 169, 64 N. W. 97 (1895). 81 Blanchard v. Atlantic, etc., Ins. Co., 33 N. H. 9 (1856); Brown v. Grand Council, 81 Iowa 400, 46 N. W. 1086 (1890). 92 Painter v. Industrial L. Ass'n, 131 Ind. 68, 30 N. E. 876 (1891) [ordinary life policy]. 93 Miller v. Union Cent. L. Ins. Co., 110 111. 102 (1884). 94 Erdmann v. Mutual Ins. Co., 44 Wis. 376 (1878). 95 Manson v. Grand Lodge, 30 Minn. 509 (1883). A lapsed policy can only be revived, so far as the insured is concerned, by the actual payment and acceptance of the pre- mium, or by a contract based upon a sufficient consideration: Lantz v. Vermont L. Ins. Co., 139 Pa. St. 546, 10 L. R. A. 577 (1891), and cases therein cited. 96 French v. Mutual, etc., Ass'n, 111 N. C. 391, 32 Am. St. 803 (1892); Jones v. Preferred, etc., Assur. Co., 120 Mich. 211, 79 N. W. 204 (1899). See note, 3 Am. St. 634. 143 THE CONSIDERATION. 126 acceptance of an assessment during the period of suspension, with a full knowledge of all facts, in itself reinstates a member. 97 143. Waiver Estoppel. The insurer may expressly or by im- plication waive strict compliance with the requirement that dues and assessments shall be paid within a specified time. The tendency of the courts is to protect the members of such associations from for- feiture of their rights. As said by the supreme court of Minnesota, 98 "The defendant had by its conduct led him to suppose and believe that a default of two or three months in any one payment would not affect his standing as a member, or his right and interest in the fund out of which his beneficiary would be paid in case of his decease. The defendant could not, after long continued conduct of this nature, by which he was lulled into the conviction that his delay was unobjec- tionable and his good standing unaffected, suddenly and without no- tice insist upon a forfeiture, and that he was no longer in good stand- ing, and had forfeited all his rights and privileges." The court said that the general rule was that "if the company has, by its course of conduct, acts or declarations, misled the insured in any way in re- gard to the payment of premiums, or created a belief on the part of the insured that strict compliance with the letter of the contract as to the payment of the premiums on the day stipulated will not be exacted, and the insured, in consequence, fails to pay on the day ap- pointed, the company will be held to have waived the requirement 87 Sweetser v. Odd Fellows, etc., account of failure to pay according Ass'n, 117 Ind. 97, 19 N. E. 722 to the stipulations therein written. (1888). Thompson v. Insurance Co., 104 U. 88 Mueller v. Grand Grove, 69 8.252(1881). But such a course of Minn. 236, 72 N. W. 48 (1897). dealing may be shown as will estop In Sweetser v. Odd Fellows, etc., the company to show that there was Ass'n, 117 Ind. 97 (1888), the court any agreement after it has permitted said: "It is quite true that mere its policy to stand open and uncan- occasional indulgence on the part celed after it has accepted payment of the insurance company, in the of overdue premiums or assessments absence of an express or implied in a specified manner, which has agreement to waive payment of been conformed to during the life- the assessments according to the time of the assured." See also Rich- conditions of the contract, can not wine v. LaCrosse, etc., Ass'n, 76 justly be construed as a permanent Minn. 417, 79 N. W. 504 (1899); waiver or as depriving the company Jones v. Preferred, etc., Assur. Co., of the right to insist upon a for- 120 Mich. 211, 79 N. W. 204 (1899). feiture, or to cancel its policy on 127 THE PREMIUM. 143 and is estopped from setting up the condition as a cause of forfeit- ure." Where the constitution and by-laws of a mutual benefit association limit and define the powers of the officers and forbid the alteration or amendment of such constitution except by the governing body, in the manner therein provided, and the by-laws provide that the member must pay the assessment within a specified time, and no further or other notice need be given, it was held that the secretary could not waive such provisions." There are numerous cases which hold that the officers of 'such a concern can not waive by-laws which relate to the substance of the contract. 100 90 Kocher v. Supreme Council (N. Ins. Co., 152 Mass. 272, 25 N. B. 289 J.), 52 L. R. A. 861 (1901). (1890); Niblack Mut. Ben. Soc. (2d 100 McCoy v. Roman Cath., etc., ed.) 195. PART V. AGENCY, WAIVER AND ESTOPPEL CHAPTER VIII. INSURANCE AGENTS AND THE GENERAL RULES OF AGENCY. SEC. SEC. . 150. In general. 160. Limitations on authority of 151. Statutory provisions relating to agent. insurance agents. 160a. Limitations on authority 152. Construction of such statutes. Continued. 153. Evidence of agency. 161. Limitations contained in appli- 154. Character of the agency. cation Constructive notice. 155. Various special agents. 162. Preparation of application. 156. Sub-agents and clerks. 163. Provisions restricting power of 157. Insurance brokers. officers and general agents. 158. Powers of agents. 164. Notice. 159. Restrictions in application or 165. Notice of loss to local agent. policy. 166. Rights and liabilities of agent. 150. In general. In modern times almost all insurance is un- derwritten by corporations, which necessarily act through their officers and other agents. The powers and duties of the corporate officers are governed by the general law of corporations and agency, to which the reader is referred for a full discussion. In a large measure this is also true of the principles governing insurance agents ; and in a work of the scope of the present volume it is only necessary to summarize these rules and refer to the statutory and other modifications affected by the nature of the contract and the conditions under which it is en- tered into. These general rules apply to agents of all kinds of in- surance companies, and generally to individuals who are engaged in business as insurers. As the words are commonly used, an insurance agent is a person employed by an insurance company to solicit risks and effect insur- (128) 129 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 151 ance, collect and transmit premiums, and in general to represent the insurer in the solicitation, consummation and adjustment of the con- tract. It applies equally to one who represents the insured. 1 151. Statutory provisions relating to insurance agents. The attempts of insurance companies to escape responsibility for the acts of their agents by inserting provisions in their applications and con- tracts limiting the powers of their agents, and providing that the person taking the application shall be regarded as the agent of the applicant, have led to the enactment of statutes defining who are in- surance agents and determining their powers. These statutes pro- vide that a local or traveling agent engaged in taking applications for insurance shall be deemed the agent of the insurer and as rep- resenting it, and not the insured, in connection with all statements made in the application. 2 It is also common to require insurance agents to procure a license, and in some instances it is made a crim- inal offense to solicit insurance without having such a license, 3 or to act as agent for an insurance company which has not procured a certificate of authority to do business within the state. 4 The business of insurance is of such a nature that the state may impose restric- tions upon it, and, if thought advisable, prohibit individuals from engaging in it. 5 Where individuals are permitted to become insurers, the state may impose the same restrictions upon their agents as upon the agents of corporations engaged in the same business. It has been noted that foreign insurance corporations may be excluded from a state, or permitted to engage in business therein upon such condi- tions as the state chooses to impose. But individual citizens of other 1 That the rule is the same in deal- New York L. Ins. Co., 78 Fed. 33 ing with the agents of mutual and (1897); Bankers' L. Ins. Co. v. Rob- stock insurance companies, see Kau- bins, 55 Neb. 117, 75 N. W. 585 sal v. Minnesota, etc., Ins. Co., 31 (1898); Continental L. Ins. Co. v. Minn. 17, 47 Am. Rep. 776 (1883); Chamberlain, 132 U. S. 304 (1889). Whitney v. National, etc., Ass'n, 57 See also Continental Ins. Co. v. Minn. 472, 59 N. W. 943 (1894); Ruckman, 127 111. 364, 11 Am. St. Cumberland Valley, etc., Co. v. 121 (1889). Schell, 29 Pa. St. 31 (1857); Frank- 8 See State v. Hosmer, 81 Me. 506 lin F. Ins. Co. v. Martin, 40 N. J. L. (1889). 568, 579 (1878). In re Hogan (N. Dak.), 78 N. W. Vermont Rev. Laws 1880, 3620; 1051, 45 L. R. A. 166 (1899). Iowa Rev. St. 1888, 1732, quoted B Com. v. Vrooman, 164 Pa. St. 306, and commented on in McMaster v. 25 L. R. A. 250 (1894). 9 ELLIOTT INS. 152 AGENCY, WAIVER AND ESTOPPEL. 130 states who are permitted to engage in the business of insurers may only be subjected to such restrictions and conditions as are imposed upon citizens of the same state* of equal standing and merit. 6 An insurance solicitor who places a risk through brokers in another state, without knowing by what company it was taken, is not relieved from liability under the statute authorizing the recovery of the loss from persons who act as agents of unlicensed foreign companies. 7 152. Construction of such statutes. In Iowa it is provided that ''any person who shall hereafter solicit insurance, or procure appli- cations therefor, shall be held to be the soliciting agent of the insur- ance company or association issuing the policy on such application, or, on a renewal thereof, anything in the application or policy to the contrary notwithstanding." 8 This act was held to apply to all kinds of insurance, 9 and to be intended to settle, as between the parties to the contract, the stat-us of the party through whom negotiations are conducted. Its object was to cut out the class of defenses interposed under the provisions which many companies inserted in their appli- cations and policies, to the effect that the agent by whom the appli- cation was procured should be regarded as the agent of the insured. 10 The supreme court of the United States held 11 that by force of this statute a person procuring an application for life insurance is the agent of the company, and can not be converted into the agent of the insured by any provision in the application. Such an agent is under no obligation to aid in filling out an application, and if he does so and gives advice as to the character of the answers given, his acts are the acts of the company. 'State v. Stone, 118 Mo. 338, 25 therefor shall be held to be the L. R, A. 243 (1893). As to restric- agent of the party thereafter issu- tions upon insurance by unincor- ing the policy upon such applica- porated associations from another tion, or a renewal thereof, anything state, see note, 25 L. R. A. 238. in the application or policy to the 1 Noble v. Mitchell, 100 Ala. 519, contrary notwithstanding." Similar 25 L. R. A. 238 (1893). provisions are found in other states. 8 Iowa Laws 1880, ch. 211. By 9 Cook v. Federal Life Ass'n, 74 Minn. Laws 1895, ch. 175, 88, such Iowa 746 (1887). agent is made the agent of the com- 10 St. Paul, etc., Ins. Co. v. Sharer, pany for the purpose of receiving 76 Iowa 282 (1888). the premium. Section 25 provides " Continental Ins. Co. v. Chamber- that "any person who solicits insur- lain, 132 U. S. 304 (1889). ance and procures the application 131 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 153 153. Evidence of agency. The fact and character of the agency may be shown by any competent evidence ; such as an express contract between the agent and his principal, the holding out or recognition of the part} r as his agent, 12 the possession of papers such as policies ex- ecuted in blank, which an insurance company would furnish ordinarily only to its agents ; 13 and generally by the existence of a state of facts from which agency would be inferred as a matter of law, 14 or as a mixed question of law and fact. 15 Thus, a person soliciting insurance and taking the application, in the absence of notice to the insured of limitations upon his authority, will be deemed the agent of the com- pany which accepts the application, issues the policy and retains the premium. 16 But an agent's apparent authority to bind his principal must be based on something tangible; such as the possession by the agent of blank policies signed by the officers of the company, or some other act of the company, such as permitting the party to continue business after it has notice that he is representing himself as its agent. 17 154. Character of the agency. The nature of the agency in each case depends upon the terms of the employment and the charac- ter of the business to be transacted. As between the principal and the agent, or the principal and persons dealing with the agent, with "List v. Commonwealth, 118 Pa. don, etc., Ins. Co. v. Gerteisen (Ky.), St. 322, 328 (1888); Enos v. St. Paul, 51 S. W. 617 (18&9). etc., Ins. Co., 4 S. Dak. 639, 46 Am. "Possession of blanks as evi- St. 796 (1894); Parker v. Citizens' dence, see Dickerman v. Quincy, Ins. Co., 129 Pa. St. 583 (1889) [affi- etc., Ins. Co., 67 Vt. 609 (1895). davit of alleged agent used in liti- 14 Sellers v. Commercial P. Ins. gation]; Schreiber v. German-Amer., Co., 105 Ala. 282 (1894); Indiana etc., Ins. Co., 43 Minn. 367 (1890) Ins. Co. v. Hartwell, 123 Ind. 177 [admission by president of com- (1889); Duluth Nat. Bank v. Knox- pany]. A company which has rati- ville F. Ins. Co., 85 Tenn. 76, 4 Am. fled the acts of a person in writing St. 744 (1886); Allen v. German- an application for insurance, by ac- Amer. Ins. Co., 123 N. Y. 6 (1890). cepting it and issuing a policy there- 15 Lumbermen's Mut. Ins. Co. v. on, can not thereafter repudiate Bell, 166 111. 400, 57 Am. St. 140 such acts because the agent had not (1897). See Davis v. ./Etna, etc., a written certificate of appointment: Ins. Co., 67 N. H. 335 (1892). Landes v. Safety, etc., Ins. Co., 190 16 London, etc., Ins. Co. ,v. Gertei- Pa. St. 536, 42 Atl. 961 (1899). When sen (Ky.), 51 S. W. 617 (1899). See the company issues a policy upon an 160, infra. application taken by a solicitor, it is 1T Bell v. Peabody Ins. Co. (W. estopped to deny his agency: Lon- Va.), 38 S. E. 541 (1901). 154 AGENCY, WAIVER AND ESTOPPEL. 132 knowledge of the terms of employment, such terms are conclusive. But the agent may exceed his actual authority under such circum- stances as will justify persons dealing with him without knowledge of limitations on his authority in assuming that he has greater author- ity than is in fact the case as between the agent and his principal. One who has no knowledge of limitations may assume that an agent has power to bind his principal within the scope of his apparent authority. Insurance agents are known by various designations, such as gen- eral, special and soliciting, which in a rough way describe the powers which are conferred upon them. Lord Ellenborough denned a gen- eral agency as one which arises from general employment, while a special agency is confined to and constituted by the authority dele- gated in that particular instance. Judge Story said that "a special agency properly exists when there is a delegation of authority to do a single act, and a general agency, where there is a delegation to all acts connected with a particular trade, business or employment. Hence, a general agent is one who is employed to transact all the business of his principal of a particular kind or in a particular place, while a special agent is one authorized to act only in a specific transaction." 18 It is doubtful whether the distinction is of much practical value, as the relation of the agent to third parties is controlled ordinarily by what the person dealing with the agent has a right under the circumstances to assume from the nature and scope of the agenf s employment. 19 The distinction between general and special insurance agents has been abolished by the statutes of some states. Thus, in Wisconsin, the agents of insurance companies, without reference to attempted limita- tions, have power to do almost anything that their companies could do. The statute gives all insurance agents general powers; and it was held that an agent might make a valid oral agreement for imme- diate insurance, notwithstanding a stipulation in the application, "See Whitehead v. Tuckett, 15 and S, though representing their East 400 (1812); Story Agency principal in a particular locality, or (1882), 17; Swell's Evans Agency within a limited territory, and 2; Dunlop's Paley Agency (1856) 2. therefore called local agents, were That the nature of the agency is not in fact general agents of the defend- affected by the fact that it is re- ant in the matter of issuing poli- stricted to a particular locality, see cies." Continental, etc., Ins. Co. v. Ruck- "See Gore v. Canada L. Assur. man, 127 111. 364, 11 Am. St. 21 Co., 119 Mich. 136, 77 N. W. 650 (1889), where the court said: "W (1898). 133 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 155 which was subsequently signed by the applicant without actual knowl- edge of its contents, that the insurer should not be liable until the application and premium were received by the secretary. The court said : "All the insurance companies understand that all their agents doing business in this state are general agents, however restricted their powers may be by the rules of the companies, or by the stipula- tions of their policies, or by the applications for insurance/' 20 155. Various special agents. A person who deals with a gen- eral agent may assume that he has authority co-extensive with his apparent authority. But if the circumstances are such as to show that the authority is limited and special, the person dealing with him is under obligation to learn the extent of such limitations. 21 There is considerable conflict of authority as to the powers of a soliciting agent who has actual authority merely to receive applications and forward them to the company for approval. It has been held that such an agent can not bind the company by an oral contract of in- surance, 22 or for the renewal of a policy, 23 or for additional insur- ance, 24 or by his construction of the policy; 25 nor can he consent to *>Wis. Rev. Stat., 1977; Mathers v. Union, etc., Ass'n, 78 Wis. 588, 11 L. R. A. 83 (1891). 21 As to the circumstances under which the applicant must ascertain the agent's authority, see Sun Fire Office v. Wich, 6 Colo. App. 103, 39 Pac. 587 (1894). The mere fact that a person is the representative of the insurer for a certain purpose, such as the making of a medical ex- amination, does not justify the in- ference that he has authority to represent the company in other mat- ters, such as the filling out of the application for insurance: Flynn v. Equitable L. Assur. Soc., 67 N. Y. 500 (1876). The medical examiner is the agent of the company in mak- ing the examination, although the application recites that he shall be regarded as the agent of the appli- cant: Knights of Pythias v. Cog- bill, 99 Tenn. 28 (1887). The local agent of a life insurance company is in the discharge of no duty which he owes his company when he is present at the medical examination of an applicant. He can not there- fore bind the company by his ad- vice as to the proper answer to a question as to whether the applicant has ever been rejected as an appli- cant for insurance in other com- panies: U. S. L. Ins. Co. v. Smith, 92 Fed. 503, 34 C. C. A. 506 (1899). 22 O'Brien v. New Zealand Ins. Co., 108 Cal. 227 (1895); Fleming v. Hartford F. Ins. Co., 42 Wis. 616 (1877). 23 Shank v. Glens Falls Ins. Co., 4 N. Y. App. Div. 516 (1896). In this case the powers of the agent were clearly limited by the policy. "Heath v. Springfield, etc., Ins. Co., 58 N. H. 414 (1878). 25 Dryer v. Security F. Ins. Co., 94 Iowa 471 (1895). 156 AGENCY, WAIVER AND ESTOPPEL. 134 the assignment of the policy, 28 or waive a condition therein. 27 A mere collecting agent can not bind the company by an agreement to waive any of the terms of the policy. 28 So, it has been held that an agent with authority to adjust a loss can not waive a forfeiture of the pol- icy, 29 although he may waive the making of preliminary proofs of loss. 80 156. Sub-agents and clerks. Although the recent authorities upon the power to delegate authority to sub-agents and clerks have been subjected to some criticism, the rule is well established that the insurer is liable not only for the acts of his general agent, but also for the acts of the clerks and employes of such agent to whom he has delegated authority to discharge his functions within the scope of his agency. 31 It was said in a recent case 32 that "insurance companies know, or ought to know, when they appoint general agents, that, ac- cording to the ordinary course of business, they have clerks and other persons who assist them, and that their agents in many instances could not transact the business intrusted to them if they were required to give their personal attention to all its details. It being necessary, therefore, and according to the usual course of business, for their agents to employ others to aid them in doing the work, it is just and * Strickland v. Council Bluffs Ins. 31 Steele v. German Ins. Co., 93 Co., 66 Iowa 466 (1885). Mich. 81, 18 L. R. A. 85 (1892); "As to proof of loss, see Lohnes Swain v. Agricultural Ins. Co., 37 v. Ins. Co., 121 Mass. 439 (1877); Minn. 390 (1887); Indiana Ins. Co. Bowlin v. Hekla F. Ins. Co., 36 v. Hartwell, 123 Ind. 177 (1889). Minn. 433 (1887). In some cases it is said that the w Bryan v. National L. Ins. Ass'n, power of the p'rincipal can not be 21 R. I. 149, 42 Atl. 513 (1899). delegated to a sub-agent without ac- "Hollis v. State Ins. Co., 65 Iowa tual or implied authority. See 454 (1884). Phoenix Ins. Co. v. Spiers, 87 Ky. ""^Etna Ins. Co. v. Shryer, 85 Ind. 285 (1888); Waldman v. North Brit- 362 (1882). The contract of an ish, etc., Ins. Co., 91 Ala. 170, 24 Am. agent sent to adjust a loss is bind- St. 883 (1890). But, as stated in ing upon the company in the ab- the cases above cited, the authority sence of notice to the insured of any may easily be implied from the cir- limitation upon the authority of cumstances. such adjuster: Slater v. Capital M Goode v. Georgia Home Ins. Co., Ins. Co., 89 Iowa 628, 23 L. R. A. 181 92 Va. 392, 30 L. R. A. 842 (1895); (1894). See also Faust v. American Deitz v. Providence Wash. Ins. Co., F. Ins. Co., 91 Wis. 158, 30 L. R. A. 33 W. Va. 526 (1890). 783 (1895); Dick v. Merchants' Ins. Co., 92 Wis. 46, 65 N. W. 742 (1896). 135 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 157 reasonable that insurance companies should be held responsible not only for the acts of the agents, but also for the acts of their agents' employes within the scope of the agents' authority. It is no suffi- cient answer to this view to say that the insurers did not authorize their agents to delegate their authority to others. It may be that they did not do so expressly, but they appointed agents whom they knew, or ought to have known, would, according to the usage or the necessities of the business, engage the services of others in doing the work intrusted to them; and, having this knowledge, they will be held to have impliedly authorized their agents to do what was usual or necessary in the business." An insurance agent may, therefore, employ a clerk and authorize him to contract for risks, to deliver policies and make renewals, collect premiums and give credit therefor by waiving prepayment. 33 Where a policy contained a provision that "only such persons as shall hold a commission from this company shall be considered as its agents in any transaction relating to this insurance," it was held that notice of other insurance given a clerk or employe of a commissioned agent was notice to the company. 34 So, notice to a clerk of the insurer's agent of the condition of the insured's title is notice to the company. 35 157. Insurance brokers. An insurance broker must be dis- tinguished from an ordinary agent. 36 He is generally the agent of the insured, and may hence bind him by his concealments and rep- resentations made in the course of the negotiation. 37 A broker is 33 Bodine v. Exchange F. Ins. Co., He is the agent for the assured, ac- 51 N. Y. 117, 10 Am. Rep. 566 (1872). cording to all the authorities on the 34 Arff v. Star F. Ins. Co., 125 N. Y. subject, though at the same time, 57, 10 L. R. A. 609 (1890). for some purposes, he may be the 35 Carpenter v. German- Amer. Ins. agent for the insurer, and his acts Co., 135 N. Y. 298 (1892). and representations within the 36 Gude v. Exchange F. Ins. Co., 53 scope of his authority as such agent Minn. 220 (1893); Bernheimer v. are binding upon the insured: City of Leadville, 14 Colo. 518 Mechem Agency, 931; Hartford F. (1890). Ins. Co. v. Reynolds, 36 Mich. 502 37 In John R. Davis L. Co. v. Hart- (1877); Standard Oil Co. v. Tri- ford F. Ins. Co., 95 Wis. 226, 37 L. umph Ins. Co., 64 N. Y. 85 (1876); R. A. 131 (1897), Mr. Justice Mar- Hamblet v. City Ins. Co., 36 Fed. 118 shall said: "Leaving out of view (1888); American F. Ins. Co. v. the statute, what the powers of an Brooks, 83 Md. 22 (1896). Ques- insurance broker are can hardly be tions involving the scope of the a subject for serious controversy, powers of an insurance broker to 157 AGENCY, WAIVER AND ESTOPPEL. 136 defined as a person who, "for compensation, acts or aids in any man- ner in the negotiation of contracts of insurance or reinsurance, or placing risks or effecting insurance or reinsurance, for a person other than himself, and not being the appointed agent or officer of the com- pany in which such insurance or reinsurance is effected/' 38 It must be determined from the facts of each case whether the broker repre- sents the insured or the insurer, or each for certain purposes. If he is employed by the insurer he is, of course, its agent. 39 But the mere fact that he solicits the insurance from the insured, and receives a commission from the company which delivers the policy to the in- sured, does not make him the agent of the company. 40 The broker may be the agent of one party for one purpose and of the other for another purpose. In Indiana he is said to be the agent of the com- pany for the purpose of delivering the policy and receiving the pre- mium. 41 In Texas he is its agent to collect premiums only; 42 and this is the rule by statute in Massachusetts. 43 In Pennsylvania 44 he is not the agent of the insurer even for this purpose. A broker who is employed only to secure a policy can not, by virtue of such employ- ment, represent his employer in other matters relating to the in- surance. His agency ceases when the policy is procured, and he can not thereafter cancel the policy, and his principal is not affected by represent the insured arise most fre- stands in the place of the principal, quently where notice of cancellation and the latter is bound by whatever, is served by the insurer on such within such scope, such agent may broker when the contract of insur- do, to the same extent as if it was ance requires it to be served upon done by the principal." the insured. In such case the ques- M Mass. Laws 1887, ch. 214, 93. tion turns on whether the employ- ^ See Newark F. Ins. Co. v. Sam- ment of the broker extended beyond mons, 110 111. 166 (1884). the mere procurement of the insur- * Seamans v. Knapp, 89 Wis. 171, ance. If not, it is held that his 27 L. R. A. 362 (1895). agency ceased upon the delivery and " Indiana Ins. Co. v. Hartwell, 123 acceptance of the policy, so that the Ind. 177 (1889). To same effect is service of notice of cancellation Hermann v. Niagara F. Ins. Co., 100 upon him was ineffectual. But the N. Y. 411 (1885). broker may be so clothed with au- "East Texas F. Ins. Co. v. Blum, thority as to have full power to act 76 Tex. 653 (1890). for the insured in canceling, as well 43 See Davis v. JEtna,, etc., Ins. Co., as procuring policies. In all cases 67 N. H. 335 (1892). the familiar rule respecting the re- M Pottsville, etc., Ins. Co. v. Min- lation of principal and agent ap- nequa Springs, etc., Co., 100 Pa. St. plies, that within the scope of his 137 (1882). authority to procure insurance he 137 INSURANCE AGENTS AND GENEEAL RULES OF AGENCY. 158 notice of cancellation or of other matters relating to the risk. 45 The delivery of the policy to a broker, employed by the insured to procure it, is a delivery to the insured. 46 Where a company issues policies upon representations of brokers assuming to act for it, and, in pur- suance of business methods customary between them, without any communication with the insured, the broker will be held to be the agent of the insurer, although the policy provides that no person, un- less duly authorized in writing, shall be deemed its agent. 47 158. Powers of agents. An agent may bind his principal when acting within the scope of his authority, and his power is determined not alone by the actual, but also by the apparent or ostensible author- ity. The latter is such as a principal, intentionally or by want of ordinary care, allows a third person to believe the agent to possess. 48 A general agent can bind his principal by any act within the ordinary scope of the business. 49 His acts are the acts of the principal, and he may hence waive a condition in a policy which his principal could waive, 50 correct a misdescription of the property in the policy, 81 and do other such things, subject always to the provision that his powers may legally be limited, if such limitations are known to the persons who deal with him. But secret instructions, in derogation of the ordinary powers which the public may properly assume to be pos- sessed by such agents, are ineffectual. 52 46 Hermann v. Niagara F. Ins. Co., B0 Ins. Co. v. Norton, 96 U. S. 234 100 N. Y. 411, 53 Am. Rep. 303 (1877). An agent of an insurance (1885). company acting within the scope of "Holmes v. Thomason (Tex. Civ. his authority may, upon notice of a App.), 61 S. W. 504 (1901). breach of condition contained in a 47 The insured had no knowledge policy of insurance, waive the com- of the actual relations between the pany's right to take advantage of a company and the broker: McElroy forfeiture: Home F. Ins. Co. v. v. British Amer. Assur. Co., 94 Fed. Kuhlman, 58 Neb. 488, 78 N. W. 936 990, 36 C. C. A. 615 (1899). (1899). It is immaterial what the 48 Ins. Co. v. Wilkinson, 13 Wall, agent is called so long as he is act- (U. S.) 222 (1871); O'Brien v. New ing within the scope of his au- Zealand Ins. Co., 108 Cal. 227(1895); thority. Viele v. Germania Ins. Co., 26 Iowa 51 Taylor v. State Ins. Co., 98 Iowa 9 (1868); California Ins. Co. v. 521, 60 Am. St. 210 (1896). Gracey, 15 Colo. 70, 22 Am. St. 376 K Hall v. Union, etc., Ins. Co. (1890). (Wash.), 51 L. R. A. 288 (1900). 48 Croft v. Hanover F. Ins. Co., 40 W. Va. 508, 52 Am. St. 902 (1895). 159 AGENCY, WAIVER AND ESTOPPEL. 138 159. Restrictions in application or policy. The early cases holding the insurance companies to strict responsibility for acts of their soliciting agents led to the insertion in applications and pol- icies of numerous provisions whereby it was sought to make the in- sured bear the burden of the agent's misconduct. As a result, their policies became shingled over with stipulations that were practically deceptions. 53 Had full force and effect been given to all these pro- visions, a policy of insurance would have been simply a unilateral contract, with an option to perform on the part of the company. But as the companies became astute in contriving such provisions, courts were careful to see that they were not used as the instruments of fraud and injustice. Out of this condition there grew a mass of hopelessly conflicting decisions which can not be reconciled on any theory other than the desire of the courts to do justice in the par- ticular case. In many states this has been remedied by the enact- ment of statutes declaring the powers and duties of agents of insur- ance companies and prescribing the form of policy which must be used. Where these statutes exist, they are, of course, controlling. The effectiveness of such restrictive provisions depends largely upon whether the applicant for insurance has knowledge of their ex- istence. Where the limitation is inserted in the application, which is signed by the applicant, he is generally held bound by notice of its existence, 54 although in some cases this is held not conclusive. 65 Such limitations may be ineffectual in the particular case because not regarded as notice to the applicant, or because waived by the com- pany or its authorized agent, or because by its conduct the company has estopped itself from asserting the defense. In considering the power of an agent it is necessary to bear in mind the distinction be- tween acts which are connected with the procuring of the insurance and those which relate to the modification or waiver of conditions in the policy which relate to the future. Where the policy contained a provision that the company "shall not be bound * * * by any act or statement made * * * by any agent * * which is not authorized by this policy or con- 63 See the tirade against insurance World, etc., Ins. Co., 41 Conn. 168, companies by Chief Justice Doe of 16 Am. Rep. 490 (1874). New Hampshire in DeLancey v. Ins. M See State Ins. Co. v. Gray, 44 Co., 52 N. H. 581 (1873). Kan. 731 (1890); Tubbs v. Dwelling- 84 New York L. Ins. Co. v. Fletch- House Ins. Co., 84 Mich. 646 (1891). er, 117 U. S. 531 (1886); Ryan v. 139 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 160 tained therein, or in any written paper mentioned herein/' the power can only be exercised in the mode prescribed, "unless it is shown that the agent possessed actually or apparently the power of his principal in respect to the provisions alleged to have been waived." 66 In line with this it was said in a case where it was claimed that the agent had waived a provision requiring prompt payment of a premium note, that "the written agreement of the parties, as embodied in the policy and the indorsement thereon, as well as the notes and the receipts given therefor, was undoubtedly to the express purport that a failure to pay the note at maturity would incur a forfeiture of the policy. It also contained an express declaration that the agents of the company were not authorized to make, alter or abrogate contracts or waive forfeitures'. And these terms, had the company so chosen, it could have insisted on. But a party always has the option to waive a con- dition or stipulation made in his own favor. The company was not bound to insist upon a forfeiture, though incurred, but might waive it. It was not bound to act upon the declaration that its agent had not power to make agreements or waive forfeitures, but might at any time give them such power. The declaration was only tantamount to a notice to the assured, which the company could waive and disregard at pleasure. In either case, both with regard to the forfeiture and the powers of its agent, a waiver of the stipulation or notice would not be repugnant to the written agreement, because it would only be the exercise of an option which the agreement left in it. And whether it did exercise such option or not was a fact provable by parol evi- dence as well as by writing, for the obvious reason that it could be done without writing." 37 160. Limitations on authority of agent. As between the prin- cipal and the agent, the authority of the agent may be limited in any manner thought desirable by the principal, and such limitations will be given full force and effect as against all persons who have knowledge of their existence. But undisclosed instructions which are contrary to the natural, ordinary and ostensible powers possessed by such agent are not binding upon those who have neither actual nor constructive notice of their existence. It is generally held that the 08 Messelback v. Norman, 122 N. Y. B7 Insurance Co. v. Norton, 96 U. S. 578 (1890). 234 (1877). 160a AGENCY, WAIVER AND ESTOPPEL. 140 insured will be deemed to have notice of limitations which are con- tained in the application which he signs. 57 * 160a. Limitations on authority Continued. Some courts re- fuse to give effect to a provision in the policy limiting the power of the company's agent, 58 while others treat it as a stipulation by which the assured, by accepting the policy, agrees to be bound. 59 In Wis- consin it was said 60 that "when the assured has accepted a policy con- taining a clause prohibiting the waiver of any of its provisions by the local agent he is bound by such inhibition, and that any subsequently attempted waiver merely by virtue of such agency is a nullity. This proposition seems to be supported by the weight as well as the logic of the adjudicated cases." Provisions in a policy which restrict the future power of the agent by prescribing the manner in which he can act are generally sustained. 61 The tendency is to hold that such BT a New York L. Ins. Co. v. Fletch- er, 117 U. S. 531 (1886), and cases cited; Ruggles v. American Cent. Ins. Co., 114 N. Y. 415 (1889); Hall v. Union, etc., Ins. Co. (Wash.), 51 L. R. A. 288 (1900). 68 The local agent of an insurance company, who is authorized to make contracts of insurance, issue poli- cies, and receive premiums there- for, and is clothed with all the au- thority of his principal with respect thereto, may waive a forfeiture of a policy under a provision that it shall be void if foreclosure proceed- ings are commenced, notwithstand- ing that the policy provides that the agent who issues the policy shall not have power to waive, modify, or revive the same: Springfield, etc., Co. v. Traders' Ins. Co., 151 Mo. 90, 52 S. W. 238 (1899). 58 Enos v. Sun Ins. Co., 67 Cal. 621 (1885); Cleaver v. Traders' Ins. Co., 65 Mich. 527, 32 N. W. 660 (1887); Burlington Ins. Co. v. Gibbons, 43 Kan. 15, 22 Pac. 1010 (1890); Wei- dert v. State Ins. Co., 19 Ore. 261, 24 Pac. 242 (1890); Greene v. Lycom- ing F. Ins. Co., 91 Pa. St. 387 (1879) ; Greenwood v. New York L. Ins. Co., 27 Mo. App. 401 (1887); Equitable Ins. Co. v. Cooper, 60 111. 509 (1871); Zimmerman v. Hpme Ins. Co., 77 Iowa 685, 42 N. W. 462 (1889); Clevenger v. Mutual L. Ins. Co., 2 Dak. 114 (1878); Walsh v. Hartford F. Ins. Co., 73 N. Y. 5 (1878). An agent of an insurance company who is only authorized to solicit and take applications for insurance, re- ceive the premiums, and deliver the policies, which have been signed by the proper officers, has no authority, either express or implied, to waive a breach of the stipulation in the policy that subsequent addition- al insurance shall not be effected on the property without the consent of the underwriter: Alabama, etc., Assur. Co. v. Long, etc., Co. (Ala.), 26 So. 655 (1899). 60 Hankins v. Rockf ord Ins. Co., 70 Wis. 1, 35 N. W. 34 (1878), citing many cases. ei Kyte v. Commercial U. Assur. Co., 144 Mass. 43 (1887); Behler v. German, etc., Ins. Co., 68 Ind. 347 141 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 160a provisions are binding on the assured only in respect to such matters as occur after the delivery of the policy. In a leading case Mr. Jus- tice Mitchell forcibly said: 62 "It would be a stretch of legal prin- ciples to hold that a person dealing with an agent, apparently clothed with authority to act for his principal in the matter in hand, could be affected by notice, given after the negotiations were completed, that the party with whom he had dealt should be deemed transformed from the agent of one party into the agent of the other. To be effica- cious, such notice should be given before the negotiations are com- pleted. The application precedes the policy, and the insured can not be presumed to know that any such provision will be inserted in the latter. To hold that by a stipulation unknown to the insured at the time he made the application, and when he relied upon the fact that the agent was acting for the company, he could be held responsible for the mistakes of such agent would be to impose burdens upon the insured which he never anticipated. Hence we think that if the agent was the agent of the company in the matter of making out and re- ceiving the application, he can not be converted into the agent of the insured by merely calling him such in the policy subsequently issued ; neither can any mere form of words wipe out the fact that the insured truthfully informed the insurer through its agent of all matters per- taining to the application at the time it was made. We are aware that in so holding we are placing ourselves in conflict with the views (1879); Wilkins v. State Ins. Co., 43 clause in a policy withholding from Minn. 177 (1890); O'Brien v. Pres- agents authority "to make, alter or cott Ins. Co., 134 N. Y. 28, 31 N. E. discharge this or any other contract 265 (1892); Hartford F. Ins. Co. v. in relation to the matter of this in- Small, 66 Fed. 490, 14 C. C. A. 33 surance" has no relation to the ap- (1895); Gould v. Dwelling-House plication which precedes the policy. Ins. Co., 90 Mich. 302, 51 N. W. 455 "This provision of the policy does (1892); Marvin v. Universal L. Ins. not take effect until the application Co., 85 N. Y. 278 (1881); Smith v. is made and accepted and the policy Niagara F. Ins. Co., 60 Vt. 682, 1 L. is issued. Its relation to the policy R. A. 216 (1888); Knudson v. Hekla and other completed contracts con- F. Ins. Co., 75 Wis. 198, 43 N. W. cerning the insurance has no refer- 954 (1889); Quinlan v. Providence ence to the application which pre- Wash. Ins. Co., 133 N. Y. 356, 31 N. cedes the policy, and which, until it B. 31 (1892). is accepted and the policy issued, is M Kausal v. Minnesota,, etc., Ins. a mere offer or proposition for a Ass'n, 31 Minn. 17, 47 Am. Rep. 776 contract of insurance:" Mutual, (1883). See also Boetcher v. Hawk- etc., Ins. Co. v. Robison, 58 Fed. 723, eye Ins. Co., 47 Iowa 253 (1877). A 22 L. R. A. 325, 7 C. C. A. 444 (1893). 161 AGENCY,, WAIVER AND ESTOPPEL. 142 of some eminent courts. But the conclusion we have reached is not without authority to sustain it, and is, as we believe, sound in prin- ciple and in accordance with public policy." 161. Limitations contained in application Constructive no- tice. While the courts should not give effect to a provision in the ap- plication which attempts to limit the authority of the agent, when it appears that the applicant was in any way misled, there seems to be no good reason why the company should not be permitted to prohibit its' agent from acting as the amanuensis of the applicant. When there is no statute regulating the matter, and the applicant has knowl- edge of the limitations, he is bound thereby. A person who signs a written statement should know its contents or be able to give an ex- cuse for his ignorance other than his own negligence. The applica- tion signed by the applicant is ordinarily, and often by statute re- quired to be, attached to the policy, 63 and thus is delivered to the in- sured, who has an opportunity to become acquainted with its con- tents. If the statements in the application are incorrect, he should make the fact known to the company within a reasonable time, or be estopped from thereafter asserting it. 64 But some courts do not hold the applicant bound to know the contents of the application and policy. In Pennsylvania it was said 65 that the law does not, in anticipation of a fraud upon the part of the company, impose upon the assured an absolute duty to read its policy when he receives it, although it was suggested that it would certainly have been an act of prudence on his part to do so. Notwithstanding this, "one thing is certain, however the company can not repudiate the fraud of its agent and thus escape the obligations of a contract consummated thereby, merely because the insured accepted in good faith the act of the agent without examina- tion." The supreme court of the United States recognizes the doc- trine that when an insurance agent who is not limited in his authority, or when such limitation is not known to the insured, undertakes to prepare an application and writes the answers for the applicant, he is acting for the company. But when such limitation is embodied in 43 As by Mass. Laws 1894, ch. 120; M Ryan v. World, etc., Ins. Co., 41 Iowa Code, 1741, 1819, 1826. In Conn. 168 (1874); Reynolds v. Atlas Michigan a copy of the application Ace. Ins. Co., 69 Minn. 93, 71 N. W. must be attached to the policy when 831 (1897). requested by insured: Laws 1899, 65 Kister v. Lebanon, etc., Ins. Co., ch. 87. 128 Pa. St. 553, 5 L. R. A. 646 (1889). 143 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 162 the application, which is signed by the insured, he must be presumed to have read it, and is therefore bound by its contents. 66 When the application is prepared by a general agent having no superior in the state, the question of limitations upon the agent's authority does not arise; and the company is bound by all answers written by the agent, although the application is attached to the policy and delivered to the insured. 67 162. Preparation of application. An agent who is authorized to receive applications for insurance represents the insurance com- pany in all he does in connection with the preparation of the applica- tion, and if he receives truthful information from the insured, and undertakes to fill out the application and inserts false or incorrect answers, his act is that of the company and not of the applicant. This rule is established by statute in many states, and is generally adopted even where no statutes are in existence. 68 163. Provisions restricting power of officers and general agents. A company can not, by a provision in its policy, restrict its power to act through its officers or general agents. Thus, a pro- vision that the terms of the policy can not be waived or changed by any "officer or agent of the company" except in writing is invalid in so far as it attempts to restrict the power of the company as well as its agent. 69 This principle applies to a general agent as well as an 66 New York L. Ins. Co. v. Fletch- nesota, etc., Ins. Ass'n, 31 Minn. 17, er, 117 U. S. 519 (1886); Maier v. 47 Am. Rep. 776, and note, 20 L. R. Fidelity, etc., Ass'n, 47 U. S. App. A. 277 (1883); Messelback v. Nor- 322 (1897), per Harlan, J. See Fire- man, 122 N. Y. 578 (1890). "In man's Fund Ins. Co. v. Norwood, 69 writing the application, and in ex- Fed. 71, 16 C. C. A. 136 (1895). That plaining the interrogatories and the the insured may, under certain cir- meaning of the terms used, he is to cumstances, be excused from read- be regarded as the agent of the com- ing the policy, see McMaster v. pany:" Ryan v. World, etc., Ins. New York L. Ins. Co. (U. S.), 22 Co., 41 Conn. 168 (1874). But the Sup. Ct. 10 (1901). court refused to go further and 67 Michigan, etc., Ins. Co. v. Leon, hold the company responsible for 138 Ind. 636, 37 N. B. 584 (1894). false statements written by the 88 Bartholomew v. Merchants' Ins. agent, as such authority could not Co.. 25 Iowa 507, 96 Am. Dec. 68 by any possibility have been con- (1868), per Dillon, C. J.; Ins. Co. v. templated as within the scope of the Wilkinson, 13 Wall. (U. S.) 222 agency. But see Allen v. German- (1871); Ins. Co. v. Mahone, 21 Wall. Amer. Ins. Co., 123 N. Y. 6 (1890). (U. S.) 152 (1874); Kausal v. Min- 60 Lamberton v. Connecticut F. 164 AGENCY, WAIVER AND ESTOPPEL. 144 officer of the corporation; as whatever the company can lawfully do can be done by its duly authorized agent. Where a policy provided that its provisions could not be waived by the president and secretary, the court said: 70 "This provision may be modified by the company to the same extent as any other, and whatever the company can do can be done by the general agent." In Wisconsin it was said: 71 "We must hold, however, that such attempted restrictions upon the power of the company or its general officers or agents, acting without the scope of their general authority, to subsequently modify the con- tract and bind the company in a manner contrary to such previous conditions in the policy, are ineffectual." So, in New York it is said: 72 "Notwithstanding the provisions of the policy, that any- thing less than a specific agreement clearly expressed and indorsed on the policy should not be considered as a waiver of any printed or written conditions therein, the court recognized and affirmed the law, as settled in this state, that such condition can be dispensed with by the company or its general agent by oral consent as well as by writ- ing." 164. Notice. The doctrine by which a principal is charged with knowledge of facts of which his agent has notice is thus stated by Mr. Justice Story: 78 "Notice of facts to an agent is constructive notice thereof to the principal himself when it arises from or is connected with the subject-matter of his agency; for, upon general principles of public policy, it is presumed that the agent has com- municated such facts to his principal, and if he has not, still, the prin- cipal having intrusted the agent with the particular business, the other party has the right to deem his acts and knowledge obligatory upon the principal; otherwise the neglect of the agent, whether de- signed or undesigned, might operate most injuriously to the rights and interests of such party." Ins. Co., 39 Minn. 129 (1888); Ruth- "Story Agency, 140. See also ven v. American F. Ins. Co., 92 Iowa Eagle Fire Co. v. Globe, etc., Co., 44 316, 60 N. W. 663 (1894). Neb. 380, 62 N. W. 895 (1895); Gans 70 German Ins. Co. v. Gray, 43 v. St. Paul, etc., Ins. Co., 43 Wis. Kan. 497, 8 L. R. A. 70 (1890). 108 (1877); Forward v. Continental "Renier v. Dwelling-House Ins. Ins. Co., 142 N. Y. 382 (1894); Co., 74 Wis. 89 (1889), and cases Phenix Ins. Co. v. Stocks, 149 111. therein cited. 319 (1894); Mesterman v. Home., "Weed v. London, etc., Ins. Co., etc., Ins. Co., 5 Wash. 524, 34 Am. 116 N. Y. 117 (1889). St. 877 (1893). 145 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 164 In some states the statute provides that where a company issues a policy "upon an application prepared by a third person, assuming to act as its agent or otherwise, it shall be charged with his knowledge of facts relating to the property insured, as they were stated in the application." 74 Hence, where a policy is issued by an agent who has knowledge of other insurance on the property, his knowledge is the knowledge of the company, and it is estopped to assert that consent to the concurrent insurance was not given in writing. 75 So, where true information is given to the agent with reference to matters in- quired about, his knowledge is the knowledge of the company, and it is immaterial that the agent did not correctly write the answers. 76 So, the knowledge of the agent that the applicant for life insurance has made a false statement, 77 or that he is intemperate, or has some disease, has been held to be the knowledge of the company and made the basis of waiver or estoppel. 78 Generally, where there is no written application containing representations and warranties, the company is charged with a knowledge of the risk obtained by its agent through his own inquiries and investigations. 79 A company which gives to an agent the supervision and inspection of its risks is charged with knowledge of all the facts with reference to the risk learned by the agent while engaged in the performance of his duties. 80 But a person who is employed to procure insurance upon certain property, and who applies to the general agents of several com- panies for policies, and, after receiving them, collects the premiums and pays the general agents the amounts claimed by them, is not the agent of the insurers, so as to charge them with his knowledge as to the existence of other policies. 81 So, an insurance company, by mak- ing a person its agent to deliver a policy, does not become chargeable with knowledge obtained by him while acting as agent of the insured 74 See New Hampshire Laws 1885, 7T McGurk v. Metropolitan L. Ins. ch. 170. Co., 56 Conn. 528, 16 Atl. 263 (1888). 75 Phenix Ins. Co. v. Covey, 41 Neb. 78 Newman .v. Covenant, etc., Ins. 724, 60 N. W. 12 (1894); Home F. Ass'n, 76 Iowa 56, 40 N. W. 87 Ins. Co. v. Hammang, 44 Neb. 566, (1888). 62 N. W. 883 (1895), citing many "Cumberland Valley, etc., Co. v. cases. Schell, 29 Pa. St. 31 (1857). 78 Ins. Co. v. Wilkinson, 13 Wall. " Phenix Ins. Co. v. Holcombe, 57 (U. S.) 232 (1871); Mutual Ben. L. Neb. 622, 78 N. W. 300 (1899). Ins. Co. v. Robison, 58 Fed. 723, 7 "United Firemen's Ins. Co. v. C. C. A. 444 (1893). Thomas, 92 Fed. 127, 34 C. C. A. 240 (1899). 10 ELLIOTT INS. 165 AGENCY, WAIVER AND ESTOPPEL. 146 in procuring the insurance. 82 The general rule is that the principal is not chargeable with notice of facts learned by the agent in the course of an .employment in no way connected with the agency. 83 But there are cases which do not admit this limitation ; 84 and others hold the principal bound by knowledge acquired by the agent in another business, acquired at such a time with reference to the issuance of the policy as to justify the assumption that he had it in mind when the policy was issued. 85 165. Notice of loss to local agent. The local agent of a fire insurance company had actual authority to accept applications for 'insurance, fix the premium or rate of insurance, and fill up, counter- sign and issue policies thereon, which he received from the company, already signed by its president and secretary. This was the extent of the agent's actual authority, and there was no evidence tending to show that his apparent authority was other or greater than his actual authority. The policy required written notice of loss to be given to the company. It was held that the agent had no authority to receive or waive notice of loss, and, hence, notice to him was not notice to the company. 86 166. Eights and liabilities of agent. As between the principal and agent, their rights and liabilities are determined by the express or implied provisions of the contract of employment. The agent is entitled to his compensation for services performed, and the com- pany can not refuse to pay his commissions on the ground that it had 82 United Firemen's Ins. Co. v. present in his mind, issued the pol- Thomas, 92 Fed. 127 (1899). icy or did some act in the course of 83 St. Paul, etc., Ins. Co. v. Par- his duties as agent recognizing the sons, 47 Minn. 352 (1891). continuing validity of the policy:" 84 See Hartford F. Ins. Co. v. Haas, Phoenix Ins. Co. v. Flemming, 65 87 Ky. 531, 2 L. R. A. 64 (1888). Ark. 54, 39 L. R. A. 789 (1898). 85 Stennett v. Pennsylvania F. Ins. ^ Ermentrout v. Girard, etc., Ins. Co., 68 Iowa 674 (1886). "The Co., 63 Minn. 305, 30 L. R. A. 346 knowledge of the fire-works shown (1895), citing Lohnes v. Ins. Co., here was acquired by the agent, not 121 Mass. 439 (1877); Smith v. while acting for the company or for Niagara F. Ins. Co., 60 Vt. 682 his firm, but casually while attend- (1888); Bush v. Westchester F. Ins. ing to his own affairs. To make Co., 63 N. Y. 531 (1876). See Ruth- this knowledge affect the company ven v. American F. Ins. Co., 92 Iowa it must be shown that, the agent 316, 60 N. W. 663 (1894). See afterwards, with this information 188, infra. 147 INSURANCE AGENTS AND GENERAL RULES OF AGENCY. 166 decided to change its rates and charge a higher rate after the serv- ices were performed. An agent procured applications for insur- ance in accordance with his instructions and the rules and regula- tions of the company, and forwarded them to the home office of the defendant for its action upon them. The applications were in due form, and the court said that it is to be presumed that the applicants were insurable risks, and that the risks were satisfactory to the com- pany. No objection to them was pointed out, and the presumption is that none existed. The only objection made to delivering the policies was that the rate of premium on them was too low. It was held that while an agent is not usually entitled to his commissions until the transaction is complete, yet, if he has faithfully performed his part of the transaction, and from no fault of his own, but by the re- fusal of the principal to complete the contract, it is not consummated, he is entitled to his commissions. 87 The agent is responsible to the company for damages caused by his neglect to cancel a policy within a reasonable time after being in- structed to do so, 88 or by accepting a risk and issuing a policy contrary to instructions, 89 or by wrongfully and without authority canceling a policy. 90 Acceptance of a premium by an insurance company is not a ratifica- tion, as between it and its agent, of the latter's unauthorized issuance of a policy, since, the policy being binding on the company, the pre- mium became its property, as an incident to the policy, and did not prevent its seeking recourse over against its agent; and this though the agent had first deducted his commission from the premium. 91 87 Currier v. Mutual, etc., Ass'n, 8 " Hanover F. Ins. Co. v. Ames, 39 108 Fed. 737 (1901). As to the Minn. 150 (1888). agent's right to damages for breach "American, etc., Ins. Co. v. An- of contract, see Pellet v. Manufac- derson, 130 N. Y. 134 (1891). As to turers', etc., Ins. Co., 104 Fed. 502, the liability of sureties on agent's 43 C. C. A. 669 (1900). bond, see Royal Ins. Co. v. Clark, 61 88 Phoenix Ins. Co. v. Pratt, 36 Minn. 476 (1895). Minn. 409 (1887); Franklin Ins. Co. 91 Mechanics', etc., Ins. Co. v. Rion, v. Sears, 21 Fed. 290 (1884). (Tenn. Ch.), 62 S. W. 44 (1901). CHAPTER IX. THE RULES OF WAIVER AND ESTOPPEL AS APPLIED TO CONTRACTS OF INSURANCE. SEC. 175. In general. 176. Definition. 177. Knowledge and intent. 178. Basis of waiver. 179. Effect of mere silence. 180. What may be waived. 181. Waiver of certain defenses. 182. Power of agent to waive. 183. Waiver by agent Continued. 184. Prepayment of premium. SEC. 18o. Waiver in writing only. 186. Limitations in policy Prepay- ment of premium. 187. Estoppel by act of agent. 188. Facts known to company when policy issued. 189. Oral testimony to show actual statements. 190. Bad faith Collusion between applicant and agent. 175. In general. The doctrines of waiver and estoppel are so commingled in the cases that the underlying distinctions are fre- quently disregarded. Waiver implies an intent not to assert a known right by one who has full knowledge of the circumstances. It is the result of a mental conclusion arrived at by the party, while an estop- pel is a conclusion drawn by the law from something said or done by a party upon which another has relied to his prejudice. Estoppel may thus exist where there is no technical waiver. It is often said that a party has waived certain rights, and, therefore, is estopped from there- after asserting them. 1 176. Definition. A waiver is the voluntary relinquishment of a known right. It may be by express language or by acts from which an intention to waive may be inferred or from which a waiver follows as a legal result. 2 v. Massachusetts, etc., prejudice: Boyd v. Ins. Co., 90 Ins. Co., 39 Fed. 752 (1872). There Tenn. 212, 16 S. W. 470 (1891). can be no estoppel where the in- 2 German Ins. Co. v. Gibson, 53 sured has not been misled to his Ark. 494, 14 S. W. 672 (1890). The (148) 149 WAIVER AND ESTOPPEL IN CONTRACTS OF INSURANCE. 177 177. Knowledge and intent. As a waiver is the intentional relinquishment of a right, hoth intent and knowledge of the facts are essential elements. 3 Hence, to establish a waiver of any of the rights of the insurer it must be shown that there was "knowledge on the part of the insurer of the act or omission on the part of the in- sured which it claimed to have dispensed with or waived. The knowl- edge on a waiver need not be expressly shown, but may be implied, when the act of commission or omission is of such a character as fairly to preclude the idea of ignorance." 4 178. Basis of waiver. It has been held that a waiver, to be operative, must be supported by an agreement founded upon a val- uable consideration, or the acts relied upon must be such as to estop a party from insisting upon a performance of the contract, or the forfeiture of the conditions. 5 This rule was at one time declared in New York, but it was subsequently held that such a waiver need not be based upon a new consideration or upon facts sufficient to establish an estoppel, 6 and this is now the prevailing rule. 7 As said in a Xew York case : "While the later decisions all hold that such waivers need not be based upon a technical estoppel in all the cases where this question is presented, where there has been no express waiver, the fact is recognized that there exist the elements of an estoppel." 8 waiver of a forfeiture gives the pol- 120 N. Y. 510 (1890); Titus v. Glens icy the same force and effect as it Falls Ins. Co., 81 N. Y. 410 (1880). originally possessed : Siltz v. Hawk- T Carpenter v. Continental Ins. Co., eye Ins. Co., 71 Iowa 710, 29 N. W. 61 Mich. 635 (1886); Hollis v. State 605 (1886). Ins. Co., 65 Iowa 254 (1884); Schimp 3 Ryan v. Springfield, etc., Ins. Co., v. Cedar Rapids Ins. Co., 124 111. 354 46 Wis. 671 (1879); Findeisen v. (1888); Grubbs v. North Carolina, Metropole F. Ins. Co., 57 Vt. 520 etc., Ins. Co., 108 N. C. 472 (1891). (1885); Diehl v. Adams, etc., Ins. 'Armstrong v. Agricultural Ins. Co., 58 Pa. St. 443, 98 Am. Dec. 302 Co., 130 N. Y. 560 (1892); German (1868). Ins. Co. v. Gibson, 53 Ark. 494 *2 Biddle Ins., 1053. (j.oi Rafel v. Nashville, etc., Ins. Co., Gray (Mass.) 504 (1855). 7 La. Ann. 244 (1852). 73 Moadinger v. Mechanics' F. Ins. 77 Huckins v. People's, etc., Ins. Co., 2 Hall (N. Y.) 490 (1829). Co., 11 Fost. (N. H.) 238 (1855). 74 Mooney v. Howard Ins. Co., 138 78 Wilson Drug Co. v. Phoenix Mass. 375, 52 Am. Rep. 377 (1885). Assur. Co., 110 N. C. 350, 14 S. E. 790 (1892). 181 FORMAL PART OF CONTRACT. 216 icy. 79 So, a policy on "all the articles making up the stock of a pork house and all within the building and appurtenant thereto," covers whatever belongs to the stock without reference to ownership of par- ticular articles, notwithstanding the fact that there is a provision in the policy requiring goods on commission to be insured as such. 80 A policy insuring a railroad company on its wood and logs cut and piled along its line does not cover property belonging to other parties which is destroyed by sparks from the company's locomotives and for which it is responsible in damages. 81 The word "guano" includes fertilizer. 82 Whether flax is included in the term grain is for the jury to determine. 83 A policy on "freight cars owned or used by a .railroad company" protects the cars of another road while in the possession of and used by the insured. 84 The word "machinery" in- cludes all instruments intended to be operated exclusively by ma- chinery in the business of the insured which are so used from time to time in the regular and ordinary prosecution of the business re- ferred to in the policy, and covers movable dies worked by a press, which, when not in use, were deposited and kept on shelves. 85 Where the insured is permitted to occupy a portion of a warehouse for the purpose of rehandling tobacco, he may, on the destruction of the premises by fire, recover for the tobacco which was on hand and for sale. 86 A policy on a creamery building and merchandise, which con- sisted chiefly of butter and cheese, manufactured and in the process of manufacture, covers milk cans used in the business. 87 Millet hay is included in an insurance policy on "grain." 88 Carpets and bed cloth- ing are covered by the term "household furniture." 89 Stationery and boxes of a glove manufacturer are not included in the term "all other kinds of implements." 90 A policy on "live stock" covers a horse 79 Bryant v. Poughkeepsie, etc., M Seavey v. Central, etc., Ins. Co., Ins. Co., 17 N. Y. 200 (1858). Ill Mass. 540 (1873). "ojEtna Ins. Co. v. Jackson, 16 B. ^ Western Assur. Co. v. Ray, 20 Mon. (Ky.) 242 (1855). Ky. L. 1360, 49 S. W. 326 (1899). 81 Monadnock R. Co. v. Manufac- " Cronin v. Fire Ass'n, 112 Mich. turers 1 Ins. Co., 113 Mass. 77 (1873). 106, 70 N. W. 448 (1897). 82 Planters', etc., Ins. Co. v. Engle, M Norris v. Farmers', etc., Ins. Co., 52 Md. 468 (1879). 65 Mo. App. 632 (1896). 83 Hewitt v. Watertown F. Ins. Co., 89 Patrons', etc., Soc. v. Hall, 19 55 Iowa 323 (1880). Ind. App. 118, 49 N. E. 279 (1898). 84 Commonwealth v. Hide, etc., M Stemmer v. Scottish, etc., Ins. Ins. Co., 112 Mass. 136 (1873). Co., 33 Ore. 65, 49 Pac. 588, 53 Pac. 498 (1898). 216 THE STANDARD POLICY. 182 acquired after the date of the policy. 91 A policy on the machinery of a paper mill was held to cover all machinery, tools and implements used in connection therewith in the manufacture of paper. 92 A policy on tools used "in the manufacture of boots and shoes" includes pat- terns for making tools. 93 A policy on eggs "in pickle" covers the eggs at any time while in store undergoing the process of pickling. 9 * The insured were manufacturers of machinery, parts of which were made of cast iron, and the policy covered "their fixed and movable machin- ery, engines, lathes and tools." They were obliged to keep themselves supplied with wooden patterns in order to make the iron castings necessary to the completion of their machinery, and their practice was to send these patterns to various foundries from which they pro- cured castings. It was held that it could not be shown by parol evi- dence that the parties intended to include patterns under the general term of tools. The court said: "The usual meaning of the word 'too? is an instrument of manual operation that is, an instrument to be used and managed by hand instead of being moved and con- trolled by machinery. We see no grounds for holding that these patterns are machines or parts of machines. As we understand the case presented, they, or some of them at least, were not raised or lowered by machinery, but were of such size and shape that they were applied and removed by hand. * * * We think, therefore, that, without doing any violence to the language of the policy, it may be interpreted as covering all patterns which from their size and shape admitted of being applied and managed by the hands of one man/' 95 A policy covered "merchandise in a store and furniture and fixtures in a building" to be used by the assured as a "fancy goods and Yankee notion store." It contained provisions against certain hazardous and extra hazardous articles, but plaintiff was permitted to show that fireworks and firecrackers constituted an ordinary, usual, and recog- nized portion of a stock of fancy goods and Yankee notions, and were therefore covered by the policy. 96 A policy "on a stock in trade, being mostly chamber furniture in sets and other articles usually kept by 81 Mills v. Farmers' Ins. Co., 37 94 Hall v. Concordia F. Ins. Co., 90 Iowa 400 (1873). Mich. 403, 51 N. W. 524 (1892). 8i Buchanan v. Exchange F. Ins. 95 Lovewell v. Westchester F. Ins. Co., 61 N. Y. 26 (1874). Co., 124 Mass. 418, 26 Am. Rep. 671 03 Adams v. New York, etc., Ins. (1878). Co., 85 Iowa 6, 51 N. W. 1149 OJ Barnum v. Merchants' F. Ins. (1892). Co., 97 N. Y. 188 (1884). 183 FORMAL PART OF CONTRACT. 217 furniture dealers/' based on an application which is made a part of the contract, which described it as "household furniture, being my stock in trade, mostly chamber furniture in sets," covers paints and var- nishes used in finishing furniture, although applicant, in answer to the question as to whether any highly inflammable matter was kept in or on the premises, answered "Not to my knowledge." 97 A policy on a stock of "paints, oils, brushes, blinds, and such other merchandise while contained in the second story of the frame building, etc.," was held to cover such articles as set tackle and fall, ropes, knives, cans, scales, etc., which were kept for use and not for sale. 98 The court said: "We think the term 'merchandise' not only may be, but often is, used as a synonym of goods, wares and commodities. * * * If used in an insurance policy to describe the goods of a merchant, it might, perhaps, be very properly limited to the goods intended for sale; if used for the same purpose to describe the goods of a painter, it might be held to cover property intended for use and not for sale." A policy on all the furniture contained in a brick building and addi- tions attached covers furniture in a frame building on the next lot extending over against the rear of the brick building, and used in connection therewith as a storehouse. 99 A policy on lumber in a "yard" does not protect lumber in a clearing in a forest. 100 217. Description of buildings. "The three-story granite build- ing" is a proper description of a building with a granite front three stories in front and rear, although but one story in the middle. 101 "The frame building occupied as a tannery" does not include an engine and machinery. 102 A building twenty-five feet from a detached dwelling is not contiguous to it. 103 A policy describing the property as "buildings adjoined, and communicating, occupied * * * sit- uated detached," does not mean that they are detached from each other, but that the whole house is detached from other buildings. 10 * A 97 Haley v. Dorchester, etc., Ins. 101 Medina v. Builders', etc., Ins. Co., 12 Gray (Mass.) 545 (1859). Co., 120 Mass. 225 (1876). 98 Hartwell v. California Ins. Co., 1( ' 2 Sunderlin v. JEtna Ins. Co., 18 84 Me. 524, 24 Atl. 954 (1892). Hun (N. Y.) 522 (1879). "Maisel v. Fire Ass'n, 69 N. Y. 103 Olson v. St. Paul, etc., Ins. Co., Supp. 181, 59 App. Div. (N. Y.) 461 35 Minn. 432 (1886). (1901). 1( * Broadwater v. Lion F. Ins. Co., 100 Cook v. Loew, 69 N. Y. Supp. 34 Minn. 463 (1886). 614, 34 Misc. (N. Y.) 276 (1901). THE STANDARD POLICY. 184 policy on an "elevator building and additions"' covers a warehouse standing two and one-half feet from the elevator building attached thereto by boards nailed to both buildings. 106 Whether counters and shelving are included in insurance upon a building depends upon whether they are movables or fixtures. 107 A policy on a building while in the process of construction covers the building after it is com- pleted. 108 Where the property is described as "the Wolfe house/' it may be shown by parol evidence that the parties intended to include a certain barn. 109 A "starch manufactory" includes machinery and fix- tures necessary for the manufacture of starch. 110 A policy on a steam saw mill covers not only the building, but the machinery necessary to make it a steam saw mill in all its parts. 111 A policy on "an unfin- ished house" does not cover material which has been prepared for the house and deposited in an adjoining building, 112 but the word "house" in a policy includes whatever is appurtenant and necessary to a house as a building. 113 A policy on a barn, which, although an agricultural building, should not strictly have been described as a barn, but which, had there been a correct description, would have been insured at the same rate, is valid. 114 Machinery placed in a mill building and de- signed for a portion of the mill is real property within the meaning of a valued policy law. 115 A policy on a frame steam saw mill, with a specific amount on the "boiler, engine, machinery and belting con- tained therein," covers a planing mill in a shed on the same floor with the machinery proper and connected with it by belting. 116 Fix- tures built into and forming a part of a building are covered "by the policy, although such fixtures are included among others in a separate item covered by other insurance, where the indemnity on the latter 104 Cargill v. Millers', etc., Ins. " 2 Ellmaker v. Franklin F. Ins. Co., 33 Minn. 90 (1885). Co., 5 Pa. St. 183 (1847). 101 Capital City Ins. Co. v. Cald- m Workman v. Insurance Co., 2 well, 95 Ala. 77, 10 So. 355 (1892). La. 507 (1830). 108 Frost's, etc., Works v. Millers', m Dobson v. Sotheby, Moody & M. etc., Ins. Co., 37 Minn. 300, 5 Am. 90 (1827). St. 846 (1887). "'British, etc., Assur. Co. v. Brad- 10 Claffey v. Hartford F. Ins. Co., ford, 60 Kan. 82, 55 Pac. 335 (1898) 68 Cal. 169 (1885). (under ch. 102, Laws 1893). 1 - Peoria, etc., Ins. Co. v. Lewis, u " James River Ins. Co. v. Merritt, 18 111. 553 (1857). 47 Ala. 387 (1872). 111 Bigler v. New York, etc., Ins. Co., 22 N. Y. 402 (1860). 185 FORMAL PART OF CONTRACT. 217 item is not sufficient to cover the loss on the fixtures. 117 A policy describing a building as used for the manufacture of lead pipe cov- ers wooden reels on which the pipe is coiled. 118 The words "pottery building/' as descriptive of the property, do not cover a two-story brick boiler house, built at the end of but not connected by a door with a three-story brick building in which pottery is manufactured, where the lower part of the boiler house is used exclusively in con- nection with another and distinct business in a different building, although the second story is used for storing pottery. 119 The word "store" is equivalent to the word "shop," and properly describes a bakery and restaurant. 120 A structure which has been injured by fire may, while in its injured condition, be insured as a "building." 121 Permission to use a building for "mercantile purposes" does not per- mit its use as a restaurant. 122 The word "school-house" means a house or building in which school is kept, and is not restricted to a district school-house. 123 A cellar wall is a part of a building, 124 and in describing the building it is not necessary to refer to the cellar underneath the same. 125 The words "the two-story brick build- ing" are sufficient to describe a building which is two stories in front and one in the rear. 126 A policy on a planing mill building and addition, and machinery, including shafting, gearing, belting, saws, tools, force pump and hose therein, covers an engine room from which motive power was furnished, which was situated twenty-two feet from the mill building and connected therewith by shafting for the transmission of power, and by a spout through which shavings were forced into the engine room. 127 The court said: "It conclu- sively appears that the engine in the engine room was the only mo- 117 Niagara F. Ins. Co. v. Heenan, I23 Luthe v. Farmers', etc., Ins. Co., 181 111. 575, 54 N. E. 1052 (1899). 55 Wis. 543 (1882). 118 Collins v. Charlestown, etc., Ins. 124 Ervin v. New York, etc., Ins. Co., 10 Gray (Mass.) 155 (1857). Co., 3 T. & C. (N. Y.) 213 (1874). 119 Forbes v. American Ins. Co., 125 Benedict v. Ocean Ins. Co., 31 164 Mass. 402, 41 N. E. 656 (1895). N. Y. 389 (1865). See Ohage v. 120 Richards v. Washington, etc., Union Ins. Co., 82 Minn. 426 (1901). Ins. Co., 60 Mich. 420 (1886). l20 Carr v. Hibernia Ins. Co., 2 121 Hamburg, etc., Ins. Co. v. Gar- Mo. App. 466 (1876). lington, 66 Tex. 103 (1886). J37 Home, etc., Ins. Co. v. Roe, 71 122 Garretson v. Merchants', etc., Wis. 33 (1888). Ins. Co., 81 Iowa 727, 45 N. W. 1047 (1890). 218 THE STANDARD POLICY. 186 tive power for propelling any of the machinery iri either of the buildings. The engine was used for no other purpose. It was therefore an essential part of the mill. Without it there would have been no complete mill. * * * Stress is laid upon the fact that the engine, which was the principal machine, was not specially men- tioned in the policy, but we are inclined to think it was covered by the word machinery, and that other things were specifically enumer- ated for fear that they might not otherwise be included." A policy which covered "one two-story frame dwelling and additions thereto, occupied by the assured as a dwelling house," was held to cover a car- riage house and stable under the same roof and in the rear of the portion occupied for dwelling purposes, but attached thereto. 128 218. Location of property In general. Under this provision, which is not found in the Massachusetts form, the property is insured while located as described "and not elsewhere." This is so definite that it would seem that there could be but little controversy as to its proper construction. 129 In a recent case it appeared that the policy was issued to a judge who was in the habit, while holding court in neighboring counties, of taking the insured property along with him for use in such other places. The court recognized the fact that a 128 Hannan v. Williamsburgh, etc., from the dwelling, and there was in Ins. Co., 81 Mich. 556 (1890). The the policy that which made it clear court said: "I am not prepared to to the learned judge who wrote the say that the words 'occupied as a opinion that the barn was not in- dwelling house' as used in the pol- tended to be included in the general icy of insurance necessarily exclude term 'dwelling house.' " the idea that some part of the build- 129 "The general doctrine is fully ing may be used as a stable. If the established that insurance of prop- family lived in the building it is erty in a certain place will not fol- not deprived of its character as a low the property on its removal to dwelling house because domestic a place different from that in which animals were also housed there, it was insured. Some courts have Nor does this view conflict with the in some particulars qualified this doctrine in English v. Franklin F. general proposition, * * * but the Ins. Co., 55 Mich. 273, cited by de- general doctrine is recognized in fendant's counsel. In that case the all the cases." See extensive note barn which it was sought to bring to Benton v. Farmers' Mut. Ins. Co., within the term 'dwelling house and 26 L. R. A. 237 (1894), on "Location additions thereto' was a separate of Movable Property as Affecting building detached about forty feet Fire Insurance Thereon." 187 FORMAL PART OF CONTRACT. 219 number of cases construed somewhat similar language as being merely descriptive of the place at which the property is located at the time the insurance was obtained, and that others hold that such language must be construed with reference to the use of the property, and if this ordinarily causes it to be absent from such place, the com- pany is liable. It was said : "However, in this policy the insurance company so definitely and unequivocally expresses a contract by which it is not bound for the loss of the property when absent from the place named that there is no room for construction. The protection afforded by the policy is expressly limited to the time that the sub- ject of the insurance shall be in the house described, and when- ever it was taken therefrom it was removed beyond the protection of the contract." 130 219. location material. A mere description of the place where the insured property is located, as a general rule, renders the loca- tion material to the risk, although it may be inferred that it is the intention of the parties that property of a certain character should be covered by the insurance while in ordinary use at other places. "As a rule," says Mr. Joyce, 131 "locality and place are essential, but in determining how far locality is important in describing property in- sured, reference must be had to the character of the property, to a consideration of what is the primary object in effecting insurance, and also to the fact to what uses the property insured would in all rea- sonable probability be put. So usage may be a controlling factor in the matter, as may also be the fact in the case of certain kinds of prop- erty, whether removal thereof is permanent or temporary. Where the policy is upon a class of property, the risk upon which from its par- ticular character depends so much upon place or location, that the same constitutes an essential element of the contract, as in the case of a stock of goods or furniture 'contained in' a specified building, then such property will, as a rule, not be covered if changed or removed to another place or locality. The insurer, for various rea- 130 British, etc., Assur. Co. v. Mil- Ass'n, 119 Mich. 427, 75 Am. St. 410 ler, 91 Tex. 414, 66 Am. St. 901, 29 (1899). L. R. A. 545 (1898); Green v. Liver- 131 2 Joyce Ins., 1742. See Brad- pool, etc., Ins. Co., 91 Iowa 615 bury v. Fire Ins. Ass'n, 80 Me. 396 (1894); Mawhinney v. Southern (1888); Lyons v. Providence, etc., Ins. Co., 98 Cal. 184 (1893); Haws Ins. Co., 14 R. I. 109, 51 Am. Rep. v. St. Paul, etc., Ins. Co. (Pa.), 15 362 (1883). Atl. 915 (1888); L'Anse v. Fire 219 THE STANDARD POLICY. 188 sons in cases of this character, might refuse to accept the risk al- together, or might accept it at an enhanced premium if he had known that its location was other than that designated, and the right of the insurer to know exactly what risk he is undertaking can not be denied. But if the primary object is to insure the property described, and the character of the property is such as to warrant that presump- tion, then its exact location may be a subordinate matter of more or less importance." There is a line of cases which construe the statement that the insured property is "contained in" a certain place as descriptive mere- ly of its location at the time the insurance was obtained. The de- scriptive words are construed with reference to the use of the prop- erty, and if this ordinarily causes it to be absent from such place, and while so absent it is destroyed, the property is nevertheless pro- tected by the policy. 132 Such descriptive words are thus held to amount merely to a warranty that the property is at the place desig- nated at the time the policy is executed, but not that it will remain there. The insured thus has the right to the use of the property in the usual manner without losing his protection, and he may remove it temporarily if it be necessary in making such use of it. 133 Thus, where the policy was upon a house, grain, hay and horses situated on section 22, it was held to cover the horses while in ordinary use on the farm or temporarily away from home. 13 * So, a sealskin coat "contained in a frame dwelling," etc., was held covered by the policy while in a fur store, where it had been sent for repairs. 135 So, it was held that where the company insured farm horses, it assumed any risk arising from the ordinary use of the animals for farm pur- poses, although the risk was greater than that assumed while the ani- mals were in the barn. 136 Insurance upon carriages "contained in" a described building "occupied as a livery and sales stable" covers a 132 McCluer v. Girard, etc., Ins. 134 Peterson v. Mississippi Valley Co., 43 Iowa 349, 22 Am. Rep. 249 Ins. Co., 24 Iowa 494 (1868). To (1876); Mills v. Farmers' Ins. Co., the same effect, see Mills v. Farm- 37 Iowa 400 (1873); American, etc., ers' Ins. Co., 37 Iowa 400 (1873), Ins. Co. v. Haws (Pa.), 11 Atl. 107 where the horses were killed by (1887). lightning when six miles from 133 Farmers', etc., Ins. Ass'n v. home. Kryder, 5 Ind. App. 430, 51 Am. St. 135 Noyes v. Northwestern, etc., 284 (1892). See, also, Bradbury v. Ins. Co., 64 Wis. 415 (1885). Westchester F. Ins. Co., 80 Me. 396, I3I) Holbrook v. St. Paul, etc., Ins. 6 Am. St. 219 (1888). Co., 25 Minn. 229 (1878). 189 FORMAL PART OF CONTRACT. 219 carriage while undergoing repairs at a repair shop. 137 But the de- cisions are not uniform upon this question, as some courts construe the provision more strictly. Thus, where the policy insured plain- tiffs "frame stable building, occupied by the assured as a hack, livery and boarding stable, situated on the north side of Court street, Au- burn, Me.," it was held not to cover the loss of a hack while in a re- pair shop on another street, to which it had been removed before the fire without the knowledge and consent of the company. 138 So, a policy on a fire engine, hose, hose-cart, while located and contained in the engine-house, "and not elsewhere," does not cover 137 Niagara F. Ins. Co. v. Elliott, 85 Va. 962, 9 S. E. 694 (1889). 138 Bradbury v. Fire Ins. Ass'n, 80 Me. 396, 15 Atl. 34, Woodruff's Ins. Gas. 170 (1888). The court said: "The general rule stated by text writers and held by the general current of decided cases, is that the place where the personal property insured is kept is of the essence of the contract, as by that the charac- ter of the risk is largely determined, and the property is covered by the policy only while in the place de- scribed: Wood Ins., p. 110; Blodg- ett Fire Ins., p. 22; Eddy Street Iron Foundry v. Hampden, etc., Ins. Co., 1 Cliff. (C. C.) 300 (1859); Mary- land F. Ins. Co. v. Gusdorf, 43 Md. 506 (1875); Fitchburg R. Co. v. Charlestown, etc., Ins. Co., 7 Gray (Mass.) 64 (1856). The following cases are cited as an exception to the general rule and as sustaining the plaintiff's contention: Everett v. Continental Ins. Co., 21 Minn. 76 (1874); Holbrook v. St. Paul, etc., Ins. Co., 25 Minn. 229 (1878); Mc- Cluer v. Girard, etc., Ins. Co., 43 Iowa 349 (1876); Longueville v. Western Assur. Co., 51 Iowa 553 (1879); Ly- ons v. Providence, etc., Ins. Co., 13 R. I. 347 (1881). We think a careful examination of all these cases will show that the chattels in- sured were so described in the pol- icy that they can be identified with- out reference to the building or place where they were kept, and the courts held that the words 'con- tained in' a certain building or kept in a certain building or place was a part only of the description of the chattel, and if, from its nature or character or ordinary use, the par- ties must have understood that it was to be out of the building or place a part of the time in ordinary use, the policy should be held to cover it while so out. This is going to the verge in construing the language used by the parties to the contract, when, ordinarily, it does not bear such meaning. But this case does not appear to us to be within the authority of those cases. * * * * The policies are similar to an insurance of a shop- keeper on his stock of goods in his shop, or of a railroad company on its rolling stock on its road, con- stantly changing. In such cases the property insured can be ascertained only from the place of business named: Lyons v. Providence, etc., Ins. Co., 13 R. I. 347 (1881). The policies insure such of the plain- tiff's carriages, hacks, etc., as are contained in his stable at the time of the loss." 220 THE STANDARD POLICY. 190 a loss on the property which was being used at the time to extinguish a fire several hundred feet from the fire-engine house. 139 So, where the application requests insurance upon property "while on the premises only/' and the policy covers farming utensils, and live stock on the described premises, and hay in stacks, it does not cover property taken temporarily for the purpose of plowing to a place twenty miles distant. 140 This case recognizes the rule that the property insured may sometimes be taken from the place described in the policy where it is of such a character that the use must have been within the contemplation of the parties, but holds that the language of this policy takes it out of the operation of the rule. A harvesting machine which is insured "while operating in the grain fields, and in transit from place to place in connection with harvest- ing," was held not protected while in a blacksmith's shop for the pur- pose of being repaired. 141 Where the property is removed the policy is merely suspended, and if there is no loss and the property is returned it re-attaches. 142 The right of the company to deny liability where the property in- sured is specifically located in a given building, on the ground that it has been removed and was destroyed at a different place, may be waived by acts and declarations of the company after the loss show- ing an intention to relinquish such right after knowledge of re- moval. 143 220. Illustrations. Where the policy insured household goods contained in a dwelling house, and they were burned while stored in a barn on the same premises, it was held that the knowledge of the company that the goods were so stored did not amount to a waiver of the provision in the policy. 144 Mr. Justice Cooley said: "The defendant merely undertook, for a certain consideration, the respon- 139 L'Anse v. Fire Ass'n, 119 Mich. Ins. Co., 97 Cal. 468, 32 Pac. 512 427, 75 Am. St. 410 (1899); British, (1893). etc., Assur. Co. v. Miller, 91 Tex. 142 British, etc., Assur. Co. v. Mil- 414, 66 Am. St. 901 (1898). ler, 91 Tex. 414, 66 Am. St. 901 "Lakings v. Phoenix Ins. Co., 94 (1898). Iowa 476, 28 L. R. A. 70 (1895). " 3 Montgomery v. Delaware Ins. "'Mawhinney v. Southern Ins. Co., 55 S. C. 1, 32 S. E. 723 (1898). Co., 98 Cal. 184, 32 Pac. 945 (1893); M English v. Franklin F. Ins. Co., Benicia Agri. Works v. Germania 55 Mich. 273, 54 Am. Rep. 377 (1884). 191 FORMAL PART OF CONTRACT. 220 sibility while the goods were in the house, and it was at the plaintiff's option to have them there or elsewhere as he pleased. If they were lost by fire while elsewhere, the loss was not one against which the defendant had undertaken to insure him, nor was the defendant called upon to cancel the policy by reason of the goods being removed from the building where they were insured. If the dwelling house had been repaired and the goods restored to it, the policy would again have covered them ; and this, for anything that appears to the contrary, may have been what both parties desired. At any rate, it does not appear that the plaintiff desired the policy canceled, and if it had desired it the cancellation would have been optional with the defendant." A policy upon the contents of a building, described in no other way, will not cover articles then contained in the building after they are removed and stored elsewhere. 145 A policy covering "oil while con- tained in a tank" in a certain location was held binding, although the tank had been swept away from such location by a flood. 147 A policy upon horses and colts "while in a barn, and by lightning only while in use or running in the pasture, while on his farm in the town of Le Seur, Minn.," covers loss by lightning at any place in the town. 148 Where a horse is insured "while in the barn or in the fields," it was held to be covered while in a barn built on the farm after the policy was issued. 150 A vessel insured while lying at a certain dock is not covered by the policy while moored outside in the river some 700 yards distant for the purpose of being refitted. 151 Where the policy described the goods as being "in the store part of the building," it was held not to cover loss of goods which had been removed to the second or third stories, which were not used for ordinary store pur- poses. 152 A policy on "furniture in a house" covers property stored in a garret which is not in common use. 153 Where the policy de- scribed the property as contained in the "frame dwelling house and bake-house, front and rear, situated at No. 17 Thomas St.," it did not 145 Benton v. Farmers', etc., Ins. 15 Trade Ins. Co. v. Barracliff, Co., 102 Mich. 281, 26 L. R. A. 237 16 Vroom (N. J.) 543 (1883). (1894). 151 Pearson v. Commercial, etc., 147 Western, etc., Pipe Lines v. Assur. Co., L. R. 1 App. Cas. 498 Home Ins. Co., 145 Pa. St. 346, 22 (1876). Atl. 665 (1891). 1M Boynton v. Clinton, etc., Ins. 148 Boright v. Springfield, etc., Ins. Co., 16 Barb. (N. Y.) 254 (1853). Co., 34 Minn. 352 (1885). 153 Clark v. Firemen's Ins. Co., 18 La. 431 (1841). 220 THE STANDARD POLICY. 192 cover flour in a shed leading from the bake-house to the front house. 154 Wearing apparel described as contained in a certain building was not covered by the policy after it was removed to a place where the owner was residing. The removal was not such a temporary one as the parties might reasonably be supposed to have contemplated. The court said: "The ordinary use of clothing in such cases does not include the using involved in a long journey, or during a protracted visit, during which the goods may be exposed to risks that the in- surer would not have been disposed to incur. It would be unreason- able to infer any intention of that kind." 155 But wearing apparel is insured while worn by the party in the streets of a city. 156 Where the insured desired to remove goods covered by the policy to another building and secured an indorsement on the policy to the effect that "it was transferred to cover similar property in the new building/' and the goods were destroyed before they were removed, the company was held liable for the loss. The court said: 157 "The evidence clearly shows that the object was to continue the insurance until after their removal, and it appears to me to repel the idea that they should be uninsured in the meantime, while remaining in the place they were in while first insured." A policy covered goods in two places, one a sales-room and the other a storeroom, and the insured, wishing to remove the goods from the storage room to the sales-room, gave notice of the fact to the company, and obtained an indorsement upon the policy acknowledging notice of the fact that the goods "were being removed," and agreeing for a consideration that "the policy should cover the goods in both places during removal and thereafter in the last named locality only." It was held that "when this consent was obtained and indorsed upon the policy, it did not make it neces- sary for the assured to remove. They might avail themselves of the privilege they had purchased or they might refrain from so doing. If they did not move they lost the money they paid to secure the privilege, but they lost nothing more. Their policy was unaffected by the indorsement unless they acted under it. If they acted under it and entered on the work of removal they were not bound to suspend 164 Moadinger v. Mechanics' F. Ins. 1M Longueville v. Western Assui. Co., 2 Hall (N. Y.) 490 (1829). Co., 51 Iowa 553 (1879). 195 Towne v. Fire Ass'n, 27 111. I5J Kunzze v. American, etc., Ins. App. 433 (1888). Co., 41 N. Y. 412 (1869). 193 FORMAL PAKT OP CONTRACT. 221 their business while that work was in progress and devote all their energies to the transfer of the goods. They had the right to con- tinue to buy and ship, pending the removal, as well as before and after, just as they were in the habit of doing; and the policy covered concur- rently with others the stock actually used in the ordinary way without regard to the specific articles of which it was composed. While the removal was in progress the protection of the policy was on each part of the stock according to its pro rata value. When the whole stock was transferred, the whole effect of the policy was transferred to the actual site of the stock. We think, therefore, that the indorsement did not limit the policy to the articles that were in the building from which they were to be removed at the time of the indorsement." 158 A policy insured against loss by fire a threshing machine, engine and separator "while not in use." The outfit had been in use, but was hauled to another place and left standing near a farm house preparatory for use, and a few days later was there destroyed by fire. It was held that the machines were not in use within the meaning of the policy. 159 So, insurance on a harvester while in use in "Tulare county" does not cover a loss which occurred while it was stored in a shed, not being actually used for harvesting purposes. 160 221. Risks insured against. The policy insures "against all di- rect loss or damage by fire except as herein provided." These excep- tions, which include explosions, lightning, fall of the building, in- vasion, and negligence after the fire, will be referred to hereafter. The restrictive word "direct" does not appear in the Massachusetts form. "Direct loss or damage by fire" means loss or damage accru- ing directly from fire as the destroying agency, in contradistinction to the remoteness of fire as such agency. The word "direct" means merely the immediate or proximate as distinguished from the remote cause. 162 Loss by fire means the result of the ignition of the prop- erty or of some substance near it. But it is not necessary that any 168 Sharpless v. Hartford F. Ins. Assur. Co., 122 Gal. 595, 55 Pac. 417 Co., 140 Pa. St. 437 (1891). (1898). 159 Minneapolis, etc., Co. v. Fire- 162 Ermentrout v. Girard, etc., Ins. men's Ins. Co., 57 Minn. 35, 58 N. Co., 63 Minn. 305, 56 Am. St. 481 W. 819 (1894). (1895). 100 Slinkard v. Manchester F. 13 ELLIOTT INS. 221 THE STAXDARD POLICY. 194 part of the insured property shall be actually ignited or consumed by fire. 163 Thus, in one case a house protected by a policy of insurance against damage by fire was injured by the falling of a part of the wall of an adjoining house, and it was held that fire was the proxi- mate cause of the loss, and that the insurers were liable, although the house insured had never been on fire. 164 The word "fire" does not include heat of a degree too low to cause ignition, but actual ignition is not necessary, as the policy protects against all the direct conse- quences of actual ignition. 165 Where the property was injured by great heat occasioned by the closing of a register, and there was no ignition, it was held that the damage was not caused by fire within the meaning of the policy. 166 The rule is thus stated by Eichards : 167 "A proximate result of fire within the rule of law establishing liabil- ity of the insurer may include other things than combustion ; as, for example, injuries to the insured property by water from fire engines or exposure of goods during a fire, or during their reasonable re- moval, a loss of goods by theft during a fire or during a reasonable removal to a place of safety." Damage by water used in preventing the destruction of a building and its contents by fire is within a pol- icy insuring against damage by fire. 168 So; a fire is the proximate cause of damage to goods which is suffered in the process of removal to save them from fire. 169 But such a policy does not protect against damage occasioned to the goods while being removed from a neighbor- ing building under the apprehension of a spread of fire. 170 A fire policy covers loss or damage by fire occasioned by explosion 193 Transatlantic F. Ins. Co. v. Republic, etc., Ins. Co., 57 Me. 91, Darsey, 56 Md. 70 (1880). 2 Am. Rep. 22 (1869); Stanley v. 184 Johnston v. West Scotland Ins. Western, etc., Ins. Co., L. R. 3 Exch. Co., 7 Shaw & D. 52 (1828); Ermen- 74 (1868). trout v. Girard, etc., Ins. Co., 63 3GS John Davis & Co. v. Insurance Minn. 305 (1895). Co., 115 Mich. 382, 73 N. W. 393 185 Gibbons v. German Ins., etc., (1897). Inst., 30 111. App. 263 (1888). 169 Balestracci v. Firemen's Ins. 198 Austin v. Drew, 6 Taunt. 435 Co., 34 La. Ann. 844 (1882); Lewis (1816); Babcock v. Montgomery, v. Springfield, etc., Ins. Co., 10 Gray etc., Ins. Co., 6 Barb. (N. Y.) 637 (Mass.) 159 (1857). (1849); Scripture v. Lowell, etc., 1TO Hillier v. Allegheny, etc., Ins. Ins. Co., 10 Cush. (Mass.) 356; 57 Co., 3 Pa. St. 470, 45 Am. Dec. 656 Am. Dec. Ill (1852). (1846). 187 Richards Ins., 128; White v. 195 FORMAL PART OF CONTRACT. 221 or any other cause not expressly excepted in the policy. 171 In an elaborate decision in which many cases are reviewed, Mr. Justice Gushing said: 172 "The rule should be that where the effects pro- duced are the immediate results of the action of the burning substance in contact with a building, it is immaterial whether these results manifest themselves in the form of combustion or explosion, or of both combined. In either case the damage occurring is by the action of fire and covered by the ordinary terms of the policy against loss by fire." Damage by fire caused by a break in pipes resulting from a boiler explosion within the building is not covered by a policy which provides that the company shall not be liable for loss caused by explosion unless fire ensues, and in that event for the damage by fire only. 173 A lamp is not a fire within the meaning of a policy cover- ing damages by fire or lightning, and there can be no recovery for damages caused by smoke therefrom when no ignition occurs out- side of the lamp. 174 There can be no recovery for overheating caused by the unskillful use of fire in a factory, where there is no combus- tion. 175 Where fire is employed as an agent, either for ordinary pur- poses of heating the insured building, or for the purposes of manu- facture, or as an instrument of art, the company is not liable for the consequences so long as the fire itself is confined within the limits of the agencies employed. Hence under a policy insuring against all direct loss or damage by fire, the insurer is not liable for dam- ages arising from smoke or soot coming from a defective stove- pipe, and resulting from a fire intentionally built in a stove and kept confined therein, nor for damage caused by water used in cooling portions of the building heated by such stove-pipe, when the use of such water is not necessary to prevent ignition. In order to bring such consequences within the risk there must be actual ignition out- side of the agencies employed, not purposely caused by the insured, and the consequence of such ignition dehors the agencies. 176 In a 1T1 Germania Ins. Co. v. Sherlock, Co., 62 N. Y. Supp. 824, 30 Misc. 25 Ohio St. 33 (1874). (N. Y.) 72 (1899). 172 Scripture v. Lowell, etc., Ins. m Scripture v. Lowell, etc., Ins. Co., 10 Gush. (Mass.) 356, 57 Am. Co., 10 Gush. (Mass.) 356, 57 Am. Dec. Ill (1852). Dec. Ill (1852). See generally, 173 John Davis & Co. v. Insurance note to 36 Am. St. 857. Co., 115 Mich. 382, 73 N. W. 393 178 Cannon v. Phcenix Ins. Co., 110 (1897). Ga. 563, 78 Am. St. 124 (1900). 174 Fitzgerald v. German, etc., Ins. See, also, Gibbons v. German Ins., etc., Inst, 30 111. App. 263 (1889). 221 THE STANDARD POLICY. 196 recent case in Massachusetts 177 it was held that the company was liable for damages caused to the insured goods by smoke and soot escaping from the stove in which the fire had been built for ordinary pur- poses. It was contended that the policy was not intended to apply to a fire which is lighted and maintained for ordinary purposes for which fires are used in buildings, and which is confined to its place thus fitted for such fires. But Mr. Justice Knowlton said: "We are not disposed to question the soundness of the general principle upon which this contention is founded, and we find it by no means easy to determine whether the principle should be extended far enough to cover an occasional fire in a chimney incidental to the or- dinary use of the stove, or whether such a fire should be held one for whose unexpected injurious consequences an insurance company should be liable. We are inclined to the opinion that a distinction should be made between a fire intentionally lighted and maintained for a useful purpose in connection with the occupation of a building and a fire which starts from such a fire without human agency, in a place where fires are never lighted nor maintained, although such ignition may naturally be expected to occur occasionally as an inci- dent to the maintenance of necessary fires, and although the place where it occurs is constructed with a view to prevent damage from such ignition. A fire in a chimney should be considered rather a hostile fire than a friendly one, and as such, if it causes damage, it is within the provisions of ordinary contracts of fire insurance." A policy on a tug and her fixtures insuring against loss or damage by fire does not cover injury to the interior of her boiler caused by overheating or leaking of water. The terms of the policy in this case, said the court, "are such as are ordinarily employed in fire pol- icies on steam vessels where the risk is taken on the hull and all the machinery and appurtenances of the vessel. And it is conceded that for any injury done by fire to any part of the vessel or to the machinery, whether to the boiler or to any other part, if the injury was done by ignition or heat generated beyond the furnace, where fire was intend- ed to burn, the insurance company would be liable. But the subject of insurance here necessarily excepts the operation of fire to some extent. The subject of the policy is a steam tug, her boiler and 177 Way v. Abington, etc., Ins. Co., Am. St. 857 (1892); Hillier v. Alle- 166 Mass. 67, 55 Am. St. 379 (1896). gheny, etc., Ins. Co., 45 Am. Dec. See further, extended notes to Gil- 656, 55 Am. St. 379 (1846). son v. Delaware, etc., Canal Co., 36 197 FORMAL PART OF CONTRACT. 222 other machinery. Of necessity fire was to be maintained in the fur- nace and in contact with the boiler as a means to generate the motive power by which the vessel could be propelled. The burning or warp- ing of the bars of the grate in the furnace, if produced by the action of fire, could hardly be supposed to be within the scope of the risk insured against, however general the terms of the policy. And if that be true of the furnace, it is difficult to perceive why it is not equally true of such parts of the boiler as are brought in contact with the fire in the furnace or heat evolved therefrom. The fire, while in the furnace, was in its proper place, and where it was intended to be ; and it was placed there to act upon the boiler, which in the course of time would be burned out or warped as the grate in the furnace would be by the continued action of fire thereon. And if such re- sults of the action of fire upon these materials, while in ordinary use, are not within the risk it would be difficult to see upon what de- gree of heat or under what conditions the liability under the policy would attach for the injury caused by the action of fire while con- tained in the furnace and producing no external ignition. If a per- son has his house insured against loss or damage by fire, and he should make a fire in his grate or fire-place of such intense heat as to crack his chimney or to warp or crack his mantel-pieces, it could hardly be contended that he could hold the insurance company liable for such damage and for damage so unintentionally allowed to be produced by the action of fire. In such a case the fire would not have extended beyond the proper limits within which it was intended to burn, but the heat emitted therefrom would have produced effects not intended by the insured. No doubt there are many instances where the in- surer has been held liable for injury done to buildings or furniture by heat or smoke without actual ignition, where the heat or smoke is produced from fire outside of the limits of the place in which it was intended by the contract of insurance to burn. But that is a differ- ent question from that presented." 178 222. Proximate cause Electric wires. In an action upon a policy insuring a building, machinery, dynamos and other electric fixtures of ah electric company, it appeared that the fire produced a short circuit in the wires connecting with a part of the building re- mote from the fire, and that such short circuit caused such a strain 178 American Towing Co. v. German F. Ins. Co., 74 Md. 25, 21 Atl. 553 (1891). 222 THE STANDARD POLICY. 198 on the machinery as to break it to pieces. The fire occurred in the wire tower of the building, through which the wires for electric light- ing were carried from the building. It was extinguished without contact with other parts of the building, with but slight damage to the tower and its contents. It was held that the damage was "loss or damage by fire" within the meaning of a policy. 179 The court said : "The subject-matter of the insurance was the building, machinery, dynamos and other electrical fixtures, besides tools, furniture and sup- plies used in the business of furnishing electricity for electric light- ing. The defendants, when they made their contracts, understood that the building contained a large quantity of electrical machinery and that electricity would be transmitted from the dynamos, and would be a powerful force in and about the building. They must be presumed to have contemplated such effects as fire might naturally produce in connection with the machinery used in generating and transmitting strong currents of electricity." After considering the general rule that the active efficient cause that sets in motion a train of events which brings about a result, without the interven- tion of any force started and working actively from a new and independent source, is the direct and proximate cause, the court said : "If this was an action against one who negligently set the fire in the tower and thus caused the injury to the machinery, it is clear on the theory of the plaintiff that the negligent act of setting the fire would be deemed the active efficient cause of the disruption of the machinery and consequent injury to the building. It remains to inquire whether there is a different rule in an action on a policy of fire insurance. * * In suits brought on a policy of fire insur- ance it is held that the intention of the defendants must have been to insure against losses where the cause insured against was a means or agency in causing the loss, even if it was entirely due to some other active efficient cause which made use of it or set it in motion, if the original efficient cause was not itself made a subject of separate insurance in the contract between the parties. For instance, when the negligent act of the insured or of anybody else causes a fire and so causes damage, although the negligent act is the direct, proximate cause of the damage through fire, which was the passive agency, the insurer is held liable for the loss caused by fire. This is the only particular in which the rule in regard to remote and proxi- 179 Lynn, etc., Co. v. Meriden F. Ins. Co.; 158 Mass. 570, Woodruff Ins. Cas. 178 (1893). 199 AUTHORIZATION' OF AGEXT. 223 mate causes is applied differently in actions on fire insurance pol- icies from the application of it in other actions. A failure some- times to recognize this rule as standing on independent grounds and established to carry out the intention of the parties to the contract of insurance has led to confusion of statement in some of the cases. The difficulty of applying the general rule in complicated cases has made the interpretation of some of the decisions doubtful, but on prin- ciple and by the weight of authority in many well-considered cases, we think it is clear that, apart from the single exception above stated, the question, What is the cause which creates a liability? is to be de- termined in the same way in actions upon policies of fire insurance as in other actions. * * * In the present case the electricity was one of the forces of nature, a passive agent working under natural laws, whose existence was known when the insurance policies were issued. Upon the theory adopted by the jury, the fire worked through agencies in the building the atmosphere, the metallic machinery, electricity and other things and working precisely as defendants would have expected it to work if they had thoroughly understood the situation and laws applicable to the existing conditions, it put a great strain on the machinery and did great damage. No new cause acting from an independent source intervened. The fire was the direct and proximate cause of the damage according to the meaning of the words 'direct and proximate' by the best authorities/' //. Authorization of Agent. In any matter relating to this insurance, no person, unless duly authorized in writing., shall ~b& deemed the agent of this company. 180 223. Agency. The subject of agency has already been consid- ered. This clause attempts to make a writing the only evidence of agency. Ordinarily a fire insurance agent is given a written com- mission which in general language defines his authority, but the in- 180 This provision is found in the setts and Minnesota. The Michi- standard policies of New York, New gan policy provides that: "In Jersey, Connecticut, Rhode Island, any matter relating to the procur- Louisiana, Iowa, North Dakota, ing of this insurance, no person, South Dakota and North Carolina, unless duly authorized in writing, The provision is not found in the shall be deemed the agent of this standard policies of Maine, New company." Hampshire, Wisconsin, Massachu- 223 THE STANDARD POLICY. 200 surer does not, by virtue of this provision of the standard policy, escape responsibility for acts of those who are in fact its agents, al- though they may not be able to show written authority. The rule established by the weight of authority, as stated by May, and quoted with approval by Richards, 181 is that: "It makes no difference that the policy declares the agent to be the agent of the assured and not of the company. For whom a person is acting is a matter of law on the facts of every case. The application precedes the policy; and to hold that a provision in the after-coming policy, unknown to the as- sured at the time of the application, could turn the insurance agent into his agent, when he thought all the time he was dealing with him and accepting his advice as the agent of the company, would be an outrage." Any other rule would permit an insurance company to relieve itself from all responsibility for the mistakes or misconduct of its agents, by the simple device of sending them out without writ- ten authorization. The matter has been regulated by statute in some of the states, and this provision of the policy must be read in connection with such statutes. This clause may properly be regarded as notice to the insured that it is unsafe to deal with a person who can not show written authority, but agency is a fact, and may be proven by any competent evidence. ///. Application and Survey. If an application, survey, plan or description of the property be referred to in this policy, it shall be a part of this contract and a warranty by the insured. 2 181 Richards Ins., 171; Kausal v. does not appear in the Maine, Mas- Minnesota, etc., Ins. Ass'n, 31 Minn, sachusetts, and Minnesota standard 17, 47 Am. Rep. 776 (1883); Allen policies. It does not appear in the v. German, etc., Ins. Co., 123 N. Y. New Hampshire standard policy, 6 (1890); Insurance Co. v. Norton, but chapter 170 of the Public Stat- 96 U. S. 234 (1877). See 160, utes of New Hampshire, which is supra. printed on the back of the policy 182 This provision appears in the and forms a part thereof, provides standard policies of New York, New that: "Descriptions of property Jersey, Connecticut, Rhode Island, and statements concerning its value Wisconsin, Iowa, Louisiana, North and the title of the insured thereto Dakota, South Dakota, and North in an application of insurance or in Carolina. Michigan adds the words, an insurance policy shall not be "as to material facts." The clause treated as warranties." 201 APPLICATION SURVEY MISCONDUCT OF INSURED. 224 224. Application a part of the policy. A reference in the policy to an application, survey, plan or description of the property makes it a part of the contract and warrants its correctness. The clause is not contained in the Massachusetts form, and in that state only such parts of the application as are set forth in the policy become a part of the contract. The language probably extends the established rule by making a mere reference sufficient, which was not enough under the earlier decisions. 183 But the reference must still be of such a character as to show an intention to incorporate the matter into the contract. Thus, the entire application is not made a part of the policy which contains this provision by a statement in the policy that the property is situated in a specified place, "as per diagram filed with application," where such diagram was put on the back of the application after it had been signed by the applicant. 184 The materiality of the matters thus warranted must be determined by general and statutory rules, to which reference has already been made. 185 IV. Misconduct of Insured in Procuring Policy. This entire policy shall be void if the insured has concealed or mis- represented, in writing or otherwise, any material fact or circum- stance concerning the insurance or the subject thereof; or if the in- terest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any mat- ter relating to this insurance or the subject thereof, whether before or after the loss. iss 225. Entirety of contract. Under the old forms there were many cases which held that an insurance contract was severable where distinct items were insured for separate amounts, although but 183 Vilas v. New York, etc., Ins. provision appears in the standard Co., 72 N. Y. 590, 28 Am. Rep. 186 policies of Massachusetts, Minne- (1878). sota, Maine, and New Hampshire: 181 La Belle v. Norwich F. Ins. "This policy shall be void if any Soc., 34 N. B. (Can.) 515 (1898). material fact or circumstance 188 See 116, 119, supra. stated in writing has not been 188 This provision is found in the fairly represented by the insured, standard policies of New York, New or if the insured shall make any Jersey, Connecticut, Rhode Island, attempt to defraud the company Wisconsin, Louisiana, Iowa, North either before or after the loss." Dakota, South Dakota, Michigan, Nothing is said concerning a mis- and North Carolina. The following representation of interest. 225 THE STANDARD POLICY. 202 one premium was paid. The decisions are very conflicting; but probably the weight of authority is to the effect that such a con- tract is entire and that breach of a warranty which relates solely to one class of property will avoid the entire policy. lss Under this provision of the standard policy there is little room for controversy. Where a policy which covered a barn and its contents contained a provision that under certain conditions "this entire policy and every part thereof shall be void/' and there was a misdescription as to the amount of the incumbrances, the court said: 189 "It is urged by the respondent that this contract of insurance is severable, that the insurance on the barn should be deemed one contract, the insur- ance on its contents another contract, and that a misstatement in respect to the amount for which the realty was incumbered does not invalidate the insurance on the personalt}', and that defendant, hav- ing asked the court to rule that no part of the loss could be recovered, asked for too much in the instruction prayed for and in its motion for a nonsuit, and that exceptions to these rulings are unavailable. Under forms of policies quite different from the one in the case at bar, in- suring specific amounts on separate items of property, contracts have been held severable. It is expressly stipulated in this policy that if either the real or personal property or any part of it be incumbered it 187 Taylor v. Anchor, etc., Ins. Co. are therein insured, and though the (Iowa), 88 N. W. 807 (1902), and stipulation violated relates solely cases there cited; Merrill v. Agri- to a matter which could have no cultural, etc., Ins. Co., 73 N. Y. 452 connection with but one of these (1878); Schuster v. Dutchess Co. classes." Ins. Co, 102 N. Y. 260 (1880). As to 1SO Smith v. Agricultural Ins. Co., the severability of contracts of in- 118 N. Y. 518 (1890); Geiss v. surance, see note to Wright v. Lon- Franklin Ins. Co., 123 Ind. 172 don F. Ins. Ass'n (Mont.), 19 L. R. (1889). In Pratt v. Dwelling House, A. 211 (1893). etc., Ins. Co., 130 N. Y. 206 (1891), 188 In Southern F. Ins. Co. v. the court said: "Whatever the Knight, 111 Ga. 622, 78 Am. St. 216 rule may be elsewhere, it is set- (1900), after a review of many cases, tied in this state that where the court said: "Our conclusion is, insurance is made upon different that where an insurance policy is kinds of property, each separately issued in consideration of a gross valued, the contract is severable, premium, and provides that the even if but one premium is paid, policy shall be void in the event of and the amount insured is the sum a certain condition therein named, total of the valuations." See Loom- and this condition is broken, no re- is v. Rockford Ins. Co., 77 Wis. 87 covery can be had on the policy, (1890); McQueeny v. Phrenix Ins. though separate classes of property Co., 52 Ark. 257 (1889). 203 MISCONDUCT IN PROCURING POLICY. 225 must be so represented to the company in the application, otherwise the entire policy and every part of it shall be void. This policy is quite different in its legal effect from those considered in the cases cited, it not being expressly provided in those policies as in this that a misrepresentation of the situation of one of the subjects insured should invalidate the insurance on all other property covered by the policy." In Missouri it was held that the clause making the "entire policy void, in case of breach of condition in any respect," does not render the policy indivisible so as to preclude any recovery on it in case it is for convenience made to cover different kinds of prop- erty which are separately valued, although but one premium is paid. The court said: 190 "When this contract was made it was the settled i9o Trabue v. Dwelling House Ins. Co., 121 Mo. 75, 23 L. R. A. 719 (1894). In McGowan v. People's, etc., Ins. Co., 54 Vt. 211, Woodruff Ins. Gas. 205 (1881), it appeared that the policy covered both real and personal property. The real estate was conveyed in violation of a condition in the policy and it was claimed that this did not affect the insurance upon the personal prop- erty which was situated in the dwelling house insured. The court said: "This is a question of great practical importance, as a large pro- portion of insurance contracts em- brace more than one item of prop- erty insured. The decisions are ap- parently conflicting; but we think are easily reconciled by referring to the plain principles which should govern them. The general rule, 'void in part, void in toto.' should apply to all cases where the con- tract is affected by some all-per- vading vice, such as fraud or some unlawful act, condemned by public policy or the common law; cases where the contract is entire and not divisible; and all those cases where the matter that renders the policy void in part, and the result of its being so rendered void, affects the risk of the insurer upon the other items in the contract. Keeping these rules in mind, the leading cases on this subject can all be rec- onciled. A recovery should be had in all those cases where the con- tract is divisible; the different prop- erties insured for separate sums; and the risk upon the property, which is claimed to be valid, unaf- fected by the cause that renders the policy void in part. Such are the cases of Howard, etc., Ins. Co. v. Cornick, 24 111. 455 (1860); Hartford F. Ins. Co. v. Walsh, 54 111. 164 (1870); Clark v. New Eng- land, etc., Ins. Co., 6 Cush. (Mass.) 342 (1850); Date v. Gore, etc., Ins. Co., 14 Up. Can. C. P. 548 (1864); Phrenix Ins. Co. v. Lawrence, 4 Mete. (Ky.) 9 (1862); Loehner v. Home, etc., Ins. Co., 17 Mo. 247 (1852); Koontz v. Hannibal, etc., Ins. Co.. 42 Mo. 126 (1868); Cucullu v. Orleans Ins. Co., 9 Mar. (La.) 6. The cases following have held the contract entire, indivisible, and no recovery could be had upon them: Hinman v. Hartford F. Ins. Co., 36 Wis. 159 (1874); Associated F. Ins. Co. v. Assum, 5 Md. 165 (1853); Bowman v. Franklin F. Ins. Co., 40 Md. 620 (1874); Fire Ass'n v. Williamson, 26 Pa. St. 196 (1856); Gottsman v. Pennsylvania Ins. Co., 226 THE STANDARD POLICY. 204 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." 226. Concealment and misrepresentation. This clause makes no changes in the general rules governing the effect of concealment and misrepresentation. It simply declares the existing law, an.d its only importance here is in connection with the evident intention that the contract shall not be treated as severable, but that the entire policy shall be rendered void by concealment or misrepresentation in con- nection with any material matter. 191 227. Statement of interest. In the absence of any provision re- quiring a statement of the interest of the insured, the extent and nature of such interest need not be disclosed, and it will be sufficient for him to show an insurable interest at the time of the loss. 192 The applicant may state simply that he is the owner if this is true in any substantial sense. 193 This clause does not require the applicant to state the value of his interest or whether it is subject to incumbrances or liable to be terminated. 194 The word "interest" is broader than title. 195 . 228. Fraud and false swearing. The entire policy is rendered void by fraud or false swearing either before or after the loss. But mere mistake in the expression of an opinion, or an innocent mis- statement, will not work a forfeiture under this provision. It must 56 Pa. St. 210 (1867); Bleakley v. m See ch. vi. Niagara, etc., Ins. Co., 16 Grant 192 See 45, supra; Buffum v. (Up. Can.) 198 (1869). In the case Bowditch, etc., Ins. Co., 10 Gush. at bar the whole property was in- (Mass.) 540 (1852). sured for $872, divided into specific m Wainer v. Milford, etc., Ins. Co., items, but one premium was paid 153 Mass. 335 (1891). and one premium note given. We m Dolliver v. St. Joseph, etc., Ins. think the authorities justify us in Co., 128 Mass. 315, 35 Am. Rep. 378 holding that the contract was an (1880); Carson v. Jersey City, etc., entire one; separate and distinct Ins. Co., 43 N. J. L. 300, 39 Am. Rep. only so far as to limit the extent 584 (1881). of the risk assumed by the company 1M Lee v. Agricultural Ins. Co., 79 on each kind of property." Iowa 379 (1890). 205 MISCONDUCT IN PROCURING POLICY. 228 be false and fraudulent. 196 Thus, a false statement as to the value of the property will not invalidate the policy if given in good faith and as an honest expression of opinion. 197 A concealment or misstate- ment relative to the value of the property is sometimes held to be immaterial where the policy is not valued. Thus, in one case it was said: "By the terms of the policies it is expressly provided that the companies were not liable beyond the actual cash value of the property at the time of the loss. The policies were not valued, but were open policies, and the companies were liable only for the actual value of the property lost. In such policies an overvaluation of the property is immaterial. If such representation in such a policy is not material to the risk, does not increase the risk in any way, we fail to see any reason for saying that because the insured was at the time the company's agent, such representation by him was material." 198 Over- valuation, however great, is not conclusive evidence of fraud. It is at the most merely presumptive evidence of fraudulent intent and is strong in proportion to the excess. 199 Thus, where there was testi- mony that misstatements in the proof were made by mistake, it was held error to take the case from the jury, as the policy was only ren- dered void by willful false swearing with the intent to defraud. 200 Where the policy contained a warranty and provided that "false representations by the assured of the conditions, situation, or occu- pancy of the property or any omission to make known any fact ma- terial to the risk, or any overvaluation or misrepresentation whatever, either in the written application or otherwise, shall make the policy void/' it appeared that there was a clear overvaluation, and thus a breach of warranty. The court said: 201 "The trial court erred in submitting the question of overvaluation simply as one of fraud or good faith, and in stating to the jury that if the applicant placed a value on the property which he honestly believed to be its legitimate 196 Titus v. Glens Falls, etc., Ins. v. Coombs, 19 Ind. App. 331, 49 N. Co., 81 N. Y. 410 (1880). E. 471 (1898). 197 Baker v. State Ins. Co., 31 Ore. 20 Petty v. Mutual F. Ins. Co., Ill 41, 48 Pac. 699 (1897); Phenix Ins. Iowa 358, 82 N. W. 767 (1900). Co. v. Pickel, 119 Ind. 155, 21 N. E. 201 Fowler v. ^Btna F. Ins. Co., 6 546 (1889). Cow. (N. Y.) 673 (1827), 16 Am. 198 Insurance Co. v. Osborn, 26 Ind. Dec. 460 and note; Boutelle v. West- App. 88, 59 N. E. 181 (1901). Chester F. Ins. Co., 51 Vt. 4, 31 Am. 199 Sturm v. Atlantic, etc., Ins. Co., Rep. 666 (1878); Carson v. Jersey 63 N. Y. 77 (1875); Insurance Co. City F. Ins. Co., 14 Vroom (N. J.) 300, 39 Am. Rep. 584 (1881). 228 THE STANDARD POLICY. 206 value, it would not render the policy void, although larger than the value of the property as estimated by others. Doubtless a very slight variation should be disregarded, but I think the applicant must be held responsible for any substantial excess when he thus warrants the value." Under this provision of the standard policy it is held in Michigan that the contract is not necessarily avoided because of a false statement in the affidavit, given by the assured after the loss, that a sewing machine was burned, which he explained by saying that he thought it was burned at the time he made the affidavit, but subse- quently found it was not in the building. 202 Where the policy con- tained a provision that any fraud or false swearing should forfeit all claims under it, and the plaintiff in his proofs of loss stated under oath that the building was occupied as a dwelling house and for no other purpose, the words were held to mean a verified false assertion, fitted and likely to, and which does, deceive. 203 But it appeared that the defendant, through its agents and secretary, knew the facts ; and as the words used, when charged with the meaning given them by the par- ties, were not true as between them, there was no breach of the condi- tion. The defendant could not be deceived by an assertion which to its own knowledge was false. Under this provision, false swearing in the proofs of loss in regard to the burning of wearing apparel, which has been removed from the building insured before the loss, renders the policy void as to insurance on the house and household furniture as well as that on the wearing apparel. 204 V. Excluded Risks. This company shall not be liable for loss caused directly or in- directly by invasion, insurrection,, riot, civil war or commotion, or military or usurped power, or by order of any civil authority, or by theft; or by neglect of the insured to use all reasonable means to save and preserve the property at and after a fire or when the prop- erty is endangered by fire in neighboring premises; or (unless fire ensues, and, in that event, for the damage by fire only) by explosion of any kind, or lightning; but liability for direct damage by light- ning may be assumed by specific agreement hereon. If a building or any part thereof fall, except as the result of fire, v. National F. Ins. Co., 2< * Fowler v. Phoenix Ins. Co., 35 107 Mich. 323, 65 N. W. 228 (1895). Ore. 559, 57 Pac. 421 (1899). 203 Maher v. Hibernia F. Ins. Co., 67 N. Y. 283 (1876). 207 EXCLUDED RISKS. 229 all insurance by this policy on such building or its contents shall im- mediately cease. * * * Nor., beyond the actual value destroyed by fire, for loss occasioned by ordinance or law regulating construction or repair of buildings, or by interruption of business, manufacturing processes, or other- wise? 5 229. Invasion, riot, etc. An invasion is the hostile entrance of an armed force into a certain territory, and any loss to the insured property of which the invasion is the efficient cause is not within the protection of the policy. 206 There can be no recovery in such case, although the commanding officer of the invading party did not order the property destroyed. 207 An insurrection is a "seditious rising against the government ; a rebellion ; a revolt." 208 A riot is an unlawful act done or attempted to be done by three or more persons, either with or without common cause, or it may be a lawful act done in a violent or tumultous manner. It is immaterial whether or not there is a previous unlawful assembly, or whether the rioters originally assembled for a lawful purpose. Force or violence, or some acts tending thereto, calculated to cause terror to one or more, are neces- sary in criminal law, although there may be a riot without actual violence. In insurance cases it is not necessary to first establish the fact of a riot by a judgment of a criminal court. 209 200 These provisions are found in explosions of any kind unless fire the standard policies of New York, ensues, and then that caused by New Jersey, Connecticut, Rhode fire only." They also provide that Island, Wisconsin, Louisiana, Iowa, if v "the insured property be exposed North Dakota, South Dakota, Mich- to loss or damage by fire, the in- igan, and North Carolina. The sured shall make all reasonable ef- standard policies of Massachusetts, forts to save and protect the same." Minnesota, Maine and New Hamp- 20 ^tna F. Ins. Co. v. Boon, 95 shire insure against all loss or dam- U. S. 117 (1877); Portsmouth Ins. age by fire originating from any Co. v. Reynolds, 32 Gratt. (Va.) cause except "invasion, foreign ene- 613 (1880). mies, civil commotions, riots or any 207 Barton v. Home Ins. Co., 42 military or usurped power what- Mo. 156, 97 Am. Dec. 329 (1868). ever; the amount of said loss or 208 Spruill v. North Carolina, etc., damage to be estimated according Ins. Co., 1 Jones (N. C.) 126 (1853). to the actual value of the insured 209 Joyce Ins., 2581; LycomingF. property at the time when such Ins. Co. v. Schwenk, 95 Pa. St. 89, loss or damage happens, but not to 40 Am. Rep. 629 (1880); Germania include loss or damage caused by F. Ins. Co. v. Deckard, 3 Ind. App. 229 THE STANDAKD POLICY. 208 The form of policy excepts the risks of civil war or commotion. Lord Mansfield says that the words "civil commotion" were intro- duced in 1727, and are as general and untechnical as any that can possibly be used. He distinguishes between civil commotion and invasion by usurped military power and says: "I think a civil com- motion is this: an insurrection of the people for a general purpose, though it may not amount to a rebellion while there is usurped power." 210 "Usurped power" may mean an invasion from abroad or internal authority conducted by authority, and not the power of a common mob. 211 A loss caused by the burning of a bridge by the order of the mili- tary authorities to prevent the advance of an armed force of rebels is not excepted by the clause, "loss by fire occasioned by mobs or riots," although it would be within other clauses of this provision. 212 A policy contained a provision that the company "shall not be liable to make good any loss or damage by fire which may happen or take place by means of any invasion, insurrection, riot, or civil com- motion, or of a military or usurped power." A certain town in Mis- souri was attacked by a Confederate military force; and an officer in command of the United States forces,' after a' battle had been in progress for some time, being unable to successfully defend the city, set fire to some military stores to prevent them from falling into the hands of the enemy. The fire spread through two intermediate buildings to the store containing the insured goods, and they were destroyed. The Connecticut court held that the clause did not refer to the lawful acts of military authorities, but only to acts of persons in hostility to the lawful authorities, and that the act of the com- mander in ordering the firing of the building was a lawful act and 361, 28 N. B. 868 (1891); State v. Boon, 95 U. S. 117 (1877). In Dean, 71 Wis. 678, 38 N. W. 341 Strauss v. Imperial F. Ins. Co., 94 (1888). Mo. 182, 4 Am. St. 368 (1887), the 210 Langdale v. Mason, reported in words "notorious resistance to law- 2 Marsh. Ins. (ed. 1810) 791. ful authority" were held to mean 211 Drinkwater v. London Assur. such an unusual and extraordinary Corp., 2 Wilson 363 (1767); City F. state of affairs that the ordinary Ins. Co. v. Corlies, 21 Wend. (N. civil authorities were overpowered. Y.) 367 (1839); Barton v. Home 212 Harris v. York, etc., Ins. Co., Ins. Co., 42 Mo. 156, 97 Am. Dec. 50 Pa. St. 341 (1865). 329 (1868); ^Etna F. Ins. Co. v. 209 EXCLUDED RISKS. 230 not within the exception of the policy. 213 But the Supreme Court of the United States held that the fire Avhich destroyed the goods was excepted from the risk assumed. Mr. Justice Strong said: 214 "The general purpose of this proviso is clear enough, but there is a contro- versy respecting the extent of the exemption made by it. It has been very strenuously argued that the words 'military or usurped power* must be construed as meaning military and usurped power; that they do not refer to military power of the government, lawfully exercised, but to usurped military power, either that exerted by an invading for- eign enemy or b} r an internal armed force in rebellion, sufficient to sup- plant the laws of the land and displace the constituted authorities. There is, it must be admitted, considerable authority and no less reason in support of this interpretation. In our view of the present case, however, we are not called upon to affirm positively that such is the true meaning of the words in the connection in which they were used in the policy now under review; for if it be conceded that it is, we are still of opinion that the fire which destroyed the premises of the plaintiffs below 'happened,' 'took place,' or occurred by means of a risk excepted in the policy. In other words, it was caused by 'invasion/ and the usurped military power of a rebellion against the government of the United States, as the contracting parties understood the terms 'invasion' and 'military or usurped power.' " 230. Theft. This provision, which excepts loss by theft, is bind- ing. 215 Where there is no such provision an insurer against fire only is liable for goods stolen during their removal to avoid impending loss by an adjoining fire. A clause to the effect that the company "will not be liable for damage to goods contained in show windows, when the damage is caused by a light in the window, nor shall the company be liable for loss by theft," applies only to theft from the windows, and not theft occurring while the property is necessarily being removed to avoid fire. 216 Where it was provided that "in case of fire or of loss or damage thereby it should be the duty of the assured to use his best endeavors 213 Boon v. ^Etna F. Ins. Co., 40 21 Liverpool, etc., Ins. Co. v. Conn. 575 (1874). Creighton, 51 Ga. 95 (1874). 2M ^Etna F. Ins. Co. v. Boon, 95 216 Leiber v. Liverpool, etc., Ins. U. S. 117 (1877). Co., 6 Bush (Ky.) 639 (1869). 14 ELLIOTT INS. 231 THE STANDARD POLICY. 210 for saving and preserving the property," it was held that the com- pany was liable for the value of the goods lost or stolen in the process of removal in accordance with this provision. 217 Where the policy made it the duty of the insured to "use all diligence in the removal and preservation of the property, and, in case of failure on his part so to do, the company would not be liable for loss or damage sus- tained in consequence of such neglect," and while complying with this provision there was a loss by theft, it was held that there was no liability on the part of the company for the loss under the provision that "this company shall not be liable to make good any loss by theft ; or any loss or damage by fire. which may happen or take place by means of any invasion, insurrection, riot, or civil commotion, or any military or usurped power." The clause relating to theft was treated as an independent provision. 218 231. Neglect to protect property. Unless expressly provided to the contrary, a policy covers damage occasioned by the negligence of the insured or his representatives. This provision imposes upon him the duty to use reasonable care to save and preserve the property at and after a fire, or when the property is endangered by fire existing in the neighborhood. In a case where the policy contained a similar provision, and it was alleged that the loss was occasioned by the "neglect to use all possible efforts by the plaintiff to save and pre- serve the property when exposed to fire," it was held error to refuse a request that plaintiffs could not recover for any loss or damage oc- casioned by their or either of their neglect to use all possible efforts to save or preserve the property when on fire or exposed thereto. It was said that the request "was almost in the precise words of the condition, and although the condition was not set up in the answer as a defense, the issue had been tendered in the complaint as to its breach and the question was one which affected the amount of dam- ages to be recovered even if the defendant failed to sustain his de- fense to the action." 219 232. Explosion. In the absence of a provision imposing liability there has been much conflict of authority as to the liability of the 217 Independent, etc., Ins. Co. v. Co., 14 Mo. 3 (1851). See, also, Agnew, 34 Pa. St. 96 (1859). See, Witherell v. Maine Ins. Co., 49 Me. also, Tilton v. Hamilton F. Ins. Co., 200 (1861); Fernandez v. Mer- 14 How. Pr. (N. Y.) 363 (1857); chants', etc., Ins. Co., 17 La. Ann. Newmark v. Liverpool, etc., Ins. 131 (1865). Co., 30 Mo. 160 (1860). -"> Ellsworth v. ^Etna Ins. Co., 89 218 Webb v. Protection, etc., Ins. N. Y. 186 (1882). 211 EXCLUDED RISKS. 232 insurer for loss caused by a fire which results from an explosion. In the leading early case in New York the policy contained a condi- tion that the insurer should not be liable for loss caused by the ex- plosion of a steam boiler. As a result of explosion fire was brought in contact with the insured property, which was consumed. It was held that the loss was within the exception and that the company was not liable. 220 The same conclusion was reached in Ohio under slightly different form of policy. It appeared that an inflammable vapor was formed in the course of the business of rectifying spirits, which came in contact with an ordinary gas jet and resulted in an explosion, which was followed by fire. 220a A later case in the same state would seem to be in conflict, but the court attempts to make a distinction between the two cases. 221 So, the United States Supreme Court held that under a similar exemption there was no liability where the explosion took place in a building across the street which resulted in an extensive fire, which destroyed several blocks of buildings, including the warehouse in which the insured property was stored. The court said: 222 "The only question was whether the fire happened or took place by means of the explosion, for if it did the defendant was not liable by the express terms of the policy." The contrary rule has been established in Illinois 223 and Penn- 220 St. John v. American, etc., Ins. fire and an explosion had occurred Co., 11 N. Y. 516 (1854). In Hay- in the course of the conflagration, ward v. Liverpool, etc., Ins. Co., 3 the rule might have been different. Keyes (N. Y.) 456 (1867), the policy So in Mitchell v. Potomac Ins. Co. expressly excepted liability for sub- (U. S.), 22 Sup. Ct. 22 (1901), a sequent fire. In Briggs v. North lighted match which came in con- American, etc., Ins. Co., 53 N. Y. tact with a vapor and caused an 446 (1873), under a policy which explosion was not a "fire" within contained the standard clause, it ap- the meaning of a policy which ex- peared that vapor from the works eludes liability for explosion, came in contact with the flame of 220 a United, etc., Ins. Co. v. Poote, a lamp, and an explosion ensued 22 Ohio St. 340 (1872). which nearly destroyed the build- 221 Boatman's, etc., Ins. Co. v. Par- ing and machinery. A fire resulted ker, 23 Ohio St. 85 (1872). which caused some damage, slight 222 Insurance Co. v. Tweed, 7 Wall, when compared with that caused (U. S.) 44 (1868). by the explosion, and it was held m Commercial Ins. Co. v. Robin- that the company was not liable son, 64 111. 265 (1872); Heuer v. for the loss caused by the explo- North-Western, etc., Ins. Co., 144 sion. It was suggested, however, 111. 393 (1893). that if the building had been on 232 THE STANDARD POLICY. 212 sylvania. 224 In the latter state it was said: "Careful examination of the question convinces me that the exception covered by this section is to be restricted to losses arising from explosions rather than ex- tended to the much broader ground of losses by fire originating from explosions." Where the policy excluded liability for damage caused by explo- sion, it was held that there was no liability where powder in another building was struck by lightning and the insured house was de- stroyed. 225 "The conclusions stated/' said the court, "are sustained by abundant authority. True it is that cases are to be found which declare principles of construction which, if applied here, would make the company liable for this loss if its liability were measured wholly by the lightning clause, but in no case which has come under our observation, and we have examined a great many, has liability been found to attach where there was a provision excluding liability for loss by explosion and the loss was caused by fire, or as here by light- ning taking effect in a distant building, and the damage being wrought to the insured property by an explosion produced by the fire or light- ning without either of the latter agencies coming in contact with the property." The standard form provides for liability for damages occasioned by fire which results from explosion, and exempts the insurer from liability for damages caused by the explosion itself. The loss by explosion must be distinguished from that caused by the subsequent fire. 226 Under this provision the insurer is liable for the loss where the explosion is the result of an antecedent fire. 227 Damage to prop- erty resulting immediately from an explosion of gunpowder caused by the application of fire is within the provision of the policy which exempts the company from liability for loss caused by explosion unless fire ensues, and then only for loss or damage by fire. 228 ^Heffron v. Kittanning Ins. Co., field, etc., Ins. Co., 53 Wis. 129 132 Pa. St. 580, 20 Atl. 698 (1890). (1881), 56 Wis. 96 (1882); Smiley 225 German F. Ins. Co. v. Roost, 55 v. Citizens' Ins. Co., 14 W. Va. 33 Ohio St. 581, 45 N. E. 1097, 60 Am. (1878). St. 711 (1897). ^Washburn v. Miami Valley Ins. ^Briggs v. North British, etc., Co., 2 Fed. 633 (1880). See Waters Ins. Co., 66 Barb. (N. Y.) 325 v. Merchants', etc., Ins. Co., 11 Pet. (1872); Briggs v. North American, (U. S.) 213 (1837). etc., Ins. Co., 53 N. Y. 446 (1873). 228 Phoenix Ins. Co. v. Greer, 61 See generally, Transatlantic F. Ins. Ark. 509, 33 S. W. 840 (1896). See Co. v. Dorsey, 56 Md. 70, 40 Am. Mitchell v. Potomac Ins. Co. (U. S.), Rep. 403 (1880); Waldeck v. Spring- 22 Sup. Ct. 22 (1901). 213 EXCLUDED RISKS. J333 233. Lightning. Under the standard policy a company is not responsible for damages caused by lightning when not assumed by specific agreement attached to or indorsed on the policy, unless fire results from the lightning, and then the responsibility is limited to the damages occasioned by the fire. Under a policy which insured a building generally against loss by fire, which contained a separate clause declaring the insurer should be liable for fire by lightning, the company was held not liable where it appeared that the building was struck by lightning and destroyed but there was no ignition or com- bustion. 229 234. Fall of building. The object of this clause is thus stated by Mr. Justice Gray: 230 "The manifest intent and purpose of the clause inserted in each of these policies, by which it is provided that 'if the building shall fall, except as the result of a fire, all insurance by this corporation on it or its contents shall immediately cease and determine,' is that the insurance, whether upon the building or upon its contents, should continue only while the building remains stand- ing as a building, and shall cease when the building has fallen and become a ruin. When substantially all the floors and the roof of e building used as a store-house fall, leaving nothing standing but the outer walls and perhaps a staircase, the building must be deemed to have fallen. When several buildings or the goods therein are insured by the same policy, the fall of one building terminates the policy, at least on that building or its contents." Before the com- pany can be held liable it must appear that the building fell as a result of fire, not that the fire resulted from the fall of the building. 231 229 For an elaborate discussion of (1880). But the company was held the subject of liability for damage liable where only about three- caused by lightning, see Babcock v. fourths of the building fell, and Montgomery, etc., Ins. Co., 4 N. Y. what was left was afterwards de- 326 (1850). Where the policy in- stroyed by fire which was commu- demnified against loss from any ac- nicated from the adjoining build- cidental damage "excepting only ing: Breuner v. Liverpool, etc., damage by fire or lightning," it was Ins. Co., 51 Cal. 101, 21 Am. Rep. held to cover damage resulting 703 (1875). See Ermentrout v. from a "sudden rise of water" or a Girard, etc., Ins. Co., 63 Minn. 305 flood: Hey v. Guarantors', etc., Co., (1895). See, also, Fireman's Fund 181 Pa. St. 220, 59 Am. St. 644 Ins. Co. v. Sholom, 80 111. 558 (1897). (1875), where it was held that the 230 Huck v. Globe Ins. Co., 127 _ building had not fallen when by Mass. 306 (1879). a windstorm it had been moved 231 Transatlantic F. Ins. Co. v. partly from the posts upon which Dorsey, 56 Md. 70, 40 Am. Rep. 403 it had rested and so far rendered 234 THE STANDARD POLICY. 214 A policy covered loss or damage on a building by fire originating from any cause, with the reservation that "if the building shall fall ex- cept as a result of fire all insurance by this company on it or its con- tents shall immediately cease and determine." The insured claimed that the explosion was caused by an antecedent fire, and the company that the explosion was the destroying agency, followed by fire. It- was held that whether ignition of the explosive substance was by a negligent or unlawful fire, or by an innocent fire not having in itself a destructive tendency, the scientific fact must be recognized that such explosions are preceded by ignition and accompanied by intense heat, and that it could not be said as a matter of law that the loss was not covered by the policy. 232 There is no liability for loss in case the building is blown down by wind before the fire has reached the insured goods, although the building is on fire at the time. 233 Where the policy describes the premises as a "two-story and basement frame, gravel roof, ironclad building, foundations, and all permanent fix- tures," and provides that if the building or any part thereof fall except as a result of fire, all insurance shall immediately cease, the insured can not recover for the destruction of the basement by fire after the building was blown down by a wind storm, on the the- ory that the basement or any part of it did not fall except as a result of fire. 234 Under this provision there can be no recovery where fire breaks out in the debris after the collapse of the structure. 233 In a case where, after the fall of a part of the building, the remainder was destroyed by fire, the court said : 236 "We can not say that the fall of two-fifths of the ice-house, leaving the other three separate compart- ments standing intact, was a fall of the building within the terms unfit for occupancy that the most - M Teutonia Ins. Co. v. Beard, 74 of the furniture had been removed. 111. App. 496 (1897). In Huck v. Globe Ins. Co., 127 Mass. 235 Liverpool, etc., Ins. Co. v. Ende, 306 (1879), it was held that the 65 Tex. 118 (1885); Nave v. Home, building had fallen; since nothing etc., Ins. Co., 37 Mo. 430, 90 Am. remained standing but the outer Dec. 394 (1866); Huck v. Globe Ins. walls, and an elevator five feet Co., 127 Mass. 306, 34 Am. Rep. 373 square in one corner. (1879). 232 Renshaw v. Fireman's Ins. Co., 23S Security Ins. Co. v. Mette, 27 33 Mo. App. 394 (1889). 111. App. 324 (1888). See, also, 233 Fred J. Kiesel & Co. v. Sun Ins. Breuner v. Liverpool, etc., Ins. Co., Office, 88 Fed. 243, 31 C. C. A. 515 51 Cal. 101 (1875); Leonard v. Ori- (1898). ent Ins. Co., 109 Fed. 286, 48 C. C. A. 369, 54 L. R. A. 706 (1901). 215 EXCLUDED PROPERTY. 235 of the condition; otherwise there is no halting point short of the proposition that the fall of any substantial part of the building puts the condition in operation and terminates the risk." 235. City ordinances. The parties are presumed to contract in view of city ordinances, and where a building is partly destroyed, and the application to repair is refused by the city authorities, it will be deemed a total loss. 237 VI. Excluded Property. This company shall not be liable for loss to accounts, bills, cur- rency, deeds, evidences of debt, money, notes, or securities; nor, un- less liability is specifically assumed hereon, for loss to awnings, bul- lion, casts, curiosities, drawings, dies, implements, jewels, manu- scripts, medals, models, patterns, pictures, scientific apparatus, signs, store or office furniture or fixtures, sculpture, tools, or property held on storage> or for repairs; * * * nor for any greater proportion of the value of plate glass, frescoes, and decorations than that which this policy shall bear to the whole insurance on the building de- scribed. 23 * 236. Exceptions and limitations. Certain articles are expressly excepted from the contract of insurance, and the only questions left are those of construction. 239 After it appears that there has been a loss by fire, the burden is upon the insurer to show that certain ar- ticles fall within the exceptions. 240 If the articles thus excepted are included in the description of the property insured, the written pro- vision controls. Thus, "patterns" are excluded by this clause, but under a policy insuring "fixed and movable machinery, engines, lathes and tools," wooden patterns which from their size and shape 237 Hamburg, etc., F. Ins. Co. v. evidences and securities of prop- Garlington, 66 Tex. 103 (1886). erty of every kind, books, wearing 238 This provision is found in the apparel, plate, money, jewels, med- standard policies of New York, New als, patterns, models, scientific cab- Jersey, Connecticut, Rhode Island, inets and collections, paintings, Wisconsin, Louisiana, Iowa, North sculpture and curiosities are not in- Dakota, South Dakota, Michigan, eluded in said insured property un- and North Carolina. The following less specially mentioned." provision appears in the standard 23 The articles enumerated differ policies of Massachusetts, Minne- in different standard forms. sota, Maine, and New Hampshire: ""Portsmouth Ins. Co. v. Reyn- "Bills of exchange, notes, accounts, olds, 32 Gratt. (Va.) 613 (1880). 236 THE STANDARD POLICY. 216 admitted of being managed and applied by the hands of one man were covered. 241 Furniture and movables are not "fixtures," 242 but it may be shown that there is a well-settled custom by which the words "store fixtures" in a policy are understood to include tools, furniture and all movable articles in shops which are necessary and used in the ordinary course of trade. 243 The words "store fixtures" in a policy insuring buildings and additions occupied as stores and shoe factory should be given their popular meaning of fixed furniture peculiarly adapted to a room or store. They were thus held not to refer to the fixtures of a factory, and not to include partitions, doors, windows, boiler fixtures, elevator, machinery, steam heating apparatus, gas- piping and speaking tubes. 244 Where the exception was of "fences and other yard fixtures, sidewalks and store furniture and fixtures," it was held that the shelving in a house and office inclosed in a rail- ing iu one corner of the interior were store fixtures within the mean- ing of the exception. 245 Furniture stored in a hotel to be used in the business of a hotel is not within this exception. 246 The word "storage" means safe custody, and as here used applies only to the storing of merchandise for trade purposes, and when storing is the principal object of the deposit. 247 Thus, it does not apply to goods kept merely for sale, raw material kept on hand for the purpose of being manufactured, 248 or to goods temporarily left in a storeroom. 249 Silver forks and tea and table spoons are not "plate," and are not excluded by a clause excluding "plate" and other articles. 250 241 Lovewell v. Westchester F. Ins. v. Gwathmey, 82 Va. 923, 1 S. E. Co., 124 Mass. 418, 26 Am. Rep. 671 209 (188T). As to plate and paint- (1878). ings, see Moadinger v. Mechanics' ""Holmes v. Charlestown, etc., F. Ins. Co., 2 Hall (N. Y.) 490 Ins. Co., 10 Mete. (Mass.) 211 (1829). (1845). 247 New York, etc., Ins. Co. v. 243 Whitmarsh v. Conway F. Ins. Langdon, 6 Wend. (N. Y.) 623 C6., 16 Gray (Mass.) 359 (1860). (1831). ""Thurston v. Union Ins. Co., 17 248 Vogel v. People's, etc., Ins. Co., Fed. 127 (1883). 9 Gray (Mass.) 23 (1857). 245 Commercial F. Ins. Co. v. Al- =*" Hynds v. Schenectady, tc., len, 80 Ala. 571 (1886). Ins. Co., 11 N. Y. 554 (1854). 246 Continental Ins. Co. v. Pruitt, 25 Hanover F. Ins. Co. v. Mannas- 65 Tex. 125 (1885); Home Ins. Co. son, 29 Mich. 316 (1874). 217 EXCLUDED PROPERTY. 8 237 I 237. Plate glass, frescoes and decorations. These articles are not excepted from the contract of insurance, as this clause merely provides that in case of loss the amount of recovery shall not be any greater proportion of their value than the policy bears to the whole insurance on the building described. 251 281 Moadinger v. Mechanics' F. Ins. Co., 2 Hall (N. Y.) 490 (1829). CHAPTEE XI. PROVISIONS OF THE STANDARD POLICY, CONTINUED. VII. Provisions Relating to Inter- SEC. est in and Care of Property. 272. SEC. 273. 245. Other insurance. 246. Definition Different interests. 274. 247. Whether valid or invalid. 248. Where the words valid or in- 275. valid do not appear. 276. 249. Consent of the company 277. Waiver. 278. 250. Policy covering part of the property. 279. 251. Operation of manufacturing es- 280. tablishment. 281. 252. Running over-hours. TT 253. Increase of risk. 282 254. Changes in adjoining property. 255. Effect of increase of hazard. X. 256. Repairs Employment of me- 283. chanics. 257. Ownership. 284. 258. Incumbrances. 285. 259. Illustrations. 260. Illustrations of breach of con- dition. 261. Building on leased ground. 262. Incumbrance by chattel mort- gage. 263. Foreclosure proceedings. 264. Generation of illuminating gas. VIII. Change in Interest, Title or 290. Possession. 291 265. Scope of provision. 266. Transfer of part interest. 267. Executory contract of sale. 268. Incumbrances. 269. Defeasible conveyances. XIII 270. Invalid conveyances. 293. 271. Sale with purchase-money mort- 294. gage. 295. (218) XI. 286. 287. 288. XII. 292. Conveyance to wife of insured. Transfers by and between part- ners. Transfers between joint own- ers. Legal process or judgment. By judgment. By partition. Assignment and bankruptcy proceedings. Transfer by death. Change of possession. Lease of property. Assignment. Assignment of policy. Prohibited Articles. Use of property Prohibited articles. Prohibited articles, continued. Exception in favor of kerosene oil. Vacancy. In general. Construction. Vacant and unoccupied not synonymous. Construction when applied to dwelling house. Building Contents Vacancy. Illustrations of construction of this provision. Authorized Change of Location. In general. . Renewal of Contract. In general. Illustrations. Reformation of policy. 219 INTEREST CAKE OF PROPERTY. 245 XIV. Cancellation of Policy. SEC. SEC. 300. What amounts to a cancella- 296. In general. tion. 297. The time. X V. Waiver. 298. Authority of agent to cancel. 3 01 Limitations upon the power to 299. Return of premium. waive. VII. Provisions Relating to Interest in and Care of Property. This entire policy,, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in- part by this policy; or if the subject of insurance be a manufacturing establishment, and it be operated in whole or in part at night later than ten o'clock, or if it cease to be operated for more than ten consecutive days; or if the hazard be increased by any means within the control or knowledge of the insured; or if mechanics be employed in building, altering or re- pairing the within described premises for more than fifteen days at any one tim t e; or if the interest of the insured be other than un- conditional and sole ownership; or if the subject of insurance be a building on ground not owned by the insured in fee-simple; or if the subject of insurance be personal property and be or become in- cumbered by a chattel mortgage; or if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property covered by this policy by virtue of any mortgage or trust deed; * * * or if illuminating gas or vapor be generated in the described building (or adjacent thereto) for use therein. 245. Other insurance. The entire policy shall be void if the insured at the time of the execution of the policy has, or shall there- after make or procure, any other contract of insurance, whether valid or not, on the property covered in whole or in part by the policy. 1 1 This clause is found ; in the shall hereafter make any other in- standard policies of New York, New surance on the said property with- Jersey, Connecticut, Rhode Island, out the assent of the company." The Wisconsin, Louisiana, Iowa, North New Hampshire policy provides Dakota, South Dakota, Michigan, that: "The policy shall be void if and North Carolina. The following the insured at the time of any loss provision is found in the standard has any other insurance on said policies of Massachusetts, Minne- property, without the assent in writ- sota and Maine: "The policy shall ing or in print of the company." be void if the assured now has or 245 THE STANDARD POLICY. 220 A provision rendering the policy void if the insured has, or shall make or procure other insurance, is reasonable and valid, 2 and has for its object the prevention of an increase of the moral hazard without knowledge of the company. 3 "Those insurance policies which pro- vide for the nullity of the contract in the event of other insurance being effected upon the same property, without the assent of the company, have never been held to be absolutely null when the contract was all regular upon its face but merely voidable at the option of the insurer. The object of such clauses in an insurance policy is to pre- vent other insurance and the consequent temptation to burn or lessen protection against fire." 4 The provision in the policy is effective, al- though not referred to by the parties before the policy is issued. A party accepting a policy is bound by its terms, conditions and limi- tations, and in the absence of fraud or mistake is conclusively pre- sumed to know its contents. In a recent case, which arose under the standard form of policy, the court said: 5 "The clause of the policy quoted declares, in effect, that the entire policy shall be void in case the assured had or should procure any other insurance on the prop- erty covered by the policy, or incumbered the same by a chattel mort- gage, 'unless otherwise provided by agreement indorsed thereon or 2 Commercial Union Assur. Co. v. Young, 86 Ala. 424, 11 Am. St. 51 Norwood, 57 Kan. 610, 47 Pac. 529 (1888). Concealment of the exist- (1897) [citing Allen v. German, etc., ence of other insurance in no way Ins. Co., 123 N. Y. 6, 25 N. E. 309 tends to show fraud: German, etc., (1890); Union Nat'l Bank v. Ger- Ins. Co. v. Paul (Ind. Ter.), 53 S. man Ins. Co., 18 C. C. A. 203, 71 Fed. W. 442 (1899). 473 (1896); Funke v. Minnesota, 4 Saville v. ^Etna Ins. Co., 8 Mont, etc., Ins. Ass'n, 29 Minn. 347, 13 N. 419, 20 Pac. 646 (1889). W. 164 (1882); Bard v. Penn, etc., 5 Wilcox v. Continental Ins. Co., Ins. Co., 153 Pa. St. 257, 25 Atl. 85 Wis. 193, 55^ N. W. 188 (1893); 1124 (1893)]; Barnard v. National O'Brien v. Home Ins. Co., 79 Wis. F. Ins. Co., 27 Mo. App. 26 (1887); 399, 48 N. W. 714 (1891); Bosworth Northern Assur. Co. v. Grand View v. Merchants' F. Ins. Co., 80 Wis. Bldg. Ass'n (U. S.), 22 Sup. Ct. 133 393, 49 N. W. 750 (1891). Where (1902). In Georgia Home Ins. Co. v. a policy is issued upon property on Rosenfleld, 95 Fed. 358 (1899), it was which there is already $3,000 insur- held that the fact that a short term ance and contains the words "total policy taken in violation of this concurrent insurance $4,000," the provision expires before the loss, insured may take $1,000 additional will not reinstate the policy. insurance without the consent of "O'Leary v. Merchants', etc., Ins. the company: East Texas F. Ins. Co. Co., 100 Iowa 173, 66 N. W. 175, 69 N. v. Blum, 76 Tex. 653, 13 S. W. 572 W. 420 (1895); Queen Ins. Co. v. (1890). 221 INTEREST CARE OF PROPERTY*. 246 added thereto.' There is no pretense of any agreement indorsed thereon, or otherwise, and such prior insurance and chattel mort- gage are admitted in the complaint. Such being the facts, it fol- lows from the authorities cited that the policy was void in its in- ception unless the condition was waived by the company." A provision requiring the insured to give notice of "any other insurance effected" refers to prior as well as subsequent insurance. 6 246. Definition Different interests. The words "other," "double" and "overinsurance" are used indiscriminately to describe the obtaining of two or more policies upon the same interest, against the same risk and for the benefit of the same person. 7 Although it must be upon the same interest it need not be in the same name. 8 The provision is not violated by the existence of a prior policy in which the insured has no interest and from which he can receive no benefit. 9 An insurance by a partner of his undivided interest is not a breach of the condition. 10 It follows that different interests may be insured j 11 such as that of the owner of the land and a person hold- ing under a contract for a deed, 12 or a mortgagor and mortgagee. 13 But where the policy is in the name of the mortgagor, and is made pay- able to the mortgagee as his interest may appear, a subsequent policy obtained by the mortgagor is within the provision. 14 A mortgagee to 8 Warwick v. Monmouth, etc., F. " Nussbaum v. Northern Ins. Co., Ins. Co., 44 N. J. L. 83, 43 Am. Rep. 37 Fed. 524 (1889); Mitchell v. 343 (1882). Home Ins. Co., 32 Iowa 421 (1871); 7 California Ins. Co. v. Union, etc., Herkimer v. Rice, 27 N. Y. 173 Co., 133 U. S. 387 (1890); Lebanon, (1863); Home Ins. Co. v. Bait, etc., Ins. Co. v. Kepler, 106 Pa. St. Warehouse Co., 93 U. S. 527 (1876); 28 (1884); JEtna F. Ins. Co. v. Ty- City, etc., Bank v. Pennsylvania F. ler, 16 Wend. (N. Y.) 385, 30 Am. Ins. Co., 122 Mass. 165 (1876). Dec. 90 (1836); Clarke v. Western 12 ^Etna F. Ins. Co. v. Tyler, 16 Assur. Co., 146 Pa. St. 561, 28 Am. Wend. (N. Y.) 385 (1836). St. 821 (1891). "Wheeler v. Watertown F. Ins. 8 Perkins v. New England, etc., Co., 131 Mass. 1 (1881); Guest v. Ins. Co., 12 Mass. 214 (1815); Godin New Hampshire F. Ins. Co., 66 v. London Assur. Co., 1 Burr. 489 Mich. 98, 33 N. W. 31 (1887); Wood- (1758); DeWitt v. Agricultural Ins. bury v. Charter Oak, etc., Ins. Co., Co., 157 N. Y. 353, 51 N. E. 977 31 Conn. 517 (1863). (1898). "Gillett v. Liverpool, etc., Ins. 9 Copeland v. Phoenix Ins. Co., 96 Co., 73 Wis. 203, 9 Am. St. 784 Ala. 615, 38 Am. St. 134 (1892). (1888); Sias v. Roger Williams Ins. 10 Hall v. Concordia F. Ins. Co., Co., 8 Fed. 187 (1880). 90 Mich. 403, 51 N. W. 524 (1892). 247 THE STANDARD POLICY. 222 whom loss in a policy is made payable, and who accepts and retains a policy which shows on its face that the mortgagor is insured, can not say that he is not affected by the imputed knowledge of the mortgagor as to the issuance of the policy, for the purpose of avoiding the effect of other insurance procured by the latter. 15 But invalid in- surance taken by the owner of the property in violation of this pro- vision can not be considered in determining the right of the mort- gagee when the policy provides that his interest shall not be invali- dated by any act of the owner. 16 Contemporaneous insurance is within this provision. 17 So, a provision is broken by a prior policy existing in the name of the joint owner of the property. 18 The insured is not affected by a subsequent policy procured by a stranger without his knowledge and consent, 19 although he may be- come bound by ratifying such acts or accepting benefits under the insurance. Thus, previous insurance taken out by an unauthorized agent, and of which the insured had no knowledge until after the loss, does not avoid the policy. 20 But where, without the knowledge of the insured, his wife procured additional insurance upon the property covered by the policy, and after the loss he received the benefits of the additional insurance, it was held that by thus accept- ing the benefits of the unauthorized act he ratified the same. 21 247. Whether valid or invalid. These words were added for the purpose of avoiding controversy as to the effect of subsequent in- surance under a policy which contains a provision which renders it void or voidable by the existence of a prior policy. It has been gen- erally sustained, although some courts have attempted to construe it 15 Holbrook v. Baloise F. Ins. Co., joint ownership was other insur- 117 Gal. 561, 49 Pac. 555 (1897). ance. 10 Eddy v. London Assur. Corp., 1!) Carpenter v. Providence Ins. 143 N. Y. 311, 25 L. R. A. 686 (1894). Co., 16 Pet. (U. S.) 495 (1842). See "United Firemen's Ins. Co. v. Phoenix Ins. Co. v. Michigan, etc., Thomas, 92 Fed. 127, 34 C. C. A. R. Co., 28 Ohio St. 69 (1875). 240 (1899). ^Cowart v. Capital City Ins. Co., "Horridge v. Dwelling House 114 Ala. 356, 22 So. 574 (1896); Mc- Ins. Co., 75 Iowa 374, 39 N. W. 648 Kelvy v. German, etc., Ins. Co., 161 (1888). In Pitney v. Glens Falls Pa. St. 279, 28 Atl. 1115 (1893); Ins. Co., 65 N. Y. 6 (1875), it was Hughes v. Insurance Co., 40 Neb. held that where property owned 626, 59 N. W. 112 (1894). in common was insured, a subse- 21 German Ins. Co. v. Emporia, etc., quent policy effected by one of the Ass'n, 9 Kan. App. 803, 59 Pac. 1092 owners without mentioning the (1900). 223 INTEREST CARE OF PROPERTY. 248 away. 22 Thus, in New Hampshire, it was held that as a subsequent void policy is a mere nullity it can have no effect upon existing rights. 23 So, in Indiana, it was held that there was a breach only when it was necessary to offer extrinsic evidence to show that the subsequent policy was invalid. 24 Where the same conditions are con- tained in a policy, it is held in Michigan 25 that the subsequent policy is void, and in North Carolina 26 that it affects the prior policy. In Massachusetts it was recently held that in an action on a policy con- taining a condition against other insurance, the fact that the other policies were issued by other companies either before or after the one in suit, without the consent of the company, or that suit is pending thereon, is no defense where such policies contain the same provisions. Each policy contained a rider, similar to that on the policy on which the action was brought, which contained the words: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has, or shall hereafter make or procure, any other contract of insurance, whether valid or not, on the property, in whole or in part, covered by this policy." 27 "It is clear," said the court, "that under our decisions neither of these policies affords any defense to the action. If the policy of the' Citizens' Company was issued before the policy in suit it became void by its terms when the defendant issued its policy. If it was issued subsequently, as was the policy of the Security Company, for the same reason neither it nor the policy of the latter company took effect." Where the prior policy had become void by breach of con- dition before the issuance of the policy in question, which contained the "valid or invalid" clause, it was held that there was no breach of condition. 28 248. Where the words "valid or invalid" do not appear. There has been much controversy over the effect of subsequent insurance which, by its terms, is rendered void or voidable by the existence of 22 Phoenix Ins. Co. v. Copeland, 90 25 Keyser v. Hartford F. Ins. Co., Ala. 386 (1890); Sugg v. Hartford F. 66 Mich. 664, 33 N. W. 756 (1887). Ins. Co., 98 N. C. 143, 3 S. E. 732 2 " Sugg v. Hartford F. Ins. Co., 98 (1887); Bigler v. New York Ins. Co., N. C. 143, 3 S. B. 732 (1887). 22 N. Y. 402 (1860). * Hayes v. Milford, etc., Ins. Co., 23 Gee v. Cheshire, etc., Ins. Co., 55 170 Mass. 492, 49 N. E. 754 (1898), N. H. 65, 20 Am. Rep. 171 (1874). citing earlier cases. 24 Phenix Ins. Co. v. Lamar, 106 28 Stevens v. Citizens' Ins. Co., 69 Ind. 513, 55 Am. Rep. 764 (1886). Iowa 658 (1886). 248 THE STANDARD POLICY. 224 prior insurance. The importance of cases discussing this question has been considerably decreased by the adoption of the standard form. In a recent case in Maryland it was said: 29 "Does the fact that a subsequent policy was procured without the consent of the first underwriter avoid the first policy under the above quoted con- ditions contained therein against other insurance, when the second policy explicitly declares that the company which issued it shall not be liable for loss if there is other prior insurance, whether valid or not, held on the same property without the written consent of the second insure^ ? The doctrine laid down by the highest tribunals of Massachusetts, Pennsylvania and other states is that the subse- quent insurance, being invalid at the time of the loss by reason of the breach of the condition therein, the prior insurance is good, and the first underwriter is liable on the policy issued by it. 30 On the other hand, it has been held elsewhere that the subsequent policy, whether legally enforceable or not, or whether voidable on its face or voida- ble for extrinsic matter, works a forfeiture of the prior policy. 31 29 Sweeting v. Mutual Jf; Ins. Co., 83 Md. 63, 32 L. R. A. 570 (1896). 30 Thomas v. Builders', etc., Ins. Co., 119 Mass. 121, 20 Am. Rep. 317 (1875); Allison v. Phoenix Ins. Co., 3 Dill. (U. S.) 480 (1873); Fireman's Ins. Co. v. Holt, 35 Ohio St. 189 (1878); Knight v. Eureka, etc., Ins. Co., 26 Ohio St. 664, 20 Am. Rep. 778 (1875); Stacey v. Franklin F. Ins. Co., 2 Watts & S. (Pa.) 506 (1841); Jackson v. Massachusetts Mut. F. Ins. Co., 23 Pick. (Mass.) 418, 34 Am. Dec. 69 (1839); Clark v. New England Mut. F. Ins. Co., 6 Gush. (Mass.) 342, 53 Am. Dec. 44 (1850); Hardy v. Union, etc., Ins. Co., 4 Allen (Mass.) 217 (1862); Philbrook v. New England, etc., Ins. Co., 37 Me. 137 (1853); Lindley v. Union Farmers', etc., Ins. Co., 65 Me. 368, 20 Am. Rep. 701 (1876); Gale v. Belknap County Ins. Co., 41 N. H. 170 (1860); Gee v. Cheshire, etc., Ins. Co., 55 N. H. 65 (1874); Jersey City Ins. Co. v. Nichol, 35 N. J. Eq. 291, 40 Am. Rep. 625 (1882); Schenck v. Mercer, etc., Ins. Co., 24 N. J. L. 447 (1854); Rising Sun Ins. Co. v. Slaughter, 20 Ind. 520 (1863). In St. Paul, etc., Ins. Co. v. Knicker- bocker, etc., Co., 93 Fed. 931, 36 C. C. A. 19 (1899), it was held that a provision making the policy void upon taking other insurance, so that the entire amount on the policy shall exceed a certain sum, is not violated by additional insurance to be valid only in case of deficiency of the prior policies below the amount so named, although the combined face value of the policies exceeds the amount so limited. 31 Carpenter v. Providence, etc., Ins. Co., 16 Pet. (U. S.) 495, 10 L. ed. 1044 (1842); Allen v. Merchants', etc., Ins. Co., 30 La. Ann. 1386, 31 Am. Rep. 243 (1878); Somerfield v. State Ins. Co., 8 Lea (Tenn.) 547 (1881); Funke v. Minnesota, etc., Ins. Ass'n, 29 Minn. 347, 43 Am. Rep. 216 (1882); Lackey v. Georgia Home Ins. Co., 42 Ga. 456 (1871); Bigler v. New York, etc., Ins. Co., 22 N. Y. 225 INTEREST CARE OF PROPERTY. 248 There is still an intermediate view taken by the Supreme Court of Iowa 32 to the effect that the question of the validity of the prior in- surance turns upon whether the subsequent policy has in fact been avoided. If the second policy is recognized by the insurer issuing it to be a valid policy, any breach of conditions being waived, this makes it valid insurance and avoids the first policy; but if the subsequent policy has been rescinded for condition broken, there is no other insur- ance so as to invalidate the prior policy. The obvious and insuperable objection to this latter view lies in the fact that it makes the validity of the contract between the parties under the first policy depend not upon their own agreement nor the effect of that agreement, nor upon their own acts, or acts of either of them, but upon what another person, the second underwriter, a stranger to the first contract, may volunta- rily do with respect to affirming or repudiating a totally different and distinct contract of insurance, without the slightest reference to any judicial inquiry as to the validity or invalidity of the second policy or its resultant legal effect upon the first." The court fur- ther said: "Giving to the words of the contract of insurance set forth in the first policy their obvious meaning, and bearing in mind that they do not, as do those used in the second policy, relate to or specifically designate invalid insurance, the only tenable conclusion is, that the intention of both the contracting parties was to strike down the first policy only on condition that the second was valid and binding. And this is the conclusion reached by the best considered cases. If the 'other insurance' does not mean such a contract as is legally binding and enforceable, then no certain tests can be applied, and we abandon all legal guides. As stated in Missouri, 'the sound conclusion would seem to be that in a case like this the other in- surance must be legal insurance, and that the true issue is whether the policy, not on its face, but on all the facts legally in evidence, is binding upon the insurer/ >: So, in a recent case in Illinois, 33 it was held that there can be no existing insurance upon property within the meaning of this clause unless such insurance is valid and in full force and capable of being legally enforced in case of loss. Hence, if one takes a policy of insurance containing a provision that 402 (I860); Stevenson v. Phoenix 33 Iowa 325 (1871); Behrens v. Ger- Ins. Co., 83 Ky. 7 (1884). mania F. Ins. Co., 64 Iowa 19 (1884). 32 Hubbard v. Hartford F. Ins. Co., 33 Germania F. Ins. Co. v. Klewer, 129 111. 599 (1899). 15 ELLIOTT INS. THE STANDARD POLICY. 226 it shall be void in case of other insurance on the same property without the consent of the company indorsed on the policy, and at the same time the insured has another policy on the property not consented to by indorsement on the latter policy, this will render the last policy inoperative so long as the prior policy is in force, but the latter will attach and become operative on the expiration of the prior policy. 249. Consent of the company Waiver. By the terms of this policy the consent of the company to other insurance must be ob- tained and indorsed upon the policy, hence a mere oral permission to the insured by the local agent who issued the policy to take out additional insurance is not binding upon the company and does not prevent a forfeiture where the policy contains a provision that no agent shall have power to waive any provisions or conditions except by writing attached to the policy. 3 * This provision is effective against the act of the secretary and general agent of the company where there is no proof that he had authority to act for the com- pany. 35 But it is always a mere question of authority. 36 In one case, where additional insurance was obtained with the knowledge and consent of the agent who issued the policy, it was left to the jury to determine whether the consent of the company had been given. 37 Evidence that notice of additional insurance was mailed to the com- pany, where its receipt is denied, is not sufficient to show compliance with a provision requiring that notice of all additional insurance shall be given to the company. 38 A provision forbidding additional insur- ance is for the benefit of the company and may be waived by it. 39 34 Northern Assur. Co. v. Grand ^ O'Leary v. Merchants', etc., Ins. View Bldg. Ass'n (U. S.), 22 Sup. Ct. Co., 100 Iowa 173, 62 Am. St. 555 133 (1902), reversing 41 C. C. A. (1896). 207; Lippman v. ^Etna Ins. Co., 108 See Hartford F. Ins. Co. v. Ga. 391, 33 S. E. 897 (1899); Hutch- Small, 66 Fed. 490 (1895); Cleaver inson v. Western Ins. Co., 21 Mo. 97, v. Traders' Ins. Co., 71 Mich. 414, 15 64 Am. Dec. 218 (1855); Carpenter Am. St. 275 (1888). v. Providence, etc., Ins. Co., 16 Pet. 37 Grubbs v. Virginia, etc., Ins. Co., (U. S.) 495 (1842). Where the pol- 110 N. C. 108, 14 S. E. 516 (1892). icy does not require the notice to ** Fairfield Packing Co. v. South- be in writing, although it requires ern Mut. Ins. Co., 193 Pa. St. 184, the consent of the company to be 44 Atl. 317 (1899). in writing, the notice may be by * Bigelow v. Granite, etc., Ins. Co., parol: Kenton Ins. Co. v. Shea, 6 94 Me. 39, 46 Atl. 808 (1900); Kahn Bush (Ky.) 174, 99 Am. Dec. 676 v. Traders' Ins. Co., 4 Wyo. 419, 62 (1869). Am. St. 47 (1893). 227 INTEREST CARE OF PROPERTY. , 250 The company is charged with knowledge of facts known to its agent at the time the policy is issued, and if the agent then knew of existing insurance the company is estopped thereafter to claim a forfeiture for breach of condition against other insurance. 40 It has been held that the company is under an obligation to take some affirmative action after it learns of the violation of this con- dition against additional insurance, and that if it fails to do so within a reasonable time after notice it waives the stipulation. 41 But in a case where the policy also contained a clause authorizing the com- pany to terminate at any time at its option by giving notice and re- funding a ratable proportion of the premium, and there was evidence tending to show that notice of additional insurance was communicated to the company's agent at the time of or before the fire, the court said : 42 "The provision in the policy authorizing the company to ter- minate the contract at any time, at its option, bore no special relation to that concerning other insurance. By the plain terms of the policy, other insurance without the consent of this company would ipso facto avoid the contract ; and in case of a contract thus avoided, it would not be obligatory on the insurer to repay any of the unearned premium; nor would he be required to give notice that he would insist upon and avail himself of the proper legal effect of the agreement. It re- quired no affirmative act of election on the part of the company to make operative the clause avoiding the contract whenever the specified conditions should occur. * * * The fault in the charge is in the proposition that the failure to cancel the policy by the affirm- ative action on the part of the company after it had notice of addi- tional insurance, would of itself be effectual as an election to continue the policy in force." 250. Policy covering a part of the property. By the weight 0$ authority, where the contract is entire, subsequent insurance upon a 40 Northern Assur. Co. v. Grand Pac. 822 (1897) ; Quigley v. St. Paul, View Bldg. Ass'n, 101 Fed. 77, 41 C. etc., Trust Co., 60 Minn. 275, 62 N. C. A. 207 (1900) [but this case was W. 287 (1895). reversed in 22 Sup. Ct. 133 (1902)]; "Alabama, etc., Assur. Co. v. Hackett v. Philadelphia Underwrit- Long, etc., Co., 123 Ala. 667, 26 So. ers, 79 Mo. App. 16 (1899); Swain v. 655 (1899). Macon F. Ins. Co., 102 Ga. 96, 29 S. 42 Johnson v. American Ins. Co., 41 E. 147 (1896); McBryde v. South Minn. 396, 43 N. W. 59 (1889). See Carolina, etc., Ins. Co., 55 S. C. 589, also, Robinson v. Fire Ass'n, 63 74 Am. St. 769 (1899); Strauss v. Mich. 90, 29 N. W. 521 (1886). Phenix Ins. Co., 9 Colo. App. 386, 48 250 THE STANDARD POLICY. 228 part of the property will defeat the entire policy. Thus, where a part of the insurance was apportioned to the building and a part to household goods and furniture therein, the taking of subsequent insurance upon the building alone was held to avoid the entire pol- icy. "In order, therefore, to give effect to the condition, according to the intent and purpose of the contract/' said the court, "it follows necessarily that where the property covered by one policy, although consisting of separate items, appears to be so situate as to constitute substantially one risk, then, even though separate amounts of the insurance be apportioned to each separate item or class of property, if the consideration for the contract and the risk are both indivisible, the contract must be treated as entire, nevertheless. To such a policy, the principles governing entire and indivisible contracts are appli- cable, for the reason that the matter which renders the policy void as to a part affects the risk of the insurer in respect to other items in the same manner as it affects those items in respect to which the contract is avoided. In such cases the only effect of the apportioning of the amount of the insurance upon separate items is to. limit the extent of the company's liability to some specified sum upon each item or class of property insured." 43 But in Pennsylvania it was held that where one policy covers a building and a subsequent policy in another company covers the building, machinery, shafting, etc., it is not a case of double insur- ance and not within the meaning of the clause. 44 So, where the first policy covered "electric lamps, shades, wires and all other electric fixtures and appurtenances," and a subsequent policy covered house- hold goods and "fixtures of every description," there was no appor- tionment of the risk between the different kinds of property insured, and it was held that there was not a case of double insurance. 45 In Iowa, under a policy which contained the words, "other concur- rent insurance permitted," in the absence of any limitations in amount, it was held that the latter policy need not exactly concur in covering all of the period of the time of insurance. 46 48 Havens v. Home Ins. Co., Ill Co. v. Michigan, etc., R. Co., 28 Ohio Ind. 90, 12 N. E. 137 (1887). See St. 69 (1875). Pitney v. Glens Falls Ins. Co., 65 " Sloat v. Royal Ins. Co., 49 Pa. N. Y. 6 (1875); Liscom v. Boston, St. 14, 88 Am. Dec. 477 (1865). etc., Ins. Co., 9 Met. (Mass.) 205 "Clarke v. Western Assur. Co., (1845); Quarrier v. Peabody Ins. 146 Pa. St. 561, 28 Am. St. 821 Co., 10 W. Va. 507 (1877); Illinois, (1892). See Joyce Ins., 2472, etc., Ins. Co. v. Fix, 53 111. 151, 5 2473. Am. Rep. 38 (1820); Phoenix Ins. 4S Washburn-Halligan, etc., Co. v. 229 INTEREST CARE OF PROPERTY. 251 251. Operation of manufacturing establishment. If the subject of the insurance is a manufacturing establishment, and it is operated in whole or in part at night later than ten o'clock, or if it cease? to be operated for more than ten consecutive days without the consent of the company indorsed on the policy, the entire contract is rendered invalid. 47 A breach of this condition renders the policy immediately void, 48 and the fact that a watchman is employed on the premises during the time so that there is no increase of risk, is immaterial. 49 Where the insured goods are exclusively personal property, such as machinery and merchandise, and the policy provides that if the property "is a manufacturing establishment" the non-operation of the establishment will avoid the policy, such non-operation will not avoid Merchants', etc., Ins. Co., 110 Iowa 423, 81 N. W. 707 (1900). In this case the court said: "The authori- ties determining when the insurance "is double throw little light on the question. Besides, these are in con- flict, the supreme court of Pennsyl- vania holding that policies in order to constitute double insurance must cover identically the same property: Clarke v. Western Assur. Co., 146 Pa. St. 561, 23 Atl. 248, 15 L. R. A. 127 (1892); while that of New York, in overruling an earlier case, has ad- judged it double insurance if one policy includes only part of the property covered by the other: Og- den v. East River Ins. Co., 50 N. Y. 388, 10 Am. Rep. 492 (1872)." 47 This provision is found in the standard policies of New York, New Jersey, Connecticut, Rhode Island, Wisconsin, Louisiana, Iowa, North Dakota, South Dakota, Michigan and North Carolina. The policies of Massachusetts, Minnesota and Maine provide that: "This policy shall be void if the subject of the insurance be a manufacturing establishment, running in whole or in part extra time, except that such establish- ments may run in whole or in part extra hours, not later than nine o'clock P. M., or if such establish- ments shall cease operations for more than thirty days without per- mission in writing indorsed hereon." The New Hampshire policy provides that: "This policy shall be void during the existence and continu- ance of things stipulated against as follows: * * * if the subject of the insurance be a manufacturing establishment in which the works or machinery are operated more than the customary or legal hours, or all night, without the written or printed assent of this company thereto, except that permission is hereby given to operate machinery extra hours, not later than 10 o'clock P. M., for the purpose of equalizing work, a competent man other than the regular watchman being kept in charge of those rooms in which shafting and belts are run- ning, but where the machinery is not at work; or if such establish- ment shall cease operation for more than thirty days without permission in writing indorsed thereon." 48 Cronin v. Fire Ass'n, 123 Mich. 277, 82 N. W. 45 (1900). 49 Dover Glass Works Co. v. Amer- ican F. Ins. Co., 1 Marvel (Del.) 32, 29 Atl. 1039, 65 Am. St. 264 (1895). 251 THE STANDARD POLICY. 230 the policy on the machinery.* A description of the insured prop- erty as a distillery is not a representation that it is being operated as such. 51 This provision is not broken by a temporary suspension of business, as the contract must be construed in the light of the customary methods of conducting a manufacturing establish- ment. 52 Thus, a policy upon a sawmill run by water is not in- validated by delays and interruptions incident to the business caused by low water, diminished custom, or derangement of machin- ery. 53 In one case the court defined the meaning of the words, "ceased to be operated," as follows : 54 "The operation of a large man- ufacturing establishment means doing everything necessary to its successful and profitable management. It would necessarily be the work of many hands, and the operation would be multiplied many fold. The duties of the many employes would be quite dissimilar and entirely independent of each other, but all necessary to either the profitable or successful operation of the factory. * * * The ceasing to perform any one thing for the time being of the many required to be done would certainly not be to cease to operate the fac- tory. Any one might be temporarily suspended and yet the factory be said to be in successful operation. * * * The operating of an exten- sive factory does not mean that it shall be kept employed in all its various departments every da that is, all the time. * * * It may properly be closed down over Sundays and all legal holidays, or for any cause that a prudent manager of such an establishment would deem prudent and best for the interests of the owners. On the same principle, one department may be kept in operation and others cease temporarily. It might be the fabrics manufactured might be in excess of the sales or demands of the trade, and for that reason a prudent superintendent might deem it best to stop the spindles and the looms for a season ; or the sales might be in excess of the sup- plies, and for that reason no goods would be contracted for a time. Would any one say that such a partial stoppage would be a violation Thenix Ins. Co. v. Holcombe, 57 72 N. Y. 117 (1878); Rosecrans v. Neb. 622, 73 Am. St. 532 (1899); North Amer. Ins. Co., 66 Mo. App. Halpin v. JEtna, F. Ins. Co., 120 N. 352 (1896); Glendale Woolen Co. v. Y. 73, 23 N. E. 989, 8 L. R. A, 79 Protection Ins. Co., 21 Conn. 19 (1890). (1850); Luce v. Dorchester, etc., Ins. 51 Louck v. Orient Ins. Co., 176 Pa. Co., 105 Mass. 297 (1870). St. 638, 33 L. R. A. 712 (1896). "American F. Ins. Co. v. Brighton 52 Lebanon, etc., Ins. Co. v. Leath- Cotton Mfg. Co., 125 111. 131, 17 N. B. ers (Pa.), 8 Atl. 424 (1887). 771 (1888). 53 Whitney v. Black River Ins. Co., 231 INTEREST CARE OF PROPERTY. 251 of the contract of insurance contained in the policy in suit? So narrow a construction would make the contract of no value to the assured, and to observe it would render the usual and ordinary man- agement of such establishments impracticable." It was further held that the temporary suspension of a large portion of the works was permissible within the terms of the contract. Within this rule the temporary cessation of the operation of the machinery of a sawmill during the illness of the sawyer, the other business going on as usual, does not violate the condition. 55 So, the closing of a mill for forty-two days without notice to the in- surers, occasioned by the want of logs, which are daily expected but detained by low water, will not avoid a policy conditioned to become void "if the mill should cease to be operated without notice to or consent of the company." 56 The court said: "It must mean a closing with the intention of ceasing operation, not the shutting down for a few days or weeks because of the happening of an event incident to the conducting of the mill in that locality, which could reasonably be expected." Where the insurance was upon a tannery it appeared that for some time prior to the fire the insured had not done any tanning in the shops connected with the property because of want of material. He was negotiating with parties for hides and stocks, and had given orders, but they had not been filled when the fire occurred. But during all the time the property was occupied and used as a tannery; bark was purchased, prepared and placed in the sheds, liquors were kept in the vats ready for use, and the machinery and tools all remained on the premises. It was held that the mere temporary suspension of the business for the purpose of re- pairing and for the want of a supply of material was not "ceasing to operate the establishment" within the meaning of the policy. 57 But a sawmill which has stopped running for the winter is "shut down," although men are employed in and about the premises in shipping lumber. 58 Where the policy contained a condition that "should any mill insured by this company be shut down or remain idle from any cause whatever more than twenty days continuously," it should be 55 Ladd v. .Dtna Ins. Co., 147 N. Y. '" Lebanon Mut. Ins. Co. v. Leath- 478, 42 N. E. 197 (1895). ers (Pa.), 8 Atl. 424, Woodruff Ins. 511 City Planing, etc., Co. v. Mer- Cas. 172 (1887); American P. Ins. chants', etc., Ins. Co., 72 Mich. 654, Co. v. Brighton, etc., Mfg. Co., 125 16 Am. St. 552 and note (1888). See, 111. 131 (1888). also, note to Moore v. Pluenix Ins. 58 McKenzie v. Scottish, etc., Ins., Co., 10 Am. St. 390, 396 (1886). 112 Cal. 548, 44 Pac. 922 (1896). 252 THE STANDARD POLICY. 232 void, it was held that shutting down for the purpose of making neces- sary repairs suspended the policy, as this language included and covered any and every cause that might have the effect to stop the operation of the mill. 59 So, under the Massachusetts policy, which provides for forfeiture if the establishment ceases operation for more than thirty days, it was held that the stoppage of the machinery for four months and the discharge of the employes forfeited the policy on the building and machinery, although the company knew that it was usual thus to stop business in the dull season. 60 A manufacturing establishment has not ceased to be operated within the meaning of this provision where, after the operation of the machinery ceased, and while the premises were occupied by a foreman who was engaged in putting together and selling engines and other articles belonging to the estate, the policy was renewed at the re- quest of the assignees for the benefit of the insured's creditors. 61 252. Running over hours. The provision which prohibits the operation of the establishment after ten o'clock at night without the consent of the company is valid and binding, but may be waived by the insurance company. Thus, an agent of a fire insurance company agreed to insure a factory, and after having knowledge that it was operated at night after ten o'clock, as well as in the day, delivered the policy containing this condition, and also a provision that no agent of the company should have power to waive any of the provisions ex- cept by means of a written agreement indorsed on the policy. It was held that by issuing the policy with this knowledge the provision was waived. 62 Where the prohibition is merely against running extra hours the policy is not rendered void because the mill is sometimes run at night. 63 A permit to operate the establishment over hours for a certain designated time expires by the expiration of the time, and it is not necessary that the company should do anything for the 59 Day v. Mill Owners', etc., Ins. e2 Improved Match Co. v. Michi- Co., 70 Iowa 710, 29 N. W. 443 gan, etc., Ins. Co., 122 Mich. 256, 80 (1886); Brighton Mfg. Co. v. Read- N. W. 1088 (1899). ing F. Ins. Co., 33 Fed. 232 (1887). U3 German, etc., Ins. Co. v. Steiger, 90 Stone v. Howard Ins. Co., 153 109 111. 254 (1884). For the con- Mass. 475, 27 N. E. 6, 11 L. R. A. struction of similar provisions, see 771 (1891). North Berwick Co. v. New England, 61 Bole v. New Hampshire F. Ins. etc., Ins. Co., 52 Me. 336 (1864); Co., 159 Pa. St. 53, 28 Atl. 205 Bilbrough v. Metropolitan Ins. Co., (1893). 5 Duer (N. Y.) 587 (1856). 233 INTEREST CARE OF PROPERTY. 253 purpose of reviving the condition. A policy was upon a building described as occupied principally for the making of certain articles, and stated that in consideration of the sum named and "extra pre- mium/' permission was given to work nights for four months from date. There was a printed condition to the effect that if the property insured "be a manufacturing establishment running in whole or in part over Or extra time, or at night, without special agreement indorsed on this policy/' the policy shall be void. The building was destroyed by fire while the factory was being operated in the night- time after the expiration of the four months from the date of the pol- icy, and it was held that an action could not be maintained. 64 253. Increase of risk. A policy is rendered void if the hazard be increased by any means within the control or knowledge of the insured. 65 This is merely a recognition of a general principle of in- surance which arises out of the nature of the contract. 66 There are 04 Reardon v. Faneuil Hall Ins. Co., 135 Mass. 121 (1883); Betcher v. Capital F. Ins. Co., 78 Minn. 240 (1899). 65 This provision is found in the standard policies of New York, New Jersey, Connecticut, Rhode Island, Louisiana, Wisconsin, Michigan, North Dakota, South Dakota, Iowa, and North Carolina. The New Hampshire clause is as follows: "This policy shall be void and in- operative during the existence or continuance of the acts or condi- tions of things stipulated against as follows: * * * if without such assent, the situation or circum-' stances affecting the risk, shall, by or with the knowledge, advice, agency or consent of the insured, be so altered as to cause an increase of such risk." The Maine and Massa- chusetts forms are as follows: "This policy shall be void if without the assent in writing or in print of the company, the situation or circum- stances affecting the risk shall, by or with the knowledge, advice, agency or consent of the insured, be so al- tered as to cause an increase of such risks." The Minnesota form is as follows: "The policy shall be void if without such assent the situation or circumstances affecting the risk shall, by or with the knowledge, ad- vice, agency or consent of the in- sured, be so altered as to cause an increase of such risks." The Iowa policy provides further that: "It is understood, and the insured by the acceptance of this policy so agrees, that a removal of the property, or any part thereof, without notice to, and the consent of the company en- dorsed hereon in writing or attached hereto, except in case of fire, or any change of use, or any change in occupancy (except change of ten- ants without increase of hazard), is in each instance an increase of haz- ard within the meaning of section 1743, Code of Iowa." 60 Boatwright v. ^tna Ins. Co., I Strob. (S. C.) 281 (1847); Hoffecker v. New Castle, etc., Ins. Co., 5 Houst. (Del.) 101 (1875). 253 THE STANDARD POLICY. 234 innumerable methods by which the insured may so change the con- ditions which existed when the contract was made as to impose new and uncontemplated risks upon the insurer. It may be by actual changes in the physical structure or use of the property, or by the in- troduction of new customs or methods of doing business, or by the dis- continuance of certain precautions which were understood by the insurer to be in use, such as the keeping of a watchman. 67 Where the provision is violated the contract is avoided or suspended without reference to the actual cause of the loss. 68 It is only such changes as increase the risk which violate the condition, and the question of increase of hazard is for the determination of the jury. 69 Thus, whether the erection of a grocery store by another party near the property of the insured creates such a substantial increase of the risk as to avoid the policy is for the jury. 70 But the court will take judi- cial notice of the fact that the storing of fireworks in a building in- creases the risk. 71 The provision must be given a reasonable construction. It is not broken by every act which in any degree increases the risk. It refers to an alteration or change of a durable nature, not to a casual change of a temporary character, such as the careless use of kerosene in start- ing a fire in a stove, 72 or a mere temporary use of a threshing machine for a few hours on the premises where the insured property is lo- cated. 73 Starting a fire near the insured building for the purpose of burning some rubbish, which is communicated to the building, is not such an increase of the risk or hazard as will avoid the contract where there was no design to burn the building. 74 So, a clause with refer- ence to storing hazardous goods is intended to prevent a building from being used for the ordinary deposit of such articles, and not for their 67 Houghton v. Manufacturers', 71 Betcher v. Capital F. Ins. Co., 78 etc., Ins. Co., 8 Met. (Mass.) 114, 41 Minn. 240 (1899). Am. Dec. 489 (1844); Diehl v. Ad- T - Angier v. Western Assur. Co., 10 ams, etc., Ins. Co., 58 Pa. St. 443, 98 S. D. 82, 66 Am. St. 685 (1897). Am. Dec. 302 (1868). " Adair v. Southern, etc., Ins. Co., 68 Martin v. Capital Ins. Co., 85 107 Ga. 297, 73 Am. St. 122, 45 L. R. Iowa 643, 52 N. W. 534 (1892); A. 204, 33 S. E. 78 (1899); Leggett Howell v. Baltimore Eq. Soc., 16 Md. v. .Etna Ins. Co., 10 Rich. L. (S. C.) 377 (1860). 202 (1856). 09 Pool v. Milwaukee, etc., Ins. Co., 74 Des Moines Ice Co. v. Niagara 91 Wis. 530, 51 Am. St. 91i> (1895). F. Ins. Co., 99 Iowa 193, 68 N. W. 70 Jauvrin v. Rockingham, etc., 600 (1896). Ins. Co. (N. H.), 46 Atl. 686 (1900). 235 INTEREST CARE OF PROPERTY. 253 casual introduction for a temporary purpose, such as the making of reasonable repairs. 75 The question of materiality is ordinarily determined by its effect upon the rate of premium, but this is not conclusive. 70 Thus, it has been held that the mere fact that the rate on property used in the restaurant business is higher than that on the same property when used in the confectionery and ice cream business is not conclusive that a change from the latter to the former business is an increase of the hazaxd. 77 There are many cases illustrating the construction of this provision, but from its nature it is impossible to deduce general principles, and each case must be determined upon its own facts. Changes in the form of an existing lien do not, as a matter of law, amount to an in- crease of hazard. Thus, if the property against which mechanics' liens have been filed is insured, a forfeiture of the liens and the sale of the property under execution does not, in the absence of other evi- dence, show an increase of the hazard. 78 The provision is violated by the introduction of an invention which materially increases the risk. 79 Increase of hazard must be presumed from the erection of a wooden building but a few feet distant from the insured premises, but in this case the contract contained a continu- ing warranty that there was no exposure of the building on that side by any structure or occupancy within one hundred feet, which was considered as an agreement that such non-exposure was material to the risk, and should continue during the life of the policy. 80 The use of a building insured as a dwelling house, for the illegal sale of intoxicating liquors, does not, as a matter of law, increase the risk. 81 It was held in Michigan that the burning off of paint from a building with a gasoline torch, according to the custom of painters, does not, 75 O'Niel v. Buffalo F. Ins. Co., 3 Tex. Civ. App. 147, 50 S. W. 180 N. Y. 122 (1849); Hears v. Hum- (1898). boldt Ins. Co., 92 Pa. St. 15, 37 Am. 7S Greenlee v. North British, etc., Rep. 647 (1879); Faust v. American Ins. Co., 102 Iowa 427, 63 Am. St. F. Ins. Co., 91 Wis. 158, 64 N. W. 883 455 (1897). (1895); Fraim v. National F. Ins. "Washington Mut. Ins. Co. v. Co., 170 Pa. St. 151 (1895). Manufacturers', etc., Ins. Co., 5 Ohio 78 See note to Collins v. Mer- St. 450 (1856). chants', etc., Ins. Co., 58 Am. St. 441 80 Straker v. Phenix Ins. Co., 101 (-1895). Wis. 413, 77 N. W. 752 (1898). 77 Sun Mut. Ins. Co. v. Tufts, 20 81 Martin v. Capital Ins. Co., 85 Iowa 643, 52 N. W. 534 (1892). 254 THE STANDARD POLICY. 236 as a matter of law, increase the hazard. 82 But in Massachusetts the same acts were held to be an "alteration in the situation or circum- stances affecting the risk," and hence invalidated the policy. 83 Where there are two or more changes, and one increases the risk, it is im- material that the other diminishes it. 84 A sale by one partner to the other of his interest in the property is not a violation of this pro- vision. 85 254. Changes in adjoining property. This provision of the pol- icy does not in terms refer to alterations in adjacent buildings. Such premises are not under the control of the insured, but if he has knowledge of material changes, he certainly should inform the insurer of the facts. But the erection of a building on a lot adjoining that on which the insured building is located, which belongs to another party, and is in no manner under the control of the insured, is not within the provision in the policy that it shall be void if the risk is increased in any manner, except by the erection and use of ordinary outbuildings. 88 A policy which was payable to a mortgagee contained a provision that it should be void, in case of "increase of hazard by the erection of neighboring buildings." By the terms of a mortgage clause in the policy, the mortgagee's interest was not to be invalidated by any act or neglect of the mortgagor. The renewal clause in the policy pro- vided that "in case there shall have been an increase in the hazard, it must be made known to the company by the assured at the time of the renewal ; otherwise this policy shall be void." After the contract by its terms expired, a loss occurred, and it was claimed that there had been a renewal. It appeared that during the life of the original policy the insured erected a building near the one insured, which in- creased the hazard, and that the agent who obtained the alleged re- newal for the owner and mortgagee knew of this fact, but failed to disclose it. It was held that the knowledge of the agent was charge- able to his principal, and that his failure to disclose the hazard ren- 82 Smith v. German Ins. Co., 107 ** Albion Lead Works v. Williams- Mich. 270, 65 N. W. 236, 30 L. R. A. burg, etc., Ins. Co., 2 Fed. 479 (1880). 368 (1895). Powers v. Guardian, etc., Ins. "First Cong. Church v. Holyoke, Co., 136 Mass. 108, 49 Am. Rep. 20 etc., Ins. Co., 158 Mass. 475, 33 N. E. (1883). 572, 35 Am. St. 508 (1893). * German Ins. Co. v. Wright, 6 Kan. App. 611, 49 Pac. 704 (1897). 237 INTEREST CARE OF PROPERTY. 255 dered the policy void. The clause in the mortgage protecting the mortgagee against any act or neglect of the mortgagor or owner did not apply, as it was the mortgagee's own act which rendered the policy void. 87 255. Effect of increase of hazard. In some states it is held that a violation of the condition against an increase of hazard renders the policy void, while others hold that the effect is merely to suspend the contract during the time the risk is increased. 88 Thus, in Illinois it is said to be the settled law that, under a provision that the policy shall be void in case of a change made in the property increasing the hazard, if such changes are made, and the policy has not been de- clared forfeited, and the changed conditions cease to exist, leaving the risk no more hazardous than before, the policy again becomes in force. 89 A recovery may thus be had for loss subsequently occurring to which the more hazardous use did not contribute. But many courts hold that a violation of this condition renders the policy void. In a Massachusetts case it appeared that the hazard had been increased by the use of the building for the illegal sale of intoxicating liquors with the knowledge and consent of the insured. The court said: 90 "The question is thus presented whether the provision of the policy that it shall be void in case of an increase of the risk means that it shall be void only during the time while the increase of risk may last, and may revive again upon the termination of the increase of the risk. The provision is that the policy shall be void if any one of several circumstances successively enumerated shall be found to exist. Some of these circumstances relate to the time of issuing the policy, and others could not arise till afterwards. They are of dif- ferent degrees of importance, some of them going to essential matters of the contract and others being comparatively trivial in character. 87 Cole v. Germania F. Ins. Co., Assur. Co., 149 Mass. 116, Woodruff 99 N. Y. 36 (1885); Mechanics' Ins. Ins. Cas. 142 (1889). See Concordia Co. v. Hodge, 149 111. 298, 37 N. E. P. Ins. Co. v. Johnson, 4 Kan. App. 51 (1894). 7, 45 Pac. 722 (1896). As to the ef- 88 As to effect of breach of condi- feet of the temporary use of the tions, see 205, supra. premises, see Hinckley v. Germania 89 Traders' Ins. Co. v. Catlin, 163 F. Ins. Co., 140 Mass. 38, 1 N. E. 737, 111. 256, 35 L. R. A. 595 (1895); New 54 Am. Rep. 445 (1885); Jennings v. England, etc., Ins. Co. v. Wetmore, Chenango, etc., Ins. Co., 2 Denio 32 111. 222 (1863). (N. Y.) 75 (1846). TO Kyte v. Commercial Union 256 THE STANDARD POLICY. 238 The language of the policy is the same with respect to them all, that the policy shall be void. * * * w e think an increase of risk en- titles the insurer to avoid the policy absolutely. A contract of in- surance depends essentially upon the adjustment of the premium to the risk assumed. If the assured by his voluntary act increases the risk, and the fact is not known, the result is that he gets an insurance for which he has not paid. In its effect upon the company it is not much different from misrepresentation of the condition of the prop- erty. If the provision stood alone, that in case of any material mis- representation as to the risk or any voluntary increase of the risk afterwards, the policy should be void, it could hardly be doubted that the words should te taken in their natural obvious meaning. The fact that with this are coupled the other provisions above referred to does not change its meaning with reference to the effect and conse- quence of an increase of the risk. An increase of risk which is substantial, and which is continued for a considerable period of time, is a direct and certain injury to the insurer and changes the basis upon which the contract of insurance rests ; and, since there is a provision that in case of a risk which is consented to or known by the insured, and not disclosed and the assent of the assurer obtained, the policy shall become void, we do not feel at liberty to qualify the mean- ing of these words by holding that the policy is only suspended dur- ing the continuance of such increase of risk." Expert evidence can not be received for the purpose of showing that leaving a dwelling house unoccupied for a considerable length of time increases its liability to be destroyed or injured by fire, but per- sons who are familiar with the business of insurance may testify whether such conditions affect the rate of premium. 91 256. Repairs Employment of mechanics. The entire policy, unless otherwise provided by agreement indorsed thereon, shall be void if mechanics be employed in building, altering or repairing the described premises more than fifteen days at any one time. 92 When a building is insured it is implied that it will be used in the 81 Luce v. Dorchester, etc., Ins. Co., Iowa, Wisconsin, Michigan, North 105 Mass. 297 (1870). Dakota, South Dakota, and North 92 This provision is found in the Carolina. It is not found in the standard policies of the following standard policies in use in Maine, states: New York, New Jersey, Con- Massachusetts, New Hampshire and necticut, Rhode Island, Louisiana, Minnesota. 239 INTEREST CARE OF PROPERTY. 256 ordinary way in which similar buildings are used and not set apart and wholly devoted to being kept safely. One of the incidents of such use is that of making ordinary repairs, and the general right to make such repairs is not questioned when the policy contains no special provision upon the subject. 93 A clause similar to that in the stand- ard policy was held not to apply to ordinary and necessary repairs, as it would be unreasonable to assume that in order to protect a build- ing from fire it was the intention to provide for its destruction by the other elements. 04 The limitation is rendered more definite and reasonable by a time limit, and when it appears that mechanics have been employed in making repairs for more than fifteen days the policy is invalid with- out reference to whether such changes contributed to the loss. 95 Painters employed in repainting a building are not mechanics within this provision. 90 A similar provision was given full force and effect by the Supreme Court of the United States. The policy was to be void and of no effect if, without notice to the company and permission in writing indorsed thereon, "mechanics are employed in building, altering or repairing the premises named herein, except in dwelling houses, where not exceeding five days in any one year are allowed for repairs." The insurance was upon a courthouse, and it was held invalidated by the employment of mechanics altering or repair- ing the building, although the fire did not occur in consequence of such alterations and repairs. The court said: 97 "These provisions are not unreasonable. The insurer may have been willing to carry the risk at the rate charged and paid, so long as the premises con- tinued in the condition in which they were at the date of the con- tract; but the company may have been unwilling to continue the con- tract under other and different conditions, and so it had the right to make the above stipulations and conditions on which the policy or the contract should terminate. These terms and conditions of the policy present no ambiguity whatever. The several conditions 83 Townsend v. Northwestern Ins. M Smith v. German Ins. Co., 107 Co., 18 N. Y. 168 (1858). Mich. 270, 30 L. R. A. 368 (1895). 94 Franklin F. Ins. Co. v. Chicago See First Cong. Church v. Holyoke, Ice Co., 36 Md. 102 (1872). etc., Ins. Co., 158 Mass. 475, 19 L. R. 95 Newport Improvement Co. v. A. 587 (1893). Home Ins. Co., 163 N. Y. 237, 57 N. 97 Imperial F. Ins. Co. v. Coos E. 475 (1900); Chamberlain v. Brit- County, 151 U. S. 452 (1893). ish, etc., Assur. Co., 80 Mo. App. 589 (1899). 256 THE STANDARD POLICY. 240 were separate and distinct, and wholly independent of each other. The first three of the above conditions depend upon an actual in- crease of the risk by some act or conduct on the part of the insured ; but the last condition is disconnected entirely from the former, whether the risk be increased or not [this last condition refers to mechanics employed in the building]. This last condition may properly be construed as if it stood alone, and a material alteration and repair of the building beyond what was incidental to the ordi- nary repairing necessary for its preservation, without the consent of the insurer, would be a violation of the condition of the policy, even though the risk might not have been in fact increased thereby. * * * Being a separate and valid stipulation of the parties, its violation by the assured terminated the contract of the insurer, and it could not thereafter be made liable on the contract without having waived that condition, merely because, in the opinion of the court and the jury, the alterations and repairs of the building did not in fact increase the risk. The specific thing described in the last condition as avoiding the policy if done without consent was one which the insurer had the right in its own judgment to make a material element of the contract, and, being assented to by the assured, it did not rest, in the opinion of other parties, the court or the jury, to say that it was immaterial unless it actually increased the risk." A policy contained a provision that the "working of carpenters, roofers, gas-fitters, plumbers and other mechanics in building, alter- ing or repairing, in the building or buildings covered by this policy, will cause a forfeiture of all claims under this policy, without the written consent of this company indorsed hereon;" also, that the policy should be void if the risk were increased by any means within the control of the insured. At the time the policy was issued the building was occupied as a grocery store by a tenant. Some time thereafter the insured executed a lease to other tenants, who con- templated changing the business to that of drying fruit. This re- quired extensive alterations in the character of the building, and it was held that there was a deliberate attempt to change the character and occupation of the insured building from a comparatively safe to a hazardous one, and that such substantial alterations by carpenters invalidated the policy. 98 In this case the fire which destroyed the building occurred while the alterations were being made. 98 Mack v. Rochester, etc., Ins. Co., 106 N. Y. 560, Woodruff Ins. Cas. 173 (1887). 241 INTEREST CARE OF PROPERTY. This provision is not found in the Massachusetts form, and the subject of repairs falls under the general claiise relating to the in- crease of the risk. In that state it is' not necessary for the risk to be permanently increased. Where the lower floors of the premises were changed from two tenements into flats, new floors laid, doors changed and the stairs removed to the outside of the building, it was held that the fact that the alterations were completed before the loss occurred did not prevent the company from avoiding the policy because of such breach." Where a condition of the policy was that it should be void "if the building shall be altered, enlarged, or ap- propriated to any other purpose than that herein mentioned, or the risk otherwise increased," it was held that a deliberate and consider- able alteration of the building, not incidental to the ordinary use of the property, made by the tenant with the knowledge of the insured extending over three weeks, which, while it lasted, increased the risk, invalidated the policy, although it did not permanently increase the risk or cause the fire. 100 Where the policy was upon a "mill build- ing and additions, including flumes, * * * an( j an automatic sprinkler equipment complete," and permission was given to make alterations, additions and repairs to the building and machinery, it was held that the insured might remove the sprinkler equipment for the purpose of putting in a more complete one, without violating this condition of the policy. 101 Placing and operating an engine fifty feet away from the insured building is not an alteration of the insured property, nor does it violate the condition against an increase of the risk unless expressly so provided in the policy. 102 257. Ownership. If the interest of the insured is other than unconditional and sole ownership of the property, the fact must be disclosed to the company. 103 This is a reasonable provision and is 98 Hill v. Middlesex, etc., Assur. 103 This is found in the standard Co., 174 Mass. 542, 55 N. E. 319 policies of New Jersey, Connecticut, (1899). Rhode Island, North Carolina, Lou- 100 Lyman v. State, etc., Ins. Co., 14 isiana, Iowa, North Dakota, New Allen (Mass.) 329 (1867). York, Sout^ Dakota, Wisconsin, and 101 Firemen's Ins. Co. v. Appleton, Michigan. It is not found in the etc., Co., 161 111. 9, 43 N. E. 713 standard policies of Massachusetts, (1896). Minnesota, Maine and New Hamp- 102 Schaeffer v. Farmers', etc., Ins. shire. Co., 80 Md. 563, 45 Am. St. 361 (1895). 16 ELLIOTT INS. 257 THE STANDARD POLICY. 242 binding upon the insured. 104 In discussing this provision it was said: 105 "The nature and extent of the interest of the insured are matters which are largely influential with underwriters in taking or rejecting risks and estimating premiums, and for that reason any con- dition respecting them in a contract is material and must be con- strued so as to effectuate the purposes of the parties. But while this must be done, the law assumes that the parties understood the words they have used; therefore, unless there are potential reasons to the contrary, they are bound by the legitimate and usual meaning of the phrases they employ. Now it must be observed that it is not title, but interest, that is spoken of in the clause. Title and interest are en- tirely different things. It was undoubtedly competent for the parties to have contracted as to title, * * * but in this case they have chosen to limit the provision to a condition of the interest, either legal or equitable. The question presented, therefore, to us now is, Was the 'interest/ legal or equitable, of D, 'unconditional and sole ?' As to the meaning of these words, when used in the present connection, there seems to be a concurrence of authority. To be 'unconditional and sole' the interest must be completely vested in the assured, not con- tingent or conditional, nor for life or years only, nor in common, but of such a nature that the insured must stand the entire loss if the property is destroyed, and this is so whether the title was legal or equitable/' This provision of the policy does not necessarily dis- tinguish between the legal and equitable title. If the title is con- ditional or contingent, if it is for years only or for life, or in com- mon, it is not an entire, unconditional and sole ownership; but the interest is the same as it affects the contract of insurance, whether the title of the insured be legal or equitable. "The purpose of this provision is to prevent a party who holds an undivided or contingent, but insurable, interest in property from appropriating to his own use the proceeds of a policy taken upon the valuation of the entire and unconditional title as if he were the sole owner, and to remove from him the temptation to perpetrate fraud or crime. For without this, a person might be able to exceed the measure of an actual in- 104 Barnard v. National, etc., Ins. Dougherty, 102 Pa. St. 568 (1883); Co., 27 Mo. App. 26 (1887). Dupreau v. Hibernia Ins. Co., 76 1011 Hartford F. Ins. Co. v. Keating, Mich. 615 (1889); JEtna F. Ins. Co. 86 Md. 130 (1897); Imperial F. Ins. v. Tyler, 16 Wend. (N. Y.) 396 Co. v. Dunham, 117 Pa. St. 460, 2 (1836); Oshkosh, etc., Co. v. Ger- Am. St. 686, Woodruff Ins. Gas. 153 mania F. Ins. Co., 71 Wis. 454, 5 (1888); Pennsylvania F. Ins. Co. v. Am. St. 233 (1888). 243 INTEREST CARE OF PROPERTY. 257 demnity. But where the entire loss, if the property is destroyed by fire, must fall upon the party insured, the reason and purpose of this provision does not seem to exist, and in the absence of any par- ticular inquiry as to the specific nature of the title or of any express stipulation in the policy that the insured held the legal or equitable title, either being available to secure the entire, unconditional and sole ownership, the provision referred to can, we think, have no force to defeat the plaintiff's recovery in this case." 106 It is enough if the insured be the substantial equitable owner of the property insured. 107 Where the reason for such a general condition in a printed form of a policy of insurance does not exist in a particular case, the con- dition itself becomes meaningless and inoperative. Hence, where a form of policy is used by the company for a particular kind of prop- erty peculiarly situated, and the policy contains conditions which are inapplicable to the subject-matter of the insurance, the conditions will be ignored in . construing the contract. Thus, a person owned individually and in common with others a certain number of barrels of petroleum, which had been placed for transportation and storage in a certain pipe line. To protect himself from loss in case of fire, he took out a policy of insurance for a fixed sum on the petroleum "his own or held by him in trust for others;" and a condition in the pol- icy provided that "if the insured is not the absolute and uncondi- tional owner of the property insured, then this policy to be void." It was held that the condition was not, under the circumstances, applicable, and that the company was liable to the extent of the policy upon all the oil destroyed in which the insured had any interest what- ever, but not for the loss of oil in which he had no interest and which the owners had in writing requested him to insure before the issuing of the policy. 108 This provision must not be construed in a technical sense. It mere- ly requires that the insured shall be the actual and substantial owner. Where the interest of the insured was acquired by devise "to be his forever for his own proper use, subject only to restriction and aliena- tion until he attains a certain age, having yet thirteen years to run," it was held that he was the owner of the property within the meaning of the policy. 109 108 Imperial F. Ins. Co. v. Dunham, State Ins. Co., 44 N. J. L. 485, 43 Am. 117 Pa. St. 460 (1888). Rep. 397 (1882). 107 Lebanon, etc., Ins. Co. v. Erb, 1U8 Grandin v. Rochester, etc., Ins. 112 Pa. St. 149 (1886); Martin v. Co., 107 Pa. St. 26 (1884). 109 Yost v. McKee, 179 Pa. St. 381, 258 THE STANDARD POLICY. 244 There is some conflict of authority on the question of the binding effect of provisions of this character in a policy issued without a written application. The weight of authority doubtless supports the view that the insured, by accepting the policy, is charged with knowledge of its contents. Thus, it was held in Missouri that the acceptance of a policy which contained this provision, although is- sued on an oral application which made no statement as to title, amounts to a declaration that the title is absolute, 110 while in Michi- gan this is not regarded as conclusive upon the insured. 111 Where there are no special provisions in the policy requiring an exact dis- closure of the entire quantity and quality of title, it is sufficient to describe it in general terms. Thus, where the true title was called for, it was held sufficient where the property was described as "his" and unincumbered, although it appeared that two mortgages had been given upon the property by previous owners, and the former owner's equity of redemption had been sold on execution to another person before the plaintiff acquired his title. But as the plaintiff at the time of the insurance had the right to redeem the equity of redemp- tion and then to remove the other incumbrances and thus make his title absolute, there was no misrepresentation of title. "The assured had an estate in the land subject to mortgages and sales on execution, deeply incumbered but still redeemable, and therefore he had an estate to which the lien of the company would attach, and that such an interest is insurable is well settled by many cases." 112 258. Incumbrances. A condition in a policy that it shall be void in case the interest of the insured be other than sole and uncon- ditional ownership refers to the quality of the estate or interest, and is not broken by incumbrances existing on the property when the insurance is effected. 113 The insured is therefore under no obliga- tion to disclose the fact that there are mortgages or other incum- brances upon the property unless it is required by some other pro- vision of the policy. 114 A vendor's lien for part of the purchase- 57 Am. St. 604 (1897); Barnard v. 112 Buffum v. Bowditch, etc., Ins. National F. Ins. Co., 27 Mo. App. 26 Co., 10 Cush. (Mass.) 540 (1852). (1887). ""Morotock Ins. Co. v. Rodefer, 92 ""Overton v. American, etc., Ins. Va. 747, 53 Am. St. 846 (1896); Cap- Co., 79 Mo. App. 1 (1898). lis v. American F. Ins. Co., 60 Minn. m Miotke v. Milwaukee, etc., Ins. 376, 51 Am. St. 535 (1895). Co., 113 Mich. 166, 71 N. W. 463 m Dolliver v. St. Joseph, etc., Ins. ' (1897). Co., 128 Mass. 315, 35 Am. Rep. 378 245 INTEREST CARE OF PROPERTY. 258 money of land is not inconsistent with the entire unconditional and sole ownership within the meaning of the provision avoiding the in- (1880); Judge v. Connecticut F. Ins. Co., 132 Mass. 521 (1882); Clay, etc., Ins. Co. v. Beck, 43 Md. 358 (1875); Ellis v. Ins. Co., 32 Fed. 646 (1887); Bowditch, etc., Ins. Co. v. Winslow, 3 Gray (Mass.) 415 (1855). Policies often contain provisions requiring the insured to disclose existing in- cumbrances. In Seal v. Farmers', etc., Ins. Co., 59 Neb. 253, 80 N. W. 807 (1899), it was held that a mis- representation as to the amount of the incumbrance upon the property insured, where the policy is condi- tioned that it will be void if the prop- erty be mortgaged or otherwise in- cumbered without notice to and con- sent of the company indorsed there- on, will, in the absence of a waiver, avoid the policy. The fact that such mortgage was paid before the loss occurred, does not alter the legal ef- fect of a breach of the requirement: Insurance Co. v. Wicker (Tex.), 54 S. W. 300; affirmed 93 Tex. 390, 55 S. W. 740 (1900). In Collins v. Mer- chants', etc., Ins. Co., 95 Iowa 540, 58 Am. St. 438 (1895), it was held that the provision that the policy should be void if the property be in any manner incumbered, "and such fact be not stated in this policy or the insured's application for insur- ance," is a stipulation against an incumbrance existing when the con- tract is made and not against fu- ture incumbrances. The court said: "If the statement was that it should be void if the property be in any manner incumbered or in litigation, there is no doubt it should be con- strued as covering future as well as existing incumbrances: Mallory v. Farmers' Ins. Co., 65 Iowa 450; but the policy contains more than this. It says it shall be void under these circumstances unless the fact is stated in this policy or in the in- sured's application for insurance. * * * Manifestly this is an existing or present one and not one created in the future. The words used are certainly open to this con- struction, and if so, we should adopt that most favorable to the insured under all the established tenets." In Insurance Co. v. Saindon, 53 Kan. 623, 36 Pac. 983 (1894), it was held that where the insurance policy provides against future incum- brances, the policy will be avoided if a subsequent incumbrance is cre- ated, or if an incumbrance existing at the time of the application for in- surance be materially increased by a new or additional debt. But the mere subsequent renewal of a prior lien or mortgage with the accrued interest, is not an increase of such pre-existing indebtedness or the cre- ation of a new or additional incum- brance. In Koshland v. Home, etc., Ins. Co., 31 Ore. 321, 49 Pac. 864, 50 Pac. 567 (1897), it appeared that the policy was issued with the knowl- edge that there was an incumbrance upon the property. The policy con- tained a clause rendering it invalid if the property should be incum- bered in the future without the knowledge and consent of the com- pany, and it was held that the pro- vision was not invalidated by the making of a new mortgage for the purpose of discharging the old. In Cagle v. Chillicothe, etc., Ins. Co., 78 Mo. App. 215 (1899), where the pol- icy contained a stipulation that "any incumbrance shall avoid the policy unless the written consent of 259 THE STANDARD POLICY. 246 surance if the interest of the insured be other than such sole owner- ship. 115 A lease of the premises is not an incumbrance within the meaning of a condition rendering the policy void if the property is incumbered by a future mortgage or lien. 116 259. Illustrations. As already noted, there is a distinction be- tween the words title and interest as used in insurance policies. Thus, a provision that a policy shall be void if the interest of the insured the company is obtained," and the application, which was a part of the contract, did not mention certain unsatisfied mortgages, it was held that the policy was void, although the local agent knew of the exist- ence of the mortgages; since the sec- retary alone could consent to the in- cumbrances. But in Seal v. Farm- ers', etc., Ins. Co., 59 Neb. 253, 80 N. W. 807 (1899), it was held that where the application was oral and no inquiry was made as to the char- acter and condition of the title, a failure to disclose the existence of incumbrances would not, in the ab- sence of fraud, avoid the policy. In Flournoy v. Traders' Ins. Co., 80 Mo. App. 655 (1899), the agent is- sued the policy knowing of the in- cumbrances on the property, and it was held that the company thereby waived the stipulation against such incumbrance, notwithstanding the further stipulation that such agent was not authorized to waive, as such stipulation applied only to acts subsequent to the issuing of the pol- icy and not to those preceding it. In Arthur v. Palatine Ins. Co., 35 Ore. 27, 57 Pac. 62 (1899), it was held that where the policy was is- sued on an oral application and no inquiry was made as to incum- brances, and representations were made with reference thereto, and the insured did not know that if a mortgage existed the com- pany would not take the risk, or that the policy contained a pro- vision making it void if there were existing incumbrances, the insurer was held to assume the risk of in- cumbrances. In Insurance Co. v. Wicker, 93 Tex. 390, 54 S. W. 30, 55 S. W. 74 (1900), it was held that a fail- ure to give notice of the existence of a mortgage on the property insured when required by the terms of the policy is not waived by the insurer's knowledge of a mortgage subse- quently given on the property to secure money with which to pay a mortgage existing at the time the policy was issued. See, also, Mc- Kibban v. Des Moines Ins. Co. (Iowa), 86 N. W. 38 (1901). In Parker v. Otsego, etc., Ins. Co., 47 App. Div. (N. Y.) 204 (1900), it ap- peared that the application was made upon a printed form furnished by the company, and that the para- graph reading, "The aforesaid prem- ises are not incumbered by mort- gage or otherwise to exceed the sum of $ ," was not completed by the applicant's filling out the blank, and it was held neither an assent nor dissent to the fact of the existence of a mortgage. 115 Boulden v. Phoenix Ins. Co., 112 Ala. 422, 20 So. 587 (1895). 119 Read v. State Ins. Co., 103 Iowa 307, 64 Am. St. 181 (1897). 247 INTEREST CARE OF PROPERTY. 259 is not an entire, unconditional and sole ownership of the property means, where the interest of a mortgagee is insured, that the interest insured, namely, the mortgage lien, is an unconditional interest be- longing to the mortgagee, and not a conditional or speculative one. 117 A person in whom the entire legal title is vested is the sole and un- conditional owner within the meaning of the policy, although he has made a lease or bill of sale of the property, reserving title until the consideration is fully paid. 118 A person who owns the fee of prop- erty subject to a mortgage and lease for a term of years has the en- tire, unconditional and sole ownership of the property. 119 It is well settled that an outstanding lease does not affect the matter of owner- ship within this provision. 120 Where no written application was made and no questions were asked concerning the title, it was held that the insurance was valid, although the policy contained a condition declaring it to be void if the interest of the insured was other than unconditional and sole ownership, although it appeared that he did not own the legal title and had merely purchased the property and paid therefor without having received a conveyance. 121 A vendee in possession without a deed, with an equitable right to the entire, unincumbered title is the owner of the property. 122 So, the owner of an estate in fee on a condition subsequent, who is in possession with no conditions broken, is the sole and unconditional owner of the property. 123 One who has received a deed from a married man in which his wife has not joined is the owner of the property; as the wife has no claim on the realty before the death of the husband. 124 Where the plaintiff paid a portion of the purchase-price and took possession of certain personal property under an agreement that after a certain time he would either pay the balance or resell or convey the property to the vendor, it was held that he took an absolute title, and in case of fire was entitled to collect the insurance on a policy conditioned that it was void if 117 Hanover F. Ins. Co. v. Bonn, 48 12U Insurance Co. v. Haven, 95 U. S. Neb. 743, 58 Am. St. 719 (1896). 242 (1877). 118 Burson v. Fire Ass'n, 136 Pa. 121 Dooly v. Hanover F. Ins. Co., 16 St. 267, 20 Am. St. 919 and note Wash. 155, 58 Am. St. 26 (1896). (1890); Johannes v. Standard Fire I22 Bonham v. Iowa, etc., Ins. Co., Office, 70 Wis. 196, 5 Am. St. 159 and 25 Iowa 328 (1868). note (1887). m Davis v. Pioneer Furniture Co., ""Dolliver v. St. Joseph, etc., Ins. 102 Wis. 394 (1899). Co., 128 Mass. 315, 35 Am. Rep. 378 124 Ohio, etc., Ins. Co. v. Bevis, 18 (1880). Ind. App. 17, 46 N. E. 928 (1897). 259 THE STANDARD POLICY. 248 the interest of the insured was other than sole and unconditional. 125 The fact that the property was conveyed to the insured without con- sideration for the purpose of placing it beyond the reach of the grantor's creditors is not a defense under this provision. 126 A mar- ried man has such an interest in the household furniture owned by his wife before marriage as constitutes him its sole and unconditional owner. 127 The fact that the legal title to the property was in an- other will not defeat a recovery where the insured was the beneficial owner at the time the policy was issued. 128 A married woman is the owner of her property, although her husband has a homestead in- terest therein. 129 So, the owner of a farm is the sole and uncondi- tional owner of hay produced on the farm, where the hay is pro- duced at his expense, and he owns two-thirds of it absolutely, and under a contract with a laborer is to credit him with the proceeds of the other one-third and charge him with the cost of production. 130 Where the property was insured in the name of a firm of which the insured was a member, but which had been dissolved before the is- suance of the policy, it was held that the policy was valid although it contained the pondition under consideration. 131 The words "as his interest may appear" in a policy indicate un- certainty not only as to the extent, but as to the quality and character of the interest ; and where it appeared that the insured, although not the owner, had an insurable interest, it was held that there was no breach of condition in the policy forfeiting it in case the interest of the insured is not truly stated in the policy, or if the interest is less than an absolute ownership. 132 A condition in a policy issued to a husband and wife that it shall be void if the subject of the in- surance is a building on ground not owned by the insured in fee- simple is not broken by the fact that the fee-simple of the land is in the wife alone, as there must be an ownership in some other person m Stowell v. Clark, 47 App. Div. 12a Sun Ins. Office v. Beneke (Tex. (N. Y.) 626 (1900). Civ. App.), 53 S. W. 98 (1899). 126 Rochester Loan, etc., Co. v. Lib- rM Manchester F. Assur. Co. v. erty Ins. Co., 44 Neb. 537, 48 Am. St. Abrams, 89 Fed. 932, 32 C. C. A. 426 745 and note (1895). (1898). 1ZT Georgia Home Ins. Co. v. Brady m Delaware Ins. Co. v. Bonnet, 20 (Tex. Civ. App.), 41 S. W. 513 Tex. Civ. App. 107, 48 S. W. 1104 (1897). (1898). 128 McCoy v. Iowa, etc., Ins. Co., 132 Dakin v. Liverpool, etc., Ins. 107 Iowa 80, 77 N. W. 529 (1898). Co., 77 N. Y. 600 (1879). 249 INTEREST CAKE OF PROPERTY. 260 than the insured to violate the condition. 133 A policy declared that the application was a part of the contract of insurance and was made subject to the rules pf the company, which provided that the policy should be void if the application should not contain a full, fair, sub- stantial and true representation of all the facts and circumstances respecting the property so far as within the knowledge of the insured and material to the risk. The applicant stated that she was the owner of the land upon which the building stood, and it appeared that she was a widow, and that her only title was a life estate under the will of her husband, which contained no disposition of the re- mainder. Her husband left two children not named in the will, and they had not during the twelve years that had elapsed since the pro- bate of the will, of which six had passed before the application for the insurance was made, claimed the share to which they would have been entitled if he had died intestate. It was held that the answer was a sufficient description of her interest. 134 260. Illustrations of breach of condition. One who owns an un- divided one-half of the insured property has not the entire, uncon- ditional and sole ownership. 135 Nor has one who has purchased property on the installment plan, the title remaining in the vendor. 136 Where the insured states in his application that he is the sole owner of the property, and it is stipulated that if his answer is untrue, or his interest other than a perfect legal and equitable ownership, the policy shall be void, there is a breach of condition where the property is owned by his wife. 137 The holder of a quitclaim deed from a second mortgagee is not the unconditional and sole owner of the property, 138 nor is a vendor after the vendee has gone into posses- sion and paid the purchase-price; 139 nor is a surviving partner the sole owner of property belonging to the undivided partnership es- tate. 140 A partnership does not, within the meaning of this pro- 13a Mascott v. First Nat'l F. Ins. m Planters' Mut. Ins. Co. v. Loyd, Co., 69 Vt. 116, 37 Atl. 255 (1896). 67 Ark. 584, 77 Am. St. 136 (1900); 134 Allen v. Charlestown, etc., Ins. Trott v. Woolwich, etc., Ins. Co., 83 Co., 5 Gray (Mass.) 384 (1855). Me. 362, 22 Atl. 245 (1891). 135 Sisk v. Citizens' Ins. Co., 16 13S Southwick v. Atlantic, etc., Ins. Ind. App. 565, 45 N. E. 804 (1897). Co., 133 Mass. 457 (1882). 136 Dumas v. Northwestern, etc., 139 Clay, etc., Ins. Co. v. Huron, etc., Ins. Co., 12 App. Cas. (D. C.) 245, 40 Co., 31 Mich. 346 (1875). L. R. A. 358 (1898); Geiss v. Frank- 14 Crescent Ins. Co. v. Camp, 64 lin Ins. Co., 123 Ind. 172 (1889). Tex. 521 (1885). 260 THE STANDARD POLICY. 250 vision, own property contributed as a partner's share of the capital, but which has not been deeded to the partnership. 141 This condition is broken where the insured is the owner only of an undivided one- half interest in the property, although at the time the insurance was issued he thought he was the sole owner by virtue of an executory contract of the other owners to convey to him. 142 A person who has purchased property at a judicial sale, but whose bid has not been ratified, or the sale confirmed by the court, has not an unconditional and sole ownership of the property. In one case the court said: 143 "We have been referred to cases where it is held that when the insured is in possession under a contract of purchase, and the legal title has not passed by conveyance, the ownership is not un- conditional until the purchase-money has been wholly paid; 144 but it may be doubted whether such cases are in line with the current of authority/' Where the insured had received a deed of the property, upon which there was a mortgage, from her son, but failed to record it, and the_ mortgage had been foreclosed and the property sold, and she was not made a party to the foreclosure suit, and failed to re- deem from the sale under the judgment within the time allowed by statute, it was held that she was not the sole and unconditional owner of the property within the meaning of the policy. 145 So, one who has given his bond for a debt secured by a mortgage on the premises, and is the holder of another mortgage, is not the sole and uncon- ditional owner of the property. 146 A person who owns all the stock of a corporation is not the owner of the property of the corporation within the meaning of this provision. 147 A tenant for life can not recover on a policy which provides that there shall be no liability "if the interest of the assured is not one of absolute and sole owner- ship." 148 A policy of insurance issued to one whose only interest in the property is by virtue of a land contract which he holds as col- 141 Citizens' F. Ins., etc., Co. v. Soc., 124 Cal. 164, 56 Pac. 770 (1899). Doll, 35 Md. 89, 6 Am. Rep. 360 14B Ordway v. Chace, 57 N. J. Eq. (1871). 478, 42 Atl. 149 (1899). 142 Liverpool, etc., Ins. Co. v. Coch- 147 Syndicate Ins. Co. v. Bonn, 65 ran, 77 Miss. 348, 26 So. 932 (1899). Fed. 165, 12 C. C. A. 531 (1894). 143 Hartford F. Ins. Co. v. Keating, 14S Collins v. St. Paul, etc., Ins. Co., 86 Md. 130, 63 Am. St. 499 (1897). 44 Minn. 440, 46 N. W. 906 (1890). 144 Farmers', etc., Ins. Co. v. Curry, See, also, Davis v. Iowa State Ins. 13 Bush (Ky.) 312, 26 Am. Rep. 194 Co., 67 Iowa 494, 25 N. W. 745 (1877). (1885); Garver v. Hawkeye Ins. Co., 145 Breedlove v. Norwich, etc., Ins. 69 Iowa 202, 28 N. W. 555 (1886). 251 INTEREST CARE OF PROPERTY. 261 lateral security for money advanced to the purchaser is void in its inception where it provides that it shall be void unless otherwise pro- vided, if the interest of the insured be other than unconditional and sole ownership, or if the subject of the insurance be a building on ground not owned by the insured in fee-simple, although the recitals that the insured held the property under a land contract might protect him if he had been the absolute owner of the contract. 149 This provision, like all others inserted for its benefit, may be waived by the company, and it is generally held that it can not dispute the validity of the policy on the ground that the insured's interest in the property was not an unconditional and sole ownership when the limited interest was fully and correctly disclosed to the agent of the company when the policy was taken out. 150 261. Building on leased ground. "The entire policy, unless otherwise provided by agreement indorsed thereon, is void if the sub- ject of the insurance be a building on ground not owned by the in- sured in fee-simple/' 151 This provision is valid, and its breach will invalidate the policy. 152 It is violated where the applicant is the 149 Gettelman v. Commercial, etc., Assur. Co., 97 Wis. 237, 72 N. W. 627 (1897). 150 Clapp v. Farmers', etc., Ins. Ass'n, 126 N. C. 388, 35 S. E. 617 (1900); Westchester F. Ins. Co. v. Wagner (Tex. Civ. App.), 57 S. W. 876 (1900); London, etc., Ins. Co. v. Gerteson, 21 Ky. L. 471, 51 S. W. 617 (1899); Teutonic, etc., Ins. Co. v. Howell, 21 Ky. L. 1245, 54 S. W. 852 (1900); Porter v. Orient Ins. Co., 72 Conn. 519, 45 Atl. 7 (1900). An in- surer, which, knowing that the title of the insured is less than a fee simple, issues a policy providing that it shall be void if the title of the insured is less than a fee-simple, unless otherwise provided by agree- ment indorsed on or annexed to the policy, thereby waives such provi- sion, whether or not it intended to do so: Schultz v. Caledonian Ins. Co., 94 Wis. 42, 68 N. W. 414 (1896). 151 This clause is found in the standard forms in use in New York, New Jersey, North Carolina, Con- necticut, Rhode Island, Wisconsin, Louisiana, North Dakota, South Da- kota, and Michigan. The Iowa form adds the words, "and the title be not evidenced by deed." It is not found in the Massachusetts, Minnesota, Maine and New Hampshire stand- ard forms. 152 Dowd v. American F. Ins. Co., 41 Hun (N. Y.) 139, Woodruff Ins. Cas. 176 (1886); Ben Franklin Ins. Co. v. Weary, 4 111. App. 74 (1879). As to buildings on leased ground generally, see Fletcher v. Common- wealth Ins. Co., 18 Pick. (Mass.) 419 (1836); Fowle v. Springfield, etc., Ins. Co., 122 Mass. 191, 23 Am. Rep. 308 (1877); Insurance Co. v. Haven, 5 Otto (U. S.) 242 (1877). Such a provision is a warranty and can not be disregarded: East Texas F. Ins. 262 THE STANDARD POLICY. 252 owner in fee of only an undivided interest in the land. 133 The pos- session of a life estate in real estate is not a compliance with this provision. 154 It has been held that one who has the equitable right to- a fee-simple title is within the provision. 153 Where no questions were asked and no representations made, it was held that one who had paid the full purchase-price for the property, but had not received his deed, was the owner of the ground in fee-simple within the mean- ing of this provision. 136 So, a provision avoiding the policy, if the subject of the insurance is a building on "ground not owned by the insured," is not broken if a part of the building stands on ground not owned by the insured. 157 The provision does not apply where the policy is issued on a leasehold interest. 158 Where the company knew that the building was on leased property when the policy was issued, and no indorsement showing such fact was made on the policy, it was held that it could not defeat a recovery for breach of this condi- tion. 159 The condition is broken where the deed is delivered to a third person to hold until certain conditions are performed. 100 262. Incumbrance by chattel mortgage. The policy is rendered void if a chattel mortgage is placed upon the property without the consent of the insurer. 161 In the absence of this provision the execu- Co. v. Brown, 82 Tex. 631, 18 S. W. 1M Dooly v. Hanover *\ Ins. Co., 16 713 (1891). When the insured Wash. 155, 47 Pac. 507 (1895). property is described as located on a 157 Haider v. St. Paul, etc., Ins. Co., military reservation it is sufficient 67 Minn. 514, 70 N. W. 805 (1897). notice to the company that the in- 15S Philadelphia Tool Co. v. Brit- sured does not own the title in fee; ish, etc., Assur. Co., 132 Pa. St. 236, and the provision is inoperative: 19 Atl. 77 (1890). Broadwater v. Lion F. Ins. Co., 34 J59 Cowell v. Phoenix Ins. Co., 126 Minn. 465 (1886). ' N. C. 684, 36 S. E. 184 (1900). See, 153 Scottish, etc., Ins. Co. v. Petty, also, Clawson v. Citizens', etc., Ins. 21 Fla. 399 (1885). Co., 121 Mich. 591, 80 N. W. 573 1M Garver v. Hawkeye Ins. Co., 69 (1899); Berry v. American, etc., Ins. Iowa 202 (1886). But see Haden v. Co., 132 N. Y. 49 (1892). Farmers', etc., Ass'n, 80 Va. 683 16 Pangborn v. Continental Ins. (1885). Co., 62 Mich. 638 (1886). 155 Swift v. Vermont, etc., Ins. Co., m This clause is found in the 18 Vt. 305 (1846); Pennsylvania F. standard forms of the following Ins. Co. v. Dougherty, 102 Pa. St. states: New Jersey, Connecticut, 568 (1883); Elliott v. Ashland, etc., Rhode Island, Wisconsin, Louisiana, Ins. Co., 117 Pa. St. 548, 12 Atl. 676 North Dakota, South Dakota, New (1888); Lewis v. New England F. York, North Carolina, and Michigan. Ins. Co., 29 Fed. 496 (1886). The Iowa form adds the words, 253 INTEREST CARE OF PROPERTY. 2G2 tion of a chattel mortgage is not a violation of the provision relating to an increase of the risk, or a change in the title, interest or posses- sion of the property. 162 But there are some authorities to the con- trary. Thus, it was held that a chattel mortgage was a violation of the clause relating to the "alteration of the ownership/' 163 and that it was an "alienation in part." 164 So, in Michigan it was recently held that the execution of a chattel mortgage by a partner on the partnership chattels insured for the benefit of the firm, is such a change in the subject of the insurance as will render the policy void. 165 This provision in the standard policy is valid and binding, 166 and the same is true of one which provides that the policy shall be void if, at the time of the execution of the policy, the property is covered by a chattel mortgage. 167 Such conditions prohibiting incumbrances upon insured property are legal, reasonable and proper, and in line with public policy. They apply, however, only to voluntary liens and levies and not to invol- untary incumbrances, such as tax liens and payments procured in invitum. It is said, however, that a violation of such a condition does not render a policy absolutely void, but merely voidable at the election of the insurer. 168 The provision in the standard policy refers only to the common, ordinary chattel mortgage and instruments of that general' nature, use and purpose. It does not, therefore, apply to a covenant in a lease which provides that the lessor shall. have a first lien on all the buildings for any unpaid rents or taxes, as such a covenant is not a chattel mortgage in the ordinary sense of the term. 169 "judgment, mechanic's lien, or any 1W Webster v. Dwelling House Ins. other lien, or be or become liable in Co., 53 Ohio St. 558, 30 L. R. A. 719 any way to any lien-holder." The (1895); Brown v. Westchester F. clause does not appear in the stand- Ins. Co., 9 Kan. App. 526, 58 Pac. ard forms of Massachusetts, Minne- 276 (1899). sota, Maine, and New Hampshire. 16r Crikelair v. Citizens' Ins. Co., 102 Wytheville Ins. Co. v. Stultz, 87 168 111. 309, 61 Am. St. 119 (1897). Va. 629 (1891). See, also, Wilcox v. Continental Ins. 163 Edmands v. Mutual, etc., Ins. Co., 85 Wis. 193 (1893); Wierengo Co., 1 Allen (Mass.) 311 (1861). v. American F. Ins. Co., 98 Mich. 164 Abbott v. Hampden, etc., Ins. 621 (1894). Co., 30 Me. 414 (1849); Judge v. Con- 1M Dover Glass Works Co. v. Amer- necticut F. Ins. Co., 132 Mass. 521 ican F. Ins. Co., 1 Marvel (Del.) 32, (1882). 65 Am. St. 264 (1895). 165 Olney v. German Ins. Co., 88 18 Caplis v. American F. Ins. Co., Mich. 94, 26 Am. St. 281 and note 60 Minn. 376, 51 Am. Rep. 535 (1891). (1895). 262 THE STANDARD POLICY. 254 In Nebraska and Iowa the cancellation or discharge of a mortgage on the insured chattels, given in violation of this condition before the loss occurs, revives the contract from the date of the cancellation or discharge. 170 But in Arkansas such an incumbrance avoids the con- tract, although it is paid before the loss occurs. The court said: 171 "The language of the clause, in its plain, ordinary and popular sense, indicates a total extinction of the policy if the property be incum- bered, and not a suspended animation thereof, subject to be revived upon the payment of the mortgage debt. Courts, by interpretation, can not engraft on an insurance contract any more than on any other, a meaning foreign to that which the plain terms employed by the parties themselves convey. It is undoubtedly true that where the contract, on account of any ambiguity of the language used, is reason- ably susceptible of different constructions, that construction should be adopted which is most favorable to the insured. The insurer had the right to contract against any possible risk of loss or embarrass- ment incident to incumbering the property insured. * * * The clause is reasonable and clear and the parties had the right to so contract." A policy insuring both real and personal property provided that if "the property should thereafter become mortgaged or incum- bered," the policy should be void, and also declared it would be for- feited if other insurance was taken out on any of such property. It was held that since the provision for forfeiture for mortgaging did 170 Home F. Ins. Co. v. Johansen, not be settled without expensive 59 Neb. 349, 80 N. W. 1047 (1899); litigation. The insured mortgagor State Ins. Co. v. Schreck, 27 Neb. might enter into collusion with the 527, Woodruff Ins. Gas. 160 (1899); mortgagee to defraud the insurance Born v. Home Ins. Co., 110 Iowa 379, company after the loss occurred by 81 N. W. 676 (1900); Kimball v. claiming that the mortgage had been Monarch Ins. Co., 70 Iowa 513 paid off and discharged, when in (1886). fact it had not. Unfortunately all 171 German, etc., Ins. Co. v. men are not honest. Without some Humphrey, 62 Ark. 348, 54 Am. St. such provision in the policy, the un- 297 (1896). The court said: "If scrupulous would have an inviting it be said that where the mortgage opportunity, after a loss, to divide is paid off, there is no longer an in- the spoils, at the expense of the in- cumbrance and increase of risk, surer. Doubtless some such consid- still, as to whether or not the mort- erations as these prompted the gage had been paid off would be the clause in the policy under consider- question, and one that often could ation." 255 INTEREST CARE OF PROPERTY. 263 not provide a forfeiture for mortgaging "any" of the property, but treated "the property" as a whole, the policy would not be forfeited by a mortgage given on part of the property only. 172 A statute requir- ing every insurer, before issuing a policy, to examine the building or structure .to be insured and fix the insurable value thereof, and provid- ing that recovery may be had notwithstanding any subsequent change not affecting the risk, applies only to the condition of the building and structure, and does not impair or affect any condition in the policy against the making of any subsequent incumbrance without notice to and consent of the company. 173 Where the policy provided that it should become void "if the property be or become incumbered by a chattel mortgage," and no written application was made and no questions asked regarding incumbrances, it was held that the condi- tion was broken by the existence of a chattel mortgage, although it was of record at the time the policy was issued. It was said that the great weight of authority is to the effect that where the policy con- tains such a stipulation, and the property at the time of the execution of the policy is covered by a mortgage, no recovery can be had unless it appears that there was a waiver or estoppel by which the company is precluded from relying on the contract. 174 A mortgage which has been paid, but not satisfied, at the time the policy is issued, is not within this provision. 175 263. Foreclosure proceedings. The policy is void if, with the knowledge of the insured, foreclosure proceedings are commenced or notice given of the sale of the property covered by the policy by virtue of any mortgage or trust deed. 176 This clause is peculiar to the New 172 Born v. Home Ins. Co., 110 Iowa Co., 17 Pa. St. 253 (1851); Pennsyl- 379, 81 N. W. 676 (1900). vania Ins. Co. v. Gottsman's Admrs., 173 Webster v. Dwelling House Ins. 48 Pa. St. 151 (1864). The principle Co., 53 Ohio St. 558, 53 Am. St. 658 upon which these decisions rest was (1895). See, also, Sun Fire Office v. recognized and applied in Reaper Clark, 53 Ohio St. 414 (1895). City Ins. Co. v. Brennan, 58 111. 158 174 Crikelair v. Citizens' Ins. Co., (1871), and Hebner v. Sun Ins. Co., 168 111. 309, 48 N. E. 167 (1897). It 157 111. 144, 41 N. E. 627 (1895). was so expressly held in Wilcox v. 175 Laird v. Littlefleld, 164 N. Y. Continental Ins. Co., 85 Wis. 193, 597, 58 N. E. 1089 (1900). 55 N. W. 188 (1893); Wierengo v. m This clause is found 'in the American F. Ins. Co., 98 Mich. 621, standard policies in use in the states 57 N. W. 833 (1894); Fitchburg, etc., of New Jersey, Connecticut, Rhode Bank v. Amazon Ins. Co., 125 Mass. Island, Wisconsin, Louisiana, North 431 (1878); Smith v. Columbia Ins. Dakota, New York, North Carolina, 263 THE STANDARD POLICY. 256 York form and would seem to indicate that the giving of a mortgage need not be communicated to the insurer until foreclosure proceedings are commenced. 177 As said in New York: 178 "A provision that a policy shall be void in case of foreclosure proceedings is common in insurance policies, and we must assume that experience has shown to the underwriters that such proceedings increase the risk to the in- surer. The defendant might have been willing for the premium charged to insure this barn with the mortgage upon it, and yet not willing to insure it in case of proceedings to foreclose the mortgage. It did assent to the mortgage and agree that loss, if any, should be paid to the mortgagee, but it did not assent to continue the insurance in case the risk was increased by proceedings to foreclose the mort- gage. Before commencing the foreclosure the plaintiff should have obtained the assent of the defendant. It might have examined the circumstances and granted such assent without any conditions, or it might have required additional premium for the increased risk. It might have refused altogether, and in that case the plaintiff could have delayed his foreclosure until the end of the year or surrendered the policy and procured insurance elsewhere. Even if the provision were found to be very inconvenient and embarrassing, there is no help for it. There it is, and we can not take it out of the policy by construction." This provision relates only to the future, and therefore the policy is not rendered void by the fact that foreclosure proceedings are pending when the policy is issued, which fact was not disclosed to the insurer. 179 If a policy upon mortgaged property expressly provides South Dakota, and Michigan. The Co., 45 Conn. 430 (1878); Shepherd Iowa clause is as follows: "Or if v. Union, etc., Ins. Co., 38 N. H. 232 foreclosure proceedings be com- (1859); Smith v. Monmouth, etc., menced or a suit begun in which Ins. Co., 50 Me. 96 (1863); Byers v. ownership, title or possession is in- Farmers' Ins. Co., 35 Ohio St. 606, volved or disputed, or notice given 35 Am. Rep. 623 (1880)]. But see of sale of any property covered in Western, etc., Ins. Co. v. Riker, 10 whole or in part by this policy." Mich. 279 (1862). The clause is not found in the stand- m Titus v. Glens Palls Ins. Co., ard policies of Massachusetts, Min- 81 N. Y. 410, Woodruff Ins. Cas. 176 nesota, Maine or New Hampshire. (1880); Quinlan v. Providence, etc., 177 Richards Ins., 146 [citing Ins. Co., 133 N. Y. 356, 31 N. E. 31 Conover v. Mutual Ins. Co., 1 Comst. (1892). (N. Y.) 290 (1848); Judge v. Con- m Orient Ins. Co. v. Burrus (Ky.), necticut F. Ins. Co., 132 Mass. 521 63 S. W. 453 (1901). (1882); Bishop v. Clay, etc., Ins. 257 INTEREST CAKE OF PKOPEETY. 263 that it shall become absolutely void upon the commencing of proceed- ings for foreclosure of the mortgage without the written consent of the insurer, and the mortgage by its terms is subject to foreclosure if the taxes upon the property are permitted to become delinquent, it is invalidated when the property is advertised for sale on account of such default. 180 To render the policy void for violation of this pro- vision it is not necessary to restore any part of the premium, as this is to be done only when the policy is returned for cancellation. 181 Under a provision in the policy that it shall be void unless otherwise provided by agreement thereon, if, with the knowledge of the insured, proceedings be commenced to foreclose a mortgage on the property, and that no condition of the policy can be waived except by writing thereon, such foreclosure, without an indorsement on the policy, avoids it, although notice of the foreclosure is given to the agent who issued the policy. 182 Where a policy insuring a mortgagee's in- terest was excepted from the condition that it should be void if fore- closure proceedings should be commenced against the property with- out the knowledge of the mortgagee, it was held that the policy was not invalidated as to him by the foreclosure of a judgment lien against the property by a third party. 183 A provision to the effect that the "entry of a foreclosure of a mort- gage should be deemed an alienation of the property" does not import a complete foreclosure. 184 Where the policy contained a provision that it should be void "if, with the insured' s knowledge, foreclosure proceedings be commenced or notice of sale given of any property covered by this policy by virtue of any mortgage," it was held that where the mortgagors and another party gave the assignee of the mort- gage a personal judgment note for the balance due on the mortgage, a judgment thereafter entered on the note was not a foreclosure of the mortgage within the meaning of the provision. 185 J8 Springfield, etc., Co. v. Traders' m Sun Ins. Office v. Beneke (Tex. Ins. Co., 151 Mo. 90, 74 Am. St. 521 Civ. App.), 53 S. W. 98 (1899). (1899). See, also, Horton v. Home m Mclntire v. Norwich F. Ins. Co., Ins. Co., 122 N. C. 498, 65 Am. St. 102 Mass. 230, 3 Am. Rep. 458 (1869). 724 and note (1898). In Pennsylvania the mere issuance isi N orr i s v. Hartford F. Ins. Co., of a scire facias on the property does 55 S. C. 450, 33 S. E. 566 (1899). not invalidate the policy: Weiss v. 182 Woodside Brewing Co. v. Pa- American F. Ins. Co., 148 Pa. St. 349, cine F. Ins. Co., 159 N. Y. 549, 54 23 Atl. 991 (1892). N. E. 1095 (1899). 185 Collins v. London Assur. Corp., 165 Pa. St. 298, 30 Atl. 924 (1895). 17 ELLIOTT INS. 264 THE STANDARD POLICY. 258 An illegal foreclosure sale made without the consent of the insured will not cause a forfeiture of the policy. 186 Where there is a fore- closure sale, and the order of confirmation is thereafter set aside for irregularity, the interest of the mortgagor remains and is protected by the policy. 187 264. Generation of illuminating gas. "The policy is rendered void if illuminating gas or vapor is generated in or adjacent to the insured buildings for use therein/' 188 The prohibition is upon the generation of gas or vapor, and not upon its use for lighting the build- ing. Where the policy contained a clause prohibiting, unless by special agreement indorsed on the policy, "the generating or evaporat- ing within the building or contiguous thereto of any substance for a burning gas or the use of gasoline for lighting," and the plaintiffs constructed works fifty feet from the building for the manufacture of gas from gasoline which was conducted to the building through pipes, it was held that the gas works were not contiguous to the build- ing within the meaning of the policy. 189 VIII. Change in Interest, Title or Possession. This entire policy shall be void * * * if any change, other than by the death of an insured, take place in the interest, title, or 188 Niagara P. Ins. Co. v. Scammon, iana, North Dakota, South Dakota, 144 111. 490, 28 N. E. 919, 32 N. E. Michigan, North Carolina, Iowa, and 914, 19 L. R. A. 118 (1893); Rich- Wisconsin. It is not found in the land, etc., Ins. Co. v. Sampson, 38 standard policies of Massachusetts, Ohio St. 672 (1883); Georgia, etc., Minnesota, Maine or New Hamp- Ins. Co. v. Kinnier, 28 Gratt. (Va.) shire. 88 (1877). 189 Arkell v. Commerce Ins. Co., 69 187 Richland, etc., Ins. Co. v. Samp- N. Y. 191, 25 Am. Rep. 168 (1877). son, 38 Ohio St. 672 (1883). In this A condition in a policy of insur- case the insured retained an insura- ance upon goods "contained in a hie interest at the time of the fire, brick building situate, etc.," against There was no provision in the policy "lighting the premises insured, by relating to a change of interest in camphine or spirit gas," held to be the property, and the question was good and to preclude the use of whether before the fire the insured spirit gas as a means of lighting in had lost all insurable interest. and about the goods at the place 188 This clause is found in the where they were described to be: standard policies in use in the Stettiner v. Granite Ins. Co., 5 states of New York, New Jersey, Duer (N. Y.) 594 (1856). Connecticut, Rhode Island, Louis- 259 CHANGE IN INTEREST, TITLE OR POSSESSION. 265 possession of the subject of insurance (except change of occupants without increase of hazard), whether by legal process or judgment, or by voluntary act of the insured or otherwise. 190 265. Scope of provision. This provision is very broad, and pro- vides that notice of all such changes must be given to the company in order that it may cancel the policy if it desires so to do. But under it only material changes in the title avoid the policy. 191 The appointment of a receiver is not such a change in the title or possession of the property as to avoid a policy which contains the provision that "if any change takes place in the title or posses- sion of the property, whether by sale or judicial decree, without notice to the company, and its consent indorsed thereon, then the policy shall be void;" 192 nor is a change of receivers such a change ""This clause is found in the standard policies of New York, New Jersey, Connecticut, Rhode Island, Wisconsin, Louisiana, North Dakota, South Dakota, Michigan and North Carolina. The Iowa form is as fol- lows: "Or if any change or diminu- tion other than by the death of the insured take place in the interest, title or possession of the subject of the insurance (except change of oc- cupants without increase of haz- ard); or if any other person than the insured now have or shall here- after acquire any interest in or lien on the property insured, or any part thereof; or if this policy be assigned before a loss." The standard forms of Massachusetts, Minnesota and Maine provide that the policy shall be void if "without such assent the said property be sold or the policy assigned." The New Hampshire pol- icy provides that the policy shall be "void and inoperative during the ex- istence or continuance of the acts or conditions of things stipulated against as follows: * * * or if, without such assent, the said proper- ty shall be sold, or this policy as- signed." 191 Barnes v. Union, etc., Ins. Co., 51 Me. 110, 81 Am. Dec. 562, and note (1863). See notes in 59 Am. Dec. 307 and 28 Am. Dec. 154. As to the effect of a temporary aliena- tion, see Hill v. Middlesex, etc., As- sur. Co., 174 Mass. 542 (1899). Where the insurer consented to the transfer it was held that the pro- vision was violated by a retransfer without the consent of the company: St. Onge v. Westchester F. Ins. Co., 80 Fed. 703 (1897). A change which increases the interest of the insured is not such a change of ownership as requires notice to be given to the company, under the terms of a sub- rogation contract which provides that the mortgagee shall notify the company of any change in the inter- est: Dodge v. Hamburg, etc., Ins. Co., 4 Kan. App. 415, 46 Pac. 25 (1896). See 46, supra. 192 Georgia, etc., Ins. Co. v. Bart- lett, 91 Va. 305, 50 Am. St. 832 (1895). See also, Union Bank of Chicago v. Kansas City Bank, 136 U. S. 223 (1890). 266 THE STANDARD POLICY. 260 of possession or title as will invalidate the policy. 193 Where, after the sale of property under foreclosure and before the expiration of the time to redeem, property is insured for the benefit of a mortgagee, as its interest may appear, and the mortgagee pays the premium, the non-redemption from the mortgage sale by the owner of the property does not work an alienation of the property so as to defeat the policy. 194 An agreement between the owner of the property and another per- son to represent to the creditors of the owner, for the purpose of pre- venting a levy and attachment, that the property had been sold to such other person, does not avoid the policy. 195 Like other provisions for the benefit of the insurer, this provision against alienation may be waived. 196 The notice may be given to the person who signed the policy, as the agent of the company, when the insured has no notice that such person has ceased to be an agent. 197 266. Transfer of part interest. Whether a transfer of a part interest in the insured property invalidates a policy depends upon the particular language of the provision. Where the prohibition is mere- ly upon the sale or conveyance of the property it is held that it is not violated by the sale of anything less than the entire interest of the insured. 198 Conditions restricting the right of alienation are strictly construed against the insurer. The general rule is that such a condition refers only to an absolute transfer of the entire interest of the insured which completely divests him of his insurable interest. Any sale or transfer short of this is not within the scope of such a condition. 199 But a provision to the effect that the policy shall be 193 Thompson v. Phenix Ins. Co., some states the effect is to suspend 136 U. S. 287 (1890). the policy. Provisions forbidding 194 Washburn Mill Co. v. Fire a change of title without the consent Ass'n, 60 Minn. 68, 51 Am. St. 500 of the insurer are reasonable and (1895). have always been enforced: Cum- 198 Orrell v. Hampden F. Ins. Co., mins v. National F. Ins. Co., 81 Mo. 13 Gray (Mass.) 431 (1859). App. 291 (1899). 186 Stuart v. Reliance F. Ins. Co. 198 Cowan v. Iowa State Ins. Co., (Mass.), 60 N. E. 929 (1901). 40 Iowa 551, 20 Am. Rep. 583 (1875); m Whitney v. American Ins. Co. Scanlon v. Union F. Ins. Co., 4 Biss. (Cal.), 56 Pac. 50 (1899). A breach (C. C.) 511 (1869). See also, Stet- of this condition renders the policy son v. Massachusetts, etc., Ins. Co., ipso facto void: Farmers', etc., Ins. 4 Mass. 330, 3 Am. Dec. 217 (1808). Ass'n v. Price, 112 Ga. 264, 37 S. E. 199 Clinton v. Norfolk, etc., Ins. Co., 4^7 (1900). As elsewhere noted, in 176 Mass. 486, 57 N. E. 998, 79 Am. 261 CHANGE IN INTEREST, TITLE OR POSSESSION. 267 void if there is a sale,, transfer or change of title of the insured prop- erty, is broken by a conveyance of an undivided interest in the prop- erty, although the remaining interest of the insured exceeds in value the amount of the policy. 200 A conveyance of an undivided one-half interest in the property violates a condition which forbids a change in the title or possession of the property, whether by sale, lease, legal process, judicial decree, or voluntary transfer without the consent of the company. 267. Executory contract of sale. The execution of a contract of sale, by the terms of which the title is to remain in the vendor until the purchaser pays the deferred payments, is not a violation of the condition which forbids any change in the title of the insured prop- erty. 201 So, the condition is not broken by a contract of sale and the part payment of the purchase-money with a provision for the giving of possession at a future date, where the loss occurs before that time. 202 But where, under a contract for the sale of real estate, the purchaser has taken possession, and nothing remains to be done but to make the deed and pay the balance of the purchase price, there is a breach of condition, although the contract provides that it is to be- come of no effect if default is made in the payments at the stipulated time. 203 It was held that the condition was broken by the execu- tion of a written contract of sale which passed the equitable title and beneficial interest. 204 In this case the court said: "The rule seems to be general that if the insured, in making a transfer of the title, St. 325 (1900), and cases there cited. 27 Am. Rep. 86 (1878); Forward v. See note to Lane v. Maine, etc., Ins. Continental Ins. Co., 142 N. Y. 382, Co., 28 Am. Dec. 150 (1835). 25 L. R. A. 637 (1894). 200 Western, etc., Ins. Co. v. Riker, 202 Kempton v. State Ins. Co., 62 10 Mich. 279 (1862). Iowa 83, 17 N. W. 194 (1883). 201 Home Ins. Co. v. Bethel, 142 111. 203 Davidson v. Hawkeye Ins. Co., 537, 32 N. E. 510 (1892). See also, 71 Iowa 532, 32 N. W. 514, 60 Am. Grable v. German Ins. Co., 32 Neb. Rep. 818 (1887). A transfer from 645, 49 N. W. 713 (1891). Contra: a mortgagor to a mortgagee before Skinner v. Houghton, 92 Md. 68, 48 the fire, which is not accepted until Atl. 85 (1900). A condition pro- the day after the fire, will not avoid hibiting any sale or transfer, or the policy: Pioneer Sav., etc., Co. any change in the possession of the v. Providence, etc., Ins. Co., 17 Wash, property, does not apply to a mere 175, 38 L. R. A. 397 (1897). executory contract for a sale with- 2W Cottingham v. Fireman's Fund out change of possession: Brown- Ins. Co., 90 Ky. 439, 14 S. W. 417, ing v. Home Ins. Co., 71 N. Y. 508, 9 L. R. A. 627 (1890). 267 THE STANDARD POLICY. 262 retains an interest in any of the insured property, the policy is not vacated by a sale. Pursuant to this rule, it has been held in a num- ber of cases, and by elemental} 7 writers, that the sale, in order to vacate the policy, must be of the legal title; that the sale of a mere equity, the vendor holding the legal title, will not suffice to va- cate the insurance. It is believed that the rationale of this rule is that the vendor in such cases, as the owner of the legal title, he not having parted with it, retains the risk of the property that is, the risk of the property remains with the legal title and the loss or destruction of the property falls upon the owner of the legal title; and under that view it is believed that if the owner has sold the equitable, but not the legal title, he has not parted with his insurable interest in the property. But in this state the purchaser of real estate by a title bond takes the risk of the property. He is the bene- ficial owner of it, and its loss or destruction falls upon him and not the vendor. It is the vendor's parting with the beneficial interest in the property that vacates his contract of insurance, and where the sale of the legal title is necessary to deprive the owner of such interest, the sale of the equitable title only will not be sufficient for that pur- pose. But where, as in this state, the beneficial interest is passed to the vendee of the equitable title, the contract of insurance is vacated by such sale. The vendee in such cases assumes all risk of loss or de- struction of the property." Where the policy contains a provision invalidating it "if any change take place in the interest, title or possession of the subject of insurance/' it is not invalidated by an agreement to exchange the insured property, which was to take effect on a specified date in the future, but which was never in fact executed. The court said that "it was simply an agreement to in the future make such a change, which was never done. It is true that the policy stipulates against a change of interest, or change of title, or change of possession, but there was no change of either. 205 A contract for the sale of the in- sured property does not violate this condition where the property is not passed to the purchaser, although a portion of the purchase-money is paid. 206 The word "interest" is broader than the word "title," 206 Erb v. German, etc., Ins. Co., 20 Boston Ice Co. v. Royal Ins. Co., 98 Iowa 606, 67 N. W. 583, 40 L. R. 12 Allen (Mass.) 381, 90 Am. Dec. A. 845 (1896). See also, Washing- 151 (1866). ton F. Ins. Co. v. Kelly, 32 Md. 421, 3 Am. Rep. 149 (1870). 263 CHANGE IX INTEREST, TITLE OR POSSESSION. 268 and includes both legal and equitable rights. Hence, where the pol- icy provides that it shall be void if any change takes place in the interest of the insured, whether by voluntary act of the insured or otherwise, an executory agreement to convey the insured premises under which the vendee takes possession and pays part of the pur- chase price is a breach of the condition. 207 268. Incumbrances. The weight of authority supports the view that the execution of a mortgage on the insured premises is not a breach of the condition against a change of title, interest or posses- sion. 208 Nor is this provision violated by the existence of a mortgage on the property at the time the policy was issued, as the condition re- fers only to subsequent changes. 209 Policies sometimes contain con- ditions requiring the disclosure of existing incumbrances, and render- ing the contract void if this is not done. No such provision appears in the standard form under consideration. 210 Of course the execution of a mortgage for the purpose of paying off a mortgage which was in existence at the time the policy was 207 Gibb v. Philadelphia F. Ins. Co., 59 Minn. 267, 61 N. W. 137, 50 Am. St. 405 (1894); Trumbull v. Portage, etc., Ins. Co., 12 Ohio 305 (1843). As to the meaning of the word "in- terest," see Walradt v. Phrenix Ins. Co., 136 N. Y. 375, 32 N. E. 1063, 32 Am. St. 752 (1893). In Skinner & Sons' Co. v. Houghton, 92 Md. 68, 48 Atl. 85 (1900), it was held that a contract for the sale of the insured premises was a breach of a con- dition which provided that the pol- icy should be void if any change take place in the interest, title or possession of the property, whether by legal process or by voluntary act of the insured. 208 Judge v. Connecticut F. Ins. Co., 132 Mass. 521 (1882); Commercial Ins. Co. v. Spankneble, 52 111. 53 (1869); Peck v. Girard, etc., Ins. Co., 16 Utah 121, 67 Am. St. 600 (1897); Barry v. Hamburg, etc., Ins. Co., 110 N. Y. 1 (1888); Conover v. Mutual Ins. Co., 1 N. Y. 290 (1848); Hart- ford, etc., Ins. Co. v. Lasher Stock- ing Co., 66 Vt. 439, 29 Atl. 629, 44 Am. St. 859 (1894); Rice v. Tower, 67 Mass. 426 (1854); Loy v. Home Ins. Co., 24 Minn. 315, 31 Am. Rep. 346 (1877); Byers v. Farmers' Ins. Co., 35 Ohio St. 606, 35 Am. Rep. 623 (1880); Sun Fire Office v. Clark, 53 Ohio St. 414, 42 N. E. 248, 38 L. R. A. 562 (1895); Smith v. Monmouth, etc., Ins. Co., 50 Me. 96 (1863); Taylor v. Merchants', etc., Ins. Co., 83 Iowa 402, 49 N. W. 994 (1891); Germania F. Ins. Co. v. Stewart, 13 Ind. App. 627, 42 N. E. 286 (1895); Forehand v. Niagara Ins. Co., 58 111. App. 161 (1894). See also, Nussbaum v. Northern Ins. Co., 37 Fed. 524, 1 L. R. A. 704 (1889). 209 Morotock Ins. Co. v. Rodefer, 92 Va. 747, 53 Am. St. 846 (1896). 210 See note to 258, supra. 268 THE STANDARD POLICY. 264 executed is not a breach of this provision against the creation of a future incumbrance. 211 But there are some authorities which hold that the execution of a mortgage results in a change of the title or interest of the mort- gagor. Thus, in Texas it was held that the execution of a mortgage on the insured property is a breach of the condition against any "change in the interest of the insured, whether by sale, transfer or conveyance." 212 So, the giving of a mortgage with a power of sale has been held a violation of the condition against alienation. 213 The execution of a chattel mortgage on partnership property by one of the partners to secure a personal debt violates a condition which provides that if any change takes place in the interest, title, or pos- session of the property, the policy shall be void. 214 A mortgage on the insured property by a person who holds the legal title will not avoid a policy under a prohibition against changes in the title without the consent of the company indorsed upon the policy, if such mortgage is merely the obligation of the mortgagor and not of the insured. 215 The giving of a mortgage is a material alteration of the ownership of the property insured, under a policy which provides that "all alienations and alterations in the ownership, situation or state of the property" shall invalidate the policy. 216 Where the policy contains a condition against a change of title and the creation of incumbrances, a mere paper transfer, without a bill of sale and without consideration, and without a delivery of the posses- sion of the property, is not a breach of the condition. 217 Where the policy contains a condition that it shall be void if there is any change in the title, or the creation of an incumbrance, and to which is attached a mortgage slip protecting the rights of a mortgagee against a breach of condition by the mortgagor, the rights of such mortgagee are not 211 McKibban v. Des Moines, etc., 214 Olney v. German Ins. Co., 88 Ins. Co. (Iowa), 86 N. W. 38 (1901); Mich. 94, 50 N. W. 100, 13 L. R. A. Aurora F. Ins. Co. v. Eddy, 55 111. 684 (1891). 213 (1870); Koshland v. Home, etc., 215 Hoose v. Prescott Ins. Co., 84 Ins. Co., 31 Ore. 321, 49 Pa"c. 864, 50 Mich. 309, 47 N. W. 587, 11 L. R. A. Pac. 567 (1897). 340 (1890). 212 East Texas F. Ins. Co. v. Clarke, 21 Edmands v. Mutual, etc., Ins. 79 Tex. 23, 15 S. W. 166, 11 L. R. A. Co., 1 Allen (Mass.) 311 (1861). 293 (1890). 217 Forward v. Continental Ins. Co., 2I3 Sossaman v. Pamlico, etc., Ins. 142 N. Y. 382, 25 L. R. A. 637 Co., 78 N. C. 145 (1878). (1894). 265 CHANGE IN INTEREST, TITLE OR POSSESSION. 269 affected by a transfer of the title or the creation of an incumbrance by the mortgagor. 218 269. Defeasible conveyances. A deed absolute in form, but in- tended as a mortgage, is not a breach of the condition that the policy will be void if there is any change in the title or possession. 219 Such conveyances are treated as simply incumbrances, and hence come within the rule stated in the preceding section. The fact that a deed absolute in form is recorded, and the defeasance is not, does not change the rule, although a statute provides that persons having no notice of an unrecorded instrument of defeasance shall not be affected thereby. 220 A conveyance of real estate by a debtor to a cred- itor under the provisions of the Georgia code is not an alienation of the property within the prohibition against a change of title. 221 270. Invalid conveyances. A deed to the property covered by the policy, executed by the insured while insane, is not a violation of the condition. 222 So, the rights of the insured are not affected by a sale of the property made by her husband without her consent. 223 But a voluntary conveyance is a breach of the condition against alienation, although it is without consideration. 22 * 218 Phenix Ins. Co. v. Omaha Loan, ~ Bryan v. Traders' Ins. Co., 145 etc., Co., 41 Neb. 834, 60 N. W. 133, Mass. 389, 14 N. B. 454 (1887). See 25 L. R. A. 679 (1894); Boyd v. Foote v. Hartford F. Ins. Co., 119 Thuringia Ins. Co. (Wash.), 65 Pac. Mass. 259 (1876); Dailey v. West- 785 (1901). Chester F. Ins. Co., 131 Mass. 173 218 German Ins. Co. v. Gibe, 162 111. (1881). 251, 44 N. E. 490 (1896); Barry v. 221 Phoenix Ins. Co. v. Asberry, 95 Hamburg, etc., Ins. Co., 110 N. Y. Ga. 792, 22 S. B. 717 (1895). 1, 17 N. E. 405 (1888). Contra: ^ Gerling v. Agricultural Ins. Co., Western, etc., Ins. Co. v. Riker, 10 39 W. Va. 689, 20 S. B. 691 (1894). Mich. 279 (1862); Adams v. Rocking- 223 Commercial Ins. Co. v. Spank- ham, etc., Ins. Co., 29 Me. 292 neble, 52 111. 53, 4 Am. Rep. 582 (1849); Tomlinson v. Monmouth, (1869); German Ins. Co. v. York, 48 etc., Ins. Co., 47 Me. 232 (1859). But Kan. 488, 29 Pac. 586, 30 Am. St. in Bemis v. Harbor Creek, etc., Ins. 313 (1892). Co. (Pa.), 49 Atl. 769 (1901), it was 224 Home F. Ins. Co. v. Collins held that a deed absolute in form, (Neb.), 85 N. W. 54 (1901); Brown and containing no intimation that it v. Cotton, etc., Ins. Co., 156 Mass. is not an absolute conveyance, is a 587, 31 N. E. 691 (1892). breach of the condition. 271 THE STANDARD POLICY. 266 271. Sale with purchase-money mortgage. A condition pro- hibiting a change of title, interest or possession is broken by the exe- cution and delivery of a deed and the taking back of a mortgage to secure the payment of the purchase-money. 225 The contrary is held in Ohio on the theory that only a transfer of the entire interest of the insured violates this condition. 226 . 272. Conveyance to the wife of insured. A transfer of the in- sured property to a third party, and by such party to the wife of the insured, is a breach of this condition and renders the policy void. 227 A marriage contract conveying land to the wife, but pro- viding for a reversion should she prove unfaithful or fail to survive the grantor, vests such a title in the wife as to come within the pro- hibition against change of title, and the fact that after the loss the husband secured a divorce can not authorize a recovery by the husband on the policy. 228 Under the Illinois statute, which pro- vides that no conveyance of a homestead estate shall be valid unless signed and acknowledged by the wife, it is held that a conveyance by the insured to his wife does not constitute such a change of title as would avoid the policy, where the wife does not join in the execu- tion and acknowledgment of the deed. 229 273. Transfers by and between partners. A condition making the policy void if there is any change in the title or interest of the insured without the consent of the company is not violated by the 225 Savage v. Howard Ins. Co., 52 Co., 48 Ohio St. 533, 29 N. E. 278, 14 N. Y. 502, 11 Am. Rep. 741 (1873); L. R. A. 431 (1891). Kitts v. Massasoit Ins. Co., 56 Barb. ~~ Walton v. Agricultural Ins. Co., (N. Y.) 177 (1867); Tittemore v. 116 N. Y. 317, 22 N. E. 443, 5 L. R. Vermont, etc., Ins. Co., 20 Vt. 546 A. 677 (1899); Baldwin v. Phoenix (1848). In Sanders v. Hillsborough, Ins. Co., 60 N. H. 164 (1880); Lang- etc., Ins. Co., 44 N. H. 238 (1862), don v. Minnesota, etc., Ass'n, 22 notice of the transaction was given Minn. 193 (1875). See also, Oakes to the company and consent to the v. Manufacturers', etc., Ins. Co., 131 continuance of the insurance was in- Mass. 164 (1881); Glaze v. Three dorsed on the policy. See also, Rivers, etc., Ins. Co., 87 Mich. 349, Farmers' Ins. Co. v. Archer, 36 Ohio 49 N. W. 595 (1891). St. 608 (1881); California State ^Cummins v. National F. Ins. Bank v. Hamburg, etc., Ins. Co., 71 Co., 81 Mo. App. 291 (1899). Cal. 11, 11 Pac. 798 (1886). ^ Kitterlin v. Milwaukee, etc., Ins. ^Blackwell v. Miami, etc., Ins. Co., 134 111. 647, 25 N. E. 772, 10 L. R. A. 220 (1890). 267 CHANGE IN INTEREST, TITLE OR POSSESSION. 273 sale by one partner to another of his interest in the property, as this provision has no reference to a transfer of interest between partners. 230 This is the general rule, but in Iowa, under an in- surance policy on partnership property, which provided that it should be void, "if the title of the property is transferred, incumbered or changed," a sale by one partner of his interest to another partner will avoid the policy. It was held that the condition was broken where two of the partners sold and delivered their interests to the other partner. The court said: "This policy is conditioned against the property being sold or transferred, or any change taking place in the title and possession. Prior to the sale and delivery to the plaintiff the title and possession were in the firm, consequently there was not only a change and transfer in the title but also in the pos- session. If it should be said that the title was in the individuals, and not in the firm, still there was a change in the possession, for un- questionably it was the firm that was using and had possession of the property.'' 231 So, it was held that the retiring of one partner from participation in the business management or control of the partnership business, reserving to himself simply the right to see that the stock of goods is kept up to its value at the time of re- 230 Wood v. American F. Ins. Co., Vaughan, 88 Va. 832, 14 S. E. 754 149 N. Y. 382, 52 Am. St. 733 (1896); (1892). Agreement of one partner Phenix Ins. Co. v. Holcombe, 57 Neb. to sell his interest to another: 622, 73 Am. St. 532 (1899); Drennen Georgia, etc., Ins. Co. v. Hall, 94 v. London Assur. Corp., 20 Fed. 657 Ga. 630, 21 S. E. 828 (1894); (1884); Burnett v. Eufaula, etc., Ins. Allemania F. Ins. Co. v. Peck, 133 Co., 46 Ala. 11 (1871); Sun Fire 111. 220, 24 N. E. 538, 23 Am. St. Office v. Wich, 6 Colo. App. 103, 39 610 (1890). Pac. 587 (1895); Powers v. Guard- 231 Oldham v. Anchor, etc., Ins. Co., ian, etc., Ins. Co., 136 Mass. 108, 49 90 Iowa 225, 57 N. W. 861 (1894). Am. Rep. 20 (1883); New Orleans As supporting the rule that a trans- Ins. Ass'n v. Holberg, 64 Miss. 51, fer from one partner to another is 8 So. 175 (1886); Wilson v. Genesee, within this provision, see Buckley etc., Ins. Co., 16 Barb. (N. Y.) 511 v. Garrett, 47 Pa. St. 204 (1864); (1853); Hoffman v. yEtna F. Ins. Keeler v. Niagara F. Ins. Co., 16 Co., 32 N. Y. 405, 88 Am. Dec. 337 Wis. 550, 84 Am. Dec. 714 (1863); (1865); Tallman v. Atlantic, etc., Finley v. Lycoming, etc., Ins. Co., Ins. Co., 29 How. Pr. (N. Y.) 71 30 Pa. St. 311, 72 Am. Dec. 705 (1865); West v. Citizens' Ins. Co., (1858); Hartford F. Ins. Co. v. Ross, 27 Ohio St. 1, 22 Am. Rep. 294 23 Ind. 179, 85 Am. Dec. 452 (1864); (1875); Texas, etc., Ins. Co. v. Co- Tillou v. Kingston, etc., Ins. Co., 5 hen, 47 Tex. 406, 26 Am. Rep. 298 N. Y. 405 (1851). (1877); Virginia, etc., Ins. Co. v. 273 THE STANDARD POLICY. 2G8 tiring as security for the payment of the amount allowed hy the other partner for his interest, is such a change of possession, if not of title, as to avoid the policy on the goods, under a policy which provides that it shall be void if the title or possession of the property is changed. 232 So, a change in the firm by which a third party becomes a member of the firm is a violation of the condition and renders the policy void. 233 In a recent ISTew York case, where the policy contained a pro- vision that it should be void "if the property be sold or transferred, or any change takes place in the title or possession," the court said : 234 "The contract of insurance is peculiarly personal in its nature, and the success of the business of underwriting depends largely upon what is known as the moral hazard. It is a well established principle of the common law that every man has the right to determine with whom he will enter into contract obligations. The insurer is induced to issue or withhold its policy after carefully scrutinizing the char- acter of the applicant for insurance. It is of the utmost importance to the company to ascertain who is to be vested with the title and pos- session of the property sought to be insured. It would be a harsh and indefensible rule that required an underwriter who had insured an in- dividual on a stock of goods in a store to continue the insurance after the insured had taken in two partners and formed a firm wherein each partner was vested with an undivided one-third interest of the 232 Jones v. Phoenix Ins. Co., 97 lantic, etc., Ins. Co., 51 Conn. 222, Iowa 275, 66 N. W. 169 (1896). 250 (1883). The mere dissolution 233 Drennen v. London Assur. of a firm does not destroy the joint Corp., 20 Fed. 657 (1884); Firemen's interest of the copartners in the Ins. Co. v. Floss, 67 Md. 403, 10 Atl. partnership property or make them 139 (1887). See also, Virginia, etc., tenants in common. The property Ins. Co. v. Thomas, 90 Va. 658, 19 S. continues as partnership property E. 454 (1894); Card v. Phoenix Ins. until it is disposed of. Until this Co., 4 Mo. App. 424 (1877). is done there is no violation of the 234 Germania F. Ins. Co. v. Home condition against a change in the Ins. Co., 144 N. Y. 195, 26 L. R. A. title. But a dissolution of the part- 591, 43 Am. St. 749, 39 N. B. 77 nership and a division of the part- (1894). See cases cited in Beebe nership property prior to the fire is a v. Ohio, etc., Ins. Co., 93 Mich. 514, violation of the condition: Roby 18 L. R. A. 481 (1892). See also, v. American, etc., Assur. Co., 120 as sustaining this doctrine, Dren- N. Y. 510, 24 N. E. 808 (1890); nen v. London Assur. Corp., 20 Fed. Dreher v. JEtna Ins. Co., 18 Mo. 128 657 (1884); Card v. Phrenix Ins. Co., (1853). 4 Mo. App. 424 (1877); Malley v. At- 269 CHANGE IX INTEREST, TITLE OR POSSESSION, 274 property covered by the policy without having been offered an oppor- tunity to examine into the moral and business character of the two strangers to the original contract. This right of the insurance com- pany was in no wise invaded when this court held that a sale by one partner to another of his interest, where both were insured, did not avoid the policy. It is only when a stranger is to be brought into contractual relations with the insurance company that the consent of the latter is essential/' 274. Transfers between joint owners. The provision prohibiting the sale of insured property does not prevent sales and transfers of interests as between joint owners. 235 Thus, a transfer from one joint tenant to another such tenant is not an alienation of the property. 236 But a transfer from one tenant in common to another is within the provision against "alienation by sale or otherwise." 237 275. Legal process or judgment. The clause in the standard pol- icy forbids alienation or change of interest by legal process or judg- ment as well as by voluntary acts of the insured. This provision is valid; and its violation, as by confessing judgment, will render the insurance void. 238 It is not, however, broken by the seizure of the goods on execution, 239 as the mere levy of an execution is not an alien- ation of the property so long as the right of redemption remains. 240 A change of title or interest is not effected by a delivery of an execution to an officer and a levy thereunder. As said in New York: 241 "The interest which a person may have in property is affected in many ways without producing a change in such interest 235 Hoffman v. ^Etna P. Ins. Co., 32 Pennsylvania, etc., Ins. Co. v. N. Y. 405, 88 Am. Dec. 337 (1865). Schmidt, 119 Pa. St. 449 (1889). 236 Lockwood v. Middlesex, etc., 2ia Rice v. Tower, 1 Gray (Mass.) Assur. Co., 47 Conn. 553 (1880); 426 (1854). Tillou v. Kingston, etc., Ins. Co., 7 ^ Clark v. New England, etc., Co., Barb. (N. Y.) 570 (1850). 6 Gush. (Mass.) 342, 53 Am. Rep. 237 Buckley v. Garrett, 47 Pa. St. 44 (1850); Greenlee v. North Brit- 204 (1864). ish, etc., Ins. Co., 102 Iowa 427, 63 238 Dover Glass Works v. American Am. St. 455 (1897). See, also, Wood F. Ins. Co., 1 Marvel (Del.) 32, 29 v. American F. Ins. Co., 149 N. Y. Atl. 1039, 65 Am. St. 264 (1894). 382, 52 Am. St. 733, and note (1896). See Olney v. German Ins. Co., 88 241 Walradt v. Phrenix Ins. Co., 136 Mich. 94, 26 Am. St. 281 (1891). A N. Y. 375, 32 N. B. 1063, 32 Am. St. judgment entered on a warrant of 752 (1893). an attorney is an incumbrance : 275 THE STANDARD POLICY. 270 as that term is generally understood; when he contracts a debt or incurs an obligation this, in a broad sense, may affect such interest, as the property constitutes the means of payment; and his pecuniary condition, in a general sense, depends upon what he has left after the discharge of all his debts and obligations. The debt assumes an- other form by the recovery of a judgment, and the execution is a pro- cess which, when delivered to an officer, clothes him with authority to enforce the collection of the debt. That is the foundation of all the subsequent steps. While each event in the progress of the proceedings for collection may bring the debtor and creditor into closer relations and press nearer upon the property of the debtor, yet his title or interest in the property is not divested or transferred until the sale is made which operates in law to transfer his interest to another. By the delivery of the execution and levy thereunder the officer has simply obtained authority at some future time and in the mode prescribed by law to expose the property of the debtor for sale, and that is the final act which changes the title and interest of the debtor. An officer has, no doubt, in law and from the necessities of the case, a sufficient interest in the property levied upon to enable him to protect it by insurance or against the acts of wrongdoers, other- wise the proceedings for the collection of the debt may be defeated, but still the owner retains the title in the same sense that he did after he made default in the payment of the debt, which as we have seen is the basis of every step in the process of enforcement. His interest is, no doubt, affected by the issuing of the execution and the levy, but that is also true, though perhaps in a remote sense, by contracting the debt. The words 'change of interest/ as used in the policy, are substantially synonymous with the words 'change of title/ and neither event occurs until the sale upon the execution. It may be asked what effect is, under such a construction, to be given to the word 'interest' as used in the condition. It must be borne in mind that the standard policy now in use is so framed as to contain words suitable and applicable to every subject of insurance; but all the provisions are not necessarily applicable to every case. That must always be so whenever a contract in the same form and expressed in the same language is sought to be applied to different things or classes of property. The subject of the insurance, its condition and situation, and the surrounding circumstances, may vary so as to render words and phrases contained in the policy not strictly applicable. There is a large class of risks, however, to which the word 'interest/ as used 271 CHANGE IN INTEREST, TITLE OR POSSESSION. 276 in the condition under consideration, is no doubt applicable. Policies are frequently written in favor of parties who have a claim on the property in the nature of a lien, to secure payment of a debt and, perhaps, for other purposes." .Where the policy provided that it should be rendered void by the "levying of an execution," it was held that the mere issuance of an execution and the advertisement of the property for sale by the sheriff, was not a violation of the provision. 242 This provision is limited to acts of omission or commission by the insured, or to a change of possession by process under his order or control. 243 Where the policy contained a condition that it should be void "if any change takes place in the title or possession of the property, ex- cept in case of succession by reason of the death of the insured, whether by sale, transfer, conveyance, legal process or judicial de- cree," it was held that a writ of attachment was, under the Wis- consin statute, process, and that therefore the policy was rendered invalid by the levy of the attachment on the insured property. "There can be no question," said the court, "but that the deputy sheriff took exclusive possession of the property under the writ and that a change of possession of the property took place by legal process under the language of the condition." 2 ' 44 An illegal levy, assessment, seizure and sale of the insured prop- erty do not violate this condition. 245 276. By judgment. A change of title by "judgment" means change of title through judicial sale. Where the provision merely referred to a change of title, ownership or possession of the property, it was not broken by a sale under execution where, before the time for redemption had expired, the husband of the insured paid the money to redeem the property under an agreement that the pur- chaser would convey to him, and the property was destroyed before the conveyance was actually made. It appeared that the insured remained in undisputed possession until the loss, and never agreed that the property should be conveyed. 246 There is no change of title until 242 Caraher v. Royal Ins. Co., 63 84 Wis. 80, 54 N. W. 18, 36 Am. St. Hun (N. Y.) 82 (1892). 907, 20 L. R. A. 267 (1893). 243 Carey v. German, etc., Ins. Co., 24B Runkle v. Citizens' Ins. Co., 6 84 Wis. 80, 54 N. W. 18, 36 Am. St. Fed. 143 (1881). 907, 20 L. R. A. 267 (1893). 246 Lodge v. Capital Ins. Co., 91 244 Carey v. German, etc., Ins. Co., Iowa 103, 58 N. W. 1089 (1894). 277 THE STANDAED POLICY. 272 the period of redemption expires. 247 So, a sale by the sheriff does not pass title until his deed is acknowledged and delivered. 248 277. By partition. The condition prohibiting a change in the interest, title or possession of the property is broken by the setting aside of the insured property to the widow of the insured in par- tition proceedings after his death. The partition of the property, whether it is inter se or by judgment or decree, effects "a change in the interest, title or possession of the property." 249 278. Assignment and bankruptcy proceedings. A general as- signment of the property of the insured for the benefit of his creditors violates the clause which provides that the policy shall be void, "if the property or any interest therein be sold or transferred." 250 This is true under a policy which provides that "when any property insured by this company shall be taken possession of by a mortgagee, or in any way be alienated, the policy shall be void." 251 A condition against alienation is broken by a transfer of the property by the wife of the insured, who held the title as security for a debt to the husband's assignee in insolvency. 252 It was held in Kentucky that a transfer of goods to an assignee in trust to pay the creditors of the insured, the insured remaining in actual possession, did not violate the clause prohibiting a "transfer of the interest of the insured by sale or otherwise," without the consent of the company. 253 So, an assignment for the benefit of creditors by one member of a firm does not affect the 247 Wood v. American F. Ins. Co., 2DO Ohio, etc., Ins. Co. v. Waters 149 N. Y. 382, 44 N. E. 80, 52 Am. (Ohio), 61 N. E. 711 (1901); Orr St. 733 (1894). v. Hanover F. Ins. Co., 158 111. 149, 248 Collins v. London Assur. Corp., 41 N. E. 854 (1895). See also, Small 165 Pa. St. 298, 30 Atl. 924 (1895). v. Westchester F. Ins. Co., 51 Fed. 249 Trabue v. Dwelling House Ins. 789 (1892); Campbell v. German Ins. Co., 121 Mo. 75, 25 S. W. 848, 23 L. Co. (Tex. Civ. App.), 31 S. W. 310 R. A. 719 (1894). See, also, Sher- (1895). wood v. Agricultural Ins. Co., 73 N. 251 Young v. Eagle F. Ins. Co., 14 Y. 447, 29 Am. Rep. 180 (1878); Gray (Mass.) 150, 74 Am. Dec. 673 Burbank v. Rockingham, etc., Ins. (1860). Co., 24 N. H. 550, 57 Am. Dec. 300 252 Brown v. Cotton, etc., Ins. Co., (1852); Barnes v. Union, etc., Ins. 156 Mass. 587, 31 N. E. 691 (1892). Co., 51 Me. 110, 81 Am. Dec. 562 K3 Phoenix Ins. Co. v. Lawrence, 4 (1863); Finley v. Lycoming, etc., Mete. (Ky.) 9, 81 Am. Dec. 521 Ins. Co., 30 Pa. St. 311, 72 Am. Dec. (1862). 705 (1858). 273 CHANGE IN INTEREST, TITLE OR POSSESSION. 279 sole and undivided ownership by the firm of the partnership prop- erty. 254 A similar provision to that in the standard policy is violated by a transfer by a registrar under and in pursuance of the bankruptcy act. 265 279. Transfer by death. The clause in the New York form of policy refers to any change in the title "other than by the death of the insured." By the weight of authority, even in the absence of this exception, a general provision forbidding a transfer of the property will be construed as referring to a voluntary transfer, and not to a transfer as a result of the death of the insured. 256 Such cases distin- guish between alienation and devolution, one being the act of the party and the other the act of the law. But some decisions hold that un- der the language of the policy there under consideration the pass- ing of the title by devolution upon the death of the insured terminates the policy. 257 This was the effect where the prohibition was against "a change of title." 258 Where, after the death of the insured, his wife rents the premises to tenants without the consent of the com- pany, the provision forbidding a change of occupancy and posses- sion is violated. 250 280. Change of possession. The prohibition against a change, of possession does not apply where the property is insured for the joint benefit of partners, and is transferred from one partner to another. 260 There is no change of possession within the meaning of this pro- vision where the insured enters into an oral contract to lease the prop- erty and the intended lessee enters into actual possession under a 2M Wood v. American F. Ins. Co., N. E. 139, 74 Am. St. 161 (1899); 149 N. Y. 382, 44 N. E. 80 (1897). Planters', etc., Ins. Ass'n v. Dew- 285 Perry v. Lorillard Ins. Co., 61 berry (Ark.), 62 S. W. 1047 (1901). N. Y. 214, 19 Am. Rep. 272 (1874); 257 Sherwood v. Agricultural Ins. Adams v. Rockingham, etc., Ins. Co., Co., 73 N. Y. 447, 29 Am. Rep. 180 29 Me. 292 (1849). (1878). 256 Pfister v. Gerwig, 122 Ind. 567, 258 Miller v. German Ins. Co., 54 23 N. E. 1041 (1890); Richardson v. 111. App. 53 (1894). German Ins. Co., 89 Ky. 571, 13 S. W. 209 Planters', etc., Ins. Ass'n v. 1, 8 L. R. A. 800 (1890); Burbank v. Dewberry (Ark.), 62 S. W. 1047 Rockingham, etc., Ins. Co., 24 N. H. (1901). 550, 57 Am. Dec. 300 (1852); Geor- 20 Allemania F. Ins. Co. v. Peck, gia Home Ins. Co. v. Kinnier, 28 133 111. 220, 24 N. E. 538 (1890). But Gratt. (Va.) 88 (1877); Forest City see cases cited at 273, supra. Ins. Co. v. Hardesty, 182 111. 39, 55 18 ELLIOTT INS. 281 THE STANDARD POLICY. 274 parol license from the insured for the mere purpose of making re- pairs. 261 Leaving the property in charge of a person as agent of the owner is not a change of the possession of the property. 262 Nor is there a change of possession under a policy which is payable to a chat- tel mortgagee, where he takes possession on default by the mort- gagor. 263 But the execution of a lease, where the lessee goes into pos- session, is a violation of the condition against a change of posses- sion. 264 A policy was issued upon cotton "owned by the insured or held by it in trust or on commission." The insured gave its receipts to the owners and thereafter the receipts were transferred to certain rail- road companies, which received bills of lading therefor from the insured. It was held that this did not effect a change of posses- sion. 265 281. Lease of the property. The leasing of the insured prop- erty does not violate a condition that the policy shall be void if the property be sold or transferred, or any change take place in the title or possession, "whether by legal process, judicial decree, voluntary transfer or conveyance. 266 Of course, a lease with the privilege of purchase at any time during the term does not violate the provision where the privilege is not exercised. 267 IX. Assignment. This entire policy shall be void * * * if this policy be as- signed before a loss. 2es 281 Alkan v. New Hampshire Ins. 2ti7 Planters', etc., Ins. Co. v. Row- Co., 53 Wis. 136, 10 N. W. 91 land, 66 Md. 236, 7 Atl. 257 (1886). (1881). 208 This provision is found in the 262 Shearman v. Niagara F. Ins. standard policies of New York, New Co., 46 N. Y. 526 (1871). Jersey, Connecticut, Rhode Island, 263 Getman v. Guardian F. Ins. Co., Wisconsin, Louisiana, North Dakota, 46 111. App. 489 (1892). South Dakota, Michigan, North Car- 264 Wenzel v. Commercial Ins. Co., olina, Iowa, Massachusetts, Minne- 67 Cal. 438, 7 Pac. 817 (1885); Smith sota and Maine. The New Hamp- v. Phenix Ins. Co. (Cal.), 23 Pac. shire policy provides that the policy 383 (1890). See Fire Ass'n v. shall be "void and inoperative dur- Flournoy, 84 Tex. 632, 19 S. W. 793, ing the continuance or existence of 31 Am. St. 89 (1892). the acts or conditions of things stip- 286 California Ins. Co. v. Union ulated against as follows: * * * Compress Co., 133 U. S. 387 (1890). or if, without such assent, the said 268 Rumsey v. Phoenix Ins. Co., 1 property shall be sold, or this policy Fed. 396 (1880). assigned." 275 ASSIGNMENT. 282 282. Assignment of policy. This form prohibits an assignment of the policy before loss. The provision is reasonable and valid, 269 and is not an unlawful restraint upon the right to transfer prop- erty. 270 Fire insurance contracts are personal in their nature, and are therefore not assignable without the consent of the insurer. 271 A transfer of the insured property does not of itself effect an assign- ment of the policy. 272 The clause does not apply to a deposit by way of pledge which gives a creditor a lien upon the proceeds. 273 An equitable assignment of the insured's interest in the policy will not defeat the insurance under this general clause. 274 Where the policy is assigned with the consent of the company, and the property is transferred to the assignee, a new contract is created between such assignee and the insurance company, which is not affected by sub- sequent breaches of conditions of the policy by the assignor. 275 But it is otherwise where the policy is merely assigned as collateral secur- ity, as the insurance is still upon the interest of the assignor. 276 This is true where the policy is assigned with the consent of the company as collateral security to a mortgagee, and unless there is an agree- ment to the contrary, 277 the policy will be rendered invalid by sub- 269 Biggs v. North Carolina, etc., 273 Ellis v. Kreutzinger, 27 Mo. 311, Ins. Co., 88 N. C. 141 (1883); Water- 72 Am. Dec. 270 (1858). house v. Gloucester F. Ins. Co., 69 274 Bergson v. Builders' Ins. Co., 38 Me. 409 (1879); Spare v. Home, etc., Cal. 541 (1869); Hall v. Dorchester, Ins. Co., 19 Fed. 14 (1884). See Car- etc., Ins. Co., Ill Mass. 53, 15 Am. R. roll v. Boston, etc., Ins. Co., 8 Mass. 1 (1872). 515 (1812); Stolle v. ^Etna, etc., Ins. 275 Fogg v. Middlesex, etc., Ins. Co., Co., 10 W. Va. 546 (1877). An as- 10 Gush. (Mass.) 337 (1852); Don- signment of a fire insurance policy nell v. Donnell, 86 Me. 518, 30 Atl. must be in writing: St. Paul, etc., 67 (1894); Bonefant v. American Ins. Co. v. Brunswick Grocery Co., Ins. Co., 76 Mich. 653, 43 N. W. 682 113 Ga. 786, 39 S. B. 483 (1901). (1889); Cummings v. Cheshire, etc., 270 Lazarus v. Commonwealth Ins. Ins. Co., 55 N. H. 457 (1875); Co., 5 Pick. (Mass.) 76 (1827). Buckley v. Garrett, 47 Pa. St. 204 ^Rayner v. Preston, L. R. 18 Ch. (1864); Commonwealth v. National Div. 1 (1881); Simeral v. Dubuque, Ins. Co., 113 Mass. 514 (1873); Ellis etc., Ins. Co., 18 Iowa 319 (1865); v. Insurance Co., 32 Fed. 646 (1887). Jecko v. St. Louis, etc., Ins. Co., 7 *" Birdsey v. City F. Ins. Co., 26 Mo. App. 308 (1879); Lett v. Guard- Conn. 165 (1857); Pupke v. Resolute ian F. Ins. Co., 125 N. Y. 82, 25 N. E. F. Ins. Co., 17 Wis. 378, 84 Am. Dec. 1088 (1890). 754 (1863); Reed v. Windsor, etc., 272 Lett v. Guardian F. Ins. Co., 125 Ins. Co., 54 Vt. 413 (1882). N. Y. 82, 25 N. E. 1088 (1890). m Hartford F. Ins. Co. v. Wil- liams, 63 Fed. 925 (1894). 282 THE STANDARD POLICY. 276 sequent breaches of condition by the assignor. 278 Where a mort- gagee to whom such an assignment is made assumes the payment of future premiums the transaction will be construed so as to protect him from the results of future breaches of conditions by the as- signor. 279 But the assignee takes subject to the conditions of the policy, and if the assignor has lost his right to recover thereon by reason of a breach of condition, he can transfer nothing to the as- signee. 280 This clause does not affect the right of the insured to transfer his interest after a loss. 281 It is, then, a mere chose in action, and is assignable like any other claim, without the consent of the company, subject, of course, to such defenses as would have been available against the original insured. 282 The transfer and assignment of a claim after loss is not void as against public policy. 283 An executory contract for the sale of property does not violate the provision against sale or assignment. 284 Nor is it violated by a transfer of an interest in the insured property from one partner to another. 285 This pro- vision does not apply to the assignment of the interest of a mort- gagee to whom the policy is made payable as his interest may ap- pear. Where this was done the court said: 286 "The object of that provision (coupled with the provision declaring the policy void if the property insured is sold) is to prevent the company becoming 278 Illinois, etc., Ins. Co. v. Fix, 53 111 Mass. 53 (1872); Imperial P. 111. 151, 5 Am. Rep. 38 (1870); Tom- Ins. Co. v. Dunham, 117 Pa. St. 460 linson v. Monmouth, etc., Ins. Co., (1888). 47 Me. 232 (1859); Grosvenor v. At- 282 Imperial F. Ins. Co. v. Dunham, lantic F. Ins. Co., 17 N. Y. 391 117 Pa. St. 460 (1888); Dogge v. (1858). Northwestern, etc., Ins. Co., 49 Wis. ""Francis v. Butler, etc., Ins. Co., 501 (1880). 7 R. I. 159 (1862); Brannin v. Mer- 283 Goit v. National, etc., Ins. Co., cer, etc., Ins., 28 N. J. L. 92 (1859). 25 Barb. (N. Y.) 189 (1855); West 280 Home, etc., Ins. Co. v. Hauslein, Branch Ins. Co. v. Helfenstein, 40 60 111. 521 (1871); Eastman v. Car- Pa. St. 289, 80 Am. Dec. 573 (1861); rol, etc., Ins. Co., 45 Me. 307 (1858); Alkan v. New Hampshire Ins. Co., Citizens', etc., Ins. Co. v. Doll, 35 53 Wis. 136 (1881). Md. 89, 6 Am. Rep. 360 (1871). In 284 Washington, etc., Ins. Co. v. Ellis v. Council Bluffs Ins. Co., 64 Kelly, 32 Md. 421, 3 Am. Rep. 149 Iowa 507 (1884), it was held that (1870). by consenting to an assignment the 285 Hoffman v. JEtna F. Ins. Co., 32 company, as against the assignee, N. Y. 405 (1865); West v. Citizens' could not defend on the ground of Ins. Co., 27 Ohio St. 1, 22 Am. Rep. the fraud of the assignor in obtain- 294 (1875). ing the insurance. 288 Whiting v. Burkhardt (Mass.), 181 Hall v. Dorcester, etc., Ins. Co., 60 N. E. 1 (1901). 277 ASSIGNMENT. \_ the insurer of property of a person who is not acceptable to it. An insurance company has the right to refuse to insure a person whose character is such that the moral risk, to use the term employed in the insurance business, is greater than it is where the same property is owned by an honest man, and is one which they do not care to assume. The transfer prohibited by this provision is a transfer of the contract of insurance, that is to say, a transfer by the persons insured, not a transfer by J., who was the person , desig- nated as the person entitled to receive the proceeds of the insurance, if any, due under the contract between the company on the one hand and the insured on the other. * * * What J. did by assigning his 'right and interest in this policy' was not to transfer the policy, but to assign to another his right to receive the proceeds, if any, under it, the policy remaining, after this assignment, as before, the policy of G." A policy was made payable to a mortgagee, and provided that no act or default of any person but the mortgagee, his agents or those claiming under him, should affect his right to recover in case of loss ; and it was held that the assignee of such mortgagee might recover on the policy, although' a part owner of the property had sold his interest therein before loss, and that the provision against assign- ment did not apply to an assignment by such mortgagee. 287 The assent of the company to an assignment of the policy may be given after an unauthorized assignment as well as before. 288 Where a policy which had been assigned was presented to the agent of the company for the purpose of having its consent indorsed thereon, and the agent, instead of making this indorsement, signed and at- tached to the policy a slip which provided that loss, if any, there- under, should be payable to the assignee, as his interest might ap- pear, it was held that there was a substantial consent to the assign- ment. 289 Where, at the instance of the insured, an entry was made in the policy register of the company, "transferred to G-.," it was held sufficient to show acceptance by the company of G. instead of the original insured. 290 It has been held that an. indorsement, "in case 287 Whiting v. Burkhardt (Mass.), 289 Queen Ins. Co. v. Block (Ky), 60 N. B. 1 (1901). 58 S. W. 471 (1900). See, also, 288 Gould v. Dwelling House Ins. Southern Fertilizer Co. v. Reams, Co., 134 Pa. St. 570, 19 Atl. 793, 19 105 N. C. 283, 11 S. E. 467 (1890); Am. St. 717 (1890); Shearman v. Buchanan v. Exchange F. Ins. Co., Niagara F. Ins. Co., 46 N. Y. 526 61 N. Y. 26 (1874). (1871). 2M Griswold v. American, etc., Ins. 282 THE STANDARD POLICY. 278 of loss, pay to A./' is not an assignment of the policy. 291 Generally the insertion of a clause in the policy making the loss payable to a third party does not operate as an assignment of the policy. 292 Thus, where the policy is payable to a mortgagee as his interest may appear, there is no assignment of the policy by a mere designation of one to whom the fund, or a portion thereof, is to be paid with the com- pany's consent. The right of action is still in the original insured. 293 A mortgagee to whom a policy is made payable as his interest may ap- pear need not obtain the further consent of the company as upon a formal assignment of the policy. 294 An unsuccessful attempt to as- sign the policy where the interest in the insured property is not transferred will not render the policy void under this provision. 295 The consent to an assignment may be given by any duly authorized agent of the company. 296 No one but the company can object to an assignment of the policy. 297 X. Prohibited Articles. This entire policy shall be void * * * if (any usage or custom of trade or manufacture to the contrary notwithstanding) there be kept, used, or allowed on the above described premises, benzine, ben- zole, dynamite, ether, fireworks, gasoline, greek fire, gunpowder ex- ceeding twenty-five 'pounds in quantity, naphtha, nitroglycerine, or Co., 70 Mo. 654 (1879). See Min- ->* Smith v. Monmouth, etc., Ins. turn v. Manufacturers' Ins. Co., 10 Co., 50 Me. 96 (1863). In Bursinger Gray (Mass.) 501 (1858). As to the v. Watertown Bank, 67 Wis. 75, 58 meaning of "indorsement" when re- Am. Rep. 848 (1886), it appeared quired to he on the policy, see Penn- that the insured attempted to assign sylvania Ins. Co. v. Bowman, 44 the policy while intoxicated. Pa. St. 89 (1862); Reynolds v. Atlas, ^ Breckinridge v. American, etc., etc., Ins. Co., 69 Minn. 93, 71 N. W. Ins. Co., 87 Mo. 62 (1885); Imperial 831 (1897). F. Ins. Co. v. Dunham, 117 Pa. St. ^Russ v. Waldo, etc., Ins. Co., 52 460, 12 Atl. 668 (1888). As to man- Me. 187 (1863). ner in which assent may be made, 292 Martin v. Franklin F. Ins. Co., see Durar v. Hudson, etc., Ins. Co., 9Vroom (N. J.) 140 (1875); Froehly 24 N. J. L. 171 (1853); Boynton v. v. North St. Louis, etc., Ins. Co., 32 Farmers', etc., Ins. Co., 43 Vt. 256, 5 Mo. App. 302 (1888). Am. Rep. 276 (1870); Grant v. Eliot, 293 Williamson v. Michigan, etc., etc., Ins. Co., 75 Me. 196 (1883). Ins. Co., 86 Wis. 393, 39 Am. St. 906 29T Leinkauf v. Caiman, 110 N. Y. (1893). 50 (1888). 294 National F. Ins. Co. v. Crane, 16 Md. 260, 77 Am. Dec. 289 (1860). 279 PROHIBITED ARTICLES. 283 oilier explosives, phosphorus, or petroleum or any of its products of greater inflammability than kerosene oil of the United States standard ( irhich last may be used for lights and kept for sale according to law, but in quantities not exceeding five barrels, provided it be drawn and lamps filled by daylight or at a distance not less than ten feet from artificial light) 2 283. TJse of property Prohibited articles. This section con- tains a proper restriction upon the use of the property, and must be observed by the insured. 299 The language, "any use or custom of trade or manufacture to the contrary" was inserted in the standard form for the purpose of avoiding the rule of construction which permits the use of the articles named in the printed slip, where they constitute an ordinary part of the stock of goods described in the policy or are necessary and commonly used as incident to the busi- ness. But the rule still prevails, and the only effect of the clause is "to impose on the insured the burden of showing with perhaps greater clearness that the written description clearly covers the pro- hibited articles in question." 300 Operating a laundry is not a trade or manufacture within this 298 This clause is found in the may be used for domestic purposes standard policies in use in the to be filled when cold by daylight, states of New York, New Jersey, and with oil of lawful test only." Connecticut, Rhode Island, Louisi- The New Hampshire clause makes ana, North Dakota, South Dakota, no reference to the use of kerosene Michigan, North Carolina, and Iowa, oil stoves for domestic purposes, Wisconsin substitutes the words otherwise it is the same as the pre- "Wisconsin standard" for "United ceding clause. States standard" in referring to ker- 2 " United, etc., Ins. Co. v. Foote, osene oil. Massachusetts, Maine and 22 Ohio St. 340, 10 Am. Rep. 735 Minnesota have the following clause (1872); Liverpool, etc., Ins. Co. v. in their standard policies: "Or if Gunther, 116 U. S. 113 (1885). In gunpowder or other articles subject Yoch v. Home, etc., Ins. Co., Ill Cal. to legal restrictions shall be kept 503, 44 Pac. 189 (1896), it was held in quantities or manner different that "an agreement indorsed" per- from those allowed or prescribed by mitting otherwise prohibited arti- law, or if camphine, benzine, naph- cles to be kept on the insured prem- tha or other chemical oils or burn- ises is made where the articles are ing fluids shall be kept or used by included in the written description the insured on the premises insured, of the insured property, except that what is known as re- 30 Richards Ins., 149; Birming- fined petroleum, kerosene or coal oil, ham F. Ins. Co. v. Kroegher, 83 Pa. may be used for lighting, and in St. 64, 24 Am. Rep. 147 (1876). dwelling houses kerosene oil stoves 283 THE STANDARD POLICY. 280 clause so as to preclude proof of a custom of using gasoline by the residents of a community at the time the policy was issued. 301 The general rule of construction is that the written part of a contract will prevail over what is printed ; and therefore, where the writing de- scribes a certain kind or stock of goods or property used in a certain business it is presumed that the intention was to insure all that is commonly carried in such a stock, and to permit the property to be used in the ordinary and customary way. Hence, a policy covering materials of a certain business, which contained a printed condition prohibiting the keeping or using of certain inflammable substances, is valid where the business is of such a character that the substances constitute a component part of the stock of materials used in the business. In a case where the question received full consideration it was said: 302 "The contrary doctrine would present the strange anomaty of issuing a polic} r of insurance containing such conditions that under no circumstances could payment of the loss thereunder be legally demanded. A rule which permitted the printed con- ditions to control the written statement of the subject on which the insurance was issued would place the insurance company in the pe- culiar position of saying in effect : 'I issue you this policy ; I accept your money in satisfaction of my demands for premiums; I insure your property to be used in your business, but if you use it your policy is void/ " Where the policy covered property described as a stock such as is usually kept in a general retail store, and the keeping of gunpowder was prohibited by the printed portions of the policy, it was held that if the gunpowder was a part of the stock usually kept in a retail store it might be kept without violating the condition of the policy. 303 So, a policy insuring a stock of hardware provided that the keeping or using or allowing of dynamite on the premises would render the policy void unless otherwise provided by agreement on the policy. 301 Northern Assur. Co. v. Craw- by an indulgent but apprehensive ford (Tex. Civ. App.), 59 S. W. 916 matron to her daughter: (1900). "'Mother, may I go out to swim?' 302 Maril v. Connecticut F. Ins. Co., 'Yes, my darling daughter; 95 Ga. 604, 51 Am. St. 102 (1895). Hang your clothes on a hickory In this case the learned judge sug- limb, gests that the doctrine asserted by But don't go near the water.' " the insurance company is well illus- 303 Peoria, etc., Ins. Co. v. Hall, 12 trated by the poetical advice offered Mich. 202 (1864); Pindar v. Kings, etc., Ins. Co., 36 N. Y. 648 (1867). 281 PROHIBITED ARTICLES. 283 An attached slip provided that the insurance should cover merchan- dise usually kept for sale in a hardware store, and it was held that the policy covered dynamite when it was shown that it was usual to keep dynamite in such stores. 304 So, where the policy covered a stock of goods such as is usually kept in country stores, and contained a printed condition that it should be void if certain articles, including gasoline, were kept, used, or allowed on the premises, it was held valid, where gasoline was kept as a part of the usual stock of merchandise. After discussing the various rules, the court said: "Applying these rules to the con- tract in the present case, it must be held that it was the intention of the defendant to insure gasoline if it was an article usually kept in country stores, and that if such was its intention, it was no viola- tion of the policy that the insured did keep gasoline on the premises as a part of the stock of merchandise." 305 Benzine kept in small quantities as part of a stock of drugs and chemicals does not avoid a policy on such stock, although there is a stipulation against the keeping of benzine in the store. "The court will not presume that the parties intended to make such an absolute agreement, but in such cases will presume that the intention was that the printed portions of the policy forbidding the keeping of benzine should not apply to the keeping of it bottled in small quantities, as customary with druggists, but only to storing and keeping it in large quantities." 306 An insurance company must be presumed to be familiar with the materials necessary to carry on a trade or business and to know what is commonly included in a stock of goods such as that insured, and in issuing the policy it must be deemed to have intended to include all such materials in the risk. 307 Hence, where the policy was issued upon the materials used in the business of photography, it was held to cover all such articles, such as kerosene, as were in common use, although some other things might have been substituted therefor. 3 . 08 A policy upon a stock of fancy goods, toys and other articles used 304 Phenix Ins. Co. v. Walters, 24 SOT Lancaster P. Ins. Co. v. Len- Ind. App. 87, 56 N. E. 257 (1900), heim, 89 Pa. St. 497, 33 Am. Rep. citing many cases. 778 (1879), annotated. 305 Yoch v. Home, etc., Ins. Co., Ill 30S Hall v. Insurance Co., 58 N. Y. Cal. 503, 34 L. R. A. 857 (1896). 292, 17 Am. Rep. 255 (1874); Amer- 306 Phoenix Ins. Co. v. Flemming, ican, etc., Ins. Co. v. Green, 16 Tex. 65 Ark. 54, 39 L. R. A. 789 (1898). Civ. App. 531, 41 S. W. 74 (1897). 283 THE STANDARD POLICY. 282 in the business of the defendant as a German jobber and importer, with the privilege of keeping fireworks, which, contained a pro- vision requiring hazardous articles, such as fireworks, if kept, to be specially written in the policy, is avoided by the storing of fireworks on the premises without such permission. Where a dealer was permit- ted to keep firecrackers, it was held not to include fireworks; nor were they within the phrase, "other articles in his line of business," in view of the express provisions of the policy. 309 The use of an inflammable substance, which is a necessary, usual and customary incident to the business in which the insured property is used, will be held to have been within the contemplation of the parties at the time of issuing the policy. 310 Where the printed con- ditions exempt the insurer from liability for loss occasioned by the use of camphine, and there was a written provision granting the privi- lege for a printing office, bindery, bookstore and steam boiler in the yard, it was held that the use of camphine as one of the necessary articles for use in a printing office did not invalidate the policy. 311 The provision will be given a liberal construction where the pro- hibited articles are used incidentally and for temporary purposes only, such as for cleaning machinery. 312 It is not broken by the keep- ing in a store of a jug containing crude petroleum, which is used by the insured for medicinal purposes, if the risk is not thereby increased, and this is a question for the jury. 313 Gasoline is not kept, used, or allowed on the premises within the meaning of the policy by leaving a five-gallon can containing gasoline in a building for a number of days for use in burning off paint preparatory to painting the building. The prohibition refers to the habitual keeping, using or allowing of any of these articles on the premises, and not to the cas- ual introduction of the articles for some temporary purpose con- nected with their occupation. 314 So, there is no breach of the condi- 309 Steinbach v. Relief F. Ins. Co., 3n Harper v. New York, etc., Ins. 13 Wall. (U. S.) 183 (1871). In Co., 22 N. Y. 441 (1860). Steinbach v. Lafayette F. Ins. Co., 312 Wheeler v. Traders' Ins. Co., 62 54 N. Y. 90 (1873), upon the same N. H. 450, 13 Am. St. 582 (1883), facts, it was held that if, as a matter note. of fact, the keeping of fireworks was 313 Williams v. People's F. Ins. Co., in the plaintiff's line of business, 57 N. Y. 274 (1874). they were embraced in the descrip- 314 Smith v. German Ins. Co., 107 tion of the property covered by the Mich. 270, 30 L. R. A. 368 (1895). policy. Contra, see First Cong. Church v. 310 Maril v. Connecticut F. Ins. Co., Holyoke, etc., Ins. Co., 158 Mass. 475, 95 Ga. 604, 30 L. R. A. 835 (1894). 33 N. E. 572, 35 Am. St. 508, 19 L. R. 283 PROHIBITED ARTICLES. 284 tion where the policy prohibits the use of camphine, spirit gas, burn- ing fluid, or chemical oils, but permits the use of refined coal oil, kero- sene or other carbon oils for lights, if drawn and the lamps filled by daylight, and the insured uses lard oil and candles for lights and filled the lamps at night. 315 284. Prohibited articles, continued. A much narrower rule of construction than that stated in the preceding section is adopted in some states. Thus, in New Hampshire, a violation of the provision against the keeping and use of benzine and other enumerated articles of similar character was held to render the policy void. The court said: "Cases in which a disregard of the prohibition of the keeping or using of extraordinarily hazardous articles has not been held to work a forfeiture of the policy, are those where the use made was one incident to the business of the insured, adopted from necessity or cus- tom, and recognized by the insurer so that a waiver of the prohibitory clause followed." In reference to the claim that the provision was not violated because the use was merely temporary, the court said: "The cases relied on as authority for this position are cases for the most part where there was no express stipulation or warranty against the use of the particular dangerous article or material in question, but only a provision in general terms against the keeping of hazard- ous things on the premises, or of carrying on a different or more dangerous trade. But where there is a stipulation that the policy shall be avoided on the use of the article expressly named, and there is nothing in the policy from which permission to use the article in a limited, partial or temporary way can be inferred, full effect is usually given to the prohibitive clause by a forfeiture of the policy for its violation."' 316 So, in Pennsylvania, under a policy which provided that it should be void if the hazard be increased by any means within the control or knowledge of the insured, or if there be kept, used or allowed on the premises fireworks or other named explosives, it was held that the temporary storing of an assorted lot of fireworks upon the premises A. 587 (1893), where it was held Compare Wheeler v. Traders' Ins. that the policy was avoided by the Co., 62 N. H. 450, 13 Am. St. 582 use of a naphtha torch for burning (1883). off old paint on the building. 31 Wheeler v. Traders' Ins. Co., 315 Carlin v. Western Assur. Co., 62 N. H. 450, Woodruff Ins. Gas. 162 57 Md. 515, 40 Am. Rep. 440 (1881). (1883). 285 THE STANDARD POLICY. 284 for celebration purposes, with the knowledge and consent of the in- sured, was a breach of the condition and prevented a recovery for loss arising from the accidental explosion of such fireworks. The court said: "We have never gone to the length that other courts have in construing away express provisions or stipulations as to for- feiture. While some hold that it is permissible to use the articles prohibited by the general printed clause, provided they are such as naturally appertain to the stock of goods or property described in the written part of the policy, this court has refused to go so far." 317 But even in Pennsylvania it has been held that where the use of the prohibited article is a necessary one in connection with the business, it must be presumed that the intent of the parties was to insure the subject of the insurance as it would continue to be during the life of the policy, notwithstanding the printed provision. 318 285. Exception in favor of kerosene oil. "Kerosene oil of the United States standard may be used for lights and kept for sale according to law, but in quantities not exceeding five barrels, pro- vided that it be drawn and lamps filled by daylight at a distance not less than ten feet from artificial light." 319 The policy is not avoided by the use of kerosene oil otherwise than in lamps for illu- minating purposes where the policy provides that "kerosene oil of the 317 Heron v. Phoenix Ins. Co., 180 of New York, New Jersey, Connecti- Pa. St. 257, 57 Am. St. 638 (1897), cut, Rhode Island, Louisiana, North reviewing Pennsylvania cases. In Dakota, South Dakota, Michigan, this case fireworks were placed in North Carolina, and Iowa. Wiscon- the parlor of a residence on the sin substitutes the words "Wiscon- third of July for the purpose of sin standard" for "United States using them in a celebration on the standard." The standard policies of evening of the fourth, and the policy Massachusetts, Minnesota and Maine contained a clause that it should provide that: "Kerosene or coal oil be void if fireworks or other such may be used for lighting, and in articles "were kept, used, or allowed dwelling houses oil stoves may be on the premises, any usage or cus- used for domestic purposes, to be torn of trade or manufacture to the filled when cold by daylight, and contrary notwithstanding." with oil of lawful test only." The 318 Fraim v. National F. Ins. Co., New Hampshire policy makes no ref- 170 Pa. St. 151, 50 Am. St. 753 erence to the use of kerosene for (1895). domestic purposes; otherwise it is 319 This provision is found in the the same as the Massachusetts, Min- standard policies in use in the states nesota and Maine policies. 285 VACANCY. 286 legal standard may be used for lights only, provided the oil be drawn and the lamps filled and trimmed solely by daylight/' as this restriction is merely a regulation of the use of kerosene when used for lighting purposes, and will not be construed to prohibit its use for any other purpose than for lights. 320 XI. Vacancy. This entire policy shall be void * * * if a building herein described, whether intended for occupancy by owner or tenant., be or become vacant or unoccupied and so remain for ten days. 321 286. In general. The standard form permits the insured prem- ises to become vacant for ten days or less without notice to the in- surer. The question of the effect of a temporary vacancy is thus elim- inated. A vacancy beyond the prescribed period is a breach of the condition. 322 Under a general provision rendering a policy void if the insured buildings become vacant and unoccupied, it is held by the weight of authority that a mere temporary vacancy will not affect a recovery, 323 although there are authorities to the contrary. Thus, 320 Snyder v. Dwelling House Ins. Co., 59 N. J. L. 544, 59 Am. St. 625 (1896). The New York court de- clined, in view of the fact that the legislature has declared certain grades and qualities of kerosene proper and safe to use, to take ju- dicial notice of the explosive quali- ties of kerosene. It was incumbent on the defendant to show that the kerosene used was in fact inflam- mable: Wood v. North Western Ins. Co., 46 N. Y. 421 (1871). See, also, Mears v. Humboldt Ins. Co., 92 Pa. St. 1 (1879). 321 This provision is found in the standard policies of New York, New Jersey, Connecticut, North Carolina, Rhode Island, Wisconsin, Louisiana, Michigan, North Dakota, and South Dakota. The Iowa clause reads, "or if a building herein described, whether intended for occupancy by the owner or tenant, be or become vacant or unoccupied, or if the premium be not paid when due." The standard policies of Massachu- setts, Minnesota,, Maine, and New Hampshire read, "or if the premises hereby insured shall become vacant by the removal of the owner or oc- cupant, and' so remain vacant for more than thirty days without per- mission in writing indorsed hereon." 322 Thompson v. Caledonia F. Ins. Co., 92 Wis. 664, 66 N. W. 801 (1896); Burner v. German, etc., Ins. Co., 20 Ky. L. 71, 45 S. W. 109 (1898). As to statutory provision that vacancy will avoid the policy only when there is an increase of risk, see Moody v. Amazon Ins. Co., 52 Ohio St. 12, 38 N. E. 1011, 26 L. R. A. 313, 49 Am. St. 699 (1894). 323 Liverpool, etc., Ins. Co. v. Buck- staff, 38 Neb. 146, 41 Am. St. 725 (1893); Johnson v. Norwalk F. Ins. Co., 175 Mass. 529, 56 N. E. 569 (1900). 287 THE STANDARD POLICY. 286 in Texas it is held that where the policy provides that if the buildings become vacant and unoccupied without the consent of the company indorsed upon the policy, it shall be mill and void, it is invalidated by a temporary vacancy of the property, although without the knowl- edge of the owner, and a subsequent re-occupancy does not revive the policy unless the forfeiture has been waived by the insurer. 324 It has been held that a reasonable time elapsing between a change of tenants does not render the policy void under this clause. 325 Vacancy of the house alone does not avoid the policy where it prohibits vacancy of the premises and covers both a house and a barn. 326 287. Construction. This condition against a building becoming vacant or unoccupied must be construed in the light of the situation and character of the property and the ordinary incidents and contin- gencies affecting the use to which it and other property of similar character in the same use is subject. 327 In construing the provision the Supreme Court of Wisconsin said: 328 "Under certain circum- stances premises may be vacant or unoccupied when under other cir- cumstances premises in like situation may not be so within the meaning of that term in insurance policies. Thus, if one insures his dwelling house described in the policy as occupied by himself as his residence, and moves out of it, leaving no person in occupation thereof, it thereby becomes 'vacant or unoccupied.' But if he in- sures it as a tenement house or as occupied by a tenant it may fairly be presumed, nothing appearing to the contrary, that the parties to 324 East Texas F. Ins. Co. v. Kemp- and note (1878); Carr v. Williams' ner, 87 Tex. 229, 47 Am. St. 99 Ins. Co., 60 N. H. 513 (1881). (1894). Contra, yEtna Ins. Co. v. 8 Hotchkiss v. Phrenix Ins. Co., Meyers, 63 Ind. 238 (1878). 76 Wis. 269, 20 Am. St. 69 (1890). 325 Worley v. State Ins. Co., 91 To the same effect, see Lockwood v. Iowa 150, 51 Am. St. 334 (1894). Middlesex, etc., Assur. Co., 47 Conn. 320 Worley v. State Ins. Co., 91 553 (1880); Traders', etc., Ins. Co. Iowa 150, 51 Am. St. 334 (1894), v. Race, 142 111. 338 (1892); Home commenting on Connecticut F. Ins. Ins. Co. v. Wood, 47 Kan. 521 Co. v. Tilley, 88 Va. 1024, 29 Am. St. (1891); Doud v. Citizens' Ins. Co., 770 (1892). 141 Pa. St. 47, 23 Am. St. 263 327 Hamburg v. German F. Ins. Co., (1891); Roe v. Dwelling House Ins. 90 Iowa 709, 48 Am. St. 468 (1894); Co., 149 Pa. St. 94, 34 Am. St. 595 Continental Ins. Co. v. Kyle, 124 (1892); City Planing, etc., Co. v. Ind. 132, 19 Am. St. 77, and note Merchants', etc., Ins. Co., 72 Mich. (1890); Whitney v. Black River Ins. 654, 16 Am. St. 552 (1888); Gum- Co., 72 N. Y. 117, 28 Am. Rep. 116, mins v. Agricultural Ins. Co., 67 N. Y. 260, 23 Am. Rep. Ill (1876). 287 VACANCY. 288 the contract of insurance contemplated that the tenant was liable to leave the premises and that more or less time might elapse before the owner could procure another tenant to occupy it, and hence that the parties did not understand that the house should be con- sidered vacant and the policy forfeited or suspended (according to its terms) immediately upon the tenant's leaving it." The condi- tion against non-occupancy must therefore be construed and applied with reference to the subject-matter of the contract, and the ordinary incidents attending the use of such property. 329 288. Vacant and unoccupied not synonymous. The word "va- cant" does not necessarily mean the same thing as "unoccupied." In the New York standard form of policy the words are connected by the conjunction "or," and it follows that a breach of either condition in- validates the policy. It would seem, however, that unoccupied in this sense must be intended to guard against the same condition as the word vacant. Where it is evident from the connection that the words are used to protect the company against the extra risk involved in the absence of persons from the premises, they should be construed, as if they meant the same thing. Thus, it was held in New Hampshire that a house from which the insured had removed was both vacant and unoccupied, although certain articles of furniture remained in the house. 330 Where the condition was that the policy should be void if the house become vacant and unoccupied, it was held that there was no breach unless the building was both empty and unused as a place of abode. The buildings must not only be unoccupied, but also vacant, and a dwelling house furnished through- out, from which the owner had removed for the season, intending to re- turn and resume possession, was not vacant. It appeared that the defendant issued a policy containing this condition on the plaintiff's summer residence, from which he removed in November, leaving it furnished and in charge of a person living near, and intending to re- turn again the following spring. The court said : "A dwelling house is unoccupied when no one lives therein, but is not then necessarily 320 Halpin v. Phenix Ins. Co., 118 Ashworth v. Builders', etc., Ins. Co., N. Y. 165 (1890). To the same ef- 112 Mass. 422 (1873). feet, see Albion Lead Works v. Wil- 33 Moore v. Phoenix Ins. Co., 62 N. liamsburg, etc., Ins. Co., 2 Fed. 479 H. 240, 10 Am. St. 384 (1882), anno- (1880); Keith v. Quincy, etc., Ins. tated. Co., 10 Allen (Mass.) 228 (1865); 289 THE STANDARD POLICY. 288 vacant. A house filled with furniture throughout can not be said to be vacant, the primary and ordinary meaning of which is empty. To avoid the policy the premises must not only be unoccupied, but also vacant. Force should be given to both words." 331 The same court in a subsequent case recognized the fact that the words may have different meanings, and said : 332 "The plaintiff contends that the two words, 'vacant' and 'unoccupied,' are synonyms and are to be inter- preted as having the same meaning, and that meaning is empty, and then argues that as the dwelling house was not empty there was no breach of condition. There are doubtless conditions of a dwelling house, or other like structure, when either word applied to it, or both words applied to it, will express a like state of it. There are, how- ever, states of it ,when that will not be the case. It is so because the different things which are receptive of the epithets of vacant and unoccupied are different in their capability and susceptibility of being filled or occupied. Some can not have one of those terms applicable to them without the other at the same time being also applicable. * * * And it is because, in our experience of the purpose and use of a dwelling house, we have come to associate our no- tion of the occupation of it with the habitual presence and continued abode of human beings within it, that the word applied to a dwelling always raises that conception in the mind. Sometimes, indeed, the use of the word 'vacant/ as applied to a dwelling, carries the no- tion that there is no dweller therein, and we would not be sure always to get or convey the idea of an empty house by the words 'vacant dwelling 5 applied to it. But when the phrase 'vacant or unoccu- pied' is applied to a dwelling house, plainly there is a purpose an attempt to give a different statement of the condition thereof; by the first word as an empty house, by the second word as one in which there is not habitually the presence of human beings. * * * The term 'unoccupied,' used in the policy, is entitled to a sense adapted to the occasion of its use and the subject-matter to which it is applied." 289. Construction when applied to dwelling house. When the insurance is upon a dwelling house the condition must be con- strued in the light of the ordinary use of such premises. The evi- 331 Herrman v. Merchants' Ins. Co., ^ Herrman v. Adriatic F. Ins. 81 N. Y. 184, 37 Am. Rep. 488 Co., 85 N. Y. 162, Woodruff Ins. Cas. (1880). 165 (1881). 289 VACANCY. 289 dent intent of the insurer is that the house shall be used as a place of abode for human beings, 333 and when this is not the case there is added a risk which is not assumed under the contract. A dwelling house should therefore be deemed vacant and unoccupied when, it is no longer used as a place of abode. 334 Hence, the casual sleeping in a house does not constitute occupany of it. A policy was held in- validated where it appeared that the insured moved his family to an- other building, taking all the furniture except a few beds and trifling household articles, trunks containing clothing and some provisions in the pantry, and that the only occupation of the house was by laborers in the employment of the insured, sleeping therein part of the time, and his wife going there every day to get provisions. 335 The occupation of a dwelling house as a mere storehouse is not a com- pliance with this condition. 336 Where a tenant removed a week be- fore the fire, and the furniture was all stored in one of the rooms for the purpose of being removed, and no one had slept in the house for more than a month, the house was held to be "vacant, unoccupied or uninhabited," although a person went there occasionally to see if the goods were all right. 337 But to constitute occupancy of a dwell- ing house it nee,d not be used continuously. The family may be ab- sent for health, business or convenience for reasonable periods. A dwelling is not vacant within this provision, although it has ceased to be vised as the family residence, if household goods remain in it ready ^Weidert v. State Ins. Co., 19 Ore. 261, 20 Am. St. 809, and note (1890); Bonefant v. American F. Ins. Co., 76 Mich. 653, 43 N. W. 682 (1889). See note in Moore v. Phoanix Ins. Co., 10 Am. St. 392 (1886). 334 North American F. Ins. Co. v. Zaenger, 63 111. 464 (1872); Ameri- can Ins. Co. v. Padfleld, 78 111. 167 (1875); Fitzgerald v. Connecticut F. Ins. Co., 64 Wis. 463 (1885); Alston v. Old North, etc., Ins. Co., 80 N. C. 326 (1879); Agricultural Ins. Co. v. Hamilton, 82 Md. 88, 51 Am. St. 457 (1895). 330 Agricultural Ins. Co. v. Hamil- 19 ELLIOTT INS. ton, 82 Md. 88, 51 Am. St. 457 (1895). ^ Halpin v. ^Etna F. Ins. Co., 120 N.Y. 70 (1890); Limburg v. German F. Ins. Co., 90 Iowa 709, 48 Am. St. 468 (1894), reviewing many cases; Agricultural Ins. Co. v. Hamilton, 82 Md. 88, 51 Am. St. 457 (1895). A house is unoccupied when no one is living in it: Cook v. Continental Ins. Co., 70 Mo. 610, 35 Am. Rep. 438 (1879); Herrman v. Adriatic F. Ins. Co., 85 N. Y. 162, 39 Am. Rep. 644 (1881); Stoltenberg v. Continental Ins. Co., 106 Iowa 565, 68 Am. St. 323 (1898). 337 Home Ins. Co. v. Boyd, 19 Ind. App. 173, 49 N. E. 285 (1898). 290 THE STANDARD POLICY. 290 to be used and it continues to be occupied by one or more members of the family or a tenant having access to the entire building for the purpose of caring for it, and it is cared for and some use made of it as a place of abode. 338 So, a policy is not invalidated where it appears that the occupant and his wife absented themselves from the house for a considerable period, but for a temporary and special purpose, and retained it as a residence, intending to return to it, leaving his family clothing there, and his wife going once a week to the house for the purpose of caring for and cleansing it, and from time to time for other purposes. 339 Where the policy covered the house and barn the court said : "Oc- cupancy, as applied to such buildings, implies the actual use of the house as a dwelling house, and such use of the barn as is ordinarily incident to a barn belonging to an occupied house, or at least more than the use of it for mere storage. The insurer had the right by the terms of the policy to the care and supervision which is in- volved in such occupancy." 340 290. Building Contents Vacancy. The insurance upon a building may be invalidated by reason of a breach of this condition without affecting the insurance upon the personal property in the building. A manufacturing establishment is an establishment for the manufacture of raw material, and the idea excludes the material upon which it operates. "The same form of policy is prescribed for insur- ance upon all kinds of property, and general provisions would nat- urally be inserted which are applicable to some kinds of property and not to other kinds. The provision in regard to the removal of the property insured is evidently intended for movable property; the provision in regard to the premises being vacant by the removal of the owner or occupant, and the provision in regard to dangerous materials being kept or used upon the premises, evidently relate only to buildings insured. There is more reason for holding that those provisions apply to furniture, and that an insurance on furniture or any personal property in a house would be made void by the vacancy of the house or by the keeping in it of the dangerous articles men- tioned, than that the insurance upon a stock in a manufacturing es- 338 Moody v. Amazon Ins. Co., 52 ^Ashworth v. Builders', etc., Ins. Ohio St. 12, 49 Am. St. 699 (1894). Co., 112 Mass. 422, 17 Am. Rep. 117 339 Cummins v. Agricultural Ins. (1873). Co., 67 N. Y. 260 (1876). 291 VACANCY. 291 tablishment would be made void if the factory should cease operation. All these provisions have full meaning and effect when applied, ac- cording to their terms, to an insurance of property to which they can be applied. To extend them to an insurance of property to which they do not apply, because the destruction of such property not in- sured may cause the destruction of property insured, is against all rules of construction and seems to be a plain interpolation of what is not in the contract. The building, and the machinery, fixtures and appliances, constitute the manufacturing establishment. It is going far enough to hold that in one insurance of machinery the premises insured are a manufacturing establishment of which the machinery constitutes a part." 341 291. Illustrations of construction of this provision. A building is unoccupied where a tenant who occupies the same as a store aban- dons it before the end of the term and leaves therein only a small amount of merchandise of a nominal value, although he retains the key to the building at the request of the insured. 342 So, a dwelling or tenement house is vacant and unoccupied if the occupant has left it, although some trifling articles of furniture of little value are left in one of the rooms. 343 The fact that a tenant intending to remove goes away to meet his wife, leaving two of his children in the house, with instructions to remain there until he returned, and that a small portion of the furniture has been removed, does not constitute a breach of this condition. 344 A building was not occupied by a tenant as a dwelling house where the tenant had moved out and the son of the owner slept in the house during the day and worked nights, having only a cot, chair and alarm clock in the house, and the family of the owner resided next door and obtained water from a cistern in the kitchen of this house, and the owner went through the house every day. 345 The fact that a tenant and his servants had for two days before the fire been cleaning the house preparatory to its occupation does not constitute occupation. 346 So, a house was not occupied al- 341 Stone v. Howard Ins. Co., 153 ^ Eureka, etc., Ins. Co. v. Bald- Mass. 475, 27 N. E. 6 (1891). win, 62 Ohio St. 368, 57 N. E. 57 342 Home Ins. Co. v. Scales, 71 Miss. (1900). 975, 42 Am. St. 512 (1894). '""Thomas v. Hartford F. Ins. Co., 343 Schuermann v. Dwelling House 21 Ky. L. 914, 53 S. W. 297, rehear- Ins. Co., 161 111. 437, 52 Am. St. 377 ing denied (1899) 21 Ky. L. 1139, (1896). 56 S. W. 264. "Burlington Ins. Co. v. Lowery, 61 Ark. 108, 54 Am. St. 196 (1895). 291 THE STANDARD POLICY. 292 though two workmen took their meals there and kept their trunks and clothing in the building and slept at night in one of the rooms, but were employed elsewhere during the day. 347 So, a dwelling house is unoccupied where the house remains vacant for three months and is then let to a tenant, who, up to the time of the loss, has placed therein implements for cleaning it, but not otherwise occupied the premises. 348 A church used by a congregation in the ordinary manner that such buildings are used, and which is occasionally visited by the sexton at times when the congregation is not in session, is occupied, although there was no church meeting in the building for a period of six weeks, during which time there was no minister of the church and the con- gregation was awaiting the arrival of a new minister. 349 A house was not vacant where a part of the tenant's goods were in the house the night of the fire, and the tenant had retained the key to enable him to remove the same the next day, although he had already removed a part of the goods and the house was not occupied that night. 350 An ice house is not, as a matter of law, vacant and unoccupied be- cause there is nothing therein at the time it was burned, in October, except the tools used in putting up ice and a small quantity of unmer- chantable ice. 351 The premises are not vacated by a tenant leaving the premises when threatened by a forest fire in order to remove his sick wife to a place of safety, leaving several people to defend the property against fire. 352 So, occupation by one tenant is within the provision that it shall become void if the premises be occupied by tenants. 353 A house is not vacant where it appears that the occupant of the house commenced to move out at nine o'clock in the morning and intended to complete the removal of the goods in the afternoon, and the house was destroyed by fire at noon. 354 So, a building de- scribed as "a ten tenement frame block" is not unoccupied if two of the tenements are in actual use and occupancy as residences. 355 Where 347 Poor v. Humboldt Ins. Co., 125 F. Ins. Co., 99 Iowa 193, 68 N. W. Mass. 274 (1878). 600 (1896). 348 Litch v. North British, etc., Ins. ^Raymond v. Farmers', etc., Ins. Co., 136 Mass. 491 (1884). Co., 114 Mich. 386, 72 N. W. 254 349 Hampton v. Hartford F. Ins. (1897). Co., 65 N. J. L. 265, 47 Atl. 433, 52 363 Elliott v. Farmers' Ins. Co. L. R. A. 344 (1900). (Iowa), 86 N. W. 224 (1901). 360 Norman v. Missouri, etc., Ins. 3M Insurance Co. v. Coombs, 19 Co., 74 Mo. App. 456 (1898). Ind. App. 331, 49 N. E. 471 (1898). 351 Des Moines Ice Co. v. Niagara ^Harrington v. Fitchburg, etc., Ins. Co., 124 Mass. 126 (1878). 293 CHANGE OF LOCATION RENEWAL OF CONTRACT. 292 the former occupant of a house had moved with his family into an- other house, where they slept and took their meals, the house was vacant, although some furniture remained in the house and the keys had not been surrendered to the landlord. 356 XII. Authorized Change of Location. If the property covered by this policy is so endangered by fire as to require removal to a place of safety,, and is so removed, that part of this policy in excess of its proportion of any loss and of the value of property remaining in the original location, shall, for the, ensuing five days only, cover the property so removed in the new location; if removed to more than one location, such excess of this policy shall cover therein for such five days in the proportion that the value of any one such new location bears to the value in all such new locations; but this company shall not, in any case of removal, whether to one or more locations, be liable beyond the proportion that the amount hereby insured shall bear to the total insurance on the whole property at the time of fire, whether the same cover in new location or not. 35 ' 1 292. In general. This provision authorizes the removal of the property when endangered by fire and provides that the policy shall remain in force for five days after such removal. It also provides for the amount, of recovery whether the property is in tne new location or not. It does not seem to have been construed by the courts. There are, however, numerous cases which determine the liability of the company for damage occasioned while the property is being removed from a building which is on fire or threatened with de- struction. 358 XIII. Renewal of Contract. This policy may by a renewal be continued under the original stipu- lations, in consideration of premium for the renewed term, pro- 350 Corrigan v. Connecticut F. Ins. policies of Massachusetts, Minne- Co., 122 Mass. 298 (1877). sota, Maine and New Hampshire 857 This provision is found in the provide that: "If such removal shall standard policies of New York, New be necessary for the preservation of Jersey, Connecticut, Rhode Island, the property from fire, this policy Wisconsin, Louisiana, Michigan, shall be valid without such assent North Dakota, South Dakota, Iowa, for five days thereafter." and North Carolina. The standard ** See 218, supra. 293 THE STANDARD POLICY. 294 vided that any increase of hazard must be made known to this com- pany at the time of renewal or this policy shall be void. 359 293. In general. Whether a renewal creates a new contract de- pends upon its terms. It has been held that every renewal of a policy of insurance, being upon a new consideration and optional with both parties, creates a new contract, and is, unless otherwise expressed, subject to the terms and conditions which are contained in the original policy. 360 Where the contract is renewed from year to year the descrip- tion of the insured property in the original policy must be applied to the condition of the property at the date of the last renewal. 361 The clause quoted from the standard form does not provide that the pre- mium must be paid at the time of the renewal. In Maryland it was held that where, under a policy of insurance, an option was given to renew the same at its expiration, and the insured elected to renew, and notified the company of its election, such notification did not bind the company unless accompanied by payment or tender of payment of the premium. 362 Where an application for renewal was made, and the company's agent filled out, signed and delivered the policy without asking for payment of the premium, it was held that there was a valid contract. 363 But where the company provided that it should not be liable by virtue of the policy or any renewal thereof until the premium had been actually paid, and it had been the custom of the agent to make renewals, deliver them and collect the premium, and ten days before the original contract expired the insured asked the agent to attend to its renewal, and he promised to do so, but noth- ing was done and the property was burned six months thereafter, it was held that the agent had not waived prepayment of the pre- 359 This provision is found in the Co. v. Kranich, 36 Mich. 289 (1877). standard policies of New York, New Contra, New England, etc., Ins. Co. Jersey, Connecticut, Rhode Island, v. Wetmore, 32 111. 221 (1863). Wisconsin, South Dakota, Iowa, 3C1 Garrison v. Farmers', etc., Ins. Michigan, North Dakota, Louisiana, Co., 56 N. J. L. 235, 28 Atl. 8 and North Carolina. It is not found (1893). in the standard policies of Massa- ' M2 American Casualty Co.'s Case, chusetts, Minnesota, Maine and New 82 Md. 535; s. c. sub nom. Boston, Hampshire. etc., Co. v. Mercantile, etc., Co., 34 360 Hartford F. Ins. Co. v. Walsh, Atl. 778, 38 L. R. A. 97 (1896). 54 111. 164, 5 Am. Rep. 115 (1870); """Luna v. United States F. Ins. Brady v. Northwestern Ins. Co., 11 Co., 104 Mich. 397, 62 N. W. 562 Mich. 425 (1863); Aurora, etc., Ins. (1895). 295 RENEWAL OF CONTRACT. 293 miuin and that the company was not liable on the policy. 364 Where there was a verbal agreement to renew the risk, and payment of the premium was to be made on the first day of the succeeding month, which fell on Sunday, an offer to pay on Monday was sufficient, al- though the building was burned on Sunday. 365 The authorized agent of the company may renew a policy by parol, although the policy provides that it can be done only in writing. 366 A renewal need not be under seal, although the policy is under seal. 367 An agent of the company has power to make a valid parol agreement to renew a contract of insurance, although the policy and certificates of renewal issued by the company provide that it shall not be valid unless countersigned by the agent. 368 An agreement to renew must have all the elements of a contract. 389 Where the authority of the agent was limited by the policy so that he could only renew on the same policy, "provided the premium be paid or indorsed on the policy or a receipt given," it was held that the company was not liable where the evidence merely showed a con- versation between the insured and the agent which took place four 304 Zigler v. Phoenix Ins. Co., 82 Iowa 569, 48 N. W. 987 (1891). scs Taylor v. Germania Ins. Co., 2 Dill. (C. C.) 282, Fed. Gas. No. 13,793 (1872). An insurance com- pany agreed that a policy for one year should be a permanent risk, and that its officers should call for the premiums as they became due, and leave the certificates of pay- ment and renewal. The assured party relying on this arrangement, did not call and pay the renewal premium, or get a renewal certifi- cate. Before any of the officers called for the renewal premium, the property was destroyed by fire. Held, that the company was liable for the loss: Trustees, etc., v. Brooklyn F. Ins. Co., 18 Barb. (N. Y.) 69 (1854). 300 Cohen v. Continental F. Ins. Co., 67 Tex. 325, 3 S. W. 296, 60 Am. Rep. 24 (1887). See Royal Ins. Co. v. Beatty, 119 Pa. St. 6, 12 Atl. 607 (1888). 307 Lockwood v. Middlesex, etc., Assur. Co., 47 Conn. 553 (1880). 368 Post v. JEtna Ins. Co., 43 Barb. (N. Y.) 351 (1864). See, also, Co- hen v. Continental F. Ins. Co., 67 Tex. 325, 3 S. W. 296, 60 Am. Rep. 24 (1887). 3 " 9 O'Reilly v. London Assur. Corp., 101 N. Y. 575, 5 N. E. 568 (1886); Johnson v. Connecticut F. Ins. Co., 84 Ky. 470 (1886). Mere silence of the agent when asked if the com- pany would renew is not a renewal : Royal Ins. Co. v. Beatty, 119 Pa. St. 6, 12 Atl. 607 (1888). As to the au- thority of the agent to renew, see Carroll v. Charter Oak Ins. Co., 40 Barb. (N. Y.) 292 (1863); Baubie v. ^Etna Ins. Co., 2 Dill. (C. C.) 156 (1873). A contract to "hold" certain expiring policies is a renewal: Baker v. Westchester F. Ins. Co., 162 Mass. 358, 38 N. E. 1124 (1894). 293 THE STANDARD POLICY. 296 weeks before a renewal was necessary, of which the agent made no entry on the policy or in his books, gave no renewal receipt, and on which the insured never paid any premium or made any arrange- ment therefor. 370 When a policy is renewed it is the duty of the insured to inform the company of any change in the nature or use of the property which increases the hazard. Where the insured made representations as to the nature of the occupancy of the premises, and stipulated that, should they be used and occupied so as to increase the risk without the notice and consent of the insurer in writing, the policy should be void, and that the insurance might be continued for such time as might be agreed upon, the performance of such conditions, unless otherwise specified in writing, should be construed as continued under the original representations, and an omission to give notice of a change of occupancy, increasing the risk, rendered a subsequent re- newal invalid. 371 So, where a fire policy provided that "this insur- ance, the risk not being changed, may be continued for such further time as shall be agreed on * * * under the original representa- tion, * * * but in case there shall have been a change in the risk, either within itself or of the neighboring buildings, not made known to the company by the assured at the time of renewal, this policy and renewal shall be void," it was held, that if, after the first insurance and before the renewal policy was delivered, there was any change in the risk increasing the hazard, whether known to the in- sured or not, and it was not made known to the company at the time of the renewal, the policy and the renewal were void. 372 There is no increase of hazard under a policy which contains no provision against alienation, where the insured sells the property and takes back a mortgage as security for the purchase-money, and it is not necessary to give notice of this change in the nature of the interest at the time of the renewal. 373 Although by the terms of a mortgage clause in the policy the rights of a mortgagee were not to be affected by any act of the mortgagor in increasing the hazard during the life of the policy, it is necessary upon a renewal of the policy to inform the company of any facts which increase the hazard. 374 Like other provisions, this 370 O'Reilly v. London Assur. Corp., 373 Phelps v. Gebhard F. Ins. Co., 101 N. Y. 575, 5 N. E. 568 (1886). 9 Bosw. (N. Y.) 404 (1862). m Wolff v. Oswego, etc., Ins. Co., ** Cole v. Germania F. Ins. Co., 99 6 N. Y. St. Rep. 548 (1887). N. Y. 36, 1 N. B. 38 (1885). ^Brueck v. Phrenix Ins. Co., 21 Hun (N. Y.) 542 (1880). 297 RENEWAL OF CONTRACT. 294 requirement may be waived. Where the president of the company often stopped at a hotel which was the subject of the insurance, while additions were being made which were claimed to increase the risk, and gave his consent to the making of such changes, it was held that there was a waiver of a breach of the conditions, and upon re- newal of the policy it was not necessary to make representations in writing as to the changes. 375 294. Illustrations. Where the policy does not state the pro- cedure necessary to effect such renewal, the company can not show that there were secret limitations upon the authority of its agent to contract for renewal. 376 Where a policy upon a building was re- newed it was held that an ordinance passed during the life of the original policy forbidding the rebuilding or repairing of wooden buildings within certain limits entered into the new contract cre- ated by renewal. 377 A policy covered the plaintiff's property gen- erally, and an indorsement apportioned it among several items. Be- fore the term expired plaintiff took the policy to defendant's agent and requested a renewal. Nothing was said in reference to a differ- ent policy, or to any alteration of the terms of the existing one, and it was held that it was the intention of the parties that the new policy should contain the same provisions as those indorsed on the old policy. 378 Where the policy covered a specified sum on a grist mill, and another sum on the machinery therein, and was renewed in general terms for an amount equal to the entire insurance, without any distribution of the risk, it was held that the insurance should thereafter be without distribution and apply generally to both build- ing and machinery. 379 The owner of an insured building sold one- half of it to a partner, and at the expiration of the original policy a renewal certificate was issued reciting the receipt of the premium from the firm and the continuation of the policy, and that "the renewal is made upon condition that the original policy continues in force, and that there has been no change in the risk since first insured not noticed on the books of this company, otherwise this 875 Martin v. Jersey City Ins. Co.. 378 Cochran Cotton Seed Oil Co. v. 44 N. J. L. 273 (1882). Phoenix Ins. Co., 7 Misc. (N. Y.) 378 McCullough v. Hartford F. Ins. 695, 28 N. Y. Supp. 45 (1894). Co., 2 Pa. Super. Ct. 233 (1896). m Driggs v. Albany Ins. Co., 10 377 Brady v. Northwestern Ins. Co., Barb. (N. Y.) 440 (1851). 11 Mich. 425 (1863). 295 THE STAXDAPD POLICY. 298 renewal is not binding." It was held that the insurers intended to continue the insurance on the property on the terms and conditions expressed in the policy, for the benefit of the parties who paid the premium. 380 295. Reformation of the policy. A renewal policy containing a coinsurance clause which was not in the original policy will be reformed where it apjpears that the renewal was solicited by the com- pany with the understanding that the two policies were to be the same, and that the insured, relying upon the agreement and good faith of the company, did not read the policy and discover the ma- terial changes until after the loss had occurred. 381 A mortgagee applied to the company for a renewal with an increase of the insur- ance, which was agreed to, and the new policy contained a clause not in the first, that in case of loss the mortgagee should assign to the company all her right to receive satisfaction from any other person, and that the loss should not be payable until after the enforcement of the original security, and that the company should only be liable for so much as could not be collected. The mortgagee did not dis- cover the change until after loss, and it was held that he might maintain an action to reform the policy and recover thereon as re- formed, but that it was discretionary with the court to refuse relief on the ground of hi.s neglect to discover the change within a reason- able time. 382 XIV. Cancellation of Policy. This policy shall be canceled at any time at the request of the in- sured; or by the company by giving five days' notice of such cancel- lation. If this policy shall be canceled as hereinbefore provided., or become void or cease, the premium having been actually paid, the un- earned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate, except that when this policy is canceled by this company by giving notice it shall retain only the pro rata premium. 383 ^Lancey v. Phoenix F. Ins. Co., ^ This provision is found in the 56 Me. 562 (1869). standard policies of New York, New 381 Palmer v. Hartford Ins. Co., 54 Jersey, Connecticut, Rhode Island, Conn. 488, 9 Atl. 248 (1887). Louisiana, South Dakota, Iowa, 382 Hay v. Star F. Ins. Co., 77 N. Y. Michigan, North Dakota, and North 235, 33 Am. Rep. 607 (1879). Carolina. The Wisconsin provision 299 CANCELLATION OF POLICY. 296 296. In general. In a number of states there are statutes which secure to the parties the right to cancel a contract of insurance upon proper notice. Unless there is such a statute or stipulation in the contract of insurance, the policy can not be canceled without the consent of the insured. 384 The right does not exist unless reserved, and the clause conferring the right is in the nature of a condition precedent which must be strictly complied with in order to make an effort to cancel effective. 385 Where the policy provides that "the insurance may be terminated at any time at the request of the in- sured/'' a surrender of the policy, with the request that it be ter- minated, operates ipso facto as a cancellation. 386 Where the con- tract is intended to bind the insurer only so long as it chooses, it is as follows: "This policy shall be canceled at any time at the request of the insured; or by the company by giving five days' notice of such cancellation; unless during a time in which the hazard shall be in- creased solely by the act of God, and in such case and during such time of such increase of hazard the company shall not cancel this policy except upon sixty days' notice of such cancellation, without the con- sent of the assured." The standard policies of Massachusetts, Minne- sota, Maine and New Hampshire have the following provision: "This policy may be canceled at any time at the request of the insured, who shall thereafter be entitled to a re- turn of the portion of the premium remaining, after deducting the cus- tomary monthly short rates for the time this policy shall have been in force. The company also reserves the right after giving written no- tice to the insured, and to any mortgagee to whom this policy is made payable, and tendering to the insured a ratable proportion of the premium, to cancel this policy as to all risks subsequent to the expira- tion of ten days from such notice, and no mortgagee shall then have the right to recover as to such risks." 384 Alliance, etc., Ins. Co. v. Swift, 10 Gush. (Mass.) 433 (1852). 385 Wicks v. Scottish, etc., Ins. Co., 107 Wis. 606, 83 N. W. 781 (1900); Van Valkenburgh v. Lenox F. Ins. Co., 51 N. Y. 465 (1873). Provisions for cancellation in an insurance pol- icy must be strictly followed to ef- fect that result: John R. Davis Lumber Co. v. Hartford F. Ins. Co., 95 Wis. 226, 37 L. R. A. 131 (1897). Transactions with reference to the cancellation of an insurance policy must be construed reasonably and fairly, and in accordance with the evident understanding of the par- ties at the time: Bingham v. Fire Ins. Co., 74 Wis. 498 (1889). The cancellation of a policy and the retention of the pro rata pre- mium is a confirmation of the va- lidity of the policy: Commercial Assur. Co. v. New Jersey Rubber Co. (N. J.), 49 Atl. 155 (1901). 380 Crown Point Iron Co. v. ^Etna Ins. Co., 127 N. Y. 608, 14 L. R. A. 147 (1891). 297 THE STANDARD POLICY. 300 may cancel the policy at any time by notice to the other party. 387 After the liability of the company has become fixed by fire, notice of a previous election to cancel the policy has no effect on the con- tract. 388 The right to cancel the policy thus reserved to the company can not be exercised under circumstances which would operate as a fraud on the insured; as where notice was given pending an approaching conflagration which threatened to destroy the insured property. 389 Where the policy provides for notice it means notice to the insured. 390 His rights can not be affected by the conduct of others who have no authority to represent him. The consent of a mortgagee, to whom the policy is made payable in case of loss, to a cancellation without the knowledge of the insured, is of no effect and does not deprive him of his rights. 391 297. The time. This provision requires five days' notice of an intent to cancel the contract. An attempt to transfer the risk from a company which has refused to carry it to another without the con- sent of the insured, after the agent has placed the risk in the former company under a general request for insurance, without specifying any company, is ineffectual when the five days' notice of the cancella- tion of the first policy stipulated for therein was not given. 392 The parties may of course, by mutual consent, rescind the contract with- out such notice. 393 298. Authority of agent to cancel. An agency to procure in- surance is not, as a matter of law, presumed to continue for the pur- pose of canceling the policy. 394 It must appear that the person to whom notice was given was at the time the authorized agent of the 387 Manchester P. Assur. Co. v. In- 382 Clark v. Ins. Co., 89 Me. 26, 35 surance Co. of 111., 91 111. App. 609 L. R. A. 276 (1896). (1900). ^Sea Ins. Co. v. Johnston, 105 ""Massasoit Steam Mills Co. v. Fed. 286, 44 C. C. A. 477 (1900). Western Assur. Co., 125 Mass. 110 ^ Broadwater v. Lion F. Ins. Co., (1878). 34 Minn. 465 (1886); Hermann v. 389 Home Ins. Co. v. Heck, 65 111. Niagara F. Ins. Co., 100 N. Y. 411 111 (1872). (1885); Grace v. American, etc., Ins. 390 London, etc., Ins. Co. v. Turn- Co., 109 U. S. 278 (1883); White v. bull, 86 Ky. 230 (1887). Connecticut F. Ins. Co., 120 Mass. 381 Peterson v. Hartford F. Ins. Co., 330 (1876); Adams v. Manufactur- 87 111. App. 567 (1900). ers', etc., Ins. Co., 12 Ins. L. J. 787 (1883). 301 CANCELLATION OF POLICY. 298 insured for the purpose of canceling the policy, or that the act was subsequently ratified by the insured. 395 So, where a broker had been employed by the plaintiff to procure a fire policy on certain property, notice afterwards given by the company to such broker of an inten- tion to cancel the policy was held not sufficient to effect a cancella- tion. 396 Mere notice to a broker or the agent of the insured that the company desires to cancel the policy is not enough where the policy contains a provision that it may be terminated by notice to the per- son who procured it. 397 The agent of the company can not give no- tice to himself as. the person who procured the insurance. 398 A de- livery of the policy to an agent of the insurer for cancellation by a clerk in the office of the agent of the insured, who was authorized to deliver up the policy for cancellation, is the act of the insured, and not of the insurer, and will support a cancellation of the policy. 399 But where the insured left the policy in the hands of her agent, and thus placed it in his power to mislead the insurer by surrendering the policy, and the insurer acted in good faith in canceling it, it was held that the insured was bound by this surrender, although it was without authority. 400 An agent may, under certain circumstances, represent both parties. A general insurance agency representing both parties, with authority to act upon applications and issue policies, as well as to cancel the same in proper cases, may also act as the agent of the insured in waiving notice of cancellation and in accepting delivery of the new policy when substituted for the one canceled. In Minnesota it was said: 401 "Such a business arrangement is in many cases adopted by business firms and corporations in cities, and is beneficial both to the underwriters and parties insured; adding to the business of the one and relieving the other from anxiety regarding the expiration and ^Quong Tue Sing v. Anglo-He- 40 Kooistra v. Rockford Ins. Co., vada Assur. Corp., 86 Cal. 566, 10 L. 122 Mich. 626, 81 N. W. 568 (1900). R. A. 144 (1890). ^ Hamm Realty Co. v. New Hamp- 388 Healy v. Insurance Co., 63 N. Y. shire F. Ins. Co., 80 Minn. 139, 83 Supp. 1055, 50 App. Div. (N. Y.) 327 N. W. 41 (1900). See, also, s. c. 87 N. (1900). W. 933 (1901); Dibble v. Northern 397 Hermann v. Niagara F. Ins. Co., Assur. Co., 70 Mich. 1, 37 N. W. 704 100 N. Y. 411 (1885). (1888); Buick v. Mechanics' Ins. Co., 398 Insurance Companies v. Raden, 103 Mich. 75, 61 N. W. 337 (1894); 87 Ala. 311 (1888). Stone v. Franklin F. Ins. Co., 105 399 Faulkner v. Manchester F. N. Y. 543, 12 N. B. 45 (1887); Arn- Assur. Co., 171 Mass. 349, 50 N. E. feld v. Guardian Assur. Co., 172 Pa. 529 (1898). St. 605, 34 Atl. 580 (1896). 299 THE STANDARD POLICY. 302 replacement of risks. The long course of business usage and custom pursued with uniformity between the agency representing the de- fendant and other companies and plaintiff, in which the latter had permitted the former to act for it, would justify the conclusion that the agency was authorized to act for the plaintiff in waiving notice of cancellation and in accepting the new policy of insurance by which the delivery of such policy was accomplished as fully as if the plain- tiff's manager had been present and received such policy into his own hands." 299. Return of premium. This provision relating to cancellation at the instance of the company requires that, in addition to giving five days' notice, it must return or tender the unearned premium in order to effect a cancellation. Mere notice that the unearned pre- mium will be returned by the agent of the company is not sufficient. 402 There must be an actual return or tender of the money. 403 A mere request that the policy be returned and a promise to return the pre- miums are not effective. 404 A tender of a part of the unearned pre- mium, together with a policy of insurance in another company rep- resenting the remainder of such premium, will not terminate a policy which provides for its own termination upon the refunding or tender- ing back to the insured of a ratable proportion of the premium for the unexpired term of the policy. 405 An attempt to rescind the con- tract is not a cancellation of the policy. So, a tender of the unearned premiums upon a policy and a demand for its surrender for the pur- pose of the rescission of the contract from the beginning, and a re- fusal upon that ground, are not a sufficient tender to effect a can- cellation under the terms of the policy. 406 402 Tisdell v. New Hampshire F. lingsworth v. Gernlania, etc., Ins. Ins. Co., 155 N. Y. 163, 49 N. E. 664 Co., 45 Ga. 294 (1872); Peterson v. (1898). See, also, to the same ef- Hartford F. Ins. Co., 87 111. App. feet, Nitsch v. American, etc., Ins. 567 (1900). Co., 152 N. Y. 635, 83 Hun 614, 46 4M Griffey v. New York, etc., Ins. N. E. 1149 (1897). Co., 100 N. Y. 417 (1885); Tisdell v. ""^tna Ins. Co. v. Maguire, 51 New Hampshire F. Ins. Co., 155 N. 111. 342 (1869); Franklin F. Ins. Co. Y. 163, 40 L. R. A. 765 (1898). v. Massey, 33 Pa. St. 221 (1859); ^Quong Tue Sing v. Anglo-Ne- Hathorn v. Germania Ins. Co., 55 vada Assur. Corp., 86 Cal. 566, 10 L. Barb. (N. Y.) 28 (1869); Goit v. R. A. 144 (1890). National, etc., Ins. Co., 25 Barb. (N. ^ John R. Davis Lumber Co. v. Y.) 189 (1855); Peoria, etc., Ins. Co. Hartford F. Ins. Co., 95 Wis. 226, 37 v. Botto, 47 111. 516 (1868); Hoi- L. R. A. 131 (1897). 303 CANCELLATION OF POLICY. 300 The insured is estopped to assert the non-return of the premium after having induced the company's agent to believe that the cancel- lation was recognized by him without such payment. 407 The pro- vision requiring the return of the unearned premium may be waived or disregarded by the parties, and if their minds meet upon an agree- ment that the policy is canceled it is sufficient. 408 A cancellation of a policy which provides that it may be terminated on notice is ef- fective eo instanti on notice given in good faith by the insurer where no premium has ever been paid. 409 300. What amounts to a cancellation. The notice under this provision must be unequivocal, as a mere notice of a desire to cancel or to deliver the policy for cancellation is not sufficient. 410 The no- tice must be communicated to the insured, and it is held in New York and California that merely mailing notice does not effect a cancellation when it was not in fact received by the insured. 411 This provision in the standard policy is not complied with by sending the insured a letter notifying him of an intention to cancel the policy without further notice, and stating that a pro rata part of the un- earned premium will be returned. 412 Cancellation of the policy is not affected by the fact that the insured was induced to authorize its cancellation through mistake or misrepresentations of his agent concerning directions from the insurance company. 413 The mailing of the policy with the obvious purpose of its cancellation to, and its receipt by the company, effect a cancellation. 414 Where four days before the loss the company wrote a letter to the insured stating that the policy had been canceled according to notice given in a former letter, it was held that the company was liable, where it did not appear that the former notice had been given, and 407 Hopkins v. Phoenix Ins. Co., 78 147 (1891); Farnum v. Phoenix Ins. Iowa 344 (1889). Co., 83 Cal. 246 (1890). 408 Bingham v. Insurance Co., 74 413 Tisdell v. New Hampshire F. Wis. 498 (1889). Ins. Co., 155 N. Y. 163, 40 L. R. A. ""Lipman v. Niagara F. Ins. Co., 765 (1898). 121 N. Y. 454, 8 L. R. A. 719 (1890). 413 Parker, etc., Mfg. Co. v. Ex- 410 Lyman v. State, etc., Ins. Co., change F. Ins. Co., 166 Mass. 484, 44 14 Allen (Mass.) 329 (1867); Grif- N. E. 614 (1896). fey v. New York, etc., Ins. Co., 100 4U Ikeller v. Hartford F. Ins. Co., N. Y. 417, 53 Am. Rep. 202 (1885). 53 N. Y. Supp. 323, 24 Misc. (N. Y.) 411 Crown Point Iron Co. v. ^Etna 136 (1828). Ins. Co., 127 N. Y. 608, 14 L. R. A. 300 THE STANDARD POLICY. 304 where there was nothing to show an intention to surrender for imme- diate cancellation. 415 Under a written agreement which provided that the policy should remain in force from the date of expiration until discontinuance, and the insured paid pro rata for the time used, it was held that the sending of a check for an additional month's insurance was not notice of a discontinuance at the end of that month. 416 When the report of an oral contract of reinsurance was received at the office of the company, the secretary called the agents by telephone and directed them to cancel such reinsurance. The agents delivered the message by telephone to an assistant in the office of the company procuring the reinsurance, and who usually received orders over the telephone both for writing and canceling insurance, and it was held sufficient to show that the reinsurance, if ever written, had been canceled. 417 In another case it appeared that the company issued a policy to the plaintiff which provided that it could be can- celed by the company upon giving five days' notice. There was a provision that only a pro rata premium should be retained by the com- pany on its cancellation of the policy. The special agent and ad- juster of the company wrote the local agent, directing him to cancel the policy. The local agent wrote the insured requesting a return of the policy, and inclosed two policies in other companies in lieu of the one issued by the defendant. The letter was received by the insured on Saturday afternoon, and on Saturday night the property was destroyed by fire. The letter was not opened 'until Monday morning, and it was held that the letter and acts did not constitute a cancellation of the defendant's policy. 418 A compan} r demanded payment of premiums earned upon an open policy, and received a letter from the insured stating that they could not "go on" unless the rate was reduced. The company refused to make a reduction and again sent the bill asking that if the insured decided not to continue using the policy that it be returned to it. The insured returned the policy and check for the amount of the bill, saying, "We inclose check and policy, which we suppose will conclude the whole matter. If we are mistaken please return check." The check was cashed, and it was held that the policy was rescinded 416 Healy v. Insurance Co., 63 N. 4 " Manchester F. Assur. Co. v. In- Y. Supp. 1055, 50 App. Div. (N. Y.) surance Co., 91 111. App. 609 (1900). 327 (1900). and a new appraise- ment, unless it had become impossible, would still be a condition precedent to a right of action on the policy, unless waived." But apparently an insurance company must accept the insured's claim that the award is invalid or take the risk of being compelled to sustain the contrary view. It stands by the award at its peril. In the case from which the rule was just quoted, the learned judge said: "Its conduct after plaintiffs rejected the award clearly con- stituted a waiver of the right to a new appraisement. Not only did it never ask for or even suggest a new appraisement, but in its com- munications with the plaintiffs it expressly insisted upon the award 178 Westenhaver v. German, etc., Hood v. Hartshorn, 100 Mass. 117 Ins. Co. (Iowa), 84 N. W. 717 (1900). (1868); Thorndike v. Wells Memo- 179 Western Assur. Co. v. Decker, rial Ass'n, 146 Mass. 619, 16 N. E. 98 Fed. 381, 39 C. C. A. 383 (1899). 747 (1888); Davenport v. Long Is- 180 Levine v. Lancashire Ins. Co., land Ins. Co., 10 Daly (N. Y.) 535 66 Minn. 138, 68 N. W. 855 (1896) (1882); Uhrig v. Williamsburgh, [citing Hiscock v. Harris, 80 N. Y. etc., Ins. Co., 101 N. Y. 362, 4 N. E. 402 (1880); Carrol v/Girard F. Ins. 745 (1886)]. Co., 72 Cal. 297, 13 Pac. 863 (1887); 324 THE STANDARD POLICY. 350 already made, and notified them that any claim under the policy must be on that basis and no other. It took the same position in its answer." In a later case/ 81 the same court held that when one of the parties to such a controversy refuses to abide by the award on the ground of misconduct of the referees, and notifies the other party of that fact, stating the grounds of the objection and demanding a resubmission, the party so notified has the option to stand by the award or submit to a reappraisement, and if he so elects to abide by the award, and the same is adjudged illegal for the cause assigned, then there can be no resubmission to other referees, but the damages may be determined in an action brought to set aside the award. The insurance company attempted to avoid a waiver by inserting in its answer a demand for a resubmission of the controversy to ar- bitrators if, for any reason unknown to it, the award should be held invalid. In reference to the Levine case, 181a the court said : "In that case the court did not base its decision upon the fact that the defend- ant company was connected with the fraud of the referees, but held that the insurer was not entitled to a resubmission to another board of arbitration for the reason that the defendant, by its conduct, had waived such right by not suggesting a new appraisement and in ex- pressly insisting upon the award as made and notifying the insured that any claim under the policy must be on the basis of that award and no other. In the answer in that case defendant made no sug- gestion of reappraisement, but insisted from first to last upon the validity of the award ; whereas, in the case before us, appellant, in its answer, after denying the allegations of the complaint as to the in- validity of the award, asserted that it was valid and binding, and alleged that if such award should be declared invalid, then that ques- tion should be resubmitted. The demand for resubmission was con- ditioned on the result of the action and was of no importance. In our opinion, the Levine case lays down a sound principle, and one which is controlling in this case, which is to the effect that where the award is attacked on the ground of fraud and misconduct by a referee, and one party to the controversy notifies the other of that fact, demanding a reappraisement on account of such misconduct, it then becomes the duty of the other party to investigate the validity of the charges and determine whether or not it will abide by it or submit to a reappraisement, and if it shall determine to abide by the award and 181 Christiansen v. Norwich F. Ins. 181 a Levine v. Lancashire Ins. Co., Co. (Minn.), 88 N. W. 16 (1901). 66 Minn. 138, 68 N. W. 855 (1896). 351 ARBITRATION. 324 refuse to submit to a reappraisement, such party is thereby estopped from thereafter demanding another appraisement in case the charges so made shall be sustained." Not only is a party who is not at fault and who has not waived his right entitled to a resubmission of the amount of his damages to arbi- trators, but, after an unsuccessful attempt, arbitration or excuse for not arbitrating is still a condition precedent to the right of the insured to maintain an action on the policy. This is on the theory that until an offer has been made, the plaintiff has not in good faith done all that is reasonably within his power to have the agreement carried into effect, and the damages ascertained in the mode provided for in the contract. Hence, where the determination by arbitration of the amount of the loss is a condition precedent to a right of action, the plaintiff in an action on the policy must prove performance or a valid excuse for non-performance. If the award is invalid it is the duty of the insured to seek a new determination of the amount of the loss in the manner provided by the contract. He must, therefore, allege and prove either that the amount of the plaintiff's loss has been determined by arbitrators chosen in the manner stipulated by the parties or some sufficient reason why such determination has become unnecessary or impossible. 182 But in a case in the circuit court of appeals the policy provided that in case of loss and disagreement as to the amount thereof, each party should appoint an appraiser, and the two suould select an umpire, who should appraise the loss, and that no action should be maintained on the policy until after the insured should have fully complied with such provision. It was held that the insured dis- charged his obligations when he appointed an appraiser in good faith; and if the appraisement failed without his fault, he was not required to propose the selection of other appraisers, but might resort to the courts to have his damages assessed. 183 So, it was said in Maryland that "if the appraisement fail without the fault of the insured, the failure would not be an impediment to their right to recovery if they could maintain their suit on other grounds." 184 So, in North Carolina it was said: "Where the arbitrators, or a ma- jority of them, fail to agree upon an award, the plaintiff, unless he is shown to have acted in bad faith in selecting his arbitrator, is not 182 Fischer v. Merchants' Ins. Co. Caledonia Ins. Co. v. Traub, 83 Md. (Me.), 50 Atl. 282 (1901). 524, 35 Atl. 13 (1896). 183 Western Assur. Co. v. Decker, 184 Caledonia Ins. Co. v. Traub, 83 98 Fed. 381, 39 C. C. A. 383 (1899); Md. 524, 35 Atl. 13 (1896). 325 THE STANDARD POLICY. 352 compelled to submit to another arbitration and another delay, but may forthwith bring his action in the courts." 184a But where the arbitration fails through the misconduct of one of the parties, he is not, after the award is set aside, entitled to a resub- mission. This is recognized by all the courts. 185 Where the policy provides that the loss shall be ascertained by ar- bitration, and that any proceeding relative to such arbitration shall not be deemed a waiver of any condition of the policy, the company, by denying liability after an appraisement of the loss, does not waive its right to insist upon the appraisement as conclusive of the amount of the loss. 18(i 325. Demand for arbitration as admission of liability. An in- surance company can not demand an appraisal and arbitration of the amount of the loss, and at the same time deny all liability under its policy. Therefore, as there can be nothing to arbitrate where there is no liability, a demand for an appraisal by the insurer, unless the contract provides to the contrary, is a waiver of all defenses going to the question of liability. 187 But the standard form provides that the company shall not be held to have waived any condition or con- 184 a pretzf elder v. Merchants' Ins. 172 (1896); McCullough v. Phoenix Co., 116 N. C. 491, 21 S. E. 302 Ins. Co., 113 Mo. 606 (1893). (1895). 18tf Pretzf elder v. Merchants' Ins. 185 "Any attempt on the part of Co., 116 N. C. 491, 21 S. E. 302 either party to misuse or pervert (1895); citing Howard Ins. Co. v. the provisions of the standard pol- Hocking, 115 Pa. St. 415, 8 Atl. 592 icy for an appraisal so as unrea- (1886). sonably to delay an adjustment, 1ST Hickerson v. German, etc., Ins. or to secure an unjust abatement Co., 96 Tenn. 193, 32 L. R. A. 172 of an honest loss, is a breach of (1896) [citing Lasher v. Northwest- good faith and should be treated ern, etc., Ins. Co., 18 Hun (N. Y.) as a waiver of the condition and as 98 (1879); Rosenwald v. Phoenix dispensing with the necessity of an Ins. Co., 50 Hun (N. Y.) 172 (1888); appraisal, or warranting a resort to Western, etc., Ins. Co. v. Putnam, 20 an action without one, if the party Neb. 331 (1886); Bailey v. JEtna thus prejudiced has used all fair Ins. Co., 77 Wis. 336 (1890); Ger- and reasonable means and diligence man, etc., Ins. Co. v. Etherton, 25 on his part to secure it. To hold Neb. 505 (1889); Wainer v. Milford, otherwise would be to permit the etc., Ins. Co., 153 Mass. 335, 11 L. R. party in fault to profit by his own A. 599 (1891), and note; Farnum v. wrong:" Chapman v. Rockford Ins. Phoenix Ins. Co., 83 Cal. 246 (1890); Co., 89 Wis. 572, 28 L. R. A. 405 Savage v. Phoenix Ins. Co., 12 Mont. (1895); Hickerson v. German, etc., 458, 33 Am. St. 591 (1892), and Ins. Co., 96 Tenn. 193, 32 L. R. A. note]. 353 RIGHT TO REPAIR, REBUILD, OR REPLACE. 326 ditions of the policy, or any forfeiture thereof, by any requirement, act or proceeding on its part relating to the appraisal. 1873 326. Right of mortgagee. Where a policy is taken out by a mortgagor and delivered to a mortgagee, with an indorsement to the effect that loss, if any, should be payable to the mortgagee, the mort- gagee need not be a party to the arbitration. The contract is be- tween the mortgagor and the insurance company, and, unless it con- tains provisions to the contrary, is under the control of the mort- gagor. 188 XIX. Eight to Repair, Rebuild, or Replace. It shall be optional, however, with this company to take all, or any part, of th& articles at such ascertained or appraised value, and also to repair, rebuild, or replace the property lost or damaged with other of like kind and quality within a reasonable time on giving notice, within thirty days after the receipt of the proof herein required, of its intention so to do; but there can be no abandonment to this com- pany of the property described. 189 187 a See 301, supra. 188 Chandos v. American F. Ins. Co., 84 Wis. 184, 19 L. R. A. 321 (1893). In Hathaway v. Orient Ins. Co., 134 N. Y. 409, 17 L. R. A. 514 (1892), it was held that the rights of a mortgagee could not be de- feated by an accord and satisfaction between the insurer and the owner of the premises, who took out the policy in his own name. See gen- erally, as to the question of the effect, upon an assignee of an in- surance policy, of acts of forfeiture by the assignor, note to Hall v. Niagara F. Ins. Co., 93 Mich. 184, in 18 L. R. A. 135 (1892). Contra, Bergman v. Commercial Assur. Co., 92 Ky. 494, 15 L. R. A. 270 (1892). See Brown v. Hartford Ins. Co., 5 R. I. 394 (1858); Harrington v. Fitchburg, etc., Ins. Co., 124 Mass. 126 (1878). 180 This provision is found in the standard policies in use in New 23 ELLIOTT INS. York, New Jersey, Connecticut, Rhode Island, Michigan, South Da- kota, Louisiana, North Dakota, Wisconsin and North Carolina. The Iowa clause is s-'milar to that of New York, except that the company is not authorized to repair, or re- build in case of the total loss of the building. The following pro- vision is found in the standard policies of the states of Massachu- setts, Minnesota and Maine: "In case of loss or damage, the com- pany, within sixty days, * * * shall either pay the amount * * * or replace the property with other of the same kind and goodness, or it may within fifteen days after such statement has been submitted, notify the insured of its intention to rebuild or repair the premises, or any portion thereof separately insured by this policy, and shall thereupon enter upon said premises and proceed to repair or rebuild 327 THE STANDARD POLICY. 354 327. An option reserved. After the damaged property is ap- praised as provided by statute, the company reserves the right to take the articles or any part thereof at such appraised value. It also reserves an option to repair, rebuild or replace the property lost or damaged with other of like kind and quality within a reasonable time on giving notice, within thirty days after receipt of proofs, of its in- tention so to do. The right to rebuild does not exist unless reserved by the terms of the contract. 190 The insurer can elect either of the privileges reserved to it by this provision of the policy, but by the selection of one it abandons the others. Thus, where the policy con- tained a provision for the submission of certain matters to arbitration, and provided that it "should be optional with the company to repair, rebuild or replace the property with other of like kind and quality within a reasonable time," the company elected to repair the injury and restore the house to its former condition. After some work was done, defendant was informed that the repairs were completed. The insured claimed that the repairs were insufficient, but declined to specify in what particular. The company made several attempts to complete the repairs, which were unsatisfactory to the defendant, who made and served proofs of loss and claimed payment of the money. The defendant then requested that the matter of damages be submitted to arbitration. The court said: 191 "The insurers had the right to determine the manner in which they would perform their contract, and this right did not depend upon the assent of the insured. Neither his assent nor dissent could affect the power of the defendant under the contract. The rights of the parties rested alto- gether in contract, and the defendant assumed the responsibility of performing it according to its terms, subject to the" right of the insured to damages for any breach of performance. * * * One mode looked to the compensation of the insured by the payment of the same with reasonable expedi- cept that it limits the time within tion. It is moreover understood which the company can give notice that there can be no abandonment of its intention to rebuild to ten of the property insured to the com- days. pany, and that the company shall 19 Wynkoop v. Niagara P. Ins. not, in any case, be liable for more Co., 91 N. Y. 478, Woodruff Ins. than the sum insured, with interest Gas. 203 (1883). See Wallace v. Ins. thereon from the time when the loss Co., 4 La. 289 (1832). shall become payable, as above pro- m Wynkoop v. Niagara F. Ins. Co., vided." The New Hampshire pro- 91 N. Y. 478 (1883). vision is similar *o the above ex- 355 EIGHT TO KEPAIR, REBUILD, OR REPLACE. 327 damages for his loss, and the other to the restoration of the subject of the insurance to its former condition. It could not have been con- templated by the parties that both methods of performance were to be pursued. The selection by the defendant of one of these alterna- tives necessarily constituted an abandonment of the other. The election of the privilege of restoration involved the rejection not only of the right to discharge its liability by the payment of damages to the insured, but also of those provisions of the contract having reference to that method of performance. From the time of such election the contract between the parties became an undertaking on the part of the defendant to build or repair the subject insured and to restore it to its former condition, and the measure of damages for a breach of the substituted contract did not necessarily depend upon the amount of damages inflicted upon the house by the peril insured against." After the company elects to rebuild the contract becomes one for rebuilding, and the obligation which looks to the payment of money becomes obsolete and inapplicable, and the case then becomes what it would have been if the contract had simply obligated the defendant to rebuild in case of loss. 192 The option must be exercised within a reasonable time, and notice must be given within thirty days after the receipt of the proofs. An offer by the company, more than a year after the proofs of loss were furnished, to rebuild, is too late. 193 Where two separate companies elect to rebuild, and there is a breach of the new contract to rebuild, the owner may recover his full damages against either of them, leaving the one which pays to secure contribution from the other in a separate action. 194 Where separate companies have separate policies on a single building, a general elec- tion to repair and rebuild makes the obligation to repair and rebuild joint or several at the option of the insured. 195 There is some doubt as to whether the insurer is deprived of the right to rebuild reserved in the policy by the fact that there is a statute requiring the use of a valued policy. In Wisconsin the standard form limits the liability of the insured to the "actual cash value of the property at the time any loss or damage occurs," except "as other- wise provided by statute," and provides that such liability "shall in no 192 Morrell v. Irving F. Ins. Co., 33 mel, 89 Md. 437, 43 Atl. 764 (1899). N. Y. 429 (1865). See, also, Beals v. 1M Morrell v. Irving F. Ins. Co., 33 Home Ins. Co., 36 N. Y. 522 (1867); N. Y. 429 (1865). Heilmann v. Westchester Ins. Co., m Hartford F. Ins. Co. v. Peebles 75 N. Y. 7 (1878). Hotel Co., 82 Fed. 546, 27 C. C. A. 183 Maryland, etc., Ins. Co. v. Kim- 223 (1897). 327 THE STANDARD POLICY. 356 event exceed what it would then cost the insurer to repair and replace the same with other of like kind and quality/' and that "it shall be optional, however, with the insurer to rebuild or replace the property lost or damaged with other of like kind and quality." When the policy was issued there was in force a statute which declared that the amount of insurance written in the policy on real estate which has been wholly destroyed "shall be taken conclusively to be the true value of the property when insured, and the true measure of damages when destroyed." It was held that these acts should be construed together, and that the provision for a valued policy was not in conflict with the provision giving the insured the right to rebuild although the building was wholly destroyed. 196 But in Ohio the right to rebuild is regarded as inconsistent with the valued policy statute, as it changes the meas- ure of liability from the amount named in the policy to the cost of rebuilding. 19681 Where there was a controversy between the insured and insurer as to whether the latter had lost its right to elect to rebuild, the former brought an action to recover a money indemnity, and the insurer set up its election and alleged its willingness to rebuild. It was held that the company had not lost its right, and could not thereafter rescind the position assumed in the pleading and deny liability on its contract of insurance because pending the controversy the cost of building had increased. 197 In the same case it appeared that the policy contained provisions relating to both personal property and buildings, and provided that if there was loss or damage the amount of the same should be ascertained or estimated by the parties or by appraisers, and that when so estimated and the proofs of loss made, the same should be payable sixty days after receipt of these proofs, but that it should be "optional, however, with this company to take all or any part of the articles at such ascertained or appraised value, and also to repair, rebuild or replace the property lost or damaged * * * within a reasonable time on the giving of notice within thirty days after the receipt of proofs of loss herein required, of its intention so to do." It was further provided that the company should be held to have waived any provision or condition of the policy by any act or requirement or proceeding relative to appraisement. It was held that the estimate and the appraisal was preliminary to or a 199 Temple v. Niagara F. Ins. Co., 197 Langan v. ^Etna Ins. Co., 99 109 Wis. 372, 85 N. W. 361 (1901). Fed. 374 (1900). 196 a Milwaukee, etc., Ins. Co. v. Russell (Ohio), 62 N. B. 338 (1901). 357 TIME WITHIN WHICH LOSS IS PAYABLE. 328 part of the final proof of loss required, and that participation by the company in the appraisal to ascertain the damage done to the insured building did not constitute an election on its part to pay the dam- ages in money, which precluded it from thereafter exercising its option to rebuild or repair upon the giving of proper notice. 198 No deduction can be made for difference in value between the old and the new building constructed by the company under the option reserved in this policy. Where the company elected to rebuild, it was claimed that as a new store of similar dimensions and plan as the old, of new materials, would be worth more than the old one, a deduc- tion ought to be made from the estimate of the cost of the new store for the difference in value between the old and the new store, anal- ogous to the deduction of new for the old in the adjustment of losses on marine policies. "Such a rule," said the court,* 99 "is not sup- ported by any principle of justice or by the authority of any adjudged cases. It is founded upon an erroneous construction of the con- tract. It supposes that the insurers are bound to repair the build- ing or to pay the expenses of the repairs. But no such obligation is imposed upon them by the policy. They have the privilege to make requisite repairs, if they see fit, to protect themselves against the recovery of excessive damages, or for any other reason. But if they elect -not to make repairs, they are liable only to pay a fair indem- nity for the loss. But whatever may be the rule when the building insured is partially injured by the peril insured against, it has no application to cases like the present, where the building is totally destroyed and is to be replaced by a new one. We are therefore of the opinion that there is no rule of damages applicable to the present case; and that in all cases where no rule of damages is established by law, the jury are to decide upon the question, and that to their decision there can be no legal exception." XX. Time Within Which Loss is Payable. And the loss shall not become payable until sixty days after the notice, ascertainment., estimate,, and satisfactory proof of the loss herein required have been received by this company, including an award by appraisers when appraisal has been required. 200 108 Langan v. ^Etna Ins. Co., 96 20 This provision is found in the Fed. 705 (1899). standard policies of New York, New 199 Brinley v. National Ins. Co., 11 Jersey, Rhode Island, Connecticut, Mete. (Mass.) 195 (1846). Iowa, South Dakota, North Dakota, 328 THE STANDARD POLICY. 358 328. In general. The insurance company has sixty days after due proof of loss and award by appraisers, when appraisal has been required, within which to pay the amount found due, and a suit commenced before the expiration of the sixty days is prematurely brought. 201 The Michigan statute provides that suits at law may be maintained against the insurer for claims which may have accrued, if payments are withheld more than sixty days after such claims be- come due. Where the sum for which the company might be liable was payable sixty days after due notice, it was held that an action commenced on November 24 for a loss by fire, proofs of which were furnished on September 9, was premature, as the action did not lie until the expiration of one hundred and twenty days from the time the proofs of loss were filed. 202 Where the policy provided that the loss should be paid within sixty days after receiving proofs of loss, and a complaint was filed August 30, which alleged that the plaintiff notified the company of the loss on June 23, and that its adjuster two or three days thereafter made inquiry into the facts and notified the plaintiff that the loss could not be paid, it was held that the action was not prematurely brought. 203 Where the policy contains no reference to the charter of a mutual company, the rights of the parties are determined by this provision in the policy, and not by some charter provision which provides for a different procedure. 204 An action may be brought without waiting for the expiration of the sixty days after proofs of loss where the company denies all liability, and refuses to ascertain or adjust the loss, and its officer states that the only way a settlement can be ob- tained is "at the end of a lawsuit." 205 Michigan, Louisiana and North Car- pay the amount for which it shall olina. The Wisconsin clause reads, be liable or replace," etc. "and the loss shall become payable 201 Gillon v. Northern Assur. Co., sixty days after the notice and proof 127 Cal. 480, 59 Pac. 901 (1900). of loss herein required have been 202 Putze v. Saginaw, etc., Ins. Co. received by this company." Massa- (Mich.), 86 N. W. 814 (1901). chusetts, Minnesota, Maine and New 203 Home Ins. Co. v. Sylvester, 25 Hampshire have the following pro- Ind. App. 207, 57 N. E. 991 (1900). vision : "In case of any loss or 2< * First Baptist Church v. Citi- damage, the company, within sixty zens', etc., Ins. Co., 119 Mich. 203, 77 days after the insured shall have N. W. 702 (1899). submitted a statement, as provided ^ Hosmer v. St. Joseph, etc., Ins. in the preceding clause, shall either Co., 80 Mo. App. 419 (1899). 359 TIME OF BRINGING SUIT. 329 XXI. Time of Bringing Suit. No suit or action on this policy., for the recovery of any claim, shall be sustainable in any court of law or equity until after full compliance by the insured with all the foregoing requirements, nor unless com- menced within twelve months next after the fire. 2 329. Validity. It is generally held that a provision in a policy of insurance limiting the time for an action thereon to a period less than that prescribed by the statute of limitations is valid and en- forceable, 207 although in a few instances such provisions have been held void as against public policy. 208 2o This provision is found in the standard policies of New York, New Jersey, Rhode Island, Connecticut, Michigan, Louisiana, South Dakota and North Carolina. The clause does not appear in the Wisconsin standard policy, and North Dakota has no time limit other than the statute of limitations within which suit must be brought. The Iowa form is as follows: "No suit or action on this policy for the recov- ery of any claim shall be sustainable in any court of law or equity until after full compliance by the insured with all the foregoing requirements, including appraisal, and until after an award shall have been obtained fixing the amount of such claim in the manner above provided, when the company has elected to appraise, nor unless commenced not later than one year next after the time when a cause of action accrues." The Massachusetts, Minnesota and Maine policies provide that: "No suit or action against this company for the recovery of any claim by virtue of this policy shall be sus- tained in any court of law or equity in this state unless commenced within two years from the time the loss' occurs." New Hampshire lim- its the time for bringing the ac- tion to one year. 207 Riddlesbarger v. Hartford Ins. Co., 7 Wall. (U. S.) 386, Woodruff Ins. Cas. 211 (1868); Morrill & Co. v. New England F. Ins. Co., 71 Vt. 281, 44 Atl. 358 (1899); Guthrie v. Connecticut Indem. Ass'n, 101 Tenn. 643, 49 S. W. 829 (1898); Peoria, etc., Ins. Co. v. Whitehill, 25 111. 382 (1861); Williams v. Vermont, etc., Ins. Co., 20 Vt. 222 (1848); Wilson v. JEtna Ins. Co., 27 Vt. 99 (1854); North Western Ins. Co. v. Phoenix, etc., Co., 31 Pa. St. 448 (1858); Brown v. Savannah, etc., Ins. Co., 24 Ga. 101 (1858); Portage, etc., Ins. Co. v. West, 6 Ohio St. 599 (1856); Amesbury v. Bowditch, etc., Ins. Co., 6 Gray (Mass.) 596 (1856); Fullam v. New York Ins. Co., 7 Gray (Mass.) 61 (1856); Carter v. Hum- boldt F. Ins. Co., 12 Iowa 287 (1861); Stout v. City F. Ins. Co., 12 Iowa 371 (1861); Ripley v. ;Etna Ins. Co., 29 Barb. (N. Y.) 552 (1859); Gooden v. Amoskeag F. Ins. Co., 20 N. H. 73 (1849); Brown v. Roger Williams Ins. Co., 5 R. I. 394 (1858) ; Ames v. New York, etc., Ins. Co., 14 N. Y. 253 (1856). Contra, Eagle Ins. Co. v. Lafayette Ins. Co., 9 Ind. 443 (1857); French v. La- fayette Ins. Co., 5 McLean (U. S.) 461 (1853); Shawnee F. Ins. Co. v. Bayha, 8 Kan. App. 169, 55 Pac. 474 (1898). 208 Omaha F. Ins. Co. v. Drennan, 56 Neb. 623, 77 N. W. 67 (1898). 330 THE STANDARD POLICY. 360 The provision does not apply to an action to enforce a compromise agreement made between the parties after the property is destroyed. 209 The failure of a mortgagee to bring an action within the time lim- ited by the mortgage clause is not a bar to an action brought by the mortgagor within the time. 210 The statute of limitations in contracts of insurance will not be applied with the same degree of rigidity as ordinary statutes of lim- itation, and is not applicable where the performance of the condi- tions precedent is, without fault or laches on the part of the in- sured, rendered impossible by the acts of the insurer, or by the act of God, or of the government, or of the courts. 211 The rule of the New York code, that an attempt to commence an action is equivalent to its actual commencement so far as the statute of limitations is concerned, applies to limitations created by contract as well as those imposed by statute. This provision of the standard policy, being specifically prescribed by law, is not properly a con- tractual limitation. "The law establishes the period of limitation, and forbids the parties from disregarding it. The law as effectually established the period of limitation as if it had declared in express terms that the limitation of time for the commencement of an action upon a fire insurance policy should be the period of one year. Prac- tically, then, this limitation was specially prescribed by law, and hence falls directly within the principle of the [earlier] decisions of .this court." 212 This provision is waived by a representation of an agent that the company will pay without suit. 213 So, where the conduct of the in- sured is such as to mislead the insured and prevent him from prose- cuting his claim within the time limited in the policy, the limitation is waived. 214 330. Time when limitation begins to run. This form of policy provides that an action must be brought within twelve months next after a fire. Formerly it was customary to use the expression, after 209 Hanover F. Ins. Co. v. Hatton, den v. Pierce, 144 N. Y. 512, 39 N. E. 21 Ky. L. 1533, 55 S. W. 681 (1900). 638 (1895); Titus v. Poole, 145 N. Y. ""Shawnee F. Ins. Co. v. Bayha, 414, 40 N. E. 228 (1895). 8 Kan. App. 169, 55 Pac. 474 (1898). 213 Scottish Union, etc., Ins. Co. v. 211 Jackson v. Fidelity, etc., Co., Enslie, 78 Miss. 157, 28 So. 822 75 Fed. 359, 41 U. S. App. 552 (1900). (1896). ""De Farconnet v. Western 'ins. 312 Hamilton v. Royal Ins. Co., 156 Co., 110 Fed. 405 (1901). N. Y. 327, 50 N. E. 863 (1898); Hay- 361 TIME OF BRINGING SUIT. 330 a loss occurs. There are two directly opposing lines of authorities upon the question whether, under such a policy, the year of limitation begins to run from the time of the fire, or from the time when the loss is ascertained and established and the right to bring an action exists. 216 As said by the supreme court of Wisconsin, 216 "doubtless the tendency of so many courts to construe 'loss' as meaning the time when the liability was fixed induced many insurance companies to substitute the word 'fire/ as in the policy before us; it would seem as if the phrase, 'twelve months next after the fire,' was susceptible of but one meaning, yet the courts have disagreed upon this question also. Some of the decisions are to the effect that the word 'fire' is to be construed as meaning not the date of the fire, but the time when the liability is fixed and an action accrues to the insured. But the better authorities seem to hold that the limitation begins to run from the day of the fire." 217 Under the Minnesota form of policy, which provides that no suit shall be sustained unless commenced within two years from the time the loss occurs, it is held that the limitation begins to run from the time of the fire or actual destruction of the property. 218 115 That the time begins to run from the date when a right to bring an action exists, see Steen v. Ni- agara F. Ins. Co., 89 N. Y. 315 (1882); Spare v. Home, etc., Ins. Co., 17 Fed. 568 (1883); Chandler v. St. Paul, etc., Ins. Co., 21 Minn. 85 (1874); Ellis v. Council Bluffs Ins. Co., 64 Iowa 507 (1884); Miller v. Hartford F. Ins. Co., 70 Iowa 704 (1886); German Ins. Co. v. Fair- bank, 32 Neb. 750 (1891); Barber v. Fire & M. Ins. Co., 16 W. Va. 658 (1880). To the contrary, see Cham- bers v. Atlas Ins. Co., 51 Conn. 17 (1883); Johnson v. Humboldt Ins. Co., 91 111. 92 (1878); Fullam v. New York, etc., Ins. Co., 7 Gray (Mass.) 61 (1856); Glass v. Walker, 66 Mo. 32 (1877); Bradley v. Phoe- nix Ins. Co., 28 Mo. App. 7 (1887); Virginia, etc., Ins. Co. v. Wells, 83 Va. 736 (1887); Peoria Sugar Re- fining Co. v. Canada, etc., Ins. Co., 12 Ont. App. 418 (1885); Blair v. Sovereign F. Ins. Co., 19 N. S. (7 Russell & G.) 372; Travelers' Ins. Co. v. California Ins. Co., 1 N. Dak. 151 (1890); Schroeder v. Keystone Ins. Co., 2 Phila. (Pa.) 286 (1857). See authorities in note to 27 L. R. A. 48. 218 Hart v. Citizens' Ins. Co., 86 Wis. 77 (1893); Friezen v. Allema- nia F. Ins. Co., 30 Fed. 352 (1887); Hong Sling v. Insurance Co., 7 Utah 441 (1891); Case v. Sun Ins. Co., 83 Cal. 473 (1890). 217 Hart v. Citizens' Ins. Co., 86 Wis. 77, 56 N. W. 332, Woodruff Ins. Gas. 213 (1893); Steel v. Phenix Ins. Co., 47 Fed. 863 (1891); State Ins. Co. v. Meesman, 2 Wash. 459 (1891); McElroy v. Continental Ins. Co., 48 Kan. 200 (1892); Travelers' Ins. Co. v. California Ins. 'Co., 1 N. Dak. 151 (1890); King v. Water- town F. Ins. Co., 47 Hun (N. Y.) 1 (1888). 218 Rottier v. German Ins. Co. (Minn.), 86 N. W. 888 (1901). CHAPTEK XIII. CERTAIN GENERAL PROVISIONS OF THE STANDARD POLICY. XXII. Measure of Damages. XXIV. Subrogation. SEC. SEC. 332. In general. 339. The general principle. 333. Valued policy legislation. xxy Reinsurance . 334. Constitutionality of valued pol- 34Q Tne reinsurance contr act. icy laws. 335. Meaning of total loss. XXVI. Conditions Affecting Mort- 336. Total loss to frame building gagees. within fire limits. 341 - Special provisions. 337. Amount of recovery Illustra- XXVII. Construction of Terms Mu- tions. tual Companies. XXIII. Prorating Loss with Other 342 - In general. Insurers. XXVIII. Indorsement of Other Con- 338. The pro rata clause. ditions. XXII. Measure of Damages. This company shall not be liable beyond the actual cash value of the property at the time any loss or damage occurs, and the loss or damage shall be ascertained or estimated according to such actual cash value, with proper deduction for depreciation however caused, and shall in no event exceed what it would then cost the insured to repair or replace the same with material of like kind and quality; said ascertainment or estimate shall be made by the insured and this com- pany, or, if they differ, then by appraisers, as hereinafter provided; and, the amount of loss or damage having been thus determined, the sum for which this company is liable pursuant to this policy shall be payable sixty days after due notice, ascertainment, estimate, and sat- isfactory proof of the loss have been received by this company, in accordance ivith the terms of this policy. 1 1 This provision is found in the Carolina. Wisconsin inserts, "ex- standard policies of New York, New cept when otherwise provided by Jersey, Connecticut, Rhode Island, statute," in referring to liability Michigan, South Dakota, Iowa, beyond the actual cash value of the North Dakota, Louisiana and North property. Massachusetts and Maine (362) 363 MEASURE OF DAMAGES. 333 332. In general. This method of providing for the amount of recovery is in some respects in conflict with the valued policy laws in force in many states, and it must be construed in connection with such statutes. 333. Valued policy legislation. Where the policy is valued and there is a total loss, the amount of recovery is determined by the face of the policy. 2 Whether it is a valued one must be determined by the language of the contract and by existing statutes. The policy will be regarded as an open one, unless it appears to be the intention of the parties to the policy, upon a fair and reasonable construction of its terms, to value the loss and thereby fix by contract the amount of the recovery. The question must be determined by the intention of the parties gathered from the whole instrument. 3 But where a statute requires all policies to be valued, the language of the policy becomes immaterial, 4 and the amount written in the policy must be have the following clause: "This company shall not be liable beyond the actual value of the insured property at the time any loss or damage occurs. In case of any loss or damage the company, within six- ty days after the insured shall have submitted a statement, as provided in the preceding clause, shall either pay the amount for which it shall be liable, which amount if not agreed upon shall be ascertained by award of referees as hereinafter provided, or replace the property with other of the same kind and goodness * * * and that the company shall not in any case be liable for more than the sum insured, with interest there- on from the time when the loss shall become payable, as above pro- vided." The Minnesota clause is similar to the above except that the first paragraph, relieving the com- pany from liability beyond the ac- tual value of the insured property at the time any loss or damage hap- pens, is omitted. The New Hamp- shire clause provides that: "This company shall not be liable beyond the actual value of the insured prop- erty at the time any loss or damage happens, except on buildings totally destroyed, in which case the full amount of the limitation shall be paid * * * and that the company shall not in any case be liable for more than the sum insured, with interest thereon from the time when the loss shall become payable as hereinafter provided. * * * In case of any loss or damage the com- pany, within sixty days after the insured shall have submitted a statement, * * * shall either pay the amount for which it shall be lia- ble or replace the property with other of like kind and goodness." 2 Phoanix Ins. Co. v. McLoon, 100 Mass. 475 (1868). 3 Insurance Co. v. Butler, 38 Ohio St. 128, Woodruff Ins. Gas. 207 (1882). 4 Oshkosh Gas-Light Co. v. Ger- mania F. Ins. Co., 71 Wis. 454, Woodruff Ins. Gas. 209 (1888); Mil- waukee, etc., Ins. Co. v. Russell (Ohio), 62 N. E. 338 (1901), and cases cited. 333 THE STANDARD POLICY. 364 taken conclusively to be the true value of the property, and the amount of the recovery> where there is a total loss. 5 Thus, a fire in- surance company is liable, in case of a total loss, for the full amount of the policy, notwithstanding the provision in the policy by which it agrees to pay only three-fourths of the value in case of loss, where a statute provides that such company shall be liable for the full es- timated value of the property insured, as the same is fixed on the face of the policy. 6 Valued policy laws are now in force in twenty-one states, having been adopted by Wisconsin in 1874, Ohio and Texas in 1879, New Hampshire in 1885, Arkansas, Delaware and Nebraska in 1889, Oklahoma in 1890, Mississippi in 1892, Kansas, Kentucky and Oregon in 1893, Minnesota in 1895, South Carolina in 1896, Florida, Iowa and Washington in 1897, West Virginia in 1899, and California in 1901. These statutes vary in phraseology, but that of Wisconsin, which was the first enacted, may be used as an illustration. It pro- vides that "whenever any policy of insurance shall be written to in- sure any real property, and if the property insured shall be wholly destroyed without criminal fault on the part of the insured or his assigns, the amount of insurance written in such policy shall be taken conclusively to be the true value of the property when insured, and the true amount of loss and the measure of damages when destroyed." This provision of the standard policy must be construed in con- nection with the valued policy law, which, in the event of a total loss, determines conclusively that the amount named in the policy is the "actual cash value of the property." 7 Overvaluation under a valued policy, unless fraudulent, does not affect the right to recover. The valued policy laws do not as a rule apply to personal property. 8 5 Temple v. Niagara F. Ins. Co., 3 L. R. A. 523 (1889); Oshkosh 109 Wis. 372, 85 N. W. 361 (1901). Gas-Light Co. v. Germania P. Ins. 6 Caledonian Ins. Co. v. Cooke, 101 Co., 71 Wis. 454, 37 N. W. 819 Ky. 412, 41 S. W. 279 (1897); Phce- (1888). nix Ins. Co. v. Peak, 20 Ky. L. 1035, 8 Cushman v. Northwestern Ins. 47 S. W. 1089 (1898). Co., 34 Me. 487 (1852); Havens v. 7 Temple v. Niagara F. Ins. Co., Germania F. Ins. Co., 123 Mo. 403, 109 Wis. 372, 85 N. W. 361 (1901); 27 S. W. 718, 26 L. R. A. 107 (1894); Reilly v. Franklin Ins. Co., 43 Wis. German Ins. Co. v. Jansen, 18 Tex. 449 (1877); Thompson v. Insurance Civ. App. 190, 45 S. W. 220 (1898); Co., 45 Wis. 388 (1878); Seyk v. Vergeront v. German Ins. Co., 86 Millers', etc., Ins. Co., 74 Wis. 67, Wis. 425 (1893). 365 MEASURE OF DAMAGES. 334 334. Constitutionality of valued policy laws. The insurance companies have strenuously opposed such legislation, and in several states vigorous executive vetoes have been interposed to acts passed by the legislatures. Such questions have now been settled by a de- cision of the supreme court of the United States. In affirming the constitutionality of such a statute, Mr. Justice McKenna said : 9 "The specific objections which, it is claimed, bring the statute within the prohibition of the constitution in the last analysis may be reduced to the following: That the statute takes away a fundamental right and precludes a judicial inquiry of liability on policies of fire insur- ance by a conclusive presumption of fact. "The right claimed is to make contracts of insurance. The essence of these, it is said, is indemnity, and that the statute converts them into wager policies into contracts (to quote counsel) having for their bases speculation and profit, 'contrary to the course of the com- mon law.' The statement is broad, and counsel, in making it, ig- nores many things. The statute tends to assure, not to detract from, the indemnity of the contracts, and if elements of chance or specula- tion intrude it will be on account of carelessness or fraud. It is ad- mitted that the effect of the statute is to make valued policies of those issued; and the 'conclusive effect which has been ascribed to their valuation has never been condemned as making them wager policies or as introducing elements of speculation into them. "The statute, then, does not present the alternative of wager pol- icies to indemnity policies. The change is from one kind of indem- nity policy to another kind, from open policies to valued policies, both of which are sanctioned by the practice and law of insurance, and this change is the only compulsion of the law. It makes no con- tract for the parties. In this it permits absolute freedom. It leaves them to fix the valuation of the property upon such prudence and inquiry as they choose. It only ascribes estoppel after this is done estoppel, it must be observed, to the acts of the parties, and only to their acts in open and honest dealing. Its presumptions can not be urged against fraud, and it permits the subsequent depreciation of the property to be shown. "We see no risk to insurance companies in this statute. How can it come ? Not from fraud and not from change, because, as we have Orient Ins. Co. v. Daggs, 172 U. S. 557 (1899), affirming 136 Mo. 382 (1896). 335 THE STAXDARD POLICY. 36G seen, the presumptions of the statute do not obtain against fraud or change in the valuation 1 of the property. Kisk, then, can only come from the failure to observe care the care which it might be sup- posed, without any prompting from the law, underwriters would observe, and which, if observed, would make their policies true con- tracts of assurance, not seemingly so, but really so; not only when premiums are paying, but when the loss is to be paid. The state surely has the power to determine that this result is desirable, and to accomplish it even by a limitation of the right of contract claimed by the plaintiff in error. "It would be idle and trite to say that no right is absolute. Sic utere tuo ut alienum non loedas is of universal and pervading obliga- tion. It is a condition upon which all property is held. Its applica- tion to particular conditions must necessarily be within the reason- able discretion of the legislative power. When such discretion is exercised in a given case by means appropriate, and which are reason- able, not oppressive or discriminatory, it is not subject to constitu- tional objection." 335. Meaning of total loss. Under a valued policy, the amount named therein is recoverable when there is a total loss. A building- is totally destroyed within the meaning of such policy when it no longer exists as a building, although some of the material may have value as material. The New York court of appeals recently said: 10 "A total destruction within the meaning of the policy must mean the complete destruction of the insured property by fire so that nothing 10 Corbett v. Spring Garden Ins. character as a building, the insur- Co., 155 N. Y. 389, 50 N. E. 282 ance not being upon the material (1898). See, also, Hamburg, etc., composing the building but upon the Ins. Co. v. Garlington, 66 Tex. 103, building as such. When the loss by 18 S. W. 337 (1886); Oshkosh Pack- fire is such that its character as a ing, etc., Co. v. Mercantile Ins. Co., building is destroyed, and it remains 31 Fed. 200 (1887). In Pennsylva- simply as a mass of ruins, parts of nia F. Ins. Co. v. Drackett, 63 Ohio which may remain standing, but of St. 41, 57 N. E. 962 (1900), the court no value in repairing or rebuilding said : "It seems to be agreed that it the structure, though something is not necessary to constitute a total might be realized from the material loss that all the material composing by removing it, the loss is regarded the building should be destroyed, as total." See, also, Williams v. It is sufficient, though some parts of Hartford Ins. Co., 54 Cal. 442 it remain standing, if the building (1880). has lost its identity and specific 367 MEASURE OF DAMAGES. 335 of value remains of it, as distinguished from a partial loss, where the property is damaged but not entirely destroyed. This does not mean that the materials of which the building was composed were all utterly destroyed or obliterated, but that the building, though some part of it may be left standing, has lost its character as a build- ing, and instead thereof has become a broken mass, or so far in that condition that it can not properly any longer be designated as a building. When that has occurred, then there is total destruction or loss. A total loss does not mean absolute extinction ; it does not mean that all the parts composing the building are absolutely and physically destroyed, but the inquiry always is whether after a fire, the thing insured still exists as a building." A building is a total loss where the remnant is inconsiderable com- pared with the part entirely destroyed, and does not constitute a sufficient basis to restore the burnt building. 11 Thus, a building is a total loss where three of the walls are entirely destroyed, and none of the joists, floor and window sills are left, although the other wall was used in erecting a new building after being condemned as unfit for use. 12 The foundation of the building is not within the con- templation of the parties, and hence the question of injury to the foundation should not be considered in reaching a conclusion as to a total loss. 13 There is a total loss, although the building- was not sound when it was insured, where it is so injured by fire as to le rendered inse- cure and a menace to life, and for that reason is condemned by the proper authorities. 14 Under the Minnesota standard policy, total loss is to be ascer- tained as of the date of its occurrence, and is determined by the fol- lowing tests: A building is not a total loss unless it has been so far destroyed by the fire that no substantial part of it above the foundation remains in place capable of being safely utilized in restoring the building to the condition in which it was before the fire. "Murphy v. American Ins. Co. Ins. Co., 74 Wis. 67, 3 L. R. A. 523, (Tex. Civ. App.), 54 S. W. 407 41 N. W. 443 (1889). (1899). 13 Murphy v. American, etc., Ins. "American, etc., Ins. Co. v. Mur- Co. (Tex. Civ. App.), 54 S. W. 407 phy (Tex. Civ. App.), 61 S. W. 956 (1899). (1901). See, also, German F. Ins. " Monteleone v. Royal Ins. Co., 47 Co. v. Eddy, 36 Neb. 461, 19 L. R. A. La. Ann. 1563, 18 So. 472 (1895). 707 (1893); Seyk v. Millers', etc., 336 THE STANDARD POLICY. 368 The words "total loss," when applied to a building, mean totally destroyed as a building that is, that the walls, although some por- tion of them remain standing, are unsafe to use for the purpose of re- building and would have to be torn down and a new building erected throughout. There can be no total loss of a building so long as the remnant of the structure left standing above the foundation is reasonably and safely adapted for use (without being taken down) as a basis upon which to restore the building to the condition in which it was imme- diately before the fire ; and whether it is so adapted depends upon the question whether a reasonably prudent owner of a building unin- sured, desiring such a structure as the one in question was before the fire, would, in proceeding to restore the building, utilize such stand- ing remnant as such basis. If he would, then the loss is not total. A cold storage plant was insured under the following description: "Four-story and basement brick building, with composition roof, and a brick engine and boiler house attached, including steam heating and hoisting apparatus, steam, brine, water and gas pipe fixtures, and all other permanent fixtures, occupied for warehouse purposes." The engine house consisted of a small one-story brick structure at- tached to the main building, and the whole was considered and oper- ated as an entirety. It was held that, conceding the engine house was but slightly damaged by the fire, the question of total loss must be ap- plied to the structure as a whole. 15 336. Total loss to frame building within fire limits. Where a policy covers a building located within the fire limits of a city, of a class which, under certain conditions, can not be repaired without violating the city ordinances, there is a total loss when the repairing of the building insured and damaged is prevented by reason of such ordinances. But the value of what remains of the building after a fire, over and above the cost of removing it from the premises, should be deducted from the face of the policy. "There is no question in this case," said the court, 16 "but that the insured building was within 15 Northwestern, etc., L. Ins. Co. v. (1886); Brady v. Northwestern Ins. Rochester, etc., Ins. Co. (Minn.), 88 Co., 11 Mich. 425 (1863); Fire Ass'n N. W. 265 (1901). v. Rosenthal, 108 Pa. St 474, 1 Atl. "Larkin v. Glens Falls Ins. Co., 303 (1885); Monteleone v. Royal Ins. 80 Minn. 527, 83 N. W. 409 (1900); Co., 47 La. Ann. 1563, 18 So. 472 Hamburg, etc., Ins. Co. v. Garling- (1895). ton, 66 Tex. 103, 18 S. W. 337 369 MEASURE OF DAMAGES. 337 such fire limits, and no question but that the building inspector re- fused a permit to repair the same after the fire. Nor is there any question but that, without proper and suitable repairs, the building was rendered practically worthless by the fire. So we are confronted with the question as to the effect of such ordinances and the action of the inspector thereunder, on the contract of insurance. The ques- tion is a new one in this state, and an examination of the books dis- closes very few adjudged cases on the subject in other states. * * * These authorities lay down the rule that such ordinances are a part of the contract of insurance, and that the insurer is bound thereby. This is in line with the general doctrine that, where the parties con- tract upon a subject which is surrounded by statutory limitations and requirements, they are presumed to have entered into their engage- ments with reference to such statute, and the same enters into and becomes a part of the contract." After quoting the statement of Mr. Joyce that under such circumstances a recovery may be had for a total loss, the court said : "To this may be added the qualification that, if what remains of the building after the fire be of any value over and above the cost and expense of removing it, such excess value must be deducted from the recovery." The court declined to pass upon the question whether the determination of the building in- spector, or of the board of arbitration, on appeal from his decision, that the building had been damaged to the extent of fifty per cent, of its value, and therefore was not subject to repaft under the or- dinance, was final and conclusive. 337. Amount of recovery Illustrations. There are numerous cases which construe provisions similar to that of the standard policy. The purpose of the clause providing that "the company shall not be liable beyond the actual cash value of the property at the time the loss or damage occurs" is to prevent a recovery of damages beyond the prescribed limitation. It does not affect the right of the plaintiff to prove and recover damages in an amount less than the actual cash value of the property destroyed or injured. The value at the date of the loss is the limit of recovery, but it is not a constituent element of a cause of action on the policy, and need not be stated in the complaint. 17 Where the policy provided that the company should not "Osborne v. Phenix Ins. Co. (Utah), 64 Pac. 1103 (1901). 24 ELLIOTT INS. 338 THE STANDAED POLICY. 370 be liable beyond the actual cash value of the property at the time of the loss or damage, which should be ascertained according to such actual cash value, with proper deduction for depreciation, however caused, but in no event to exceed what it would cost the insured to repair or replace the same with material of like kind and quality, it was held that the measure of damages was the sum it would cost the insured to repair or replace the building with one of like kind and quality. 18 The insurance company is not bound by the value placed on the property in the application. 19 A company which, upon an ap- plication for additional insurance, increases the amount of the risk, can not, after a loss, restrict its liability to three-fifths of the addi- tional insurance because a stipulation in the original policy provides that it shall cover but a three-fifths' interest in the property desig- nated. 20 The amount of the government tax on whisky destroyed by fire in a bonded warehouse can not be deducted from the amount of the loss in an action by the owner, upon a policy of insurance against all direct loss or damage by fire to the whisky. 21 Where a part of the property was removed to other premises and was there destroyed by fire, and the loss amounts to the face of the policy, the company is not entitled to reduce the loss in the proportion that the value of the property remaining bears to that destroyed, but must indemnify the insured for the whole loss. 22 XXIII. Prorating Loss with Other Insurers. This company shall not be liable under this policy for a greater proportion of any loss on the described property, or for loss by and ex- pense of removal from premises endangered by fire, than the amount 18 McCready v. Hartford F. Ins. struction of the building caused by Co., 70 N. Y. Supp. 778, 61 App. Div. the legislation does not increase its (N. Y.) 583 (1901). In computing market value: Pennsylvania, etc., the loss sustained by the insured Co. v. Philadelphia, etc., Co. (Pa. and chargeable to the insurer under Com. PL), 10 Pa. Dist. R. 181 a fire policy, the cost of rebuilding (1900). up to the amount to be designated in " Brown v. Quincy, etc., Ins. Co., the policy is to be included, though 105 Mass. 396 (1870). increased beyond the original cost 20 London Assur. Corp. v. Pater- of construction by reason of an act son, 106 Ga. 538, 32 S. E. 650 (1899). of the assembly regulating the con- " Queen Ins. Co. v. McCoin, 20 Ky. struction of buildings, passed before L. 1633, 49 S. W. 800 (1899). the fire, but after the policy was 22 Westchester P. Ins. Co. v. Mc- issued, where the improved con- Adoo (Tenn.), 57 S. W. 409 (1899). 371 PRORATING LOSS. 338 hereby insured shall bear to the whole insurance, whether valid or not, or by solvent or insolvent insurers, covering such property, and the extent of the application of the insurance under this policy or of the contribution to be made by this company in case of loss } may be pro- vided for by agreement or condition written hereon or attached or appended hereto. 23 338. The pro rata clause. In the absence of a clause of this character, the insured may recover either a proportionate part of the loss from each insurer or the entire amount from one insurer. 2 * An insurer who pays the entire amount is entitled to contribution from the other insurers. As said by Lord Mansfield in an early case: 25 "As between the insurer and the insured, upon the foot of commuta- tive justice merely, there is no colour why the insurers should not pay the insured the whole. For they have received a premium for the whole risque. * * * If the insured is to receive but one satis- faction, natural justice says that the several insurers should all of them contribute pro rata to satisfy that loss against which they have all insured, * * * and if the whole should be recovered from one, he ought to stand in the place of the insured to receive contribu- tion from the other, who was equally liable to pay the whole." This provision of the standard policy is new in form and arrange- ment. It relates to double or other insurance, and not to insurance upon different interests. 26 The object of the clause is to prevent a multiplicity of actions. Under it there is no right of contribution between companies, as the insured can recover from each only its 23 This provision is found in the it shall not apply in case of total standard policies of New York, New loss on buildings. Jersey, Connecticut, Rhode Island, 21 See Norwich, etc., Ins. Co. v. Louisiana, Wisconsin, North Dakota, Wellhouse (Ga.), 39 S. E. 397 South Dakota, Michigan and North (1901). Carolina. Massachusetts, Maine and * Godin v. London Assur. Co., 1 New Hampshire have the following Burr. 489 (1758). clause: "If there shall be any other * See 245, supra; Fire Ins. Ass'n insurance on the property insured, v. Merchants', etc., Transp. Co., 66 whether prior or subsequent, the in- Md. 339 (1886), 7 Atl. 905; McMas- sured shall recover on this policy ter v. Insurance Co., 55 N. Y. 222, no greater proportion of the loss 14 Am. Rep. 239 (1873). See note sustained than the sum hereby in- to 15 L. R. A. 127, for cases as to sured bears to the whole amount in- what constitutes double insurance sured thereon." The Minnesota for the purpose of the apportion- clause is similar, but provides that ment of the loss. 339 THE STANDARD POLICY. 372 full pro rata share. Where there are several policies which cover in part the same and in part different property, and contain different and inconsistent provisions, it is practically impossible to prorate the loss by this or by any other rule. Mr. Eichards, after referring to the fact that these matters are generally settled by the companies out of court, says that the courts have endeavored to apply the fol- lowing principles: 1. The different policies are placed as far as possible upon an equality, and special conditions and limitations in one policy are not brought over into another policy. 2. The object of the contribution clause is construed to be a re- striction of the amount recovered from each insurer to its equitable contributory share, and must not be permitted to operate so as to reduce the aggregate amount of indemnity which the insured might otherwise recover. No arrangement of the clauses in the policy should be used to the disadvantage of the insured. He must be paid, and the dispute, if any, settled among the underwriters. 27 Liability is reduced pro rata by insurance, whether valid or not, "or by solvent or insolvent insurers." 28 The provision with reference to valid or invalid insurance refers only to other insurance obtained with the consent of the company, and has no application to other policies. 29 Where there is double insurance, and the total loss exceeds the total insurance, there can be no apportionment, and each insurer must pay in full the amount for which he is individually liable. 30 XXIV. Subrogation. If this company shall claim that the fire was caused by the act or neglect of any person or corporation, private or municipal, this com- pany shall, on payment of the loss, be surrogated to the extent of such payment to all the right of recovery by the insured for the loss resulting therefrom, and such right shall be assigned to this com- pany by the insured on receiving such payment. 31 27 Richards Ins., 164, citing Lu- M London, etc., Ins. Co. v. Turn- cas v. Jefferson Ins. Co., 6 Cowen bull, 86 Ky. 230, 5 S. W. 542 (1887). (N. Y.) 635, Woodruff Ins. Gas. 198 30 Lebanon, etc., Ins. Co. v. Kepler, (1827). This case contains a gen- 106 Pa. St. 28 (1884). eral discussion of the rules which 31 This provision is found in the govern prorating and contribution, standard policies of New York/ New 28 Cassity v. New Orleans Ins. Jersey, Rhode Island, Connecticut, Ass'n, 65 Miss. 49 (1887). Michigan, Louisiana, Wisconsin, 373 SUBROGATION. 339 339. The general principle. The common-law right of subro- gation has been referred to elsewhere. The insurer is treated as a surety, and is entitled to all the remedies of the insured against a per- son who by his wrongdoing causes the destruction of the insured property. "It is well settled that, if a loss under a policy of insur- ance is occasioned by the wrongful act of a third party, the insurer occupies the position of a mere surety, and the wrongdoer that of a principal debtor; and all the incidents of suretyship attach to the position of the underwriter in such cases, including the right of subrogation. * * * The same principle is applicable to the con- tract of insurance if the surety [assured] destroys the remedy of subrogation, and relieves the assurer to the full extent to which the wrongdoer could have been made liable for the loss." 32 The right of subrogation is expressly declared by the standard policy, which also provides for a formal assignment to the company of the insured's right of action against the wrongdoer. If the insured destroys the insurer's right of subrogation to a claim against the person causing the loss, he can not recover against the insurance company. Thus, where the insured consented to exclude a claim for certain fixtures covered by the policy from the considera- tion of the jury, in an action against the wrongdoer to recover dam- ages to other larger interests than the fixtures, it was held that he thereby lost his right of action against the insurer on account of the fixtures under a policy which provided that upon payment of the loss the assured should assign his claim against the wrongdoer to the insurer, or prosecute it at the request and expense, and for the South Dakota, North Dakota, Iowa 32 Dilling v. Draemel, 9 N. Y. Supp. and North Carolina. The standard 497 (1890); quoted in Packham v. policies of Massachusetts, Minne- German F. Ins. Co., 91 Md. 515, 50 sota, Maine and New Hampshire L. R. A. 828 (1900). See, also, Chi- contain the following clause: "And cago, etc., R. Co. v. Glenny, 175 111. whenever the company shall pay 238, 51 N. B. 896 (1898); Phoenix any loss the assured shall assign to Ins. Co. v. Erie, etc., Transp. Co., it, to the extent of the amount so 117 U. S. 312 (1886), 118 U. S. 210 paid all rights to recover satisfac- (1886). In Leavitt v. Canadian, tion for the loss or damage from etc., R. Co., 90 Me. 153, 37 Atl. 886, any person, town, or other corpora- 38 L. R. A. 152 (1897), it was held tion, excepting other insurers; or that the right of recovery against a the insured, if requested, shall pros- person causing a loss, which is thus ecute therefor at the charge and for reserved, depends upon the law ex- the account of the company." isting at the time of the fire. 339 THE STANDARD POLICY. 374 benefit of such insurer. In this case the court said: 33 "It remains for us to determine whether the proceedings resulting in the judg- ment against the gas company released the wrongdoer and destroyed the defendant's right of subrogation. Now, there was in this case but one tortious and negligent act of the gas company, resulting in one fire, which occurred at one and the same time, as well the loss incurred under this policy as the loss incurred under the other policies for which recovery was had against the gas company. This is admit- ted by the demurrer, as well as the further facts that that suit was for the whole loss occasioned by the fire; that there was no reserva- tion of any right by the plaintiff for the protection of this defendant, and no agreement qualifying the effect of the verdict ; and that by the direction of the plaintiff the recovery did not include any compensa- tion for loss incurred under this policy ; and the defendant has no in- terest in the recovery as to the policy with which we are now con- cerned. For a single indivisible tort but one suit can be brought. The plaintiff in this case could not now bring another suit against the gas company for his own benefit to recover the loss incurred un- der this policy, nor could such suit be brought in his name for the benefit of the defendant. * * * The plaintiff had one indivisible cause of action against the gas company, and that cause of action has been merged in the judgment he obtained. When he excluded from that judgment so much of that cause of action as relates to this pol- icy, he as effectually released so much of his right of action as if he had executed and delivered a release under a seal therefor, and as clearly and unequivocally destroyed the defendant's right of subroga- tion as he would have destroyed it by such release. Any act which makes performance of the agreement to assign either impossible or useless must relieve the insurance company from its concurrent ob- ligation to pay. The plaintiff, in the present case, in order to pro- tect his larger interests under the other policies, and his interest in recovery for loss of profits which were uninsured, has seen fit, for reasons doubtless satisfactory to him, to sacrifice his own and the de- fendant's interest under the policy in question, and can not now be heard to complain of the result of his own course of conduct." In a subsequent case in the same state it was held that the settle- ment of a suit for unliquidated damages, brought by the insured against the wrongdoer, when made with the approval of the major- ^Packham v. German, etc., Ins. Co., 91 Md. 515, 50 L. R. A. 828 (1900). 375 SUBROGATION. 339 ity of the insurance companies interested in the matter, can not be' complained of by the other companies that refused to come into the suit. The court said : 34 "It may be conceded that the insured can not fritter away the rights of the insurer entitled to be subrogated, and that he can not ordinarily make a compromise without being re- sponsible to the insurer for the amount paid by him ; but under such circumstances as we have stated there can, in our opinion, be no ques- tion about his right to thus settle a suit for unliquidated damages, when the majority of those interested not only approved, but urged it. * * * Where a compromise is made, the insured may retain out of the fund his costs and reasonable expenses incurred in the litigation, and this may include a contingent fee to attorneys." The company is entitled to the benefit of the money received from the wrongdoer for damage done to the insured property only. Hence, where one who had suffered loss by fire recovered from the wrongdoer the sum of $9,000 for the loss of goods, and a certain other sum for the interruption of his business, the insurance companies, which had previously settled with the insured for a sum equal to the entire amount recovered for both items, could hold the insured only for pro rata shares of the $9,000. But the fact that the insurance company has paid the amount of the policy to the insured is no defense to an action by the insured against the wrongdoer for damages. 35 It results from the prin- ciple of indemnity that the insured can not recover compensation for his loss from both the insurance company and the wrongdoer; hence, where the property is destroyed by fire negligently set by a railroad company, and the owner settles with the company, and afterwards, without informing the insurer of such fact, receives from it payment for the loss, the insurance company may recover back the monej so paid. 36 A common carrier may, by agreement with the owner of the prop- 34 Svea Assur. Co. v. Packham railroad company to recover dam- (Md.), 48 Atl. 359, 52 L. R. A. 95 ages for the destruction of the in- (1901). sured property by fire, and that in 38 Anderson v. Miller, 96 Tenn. 35, the action the amount recovered 31 L. R. A. 604 (1896). In Lake should be adjudged to the owner and Brie, etc., R. Co. v. Falk, 62 Ohio the insurer according to their re- St. 297, 56 N. E. 1020 (1900), it was spective interests, held that the insurance company 30 Chickasaw, etc., Ins. Co. v. Wei- should intervene in an action ler, 98 Iowa 731, 68 N. W. 443 brought by the owner against the (1896). 340 THE STANDARD POLICY. 376 erty, secure to himself the benefit of the insurance procured by such owner. Thus, where the bill of lading provides that the carrier, when liable for a loss, shall have the full benefit of any insurance upon the goods, the payment of the loss by the company extinguishes the shipper's right of action against the carrier and destroys the in- surance company's right to subrogation. 37 XXV. Reinsurance. Liability for reinsurance shall be as specifically agreed upon. 3S 340. The reinsurance contract. The liability on a contract of reinsurance is to be provided for by special agreement. Unless an obligation in favor of the original insured is specifically created by the contract of reinsurance, he is generally regarded as a stranger to such a contract, and has, therefore, no claim on the reinsurer. This is the rule declared by the older authorities, and is based strictly on the principle of indemnity. 39 But some recent cases regard the contract as made for the benefit of the original insured. In Xew Hampshire it is held that when the original insurer is insolvent the reinsurer must pay the amount for which it is liable directly to the party ultimately entitled to the money. In an action brought by the receiver of an insolvent company against the reinsurer, the court said: 40 "The defendants received the full consideration for the risk against which they insured, and there is no reason why they should not be required to pay the full amount of the loss. The pre- miums received by them and the sum to be paid by them in case of loss were intended to be, and in theory of law are, precisely equiva- lent." So, in a recent case in Xorth Carolina, it was held that the insured had an interest in the contract of reinsurance and could sue the reinsurer, notwithstanding the fact that he was not a party to the contract of reinsurance, which expressly provided that no such 37 Phoenix Ins. Co. v. Brie, etc., Iowa, South Dakota, North Dakota Transp. Co., 117 U. S. 312 (1886); and North Carolina. No such pro- Roos v. Philadelphia, etc., Ins. Co., vision is found in the standard pol- 13 Pa. Super. Ct. 563 (1899); Mer- icies of Massachusetts, Minnesota, cantile F. Ins. Co. v. Calebs, 20 N. Maine and New Hampshire. Y. 173 (1859). -'"See 9, supra. 38 This provision is found in the * Hunt v. New Hampshire, etc., standard policies of New York, New Ass'n, 68 N. H. 305, 38 Atl. 145, 38 Jersey, Rhode Island, Connecticut, L. R. A. 514 (1895). Michigan, Wisconsin, Louisiana, REINSURANCE. 340 action could be maintained. The court said: 41 "There is some diversity of opinion in the decisions of the courts in our sister states and the general authorities. There is no question raised as to the validity of the insuring and the reinsuring contracts, each being in due form., and supported by a valuable consideration. A policy of fire insurance is a contract of indemnity; and such contract gives the insurer an insurable interest in the property insured, coextensive with its liability. A contract of reinsurance seems to be a union and blending of the business of the two companies, presumably for the advantage of each party. The reinsurer absorbed the estate and rights of the reinsured, and assumed the risks and liabilities of the reinsured, with the privilege of the reinsured, in the present case, to continue issuing new policies for a time specified, with the same rights and liabilities under the new policies as under those al- ready outstanding; this to be done for the benefit of and under the direction of the defendant. The plaintiffs were neither a party to nor in privity with said contracts. The question is, Have they an in- terest in, or arising out of, the contract? The defendant is bound to indemnify the reinsured for all risks and loss, and the reinsured, at the same time, is bound to indemnify the plaintiffs for risk and loss. * * * We can see no reason why plaintiffs may not do directly that which it must be admitted they can do indirectly, nor do we see how the defendant is prejudiced thereby. The defendant suggests no such danger, but relies solely on the ground that it has no contract with the plaintiffs. 42 * * * It is the implied right, arising out of the express agreement of the defendant, that enables the plaintiffs to maintain the action.' 7 But the better opinion is that the simple contract of reinsurance is a contract of indemnity, under which the insurer is liable solely to the reinsured company, and not to the policy-holders. 43 Of course, where such contract also includes a promise or agreement to assume and pay losses to the original insured, a policy-holder may proceed directly against the reinsurer upon such promise or undertaking. 44 41 Shoaf v. Palatine Ins. Co., 127 Minn. 38, 45 Am. St. 438 (1893); N. C. 308, 37 S. E. 451 (1900). Strong v. Phrenix Ins. Co., 62 Mo. "Citing Johannes v. Phenix Ins. 289, 21 Am. Rep. 417 (1876); Car- Co., 66 Wis. 50, 27 N. W. 414 (1886), rington v. Commercial, etc., Ins. Co., which the court says is decisive of 1 Bosw. (N. Y.) 152 (1857). this question. " Barnes v. Hekla F. Ins. Co., 56 "Barnes v. Hekla F. Ins. Co., 56 Minn. 38, 45 Am. St. 438 (1893); 341 THE STANDARD POLICY. 378 XXVI. Conditions Affecting Mortgagees. If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore con- tained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto.*^ 341. Special provisions. The relations between the insurer and a mortgagee, to whom the policy is made payable as his interest may appear, are to be determined by such special provisions as are at- tached to the policy. In the absence of such provisions a mortgagee to whom a policy is made payable stands in the position of the mort- gagor, as far as the insurance company is concerned, and, being bound by his acts, can recover only when there has been no forfeiture by such mortgagor. 46 A mortgagee, in the absence of any provision making the policy payable to him, has no interest in a policy held by the mortgagor. 47 Glen v. Hope, etc., Ins. Co., 56 N. Y. for any increase of risks not paid 379 (1874); Cahen v. Continental for by the insured; and whenever L. Ins. Co., 69 N. Y. 300 (1877). this company shall be liable to a 45 This clause is found in the mortgagee for any sum for loss un- standard policies in use in New der this policy, for which no liabil- York, New Jersey, Rhode Island, ity exists as to the mortgagor, or Connecticut, Michigan, Louisiana, owner, and this company shall elect Wisconsin, Iowa, North Dakota, by itself, or with others, to pay the South Dakota and North Carolina, mortgagee the full amount secured Massachusetts, Minnesota, Maine by such mortgage, then the mort- and New Hampshire have a clause gagee shall assign and transfer to in their standard policies with refer- the companies interested, upon such ence to mortgagees as follows: "If payment, the said mortgage, to- this policy shall be made payable to gether with the note and the debt a mortgagee of the insured real es- thereby secured." tate no act or default of any person * Security Co. v. Panhandle Nat'l other than such mortgagee or his Bank, 93 Tex. 575, 57 S. W. 22 agents, or those claiming under him, (1900); Bates v. Equitable Ins. Co., shall affect such mortgagee's right 10 Wall. (U. S.) 33 (1869); Harring- to recover in case of loss on such ton v. Fitchburg, etc., Ins. Co., 124 real estate; provided, that the mort- Mass. 126 (1878). gagee shall, on demand, pay accord- " Lindley v. Orr, 83 111. App. 70 ing to the established scale of rates (1898). 379 CONDITIONS AFFECTING MORTGAGEES. 341 A common form of mortgage clause provides that "Loss or dam- age, if any, under this policy shall be payable to - , as mort- gagee, as his interest may appear, and this insurance as to the in- terest of the mortgagee therein shall not be invalidated by any act or neglect of the mortgagor or owner of the within described prop- erty, nor by any foreclosure or other proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy, provided that in case the mortgagor or owner shall neglect to pay any premium due under this policy the mortgagee shall, on demand, pay the same." It is also generally provided that the mortgagee shall notify the company of any change of ownership or increase of risk which shall come to his knowledge. A rider of this character is an independent contract between the company and the mortgagee. 48 It has been held that the provision requiring the mortgagee to notify the insured of any change in ownership coming to his knowledge is directory merely, and that a change to the mortgagee's knowledge which did not increase the risk did not invalidate the policy, although the company was not notified. 49 A mortgagee to whom a policy is payable in case of loss, as his interest may appear, may, when the mortgagor has forfeited his right to recover, collect only the amount due on the mortgage when the contract was made. Such a provision contemplates a possible diminu- tion of the interest of the mortgagee by part payment of his debt, but does not include additional claims. In reference to the history of this provision, the supreme court of Massachusetts said, 50 "that at first the policy was usually issued to the mortgagor in the common form, and was then assigned to the mortgagee, to the extent of his interest, the insurance company assenting to the assignment; that afterwards, the provisions for the benefit of the mortgagee were inserted in the body of the policy, but that such policies, unless there were stipula- tions to the contrary, were avoided, as against the mortgagee, by any act of the mortgagor which avoided the policy as to him ; and that the present form was adopted in order to give the mortgagee a better se- 48 Dwelling-House Ins. Co. v. Kan- curity Ins. Co., 168 Mass. 147, 46 N. sas Loan, etc., Co., 5 Kan. App. 137, E. 390 (1897); Palmer Sav. Bank v. 48 Pac. 891 (1897). Insurance Co., 166 Mass. 189, 44 N. 49 Whitney v. American Ins. Co. E. 211 (1896); Foster v. Van Reed, (Cal.), 56 Pac. 50 (1899). 70 N. Y. 19, 26 Am. Rep. 544 (1877). 50 Attleborough Sav. Bank v. Se- 341 THE STANDARD POLICY. 380 curity, but that the effect was the same as if the mortgagor had taken out the insurance in his own name and then assigned it to the mort- gagee to the extent of his interest, and the insurance company had as- sented to the assignment, and had promised the mortgagee that no act of the mortgagor should defeat the right of the mortgagee to recover to the extent of his interest. But whether the clause is to be considered as an assignment by the mortgagor of an insurance upon his interest, or as a contract made with the insured by which in a certain con- tingency it promises to pay to the mortgagee an amount to be de- termined, it seems to us clear that the nature of the interest and the extent of the risk must be made known at the time when the contract is made, in order that the premium may be measured thereby. While the insurance company can not be compelled to pay more than the face of the policy, yet, to obtain the advantages of the subroga- tion if the plaintiff's contention is correct, it may be compelled to pay several times that amount. The clause in regard to subrogation is inserted as of value to the company and must be taken into con- sideration in measuring the risk assumed and the consideration paid therefor; but if this amount can not be determined when the con- tract is made, and may be so great as to make the subrogation clause 'worthless, it ceases to be one of the elements of the contract." An action on a policy payable to a mortgagee, as his interest may appear, may be begun before the debt secured by the mortgage is due and payable. 51 The insurance company must pay the loss to the creditor, and can not require him to first proceed against his debtor. 52 The fact that the mortgagee holds collateral security which is ample to pay his debt is no defense in an action by the mortgagee against the insurance company. 53 But the contract generally provides that upon payment of the insurance to the mortgagee, the insurer shall be subrogated to the rights of the mortgagee in such collaterals. 54 Where insurance is procured by a mortgagee on his own interest, the mortgagor has no interest in the proceeds, and can not compel its ap- plication to the reduction of his debt. 55 Where the policy is payable to a mortgagee, as his interest may 51 Planters', etc., Ins. Co. v. Sav- M Kernochan v. New York, etc., ings, etc., Co., 68 Ark. 8, 56 S. W. Ins. Co., 17 N. Y. 428 (1858). 443 (1900). 51 Alamo F. Ins. Co. v. Davis 52 Excelsior F. Ins. Co. v. Royal (Tex.), 60 S. W. 802 (1901). Ins. Co., 55 N. Y. 343, 14 Am. Rep. M Foster v. Van Reed, 70 N. Y. 19, 271 (1873). 26 Am. Rep. 544 (1877). 381 CONSTRUCTION MUTUAL COMPANIES OTHER CONDITIONS. 342 appear, the balance, if any, to the mortgagor, and the indebtedness equals the total amount of the loss, the action must be brought by the mortgagee. After loss the obligation of the insurance company is a contract for the payment of money, and suit must be brought in the name of the beneficial owner. 56 XXVII. Construction of Terms Mutual Companies. Wherever in this policy the word "insured" occurs, it shall be held to include the legal representative of the insured, and wherever the word "loss" occurs, it shall be deemed the equivalent of "loss or dam- age." 57 If this policy be made by a mutual or other company having special regulations lawfully applicable to its organization, membership, pol- icies or contracts of insurance, such regulations shall apply to and form a part of this policy as the same may be written or printed upon, attached, or appended hereto. 58 342. In general. The provisions with reference to the construc- tion of terms, and the application of the standard form of policy to mutual insurance companies, are clear, and require no comment. The general rules of construction have been considered elsewhere. XXVIII. Indorsement of Other Conditions. This policy is made and accepted subject to the foregoing stipula- tions and conditions, together with such other provisions, agreements, or conditions as may be indorsed hereon or added hereto. 59 58 Capital City Ins. Co. v. Jones lina and Rhode Island. It is not (Ala.), 30 So. 674 (1901). contained in the standard policies 57 This provision is found in the of Massachusetts, Minnesota and standard policies in use in New Maine. New Hampshire provides York, New Jersey, Connecticut, in the cancellation clause that "mu- Michigan, Rhode Island, Wisconsin, tual companies may vary this clause Iowa, South Dakota, Louisiana, to suit their methods of business." North Dakota and North Carolina. 59 This provision is found in the It is not contained in the standard standard policies of New York, New policies of Massachusetts, Minne- Jersey, Rhode Island, Connecticut, sota, Maine and New Hampshire. Louisiana, Iowa, Michigan, Wiscon- 68 This provision appears in the sin, South Dakota, North Dakota, standard policies of New York, New and North Carolina. The standard Jersey, Connecticut, Michigan, policies of Massachusetts, Minne- Louisiana, Wisconsin, Iowa, North sota, Maine and New Hampshire do Dakota, South Dakota, North Caro- not contain such a provision. PART VII. LIFE, ACCIDENT AND INDEMNITY INSURANCE. CHAPTEE XIV. STIPULATIONS OF LIFE INSURANCE POLICY. SEC. 350. General statement. I. Formal Part of Contract. 351. Parties. 352. The beneficiary Manner of designation Right to fund. 353. Transmission of interest of beneficiary. 354. Rights of beneficiary. 355. Reservation of a right to change beneficiary. 356. Manner of changing beneficiary. 357. Right to proceeds Bankruptcy. II. Payment of Premium a Condi- tion Precedent. 358. Payment of premium Illustra- tions. 359. Time when premium is due Construction by agent Es- toppel. III. Powers of Agent. 360. Agents. IV. Statement of Age. 361. Age. V. Assignment of Policy. 362. Assignability. 363. Notice to company. 364. Manner of making assignment. 365. Assignment of policy by as- signee. VI. Incontestable Clause. SEC. 366. Incontestable. VII. Special Privileges. 367. Special privileges. VIII. Application Part of Contract. 367a. Provisions in the application. (a) Excepted Risks. 368. Suicide Sane or insane. 369. Where there is no provision as to the effect of suicide. 370. Suicide Construction. 371. Presumption Burden of proof. 372. Residence and occupation. 373. Death in violation of law or at the hands of justice. (o) Statements with Reference to Habits, Physical Condition, Etc. 374. Habits. 375. Health and freedom from dis- ease. 376. Bodily injuries. 377. Medical attendance. 378. Family relationship. 379. Other insurance. 380. Rejection of former applica- tion. 350. General statement. There is no standard form of life insurance policy. Each company uses the form which seems best (382) 383 STIPULATIONS OF LIFE INSURANCE POLICY. 351 adapted to its own manner of doing business; but, as in fire insur- ance, the tendency is strongly toward the adoption of a simple form, with liberal provisions and stipulations for the benefit of the in- sured. The form here adopted is now in use by one of the largest life insurance companies in the country, and is noticeable for its simplicity and clearness. I. Formal Part of Contract. In consideration of the statements and agreements in the applica- tion for this policy, which are hereby made a part of this contract, and of the sum of dollars, the receipt of which is hereby acknowledged, and the payment of a like sum on the day of in every year until full years' premiums shall have been paid, or until the death of the insured, should that event sooner occur, DOES INSURE the life of - , of - (herein called the insured), in the amount of dollars for the term of life, payable at its office in the city of - , to - , executors, administrators or assigns, upon due and satisfactory proof of interest and of the death of said insured, deducting therefrom all indebted- ness to the company on this policy, together with the balance, if any, of the current year's premium. 351. Parties. There are commonly but two parties to a fire in- surance contract, although there may be a third party to whom the fund or a part thereof has been assigned. In life insurance con- tracts, however, there are often four parties who must be considered, the insured, the insurer, the beneficiary, and the holder of the policy. The rules governing the rights and capacities of parties have been already considered. 1 352. The beneficiary Manner of designation Right to fund. The rights of beneficiaries are closely connected with the right of the insured to assign the policy. A beneficiary is a person to whom the insured directs the payment of the fund upon his death. 2 This 1 As to the right of an infant to v. Hilliard, 63 Ohio St. 478, 59 N. E. make a contract of insurance, see 230, 81 Am. St. 644 (1900). note to Craig v. Van Bebber, 18 Am. 2 As to who may be a beneficiary, St. 569 (1890), and cases cited at see Langdon v. Union, etc., Ins. Co., 11, supra; Union, etc., Ins. Co. 14 Fed. 272, Woodruff Ins. Gas. 359 (1882). 352 LIFE,, ACCIDENT AND INDEMNITY INSURANCE. 384 fund belongs to the person so designated as beneficiary in the pol- icy, although a different person is named in the application. 3 The language used in designating the beneficiary will, if possible, be so construed as to carry out the intention of the parties. 4 When it is payable to the "children" of the insured it includes his children by a former wife, 5 but not a child of his wife by a former husband. 6 Under a policy payable to the wife of the insured, and, upon her death before the insured, to "their children," a child by a woman to whom the insured is married after the death of his first wife is not a beneficiary. 7 "Children" includes an adopted child, 8 but not a grandchild. 9 Where the by-laws of the company require that the insured shall designate as beneficiary some one who is "dependent" upon him, the term is strictly construed and confined to those who are actually dependent upon him for support. 10 It includes a wife, 11 but not a concubine 12 or creditor. 13 3 Hunter v. Scott, 108 N. C. 213 (1891). A promise by a wife to her husband that she will pay his debts does not create a lien upon the proceeds of a benefit certificate on his life, of which she is the ben- eficiary: Fisher v. Donovan, 57 Neb. 361, 44 L. R. A. 383, 77 N. W. 778 (1899). The payment of pre- miums by a person other than the insured does not, in the absence of an agreement to that effect, create a lien on the proceeds: Lennon v. Metropolitan L. Ins. Co., 45 N. Y. Supp. 1033, 20 Misc. (N. Y.) 403 (1897). 4 Thus, the word "and" in a clause making the policy payable to "A, trustee and the children of B," the latter being the insured, will be read "for" in order to carry out the apparent intention of the insured to make his children the benefi- ciaries: Atkins v. Atkins, 70 Vt. 565, 41 Atl. 503 (1898). 5 McDermott v. Centennial, etc., Ass'n, 24 Mo. App. 73 (1887); Ev- ans v. Opperman, 76 Tex. 293 (1890). 6 Koehler v. Centennial, etc., Ins. Co., 66 Iowa 325 (1885). 7 ^Etna, etc., Ins. Co. v. Clough, 68 N. H. 298, 44 Atl. 520 (1895). 8 Martin v. JEtna, etc., Ins. Co., 73 Me. 25 (1881). "Cutchin v. Johnston, 120 N. C. 51, 26 S. E. 698 (1897); United States Trust Co. v. Mutual, etc., Ins. Co., 115 N. Y. 152 (1889); Winsor v. Odd Fellows', etc., Ass'n, 13 R. I. 149 (1880). Contra, Estate of Conrad, 89 Iowa 396 (1893); Duvall v. Goodson, 79 Ky. 224 (1880). 10 Ballou v. Gile, 50 Wis. 614 (1880); McCarthy v. Supreme Lodge, 153 Mass. 314 (1891). It does not include a member's fiancee unless dependent as a matter of fact: Alexander v. Parker, 144 111. 355 (1893). "Ballou v. Gile, 50 Wis. 614, Woodruff Ins. Gas. 371 (1880). 12 Keener v. Grand Lodge, 38 Mo. App. 543 (1889). 13 Skillings v. Massachusetts Ben. Ass'n, 146 Mass. 217 (1888). See Lavigne v. Ligue des Patriotes, 178 Mass. 25, 54 L. R. A. 814 (1901). 385 STIPULATIONS OF LIFE INSURANCE POLICY. 352 "Belatives" include those by marriage as well as by blood, 14 but not an illegitimate child. 14a Under a policy which directs payment to any relative of the insured, or to any person equitably entitled to it by having incurred expenses on behalf of the insured, a son of the insured not designated as beneficiary can not enforce payment although he has paid the premiums. A suit can only be maintained by the executor or administrator of the insured, with whom the contract was made. 15 The provision does not give such persons a vested interest as beneficiaries; it merely gives the company an option to pay the in- surance to them. 16 Where the policy is payable to the "executors, administrators or assigns of the insured, unless settlement shall be made under the provisions of article second, hereinafter contained," and this article provides that "the company may pay the sum of money insured hereby to any relative by blood or connection by mar 1 - riage of the insured, or to any other person appearing to said company to be equitably entitled to the same by reason of having incurred expenses in any way or on behalf of the insured for his or her burial, or for any other purpose," the company may pay the policy to the widow of the insured, and, in the absence of fraud, this will discharge its obligation. 17 The word "heirs" describes those who take under the statute of descent and distribution. By the weight of authority, when used in an instrument to designate the persons to whom personal prop- erty is thereby transferred, given, or bequeathed, and the context does not explain it otherwise, it means those who would under the statute of distribution be entitled to the personal estate in the event of death or intestacy. 18 It generally includes the widow, but does not include executors. 19 A wife who is separated from her husband may receive benefits under a certificate which the insured is entitled to hold for the benefit of his family. 20 14 Simcoke v. Grand Lodge, 84 17 American Security, etc., Co. v. Iowa 383 (1892). Prudential Ins. Co., 16 App. Cas. 14 aLavigne v. Ligue des Patriotes, (D. C.) 318 (1900). 178 Mass. 25, 54 L. R. A. 814 (1901). "Johnson v. Knights of Honor, 53 "Lewis v. Metropolitan L. Ins. Ark. 255 (1890), and cases cited. Co. (Mass.), 59 N. E. 439 (1901). "Loos v. John Hancock, etc., Ins. "Wokal v. Belsky, 53 App. Div. Co., 41 Mo. 538 (1867). (N. Y.) 167, 65 N. Y. Supp. 815 20 Smith v. Boston, etc., Ass'n, 168 (1900). Mass. 213, 46 N. E. 626 (1897). 25 ELLIOTT INS. 352 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 386 The words "legal representatives" refer to the executors and ad- ministrators 21 rather than to the heirs or next of kin of the insured. 22 But this is not always true. Thus it was said in Minnesota : 23 "Not- withstanding the loose, inaccurate and apparently contradictory use of terms in the application and policy, we are satisfied that the heirs (including the widow) of the deceased are the beneficiaries of the policy, and that the words 'legal representatives/ as used therein, must be construed as meaning heirs or next of kin, and not executors or administrators. It is always permissible to construe these words in that way, especially in wills and policies of life insurance, wherever it is apparent from the context or subject-matter that they were used in that sense. They will be construed in that way more readily in policies of life insurance than in almost any other kind of instru- ment for the reason that such insurance is very commonly intended as a provision for the family of the insured. A controlling fact in this case is, that whenever the words 'personal representatives' are used, they have reference not to the person entitled merely to receive the money, but to those for whose 'benefit' or 'use' the policy is taken or the money is payable. It is not to be supposed that the insured intended his executors or administrators personally to be the bene- ficiaries of the policy." So, it was said in Maryland: 24 "The term 'legal representatives' is not necessarily restricted to the personal representatives of one deceased, but is sufficiently broad to cover all persons who, with re- spect to his property, stand in his place, and represent his interests, whether by transfer by his own act or by operation of law. It may in this case include assigns as well as executors and administrators." Where the policy is payable to "estate," it is collectible by the legal representatives of the insured. 25 The surrender value of a policy "Johnson v. Van Epps, 110 111. v. Armstrong, 117 U. S. 591 (1886). 551 (1884); Sulz v. Mutual, etc., in Griswold v. Sawyer, 125 N. Y. Ass'n, 145 N. Y. 563 (1895). 411 (1891), it was held that a policy ** Pittel v. Fidelity, etc., Ass'n, 86 payable to his "legal representa- Fed. 255, 30 C. C. A. 21 (1898). tives" can only be assigned by the 28 Schultz v. Citizens', etc., Ins. consent of the beneficiary named Co., 59 Minn. 308 (1894), and cases therein, and the term "legal repre- cited. sentative" as employed in the policy ** Robinson v. Hurst, 78 Md. 59, means the children or heirs at law 20 L. R. A. 761 (1893); quoted from of the deceased. New York, etc., Ins. Co. v. Flack, 3 K Basye v. Adams, 81 Ky. 368 Md. 341, 56 Am. Dec. 742 (1852); (1883). approved in New York, etc.. Ins. Co. 387 STIPULATIONS OF LIFE INSURANCE POLICY. 353 which the statute provides shall be payable in cash, when, after the payment of two full annual premiums, the insurable interest in the life of the insured is terminated, is payable to the insured, and not to the beneficiaries named in the policy. 26 Where the policy is for the benefit of the wife and children of the insured, and is payable to "the beneficiaries or their executors, ad- ministrators, or assigns/' and "in case of the death of said bene- ficiary," before the death of the insured, the amount is to be paid to the executors or administrators of the insured, the personal repre- sentatives of the insured take the money only after the death of all the beneficiaries before the insured. 27 Where the policy provides that if the assured lives beyond a certain date, a fractional part of the amount shall be payable to him, his executors, or assigns, a beneficiary who, in the absence of the as- sured, has paid premiums up to that time may recover the full amount of the policy upon the presumption of the death of the insured, after his absence from the state for seven years without being heard from. Should the assured thereafter return, he would be estopped from making any claim under the policy. 28 353. Transmission of interest of beneficiary. By the weight of authority, where the policy is payable to a wife and children, the heirs of a child who dies before the death of the insured take the interest of such deceased child. Thus, where the policy was payable to the children of the insured if the mother was not living at his death, it was held that the children had a vested though contingent interest in the policy, and on the death of one of them before the mother's death, his interest descended to his widow and children. 29 So, where the wife insures her interest in the life of her husband for her own benefit if she survives him, otherwise for the benefit of her children, and dies during his lifetime, leaving children surviving her who also die during his life, the proceeds of the policy go to the ad- ministrator of the children, and not to the estate of the insured. 30 26 Hazen v. Massachusetts, etc., *> Voss v. Connecticut, etc., Ins. Ins. Co., 170 Mass. 254, 49 N. E. 119 Co., 119 Mich. 161, 44 L. R. A. 689, (1898). 77 N. W. 697 (1899). "Clark v. Dawson, 195 Pa. St. ""Millard v. Brayton, 177 Mass. 137, 45 Atl. 674 (1900). 533, 59 N. E. 436, 52 L. R. A. 117 28 Mutual, etc., Ins. Co. v. Martin (1901). See Smith v. vEtna L. Ins. (Ky.), 55 S. W. 694 (1900). Co., 68 N. H. 405, 44 Atl. 531 (1896). 353 LIFE, ACCIDENT AND INDEMNITY INSUKANCE. 388 A policy was made payable to the wife of the insured if living at the time of his death, but in the event she should die before his de- cease, then "to their children for their use, or to their guardian if under age/' At the time the policy was issued the parties had nine living children, three of whom died before their mother. Upon the death of the insured, leaving the six children surviving, the ques- tion was whether the children took each an interest in the policy immediately upon its delivery, and, if so, were the interests of the three whose deaths antedated that of their mother transmitted to their distributees and representatives. The court, following what appears to be the weight of authority, held that each child, upon the delivery of the policy, took a transmissible interest in it, and that the mother having died before the father, at his death the distributee of the dead child stood in the place of its parent and was entitled to share with the living children in the insurance fund. Quoting from an early Connecticut case, it was said: 31 "The moment this policy was executed and delivered it became property, and the title to it vested in some one. It will not be claimed that it vested in the person whose life was insured. It must have vested, then, in all, or in a part, of the payees. The payees consisted of two parties, the wife and the children. As only one could take and enjoy the prop- erty ultimately, it did not vest in all as tenants in common, nor did it vest in either so as to give a right to the present enjoyment of it. It was not, however, a mere expectancy nor a naked possibility, but it was a possibility coupled with a present interest. It was visible, tangible property, and, like any other insurance policy, it was capable of assignment and had an appreciable value. Each party took a conditional, not an absolute right to the whole policy. * * * The right to the policy, in a strict sense, was not contingent ; the pos- session and enjoyment of the fund thereby created were postponed to the future, and were contingent. This contingency applied to both parties, to the wife as well as to the children. * * * In respect to each it was then a present right to the future enjoyment of prop- erty, but it was liable to be defeated by a subsequent contingency, and was certain to be defeated as to one of them. That such a 81 Glenn v. Burns, 100 Tenn. 295, St. 396 (1893), annotated; Hooker Woodruff Ins. Gas. 372 (1898); Con- v. Sugg, 102 N. C. 115, 8 S. E. 919 tinental L. Ins. Co. v. Palmer, 42 (1889); Conigland v. Smith, 79 N. Conn. 60 (1875); Estate of Conrad, C. 303 (1878). 89 Iowa 396, 56 N. W. 535, 48 Am. 389 STIPULATIONS OF LIFE INSURANCE POLICY. 354 right is recognized as property and is transmissible to- heirs is a proposition abundantly sustained by the authorities." Other courts reject this view, and hold that on the delivery of the policy, the children then alive have a contingent interest, but say that it is not transmissible. 32 354. Rights of beneficiary. In ordinary life insurance, where no power of disposition is reserved to the insured, the beneficiary, im- mediately upon the issuance of the policy, acquires a vested right therein which can not be impaired without his consent. 33 The rule is thus stated by the supreme court of the United States: 34 "We think it can not be doubted that in the instance of contracts of in- surance with a wife or children, or both, upon their insurable inter- est in the life of the husband or father, the latter, while they are living, can exercise no power of disposition over the same without their consent; nor has he any interest therein of which he can avail himself, nor upon his death have his personal representatives or his creditors any interest in the proceeds of such contracts, which belong to the beneficiaries to whom they are payable. It is indeed the general rule that a policy, and the money to become due under it, be- long, the moment it is issued, to the person or persons named in it as beneficiary or beneficiaries, and that there is no power in the person procuring the insurance by any act of his, by deed or by will, to transfer to any other person the interest of the person named." In Wisconsin the insured may dispose of the policy, by will, to the exclusion of the beneficiary, when he has paid the premiums and kept control of the policy. 35 32 Walsh v. Mutual L. Ins. Co., 133 peal, 125 Pa. St. 303 (1889); Glanz N. Y. 408, 31 N. E. 228, 45 N. Y. St. v. Gloeckler, 104 111. 573, 44 Am. 123, 21 Ins. L. J. 598 (1892); United Rep. 94 (1882); Wilmaser v. Con- States Trust Co. v. Mutual, etc., Ins. tinental L. Ins. Co., 66 Iowa 417 Co., 115 N. Y. 152, 21 N. E. 1025 (1885); Weston v. Richardson, 47 (1889); Continental, etc., Ins. Co. v. L. T. N. S. 514; Jackson Bank v. Webb. 54 Ala. 688 (1875). Williams, 77 Miss. 398, 26 So. 965 33 Ricker v. Charter Oak L. Ins. (1899); Lambert v. Penn, etc., Ins. Co., 27 Minn. 193, 6 N. W. 771 Co., 50 La. Ann. 1027, 24 So. 16 (1880); Allis v. Ware, 28 Minn. 166 (1898). Nature of beneficiary's in- (1881); City Sav. Bank v. Whittle, terest: See Harley v. Heist, 86 Ind. 63 N. H. 587 (1885); Boyden v. Mas- 196 (1882). sachusetts, etc., Ins. Co., 153 Mass. M Central Bank v. Hume, 128 U. 544 (1891); Lockwood v. Michigan, S. 195 (1888). etc., Ins. Co., 108 Mich. 334, 66 N. 3B Foster v. Gile, 50 Wis. 603, W. 229 (1896); Ferdon v. Canfield, Woodruff Ins. Gas. 371 (1880); Berg 104 N. Y. 143 (1887); Brown's Ap- v. Damkoehler (Wis.), 88 N. W. 606 354 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 390 In many states there are statutes which protect the interests of mar- ried women and their children in the proceeds of life insurance policies upon the lives of their husbands as against the claims of creditors of the husband. 37 These statutes have undoubtedly had some effect in inducing the courts to adopt the rule above stated, although it is generally accepted without reference to the statutes. 38 This rule does not apply to certificates issued by mutual benefit associations, and beneficiaries under such certificates acquire no vested rights in the same. 39 "The essential difference between a certificate of membership of a beneficiary association and an ordinary life policy is, that in the latter the rights of the beneficiary are fixed by the terms of the policy, while in the former they depend upon the cer- tificate and rights of the member under the constitution and by- laws of the society. In the one case the rights of the beneficiary are fixed and vested from the moment the policy takes effect; in the other they are subject to such changes as the law of the association authorizes the society and the member to make. * * * All that the beneficiary has during the life of the member, owing to his right of revocation, is a mere expectancy depending upon the will and pleasure of the holder of the certificate. This expectancy is not . property/' 40 (1902). See also, Rison v. Wilker- Hubbard v. Stapp, 32 111. App. 541 son, 3 Sneed (Tenn.) 565 (1856); (1889); ^B3tna, etc., Ins. Co. v. Ma- Clark v. Durand, 12 Wis. 248 son, 14 R. I. 583 (1885); Central (1860); Kerman v. Howard, 23 Wis. Bank v. Hume, 128 U. S. 195 (1888). 108 (1868); Gambsv. Covenant, etc., ^ Thomas v. Grand Lodge, 12 Ins. Co., 50 Mo. 44 (1872), and cases Wash. 500, 41 Pac. 882. (1895); Rob- cited in preceding notes. inson v. United States, etc., Ass'n, 37 For consideration of these stat- 68 Fed. 825 (1895); Marsh v. Su- utes, see Eadie v. Slimmon, 26 N. Y. preme Council, 149 Mass. 512 9 (1862); Troy v. Sargent, 132 Mass. (1889); Finch v. Grand Grove, 60 408 (1882); Fraternal, etc., Ins. Co. Minn. 308 (1895); Martin v. Stub- v. Applegate, 7 Ohio St. 292 (1857); bings, 126 111. 387 (1888); Presby- Connecticut, etc., Ins. Co. v. Bur- terian, etc., Fund v. Allen, 106 Ind. roughs, 34 Conn. 305 (1867); Me- 593 (1886); Metropolitan L. Ins. Neil v. United Order, 131 Pa. St. Co. v. O'Brien, 92 Mich. 584 (1892); 339 (1890); Wirgman v. Miller, 98 Sabin v. Phinney, 134 N. Y. 423, 31 Ky. 620, 33 S. W. 937 (1896); Smed- N. E. 1087 (1892). ley v. Felt, 43 Iowa 607 (1876); * Masonic, etc., Soc. v. Burkhart, Ionia Co. Saving Bank v. McLean, 110 Ind. 189 (1886); Schoenau v. 84 Mich. 625 (1891). Grand Lodge (Minn.), 88 N. W. 999 38 New York, etc., Ins. Co. v. Ire- (1902). land (Tex.), 17 S. W. 617 (1891); 391 STIPULATIONS OF LIFE INSURANCE POLICY. 355 In some states the rule that the beneficiary may dispose of the policy does not apply to policies taken under statutes which authorize a policy to be taken out by the husband for the benefit of the wife. 41 The rule was established in New York under the original statute which made policies on the lives of husbands payable to married women free from claims of the creditors of the husbands, but under a later statute the wife may assign such a policy with the written consent of her husband. 42 The beneficiary may also dispose of his interest in the policy by pledge, 43 mortgage, 44 or gift. 45 355. Reservation of a right to change beneficiary. The con- tract may reserve to the insured the right to change the beneficiary at will, and when this is done the original beneficiary acquires no vested interest in the policy or its proceeds, and until after the death of the insured he has a mere expectancy. 46 This right to change the beneficiary may be reserved in the policy, certificate, or in the char- ter or by-laws, where the insurance is by mutual or benefit associa- tions. In the latter case the right may be conferred by an amend- 41 Smith v. Head, 75 Ga. 755 (1885); Godfrey v. Wilson, 70 Ind. 50 (1880); Eadie v. Slimmon, 26 N. Y. 9 (1862). 42 Eadie v. Slimmon, 26 N. Y. 9 (1862); Brick v. Campbell, 122 N. Y. 337 (1890). See N. Y. Laws 1879, ch. 248. 43 Martin v. Stubbings, 126 111. 387 (1888). 44 Dungan v. Mutual, etc., Ins. Co., 46 Md. 469 (1877). 45 Madeira's Appeal (Pa.), 4 Atl. 908 (1886). A beneficiary who mur- ders the insured can not recover on the policy. In Holdom v. Ancient Order, etc., 159 111. 619, 43 N. E. 772 (1896), the court said: "The only question of law presented in this record is, does an insane beneficiary in a life insurance policy, who kills the insured under such circum- stances as would cause the killing to be murder if the beneficiary were sane, thereby forfeit his right to recover the insurance money? This presents a question of first impres- sion. * * * ^he causing of the death of the insured by felonious means by a sane assignee of a pol- icy of life insurance, has been held sufficient to defeat a recovery on the policy: New York Ins. Co. v. Armstrong, 117 U. S. 591 (1886); Prince, etc., Ass'n v. Palmer, 25 Beav. 605 (1858). We hold: where an insane beneficiary in a life policy kills the assured under such circumstances as would cause the killing to be murder if the bene- ficiary were sane, such killing does not cause a forfeiture of the policy nor bar his right of recovery for the insurance money." "Hopkins v. Northwestern L. Assur. Co., 99 Fed. 199, 40 C. C. A. 1 (1900); Bilbro v. Jones, 102 Ga. 161, 29 S. E. 118 (1898). 355 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 392 ment to the by-laws, which by its terms may act retroactively on certificates issued before such amendment. 47 In ordinary life policies the beneficiary takes a vested interest the moment the policy is issued, and the insured can not change the beneficiary unless the express power to do so is reserved. It is equally well settled that when the right to change the beneficiary is reserved, in either the ordinary contract or a benefit certificate, the beneficiary named acquires no vested interest until the death of the insured, and prior to that time the insured may change the beneficiary at will. 48 In this respect there is a material difference between an ordinary policy of life insurance and a benefit certificate issued by a fraternal organization. The general rule is that the power to change the beneficiary in the latter case is vested in the member of the society, in the absence of any restrictions in the charter, statute, by-laws, or certificate. In a recent case in Iowa, Chief Justice Kinne said: 49 "Appellant contends that the insured in the case at bar is given no authority by the certificate, by-laws or articles of incorporation to change the beneficiary; hence the beneficiary named in the cer- tificate had a vested interest in it the moment it was issued. In other words, he says that no right has been reserved to the insured in the contract or laws of the association to change the beneficiary; therefore, none; exists; and the rights of the beneficiary would be the same, as to the assignment of the policy, as in the case of an ordinary life polic}'. Appellant's conclusions do not necessarily fol- low, even if the fact be as he claims. It is true that the rights of the assured are to be determined from the contract, and the con- tract embraces the certificate, by-laws, articles of incorporation, stat- 47 Catholic Knights v. Franke, 137 Mente v. Townsend, 68 Ark. 391, 59 111. 118 (1891); Fugure v. Mutual S. W. 41 (1900). Society, 46 Vt. 360 (1874). But see 49 Carpenter v. Knapp, 101 Iowa Thibert v. Supreme Lodge, 78 Minn. 712, 70 N. W. 764, 38 L. R. A. 128 448, 81 N. W. 220 (1899); Supreme (1897) [citing Masonic, etc., Soc. Commandery, etc., v. Ainsworth, 71 v. Burkhart, 110 Ind. 189 (1886); Ala. 436 (1882); Pellazzino v. Ger- Presbyterian, etc., Fund v. Allen, man, etc., Soc., 16 W. L. B. (Ohio) 106 Ind. 593 (1886); Thomas v. 27, 9 Dec. R. (Ohio) 635, Woodruff Grand Lodge, 12 Wash. 500, 41 Pac. Ins. Gas. 321 (1886). 882 (1895); Hoeft v. Supreme 48 Smith v. National Ben. Soc., 123 Lodge, 113 Gal. 91, 33 L. R. A. 174 N. Y. 85, 9 L. R. A. 616 (1890); (1896); Voigt v. Kersten, 164 111. Hamilton v. Royal Arcanum, 189 314 (1896); Fischer v. American L. Pa. St. 273, 42 Atl. 186 (1899); of H., 168 Pa. St. 279 (1895)]. 393 STIPULATIONS OF LIFE INSURANCE POLICY. 355 ute law, if any, either providing expressly for a change of beneficiaries or prohibiting such change; * * * but by reason of the char- acter and purpose of such associations, it should be held that the power to change the beneficiary is vested in the member insured during his lifetime." Where the insured has the right to change the beneficiary, it is immaterial, so far as the original beneficiary is concerned, that he was induced to make the change by fraud. 50 50 Hoeft v. Supreme Lodge, 113 Cal. 91, 33 L. R. A. 174 (1896). In this case the court said: "Defend- ants do not plead any contract with their deceased father, or any special equities which would deprive him of the right to make a change, but stand upon the ground that they may contest because the change was procured by fraud. But, if it was a fraud, did they have a right to complain? Clearly they had not, unless either by contract or in law they had some vested interest or right in the certificate which had formerly been taken out in their favor. They claim no such vested interest by contract. If it exists at all then, it exists by operation of law. But such rights are either constitutional or statutory, and we are referred to no law which secures to them a right of action for such cause. If they had a vested right in the certificate as such, then the insured himself, of his own volition, and without the fraudulent contrivance of a third person, could not substitute a new beneficiary. But this is not and can not be claimed, for the contract is between the order and the insured. The beneficiary's interest is the mere expectancy of an incompleted gift, which is revocable at the will of the insured, and which does not and can not become vested as a right until fixed by his death. If it is said that a devisee under a will has, during the life of the tes- tator, a like naked expectancy, it may be freely conceded that it is so; but to the heirs and devisees is confirmed a right of action for fraud, etc., by the provisions of the Code. Otherwise, they, too, would come within the scope of the gen- eral principle that a right of action for fraud is personal and untrans- ferable. One can not be defrauded of that in which he has no vested right. A vested right is property, which the law protects, while a mere expectancy is not property, and therefore is not protected. These views will be found sup- ported without conflict by a multi- tude of authorities, from which may be cited: Niblack Vol. Soc. & Mut. Ben. Ins. (2d ed.), 234a; Brown v. Grand Lodge, 80 Iowa 287 (1890); Schillinger v. Boes, 85 Ky. 357 (1887); Robinson v. United States, etc., Ass'n, 68 Fed. 825 (1895); Supreme Conclave v. Cap- pella, 41 Fed. 1 (1890); Lament v. Grand Lodge, 31 Fed. 177 (1887); Knights of Honor v. Watson, 64 N. H. 517 (1888); Beatty's Appeal, 122 Pa. St. 428 (1888); Martin v. Stub- bings, 126 111. 387 (1888). In our own state the cases of Swift v. San Francisco Stock, etc., Board, 67 Cal. 567 (1885); Order of Mutual Com- 356 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 394 356. Manner of changing beneficiary. A change in the bene- ficiary in a mutual benefit certificate must be made in the manner provided by the rules of the society, and any material departure therefrom will invalidate the transaction. 51 To this rule there are several exceptions: 52 (1) If the society has waived a strict compliance with its rules, and, in pursuance of a request of the insured to change his beneficiary, has issued a new certificate to him, the original beneficiary will not be heard to complain that the course indicated by the regulations was not pursued. 53 (2) If it is beyond the power of the insured to comply literally with the regulations, a court of equity will treat the change as having been made. (3) If the insured has pursued the course pointed out by the laws of the association and has done all in his power to change the beneficiary, but before a new certificate is actually issued he dies, a court of equity will decree that to be done which ought to be done, and act as though the certificate had in fact been issued. 54 A change of beneficiaries may be made by will in which the pro- ceeds of the certificate are bequeathed to a certain person named.. Where this was done the court said that, "in case the certificate is destroyed without fraud of the insured, so that it is impossible to panions v. Griest, 76 Cal. 494 101 Pa. St. Ill (1882); Duvall v. (1888); Bowman v. Moore, 87 Cal. Goodson, 79 Ky. 224 (1880); Pres- 306 (1890), and McLaughlin v. Me- byterian, etc., Fund v. Allen, 106 Laughlin, 104 Cal. 171 (1894), rec- Ind. 593 (1886); Supreme Council ognize the same general principles, v. Perry, 140 Mass. 580 (1886); Jory v. Supreme Council, 105 Cal. Martin v. Stubbings, 126 111. 387 20, 26 L. R. A. 733 (1894), and cases (1888); Wendt v. Iowa L. of H., 72 involving a like consideration, dif- Iowa 682 (1887); Holland v. Taylor, fer radically from the case at bar." Ill Ind. 121 (1887). As to waiver 51 Berg v. Damkoehler (Wis.), 88 by insurer, see Schoenau v. Grand N. W. 606 (1902); Milner v. Bow- Lodge (Minn.), 88 N. W. 999 (1902). man, 119 Ind. 448, 5 L. R. A. 95 M Heydorf v. Conrack, 7 Kan. (1889), annotated; Duvall v. Good- App. 202, 52 Pac. 700 (1898); Jinks son, 79 Ky. 224 (1880); Masonic, v. Banner Lodge, 139 Pa. St. 414 etc., Soc. v. Burkhart, 110 Ind. 189 (1890); Hirschl v. Clark, 81 Iowa (1886); National, etc., Soc. v. Lu- 200, 9 L. R. A. 841 (1890); Schmidt pold, 101 Pa. St. Ill (1882), and v. Iowa, etc., Ass'n, 82 Iowa 304, 11 cases there cited. L. R. A. 205 (1891). See further, 82 Supreme Conclave v. Cappella, cases collected in note to Grand 41 Fed. 1, Woodruff Ins. Gas. 381 Lodge v. Noll, 90 Mich. 37, 51 N. W. (1890). 268, 15 L. R. A. 350 (1892). 53 National, etc., Soc. v. Lupold, 395 STIPULATIONS OF LIFE INSURANCE POLICY. 357 exercise the right of naming a new beneficiary in accordance with the methods prescribed by the by-laws of the corporation, a court of equity will recognize a designation of the beneficiary by any other method which may manifest his intention to exercise the right which he unquestionably possessed, of changing the beneficiary." 55 357. Eight to proceeds Bankruptcy. The present bankruptcy law provides that where the bankrupt has an insurance policy which has a cash surrender value payable to himself, his estate, or legal representatives, he may, within thirty days after such surrender value has been ascertained, pay the amount thereof to the trustee, and keep the policy free from all claims of creditors. If he does not do this the policy passes to the trustee as assets for the benefit of his creditors. If the policy has no surrender value the trustee has no interest therein, and it is immaterial that the bankrupt has within four months prior to the filing of the petition in bankruptcy assigned such policy to his wife. 56 //. Payment of Premium a Condition Precedent. This policy does not take effect until the first premium shall have been actually paid during the lifetime of the insured. In case the said premium shall not be paid on or before the several days herein- before mentioned for the payment thereof, at the office of the com- pany in the city of , or to agents when they produce receipts. 65 Grand Lodge v. Noll, 90 Mich, to his estate: See Re Lange, 91 37, 51 N. W. 268, 15 L. R. A. 350 Fed. 361 (1899). Policy payable to (1892); Grand Lodge v. Child, 70 the insured if living, otherwise to Mich. 163, 38 N. W. 1 (1888). his wife or children: Re Boardman, 88 Morris v. Dodd, 110 Ga. 606, 50 103 Fed. 783 (1900); Re Diack, 100 L. R. A. 33 (1900), with complete Fed. 770 (1900); Bassett v. Parsons, collection of cases in note. "A policy 140 Mass. 169, 3 N. E. 547' (1885). of insurance on the life of a bank- As to the rights of creditors when rupt which has no cash surrender the policy is taken by a solvent value, and no value for any pur- creditor and made payable to his pose except the contingency of its wife, see Central Bank v. Hume, 128 being valuable at the death of the U. S. 195 (1888). See review of this bankrupt if the premiums are kept case by Prof. Williston in 25 Am. paid, does not vest in the trustee Law Rev. 185 (1891), where the au- as assets of the estate : " Re Buelow, thorities are cited. See, also, Pullis 98 Fed. 86 (1899). Policy payable v. Robison, 73 Mo. 201 (1880). to the insured if living, otherwise 358 LIFE, ACCIDENT AND INDEMNITY INSUEANCE. 396 signed by the president or treasurer, then., and in every such case, this policy shall cease and determine, subject to the provisions of the company's non- forfeiture system as indorsed hereon, witli ac- companying table. 358. Payment of premium Illustrations. Where an insurance company delivers a policy which on its face acknowledges the receipt of the first premium, it is estopped thereafter to assert that the pre- mium was not in fact paid. 57 The policy under consideration pro- vides that it shall not take effect until the first premium shall have been actually paid during the lifetime of the insured. Its legal effect dates from the time of payment of the first premium., and not from the date it bears. 58 But it becomes a binding contract where the agent accepts the note of the insured in pursuance of a prac- tice which is known to the company. 59 Thus, where it appeared that upon the issuance and delivery of a policy a note was executed and delivered by the insured to the general agent of the company for the first premium, and the policy was found among the effects of the insured at the time of his death, it was held that the presumption was that the policy was delivered at the time it bore date, and that the difference between the face of the note and the amount of the premium was paid in cash or arranged for by the insured. The giv- ing and delivery of the note and the receiving of the policy were treated as pajonent of the first annual premium. 60 But the burden of proof is upon the party who asserts. that a note was accepted as payment of the first premium. Where the defense was that the first premium was not paid, nor payment thereof waived, 57 Dobyns v. Bay State, etc., Ass'n, mers v. Fidelity, etc., Ass'n, 84 Mo. 144 Mo. 95, 45 S. W. 1107 (1898). App. 605 (1900). See 129, supra. As to liability on a receipt for the M Methvin v. Fidelity, etc., Ass'n, first premium which states that the 129 Cal. 251, 61 Pac. 1112 (1899). applicant is to be insured from date 59 Porter v. Mutual L. Ins. Co., 70 of the receipt, where the applicant Vt. 504, 41 Atl. 970 (1898). As to dies before the policy is delivered, what is payment, see Mallette v. see Lee v. Union, etc., Ins. Co., 19 British Am. Assur. Co., 91 Md. 471, Ky. L. 608, 41 S. W. 319 (1897). As 46 Atl. 1005 (1900); Baldwin v. to effect of acceptance of premium Provident, etc., Soc., 162 N. Y. 636, where policy contains a provision 57 N. E. 1103 (1900). that there is no liability unless the Thum v. Wolstenholme, 21 Utah policy has been in force twelve 446, 61 Pac. 537 (1900). months prior to the death, see Sum- 397 STIPULATIONS OF LIFE INSURANCE POLICY. 358 and that the policy never went into effect, it was held that there could be no recovery, although the evidence showed that the applica- tion was accompanied by the applicant's ten-day note for the amount of the first premium, together with a memorandum indorsed on the note that it was to be returned if not accepted; that the application and the policy both provided that the insurance should not become binding until the first premium was actually paid, but that the risk was accepted by a general agent having power to bind the company by a waiver of this provision; that the agent, upon receiving the policy and the customary voucher or receipt, tendered them to the applicant and demanded payment of the note; that the maker ex- cused the non-payment, and the agent delivered the policy to him, but retained the voucher and note; that the agent then left the note with the voucher in a bank for collection, with instructions that the voucher be delivered upon the k payment of the note ; that at the maker's request the time for the payment of the note was extended, such extension being made, however, as an extension of the time for the payment of the premium ; and that the applicant died without paying the note. Evidence that the note was taken to "tie up" the in- sured does not show or even tend to show that the obligation to pay should be deemed an actual payment. After stating the rule that the general agent of an insurance company has authority at the time of the delivery of an insurance policy to bind his principal by an agreement waiving a provision of the policy calling for the actual payment of the first premium, the court said: 61 "It is also conceded that a con- dition of the policy as to its not going into effect in advance of the actual payment of the first premium is fatal to the plaintiff's right to recover unless it was waived by the insurer through its agent, and that whether there was such waiver depends upon whether [the par- ties] expressly agreed that the former's note, given with his applica- tion for insurance, should operate as such payment." This provision may of course be waived by the company or its duly authorized agent. 62 Thus, where the agent gave the policy to the insured, although he stated that he could not pay for it at the time, it was held that the* company was liable on the policy where the death of the insured occurred but two months after such de- 81 McDonald v. Provident, etc., ^ See note to Griffith v. New York, Assur. Soc., 108 Wis. 213, 84 N. W. etc., Ins. Co., 40 Am. St. 105. 154, 81 Am. St. 885 (1900), anno- tated. 358 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 398 livery. 63 But where the policy provided that it should not go into effect until the first premium had been actually received by the company or its authorized agent during the good health of the appli- cant, and further that no agent of the company had power to make, alter, or discharge contracts, or grant credit, and that no alteration of the terms of the contract should be valid unless in writing and signed by the president of the association, it was held that an agent of the company could not waive payment of the premium during the good health of the insured, as this was a condition precedent to the liability of the association. 64 Where the company retains a note for the unearned premiums after its maturity and sends it to an attorney for collection, it waives the forfeiture provided for in the policy for failure to pay such note at maturity. 65 But where the policy exempts the company from liability while a premium note remains past due and unpaid, it is not revived by a confession of judgment on the note. 60 If the company accepts a note for the first annual premium, and delivers the policy, it is a payment of the premium, although the note is never paid. 67 Thus, where the policy provided that it should not take effect until the first premium had been actually paid during the lifetime and good health of the insured, and that agents could not alter or discharge a contract, or receive for premiums anything but cash, and the local agent accepted a note for the premium which was unpaid at the death of the insured, and it appeared that the general agent of the company for several years prior to the time of the issuing 1 of the policy had permitted such local agents to accept 63 Berliner v. Travelers' Ins. Co., Ill Ga. 482, 865, 36 S. E. 637, 944 121 Cal. 451, 53 Pac. 922 (1898). (1900). See, also, as to waiver, Haupt v. m Union Cent., etc., Ins. Co. v. Phoenix, etc., Ins. Co., 110 Ga. 146, Moreland (Ky.), 56 S. W. 653 35 S. B. 342 (1900); Sick v. Cov- (1900). enant, etc., Ins. Co., 79 Mo. App. 609 Proebstel v. State Ins. Co., 14 (1899); Griffin v. Prudential Ins. Wash. 669, 45 Pac. 308 (1896). As Co., 43 App. Div. (N. Y.) 499 to construction of forfeiture clause (1899); New York, etc., Ins. Co. v. in a premium note, see Union, etc., Scott, 23 Tex. Civ. App. 541, 57 S. Ins. Co. v. Buxer, 62 Ohio St 385, W. 677 (1900). As to effect of 57 N. B. 66 (1900). See 130, supra, agreement of agent to change date " Stewart v. Union, etc., Ins. Co., of premium payment, see Mutual L. 155 N. Y. 257, 49 N. B. 876 (1897); Ins. Co. v. Clancy, 111 Ga. 865, 36 Thum v. Wolstenholme, 21 Utah S. E. 944 (1900). 446, 61 Pac. 537 (1900). M Reese v. Fidelity, etc., Ass'n, 399 STIPULATIONS OF LIFE INSURANCE POLICY. 359 notes for premiums, and that the insured had previously taken out like policies in the same company through the same agent and given notes for premiums, which were collected by the general agent, it was held that the local agent had authority to waive the provision which required the payment of the premium in cash. 68 The burden is on the party claiming under the policy to show that the first premium has in fact been paid, or the payment waived, and it is not sufficient for him to show the execution of a note for the amount, which recites that it is accepted on condition that if not paid at maturity, the policy shall be void. 69 Payment to an agent is sufficient under a policy which provides that if payment is not made into the home office within thirty days after the date of the policy, it shall be void and of no effect. 70 It was held in North Carolina that the time of mailing a check for the premium on an insurance policy is the time of payment, 71 although it does not reach the company until past due. 72 So, the placing of a policy of life insurance in the mail with postage prepaid, so that it would in due course reach the insured before he was taken sick, is a delivery of the policy within the meaning of a provision to the effect that it shall not be in force until "the payment in cash of the first premium and the delivery of the policy to the applicant during his life and in good health." 73 Under the New York statute it was held that notice of the maturing of a premium, properly mailed as required, which never reached the insured, did not prevent a forfeiture of the policy for non- payment of the premium when it was due. 74 359. Time when premium is due Construction by agent Es- toppel. In a recent case the supreme court considered the question of the power of an agent to waive the condition of the policy with 68 Provident, etc., Soc. v. Oliver, 72 Hollowell v. Life Ins. Co., 126 22 Tex. Civ. App. 8, 53 S. W. 594 N. C. 398, 35 S. E. 616 (1900). (1899). "Mutual, etc., Ass'n v. Farmer, 69 Manhattan, etc., Ins. Co. v. My- 65 Ark. 581, 47 S. W. 850 (1898). ers, 22 Ky. L. 875, 59 S. W. 30 ' 7t McConnell v. Provident, etc., (1900). Ass'n, 92 Fed. 769 (1899). See 129, 70 Pulaski, etc., Ins. Co. v. Dawson, supra. As to construction of the 87 111. App. 514 (1900). New York statute requiring notice 71 Kendrick v. Mutual, etc., Ins. of maturity of premium, see article Co., 124 N. C. 315, 32 S. E. 728 by Robert J. Brennen in 52 Cent. (1898). L. J. 4. 359 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 400 reference to the payment of the premium, and the duty of the insured to read the policy. An application was made on December 12, and the policy was dated December 18. The premium was paid and the policy delivered on December 26, 1893, and the agent stated to the insured that under certain provisions the policy would be in force for thirteen months from the time of the payment of the first pre- mium. By the terms of the policy the next premium was payable on December 12, 1894, with thirty days' grace, making January 12, 1895, the last day for payment. The insured died January 18, 1895, having paid but the one premium. It appeared that the insured had the policy in his possession after its delivery, and the company claimed that his representatives were estopped from denying that the date of the contract was not that which appeared on the face of the policy, or that the words, "Please date policy same as applica- tion," were not in the application when it was signed by the insured, and that by accepting the policy the insured waived his right to object if the words were inserted as alleged, after the signing of the appli- cation. The policy on its face expressly required payment of the premium on December 12 of each year. Chief Justice Fuller said: 75 "The insured was justified in assum- 76 McMaster v. New York L. Ins. surance on his life. He was in fact Co. (U. S.), 22 Sup. Ct. 10 (1901). a member of several co-operative For the earlier course of this associations, and therefore did have litigation, see McMaster v. New other insurance; but the soliciting York, etc., Ins. Co., 78 Fed. 33 agent of the company, to whom he (1897); New York, etc., Ins. Co. v. stated the facts, believing that in- McMaster, 87 Fed 63, 30 C. C. A. surance of that kind was not in- 532 (1898); Central Trust Co. v. surance within the meaning of the Continental Trust Co., 171 U. S. 687 question, wrote 'No other' as the (1898); McMaster v. New York, etc., proper answer, at the same time Ins. Co., 90 Fed. 40 (1898). As to assuring the applicant that it was the construction of contract by such. And this court held that the agent, the court said: "In Conti- company was bound by the inter- nental L. Ins. Co. v. Chamberlain, pretation put upon the question by 132 U. S. 304, 33 L. ed. 341, 10 Sup. its soliciting agent. When, then, Ct. 87 (1889), it was decided that a McMaster signed these applications person procuring an application for he understood, and the company by life insurance in Iowa became by its agent understood, that if the force of the statute the agent risks were accepted at the home of- of the company in so doing, and fice he would, by paying one year's could not be converted into the premium in full, obtain contracts agent of the assured by any provi- of insurance which could not be for- sion in the application. In that felted until after the expiration of case the applicant was required to thirteen months." state whether he had any other in- 401 STIPULATIONS OF LIFE INSURANCE POLICY. 360 ing, and on the findings must be held to have assumed, that if he paid the first annual premium in full he would be entitled to one year's protection, and to one month of grace in addition that is, to thirteen months' immunity from forfeiture. And the findings show that the company, by its agent, gave that meaning to the clause, and that McMaster was induced to apply for the insurance by reason of the protection he supposed would be thus obtained. Bearing in mind that McMaster had made no request of the company in respect of antedating the policies, and was ignorant of the interpolation of the agent, and ignorant in fact, and not informed or notified in any way, of the insertion of December 12 as the date for subsequent pay- ments, he had the right to suppose that the policies accorded with the applications as they had left his hands, and that they secured to him, on payment of the first annual premiums in advance, im- munity from forfeiture for thirteen months. And the agent as- sured him that this was so. "The situation being thus, we are unable to concur in the view that McMaster's omission to read the policies when delivered to him and the payment of the premiums made, constituted such negligence as to estop the plaintiff from denying that McMaster, by accepting the policies, agreed that the insurance might be forfeited within thirteen months from December 12, 1893." 76 ///. Powers of Agent. Nor are agents authorized to make, alter., or discharge this or any other contract in relation to the matter of this insurance, or to waive any forfeiture hereof, or to grant permits. 360. Agents. The effect of this provision in a policy has been already considered. It was recently held in Missouri that an agent of a life insurance company may waive a forfeiture for non-payment of the premium, although the policy provided that there could only be a waiver of forfeiture for a breach of conditions in writing, signed 78 Citing Supreme Lodge v. With- Iowa 276, 72 N. W. 530 (1897); ers, 177 U. S. 260, 44 L. ed. 762, 20 Hartford Steam Boiler, etc., Co. v. Sup. Ct. 611 (1900), and cases cited; Cartier, 89 Mich. 41, 50 N. W. 747 Fitchner v. Fidelity, etc., Ass'n, 103 (1891). 26 ELLIOTT INS. 361 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 402 by the president or vice-president and one of the other officers of the company, where the receipts which were given by an agent pro- vided on their face that they should not be valid unless countersigned by the agent. 77 Where a company whose general manager is also a director re- ceives proofs of loss which show that the condition of the policy as to residence of the insured has been violated, and returns the proofs for minor corrections without claiming a forfeiture on account of such violation, the company is estopped from claiming a forfeiture on account thereof. 78 So, where a general agent modified a condi- tion of the application for insurance, and the policy subsequently issued required full prepayment of the premium, by accepting a por- tion of the premium and giving sixty days' credit for the balance, in violation of the terms of the policy, it was held that the company was estopped to assert the invalidity of the contract, notwithstanding the fact that the policy which was issued contained a provision pro- hibiting the modification of its terms other than by a written agree- ment signed by its president or secretary. This condition appeared in the policy, but the insured was not informed of the fact that it would be in the policy when he made the application. 79 IV. Statement of Age. Any error made in understating the age of the insured will be adjusted by paying such amount as the premiums paid would pur- chase at the table rate. 361. Age. This liberal provision of the policy relieves the in- sured from a forfeiture which would otherwise result from a mis- statement of his age. In its absence, the understatement of his age by an applicant for life insurance increases the risk as a matter of law. 80 Thus, it was held that a statement by an applicant that his age was fifty-nine, when in fact it was sixty-four, avoided the pol- icy. 81 A statement that the age of the applicant is thirty, when in 77 James v. Mutual, etc., Ass'n, 148 Wash. 26, 60 Pac. 68, 47 L. R. A. Mo. 1, 49 S. W. 978 (1898). 201 (1900). "Kidder v. Knights Templars, ""Dolan v. Mutual, etc., Ass'n, 173 etc., Co., 94 Wis. 538, 69 N. W. 364 Mass. 197, 53 N. E. 398 (1899). (1896). 81 Swett v. Citizens', etc., Soc., 78 "Cole v. Union, etc., Ins. Co., 22 Me. 541 (1886). 403 STIPULATIONS OF LIFE INSURANCE POLICY. 362 fact it is thirty-five, is a material variation. 82 A misrepresentation by a member of a benefit society as to his age invalidates the insur- ance contract, although the applicant entered the society before its constitution and regulations as to age were finally adopted. 83 But where the applicant states his age "to the best of his knowl- edge and belief," and stipulates that any untrue or fraudulent state- ment will forfeit his right to recovery, the contract is not invalidated by the fact that he was three or four years older than he stated unless there is evidence of fraud or knowledge on his part that his state- ment was untrue. 8 * V. Assignment of Policy. x No assignment of this policy shall take effect until written notice thereof shall be given to the company. 362. Assignability. The ordinary fire insurance contract, being of a personal nature, is not assignable without the consent of the in- surer, but a life insurance contract, being in the nature of a chose in action, is assignable in the absence of restrictive provisions. The accepted rule is that a policy of life insurance without restrictive words is assignable by the assured for a valuable consideration like any other chose in action where the assignment is rot made to cover a mere speculative risk and thus evade the law against wager pol- icies. 85 Payment of a policy thus assigned may be enforced by or for the benefit of the assignee. L. Ins. Co. v. France, 91 v. Bushnell, 92 Ind. 503 (1883); U. S. 510 (1875). New York, etc., Ins. Co. v. Flack, 3 ""Marcoux v. Society, etc., 91 Me. Md. 341, 56 Am. Dec. 742 (1852); 250, 39 Atl. 1027 (1898). Hewlett v. Home, etc., 74 Md. 350, M Egan v. Supreme Council, 32 17 L. R. A. 447 (1892); Bursinger v. App. Div. (N. Y.) 245, 161 N. Y. 650, Bank, 67 Wis. 75 (1886); Olmsted 57 N. B. 1109 (1900). v. Keyes, 85 N. Y. 593 (1881); Stein- 88 New York, etc., Ins. Co. v. Arm- back v. Diepenbrock, 158 N. Y. 24, strong, 117 U. S. 591 (1886); Fitz- Woodruff Ins. Cas. 402 (1899); gerald v. Hartford, etc., Ins. Co., 56 Clark v. Allen, 11 R. I. 439 (1877); Conn. 116 (1888); Mutual, etc., Ins. Falk v. Janes, 49 N. J. Eq. 484 Co. v. Allen, 138 Mass. 24 (1884); (1892); Eckel v. Renner, 41 Ohio Pingrey v. National L. Ins. Co., 144 St. 232 (1884); Roller v. Beam, 86 Mass. 374 (1887); Martin v. Stub- Va. 512, 6 L. R. A. 136 (1899), an- bings, 126 111. 387 (1888); Bushnell notated. See 62, 63, supra. 362 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 404 This restriction upon the assignability of such a policy is neces- sary not only for the protection of the company, but for the purpose of protecting the rights of the beneficiary ; and hence, if the company does not by the terms of the contract require that its consent must be given to an assignment, the beneficiary or the insured, if the right is reserved, may dispose of the policy at will. The parties may place such restrictions upon the right to transfer the policy as they choose. A policy required the consent of the com- pany to an assignment and provided that with such consent a policy so assigned as security for the claim of a creditor, as beneficiary, should not exceed the amount of the actual bona fide indebtedness of the member to him existing at the time of the death of the in- sured, together with any payments made to the association upon the certificate or policy of insurance by such creditor, with interest thereon, and "this certificate or policy of insurance as to all amounts in excess thereof shall be null and void/' It was held that the original beneficiary had parted with all his interest in the policy by the assignment. 86 "The condition in that regard may be considered harsh/' said Marshall, J., "but courts must enforce contracts as they find them. If a person sees fit to make an insurance contract so that an assignment thereof to one of his creditors will have the effect of limiting all liability thereon to the amount due such creditor from him at the time of his death, there is no law to prevent it, and he and those who come after him must abide thereby. There can be no question but that an insurance company may, by contract, place such restraints upon the assignment of its insurance policies as it sees fit, not inconsistent with its own laws or some statute. We can not escape the conclusion that, by the terms of the contract be- fore us, respondent must suffer, as the penalty for the assignment of the policy, the loss of all interest therein. This is as plainly stipu- lated in the policy as language can make it. The effect thereof, and of the assignment, was to substitute a new contract for the policy as originally written, with like conditions, except that the liability of the insurer was limited solely to the 'assignee/ and to the amount due the assignee from M. at the time of his death, including pay- ments by it to keep up the policy, and interest thereon, not exceeding in all the amount payable under the contract in the absence of the assignment." 88 McQuillan v. Mutual, etc., Ass'n as collateral security: McQuillan v. (Wis.), 87 N. W. 1069 (1901). The Mutual, etc., Ass'n (Wis.), 88 N. W. limitation applies to an assignment 925 (1902). 405 STIPULATIONS OF LIFE INSURANCE POLICY. 363 363. Notice to company. The provision above quoted does not prohibit the assignment of the contract, but provides that no assign- ment thereof shall take effect until written notice thereof shall be given to the company. It is sometimes held to be merely directory and not to affect the legality of the transfer as between the insurer and the assignee of the policy. Certainly no one but the insurer can question the validity of the assignment where no notice is given. 87 The clause does not,, like that contained in many policies, provide that an assignment without the consent of the company shall be void. As said in a Minnesota case, 88 where the policy contained a somewhat similar provision, "the consent of the company to an as- signment is not necessary. All that is required is that the assign- ment be in writing on the policy and a copy of it furnished to the company within thirty days. This provision is not one which is in- tended to guard against an increase of risk, and does not go to or infuse itself into the essence of the contract. Its sole purpose is to protect the company against the danger of having to pay the policy twice, by requiring written evidence of any change of beneficiaries to be put in reliable form and promptly furnished to the company. All that could, at the very most, be claimed as the effect of non-com- pliance with this stipulation is that the company might disregard an attempted assignment and pay the money to the original beneficiary; in other words, such attempted assignment would be merely voidable at the option of the company." The clause will not prevent the vesting of an equitable interest in the proceeds of the policy in an assignee who has an interest in the continuance of the life of the insured. 89 In Tennessee the court said: 00 "The question as to the necessity of the knowledge and assent of the underwriters to an assignment of the policy is very different with reference to fire policies from life and marine policies. The assent of the company to an assignment, in order to give it validity as against the office in case of a fire policy, is generally admitted; and notice of assignment must, therefore, be ^Embry's Adm'rs v. Harris, 21 w Mutual, etc., Ins. Co. v. Hamil- Ky. L. 714, 52 S. W. 958 (1899). ton, 5 Sneed (Tenn.) 269 (1857); 88 Hogue v. Minnesota Pack., etc., Robinson v. Gator, 78 Md. 72 Co., 59 Minn. 39, 60 N. W. 812 (1893); New York, etc., Ins. Co. v. (1894). Flack, 3 Md. 341, 56 Am. Dec. 742 89 Travelers' Ins. Co. v. Grant, 54 (1852). N. J. Eq. 208, 33 Atl. 1060 (1896). 363 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 40(5 given or the assignee will not be entitled to demand the insurance money. The reason for this requirement in fire policies is obvious. In such cases the personal character of the insured for integrity and prudence is a most important consideration. In the language of the books, there is infused into the contract of fire insurance something of the nature of a choice of persons. The insurer might be quite willing to underwrite a policy for one person, but not that of another of different character and habits. The known reputation of the in- sured might be a guarantee that he would not secretly destroy his own property with a view to recover the insurance money, while that of the assignee might furnish no such assurance. But no such risk exists in case of an insurance on the life of an individual, nor in case of marine policies. In the latter case the assent of the insurer to an assignment of the policy or notice of such assignment is not indispensable, in order to entitle the assignee of the policy to recover the money of the insurer. We are of the opinion, therefore, that, as between the insurer and the assignee of a life policy, notice of as- signment is not required to complete the right of the latter to re- ceive the insurance money from the former." There are decisions, however, to the effect that the company is entitled to the full benefit of this provision of the contract on the theory that it is intended to prevent speculative insurance. 91 Thus, it was said in Massachusetts that, "as the policy of the law accords with its purpose, the court will not regard with favor any rights sought to be acquired in contradistinction to the provision." 92 At the most, a failure to give the required notice invalidates an attempted assignment, but does not avoid the policy. 93 A notice given within a reasonable time after an assignment is sufficient, al- though the insured may have died in the meantime. 94 The provision requiring the consent of the company, "in case of an assignment" of a benefit certificate, does not apply to a change of beneficiaries. 95 Such a provision in a policy, which is payable to the 81 Stevens v. Warren, 101 Mass. The requirement that notice shall 564 (1869); Moise v. Mutual, etc., be given the company and its con- Ass'n, 45 La. Ann. 736 (1893). sent obtained may, of course, be 92 Stevens v. Warren, 101 Mass, waived by the company: Anthony 564 (1869). v. Massachusetts Ben. Ass'n, 158 98 Marcus v. St. Louis, etc., Ins. Mass. 322 (1893). Co., 68 N. Y. 625 (1877). 95 Carpenter v. Knapp, 101 Iowa 84 New York, etc., Ins. Co. v. Flack, 712, 38 L. R. A. 128 (1897). 3 Md. 341, 56 Am. Dec. 742 (1852). 407 STIPULATIONS OF LIFE INSURANCE POLICY. 364 executor or administrator of the insured, with the right to the com- pany at its option to pay the benefit to any of a certain class of persons who should be equitably entitled thereto by reason of having incurred expenses for the benefit of the insured, does not prevent the assignment of a policy by the insured in the absence of its exercise of the option thus reserved. 96 Under the New York statute, which authorizes a married woman to insure her husband's life for her sole use, a policy was held not assignable. The court said: "Policies of life insurance in favor of the wife on the life of the husband we have persistently held to be unassignable. We determined that their peculiar character and purpose necessarily took from them the chief and most important characteristic of property in general." 97 But a subsequent law au- thorizes the assignment of such a policy with the written consent of the husband. 98 Under this statute it was held that an assignment was valid where it appeared that the husband gave his oral consent and the assignment was for a consideration received by him for the purpose of enabling him to maintain his business and support a family. 99 Where a statute authorizes a married woman to sell and convey any of her personal property, she may sell and convey her right to recover upon a policy of life insurance in which she is the bene- ficiary. 100 364. Manner of making assignment. As the intention of the parties must govern, a transfer of the policy by delivery, with verbal directions as to the disposition of the proceeds, is a good assign- ment, 101 notwithstanding the fact that the policy requires the trans- 86 Prudential Ins. Co. v. Young, 14 (N. Y.) 312 (1900), under Laws Ind. App. 560, 43 N. E. 253 (1896). 1879, ch. 248. 87 Eadie v. Slimmon, 26 N. Y. 9 ' JS Dannhauser v. Wallenstein, 60 (1862); Baron v. Brummer, 100 N. Y. Supp. 50 (1899). N. Y. 372 (1885); Dannhauser v. 10 Supreme Assembly v. Campbell, Wallenstein, 65 N. Y. Supp. 219, 52 17 R. I. 402, 13 L. R. A. 601 (1891). App. Div. (N. Y.) 312 (1900). A 101 New York, etc., Ins. Co. v. contrary conclusion was reached un- Flack, 3 Md. 341, 56 Am. Dec. 742 der similar statutes in Maryland in (1852); Chapman v. Mcllwrath, 77 Emerick v. Coakley, 35 Md. 188 Mo. 38, 46 Am. Rep. 1 (1882); (1871). Hewins v. Baker, 161 Mass. 320 88 See Dannhauser v. Wallenstein, (1894), and cases there cited. 65 N. Y. Supp. 219, 52 App. Div. 365 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 408 fer to be in writing. 102 Even delivery of the policy is not always necessary, 103 as where a written assignment is executed and delivered to the assignee, and the policy is retained by the insured. 104 A life insurance policy is assignable by parol when accompanied by a de- livery. 105 A letter from the insured to the insurer, requesting that the insurance be made payable, in case of his death, to his son, is not an assignment of the contract, as under the circumstances the insured retained dominion over it, and could cancel, or, with the consent of the company, modify the same. 106 The execution by the insured of an assignment of a policy to his mother as a gift, he retaining possession of it and notifying her that he had made the assignment, and "would keep it for her," is not a complete delivery, and the insured retains the power to make an- other assignment of the policy. 101 Where the policy was made pay- able to the administrator or executor of the insured, and the insured immediately delivered it to a creditor, saying that it was an over- sight that such creditor was not named as beneficiary, and the cred- itor held the policy until after the death of the insured, it was held that there was a valid assignment of the policy. 108 Even where a writing is required it is not necessary that any par- ticular form of words be used. 109 The language must, however, be sufficient to show an intention to make the assignment, and it seems that written directions as to the manner of the disposition of the fund are not sufficient. 110 365. Assignment of policy by assignee. The assignee of a policy held as collateral security for the debt of the insured can not, in the absence of a provision therefor in the instrument of assign- ment, either sell or surrender up the policy to the company for its cash value until he has given the insured a reasonable time to re- 102 Hewins v. Baker, 161 Mass. 106 Alvord v. Luckenbach, 106 Wis. 320 (1894). 537, 82 N. W. 535 (1900). 103 surges v. New York, etc., Ins. 1OT Weaver v. Weaver, 182 111. 287, Co. (Tex.), 53 S. W. 602 (1899). 55 N. E. 338 (1899). Mailing the policy is a sufficient de- 10S Hancock v. Fidelity, etc., Ins. livery: Ib. Co. (Tenn.), 53 S. W. 181 (1899). 1M Scott v. Dickson, 108 Pa. St. 6, 109 Swift v. Railway, etc., Ass'n, 56 Am. Rep. 192 (1884). 96 111. 309 (1880). 105 Hancock v. Fidelity, etc., Ins. " St. Clair, etc., Soc. v. Fietsam, Co. (Tenn.), 53 S. W. 181 (1899). 97 111. 474 (1881). 409 STIPULATIONS OF LIFE INSURANCE POLICY. 366 deem it. 111 But such an assignee has the right, under proper cir- cumstances, to assign the policy to another party. Thus, one who holds a policy as collateral security for the payment of a note may assign the same to an indorsee of the note and confer on such as- signee the right to hold the policy as collateral security for the note. 112 A policy of life insurance is not a negotiable instrument. Where the insured assigned a policy to H. as security for a debt, and H. subsequently assigned it to a bank as security for money borrowed, it was held that the bank took the policy subject to the equities ex- isting in favor of the insured, unless the conduct of the latter was such as to create an estoppel, and the fact that the assignment from the insured to H. was absolute in form would not create such an es- toppel. It was held, however, that the laches of the insured and his practical abandonment of the policy for eleven years by neglecting to take any active measures to recover it from H., and neglecting during all that time to pay the premiums necessary to keep it from lapsing, would estop him from asserting any rights under the policy or attempting to avail himself of its benefits as against H. or his assignee, the bank, who had kept it alive by paying the premiums at its own expense. 113 VI. Incontestable Clause. This policy,, after two years, will be incontestable, except for non- payment of premiums. 366. Incontestable. This provision is neither unreasonable nor contrary to public policy. 114 There is some controversy as to whether under it the insurer can raise the question of fraud after the expira- tion of the period. It was recently held in Iowa that a provision making a policy absolutely incontestable from date on any ground is unlawful and invalid in so far as it relates to fraud in the pro- curement of the policy. 115 But the weight of authority is to the effect that such stipulation is merely in the nature of a statute of limitations, and is valid even as against the defense of fraud. 11 ' An lll Manton v. Robinson, 19 R. I. "'Clement v. New York L. Ins. 405, 34 Atl. 148, 37 Atl. 148 (1896). Co., 101 Tenn. 22, 46 S. W. 561, 42 112 Corcoran v. Mutual L. Ins. Co., L. R. A. 247 (1898). 183 Pa. 443, 39 Atl. 50 (1898). 115 Welch v. Union, etc., Ins. Co., 113 Brown v. Equitable L. Assur. 108 Iowa 224, 78 N. W. 853 (1899). Soc., 75 Minn. 412 (1899). ""Clement v. New York L. Ins. 366 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 410 exception is made in cases where the insured or the beneficiary has no insurable interest, and that defense, being founded on public policy, is always open to the company. 117 The clause controls all matters which would have the effect of defeating or destroying the contract of life insurance, such as those relating to the cause of death or the habits of the insured, although it will not control matters which affect the remedy merely. 118 A policy containing this provision is not avoided although the insured commits suicide after the expiration of the period, notwith- standing an agreement in the application that suicide is not one of the risks assumed under the policy. 119 It applies where the company seeks to avoid liability by virtue of a clause to the effect that the policy shall be void "if the insured dies in consequence of his own criminal action." 120 In a recent Wiscon- sin case, it was held that the incontestable clause covered misstate- ments or admissions of the insured respecting his health. The court said: 121 "The incontestable clause would seem to effectually bar this defense. If this clause be not altogether a glittering generality put in for no purpose except to induce men to insure, it would seem that it must cover such misstatements or admissions as are here al- leged." In Texas it was held that a clause which provided that if the terms of the policy were complied with, it should be incontestable after one year from its date, rendered the policy incontestable for false warranties after the expiration of one year, although its language was of uncertain and doubtful meaning. 122 Co., 101 Tenn. 22, 42 L. R. A. 247, 121 Patterson v. Natural Premium, 46 S. W. 561 (1898). See 68, supra, etc., Ins. Co., 100 Wis. 118, 42 L. R. 117 Manufacturers' L. Ins. Co. v. A. 253, 75 N. W. 980 (1898); citing Anctil, 28 Can. S. C. 103 (1897). Wright v. Mutual, etc., Ass'n, 118 118 Massachusetts, etc., Ass'n v. N. Y. 237, 23 N. E. 186 (1890); Robinson, 104 Ga. 256, 30 S. E. 918, Simpson v. Life Ins. Co., 115 N. C. 42 L. R. A. 261 (1898). 393, 20 S. E. 517 (1894); Goodwin 110 Goodwin v. Provident, etc., v. Provident, etc., Ass'n, 97 Iowa Ass'n, 97 Iowa 226, 66 N. W. 157, 226, 66 N. W. 157 (1896); Kline v. 32 L. R. A. 473 (1896); Mutual Re- National Ben. Ass'n, 111 Ind. 462, serve, etc., Ass'n v. Payne (Tex.), 11 N. E. 620 (1887). 32 S. W. 1063 (1895). m Franklin Ins. Co. v. Villeneuve 120 Sun L. Ins. Co. v. Taylor, 22 (Tex. Civ. App.), 60 S. W. 1014 Ky. L. 37, 56 S. W. 668 (1900). (1901). 411 STIPULATIONS OF LIFE INSURANCE POLICY. 367 VII. Special Privileges. This policy, while in force, will participate annually in the com- pany's distribution of surplus as ordered by the directors, and the special privileges printed on the third page hereof are hereby made a part of the policy contract. 367. Special privileges. Almost all of the policies now in use contain some such provision as that quoted above. The special privi- leges thus provided for,, of course, differ in each policy, and, there- fore, require no special consideration at this time. VIII. Application a Part of Contract. In consideration of the statements and agreements in the applica- tion for this policy, which are hereby made a part of this contract. 367a. Provisions in the application. The application upon which a policy of life insurance issues is by virtue of this clause in- corporated into and made a part of the contract of insurance. State- ments therein contained in answer to questions of the agent of the company and its medical examiner are generally, in express words, made warranties, and, in the absence of a statute requiring a certain construction, they will be construed as warranties under the general rules already stated. The form of application used by the com- pany whose policy we have been considering contains the following provision in addition to the answers to the specific questions: (a) Excepted Risks. I further agree that the policy hereby applied for shall become and be null and void if, within two years from date hereof, I shall commit suicide while sane or insane; or within such period, and without the written consent of the company, shall reside in or travel to the Philippine Archipelago or the Klondike region, or reside or travel elsewhere than in the remaining portions of the United States and Canada, or in or to Europe, or be personally engaged in blasting, mining, submarine operations, or in the making of explosives, or in the service of any railway train, or on a steam or sailing vessel, or in naval or army service in times of war. 368 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 368. Suicide Sane or insane. In order to avoid the contro- versy which has arisen over the meaning of the word "suicide," the insurance companies now generally protect themselves by providing that the policy shall be void if the insured die by suicide, while sane or insane. 123 In some states this defense is forbidden unless it is made to appear that the insured contemplated suicide at the time he took out the policy. 124 The provision is an exact and reasonable limitation upon the liabil- ity of the company, and under it the insurer is not liable, although the insured kills himself while in a condition which renders him wholly unconscious of the moral nature of the act. 123 It covers a case where the person who commits suicide is entirely bereft of reason. 126 This rule is recognized to its fullest extent by the supreme court of the United States, which, in a leading case, said: 127 "For the purposes of this suit it is enough to say that the policy was rendered void, if the insured was conscious of the physical nature of his act, and intended by it to cause his death, although, at the time, he was incapable of judging between right 123 An examination of the policies and applications now in use shows that almost all the leading com- panies now insert the words "sane or insane." 124 Rev. St. Mo. 1879, 5982; Rev. St. Mo. 1889, 5855; ^tna L. Ins. Co. v. Florida, 69 Fed. 932, 16 C. C. A. 618 (1895), note; Knights Tem- plars, etc., Co. v. Jarman, 104 Fed. 638, 44 C. C. A. 93 (1900); Wallace v. Bankers' L. Ass'n, 80 Mo. App. 102 (1899). See, also, Haynie v. Knights Templars, etc., Co., 139 Mo. 416, 41 S. W. 461 (1897). The Ohio statute providing that the company is estopped to set up certain de- fenses, after the lapse of three years (Rev. St., 3626), does not estop the insurer from defending on the ground of suicide: Starck v. Union, etc., Ins. Co., 134 Pa. St. 45, 19 Atl. 703 (1890). 125 Scherar v. Prudential Ins. Co. (Neb.), 88 N. W. 687 (1902); Tritschler v. Keystone, etc., Ass'n, 180 Pa. St. 205, 36 Atl. 734 (1897); Spruill v. Northwestern, etc., Ins. Co., 120 N. C. 141, 27 S. E. 39 (1897): Zimmerman v. Masonic Aid Ass'n, 75 Fed. 236 (1896); Kel- ley v. Mutual L. Ins. Co., 75 Fed. 637 (1896); Insurance Co. v. Fox, 106 Tenn. 347, 61 S. W. 63 (1901); Hart v. Modern Woodmen, 60 Kan. 678, 57 Pac. 936 (1899); Woiten v. American, etc., Ins. Co. (Tex.), 51 S. W. 1105 (1899); Scarth v. Se- curity, etc., Soc., 75 Iowa 346, 39 N. W. 658 (1888); Leman v. Manhattan L. Ins. Co., 46 La. Ann. 1189, 15 So. 388 (1894). For some lim- itations, see Mutual, etc., Ins. Co. v. Daviess, 87 Ky. 541, 9 S. W. 812 (1888); Sabin v. Senate, etc., 90 Mich. 177, 51 N. W. 202 (1892). 126 De Gogorza v. Knickerbocker, etc., Ins. Co., 65 N. Y. 232 (1875). 127 Bigelow v. Berkshire, etc., Ins. Co., 93 U. S. 284 (1876). See, also, Connecticut, etc., Ins. Co. v. Akens, 150 U. S. 468 (1893). 413 STIPULATIONS OF LIFE INSURANCE POLICY. 369 and wrong and of understanding the moral consequences of what he was doing.'' So, it was held in Michigan that such a proviso "covers all conscious acts of the insured by which death by his own hand is compassed, whether he was at the time sane or insane. If the act was done for the purpose of self-destruction, it matters not that the insured had no conception of the wrong involved in its commission." 128 It is immaterial whether the act was deliberate or otherwise. 129 The policy is void, although the insured acts under an insane impulse which overcomes his will power. 130 369. Where there is no provision as to the effect of suicide. The supreme court of the United States has recently held that in- tentional self-destruction by the assured when sane is not a risk cov- ered by a life insurance policy even when the policy does not except such a death. It was further said that a contract of life insurance which expressly provided for payment if the insured, while sane, took his own life, would be against public policy, as it would have a tendency to tempt persons to commit suicide for the purpose of pay- ing their debts or providing for those who are dependent upon them. 131 Before this decision, the weight of authority sustained the rule that where the contract contains no provision to the effect that suicide shall invalidate the contract, it is no defense to an action on the policy that the insured took his own life. 132 But a distinction should be made between cases where the insured kills himseL' for the purpose of obtaining the money for the use of his own estate, and where the money is payable to a third person as beneficiary. Thus, it was said : 133 "In the law of insurance, suicide is not as a rule recognized 128 Streeter v. Western Union, etc., 332 (1882); Hartman v. Keystone Soc., 65 Mich. 199, 31 N. W. 779, Ins. Co., 21 Pa. St. 466 (1853). See 9 Am. St. 882 (1887). See, also, note in 59 Am. Dec. 487. Sabin v. Senate, etc., 90 Mich. 177, 1W Campbell v. Supreme Conclave 51 N. W. 202 (1890). -(N. J.), 54 L. R. A. 576 (1902); 129 Union etc., Ins. Co. v. Hoi- Seller v. Economic L. Ass'n, 105 lowell, 14 Ind. App. 611, 43 N. E. Iowa 87, 43 L. R. A. 537 (1898); 277 (1896) Darrow v. Family Fund Soc., 116 N. Billings v. Accident Ins. Co., Y. 537, 15 Am. St. 430, 22 N. E. 1093, 64 Vt. 78, 24 Atl. 656, 17 L. R. A. 89 6 L. R. A. 495 (1889). (1892), annotated. 133Kerr v - Minnesota, etc., Soc., '" Ritter v Mutual L. Ins. Co., 39 Minn. 174, 12 Am. St. 631, 39 N. 169 U S. 139 (1897). See s. c. in W. 312 (1888). See Mills v. Reb- 70 Fed. 954; 17 C. C. A. 537 (1895). stock, 29 Minn. 380, 13 N. W. 162 See, also, Supreme Commandery v. (1882); Fitch v. American, etc., Ins. Ainsworth, 71 Ala. 436, 46 Am. Rep. Co., 59 N. Y. 557 (1875). 370 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 414 as a ground of exemption from liability or for forfeiture of a policy issued for the benefit of a third person," In Pennsylvania it was recently held that suicide by the insured under a policy payable to his wife does not, in the absence of any provision on the subject, avoid the policy as against the wife. 134 This rule prevails in Iowa 135 and Illinois/ 36 although it is held that suicide will avoid a policy which is payable to the assured or his personal representatives. This dis- tinction is recognized in most of the cases. 137 Hence a policy which contains no provision with reference to forfeiture if the insured com- mits suicide is void, . where the insured deliberately kills himself in order to secure the money for the benefit of his estate. 138 If, how- ever, the policy is taken out with the preconceived intention, then entertained by the insured, of taking his own life for the purpose of obtaining the insurance money, the contract is void by reason of such fraud, although it contains no provision with reference to the effect of suicide. 139 370. Suicide Construction. There has been so much contro- versy and resulting confusion over the meaning of these words, as used without other descriptive words, that it is a relief to find the insurance companies inserting the clear and definite clause which has been quoted. Where the policy simply provides that suicide by the insured shall render it invalid, the weight of authority supports the rule established by the supreme court of the United States in the well-known Terry case. 140 The policy there under consideration required the interpretation of the phrase "death by his own hand." The court charged the jury that "if he was impelled to the act by an insane impulse which the reason that was left him did not enable him to resist, or, if his reasoning powers were so far overthrown by 134 Morris v. State, etc., Assur. Co., 139 Parker v. Des Moines L. Ass'n, 183 Pa. St. 563, 39 Atl. 52 (1897). 108 Iowa 117, 78 N. W. 826 (1899); Contra, Hopkins v. Northwestern Smith v. National Ben. Soc., 123 L. Assur. Co., 94 Fed. 729 (1899). N. Y. 85 (1890). 135 Parker v. Des Moines L. Ass'n, ""Life Ins. Co. v. Terry, 15 Wall. 108 Iowa 117, 78 N. W. 826 (1899). (U. S.) 580 (1872). See, also, 136 Supreme Lodge v. Kutscher, 72 Mutual L. Ins. Co. v. Leubrie, 71 111. App. 463 (1897). Fed. 843, 18 C. C. A. 332 (1895). m See Patterson v. Natural Prem., The words "die by his own hand," etc., Ins. Co., 100 Wis. 118, 75 N. W. or "by his own act," mean suicide: 980 (1898), and cases there cited. Mutual L. Ins. Co. v. Wiswell, 56 188 Ritter v. Mutual L. Ins. Co., 70 Kan. 765, 44 Pac. 996 (1896). Fed. 954, 17 C. C. A. 537 (1895). 415 STIPULATIONS OF LIFE INSURANCE POLICY. 370 his mental condition that he could not exercise his reasoning facul- ties on the act he was about to do, the company is liable." In affirm- ing the decision of Mr. Justice Miller at circuit, the supreme court, through Mr. Justice Hunt, said: "We hold the rule in question to be this: If the assured, being in the possession of his ordinary reasoning faculties, from anger, pride, jealousy, or a desire to escape from the ills of life, intentionally takes his own life, the proviso attaches and there can be no recovery. If the death is caused by the voluntary act of the insured, he knowing and intending that his death shall be the result of his act, but when his reasoning faculties are so far impaired that he is not able to understand the moral char- acter, the general nature, consequences and effect of the act he is about to commit, or when he is impelled thereto by an insane im- pulse, which he has not the power to resist, such death is not within the contemplation of the parties to the contract, and the insurer is liable." In a subsequent case in the same court, 141 where the policy con- tained a provision to the effect that "the self-destruction of the in- sured in any form, except upon proof that the same is the direct result of disease or accident occurring without the voluntary act of the insured" should avoid the policy, Mr. Justice Gray said : "This case is governed by a uniform series of decisions establishing the fact that if one whose life is insured intentionally kills himself when*his reasoning faculties are so far impaired by insanity that he is unable to understand the moral character of his act, even if he does under- stand its physical nature, consequence and effect, it is not 'suicide' or 'self-destruction/ or 'dying by his own hand/ within the meaning of those words in a clause excepting such risks out of a policy and con- taining no further words expressly extending the exemption to such case." 142 It was held that the clause under consideration covered a case of the insured's death as the result of taking poison when his mind was so far deranged as to be unable to understand the moral character of his act, although he did understand its physical conse- quences. Of course, accidental self-destruction is not suicide or self-destruc- 141 Connecticut, etc., Ins. Co. v. U. S. 232 (1877); Manhattan L. Ins. Akens, 150 U. S. 468 (1893). Co. v. Broughton, 109 U. S. 121 142 Life Ins. Co. v. Terry, 15 Wall. (1883); Connecticut, etc., Ins. Co. (U.S.) 580 (1872); Bigelow v. Berk- v. Lathrop, 111 U. S. 612 (1884); shire, etc., Ins. Co., 93 U. S. 284 Accident Ins. Co. v. Crandall, 120 (1876); Insurance Co. v. Rodel, 95 U. S. 527 (1887). 371 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 416 tion within the meaning of such provision in an insurance contract. 143 A provision in a policy that "self-destruction, sane or insane," is a risk not assumed by the company under the contract, applies only to sui- cide intentionally committed. 144 So, the phrase, "die by his own hand or act, voluntary or otherwise," does not include the innocent or accidental taking of an overdose of medicine. 145 371. Presumption Burden of proof. The presumption is al- ways against the fact of suicide, and therefore, where there is a reasonable doubt whether death was due to suicide or accident, the presumption is in favor of accident. 146 "It is a proposition of law, supported by authority as well as reason, that this and similar clauses in policies of insurance, con- ceding them to be valid, are not infracted by the accidental and mis- taken taking of an overdose of medicine or poison or by any unin- tentional taking of his life by the insured. 147 The principle or rule in cases of this character is equally supported that suicide or inten- tional destruction by one's own hand is not presumed. The pre- sumption is otherwise. A company interposing a defense of suicide, whether sane or insane, must overcome this presumption, and must satisfy the jury or court trying the case by a preponderance of the evidence that the self-destruction was intentional." 148 The presump- 143 Pierce v. Travelers', etc., Ins. U. S. 468 (1893); Ingersoll v. Co., 34 Wis. 389 (1874); Edwards v. Knights, etc., 47 Fed. 272 (1891); Travelers' L. Ins. Co., 20 Fed. 661 Travellers' Ins. Co. v. Sheppard, 85 (1884); note to Breasted v. Farm- Ga. 751 (1890); Fidelity & C. Co. v. ers', etc., Co., 8 N. Y. 299, 59 Am. Freeman, 109 Fed. 847, 48 C. C. A. Dec. 489 (1853). 692 (1901). 144 Union, etc., Ins. Co. v. Payne, 147 Penfold v. Universal, etc., Ins. 105 Fed. 172, 45 C. C. A. 193 (1900). Co., 85 N. Y. 317, 39 Am. Rep. 660 145 Penfold v. Universal, etc., Ins. (1881); Walcott v. Metropolitan L. Co., 85 N. Y. 317, 39 Am. Rep. 660 Ins. Co., 64 Vt. 221, 24 Atl. 992 (1881); Bachmeyer v. Mutual, etc., (1891); Phadenhauer v. Germania, Ass'n, 82 Wis. 255, 52 N. W. 101 etc., Ins. Co., 7 Heisk. (Tenn.) 567, (1892); Northwestern, etc., Ins. Co. 19 Am. Rep. 623 (1872). v. Hazelett, 105 Ind. 212, 4 N. E. 582 I48 Brown v. Sun, etc., Ins. Co. (1885); Burkhard v. Travelers' Ins. (Tenn.), 51 L. R. A. 252 (1899); Co., 102 Pa. St. 262 (1883). See, citing Mallory v. Travelers' Ins. Co., also, Equitable, etc., Soc. v. Patter- 47 N. Y. 52, 7 Am. Rep. 410 (1871); son, 41 Ga. 338, 5 Am. Rep. 535 Cronkhite v. Travelers' Ins. Co., 75 (1870). Wis. 116, 43 N. W. 731 (1889); Wal- 148 Travelers' Ins. Co. v. Me- cott v. Metropolitan L. Ins. Co., 64 Conkey, 127 U. S. 661 (1887); Con- Vt 221, 24 Atl. 992 (1891); Free- necticut, etc., Ins. Co. v. Akens, 150 man v. Travelers' Ins. Co., 144 Mass. 417 STIPULATIONS OF LIFE INSURANCE POLICY. 372 tion against suicide is sometimes said to exist only when the insured was sane. 149 The rule that the burden rests upon the insurance company to establish such defense affirmatively is not changed by the fact that the proofs of death furnished by the plaintiff stated the cause of death as suicide. 150 But it is incumbent on the plaintiff to show that he was mistaken when he made the statement in the proofs. 151 So, where it appeared that the death of the insured was caused by the taking of an overdose of morphine, the plaintiff prevailed because the defendant failed to prove by a preponderance of the evidence that the insured in taking the drug intended to end his own life. 152 372. Residence and occupation. The provisions above quoted with reference to residence, occupation and travel are clear and spe- cific. Where the policy prohibited residence south of a certain de- gree of latitude, but gave permission to pass "as a passenger by the usual routes of public conveyance to and from any port or place within the limits," it was held not to be invalidated by the fact that the insured was compelled by sickness to interrupt his journey while in a place in which travel was permitted but residence prohibited. 153 The provision with reference to residence is waived by the recep- tion and retention by the company of the premium after notice of a breach of the condition to an agent authorized to receive, and who did receive and retain the premium. 154 572 (1887); Persons v. State, 90 Ins. Co. v. Akens, 150 U. S. 468 Tenn. 291, 16 S. W. 726 (1891); (1893). Accident Ins. Co. v. Bennett, 90 15 Home Ben. Ass'n v. Sargent, Tenn. 256, 16 S. W. 723 (1891). 142 U. S. 691 (1891); Union, etc., See further, as to the presumption Ins. Co. v. Payne, 105 Fed. 172, 45 with reference to death by suicide, C. C. A. 193 (1900); Leman v. Man- Mutual L. Ins. Co. v. Wiswell, 56 hattan L. Ins. Co., 46 La. Ann. 1189, Kan. 765, 35 L. R. A. 258 (1896); 15 So. 388 (1894). Johns v. Northwestern, etc., Ass'n, m Keels v. Mutual, etc., Ass'n, 29 90 Wis. 332, 41 L. R. A. 547 (1895); Fed. 198 (1886); Dennis v. Union, Standard, etc., Ins. Co. v. Thornton, etc., Ins. Co., 84 Cal. 570, 24 Pac. 100 Fed. 582, 40 C. C. A. 564, 49 L. 120 (1890). R. A. 116 (1900); Connecticut, etc., m Brown v. Sun L. Ins. Co. Ins. Co. v. McWhirter, 73 Fed. 444, (Tenn.), 57 S. W. 415 (1899). 19 C. C. A. 519 (1896). 183 Converse v. Knights Templars', ""Mutual, etc., Ins. Co. v. Daviess, etc., Co., 60 U. S. App. 288 (1898). 87 Ky. 541, 9 S. W. 812 (1888). See 1M Germania L. Ins. Co. v. language used in Connecticut, etc., Koehler, 168 111. 293, 48 N. E. 297 (1897). 27 ELLIOTT INS. 373 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 418 The policy also requires the applicant, in response to a question, to state his occupation kind of business and position. The state- ment with reference to occupation must be substantially true or the policy will be rendered void. 155 But a statement that the applicant is a soda-water maker, when he is in fact a soda-water seller, is not a breach of warranty. 156 Where the insured in his application stated that his occupation was that of a dry goods store-keeper, it was held that a failure to disclose that he was occasionally employed as a bevel-smoother of plate glass did not, in the absence of a fraudulent intent to mislead, invalidate the policy. 157 373. Death in violation of law or at the hands of justice. Many insurance contracts provide that the insurer shall not be liable if the insured comes to his death at the hands of justice, or while en- gaged in the violation of law. The death of a woman which results from her voluntary submission to an illegal operation for abortion results from a violation of law within the meaning of this provision, and invalidates the policy. 158 So, the fact that the insured was shot by a police officer a few minutes after he had committed a robbery, and while he was attempting to escape, prevents a recovery on the policy, as the insured died in consequence of his own criminal ac- tion. 159 A by-law of an insurance company which provides that there can be no recovery should a member come to his death in consequence of a violation of a criminal law embraces any act of the insured which may be denominated a crime, although it is not a felony. But it was held that where the insured struck another with his hand, and the latter, after throwing him down, inflicted injuries from which the insured died, such death was not in consequence of a viola- tion of a criminal law within the contemplation of the parties. 160 When suicide is not a crime under the laws of the state, a pol- icy which contains a clause to the effect that "it is to be void if the member herein shall die in consequence of a duel or at the hands of 1H Dwight v. Germania L. Ins. Co., 720 (1900). See illustrations, 395, 103 N. Y. 341 (1886). infra. Grattan v. Metropolitan L. Ins. 158 Wells v. New England, etc., Ins. Co., 80 N. Y. 281, 36 Am. Rep. 617 Co., 191 Pa. St. 207, 43 Atl. 126 (1880); Kenyon v. Knights Tern- (1898). plar, etc., Ass'n, 122 N. Y. 247 159 Prudential Ins. Co. v. Haley, 91 (1890). 111. App. 363 (1900). ^Perrin v. Prudential Ins. Co., 1GO Brown v. Supreme Lodge, 83 30 Misc. (N. Y.) 608, 62 N. Y. Supp. Mo. App. 633 (1900). 419 STIPULATIONS OF LIFE INSURANCE POLICY. 373 justice, or by any violation of or an attempt to violate any criminal law of the United States, or of any state or country in which the member herein named may be/' is not invalidated although the laws of the state make an attempt to commit suicide a crime. The court said: 161 "By the act of taking his own life he violated no criminal law unless the attempt to do it may be distinguished from the act accomplished. An act is characterized by the purpose, when ascer- tained, of the party doing it, or by its result. If the act fails to ac- complish its purpose, it constitutes an attempt; but if the result of it is the consummation of the purpose, the act is not commonly desig- nated an attempt." Although suicide is still technically a crime, if there is no pun- ishment provided for either an attempted or an accomplished sui- cide, it is not within such a provision. Especially should this be held where the company has stricken out the usual suicide clause. 182 A suicide committed by an alleged fugitive from justice to avoid arrest and trial for a crime is not the proximate result of the alleged crime, and hence is not within the proper meaning of the provision that "if the assured shall die in, or in consequence of, the violation of any criminal law of any country, state or territory in which the assured may be," the policy shall be void. 163 Even though a policy contains no provision for forfeiture in the event of the execution of the insured for a crime, there can be no recovery when the insured is executed. In the oft-cited Fauntleroy case, 164 Lord Lyndhurt held that a policy assuming to insure against such a risk would be void as against public policy. This rule applies where it is alleged that the conviction was erroneous and the insured in fact innocent, as it would be equally against public policy to allow insurance against the miscarriage of justice. "A contract of life in- surance, written to insure against a capital conviction in the estab- lished courts of competent jurisdiction, in the event that such con- viction is unjust and unwarranted by the evidence, is void, as against public policy." 166 181 Darrow v. Family Fund Soc., Ins. Co., 100 Wis. 118, 75 N. W. 980, 116 N. Y. 537, 22 N. E. 1093, 6 L. R. 42 L. R. A. 253 (1898). A. 495, 15 Am. St. 430 (1889); 193 Kerr v. Minnesota, etc., Ass'n, Meachem v. New York, etc., Ass'n, 39 Minn. 174, 39 N. W. 312 (1888). 120 N. Y. 237, 24 N. E. 283 (1890). 164 Amicable Society v. Bolland, 4 See also, 401, infra. Bligh (N. S.) 194, 211 (1830). 182 Patterson v. Natural Prem., etc., 1M Hurt v. Union, etc., Ins. Co., 105 Fed. 419, 44 C. C. A. 548 (1900). 374 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 420 (b ) Statements with Reference to Habits, Physical Condition, Etc. 374. Habits. A false statement to the effect that the applicant does not drink spirituous liquors will avoid the policy. 166 Such a statement precludes a recovery although he does not use liquor ex- cessively or intemperately, notwithstanding a statute which pro- vides that all statements in the application shall be deemed repre- sentations and not warranties. 167 A statement that the applicant is of temperate habits does not mean that he is a total abstainer, 168 and the supreme court of the United States has held that a man may be of temperate habits although he has once had delirium tremens. 169 Where the applicant stated that he had never used narcotics, it was held that the company could not defeat liability by showing a use of narcotics which did not amount to a custom or habit. 170 Where the applicant stated that he had always been temperate, and that the last time he had consulted a physician was about a year before for influenza, and ,he died of influenza four months after the policy was issued, and it appeared that before the application was made he had been frequently drunk and had consulted a physician within four months for vomiting and nausea caused by drunkenness, it was held that there was a breach of a material warranty, and there could be no recovery on the policy. 171 An applicant for insurance stated that he had never been intem- perate in the use of intoxicating liquors, and in construing the state- ment the court said : 172 "An occasional excess in the use of intoxicat- ing liquor does not of itself constitute a habit, and make a man in- temperate within the meaning of this policy; but if the habit has been formed and is indulged in of drinking to excess and becoming 163 Malicki v. Chicago, etc., Soc., import abstemiousness, or at least 119 Mich. 151, 77 N. W. 690 (1899). moderation 187 Union, etc., Ins. Co. v. Lee, 20 "The rule of not too much, Ky. L. 839, 47 S. W. 614 (1898). But by temperance taught." 168 Van Valkenburgh v. American " National Fraternity v. Karnes Ins.' Co., 70 N. Y. 605 (1877). (Tex. Civ. App.), 60 S. W. 576 ""Insurance Co. v. Foley, 105 U. (1901). S. 350 (1881); disapproving Thorn- m Mengel v. Northwestern, etc., son v. Weems, L. R. 9 App. Gas. Ins. Co., 176 Pa. St. 280, 35 Atl. 197 671 (1884), where it was said that (1896). "temperate in habits" is a phrase m Union, etc., Ins. Co. v. Reif , 36 to be interpreted, and though not Ohio St. 596, Woodruff Ins. Gas. 295 to be taken in a Pythagorean sense (1881). as total abstinence, yet seems to 421 STIPULATIONS OF LIFE INSURANCE POLICY. :< :;;.*, intoxicated, whether daily and continuously or periodically, with sober intervals of greater or less length, a person addicted to such habit can not be said to be of temperate habits within the meaning of this policy. * * * The habit of using intoxicating liquors to excess is the result of indulging a natural or acquired appetite by continued use until it becomes a customary practice. This habit may manifest itself in practice by daily or periodical intoxication or drunkenness. Within the purview of these questions it must have existed at some previous time or at the date of the application. It is not essential to its existence that it should be continuously prac- ticed, or that the insured should be daily and habitually under the influence of liquor. Where the general habits of the man are either abstemious or temperate, an occasional indulgence to excess does not make him a man of intemperate habits, but if the habit is formed of drinking to excess, and the appetite for liquor is indulged to in- toxication, either constantly or periodically, no one may claim that his habits are temperate though he may be sober for longer or shorter periods in the intervals between the times of his debauches." 375. Health and freedom from disease. A statement that the applicant is in "good health" means that he is free from disease or ailments which affect the general healthfulness of his system, and not from mere indisposition, which does not tend to undermine or weaken his constitution. 173 The applicant is not required to know and state with absolute certainty his physical condition or his predis- position to different diseases, and it is sufficient that he in good faith discloses fully all that he knows about his past and present health. 174 Hence, a statement that a person is in good health, made in an application for reinstatement of a lapsed policy, does not mean that his health is absolutely perfect; but means that it was practically the same as it was when the policy was issued. 175 Sound health means freedom from disease or ailment which affects the general soundness or healthfulness of the system seriously, and the word "serious" is not generally used to describe a dangerous condi- tion, but rather a grave, important or weighty trouble. 176 173 Plumb v. Penn, etc., Ins. Co., 176 Massachusetts, etc., Ass'n v. 108 'Mich. 94, 65 N. W. 611 (1895). Robinson, 104 Ga. 256, 30 S. E. 918, 174 Endowment Rank v. Cogbill, 99 42 L. R. A. 261 (1898). Tenn. 28, 41 S. W. 340 (1897); ""Brown v. Metropolitan L. Ins. Moulor v. American L. Ins. Co., Ill Co., 65 Mich. 306, 32 N. W. 610 U. S. 335 (1884). (1887); Metropolitan L. Ins. Co. v. 375 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 422 A temporary indisposition such as an ordinary cold is not an ill- ness within the meaning of that word as used in an application for a policy. 177 A man who has a cold, on account of which he is in bed, may be in good health within the meaning of such a clause, and this is not affected by the fact that he was taken with pneumonia and died a few days after the premium was paid. 178 Where the applicant, in answer to a question whether he had ever had any "illness, local dis- ease, injury, mental or nervous disease, or infirmity, or ever had any disease or weakness of the head, throat, heart, lungs, stomach, kidneys, bladder, or any disease or infirmity whatever/' answered "No," it was held not untrue, although a year before he had been treated by a physician while insensible from the influence of chloroform, pre- sumably taken with suicidal intent. 179 A failure of the applicant to state, in reply to a question as to when and for what diseases he has consulted a physician, that he had taken the Keeley cure for alcoholism is not a misrepresentation, as drunkenness is not a disease within the meaning of this inquiry. 180 A statement in the application that the applicant since childhood had not had the disease or disorder of spitting of blood is material, and invalidates the policy where it appears that within a year prior to the application he had a hemorrhage, in regard to which he con- sulted a physician. 181 So, where the applicant stated that he had never had kidney disease and had not been attended by a physician within two years, and proofs of death were made by a physician, wherein it was stated that he had attended the assured for acute kidney disease and that he had died of Bright's disease, and the proofs were by the contract made evidence against the insured, it was held that the falsity of the answers was established, and that there could be no recovery. 182 So, where the applicant stated that he had been in good health, with the exception of having had yellow fever seven or eight years before, and that he had no physician and had Howie, 62 Ohio St. 204, 56 N. E. 18 Supreme Lodge v. Taylor 908 (1900). (Ala.), 24 So. 247 (1898). 177 Billings v. Metropolitan L. Ins 181 Smith v. Northwestern, etc., Co., 70 Vt. 477, 41 Atl. 516 (1898). Ins. Co., 196 Pa. St. 314, 46 Atl. 426 178 Barnes v. Fidelity, etc., Ass'n, (1900). 191 Pa. St. 618, 45 L. R. A. 264, 43 182 Trudden v. Metropolitan L. Ins. Atl. 341 (1899). Co., 64 N. Y. Supp. 183, 50 App. Div. 179 Mutual, etc., Ass'n v. Farmer, (N. Y.) 473 (1900). 65 Ark. 581, 47 S. W. 850 (1898). 423 STIPULATIONS OF LIFE INSURANCE POLICY. 375 never been an inmate of any infirmary or hospital, and that he had never had any illness or ailment of any kind, it was held that there could be no recovery where it appeared that prior to the application the applicant was subject to fits, that he had been an inmate of two different hospitals, and had suffered from a severe gunshot wound. 188 So, where the applicant stated that he had never had any serious ill- ness, and it appeared that two months before he made the applica- tion he had a severe attack of typhoid fever, the policy was held in- valid, although there was opinion evidence to the effect that for "life insurance purposes typhoid fever is not a dangerous disease." 184 It is difficult to give any precise definition of the word "health." As said in New York : "It is a relative term. It refers to the condition of the body. Thus, it is frequently characterized as perfect, as good, as indifferent, and as bad. The epithet 'good' is comparative. It 'does not require absolute perfection. When, therefore, one is de- scribed as being in good health, that does not necessarily or ordinarily mean that he is absolutely free from all and every ill that flesh is heir to. If the phrase should be so interpreted as to require entire exemption from physical ills, the number to whom it would be strictly applicable would be very inconsiderable. In applying terms somewhat indefinite, reference should be had to the business to which they relate. This rule is very necessary when construing a language which like ours is defective in precision. The most important ques- tion on applications for life insurance is whether the proponent is exempt from any dangerous disease, one which frequently terminates fatally. It is not usually deemed an objection that one has some slight physical disturbance of which in all human probability he will soon be relieved, although it might possibly lead to a fatal disease. A slight difficulty, such as the sting of a bee, a boil, or a common cold, has sometimes induced complaints which have shortened human life; but this result is so infrequent and improbable that the mere pos- sibility is disregarded in the business of life insurance." 185 A person may be in good health although he has a touch of dys- pepsia. 186 A disorder or congestion of the liver is not necessarily a 183 Petitpain v. Mutual Ass'n, 52 18 Peacock v. New York L. Ins. La. Ann. 503, 27 So. 113 (1900). Co., 20 N. Y. 293 (1859). 184 Meyers v. Woodmen, etc., 193 186 Morrison v. Wisconsin, etc., Pa. St. 470, 44 Atl. 563 (1899). Ins. Co., 59 Wis. 162 (1884). 376 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 424 disease of the liver. 187 Questions of this character should be left for the jury to determine. 188 A policy is invalid where it appears that it was issued while the insured was dangerously ill from appendicitis, and the premium was paid by his private secretary, who intentionally concealed the fact of such illness from the officers of the company and stated that the insured was away and had left funds with which to pay the pre- mium. 189 376. Bodily injuries. Where the applicant stated : "I have never been physically injured," the court said: "The reasonable in- terpretation of the clause is that the decedent was at the time free from serious physical injury, and that any injuries he may have suf- fered from in the course of his previous life had disappeared and left no trace behind that would render him an unfit subject for accident insurance; that he was, as to such accidents and their results, free from bodily ailments/' 190 Where the applicant falsely stated that there was nothing in his physical condition tending to shorten life which was not in the ap- plication, while as a matter of fact his shoulder was in a serious condition as a result of a gunshot wound and an operation, which had not been disclosed, the company was held not estopped from relying upon this false statement by the fact that the applicant called the agent's attention to the arm and showed his use thereof. 191 Where the applicant was asked, "Have you ever had any difficulty with your head or brain?" and answered, "No," it was held that the question called for a functional or organic derangement, and did not require the disclosure of the fact that he had been subject to periodic headaches. 192 377. Medical attendance. A false statement with reference to having consulted a medical attendant invalidates the policy. 193 If 18T Cushman v. United States L. tin, 133 Ind. 376, 33 N. E. 105 Ins. Co., 70 N. Y. 72 (1877). (1893). 188 Mutual, etc., Ins. Co. v. Daviess, m National Fraternity v. Karnes 87 Ky. 541 (1888). (Tex. Civ. App.), 60 S. W. 576 189 Equitable L. Assur. Soc. v. Me- (1901). Elroy, 83 Fed. 631, 28 C. C. A. 365 m Higbie v. Guardian, etc., Ins. (1897). ' Co., 53 N. Y. 603 (1873). 190 Standard, etc., Ins. Co. v. Mar- 193 Phillips v. New York, etc., Ins. Co., 9 N. Y. Supp. 836 (1890). 425 STIPULATIONS OF LIFE INSURANCE POLICY. 378 the insured has been attended by a physician within the prescribed time it is his duty to state the fact to the company, as it is entitled to know for what cause he had medical advice, and the name and address of the physician consulted in order that it may make further inquiries from him with reference to the physical condition of the applicant. 194 A statement with reference to having consulted a physician is material to the risk within the meaning of a statute which provides that the falsity of a statement in the application for life insurance shall be no defense to an action on the policy unless it is material to the risk. 195 The question refers to a consultation about some substantial injury or ailment, and not concerning a slight and temporary indisposi- tion. 190 Thus, consulting a physician for a cold is not a breach of the condition that the insured has not been under the care of a physi- cian for two years. 197 So, calling at a physician's office for medicine to relieve a temporary indisposition, or calling at the house of a physician for the same purpose, is not a breach of a warranty that the applicant has not consulted a physician since childhood except for the measles. 198 "If the insured went to a physician for the purpose of getting his aid, advice or assistance as a physician for a difficulty under which he was then suffering, or supposed himself to be suffering, and the physician, hearing what the insured had to say, as a physi- cian, for the purpose of relief or aid or cure or assistance, gave to the insured medicine, then it might be said that the said physician prescribed for him." 199 An applicant was asked, "How long since you have consulted a physician?" and answered, "Five years." It appeared that he had consulted a physician the previous year, and it was held insufficient to establish the falsity of the answer, as the question was ambiguous. 200 378. Family relationship. The insurance company is entitled to have correct answers given to questions with reference to the family 194 United Brethren, etc., Soc. v. 19T Metropolitan L. Ins. Co. v. O'Hara, 120 Pa. St. 256, 13 Atl. 932 Larson, 85 111. App. 143 (1899). (1888). 1M Billings v. Metropolitan L. Ins. 195 Fidelity, etc., Ass'n v. Me- Co., 70 Vt. 477, 41 Atl. 516 (1898). Daniel, 25 Ind. App. 608, 57 N. E. 19 Cobb v. Covenant, etc., Ass'n, 645 (1900). 153 Mass. 176 (1891). 198 Hubbard v. Mutual, etc., Ass'n, 20 Stewart v. Equitable, etc., 100 Fed. 719, 40 C. C. A. 665 (1900). Ass'n, 110 Iowa 528, 81 N. W. 782 (1899). 379 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 426 relationships of the applicant, and a false statement with reference thereto will invalidate the policy. Thus, a false statement that the applicant is a widower, 201 or that he is a single man, 202 will render the policy void, although a statement that the person named as bene- ficiary is a cousin of the applicant is immaterial. 203 The applicant is often asked as to the cause of the death of deceased members- of his family, and as the cause of death is often a mere matter of opin- ion, about which even physicians may differ, an untrue statement with reference to the same will not invalidate the policy when made in good faith. 204 So, a statement by the applicant to a medical ex- aminer of the insurance company that he had no dead brother was construed to be a representation which would not invalidate the policy in the absence of fraud or intentional misstatement, although the application signed by him stated that the answers were warranted to be true. 205 379. Other insurance. A false answer in response to a question as to other insurance will invalidate a policy. 208 The only ques- tion which is liable to arise in reference to other insurance in con- nection with life insurance contracts is whether it includes certifi- cates in mutual benefit associations. On this the authorities are conflicting. In some states it has been held that such associations are insurance companies, and their contracts are properly termed policies, and hence constitute other insurance. 207 In others such associations are not treated as insurance companies, but belong to a recognized class of organizations known as benevolent associations. 208 201 United Brethren, etc., Soc. v. N. W. 4 (1888); Co-operative, etc., White, 100 Pa. St. 12 (1882). Ins. Order v. Lewis, 12 Lea (Tenn.) 202 Jeffries v. Life Ins. Co., 22 Wall. 136 (1883); Presbyterian, etc., As- (U. S.) 47 (1874). sur. Fund v. Allen, 106 Ind. 593, 7 ""Britten v. Supreme Council, 46 N. E. 317 (1886); Sherman v. Com., N. J. Eq. 102 (1889). 82 Ky. 102 (1884); Commonwealth 204 Knights of Honor v. Dickson, v. Wetherbee, 105 Mass. 149 (1870). 102 Tenn. 255, 52 S. W. 862 (1899). 20S Masonic Aid Ass'n v. Jones, 154 208 Globe, etc., Ins / Co. v. Wagner, Pa. St. 99, 26 Atl. 253 (1893); Com- 188 111. 133, 58 N. E. 970 (1900). monwealth v. Equitable Ben. Ass'n, See 108a, supra. 137 Pa. St. 412, 18 Atl. 1112 (1890); 200 Clapp v. Massachusetts Ben. Lithgow v. Supreme Tent, etc., 165 Ass'n, 146 Mass. 519 (1888); Bruce Pa. St. 292, 30 Atl. 830 (1895); v. Connecticut, etc., Ins. Co., 74 Theobald v. Supreme Lodge, etc., 59 Minn. 310 (1898). Mo. App. 87 (1894). 207 State v. Nichols, 78 Iowa 747, 41 427 STIPULATIONS OF LIFE INSURANCE POLICY. 380 The circuit court of appeals, in considering this question, said: 208 "It will be conceded that these associations, which are primarily for social and charitable purposes and for securing efficient mutual aid among their members, are not usually described as insurance com- panies. That the certificate which they issue to a member, insuring upon certain conditions the payment of a sum certain to a member's representatives on his death, has much resemblance in form, purpose and effect to an insurance policy is true ; and if we were called upon to give the application a wide and liberal construction in favor of the insurance company, we might properly hold that the language em- braces in its scope every association or individual contracting to pay money to one's representatives in the event of his death. Such con- struction might be warranted by the probable purpose of the question to enable the company to judge how great a motive his life insurance would furnish the applicant for self-destruction or fraudulent simu- lation of death. But we are considering a contract and application drawn with great nicety by an insurance company and framed with the sole purpose of eliciting from the insured full information of all circumstances which the company's long experience has led it to be- lieve to be valuable in calculating the risk. We can not presume the company to have been ignorant of the fact that large numbers of per- sons have taken out life insurance in mutual benefit associations which are not ordinarily described as insiirance companies, and that doubt has often arisen whether the contracts they is^ue are properly or technically described as life insurance at all. 210 Having in view the well established rule that insurance contracts are to be construed against those who frame them and that any doubt or ambiguity in them is to be resolved in favor of the insured, we conclude that a certificate in a mutual benefit and social society was not within the description 'policy of life insurance in any other company.' * 380. Rejection of former application. Insurance companies often ask whether the applicant has' previously applied for insurance in any other company and been rejected. A party signed an appli- cation for life insurance, and after the medical examination was sub- stantially completed refused to comply with certain physical tests which were required. The company thereupon rejected his applica- 209 Penn, etc., Ins. Co. v. Mechanics' 21 Continental L. Ins. Co. v. Cham- Sav., etc., Co., 72 Fed. 413, 19 C. C. berlain, 132 U. S. 304 (1889). A. 286 (1896). 380 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 428 tion and notified him of the fact by mail. Subsequently he applied to another company for insurance, and, in answer to a question, stated that he had not formally made a proposal or application to any com- pany, .agent, or association, on which a policy had not been issued. It was held that this answer was substantially and technically false and avoided the policy. 211 A person applied to an agent of an insurance company for insur- ance upon his life, filled up and signed an application which the agent was authorized to reduce to writing. The agent and the appli- cant then went to the office of the medical examiner, but, not finding- him in, no examination was made. The agent subsequently went to the medical examiner alone with the application, which had been delivered to him, and was advised by the examiner that, having at- tended the applicant professionally, he was aware that the applicant was not insurable, and that it was useless to examine him. The ap- plication, which had been reduced to writing by the agent, was there- upon destroyed. It was held that these facts established conclusively that an application for insurance had been made within the purview of a question propounded by another company to the same person subsequently applying for insurance, as to whether an application for insurance had ever been made by him to any other company. 212 The organization known as the Royal Arcanum is an "association'' within the meaning of the word as used in the question, "Has any company or association ever declined or postponed granting or re- viving insurance on your life, either for any particular amount or in any particular form?" 213 Where the applicant was asked the question, "Has an examining physician for a life insurance company or order declined to recom- mend your application?" and answered, "No," it was held that the false statement invalidated the policy. 214 211 Security, etc., Ins. Co. v. Webb, 213 Bruce v. Connecticut, etc., Ins. 106 Fed. 808, 45 C. C. A. 648 Co., 74 Minn. 310, 77 N. W. 210 (1901). (1899), and cases therein cited. 212 Edington v. ^tna L. Ins. Co., 2U Finch v. Modern Woodmen, 113 77 N. Y. 564 (1879), 100 N. Y. 536, Mich. 646, 71 N. W. 1104 (1897). 3 N. E. 315 (1885). CHAPTER XV. ACCIDENT INSURANCE. SEC. 390. In general. 391. Definition of accident. I. Construction of Provisions of Policy. 392. External, violent, or accidental injuries. 393. Risks of travel. 394. Inhaling gas Poison. 395. Occupation or employment. 396. External signs. II. Excepted Risks. 397. Effect of negligence. SEC. 398. Voluntary exposure to unneces- sary dangers. 399. Bodily infirmity or disease. 400. Injuries intentionally inflicted by others. 401. Injuries received while engaged in violation of law. 402. Injuries received while intoxi- cated. 777. General Provisions. 403. Amount of recovery Disabil- ity. 404. Construction Effect of existing judicial decisions. 390. In general. The lack of uniformity in accident insurance policies and the great number of conditions and limitations with which they are at present incumbered renders it impracticable to arrange the matter of this chapter under the provisions of a model form. 391. Definition of accident. "Accidental" means happening by chance; unexpectedly taking place; not according to the usual course of things, or not as expected. 1 It includes any unusual or unexpected result which attends the performance of a usual act. 2 Thus, within 1 Lovelace v. Travelers' Protect. Ass'n, 126 Mo. 104, 28 S. W. 877, 30 L. R. A. 209, Woodruff Ins. Gas. 270 (1894); United States, etc., Ass'n v. Barry, 131 U. S. 100 (1888); Paul v. Travelers' Ins. Co., 112 N. Y. 472, 8 Am. St. 766 (1889), and note; Richards v. Travelers' Ins. Co., 89 Cal. 170 (1891); North American, etc., Ins. Co. v. Burroughs, 69 Pa. St. 43 (1871). A snowstorm is not an "accident": Fenwick v. Schmalz, L. R. 3 C. P. 313 (1868). Injuries received in a fight in which the in- sured engaged without fault on his part are "accidental": Supreme Council v. Garrigus, 104 Ind. 133, 3 N. E. 818 (1885). 2 Providence L., etc., Co. v. Mar- tin, 32 Md. 310 (1869); Western, etc., Ass'n v. Smith, 85 Fed. 401, 29 C. C. A. 223 (1898). (429) 392 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 430 the definition of an accident are included the following : A rupture of a blood vessel while exercising with indian clubs ; 3 an unintentional taking of poison; 4 a sprain caused by lifting a heavy weight; 5 an in- jury resulting from jumping from the platform of a train under cir- cumstances which would justify a person in assuming that no harm would result; 6 suicide while insane; 7 death by hanging at the hands of a mob; 8 injuries from an assault which the insured was not ex- pecting and did nothing to induce; 9 injuries intentionally inflicted by another. 10 The accident must be the proximate and sole cause of the injury or there can be no recovery. 11 I. Construction of Provisions of Policy. 392. External, violent, or accidental injuries. A policy insuring against death or accident caused by "external, violent or accidental means" covers death by stumbling and falling against a locomotive engine; 12 a fall due to a temporary and unexpected physical dis- 3 McCarthy v. Travelers' Ins. Co., 8 Biss. (U. S.) 362 (1878). * Healey v. Mutual Ace. Ass'n, 133 111. 556, 9 L. R. A. 371 (1890); Mutual, etc., Ass'n v. Tuggle, 39 111. App. 509 (1890). 5 Martin v. Travelers' Ins. Co., 1 F. & F. 505 (1859). Policies some- times exempt the company from liability when the injury is caused by voluntary overexertion. For con- struction of this provision, see Rustin v. Standard, etc., Ins. Co., 58 Neb. 792, 79 N. W. 712, Woodruff Ins. Gas. 294 (1899); Metropolitan, etc., Ass'n v. Bristol, 69 111. App. 492 (1896); Reynolds v. Equitable Ace. Ass'n, 49 Hun (N. Y.) 605 (1888). 8 United States, etc., Ass'n v. Barry, 131 U. S. 100 (1888). But see Southard v. Railway, etc., Assur. Co., 34 Conn. 574 (1868). 7 Blackstone v. Standard, etc., Ins. Co., 74 Mich. 592, 3 L. R. A. 486 (1889); Mutual, etc., Ins. Co. v. Daviess, 87 Ky. 541 (1888). 8 Fidelity, etc., Co. v. Johnson, 72 Miss. 333, 17 So. 2, 30 L. R. A. 206 (1894). 9 Phelan v. Travelers' Ins. Co., 38 Mo. App. 640 (1890). 10 See 400, infra. 11 Freeman v. Mercantile, etc., Ass'n, 156 Mass. 351, Woodruff Ins. Gas. 282, 17 L. R. A. 753 (1892), and note on Proximate Cause of Death within the Meaning of a Life In- surance Policy. See, also, Manu- facturers' Ace. Indem. Co. v. Dor- gan, 58 Fed. 945, 7 C. C. A. 581, 22 L. R. A. 620 (1893); Western, etc., Ass'n v. South, 85 Fed. 401, 29 C. C. A. 223 (1898); Martin v. Manufacturers', etc., Co., 151 N. Y. 94, 45 N. E. 377 (1896). "Equitable Ace. Ins. Co. v. Os- born, 90 Ala. 201, 9 So. 869, 13 L. R. A. 267 (1890). 431 ACCIDENT INSURANCE. 392 order; 13 an accidental strain causing death; 14 a blow struck by an- other person; 15 death due to excitement and strain caused by at- tempting to hold and control a frightened and runaway team; 16 death caused by accidental drowning; 17 death caused by drowning while attempting to rescue the crew of a wrecked ship, where it ap- peared that there was a bruise over the left temple; 18 a rupture caused by jumping from a train ; 19 choking to death while attempting to swallow a piece of beefsteak ; 20 injury caused by the sting of an in- sect ; 21 hanging at the hands of a mob ; 22 death by inhaling gas while working in a well ; 23 blood poisoning, caused by an abrasion of the skin of a toe by a new shoe ; 24 lockjaw produced by a gunshot accidentally inflicted upon the insured by himself. 25 But a rupture caused by the insured jumping from a train, where he acted for his own convenience, and not under any necessity, was held not within the conditions of an accident policy insuring against injury caused by "violent or external means." 26 So, sunstroke contracted in the course of the ordinary duties of an architect is a disease, and not an accident caused by "ex- ternal, violent or accidental means." 27 A policy provided that "in- surance under this policy shall extend only to physical and bodily "Meyer v. Fidelity, etc., Co., 96 Iowa 378, 65 N. W. 328 (1895). 14 North American, etc., Ins. Co. v. Burroughs, 69 Pa. St. 43 (1871). 16 Richards v. Travelers' Ins. Co., 89 Cal. 170, 26 Pac. 762, 23 Am. St. 455 (1891). 10 McGlinchey v. Fidelity, etc., Co., 80 Me. 251, 14 Atl. 13 (1889). 17 Manufacturers', etc., Indem. Co. v. Dorgan, 58 Fed. 945, 7 C. C. A. 581 (1893); Mallory v. Travelers' Ins. Co., 47 N. Y. 52, 7 Am. Rep. 410 (1871); Tucker v. Mutual Ben. Life Co., 121 N. Y. 718 (1890); De Van v. Commercial, etc., Ass'n, 92 Hun (N. Y.) 256 (1895), 157 N. Y. 690, 51 N. B. 1090 (1898); Trew v. Railway, etc., Assur. Co., 6 Hurl. & N. 838 (1861); United States, etc., Ass'n v. Hubbell, 56 Ohio St. 516, 47 N. E. 544, 40 L. R. A. 453 (1897). "Tucker v. Mutual Ben. Life Co., 121 N. Y. 718, 24 N. E. 1102 (1888). 19 Travelers' Ins. Co. v. Murray, 16 Colo. 296, 26 Pac. 774 (1891). 20 American Ace. Co. v. Reigart, 94 Ky. 547, 23 S W. 191, 21 L. R. A. 651 (1893). J1 Omberg v. United States, etc., Ass'n, 19 Ky. L. 462, 40 S. W. 909 (1897). 22 Fidelity, etc., Co. v. Johnson, 72 Miss. 333, 17 So. 2, 30 L. R. A. 206 (1894). 23 Pickett v. Pacific, etc., Ins. Co., 144 Pa. St. 79, 22 Atl. 871, 13 L. R. A. 661 (1891); Paul v. Travelers' Ins. Co., 112 N. Y. 472, 20 N. E. 347, 3 L. R. A. 443 (1889). "Western, etc., Ass'n v. Smith, 85 Fed. 401, 29 C. C. A. 223 (1898). 25 Travelers' Ins. Co. v. Melick, 65 Fed. 178, 12 C. C. A. 544 (1894). 26 Southard v. Railway, etc., As- sur. Co., 34 Conn. 574 (1868). 27 Dozier v. Fidelity & Cas. Co., 46 Fed. 446 (1891). 393 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 432 injuries resulting in disability or death * * * solely by reason of and through external, violent and accidental means within the terms and conditions of this contract, and which shall, independently of all other causes immediately, wholly, totally and continuously from the date of the accident causing the injury, disable the insured. If any injury causing disability or death entitling the insured to claim benefits under the provisions of this policy be caused or contributed t * * * by anv suns troke or freezing while in the line of his duty as a railroad employe * * * then, in such case, the limit of the association's liability shall be one-fourth of the sum otherwise payable." It was held that under this limitation a sunstroke re- ceived while in the line of his employment was covered by the policy. 28 393. Risks of travel. Policies sometimes insure against acci- dents "while actually traveling in a public conveyance," and while complying with the rules and regulations of the carrier. Such a policy covers an accident which occurs while the insured is getting on or off a train, either at an intermediate station, where he left the car temporarily, or at his destination. 29 A party accepting a policy which plainly limits the risk to that of a common carrier's public conveyances can not recover for injuries received while caring for and selling horses which he was taking to market, although the agent of the company instructed him that the policy would cover such risks. 30 But the company is presumed to issue its policy with a knowledge of the ordinary customs of the business in which the in- sured is engaged. Hence, a cattle dealer who receives a policy which permits him to care for his cattle in transit on trains may show that at the time of the injury he was engaged in doing what was customary among cattle dealers. 31 A party who is insured against "accident while traveling by public or private conveyance, provided for the transportation of passengers," can recover for an injury sus- tained while going on foot from a steamboat landing to the railway station for the purpose of continuing his journey. 32 But a person who had left the landing place of a steamer and was injured while 29 Railway, etc., Ass'n v. Johnson, 31 Pacific, etc., Ins. Co. v. Snowden, 22 Ky. L. 759, 58 S. W. 694, 52 L. R. 58 Fed. 342, 7 C. C. A. 264 (1893). A. 401 (1900). 32 Northrup v. Railway Pass., etc., ""Tooley v. Railway, etc., Assur. Co., 43 N. Y. 516, 3 Am. Rep. 724 Co., 3 Biss. (U. S.) 399 (1873). (1871). 30 Fidelity, etc., Co. v. Teter, 136 Ind. 672, 36 N. E. 283 (1894).- 433 ACCIDENT INSURANCE. 394 walking home, a distance of about eight miles, was not traveling by a "public or private conveyance at the time of the injury." 33 394. Inhaling gas Poison. Under a policy which contains a provision that the liability of the company shall not extend to any death or disability which may have been caused "by the taking of poisonous substances, or the inhaling of gas, or by any surgical opera- tion or medical treatment," the company is not liable for death caused by a voluntary and intelligent act on the part of the insured, as distinguished from one which was unconscious i and in that sense involuntary. An insurance company was therefore held liable under such a policy where the insured was asphyxiated by illuminating gas which he unconsciously, involuntarily and accidentally inhaled while asleep in his room at a hotel. 34 Death caused by the poisonous sting of an insect is not within a clause exempting the company from liability for injuries caused by "poison in any form/' or "by contact with poisonous substances." 35 Death resulting from the shock caused by swallowing aqua ammonia results from taking poison. 36 Under a policy insuring against "the effects of injury to the body caused by external, violent or accidental means," but excepting liability for death caused by poison, the in- surer is liable when death is caused by poison accidentally taken by the insured. 37 33 Ripley v. Insurance Co., 16 Wall. (U. S.) 336 (1872). 84 Paul v. Travelers' Ins. Co., 112 N. Y. 472, 20 N. B. 347 (1889); Bacon v. United States, etc., Ace. Ass'n, 123 N. Y. 304, 25 N. E. 399 (1890); Menneiley v. Employers', etc., Assur. Corp., 148 N. Y. 596, 43 N. E. 54 (1896); Pickett v. Pacific Ins. Co., 144 Pa. St. 79, 22 Atl. 871, Woodruff Ins. Gas. 290 (1890); Fi- delity, etc., Co. v. Waterman, 59 111. App. 297 (1895); affirmed 161 111. 632, 44 N. E. 283 (1896). See, also, Fidelity, etc., Co. v. Lowenstein, 97 Fed. 17, 38 C. C. A. 29 (1899). Contra, on the general proposition, see McGlother v. Provident, etc., 28 ELLIOTT INS. Ace. Co., 89 Fed. 685, 32 C. C. A. 318 (1898); Early v. Standard, etc., Ins. Co., 113 Mich. 58, 71 N. W. 500 (1897). ^Omberg v. United States, etc., Ass'n, 19 Ky. L. 462, 40 S. W. 909 (1897). 3U Early v. Standard, etc., Co., 113 Mich. 58, 71 N. W. 500 (1897). 37 Early v. Standard, etc., Ins. Co., 113 Mich. 58, 71 N. W. 500 (1897); Travelers' Ins. Co. v. Dunlap, 160 111. 642, 43 N. E. 765, Woodruff Ins. Cas. 287 (1896), and cases cited; Metropolitan Ace. Ass'n v. Froiland, 161 111. 30, 43 N. E. 766 (1896). See Pollock v. United States, etc., Ass'n, 102 Pa. St. 230 (1883). 394 LIFE,, ACCIDENT AND INDEMNITY INSURANCE. 434 Where the policy contained a statement: "I agree that this instru- ment shall not be held to extend * * * to poison in any way taken, administered, absorbed, or inhaled," it was held that the' words "in any way" related to the mode or manner in which the poison was taken, and not to the motive of the insured in taking it. 38 In a recent case in Wisconsin, 39 the policy in suit excepted "in- juries, fatal or otherwise, resulting wholly or in part from poison, or anything accidentally or otherwise taken, administered, absorbed, or inhaled." The insured died from blood poisoning resulting from the treatment of a wound caused by extracting a tooth. It was said that there was no reason for extending the rule that death caused by inhaling gas accidentally or otherwise only covers cases of volun- tary, conscious inhalation. "Certainly no good reason can be given for extending it to cases of accidental taking or absorption of poison- ous substances into the system through the voluntary use for remedial purposes of some other substance. In the instances cited, the word 'inhaled' and the word 'taken/ in view of the other language used in the contract, were easily construed to contemplate voluntary, conscious action, not in the sense that the victim should know the precise nature of the substance that he was taking or inhaling, and its effect on his system, but that the taking should be by his own act or per- mission. Here, the cotton was placed in the mouth of the deceased 38 Metropolitan Ace. Ass'n v. Froi- death of the member, Froiland, land, 161 111. 30, 43 N. E. 766 having been caused by accident, is (1896). The court said : "Very near- not excluded from the risks covered ly this precise language was so by the contract of insurance sued construed in Connecticut, etc., Ins. on by reason of the exception above Co. v. Akens, 150 U. S. 468 (1893). mentioned. Insurance contracts It was there held that in the phrase are to be liberally construed so as 'self-destruction in any form' the not to defeat the indemnity which, words 'in any form' clearly related in making the contract, was the ob- to the manner of killing, and that ject to be secured, unless plainly the clause was by no means syn- necessary from the language of the onymous in meaning with such contract." phrases as 'die by suicide, sane or 39 Kasten v. Interstate Gas. Co., insane,' or by 'suicide, felonious or 99 Wis. 73, 74 N. W. 534, 40 L. R. A. otherwise, sane or insane.' In ac- 651 (1898); Early v. Standard, etc., cordance with the ruling in Trav- Ins. Co., 113 Mich. 58, 71 N. W. 500 elers' Ins. Co. v. Dunlap, 160 111. (1897); Westmoreland v. Preferred, 642, 43 N. E. 765 (1896), and etc., Ins. Co., 75 Fed. 244 (1896) Healey v. Mutual Ace. Ass'n, 133 [when the insured died from the 111. 556, 25 N. E. 52 (1890), we must effects of chloroform], hold in the case at bar that the 435 ACCIDENT INSURANCE. 395 by his own permission. True, the fact that it contained germs which propagated and evolved the poison which was absorbed into the blood with fatal effects was unknown and accidental, but that was within the express terms of the exception under consideration." 395. Occupation or employment. The ordinary accident policy insures the party against accident while he is occupied or employed as described in the contract. All occupations are not subject to the same risks, and some are so hazardous as to render it impossible for the parties engaged in them to procure accident insurance. The in- surance companies classify the various occupations and arrange their premium rates in accordance with the hazard involved. Where the contract provides that if the insured is injured in any occupation rated by the company as more hazardous than that given by the insured as his occupation, the insurance shall only be what the premium paid would purchase at the rate fixed by the tables for the increased hazard, the jury must determine whether there has been any increase in the risk. 40 Where the insured gave his occupation as that of a blacksmith employed by a railroad company, and it appeared that he also acted as a switchman and car-coupler, which occupation was classed as a more hazardous one, he was allowed to recover the amount the pre- mium paid would have secured in the more hazardous occupation. 41 A mere occasional act not strictly within the scope of the stated oc- cupation is not engaging in another occupation. Such provisions refer to classes of occupations and not to particular acts. Thus, one who is insured as a "grocer with desk and counter duties" may hunt for pleasure without being held to have engaged in the occupa- tion of a hunter. 42 So, a person insured as a mining expert does not become an engineer or fireman by casually riding on an engine. 48 A farmer may drive piles in the construction of a private bridge with- out engaging in the occupation of a piledriver. 44 A banker does "Standard, etc., Ins. Co. v. Mar- Sibley, 57 111. App. 315 (1894); tin, 133 Ind. 376, 33 N. E. 105 Kentucky, etc., Ins. Co. v. Franklin (1893). See 373, supra. (Ky.), 43 S. W. 709 (1897). "Standard L., etc., Ins. Co. v. Berliner v. Travelers' Ins. Co., Taylor, 12 Tex. Civ. App. 386, 34 121 Cal. 458, 53 Pac. 918, 41 L. R. A. S. W. 781 (1896). 467 (1898). 42 Union, etc., Ass'n v. Frohard, " National, etc., Society v. Taylor, 134 111. 228, 25 N. E. 642, 10 L. R. A. 42 111. App. 97 (1892). 383 (1890); Star Accident Co. v. 396 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 436 not change his employment to that of a sawyer hy operating a saw to cut some pieces of lumber while he is in a sawmill for the purpose of getting some boards to make a table to use in his bank. 45 But it seems that operating a buzz-saw for his own amusement is not within the permissible pleasures of one who states his occupation to be that of "retired gentleman." 46 Where the insured is engaged in a designated employment, and the policy provides that the company shall not be liable for accidents while engaged in a more hazardous employment, it is for the jury to deter- mine whether a certain employment is more hazardous than another. 47 396. External signs. A provision to the effect- that there shall be no liability for injuries which produce no external and visible signs does not apply to injuries which result in death. 48 Under such a provision the insured was allowed to recover for injury caused by a strain which produced no external result until some time after the accident. 49 A nosebleed is an external and visible sign of injury. 50 Where artificial respiration practiced upon a dead body brought forth illuminating gas, it was treated as an external or visible mark of an accident. 51 So, where water ran from the mouth of a dead body, which was taken from a river, it was held that there were external and visible signs of drowning. 52 48 Hess v. Preferred, etc., Ass'n, v. United States Gas. Co., 34 N. J. 112 Mich. 196, 70 N. W. 460, 40 L. L. 371 (1871). R. A. 444 (1897). A teacher who, 48 McGlinchey v. Fidelity, etc., Co., while out of employment, causes 80 Me. 251, 14 Atl. 13, Woodruff Ins. two dwelling houses to be erected Cas. 277 (1888); Eggenberger v. does not become a "builder:" Stone Guarantee, etc., Ass'n, 41 Fed. 172 v. United States Cas. Co., 34 N. J. L. (1889). 371 (1871). See, also, Grattan v. 49 Pennington v. Pacific, etc., Ins. Metropolitan, etc., Ins. Co., 80 N. Y. Co., 85 Iowa 468, 52 N. W. 482 281 (1880); Dwight v. Germania L. (1892). Ins. Co., 103 N. Y. 341 (1886); North ^Whitehouse v. Travelers' Ins. American, etc., Ins. Co. v. Bur- Co., Fed. Cas. No. 175,666, 7 Ins. L. roughs, 69 Pa. St. 43 (1871). J. 23 (1877). 48 Knapp v. Preferred, etc., Ass'n, 51 Menneiley v. Employers', etc., 53 Hun (N. Y.) 84 (1889). Assur. Corp., 148 N. Y. 596, 43 N. B. 47 Eggenberger v. Guarantee, etc., 54, 31 L. R. A. 686 (1896). Ass'n, 41 Fed. 172 (1890). For defl- B2 Wehle v. United States, etc., nition of "employment," see Stone Ass'n, 63 N. Y. St. 464, 31 N. Y. Supp. 865 (1895). 437 ACCIDENT INSURANCE. 397 II. Excepted Risks. 397. Effect of negligence. Unless excepted by the terms of the policy, the insured is entitled to recover where the accident was caused by his own negligence. 53 But policies ordinarily provide that the company shall not be liable unless the insured exercises due care for his personal protection. Under such a provision he is bound to exercise that degree of care which an ordinarily prudent man would use under the same circumstances. 54 The insured was not allowed to recover where the policy contained such a provision, and it appeared that he was thrown from the plat- form of a passenger coach, where he was standing in violation of a known rule of the carrier. 55 398. Voluntary exposure to unnecessary dangers. Accident pol- icies commonly exempt the insurer from liability for death or injury caused by voluntary exposure to unnecessary danger, or hazards, or perilous adventure. This means wanton or grossly imprudent ex- posure. 56 In an English case it was said: 57 "Two classes of acci- dents are excluded from the risks insured against; viz.: "(1) Accidents which arise from exposure by the insured to risk of injury, which risk is obvious at the time he exposes himself to it. "(2) Accidents which arise from an exposure by the insured to risk of injury where the risk would be obvious to him at the time if he were paying reasonable attention to what he was doing." The phrase "voluntary exposure to unnecessary danger" means intentional exposure to a danger; as where a person acts so reck- lessly and carelessly as to show an utter disregard of known danger, or does an act in the face of a risk and danger so obvious that a pru- 63 Schneider v. Provident L. Ins. v. United States Gas. Co., 34 N. J. Co., 24 Wis. 28, I Am. Rep. 157 L. 371 (1871). (1869); Wilson v. Northwestern, ^Bon v. Railway, etc., Assur. Co., etc., Ass'n, 53 Minn. 470, 55 N. W. 56 Iowa 664, 10 N. W. 225, 41 Am. 626 (1893). Rep. 127 (1881). 64 Tuttle v. Travelers' Ins. Co., 134 M Manufacturers', etc., Indem. Co. Mass. 175, 45 Am. Rep. 316 (1883); v. Dorgan, 58 Fed. 945, 7 C. C. A. Duncan v. Preferred, etc., Ass'n, 13 581 (1893). N. Y. Supp. 620 (1891); Kentucky "Cornish v. .Accident Ins. Co., L. L., etc., Ins. Co. v. Franklin, 19 Ky. R. 23 Q. B. D. 453 (1889) [insured L. 1573, 43 S. W. 709 (1897); Stone was killed while attempting to cross a railway track]. 398 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 438 dent man, exercising reasonable foresight, would not have done it. 58 It means dangers recognized, but consciously and intentionally as- sumed. 59 A policy containing such a provision does not relieve the company from liability for injury which resulted from a voluntary exposure to a danger which was contemplated by the contract. 60 A party who goes out in a boat on a dark night to fish, without a knowl- edge of the existence of snags which are dangerous to his boat, does not expose himself to unnecessary danger within the meaning of such provision. 61 Nor does a person voluntarily expose himself to danger by riding in a bicycle race and overexerting himself ; 62 nor by cleaning a gun, without the knowledge that it was defective and loaded; 63 nor by visiting a house of ill fame and getting shot immediately after leaving the place; 64 nor, generally, by doing what a man of ordinary prudence would do under the same circumstances; 65 as by climbing a bank with a loaded gun in his hand, while hunting. 67 But there can be no recovery under such a policy for an accident occasioned by jumping from a moving train after it has passed the station; 68 or by attempting to cross through a freight train standing across the highway ; 69 or by attempting to lower himself from a window to avoid police officers who were at the door. 70 A person who, with packages in M De Loy v. Travelers' Ins. Co., 171 Pa. St. 1, 32 Atl. 1108 (1895); Johnson v. London Guar., etc., Co., 115 Mich. 86, 72 N. W. 1115, 40 L. R. A. 440 (1895); Manufacturers', etc., Indem. Co. v. Dorgan, 58 Fed. 945, 7 C. C. A. 581, 22 L. R. A. 620 (1897). 59 Travelers' Ins. Co. v. Randolph, 78 Fed. 754, 24 C. C. A. 305 (1897); Ashenfelter v. Employers', etc., As- sur. Corp., 87 Fed. 682, 31 C. C. A. 193 (1898). 60 Wilson v. Northwestern, etc., Ass'n, 53 Minn. 470, 55 N. W. 626 (1893). 81 Collins v. Bankers' Ace. Ins. Co., 96 Iowa 216, 64 N. W. 778 (1895). ^Keeffe v. National Ace. Soc., 4 App. Div. (N. Y.) 392 (1896). 83 Miller v. American, etc., Ins. Co., 92 Tenn. 167, 21 S. W. 39, 20 L. R. A. 765 (1893). 64 Jones v. United States, etc., Ass'n, 92 Iowa 652, 61 N. W. 485 (1894). 65 Shevlin v. American, etc., Ass'n, 94 Wis. 180, 68 N. W. 866, 36 L. R. A. 52 (1896). 67 Cornwell v. Fraternal Ace. Ass'n, 6 N. Dak. 201, 69 N. W. 191, 40 L. R. A. 437 (1896). 68 Smith v. Preferred, etc., Ass'n, 104 Mich. 634, 62 N. W. 990 (1895). 69 Bean v. Employers', etc., Assur. Corp., 50 Mo. App. 459 (1892). One who attempted to cross the track between the cars of a freight train, when he saw the men in the places where they would he if the train was about to start, voluntarily exposed himself to unnecessary danger: Willard v. Masonic, etc., Ass'n, 169 Mass. 288, 47 N. E. 1006 (1897). 70 Shaffer v. Travelers' Ins. Co. (111.), 22 N. E. 589 (1889). 439 ACCIDENT INSURANCE. 398 his hands, attempts to cross over a trestle which he knows is danger- ous, while there are other ways of travel open to him, voluntarily exposes himself to unnecessary danger. 71 But it can not be said, as a matter of law, that a person voluntarily exposes himself to unneces- sary danger by crossing a railroad trestle bridge, where there is a plank walk and a fence railing on one side. 72 Whether standing on the platform of a moving train which is going at a rapid speed is a voluntary exposure to a known danger, is a question for the jury. 73 Whether, under all the circumstances, going on a railroad track or bridge is a voluntary exposure to unnecessary danger, is a question of fact which should be submitted to the jury. 74 Force must be given to the word "unnecessary" as qualifying "dan- ger." An attempt of a traveling man to get on a train which is -already in motion is not, as a matter of law, a voluntary exposure to an un- necessary danger. 75 The term "voluntary exposure" does not mean simply that the act of attempting to get on board of a moving train was voluntarily or was consciously or 'intentionally performed, but also that the insured was conscious of the danger to which he was thus exposing himself, and voluntarily assumed it, or that the dan- ger was so apparent that a man of ordinary intelligence would, under such circumstances, have known it. As was said by the court: "Mere failure to observe ordinary care would not, as in an action for negligence, defeat a recovery on the contract. * * * For one to leap into a turbulent stream, rush into a burning building, or to do any other hazardous thing to save human life, would be a voluntary exposure to danger, but not to unnecessary danger. So, too, many emergencies in the lives of men occur, where the most urgent necessity requires their presence at some particular place, at some particular time, and where to miss a train would involve serious consequences. In such cases the voluntary exposure to danger might not be unnecessary; as, the presence of a physician or surgeon at 71 Travelers' Ins. Co. v. Jones, 80 74 Keene v. New England, etc., Ga. 541, 7 S. E. 83, 12 Am. St. 270 Ass'n, 161 Mass. 149, 36 N. E. 891 (1888). (1894). See, also, Tuttle v. Trav- "Follis v. United States, etc., elers' Ins. Co., 134 Mass. 175, 45 Ass'n, 94 Iowa 435, 62 N. W. 807, Am. Rep. 316 (1883); Freeman v. 27 L. R. A. 78 (1895). Travelers' Ins. Co., 144 Mass. 572, "Travelers' Ins. Co. v. Randolph, 12 N. E. 372 (1887) ; Travelers', etc., 78 Fed. 754, 24 C. C. A. 305 (1897). Ace. Ass'n v. Stone, 50 111. App. 222 See Standard, etc., Ins. Co. v. Thorn- (1893). ton, 100 Fed. 582, 40 C. C. A. 564 7S Fidelity, etc., Co. v. Sittig, 181 (1900). 111. HI, 48 L. R. A. 359 (1900). 399 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 440 some critical period in the illness or injury of a human being might be necessary to save human life, and it might be necessary for him to expose himself to danger to reach his patient, or in some other respect to perform his professional duty. The necessity implied in the provision of the policy does not mean only that which is unavoid- able and inevitable, but also any object or purpose which men of moral responsibility and prudence would regard as of such serious importance in the performance of duty as to demand or justify the incurring of risk or danger to accomplish it." A complaint alleging that the insured at the time of his death was seining in a river which was very swift and full of holes, and that the insured, while so en- gaged, fell into one of said holes, and, being unable to swim, was drowned, is good as against a demurrer. 76 Where the insured, while asleep and unconscious, walked off the platform of a car and was killed, it was held not a case of "voluntary exposure, design or self- inflicted injuries." 77 399. Bodily infirmity or disease. These words, as used in an accident policy to exempt the insurer from liability for injuries re- sulting from bodily infirmity or disease, mean practically the same thing. Where the policy insured against accidental injury or death through external, violent or accidental means, and provided that it should not cover "injuries, fatal or otherwise, * * * resulting directly or indirectly from intoxicants * * * or any disease or bodily infirmity" it appeared that the defendant was subject to fits when he was insured, and it was claimed that his death was due to disease or bodily infirmity. In stating the meaning of these words, the court said: 78 "When speaking of infirmity we generally mean a state or quality of being infirm, physically or otherwise, debility or weakness; and by the use of the word 'disease' we desire to convey the impression of the morbid, resulting from some functional dis- turbance or failure of physical functions which tends to undermine the constitution. We do not, as a general rule, apply either term to a slight and temporary disorder, or to the imperfect working of some function, which is over in a short period of time, and which, when recovered from, leaves the body in its normal condition. In using either of the words we do not, as a rule, refer to a slight and 76 Conboy v. Railway, etc., Ass'n 78 Meyer v. Fidelity, etc., Co., 96 (Ind. App.), 43 N. E. 1017 (1896). Iowa 378, 65 N. W. 328 (1895). 77 Scheiderer v. Travelers' Ins. Co., 58 Wis. 13 (1883). 441 ACCIDENT INSURANCE. mere temporary disturbance or enfeeblement. If this is true of our ordinary speaking and writing it is clear that the words should be given no broader meaning when we find them used by an insurance company in a clause of its policy which it relies upon to defeat a recovery thereon." In a case in the circuit court of appeals the words were given the same meaning. "In a broad, generic sense/' said Taft, J., 70 "any temporary trouble by reason of which a man loses consciousness is a disease. It is a condition of the body not normal, and produced by the imperfect working of some function, but as the imperfect working is not permanent and the body returns at once, or in a short period of time, to its normal condition, it does not rise to the dignity of a disease. A fainting spell produced by indigestion or lack of proper food for a number of hours, or for any cause which would not indi- cate disease in the body, but would show mere temporary disturbance or enfeeblement, would not come within the meaning of the words 'disease or bodily infirmity,' as used in this policy." Sunstroke is a disease, and not an accident. 80 Death caused by a malignant pustule resulting from contact of the body with putrid animal matter is death by disease, and not accident. 81 400. Injuries intentionally inflicted by others. A policy which insures against accidents covers an injury intentionally inflicted upon the insured by a third person, unless such risk is expressly excepted. 82 "While our preconceived notion of the term 'accident' would hardly lead us to speak of the intentional killing of a person as accidental 79 Manufacturers', etc., Indem. Co. 82 Travelers' Ins. Co. v. McConkey, v. Dorgan, 58 Fed. 945, 7 C. C. A. 127 U. S. 661 (1888); Supreme Coun- 581 (1893). See, also, Pudritzky v. cil v. Garrigus, 104 Ind. 133, 54 Am. Supreme Lodge, 76 Mich. 428, 43 N. Rep. 298 (1885); Hutchcraft v. Trav- W. 373 (1889); Mutual, etc., Ins. Co. elers' Ins. Co., 87 Ky. 300 (1888); v. Daviess, 87 Ky. 541, 9 S. W. 812 Fidelity, etc., Co. v. Johnson, 72 (1888). Miss. 333, 30 L. R. A. 206 (1895), ""Dozier v. Fidelity, etc., Co., 46 annotated; Lovelace v. Travelers' Fed. 446 (1891); Sinclair v. Mari- Prot. Ass'n, 126 Mo. 104, 47 Am. St. time, etc., Co., 3 El. & El. 478 (1861). 638, 30 L. R. A. 209 (1894); Collins 81 Bacon v. United States, etc., Ace. v. Fidelity, etc., Co., 63 Mo. App. Ass'n, 123 N. Y. 304, 9 L. R. A. 617 253 (1895); American Ace. Co. v. (1890). As to disease caused by ac- Carson, 99 Ky. 441, 36 S. W. 169, cident, see Freeman v. Mercantile 34 L. R. A. 301 (1895). & Ace. Ass'n, 156 Mass. 351, 17 L. R. A. 753 (1892). 400 LIFE, ACCIDEXT AND INDEMNITY INSURANCE. 44:2 killing, yet no doubt can now remain, in view of the precedents es- tablished by all the courts, that the word 'intentional' refers alone to the person inflicting the injury, and if, as to the person injured, the injury was unforeseen, unexpected, not brought about through his agency designedly, or was without his foresight, or was a casualty or mishap not intended to befall him, then the occurrence was ac- cidental and the injury one inflicted by accidental means, within the meaning of such policies/" 83 It is customary, however,, to insert a provision exempting the company from liability for injuries inten- tionally inflicted upon the insured by others. The exemption is limited to such injuries as are intentional ; hence the insurer is liable where the injury was inflicted by an insane person who was incapable of forming an intent. 84 So, the insurer is liable for injuries caused by a blow struck by a person who did not intend to kill the insured. 85 Where the insured was shot by an officer, who had no intention of killing him, it was held that it could not be said, as a matter of law, that the insured lost his life through the design of another. 86 Where the policy provided that there could be no recovery for in- juries caused by fighting, it was held that there could be no recovery, although the insured was not the aggressor. 87 There is no liability where the insured was intentionally shot and killed by another per- son; 88 as, where the insured was waylaid and shot by robbers; 89 al- 83 American Ace. Co. v. Carson, 99 am v. Equitable Ace. Ins. Co., 87 Ky. 441, 34 L. R. A. 301, 36 S. W. Ga. 497, 13 S. E. 752, 13 L. R. A. 169 (1895). See Button v. Ameri- 838 (1891). See Accident Ins. Co. can, etc., Ace. Ass'n, 92 Wis. 83, 53 v. Bennett, 90 Tenn. 256, 16 S. W. Am. St. 900 (1896). 723 (1891). 84 Corley v. Travelers', etc., Ass'n, ** Jones v. United States, etc., Ace. 105 Fed. 854, 46 C. C. A. 278 (1900); Ass'n, 92 Iowa 652, 61 N. W. 485 Berger v. Pacific, etc., Ins. Co., 88 (1894); Fischer v. Travelers' Ins. Fed. 241 (1898). Co., 77 Cal. 246, 19 Pac. 425, 1 L. R. 85 Richards v. Travelers' Ins. Co., A. 572 (1888); Travelers' Ins. Co. v. 89 Cal. 170, 26 Pac. 762, 23 Am. St. McCarthy, 15 Colo. 351, 25 Pac. 713, 455 (1891). 11 L. R. A. 297 (1890). 86 Utter v. Travelers' Ins. Co., 65 * Railway, etc., Ace. Ass'n v. Mich. 545, 32 N. W. 812, 8 Am. St. Drummond, 56 Neb. 235, 76 N. W. 913 (1887). 562 (1897); Hutchcraft v. Travel- 87 United States, etc., Ass'n v. Mil- ers' Ins. Co., 87 Ky. 300, 8 S. W. 570, lard, 43 111. App. 148 (1892). It is 12 Am. St. 484 (1888). A recovery immaterial whether the person by was denied because, while the kill- whom the insured was killed was ing was accidental within the mean- sane or insane, if the insured volun- ing of these words, "external, vio- tarily engaged in the fight: Gresh- lent and accidental," as used on the 443 ACCIDENT INSURANCE. 401 though, in the absence of such a limiting clause, death by such means would be considered an accident. 90 Where the policy provided that "$4,000 shall be paid in case of death by accident," and that in case of death "by natural causes," the insured should be entitled to $100, the beneficiary was allowed to recover for injuries received by the insured in a fight in which he voluntarily engaged. 91 Under this exception the insurer is not liable where the insured is murdered. 92 The insurer is not liable where the insured is killed for the purpose of getting the insurance money, under a policy which provides that "this insurance does not cover * * * death re- sulting wholly or partly, directly or indirectly, from * * * in- tentional injuries inflicted by the insured or any other person," and which further provides that this clause does not exclude claims for personal injuries received by the insured while defending herself or family, or her property, from assaults of burglars, robbers, thieves or pickpockets. 93 So, there is no liability where the injuries are inflicted upon an officer by a person who is resisting arrest, although such injuries are within the meaning of the words, "external, violent and accidental means." 94 In such cases the general liability is limited by the express provision. 401. Injuries received while engaged in violation of law. Ac- cident insurance companies commonly limit their liability by a pro- vision to the effect that no claim shall be made when an injury or death occurs while the insured is engaged in, or in consequence of, any unlawful act. Under this provision the mere fact that the insured face of the policy, yet certain con- Ass'n v. Langholz, 86 Fed. 60, 29 ditions or provisos protected the C. C. A. 628 (1898) ; Butero v. Trav- company against loss, where the elers' Ace. Ins. Co., 96 Wis. 536, 71 death or injury was caused by in- N. W. 811 (1897); Johnson v. Trav- tentional injuries inflicted by the elers' Ins. Co., 15 Tex. Civ. App. 314, insured or any other person: Amer- 39 S. W. 972 (1897); Railway Of- ican Ace. Co. v. Carson (Ky.), 30 ficials', etc., Ass'n v. McCabe, 61 111. S. W. 879 (1895). App. 565 (1895); Phelan v. Travel- Ripley v. Insurance Co., 16 ers' Ins. Co., 38 Mo. App. 640 (1890); Wall. (U. S.) 336 (1872). Travelers' Ins. Co. v. McConkey, 127 91 Lovelace v. Travelers' Prot. U. S. 661 (1888). Ass'n, 126 Mo. 104, 28 S. W. 877, 30 3 Ging v. Travelers' Ins. Co., 74 L. R. A. 209, Woodruff Ins. Cas. 270 Minn. 505, 77 N. W. 291 (1898). (Ig94) "American Ace. Co. v. Carson, 99 92 Brown v. United States, etc., Co., Ky. 441, 36 S. W. 169, 34 L. R. A. 88 Fed. 38 (1898); Travelers' Prot. 301 (1895). 401 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 444 is violating some criminal statute does not absolve the company from liability unless it appears that the death was in some manner caused by such violation of law. As said in a case in Indiana, 93 "the known violation of a positive law * * * avoids the policy if the natural and reasonable consequences of the violation are to increase the risk. A violation of law does not avoid the policy if the natural and reasonable consequences of the act do not increase the risk." The insurance company must, therefore, show that the act was such as tended to produce the injury. Thus, where the insured came to his death while engaged in seining in a river, in violation of a statute, the court, after stating the general principle, said : 96 "If the insured had been accidentally shot or struck by lightning while fishing in violation of law, it could not be successfully maintained that there was a forfeiture." Applying the rule that it must be made to appear that the injury was the natural result of a violation of law, it was held that the fact that the insured was killed by being shot soon after he had left a house of ill fame, while carrying a concealed weapon, did not prevent a recovery on the policy. Chief Justice Kinne said: 97 "It may be conceded that Jones visited a house of prostitution for an unlawful purpose; that he was carrying concealed weapons, in viola- tion of law, but it does not appear that the injuries he received were caused by any of these illegal acts. It is not enough to defeat liability to show that the insured violated the conditions of the policy in these respects, but it must also be shown that such violation had a causative connection with the injury. The shooting was not, in a legal sense, caused by, or the result of, the assured's visit to the bawdyhouse, reprehensible as that act may have been, nor by his carrying concealed weapons in violation of law. In other words, it does not appear that there was any such connection between the unlawful acts and the injury as would justify the contention that the former caused the latter. If the injury was caused or produced by something else than the assured's violation of the law, then the latter can not be said to have such a legal relation to the former as to be a defense to an action upon the policy. If the acts were in themselves unlawful, as they were, and the shooting might reasonably have been expected to have re- 95 National Ben. Ass'n v. Bowman, * Conboy v. Railway, etc., Ass'n 110 Ind. 355, 11 N. E. 316 (1887); (Ind. App.), 43 N. E. 1017 (1896). Supreme Lodge v. Beck, 181 U. S. 48 " Jones v. United States, etc., (1900). See 373, supra. Ass'n, 92 Iowa 652, 61 N. W. 485 (1874). 445 ACCIDENT INSURANCE. 401 suited from them, then a causative connection between the unlawful acts and the injury may be said to have been established." 98 Where the insured was shot by an officer who was attempting to arrest him as a deserter, the death did not result from the unlawful act of the insured, as the insured was not acting unlawfully at the time of the killing." So, where the insured was injured while at the house of a friend, a few hours after he had been hunting on Sunday, in violation of law, it was held that he could recover on the policy. 100 But where the accident happened while the insured was returning from a hunting expedition, and a statute made both hunting and traveling on Sunday a crime, the insured was not allowed to recover. The court said: 101 "The effect of a violation of the Sunday law upon a person's right to recover for injuries received in the course of such violation has generally -arisen in cases in which the defendant sought to escape responsibility for his own tort to a traveler or laborer. On this question the decisions have not been uniform. Some courts have held that the immediate cause of the injury was the travel or labor on Sunday and that the" plaintiff could not recover. Other able courts have held that a Sunday traveler or laborer, injured by the wrongful act or neglect of another, might recover upon the ground that the violation of the Sunday law by the injured party is in the na- ture of a condition rather than the immediate cause of the injury. * * * The provision quoted from the policy excluded liability from any injury of which a violation of law was the cause or con- dition producing it. It also expressly provides exemption from lia- bility where the violation of law is either the proximate or remote cause or condition producing the injury. In short, it is so drawn as to exempt from liability under the reasoning and holding of the courts in both classes of cases cited. Plaintiff contends in argument that he was not engaged in hunting at the time he received the injury, 88 See, also, Bradley v. Mutual, etc., Mich. 545, 32 N. W. 812, 8 Am. St. Ins. Co., 45 N. Y. 422 (1871); Mur- 913 (1887). See, also, Griffin v. ray v. New York, etc., Ins. Co., 96 Western, etc., Ass'n, 20 Neb. 620 N. Y. 614 (1884); Griffin v. Western, (1890); Goetzman v. Connecticut, etc., Ass'n, 20 Neb. 620, 31 N. W. etc.? Ins. Co., 3 Hun (N. Y.) 515 122 (1887); Accident Ins. Co. v. (1875). Bennett, 90 Tenn. 256, 16 S. W. 723 10 Prader v. National, etc., Ass'n, (1891) [where the insured was 95 Iowa 149, 63 N. W. 601 (1895). killed while living with a mistress m Duran v. Standard, etc., Ins. Co., in violation of law]. 63 Vt. 437, 22 Atl. 530, 25 Am. St 90 Utter v. Travelers' Ins. Co., 65 773, 13 L. R. A. 637 (1891). 402 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 446 but was walking home after he had been visiting. Were his claim conceded, we do not see how it gives the plaintiff any better ground for recovery. * * * The plaintiff was clearly violating the pro- visions of the statute prohibiting traveling on Sunday. Every step he took in making that trip was in and of itself a .violation of law. 'In taking one of those steps he slipped and was injured. * * * The liability to accident must be greatly increased in the case of a person who, like the plaintiff, engages in hunting or traveling about the country on Sunday in open violation of law, as compared with one who observes the law. The defendant had the right to show that it should not assume such increased risk." A person who was shot by one upon whom he had made a violent assault died in consequence of a violation of law. 102 So, a woman who voluntarily submits to an operation for abortion is engaged in a violation of law, and there can be no recovery upon a policy for death resulting therefrom. 103 There is some difference of opinion as to whether the law which is being violated must be a criminal statute. It was held in Massa- chusetts that to invalidate the policy there must be a violation of some criminal statute. 10 * A contrary view was expressed in New York ; 105 and in Indiana the court said : 106 "In our opinion, the law is this : A known violation of a positive law, whether the law is a civil or a criminal one, avoids the policy if the natural and reasonable consequences of the violation are to increase the risk; a violation of law, whether the law is a civil or a criminal one, does not avoid the policy if the natural and reasonable consequences of the act do not increase the risk." 402. Injuries received while intoxicated. Where the contract provides that there shall be no recovery for injuries which are received while the insured is intoxicated, the insurance company is not liable, although the intoxication did not contribute to the injury. 107 102 Murray v. New York L. Ins. Co., Allen (Mass.) 308 (1866). See, also, 96 N. Y. 614, Woodruff Ins. Gas. 301 Harper v. Phoenix Ins. Co., 19 Mo. (1884); Bloom v. Franklin L. Ins. 506 (1854). Co., 97 Ind. 478 (1884). 10B Bradley v. Mutual, etc., Ins. Co., 103 Hatch v. Mutual L. Ins. Co., 120 3 Lans. (N. Y.) 341, 45 N. Y. 422 Mass. 550, 21 Am. R. 541 (1876). (1870). As to suicide being a violation of I0e Bloom v. Franklin L. Ins. Co., this provision, see 373, supra. 97 Ind. 478 (1884). 104 Cluff v. Mutual, etc., Ins. Co., 13 1OT Standard, etc., Ins. Co. v. Jones, 447 ACCIDENT IXSURAXCE 403 ///. General Provisions. 403. Amount of recovery Disability. The contract is com- monly for the payment of a specified sum for certain injuries, such as the loss of a hand, 108 foot, 109 or eye, 110 and the payment of a certain sum in case of total disability. As said by Mr. Justice Mitchell: 111 "The principal contest is as to the construction of that part of the policy, and particularly the term, 'w,holly disabled.' Accident in- surance being of comparatively recent origin, the policies do not seem to have acquired any settled form ; and the decisions construing them are comparatively few, and do not seem to have agreed on any very definite meaning to be given to the term 'total disability.' 112 The cases which have placed a construction on the term 'total disability 1 might seem to be divided into two classes ; viz., those which construe it liberally in favor of the insured, 113 and those which construe it strictly against him. 114 Any apparent conflict in the decisions may, however, be mostly reconciled in view of the differences in the lan- guage of the policies, and of the different occupations under which the parties were insured. As is well said in Wolcott v. United Life, etc., Assn.* 15 'total disability must, from the necessity of the case, bo a relative matter, and must depend largely upon the occupation and employment in which the party insured is engaged.' One who labors with his hands might be so disabled by a severe injury to one hand as not to be able to labor at all at his usual occupation; whereas a merchant or professional man might, by the same injury, be only dis- 94 Ala. 434, 10 So. 530 (1892); phreys v. National Ben. Ass'n, 139 Shader v. Railway, etc., Assur. Co., Pa. St. 214, 11 L. R. A. 564 (1891). 66 N. Y. 441, 23 Am. Rep. 65, Wood- nl Lobdill v. Laboring Men's, etc., ruff Ins. Gas. 297 (1876). See Jones Ass'n, 69 Minn. 14, 38 L. R. A. 537 v. United States, etc., Ass'n, 92 Iowa (1897). 652, 61 N. W. 485 (1894). m See cases cited in Bacon Ben. 108 See Lord v. American, etc., Soc., 501; Niblack Vol. Soc., 401. Ass'n, 89 Wis. 19, 26 L. R. A. 741 See 4 Harvard Law Review 180 (1894); Hutchinson v. Supreme (1890). Tent Co., 68 Hun (N. Y.) 355 (1893). m Hooper v. Accidental, etc., Ins. 108 Sheanon v. Pacific, etc., Ins. Co., Co., 5 Hurl. & N. 545 (1860); Young 83 Wis. 507, 9 L. R. A. 685 (1892); v. Travelers' Ins. Co., 80 Me. 244 Stevers v. People's, etc., Ins. Ass'n, (1888). 150 Pa. St. 132, 16 L. R. A. 446 114 Lyon v. Railway, etc., Assur. (1892 ). Co., 46 Iowa 631 (1877); Saveland "Mog6 v. Socie"te", etc., 167 Mass. v. Fidelity & Gas. Co., 67 Wis. 174, 298 39 L. R. A. 736 (1896); Hum- 58 Am. Rep. 863 (1886). "55 Hun (N. Y.) 98 (1889). 403 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 448 abled from transacting some kinds of business pertaining to his occu- pation. In policies of this character the aim of the insurer is usually to get as large premiums as possible by incurring the least possible liability; and, on the other hand, after the accident occurs the usual aim of the insured is to recover the greatest amount of indemnity for the least possible injury. All the courts can do is to construe the contract the parties have made for themselves; but in doing so they should give it a reasonable construction, so as, if possible, to give effect to the purpose for which it is made. There are a few proposi- tions applicable to the construction of the policy under consideration which, under the evidence, are decisive of this case. The first is that total disability does not mean absolute physical inability on the part of the insured to transact any kind of business pertaining to his occupation. It is sufficient if his injuries were of such a character that common care and prudence required him to desist from the transaction of any such business so long as it was reasonably necessary to effectuate a cure. This was a duty which he owed to the insurer as well as to himself. 116 The second is that, under the particular terms of this policy, to wit, 'from the transaction of any and every kind of business pertaining to the occupation above stated (mer- chant)/ inability to perform some kinds of business pertaining to the occupation would not constitute total disability within the meaning of the policy. * * * But the mere fact that he might be able, with due regard to his health, to occasionally perform some single and trivial act connected with some kind of business pertaining to his occupation as a merchant would not render his disability partial instead of total, provided he was unable substantially or to some material extent to transact any kind of business pertaining to such occupation. To illustrate this proposition by reference to the evi- dence in this case, it appears, as we shall assume, that on one or two occasions where the plaintiff went into his store, when down town for other purposes, he handed out some small article to a customer, and took the change for it. This would not necessarily prove that he was able to attend to the business of waiting on customers, and that he was not 'wholly disabled' within the meaning of the policy. He might be able on temporary visits to the store to occasionally per- form a trifling act of this nature and yet be substantially and essen- tially unable to transact any kind of business pertaining to his occupa- 116 Young v. Travelers' Ins. Co., 80 Me. 244 (1888). 449 ACCIDENT INSURANCE. 404 tion of merchant. The frequency and nature of these acts would be for the consideration of the jury in determining whether he was totally disabled, but would ordinarily be by no means conclusive on that question." The fact that a man whose business was that of making loans on personal security goes to his office for a short time every day, without doing any work or business there, does not show that he was not totally disabled from prosecuting any and every kind of business pertaining to his occupation. 117 404. Construction Effect of existing judicial decisions. In an action on a policy containing a provision which had, prior to its issu- ance, been given a uniform judicial construction by the courts of last resort of several states, it will be presumed that such construction was adopted by the parties and the policy issued with that under- standing. A policy contained a provision that the insurance should cover "injuries, fatal or otherwise, resulting from poison or anything accidentally or otherwise taken, administered, absorbed or inhaled." Prior to its issuance another policy issued by the same company had been construed so as not to exempt the company from liability for the death or injury of the insured resulting from the unconscious and involuntary inhaling of illuminating gas while asleep. It was held by the circuit court of appeals that the same construction would be adopted in an action on the latter policy. The court said: 118 "The defendant company issued the policy in suit, and doubtless many others of like character, after it was advised by the decisions to which reference has been made, one of which was a construction of its own contract, that, as interpreted by the courts of last resort in several states, the policy as drawn would not exempt it from liability if poisonous gas was unconsciously, involuntarily and accidentally in- haled by the insured, which occasioned his death or injury. It had knowledge, therefore, that by reason of such adjudication its policies, if it continued to issue them in the old form, would in all probability be accepted by some, and possibly many persons, upon the under- standing that the company intended, and in fact assumed, the species of risk last described. If such was not its intention, its plain duty 117 Turner v. Fidelity & Gas. Co., " 8 Fidelity, etc., Co. v. Lowenstein, 112 Mich. 425, 38 L. R. A. 529 97 Fed. 17, 38 C. C. A. 29 (1899), and (1897), annotated. See also, Hoff- cases there cited, man v. Michigan, etc., Ass'n (Mich.), 54 L. R. A. 746 (1901). 29 ELLIOTT INS. 404 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 450 was to so modify the language of its policy as to make its purpose clear, inasmuch as a slight change in the phraseology originally em- ployed would leave no room for doubt or speculation as to its meaning. We are unwilling to concede that the insurance company may con- tinue to issue policies, with no modification of their terms, after certain provisions thereof have been construed by several courts of the highest character and ability, and be heard to insist in controver- sies between itself and the insured with respect to such subsequently issued policies, that they do not in fact cover risks which they had been judicially adjudged to cover before they had been issued. While it may not be accurate to say that under such circumstances a technical estoppel arises in favor of the insured, yet courts in such cases should rigidly enforce the rule requiring policies of insurance to be construed most strongly against the insurer, and they should not hesitate to hold that decisions construing a policy adversely to the contention of the insurer thereafter create a doubt as to the proper interpretation of sufficient gravity to be resolved in favor of the insured." CHAPTER XVI. EMPLOYEES' LIABILITY, GUARANTY AND TITLE INSURANCE. /. Employers' Liability Insurance. SEC. SEC - 417. Manner of proof. 410. In general. 418. Constructive notice. 411. Injuries while engaged in desig- 419. Supervision of employe. nated business. 412. Violation of statute by insured. ' C dU Insurance - A -ID Ti7i, i- v,-i-i 420. In general. 413. When liability accrues. 414. Effect of judgment against in- 42L Construction of policy-Amount sured. f recover y- A -ic XT * * 422 - Identity of the insured. 415. Notice of injury or claim. IV. Title Insurance. II. Fidelity Insurance. 416. In general 423 ' Insurance of titles-Construc- tion. /. Employers' Liability Insurance. 410. In general. The constant risk from damage suits to which employers of men engaged in manufacturing, transportation and other business are exposed has led to the adoption of a form of in- surance which is commonly known as employers' liatility insurance. The insurance company, for an adequate premium, agrees, subject to specific exceptions, restrictions and conditions, to protect the em- ployer against liability or loss resulting from actions brought against him by his employes to recover damages for personal injuries caused by the negligence of the employer or his representatives. The busi- ness has reached considerable magnitude, and in some states there are statutes which authorize the incorporation of companies for the express purpose of writing such insurance. As between master and servant, a contract exempting the master from liability for the results of his negligence is void as against public policy; but by the great weight of authority, a contract with a third person by which such third person agrees to indemnify the master is valid. 1 1 Trenton Pass. R. Co. v. Guaran- 246, 44 L. R. A. 213 (1897); Amer- tors', etc., Indem. Co., 60 N. J. L. ican Gas. Ins. Co.'s Case, 82 Md. 535 (451) 411 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 452 411. Injuries while engaged in designated business. The em- ployer is insured against loss resulting from his liability for injuries received by his employes while engaged in a designated business. The provision with reference to the business is liberally construed for the purpose of securing to the insured the protection for which he has paid. Where a policy insured an ice company against claims for damages on the part of its employes "in all operations connected with the business of ice dealers/' it was held that, taking into consid- eration the statements contained in the application, this language cov- ered only employes in the operating department, and that a person injured while engaged in constructing an ice house was not one of such employes. 2 A policy was issued under which the liability was restricted to injuries to employes while engaged in occupations connected with the business of iron and steel works; that is, in the operating depart- ment as distinguished from a business like that of constructing nec- essary buildings. An employe was injured while at work in the operating department by the fall of a girder which was being raised to its position by an independent crew engaged in this work. The court said: 3 "The general language of the contract, 'all operations (Boston, etc., R. Co. v. Mercantile etc., Assur. Corp., 161 Mass. 122, 36 Trust, etc., Co., 38 L. R. A. 97, 34 N. E. 754 (1894). Atl. 778) (1896); Kansas City, etc., 3 Hoven v. Employers', etc., Assur. R. Co. v. Southern Ry. News Co., Corp., 93 Wis. 201, 67 N. W. 46, 32 151 Mo. 373, 52 S. W. 205, 45 L. R. L. R. A. 388 (1896). In reference to A. 380, 74 Am. St. 545 (1899). As People's Ice Co. v. Employers', etc., to the right of the injured employe Assur. Corp., 161 Mass. 122, 36 N. E. to maintain an action upon the pol- 754 (1894), the court said: "We icy of insurance, see Embler v. Hart- are not prepared to say but that ford, etc., Ins. Co., 158 N. Y. 431, 53 there was reasonable ground to N. E. 212, 44 L. R. A. 512 (1899). hold that the policy, taken in con- That such policies sometimes pro- nection with the application, and vide for the apportionment of the the language of the schedule, 'all loss between the insured and the operations connected with the busi- insurer, see Rumford Falls Paper ness of ice dealers,' covered only Co. v. Fidelity, etc., Co., 92 Me. 574, persons engaged in the actual oper- 43 Atl. 503 (1899). That this is ations of cutting, handling, storing also true of credit insurance con- and delivering ice, and not those en- tracts, see Jaeckel v. American, gaged in the construction of store- etc., Indem. Co., 34 App. Div. (N. Y.) houses; nevertheless, we should hes- 565 (1898). itate to adopt such construction if 2 People's Ice Co. v. Employers', the precise question were before us." 453 EMPLOYERS' LIABILITY INSURANCE. ;< in connected with the business of iron and steel works/ is not restricted by anything in the conditions indorsed on the policy or any paper referred to or made a part of it. If the intention was to restrict such language to operations in any particular department, or to any par- ticular branch of the business, or to any particular instrumentalities used in such business, it was easy to have said so in unmistakable language. The court should give the general language the assurer saw fit to use, under the circumstances, a broad and liberal construc- tion in favor of the objects for which the policy was taken out; and by so doing the conclusion is easily reached that it covers the opera- tion of constructing a building for the use of the assured in its business as one of the operations connected with such business.'' But a policy indemnifying for damages on account of injuries to persons not employes, resulting from "accident to or caused by horses, cars, plant, ways, works, machinery or appliances used in the business of the insured and described in the application," does not cover in- juries caused by the use of omnibus sleighs, as the risk .would be dif- ferent. "The defendants would not have been liable under the terms of the policy if the motive power had been changed by the use of steam or electricity instead of horses; and we are not able to see that the result is different when one kind of a vehicle is substituted for another. * * * Whether the risk would be increased or diminished would depend upon the circumstances of the particular case, but it is. evident that the risk in the use of sleighs differs from that in the use of cars." 4 A policy was issued upon an application which stated: "It is un- derstood that in the conduct and operation of their business, the insured employ a railroad owned by themselves and used only for their own lumbering purposes." The insurance was against liability to persons who should "sustain bodily injuries under circumstances which would impose on the insured a common-law or statutory liabil- ity therefor." The company's lumbering operations were carried on upon lands owned by it, and it had mills and dwellings for its work- men in a region not otherwise inhabited. It also had, in connection with the mills and dwellings for the workmen mentioned, a store, in which it kept for sale to its agents and other workmen such materials and goods as they required. These buildings and mills were remote from any other settlement and could not be reached by any public 4 Phillipsburg Horse Car Co. v. Fidelity, etc., Co., 160 Pa. St. 350, 28 Atl. 823 (1894). 412 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 454 road or highway. The company constructed and operated on its own land, and primarily for use in its business, a railway by which logs were transported to the mills and manufactured into lumber, and from the mills to an ordinary road some miles distant. Necessary supplies for the store were transported over the railroad as occasion required, and the company's agents and workmen, and persons hav- ing business at the mill or at the shop, such as commercial travelers, were carried from time to time over the railway. From some of such persons the company demanded and collected pay for transporta- tion. Two commercial travelers, who had been to the store to take orders, were, by special arrangement and for compensation, being carried over the road on a locomotive, which was overturned, and the passengers received injuries for which they recovered damages from the railroad company. It was held that under all the circumstances the injuries occurred within the scope of the company's lumbering operations, and that the insurance company was therefore liable. 5 412. Violation of statute by insured. It is sometimes provided that there shall be no liability for injuries to employes caused by the neglect of the insured to obey statutes and ordinances designed for the protection of such employes. Where the policy insured against liability for injuries accidentally sustained by employes, except a child illegally employed, it was held that the company was not liable for damages which were recovered from the insured for injuries sustained through its negligence by a child under twelve years of age, employed in violation of law. The insured 'claimed that under this contract the insurance company was exempted from liability only where the injuries were proximately caused by the illegality of the employment, but the court said: 6 "We can entertain no doubt but that the meaning of the clause in question which was intended by the parties, and which should be given it by the courts, is the popular meaning as distinguished from the purely technical, legal meaning. So construed, all difficulties disappear, and the clause becomes a sub- stantial limitation, as undoubtedly intended by the parties, and it encourages no violation of law, but rather discourages it." In a recent New York case, the application upon which the policy was issued contained an agreement on the part of the insured, a ce- 5 Travelers' Ins. Co. v. Wild River 6 Goodwillie v. London Guaran- Lumber Co., 83 Fed. 977, 28 C. C. A. tee, etc., Co., 108 Wis. 207, 84 N. W. 127 (1897). 164 (1900). 455 EMPLOYERS' LIABILITY INSURANT i:. 413 merit company, to "conduct all business and maintain all premises to which such proposed insurance may apply in strict compliance with all statutes and ordinances provided for the safety of persons." One of the employes of the insured was injured while attempting to oil a shafting in certain machinery, and subsequently brought an action against the cement company and secured judgment, which the cement company paid and demanded from the insurance company. The insurance company claimed that the insured had forfeited its right to indemnity because it had failed to maintain its premises in compliance with the factory act, which required such machinery to be properly guarded. "There are but few cases," said Mr. Justice Haight, 7 "to be found in our courts in which the provisions of the factory act have been construed, and these offer but little aid in construing the provisions here involved. The manifest purpose of the enactment was doubtless to give more force to the existing rule that masters should afford a reasonably safe place in which their servants are called upon to work. We think, however, that the legislature could not have intended that every piece of machinery in a large building should be covered or guarded. This would be impracticable. What evidently was intended was that those parts of the machinery which were dangerous to servants whose duty required them to work in its immediate vicinity should be properly guarded so as to mini- mize, as far as practicable, the dangers attending their labors. Human foresight is limited, and masters are not call 3d upon to guard against every possible danger. They are required only to guard against such dangers as would occur to a reasonably prudent man as liable to happen." It appearing that this had been done, the company was allowed to recover upon the policy of insurance. 413. When liability accrues. Whether the insured can main- tain an action against the insurer without having paid the claim of an employe depends, of course, upon the language of the policy. If the insurance is against damages actually suffered, it is necessary for the insured to pay the judgment or claim against it before proceed- ing against the insurance company. But where the policy by its terms protects the insured against liability for damages for injuries suffered by his employes, it is not necessary that the liability be dis- charged before bringing an action. 8 "According to the terms of the 7 Glens Falls, etc., Co. v. Travel- 8 Hoven v. Employers', etc., Assur. ers' Ins. Co., 162 N. Y. 399, 56 N. E. Corp., 93 Wis. 201, 67 N. W. 46, 32 897 (1900). L. R- A. 388 (1896). 413 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 456 policy," said Mr. Justice Martin, 9 "the insurance company under- took to pay all such sums as the railway company should become liable for in damages in consequence of bodily injuries caused by the operation of its street railway. Upon the occurrence of an accident in respect to which a claim for damages may have arisen, notice was required to be immediately given by the railway company to the insurance company. * * * The insurance company assumed the liability for such claim and had authority to settle it without litiga- tion. If any legal proceedings were instituted against the railroad company to enforce it, the insurance company bound itself to take ab- solute control of the same in the name and in behalf of the assured. In only one way could it have absolved itself from this obligation, and that was by paying or offering to pay the insured the full amount for which it was liable in such cases by its policy. According to these terms, the ascertainment and adjustment of the liability of the insured for claims for damages depended upon the insurance com- pany, provided it acted in good faith. The assured surrendered the entire control and management thereof to the insurer. So long as the latter resisted in the courts the enforcement of such claims, no right of action accrued upon the policy; for, until the termination of the litigation, both parties denied the liability of the assured, and the existence and extent thereof remained undetermined, according to the methods by which the parties, in effect, agreed it should be ascertained and fixed. Any other interpretation of the policy would take from the insurer the protection for which it contracted/' But the liability of the insured is not determined so as to render it liable to pay such damages so long as an action is pending in court against the insured, or an appeal from a judgment therefor is pending in the supreme court. An employers' liability policy provided (1) that it insured against all liability on account of fatal or non-fatal injuries suffered by an employe; (2) that the company, at its own expense, would take upon it the settlement of any loss, and the control of any legal proceedings taken against the insured to enforce a claim for injuries to an in- sured employe; (3) that the insured should not settle for any injury without the consent of the insurance company; (4) that no action should lie against the insurance company after the period in which "Fidelity, etc., Co. v. Fordyce, 64 dyce, 62 Ark. 562, 54 Am. St. 305 Ark. 174, 41 S. W. 420 (1897). See (1896). also, American, etc., Ins. Co. v. For- 457 EMPLOYERS' LIABILITY ixsn; \ NCI-:. < ill action might be brought by the employe against the insured, unless at such period there was a suit pending for such purpose, in which case the action might be brought in respect to a claim involved in such suit against the company within thirty days after a judgment was rendered in such suit, and not later. It was held that this policy was not one merely of indemnity against any act of an employe, but that in case of accident to him whereby he had a cause of action against the insured, the insurance company would assume and pay the liability. Also, that an employe having, while so employed, sus- tained injury and recovered a judgment therefor against the insured, the insurance company was liable therefor in an action against it without the employer having first paid the judgment. 10 414. Effect of judgment against insured. Ordinarily, questions' determined in a suit brought by the employe against the employer to recover damages for personal injuries are res adjudicata, in a pro- ceeding by the employer against the insurance company to recover upon a policy covering the particular risk in question. In a New York case, an action was brought by an employe against his employer to recover damages for personal injuries alleged to have been caused by the negligence of the employer. The defense was undertaken by the insurance company, but a short time before the time set for trial it withdrew from the defense and permitted judg- ment to go by default on the theory that the evidence showed that the employer had neglected to comply with the provisions of the statute for the protection of his employes, and therefore the insurance company was not, under the terms of its policy, liable for the loss. In an action subsequently brought against the insurance company by the employer, it was claimed that the question of negligence of the employer in failing to comply with the statutory provisions was res adjudicata, but the court said: 11 "We do not think that the adjudication in that action is binding upon the plaintiff in this action, for the reason that, under the contract of insurance, the insurance company had agreed to defend the action, and had conducted such defense down to the eve of the trial, and then withdrew, leaving the cement company without reasonable opportunity to prepare its own defense to the action. Had the insurance company continued its defense, it might 10 Anoka Lumber Co. v. Fidelity, "Glens Falls, etc., Co. v. Trav- etc., Co., 63 Minn. 286, 65 N. W. elers' Ins. Co., 162 N. Y. 399, 56 N. 353, 30 L. R. A. 689 (1895). E. 897 (1900). 415 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 458 have shown upon the trial that the cement company was free from negligence in the matter, and thus have avoided judgment against the company; but having withdrawn from the defense of that action im- properly, and permitted judgment to go against the cement company by default, it is now estopped from claiming that the adjudication thus obtained precludes the plaintiff from the indemnity which the defendants had contracted to render." 415. Notice of injury or claim. A provision in a policy of this character, to the effect that notice shall immediately be given to the company of the occurrence of an accident, is a condition precedent to liability, although the policy contains no forfeiture clause. Where an employe made no claim for damages until nine months after the accident, a notice given at that time was held to be too late. "Cer- tainly we can not hold," said the court, "under the conditions of this policy, that the notice of the claim for damages, made for the first time nine months after the accident, satisfied the requirement that immediate notice should be given of the occurrence of the accident ; nor can we hold that such requirement was not a condition precedent ; nor can we hold that such notice of an accident given for the first time nine months after the occurrence of the accident was imme- diate notice within the condition quoted, as those words have been repeatedly construed in this court." 12 But in Minnesota, under a policy which contained a clause to the effect that "the insured, upon the occurrence of an accident, and upon notice of any claim on account of an accident, shall give imme- diate notice in writing of such accident, or claim, with the fullest information available, to the company, at its office in New York City, or to an agent, if any, who shall have countersigned this policy," it was held that the insured need not give notice to the insurance com- pany until notice that a claim had been made. 13 12 Underwood Veneer Co. v. Lpn- Grand Rapids, etc., Co. v. Fidelity, don Guar., etc., Co., 100 Wis. 378, etc., Co., Ill Mich. 148, 69 N. 75 N. W. 996 (1898); quoting Kentz W. 249 (1896). ler v. American, etc., Ace. Ass'n, 88 13 Anoka Lumber Co. v. Fidelity, Wis. 589, 60 N. W. 1002 (1894). etc., Co., 63 Minn. 286, 65 N. W. 353, See further, as to the construction 30 L. R. A. 689 (1895). of the provision requiring notice, 459 FIDELITY INSURANCE. 416 //. Fidelity Insurance. 416. In general. Contracts by which a party is insured against loss 14 by the fraud or dishonesty of his employes are contracts of in- surance and not of suretyship. 15 "Guaranty insurance," said Mr. Justice Wilkin, 1(i "is, in its practical sense, a guaranty or insurance against losses in case the person so guaranteed makes a designated default or be guilty of specified conduct. It is usually against mis- conduct or dishonesty of an employe or officer, though sometimes against a breach of contract. This branch of insurance is so much more modern in origin and development than fire, marine, life and accident insurance that there are few decisions upon the subject ; but the business is gradually increasing and is doubtless destined to take an important place in the commercial world. It may be confidently stated that, notwithstanding the comparative absence of specific de- cisions, the general principles applicable to other classes of insur- ance are applicable here as well. Thus, the general doctrine of war- ranty, representation and concealment, as applied to fire, life and marine insurance, is applicable also to the subject of guaranty insur- ance." Fidelity policies usually provide that the insured shall promptly notify the company of any fraud or dishonesty on the part of the em- ploye. 17 A condition in the bond of fidelity insurance, which requires 14 As to what are "losses," see Rice See, also, People v. Fidelity, etc., v. National, etc., Ins. Co., 164 Mass. Co., 153 111. 25 (1894); Claflin v. 285, 41 N. E. 276 (1895). United States, etc., Co., 165 Mass. "Supreme Council v. Fidelity, 501, 52 Am. St. 528 (1896). For the etc., Co., 63 Fed. 48, 11 C. C. A. 96 general principles of insurance gov- (1894); Mechanics' Sav. Bank & erning contracts of this character, Trust Co. v. Guarantee Co., 68 Fed. see Mechanics' Sav. Bank & T. Co. 459 (1895). The principal ques- v. Guarantee Co., 68 Fed. 459 (1895); tions which have arisen out of Supreme Council v. Fidelity & Gas. credit insurance have been those of Co., 63 Fed. 48, 11 C. C. A. 96 (1894). construction. As an illustration, In the Mechanics' Sav. Bank case see the cases of Smith v. National, the court said: "The business is etc., Ins. Co., 65 Minn. 283, 68 N. W. therefore becoming one of vast pub- 28, 33 L. R. A. 511 (1896), and lie as well as private importance, Shakman v. United States, etc., Co., and it can not be objected if rules 92 Wis. 366, 66 N. W. 528, 53 Am. of reasonable stringent liability are St. 920 (1896). applied to these contracts as in 10 People v. Rose, 174 111. 310, other forms of insurance." Woodruff Ins. Gas. 16 (1898); quot- "Where the relation of principal ing 9 Am. & Eng. Enc. Law 65. and surety exists, the surety is en- LIFE, ACCIDENT AND INDEMNITY INSURANCE. 4GO that a claim thereunder shall be made as soon as practicable after the discovery of the loss, and within six months after the expiration of the bond, must be complied with or there can be no recovery ; and the fact that the insurance company has actual knowledge of the loss does not excuse compliance with such a condition. 18 Where the con- tract requires that written notice of any act of the employe involving loss to the employer shall be given as soon as practicable after knowl- edge of such act, it is not necessary to give notice of a mere suspicion. Thus, where a bond was given to protect a bank from the dishonesty of its cashier, it was held that notice need be given only after the bank had knowledge of such facts as would justify a charge of fraud or dishonesty against the cashier. 19 The notice must be given within a reasonable time. A bond pro- vided that notice should be given the company of any act of the cashier of a bank which might involve loss for which the insurance company might be responsible, "as soon as practicable after the occurrence of such acts shall have come to the knowledge of the bank." The bank suspended payment and passed into the hands of a receiver, and after- wards notified the surety company of the discovery of dishonest acts of the cashier, and made proofs of loss as required. It was held to be titled to notice, although it is not Contra, see Phenix Ins. Co. v. Find- expressly provided for in the bond, ley, 59 Iowa 591, 13 N. W. 738 In Phillips v. Foxall, L. R. 7 Q. B. (1882). 666 (1872), it was said: "We think "California Sav. Bank v. Ameri- that in the case of a continuing guar- can Surety Co., 87 Fed. 118 (1898); anty for the honesty of a servant, Michigan Sav., etc., Ass'n v. Mis- if the master discovers that the souri, etc., Trust Co., 73 Mo. App. servant has been guilty of acts of 161 (1898); Missouri, etc., Trust dishonesty in the course of the serv- Co. v. German Nat'l Bank, 77 Fed. ice to which the guaranty relates, 1TI, 23 C. C. A. 65 (1896) [where and if, instead of dismissing the a guarantee company, after it knew servant, as he may do at once, and of the fact that an employe was a without notice, he chooses to con- defaulter, took security from him tinue in his employ a dishonest without notifying the insured that servant, without the knowledge and it disclaimed liability, it was held consent of the surety, express or im- proper to submit to the jury the plied, he can not afterwards have question as to whether the guar- recourse to the surety to make good antee company waived the defense any loss which may arise from the that the employe in his application dishonesty of the servant during the for the bond had understated his subsequent service." To the same indebtedness to the bank], effect, see Lancashire Ins. Co. v. 19 American Surety Co. v. Pauly, Callahan, 68 Minn. 277 (1897). 170 U. S. 133 (1898). 461 FIDELITY INSURANCE. 416 a question for the jury as to whether notice had been given with rea- sonable promptness. 20 Such contracts are strictly limited with reference to the time and manner of employment, and therefore cease to be effective where there is a change of employment. The cashier of a national bank remains in the "service of the bank" after the bank is in the hands of a bank examiner who is investigating its affairs, and until the ap- pointment and qualification of a receiver. 21 In the same case in the lower court it was held that the cashier was "in the service of the bank" while he was in the employ of the receiver, who was winding up the affairs of the bank. 22 So, where a bank was insured against loss through the fraud or dishonesty of an employe in connection with his duties as teller, "or the duties to which, in the employer's service, he may be subsequently appointed or assigned by the em- ployer," the contract was held to cover his misconduct while acting as assistant cashier. 23 Where a bond, given to secure a bank against loss by reason of fraud or dishonesty of an employe, provided that a claim thereunder should embrace only acts and defaults committed during its currency, and within twelve months next before the discovery of the act or de- fault, it was held that it did not cover a default committed more than twelve months prior to the discovery, which would have been discov- ered within the year had not such discovery been prevented by the act of the employe in falsifying the books during the year preceding the discovery. The court said: 24 "The bank's position rests upon the assumption that it would have recovered its earlier losses by action upon this bond, but for the fraudulent postponement of their discovery. Let this be conceded, still it is obvious that seasonable discovery of the preceding dishonest acts would have rendered the perpetration of the succeeding ones impossible, and hence that the en- tire liability [of the surety] is one which could not possibly have ac- crued if discovery of the earlier embezzlements had been made within the prescribed time; and it is not possible to hold, in the face of a 20 American Surety Co. v. Pauly, Nat'l Bank, 97 Ga. 634, 54 Am. St. 72 Fed. 470, 18 C. C. A. 644 (1896). 440 (1895). 21 American Surety Co. v. Pauly, ** Fidelity, etc., Co. v. Consolidated 170 U. S. 133 (1898). Nat'l Bank, 71 Fed. 116, 17 C. C. A. 22 American Surety Co. v. Pauly, 641 (1895); reversing 67 Fed. 874 73 Fed. 470, 18 C. C. A. 644 (1896). (1895). 23 Fidelity, etc., Co. v. Gate City 417 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 462 condition limiting liability by the requirement of discovery, that, by reason of non-discovery, the liability so limited was extended or en- larged." 417. Manner of proof. The contract often provides that certain facts and statements shall be taken as proof of a default by the em- ploye, and the amount of such default. Where this is done the pro- duction of such evidence makes a prima facie case against the in- surer. 25 Where a policy insuring against actual loss by theft or dishonesty of an employe provided the means of determining the extent and amount of the shortage, and that, when thus ascertained, it should be accepted as evidence that it was caused by fraud or dishonesty, and not by any of the various other causes enumerated as exceptions, it was held that a shortage so ascertained was prima facie evidence of its existence, and that it was caused by the employe's fraud or dishon- esty, thus casting the burden upon the insured to rebut the prima facie ease by sufficient evidence. It was held, however, that it was not bound to do this by affirmative evidence showing a particular one of the causes enumerated as exceptions, but might do it by negative evidence showing that it was not caused by fraud or dishonesty of the employe, and hence must have been produced by one or more of the excepted causes. It was also held, in an action brought by the in- surance company against the employe to recover money alleged to have been paid to his employer on the bond, that, the contract of guaranty having been executed at defendant's request, the obliga- tion to indemnify plaintiff was co-extensive with the obligation of the latter to indemnify the employer, and any provisions in the con- tract between the insurer and the employer as to the proofs of liabil- ity were equally binding on the defendant in favor of the plaintiff. 26 Under a bond to "make good such pecuniary loss, if any, as may be sustained by an employer by reason of fraud or dishonesty of an em- ploye in connection with the duties referred to, amounting to embez- zlement or larceny, which was committed or discovered during the continuance of said term or any renewal thereof," entries, receipts and reports made by an employe, the treasurer of a benevolent asso- ciation, during the life of the bond in the ordinary course of his duty, 28 American Surety Co. v. Pauly, Minn. 170, 30 L. R. A. 58t>, 56 Am. 72 Fed. 484, 18 C. C. A. 657 (1896). St. 464 (1895). 28 Fidelity, etc., Co. v. Eickhoff, 63 463 FIDELITY INSURANCE. 418 charging himself with certain items, are not conclusive against the insurance company as to the time such items were received. 27 418. Constructive notice. A bank is not bound by constructive notice of matters brought to the attention of its president and caslii.-r while they were .engaged in a fraudulent design to rob the bank. "The presumption that an agent informed his principal of that which his duty and the interests of the principal required him to communicate does not arise where the agent acts or makes declara- tions not in execution of any duty that he owes to the principal, or within any authority possessed by him, but to subserve simply his own personal ends to commit some fraud against the principal. In such cases the principal is not bound by the acts or declarations of the agent unless it is proved that he had at the time actual notice of them, or, having received notice of them, failed to disavow what was as- sumed to be said or done in his behalf." 28 419. Supervision of employe. The character and extent of the supervision which will be exercised over employes by the insured is a very important factor in the risk assumed by a fidelity insurance company. But an insured owes no duty of supervision to the insurer, unless it is imposed by the contract of insurance. 29 There is some controversy as to whether a statement made by an applicant for insurance, as to the kind of supervision exercised and the method of checking accounts, is in the nature of a promissory representation and its future observance vital to the contract. In an English case' a guaranty company issued a policy upon statements that the accounts were checked weekly. It appeared that this had 27 Supreme Council v. Fidelity, that where there is nothing in the etc., Co., 63 Fed. 48, 11 C. C. A. 96 contract requiring the insured to (1894). In this decision the various notify the insurance company that authorities on both sides of the ques- it has learned that the employe is tion are collected and reviewed. untrustworthy, the knowledge of the 28 American Surety Co. v. Pauly, cashier is not imputable to the bank. 170 U. S. 133 (1898); citing Henry The doctrine of constructive notice v. Allen, 151 N. Y. 1, 36 L. R. A. 658 is held to have no application to (1896). See 2 Pomeroy Equity such a contract. Juris., 675. In Fidelity, etc., Co. -'Fidelity, etc., Co. v. Gate City v. Gate City Nat'l Bank, 97 Ga. 634, Nat'l Bank, 97 Ga. 634, 54 Am. St 54 Am. St. 440 (1895), it was held 440 (1895). 419 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 464 been the practice, and that it was discontinued after the policy was issued. It was held that there could be no recovery on the policy. 30 In a Canadian case it appeared that the policy was issued upon the express condition that the answers contained in the application em- braced a true statement of the manner in which the business was conducted, and accounts kept, and that they would be so kept. As there had been no proper supervision exercised over the books, the insured was not permitted to recover for a loss caused by the dishon- esty of an employe. 31 A good-faith, customary examination of the books of a bank, such as a committee deemed sufficient for the pro- tection of the bank, is a compliance with a requirement in the bond of a bank teller that the bank shall "observe all due and customary supervision over such employe for the prevention of default/' 32 Where a policy stipulates that a bank "shall observe all due and customary diligence" in the supervision of its employes, it is not obliged to comply with the general bank custom as to the taking of a trial balance from the individual ledgers. 33 In answer to an inquiry, the employer stated that the employe would be authorized to draw checks to which the countersignature of the bookkeeper would invariably be required. It was held that there could be no recovery for losses caused by the drawing of checks to which the signature of the bookkeeper was not required. The court said: 34 "A written statement made by the employers to the obligee so Towle v. National Guardian Ins. anced and closed at the end of each Soc., 7 Jur. (N. S.) 1109 (1861), quarter: Board of Education v. Cit- reversing same case, 30 Law J. izens' Ins., etc., Co., 30 U. C. C. P. Ch. 900 (1860). But in Benham v. 132 (1879). See also, Hunt v. Fi- United Guarantee, etc., Co., 7 Exch. delity, etc., Co., 99 Fed. 242, 30 C. C. 742 (1852), the applicant stated in A. 496 (1900), quoted at 103, answer to a question as to what supra. checks would be used to secure ac- w Mechanics' Sav. Bank & T. Co. v. curacy in the accounts of the treas- Guarantee Co., 68 Fed. 459 (1895). urer, that they were "examined by M Guarantee Co. v. Mechanics' finance committee every fortnight." Sav. Bank, etc., Co., 80 Fed. 766 It was held that this was a mere (1896). representation of intention and that "* Rice v. Fidelity & Dep. Co., 103 there could be a recovery, although Fed. 427, 43 C. C. A. 270 (1900) the loss was caused by the failure [citing American, etc., Indem. Co. to make such examination. v. Wood, 73 Fed. 81, 19 C. C. A. 31 Harbour Commissioners v. Guar- 264 (1896); American, etc., Indem. antee Co., 22 Can. Sup. Ct. 542 Co. v. Carrollton Furn. Mfg. Co., (1894). So, where the contract pro- 95 Fed. Ill, 36 C. C. A. 671 (1899)]. vided that the books should be bal- 465 CREDIT INSURANCE. 420 in a bond of indemnity against the dishonest acts of their employe, to the effect that they will invariably apply certain checks to his action, which the parties expressly agree by the statement itself and the bond, shall be the basis of the latter, and a condition precedent to a recovery upon it, is of the nature of a warranty, and not a repre- sentation, and a failure to comply with the promise it contains is fatal to an action upon the bond." 717. Credit Insurance. 420. In general. The practice of insuring merchants and trad- ers against loss through the insolvency or dishonesty of their cus- tomers is of very recent origin. 35 Massachusetts seems to be the only state that does not recognize such contracts as insurance, and it is there held that they are invalid whether made by domestic or foreign corporations, because not authorized by the insurance statutes. 86 It has been contended that the relation between the parties to such a contract is that of principal and surety, but the courts have re- fused to accept this view. In a recent case it was said: 87 'In- surance against mercantile losses is a new branch of the business of underwriting, and but few cases dealing with policies of that char- acter have as yet found their way into the courts. The necessarily nice adjustments of the respective proportions of loss to be borne by insurer and insured, the somewhat intricate provisions which are required to make such business successful, and the lack of experience in formulating stipulations to be entered into by both parties to such a contract, have naturally tended to make the forms of the policy crude and difficult of interpretation. * * * The cases cited by defendant in error holding that the surety is 'a favorite of the law/ and that a claim against him is strictissimi juris, have no application. Cdrporations entering into contracts like the one at bar may call themselves 'guarantee' or 'surety' companies, but their business is in all essential particulars that of insurers, who, upon careful calculation of the risks of such business, and with such re- 35 The first case in which such a " Tebbets v. Mercantile, etc., Guar. contract came before the courts was Co., 73 Fed. 95, 19 C. C. A. 281 (1896). Solvency Mutual Guar. Co. v. York, To the same effect, see Shakman v. 3 Hurl. & N. 587 (1858). United States, etc., Co., 92 Wis. 366, ""Clanm v. United States, etc., Co., 66 N. W. 528 (1896); United States, 165 Mass. 501, 43 N. E. 293 (1896); etc., Co. v. Robertson (N. J.), 29 Mass. Pub. St. 1887, ch. 214, 78. Atl. 421 (1894). 30 ELLIOTT INS. 421 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 466 strictions of their liability as may seem to them sufficient to make it safe, undertake to insure persons against loss, in return for pre- miums sufficiently high to make such business commercially profit- able. Their contracts are, in fact, policies of insurance, and should be treated as such." Such contracts are therefore to be construed like other contracts of insurance. 38 The general principles governing the making of such contracts apply to contracts of credit insurance. It was held in England that the rule requiring the utmost good faith on the part of the insured in disclosing facts affecting the risk extends to instruments in the form of a policy guaranteeing the solv- ency of a person who is a surety for the repayment of borrowed money. 39 But, as in cases of life and fire insurance, the American cases do not apply the rule with reference to concealment so strictly. "We think it is going too far," says Goodrich, P. J., 40 "to say that the creditor is in all cases, and without being inquired of, bound to communicate everything that it is important for the surety to know that would increase the risk. Under such a rule no one would ever know when he could rely upon a bond, and it would lead to a good deal of litigation. Besides, the duty of the defendants, when applying for a renewal of the bond, stands upon a different basis than their duty when applying for original insurance." 421. Construction of policy Amount of recovery. A policy which insures against loss on sales, sustained by the insolvency of debtors who have assigned their property for the benefit of creditors, covers an assignment under a state statute, at common law, or. for the benefit of a single creditor. "It may be a statutory assignment, a mortgage, a confession of judgment, or some other contrivance, the purpose and effect of which is to dispose of all the debtor's assets and disable him from paying his debts. In such cases the loss is fairly within the scope of the indemnity secured by the insured by this policy. It is the completeness of the transfer and its effect upon the debtor in his business, and not the name or form of the instrument or transaction, that gives it character. Any transfer by a trader or merchant of all his stock in business, when it covers substan- 38 Mercantile, etc., Guar. Co. v. M Seaton v. Heath, L. J. 68 Q. B. Wood, 68 Fed. 529, 15 C. C. A. 563 D. 630 (1899). (1895); Mercantile Cred., etc., Co. v. * American, etc., Indem. Co. v. Littleford, 18 Ohio C. C. 889 (1899). Wimpfheimer, 14 App. Div. (N. Y.) 498 (1897). See ch. v. 467 CREDIT INSURANCE. 421 tially all his property, may be an assignment within the meaning of the policy, in spite of its form or the name given to it. * * * A general assignment, within the meaning of the policy, may be made for the benefit of a single creditor or all. It may be in the form prescribed by state statutes, or an assignment at common law. The form of the transaction is not so material as the result, when it operates to divest the debtor of substantially his entire property and closes out his business. Such a transaction means insolvency, within the fair scope of the indemnity/' 41 Within the definition of the term "insolvency," as defined in a policy, was included the return of a writ of execution against the debtor unsatisfied, except where such execution has been issued and returned after the appointment of a receiver. The policy required the insured to give notice within ten days after learning of the insolvency of a debtor, upon blanks furnished by the company and in the man- ner described therein. The blank contained no reference to insolv- ency, but required the insured to answer certain questions as to the 41 People v. Mercantile Credit Guar. Co., 166 N. Y. 416, 60 N. E. 24 (1901). The policy limited liability to cases where "an execution has been returned unsatisfied on a judg- ment obtained * * * for merchan- dise sold to said debtor during the period covered by this policy." It was held that a failure to return an execution until three days after the expiration of the policy did not re- lieve the insurer from liability where the other requirements of the policy had been complied with. "To sustain the decision under review, it is necessary to hold that not only must the goods be sold within the life of the policy, and a judgment rendered and an execution issued, but that it must be returned un- satisfied within that time, which is one year; and that, too, when there is no language in the policy or in the conditions which would warrant such construction. * * * The re- turn of the execution does not con- stitute the main fact of insolvency, but is simply evidence of that fact; and if the insured, when presenting his proof of loss within the time stipulated, can say that it has then been returned, that is a compliance with the terms of the policy." [Cit- ing Sloman v. Mercantile, etc., Guar. Co., 112 Mich. 258, 70 N. W. 886 (1897).] In the same case the court said: "I can not perceive that the case of Talcott v. National, etc., Ins. Co., 9 App. Div. (N. Y.) 433 (1896), affirmed in this court without opinion, 163 N. Y. 577, 57 N. E. 1125 (1900), has any bearing upon the questions now before us. That action was against another company upon a very different in- strument. That case turned upon a condition in the contract to the effect that the insurer should not be liable for any loss of which he did not receive notice during the life of the policy." 421 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 468 failure of the debtor. The word "failure" was held to be used in its commercial sense, and hence a confession of judgment by a debtor who was in business, and the seizure of his stock by the sheriff, caus- ing a suspension of his business, was a failure, and a report thereof within ten days fulfilled the requirement as to notice, and a second notice after the return of an execution unsatisfied was not necessary. 42 A policy insuring the holder against loss "sustained by reason of the insolvency of debtors owing the insured for merchandise" provided that "in adjusting losses, * * * before determining the per- centage of loss to be borne by the company there should first be de- ducted all sums paid, offered and accepted, settled and secured, and the value of any security and collateral." Under this policy the loss insured against was not the whole amount due from the insolvent debtor at the time of his suspension, but the amount remaining due after deducting any payments made by the debtor. It was also held that the clause, "When only a part of the loss is covered by this policy, a proportionate part of everything released or secured by the insured shall be credited to so much of it as this policy covers," apparently referred to cases where a part of the loss is covered by one policy and part by another. But as it could not be brought into harmony with the rest of the contract, and the instrument considered as a whole 42 American, etc., Indem. Co. v. insured was required to notify the Carrollton Fur. Mfg. Co., 95 Fed. company within ten days after re- 111, 36 C. C. A. 671 (1899); Talcott ceiving information of any insol- v. National, etc., Ins. Co., 9 App. vency or loss, and it was provided Div. (N. Y.) 433 (1896). A bond in that final proof of loss should be this case provided "that in case the made at the home office of the corn- second party shall suffer losses in pany within thirty days after the his business during said period of expiration of the bond, and that in this bond by reason of the insol- the event of loss occurring within vency by legal process of any party the life of the bond, of which the or parties to whom said second obligor had not received notifica- party shall have sold and delivered tion before the termination of the goods during the period of this bond, such loss should not be prova- bond, * * * or by reason of ble under this policy. Proof could any judgment or decree of court not be made of claims for goods obtained for goods so delivered which had been sold during the within said period of this bond, period covered by the bond but on upon which execution shall have which no judgment had been ob- been returned unsatisfied over tained or execution returned un- and above said losses, then the satisfied until after the expiration obligor would indemnify the plain- of the term of the bond, tiff as stated in the bond." The 469 TITLE INSURANCE. 422 was ambiguous, that meaning should be given it which is most favor- able to the insured. 43 Where the policy insured against loss by insolvency of debtors owing for merchandise "sold between April 1, 1893, and March 31, 1894," and provided that the policy should "expire on March 31, 1894," and that proofs of loss must be presented within ninety days after the expiration of the policy, and that no loss should be paid until presented in such proofs, except that if the policy should be renewed, losses occurring after such expiration in sales made during its ex- istence were payable, it was held that the company was liable for losses occurring after the expiration of the policy on sales made dur- ing its existence, although the policy was not renewed. The court said: 44 "We are of the opinion that the fairer view to take is that the provision in relation to the expiration of the policy refers to the time when sales to be covered thereby shall cease, and that it does not determine the time when losses must occur upon such sales, but that these shall be recoverable, regardless of that date, subject to the lim- itation as to final proof. This conclusion is justified by the rule that any ambiguity in an instrument is to be resolved against the draftsman." 422. Identity of the insured. In guaranty insurance we find a principle somewhat analogous to that of change in interest or title in fire insurance. Two partners were insured agamst loss by uncol- lectible debts, under a policy which provided that "if any member guaranteed with respect to his gross or particular trade debts shall cease to be such trader, his guarantee or contract shall become void on his retiring from such trade," and it was held that the retirement of one partner invalidated the contract. 46 Under such a policy the death of a partner effects such a change in the firm as will release the insurer. 46 IV. Title Insurance. j 423. Insurance of titles Construction. There are but few cases construing contracts of title insurance. Apparently the gen- 43 Mercantile Credit, etc., Co. v. " Solvency Mut. Guar. Co. v. Free- Wood, 68 Fed. 529, 15 C. C. A. 563 man, 7 Hurl. & N. 17 (1861). (1895). "Cosgrave Brewing, etc., Co. v. 44 Sloman v. Mercantile, etc., Guar. Starrs, 5 Ont 189 (1884); Pember- Co., 112 Mich. 258, 70 N. W. 886 ton v. Oakes, 4 Russ. 154 (1827): (1897). 423 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 470 eral principles governing insurance contracts apply to contracts of this nature. Thus, when such a policy contains a condition which renders it void from its inception, and this is known to the insurer when the policy is issued, the condition is waived. 47 The refusal of an adjoining owner to make compensation for the use of a party wall does not constitute an incumbrance within the meaning of a policy which guarantees the title of real estate against all liens or incumbrances. 48 The words "tenancy and present occupants," used in such a policy as a defect in the title not insured against, do not include a claim of one in actual adverse possession asserting ownership in fee against the title insured. They refer to the tenancy which arises through occupation or temporary possession of the prem- ises by those who are tenants in the popular sense of the word. 49 A condition that "no right of action shall accrue unless the insured has contracted to sell the estate or interest insured, and the title has been declared by a court of last resort and competent jurisdiction defective or incumbered, by reason of a defect or incumbrance for which the company would be liable under this policy," does not apply in an action on the policy where the land was in actual adverse possession of another at the time the policy was issued, and had been actually lost by reason of a defect in the insured's title. 50 A policy issued to the holder of a mortgage on certain real estate insured him to the amount named against loss through defects in the title to the real estate, or by liens or incumbrances thereon ex- isting at the date of the policy. It provided that no right of action should accrue until the insured had conveyed or agreed to convey to the company his interest in the property at a price, which, in case of title acquired through foreclosure, should be the amount bid at the foreclosure sale, and that payment, discharge or satisfaction of the mortgage indebtedness, except by foreclosure of the mortgage, should annul the policy, and that the insurance company should have an opportunity to defend any suit affecting the title. Suits 4T Quigley v. St. Paul Title Ins., " Thomas v. Tradesmen's Trust, etc., Co., 60 Minn. 275, 62 N. W. etc., Co., 21 Pa. Co. Ct. 151, 7 Pa. 287 (1895). See this case for the Dist. R. 375 (1898). liabilities assumed by the insurance * Place v. St. Paul Title Ins., etc., company when it assumes to defend Co., 67 Minn. 126, 64 Am. St. 404 against claims on the mortgaged (1897). premises. The same case was again Place v. St. Paul Title Ins., etc., before the court in 64 Minn. 149, Co., 67 Minn. 126, 64 Am. St. 404 66 N. W. 364. (1897). 471 TITLE INSURANCE. 423 were brought to establish mechanics' liens on the property, which were unsuccessfully defended by the company. The property was then sold to satisfy the liens and the insured foreclosed his mortgage by publication, and at the sale bought it in for the amount due on the mortgage, with interest and costs. The insured having died, his representatives offered to convey to the title insurance company for the amount bid at the foreclosure sale, and demanded, in default of purchase for that amount, that the company redeem the property from the sale under the mechanics' liens. This it declined to do, and the insured's representatives redeemed the property and brought suit against the insurance company for the amount so paid. It was held that the purchase of the property by the insured at the fore- closure sale for the amount due on his mortgage did not cancel his mortgage debt and thus annul the policy, and that the title insurance company was bound either to buy the property for the amount bid at the sale or to redeem it from the sale under the liens, and that the plaintiffs were entitled to recover the amount paid by them for that purpose. "The contract," said the court, 51 "is plain and ex- plicit on this point. In a word, it is a guaranty that the mortgagee shall not suffer any loss or damage by reason of defects in the title to the property, or liens or incumbrances thereon existing at the time of the policy. Under this guarantee, if the mortgage, with a clear title, and free from incumbrances, was worth the amount of the mortgage debt, the mortgagee can confidently rely on the sufficiency of his security. The mechanics' liens upon which the property was sold were liens upon the property at the date of the policy. The de- fendant company nevertheless refused either to pay this prior lien, or to pay the insured the amount bid for the property at the fore- closure sale, which was the amount of the mortgage debt, thus forcing the insured, in order to protect his security and his title, to redeem the property from the sale under the mechanics' liens. Under the terms of the policy the mortgagee had a right to look to the defendant for the extinguishment of all liens on the property 81 Minnesota Title Ins., etc., Co. v. George v. Goldsmiths', etc., Ins. Drexel, 70 Fed. 194 (1895). There Ass'n, 67 L. J. (Q. B. D.) 807, 78 L. are many other kinds of risks T. Rep. 813 (1898). As to insurance which are insured against, but the against loss of rents, see Heller v. cases construing such contracts are Royal Ins. Co., 133 Pa. St. 152, 1 few and not yet of great importance. Atl. 349, 7 L. R. A. 411 (1890). See As to insurance against theft, see 7, supra. 423 LIFE, ACCIDENT AND INDEMNITY INSURANCE. 472 which existed at the date of the policy, and to gauge his bid on the assumption that the defendant would discharge his obligation in this regard." A policy insured against "all loss by reason of defects 6r unmar- ketableness of the title to the estate or interest insured, or because of liens or incumbrances, charging the same at the date of this policy, saving the defects, liens or incumbrances excepted in schedule B." This schedule provided that "unmarketableness by reason of the pos- sibility of mechanics' and municipal liens is excepted from this in- surance, but actual losses by reason of such liens, or by reason of the non-completion of the building now in process of erection on the prem- ises, unless such building should happen to be destroyed by fire, are hereby insured against." It was held that claims for municipal work done three years after the policy was issued were not within the policy. 62 B Wheeler v. Real Estate Title Ins., etc., Co., 160 Pa. St. 408, 28 Atl. 849 (1894). INDEX [References are to Sections.] ACCEPTANCE, of assessments after death, 141. of assessments, when a reinstatement, 142. of benefits as ratifying additional insurance, 246. of order in payment of premiums, 129. of premium sent after loss, burden of proving, 131, note 50. of premium, waiver of condition against removal, 183. of premium, when not ratification ol! issuance of policy by agent, 166. of promissory notes in payment of premiums, 130. See PAYMENT OF PREMIUM; PREMIUM; PROMISSORY NOTES; WAIVEB. ACCEPTANCE OF POLICY, assent to new conditions not implied, when, 129. holder estopped to set up powers in agent in opposition to terms of, 183. insured charged with knowledge of contents, 257. terms are binding, 245. ACCIDENT INSURANCE, construction of provisions, as to external, violent or accidental injuries, 392. signs of, 396. as to inhaling gas, 394. as to occupation or employment, 395. as to poison, 394. as to risks of travel, 393. defined, 7. definition of accident, 391. * illustrations, 391, 392. excepted risks, bodily infirmity or disease, 399. injuries intentionally inflicted by others, 400. injuries received while in violation of law, 401. while intoxicated, 402. negligence, effect of, 397. voluntary exposure to unnecessary dangers, 398. (473) 474 INDEX. [References are to Sections.} ACCIDENT INSURANCE Continued, general provisions, amount of recovery, disability, 403. construction of conditions, effect of existing judicial decisions, 404. how far a contract of indemnity, 20. in general, 390. ACTIONS, to enforce assessments, 137. by receiver, 140. ACTIONS AGAINST COMPANIES, by mortgagees, 341. under employers' liability policy, effect of judgment recovered by employe, 414. when may be brought, 328, 329. ADDITIONAL INSURANCE, soliciting agent can not bind company for, 155. See OTHER INSURANCE. ADJUSTERS, waiving forfeiture, 155, 181, note 16. waiving preliminary proofs of loss, 155, 311. See AGENTS OF COMPANIES; POWEES OF AGENTS. AGE, condition as to statement of, p. 402. AGENT, failure to impart knowledge to principal, 92, 93. in possession, with power of attorney to sell, insurable Interest, 48. insuring for owner, 48, note 39. of express company, payment of premium to, 129. of foreign company, restrictions upon, 151. of insured canceling policy without authority, 298. concealment or misrepresentation by, 92, 93, 113. is an "insurance agent," 150. representing both parties, agreeing to cancellation, 298. AGENTS OF COMPANIES, "apparent or ostensible authority," defined, 158. what based on, 153. application prepared by, 161, 162. giving advice as to filling out, 152. authorization, provision in standard policy as to, 223. bond of, liability of sureties on, 166, note 90. broker, defined, 157. character of agency, limitations, 154. collecting agent, waiver of conditions by, 155. collusion with applicant, 190. INDEX. 475 [References are to Sections.'] AGENTS OF COMPANIES Continued, consenting to other insurance, 249. to removal of stock, 183. countersigning policy, 32. designation of, 154. estoppel by acts of, 187. evidence to show agency, 153. exceeding authority, 154. fraud of, knowledge of company, recovery of premiums, 67, 135. repudiation by company, 161. fraudulent representations by, rescission of contract, 188. general agent, denned, 154. liability of company for acts of, 156. general and special, distinction abolished by statute, 154. "insurance agent," definition, 150. name applies to agent of insured, 150. issuing policy without authority, acceptance of premium not rati- fication of his act, 166. knowledge of matters not stated in application, 188. acquired in another business, 164. as to construction of building insured, 214. as to other insurance, 249. local agent, notice of loss to, 165. medical examiner is, 155, note 21. no inference of general authority, 155, note 21. misrepresentations by, estoppel, 187. mistake in describing subject-matter, 187. notice to, when notice to company, 164. oral agreement to issue policy, 27. effect of subsequently signed application, 154. payment of premiums to, 129. accepting and discounting note and receipting for premium, 130. receiving overdue premiums after death, 131. waiving cash payment, 129 and note 23, 184, 186. policy issued upon application, company can not deny agency of solicitor, 153. powers, limitations, 158, 159. restrictions as to locality, 154, note 18. relation to third parties, general or special, 154. rights and liabilities, 166. secret instructions to, 158, 160. soliciting agent, limitations of authority, 155. special agent, defined, 154. duty to learn extent of authority, 155. no inference of general authority, 155, note 21. statutory provisions relating to, 151. construction of, 152. who are not, 164. See ADJUSTEES; BBOKEBS; CLEBKS OF AGENTS; POWERS OF AGENTS. 476 INDEX. [References are to Sections.'} AGREEMENT TO INSURE, made orally by agent, 27. subsequently-signed application will not avoid, when, 154. made orally by soliciting agent, 155. ALIEN, insured against capture of property by government of insurer, 14. right to insurance, 11. ALIENATION, by assignment and bankruptcy proceedings, 278. by change of possession, 280. by contract of sale, knowledge of agent, estoppel, 188, note 35. by legal process or judgment, 275, 276. by partition, 277. condition against, 46, p. 258. breach, 205, note 15. scope of, 265. strictly construed, 46. waiver by agent, 185. conveyance to wife of insured, 272. defeasible conveyances, 269. executory contract of sale, effect, 267. invalid conveyances, 270. lease, when not breach of condition, 281. of real estate, effect on policy as to personal property, 225, note 190. sale with purchase-money mortgage, 271. transfer between joint owners, 274. between partners, 273. between tenants in common, 274. of part interest, 266. of title, by death, 279. voluntary conveyance, no consideration, 270. See CONVEYANCE OF REAL ESTATE; FRAUDULENT CONVEYANCE; INCTTM- BBANCES; INSUBABLE INTEBEST; STANDARD POLICY; TITLE AND OWNER- SHIP. ALTERATIONS, in adjoining buildings, 254. made in violation of condition as to, 256. placing and operating engine fifty feet away, 256. See STANDABD POLICY. APPLICATION, affirmative and promissory representations, 110. oral, 111. agent giving advice as to filling out, 152. agent preparing, and writing answers, 161, 162. INDEX. 477 [References are to Sections.} APPLICATION Continued, mistake, estoppel, 187. true answers wrongfully recorded, 188. warranties incorrectly written, 188, note 40. writing erroneous statements in, oral evidence to show, 189. writing untrue answers, insured consenting, 190, note 49. agent taking is agent of insurer, 151, 152. answers to specific inquiries, 84. insured admitting falsity, burden of proof as to materiality, 118. attached to policy, duty to know contents, 161. conditions in as to powers of agents, construction, 160a. construction of statements in, 105, 106. as to bodily injuries, 376. as to expectation or belief, 109. as to family relationship, 378. as to habits, 374. as to health, 375. as to medical attendance, 377. as to other insurance, 379. interpretation of agent, 359, note 75. as to rejection by other companies, 380. as to supervision of employes, 419. continuing warranties, 110. evasive answers, 88. false and material representations in, effect, 114. false statements in, knowledge of agent, 164, 188, note 35. incomplete answers to inquiries, 87. indorsement of insured's consent thereon, 67. material facts, what are, 90. duty to give, 79. nature of, 78. oral, concealment without representation, 86. part of contract, 106, 224, 367a. positive statements, binding force, 109. provision against fraud of agent, recovery of premiums, 135. restrictions in on powers of agent, 159. notice to insured, 160, 161. warranty, mistake, good faith answer, 108a. what facts must be disclosed, 83. written, presumed all material representations are contained, H See CONCEALMENT; FRAUD; LIFE INSURANCE POLICY; MISREPRESENTA- TIONS; REPRESENTATIONS AND WARRANTIES; STANDARD POLICY; WARRAN- TIES. APPRAISEMENT, See ARBITRATION AND "APPRAISEMENT. 478 INDEX. {.References are to Sections.'] ARBITRATION AND APPRAISEMENT, appraiser refusing to act, 322. award, invalidity of, 322. condition as to, p. 330. validity of, 317. condition precedent to an action, when, 320. demand for as admission of liability, 325. proofs of loss not waived, 301. when necessary, 319. denial of liability after, effect, 324. disagreement, what is, 316. in case of total loss, 318. insurer's right to repair or rebuild after, 327. manner of conducting inquiry, 322. mortgagee not a party to, when, 326. resubmission, when necessary, 324. waiver of by insurer, 324. revocation of condition, 321. waiver of, what is, 323. See AWAKD OF APPRAISERS. ASSESSMENT COMPANIES, See BENEFIT SOCIETIES; CERTIFICATE OF MEMBERSHIP; MUTUAL COMPANIES. ASSESSMENTS, acceptance after death, 141. date of notice, what is, 134, note 66. determination of rate, 136. change of rate, 126. stockholder voting to increase, 136. ignorance of terms of contract no ground for recovery, 135. in mutual company, on premium notes, liability limited, 133, note 61. levy and collection, 136. by receiver, 140. liability for, 137. how affected by withdrawal, 139. nature and payment, 125. non-payment, effect, application of dividends, 138. on premium note, limit of liability, 136. paid in anticipation for year, none made, 138, note 83. statutes fixing amount, 137. unpaid, not a debt where benefits are forfeited, 127. waiver of by-laws as to, by officers, 143. waiver of time of payment, 143. See MUTUAL COMPANIES; BENEFIT SOCIETIES. INDEX. 479 [References are to Sections.] ASSIGNEE, assigning policy to third person, recovery, 66, note 67. insurable interest in property of an insolvent, 48. of life policy, insurable interest, 60. without insurable interest can not set up incontestable clause, 68. protected as to advancements for premiums, 62. recovery of premiums paid, 67. rule in Alabama, Kansas, Kentucky, North Carolina, Pennsyl- vania, Tennessee, Texas, and federal courts, 62. rule in California, Colorado, Georgia, Illinois, Indiana, Mary- land, Massachusetts, Mississippi, New York, Ohio, Rhode Island, South Carolina, Vermont, Wisconsin, England, and Canada, 63. See INSTJRABLE INTEREST. ASSIGNMENT FOR BENEFIT OF CREDITORS, alienation by, 278. assignee no insurable interest after debt paid, 60. ASSIGNMENT OF POLICY, assignability, 362. assignee enforcing payment, 362. by assignee, 365. by creditor assignee to third person, recovery, 66, note 67. condition as to, p. 403. construction of, 282. consent of soliciting agent, 155. manner of making, 364. notice to company, 363. "payable as interest may appear," 206. to creditor as security, rights of personal representatives of insured, 58. to one without insurable interest, 58. See INSURABLE INTEREST; LIFE INSURANCE POLICY; STANDARD POLICY. AUNT, insurable interest in life of dependent niece, 66. AWARD OF APPRAISERS, impeachment, burden of proof, presumption of validity, 322. refusal or election to abide by, effect, 324. See ARBITRATION AND APPRAISEMENT. B BAD FAITH, collusion between applicant and agent, 190. BAILMENT, insurable interest of bailee, 47. 480 INDEX. [References are to Sections.] BANKRUPTCY, proceedings in as alienation, 278. right of insolvent insured to proceeds of policy, 357. BARN, when included in term "dwelling house," 217. BENEFICIARIES, creditor named as, no insurable interest after debt paid, 60. definition, 352. how designated, construction, 352. insurable interest unnecessary where insured makes contract and pays premiums, 61. nature of interest, 354. of certificate in benefit society, fiancee of holder may be, 66. of policy, fiancee of the insured may be, 66. paying premiums, no insurable interest, recovery, when, 61. proofs of loss, duty to make, when, 11. reservation of right to change, 355. manner of changing in mutual companies, 356. right to fund, 352. suicide of insured, effect, 369. transmission of interest, 353. vested right in policy, when, 354, 355. who may be, 352, note 2. See INSURABLE INTEREST; PAYEE OF LIFE INSURANCE. BENEFIT SOCIETIES, assessments and dues, nature, payment, 125. assessments, liability for, 137. accepted after death, 141. non-payment of, effect, 138. application of dividends, 138. assessments unpaid, forfeiture of benefits, dues not a debt, 127. certificate in is not "other insurance," 13. certificate payable to a person "dependent" on deceased, fiancee not dependent, 66. continuity of insurable interest, wife obtaining divorce, effect, 60. death or loss during suspension from membership, 141. insolvency, assessments by receiver, 140. organization and status, 136. regulation of, 13. payment of assessments, waiver of requirements, 143. reinstatement of members, 142. stepfather may be beneficiary of certificate, 66. waiver of by-laws by officers, 143. what are, 13. when can not contract for endowment insurance, 13. withdrawal of member, liability, 139. See ASSESSMENTS; CERTIFICATE OF MEMBERSHIP; MUTUAL COMPANIES. INDEX. 481 [References are to Section*.] BINDING CLAUSE, effect of, 203. BOOKS, See RECORDS. BROKERS, agent of insured, when, 157. of insurer, when, 157. defined, 157. delivery of policy to, 157. in another state, risk placed through, liability of agent under a statute, 151. limitations of authority, 157. rule in Indiana, Massachusetts, Pennsylvania, and Texas, 157. notice to of cancellation of policy, 298. See AGENTS OF COMPANIES; POWERS OF AGENTS. BROTHER AND SISTER, insurable interest of sister in life of brother, 66. See INSURABLE INTEREST. BUILDING, description of, what included, 217. in process of construction, insurable interest of contractor, 48. of owner, 48. policy covers after completion, 217. See FALL OF BUILDING; TOTAL Loss. BURDEN OF PROOF, as to materiality of concealment or misrepresentation, 118. of untrue answer, admitted to be untrue, 118. of warranty, 118. to show acceptance of note as payment, 358. to show acceptance of premium sent after loss, 131, note 50. to show articles lost by fire are excepted from insurance, 236. written description controls, 236. to show award invalid, 322. to show change in date of expiration, 208. to show compliance with statute as to notice of maturity of pre- miums, 134. to show insurable interest, 69. to show payment of first premium, 358. to show policy not in force, 208. to show sister's want of insurable interest, 66. to show suicide, presumption, 371. See EVIDENCE; PAROL EVIDENCE; PRESUMPTIONS. BY-LAWS, as to arbitration, 317. as to payment of premiums, waiver, 128. 31 ELLIOTT INS. 482 INDEX. [.References are to Sections.'} BY-LAWS Continued, certificate payable to a person "dependent" upon deceased, fiancee not dependent, 66. waiver by officers, 143. See BENEFIT SOCIETIES; MUTUAL COMPANIES. c CANCELLATION, acts amounting to, 300. attempt to rescind is not, 299. agent liable to company, when, 166. authority of agent, 298. by broker employed to procure insurance, 157. condition as to, p. 298. mortgagee consenting, without notice to insured, 296. notice to be given, when, 297. served on broker, 157, note 37, 298. return of premium, 299. right of, 296. See STANDARD POLICY. CAPITAL STOCK, of mutual company, premium notes as part of, 133. CARRIER, insurable interest, 47. CASH, when premium need not be paid in, 129. See PAYMENT OF PREMIUMS. CASUALTY INSURANCE, defined, 7. CAUSE OF DEATH, accident, what is, 391, 392. inhaling gas, poison, liability under accident policy, 394. injuries intentionally inflicted by another, 400. murder, 400. injuries received while engaged in violation of law, 401. malignant pustule resulting from contact with putrid animal mat- ter, 399. of relations, statements as to in application, 378. sunstroke, 399. CAUSE OP LOSS, explosion of pipes, no fire ensuing, 221. fire confined in furnace, 221. INDEX. [References are to Sections.} CAUSE OP LOSS Continued, fire, when is, 221, 222. flood, liability for damages caused by, 233, note 229. heat without ignition, 221. negligence of insured, right of recovery, 22. of third person, rights of parties, 22. short circuit in electric wires resulting from fire, 222. See EXPLOSION; FIRE; SMOKE DAMAGE; WATER DAMAGE. CERTIFICATE OF LOSS, as to amount, 309. nearest notary public, waiver, 180, note 10. See Loss; PROOFS OP Loss; TOTAL Loss. CERTIFICATE OF MEMBERSHIP, beneficiary has no vested right in, 354. liens upon, what are not, 352, note 3. payable to fiancee of holder, 66. whether constitutes other insurance, 379. See BENEFICIARIES; BENEFIT SOCIETIES; MUTUAL COMPANIES. CESSATION OF OPERATIONS, defined, 251. employment of watchman during, 251. illustrative cases, 251. CHARTER, requiring written contract, effect, 26. CHATTEL MORTGAGES, condition against, 262. See INCUMBRANCES. CHECK, giving in payment of premium, 129. See ACCEPTANCE; PAYMENT OF PREMIUMS; PROMISSORY NOTES. CHILDREN, as beneficiaries, who are, 352. CHOSE IN ACTION, valid policy assigned to a person with no insurable interest, 63. CLAUSES, to change conditions in New York standard form, 202. See BINDING CLAUSE; INCONTESTABLE CLAUSE; IRON SAFE CLAUSE. CLERKS OF AGENTS, notice to, when notice to company, 156. powers, liability of company for acts of, 156. See AGENTS OF COMPANIES; BROKERS; POWERS OF AGENTS. CLOTHING, See WEARING APPAREL. 483 484 INDEX. [References are to Sections.] COLLUSION, between applicant and agent, 190. COMMERCE, insurance is not, 12. COMMISSION MERCHANTS, insurable interest, 48. COMMISSIONS, agent's right to, 166. COMPENSATION, for services, agent entitled to, 166. COMPUTATION OF TIME, last day for notice of loss falling on Sunday, Iowa rule, 308, note 45. of maturity of premium, in New York, 129, note 32. of notice of maturity of premium in New York, 134. CONCEALMENT, as ground for avoiding policy, 85. by agent of insured, 92, 93. by broker, 157. defined, 80. materiality of, burden of proof, 118. of fact of other insurance, 245, note 3. of facts not asked about, 84. of insolvency of guarantor on promissory note, 81. of material facts, avoidance of policy, 79. rule as affected by character of insurance, 81. rule in United States, 82. through inadvertence or negligence, 91. time of, 89. See APPLICATION; FRAUD; MISREPRESENTATIONS; REPRESENTATIONS AND WARRANTIES; WARRANTIES. CONDITIONS, additional, indorsement on policy, p. 381. against additional insurance, waiver by agent, 183. against alienation, see ALIENATION. against building on leased ground, 261. See TITLE AND OWNERSHIP. against change in interest, title, or possession, p. 258. See TITLE AND OWNERSHIP. scope of provision, 265. against chattel mortgages, 262. See INCUMBRANCES. against concealment, p. 201. See CONCEALMENT. purpose and effect, 226. against foreclosure, 263. waiver by local agent, 160a, note 58. INDEX. 485 [References are to Sections.} CONDITIONS Continued, against fraud, p. 201. against generation of illuminating gas, 264. against increase of risk, 253. See INCREASE OF RISK. violation, effect, 253, 254. against incumbrances, misrepresentation, effect, 225. See INCUM- BBANCES. against misrepresentations, p. 201. See MISREPRESENTATIONS. purpose and effect, 226. against other insurance, see OTHER INSURANCE. against prohibited articles, pp. 206, 278. See EXCLUDED RISKS; PROHIBITED ARTICLES. against removing stock, effect of agent's consenting to, 183. See REMOVAL. against vacancy, p. 285. See OCCUPANCY; VACANCY. as to application and survey, p. 200. as to arbitration and appraisement, p. 330. See ARBITRATION AND APPRAISEMENT. validity of, 317. as to assignment of policy, pp. 274, 403. See ASSIGNMENT OF POLICY. as to authorization of agent, p. 199. See AGENTS OF COMPANIES. as to cancellation, p. 298. See CANCELLATION. ' as to change of location, p. 293. See LOCATION; REMOVAL. as to construction of terms, p. 381. as to examination of insured, p. 323. as to exhibition of property and records, p. 323. as to facts which will defeat policy, estoppel to assert, when, 187. as to forfeiture, see FORFEITURE. as to incontestability, p. 409. See INCONTESTABLE CLAUSE. as to interest being truly stated, p. 201. as to interest of mortgagee, p. 378. as to measure of damages, p. 362. See MEASURE OF DAMAGES. as to mortgages, breach, 205, notes 15, 16. See INCUMBRANCES. as to notice and proof of loss, p. 309. See NOTICE OF Loss; PROOFS OF Loss. as to operation of manufacturing establishment, 251. as to ownership, 257. See TITLE AND OWNERSHIP. as to payment of premiums, p. 395. See PAYMENT OF PREMIUMS. as to powers of agent, p. 401. See POWERS OF AGENTS. as to proofs of death, see DEATH. as to prorating loss, p. 370. as to regulations of mutual company, p. 381. as to reinsurance, p. 376. as to renewal, p. 293. construction, 293, 294. as to repairing, rebuilding, or replacing damaged property, p. 353. insurer's election, effect, 327. 486 TNDEX. [References are to Sections.] CONDITIONS Continued, as to repairs and employment of mechanics, 256. as to special privileges, p. 411. as to statement of age, p. 402. as to subrogation, p. 372. as to time of bringing suit, p. 359. as to time of payment of loss, p. 357. as to use of kerosene oil, 285. as to use of premises, see USE OF PREMISES. as to waiver, p. 305. breach of, effect, 205. no recovery of premiums paid, 135. waiver of forfeiture by agent, 158, note 50. Inapplicable to subject insured, 257. in paid-up policy, 132. in standard policy, breach, effect, 205. knowledge of agent that insured intends to violate, 188. materiality, when not open to question, 106. property excluded, p. 215. relating to interest in and care of property, p. 219. requiring certificate of nearest notary public, waiver, 180, note 10. restricting powers of officers and general agents, 163. waiver by agent, 158, 182. by collecting agent, 155. by company, evidence to show, 159. by soliciting agent, 155. what may be waived, 180. warranties are, 79. See CONSTRUCTION OF CONDITIONS; LIFE INSURANCE POLICY; STANDARD POLICY. CONSENT, to insurance, indorsement on application, 67. CONSTITUTIONALITY, of statutes forbidding discrimination in rates, 126. of statutes providing for construction of representations and war- ranties, 119. CONSTRUCTION, of charter provisions requiring written contract, 26. of representations, 107. must be substantially true, 115. of representations and warranties, 100. statutory provisions, 119. in Massachusetts, 120. in Pennsylvania, 121. INDEX. 437 {.References are to Sections.'] CONSTRUCTION Continued, in Michigan, Maryland, Kentucky, Maine, Iowa, Virginia, Ohio, New Hampshire, Missouri, and Georgia. 122. in Minnesota, 120, note 73. of statements in application, 105, 106. of technical warranties, 107. CONSTRUCTION OF CONDITIONS, against alienation, 46. against assignment of policy, 282. against building on leased ground, 261. against chattel mortgages, 262. against foreclosure, 263. against generation of illuminating gas, 264. against increase of risk, 253. against suicide, 370. against vacancy, 287. when applied to a dwelling house, 289. as to cancellation, 296, note 385. as to liability of insured for acts of agent, 188. as to notice of "any other insurance effected," 245. as to ownership, 257. as to prorating loss, 338. as to renewal, 293, 294. as to repairing, rebuilding, or replacing, 327. as to repairs employment of mechanics, 256. as to residence, 372. as to running manufacturing establishment after hours, 252. as to statement of interest, 227. as to time of bringing suit, ,328, 329. as to time of payment of loss, 328. as to use of kerosene oil, 285. in accident insurance policy. See ACCIDENT INSURANCE. incontestable clause, 68, 366. limiting powers of agents, 160a. of officers and general agents, 163. "other insurance," certificate in mutual benefit society is not, 13. "true" and "untrue" answers, 108a. waiver in writing only, 185. See CONDITIONS; LIFE INSURANCE POLICY; STANDARD POLICY. CONSTRUCTION OF POLICY, ambiguous words in description, 210, 213. "any use or custom of trade or manufacture to the contrary," force and effect, 283. "as his interest may appear," 259. as to property excluded from insurance. See EXCLUDED RISKS; PROHIBITED ARTICLES. 488 INDEX. [References are to Sections.] CONSTRUCTION OF POLICY Continued, building and additions, 216. building in process of construction, 217. buildings adjoined, etc., situated detached, 217. building, when counters and shelving included, 217. by soliciting agent, 155. "children," who included, 352. "contained in," cases holding descriptive merely, 219. covering goods in two places, consent to remove, 220. "dependent," who is, 352. description of buildings, what included, 217. description of property, in general, 210. goods held in trust, 211. by warehousemen, 213. shifting stock, 212. "direct loss or damage by fire," what is, 221, 222. "dwelling" construed as description, not warranty, 215. effect of existing judicial decisions, 404. "elevator building and additions," when warehouse included, 217. entirety of contract, 225. "fire engine, etc., contained in engine-house," damaged while away from engine-house, 219. "for or on account of owner," evidence to show owner, 213. frame building, engine and machinery not included, when, 217. "from the 14th day of February, 1868, until the 14th day of August, 1868," 208. "furniture in brick building and additions," 216. house, evidence to show barn included, 217. insured charged with knowledge of contents, 257. intention of parties, 333. how gathered, 106. lumber in a "yard," 216. "machinery," what included, 216. manufacturing establishment, what included, 216. "merchandise," what included, 216. "oil while contained in a tank," tank swept away by a flood, 220. "on account of whomsoever it may concern," evidence to show owner, 213. oral contract, how construed, 24. "other concurrent insurance permitted," 250. other insurance, "valid or invalid," 247. planing mill and addition, engine room, machinery, etc., 217. plate glass, frescoes and decorations not excepted from contract of insurance, 237. "pottery building," separate boiler house, 217. premium "to be paid in advance to the company," 129. "rags and old metals," evidence to show meaning, 216. INDEX. 489 [References are to Sections.] CONSTRUCTION OF POLICY Continued, removal of property from place insured at, illustrations, 220. standard policy, rule, 204. steam saw mill and machinery, planing mill connected with by belting, 217. "stock in trade," what included, 216. "waiver in writing only," 185. "while not in use," threshing machine, etc., 220. See ACCIDENT INSURANCE; CONSTRUCTION OF CONDITIONS; DESCRIPTION; EMPLOYERS' LIABILITY INSURANCE; LIFE INSURANCE POLICY; POLICIES; STANDARD POLICY; WORDS AND PHRASES. CONTIGUOUS, detached buildings twenty-five feet apart are not, 217. CONTRACT OF INSURANCE, against capture of alien's property by government of insurer, 14. against fine or forfeiture for selling intoxicating liquors, 14. against injury from accidents, how far a contract of indemnity, 20. amount of insurance, 209. by correspondence, completion, rules, 33. charter requiring written contract, effect, 26. classification and definitions. of policies, 30. completion, 31. conditions relating to interest in and care of property, p. 219. countersigning by agent, 32. damages may be liquidated before loss, 18. delivery of policy, 31. disclosure of material facts, 83. divisibility of, effect of other insurance, 250. domestic companies, control by state, 12. entirety, 225. foreign companies, control by state, 12. form, in general, 23. in respect of property, generally a contract of indemnity, 16. is aleatory, 17. is personal, and does not run with property, 15. liberally construed, 394, note 38. mistake of agent in describing property, 187. not binding until subject-matter exposed to risks, 16. not within statute of frauds, 25. on intoxicating liquors illegally kept for sale, 14. on life is not one of indemnity, 19. oral, construction, 24. specific performance, 29. parol agreement to alter, 188, note 35. 490 INDEX. [References are to Sections.'] CONTRACT OF INSURANCE Continued, parties, 10. who may be insured, 11. who may contract to insure, 12. in life insurance, 351. plate glass, frescoes and decorations are within, 237. presumption that company knows nature of goods and method of doing business, 214. renewal by parol, 26. renewal, condition as to, p. 293. construction of condition, 293, 294. repudiation after loss, 79. retrospective operation, 208. revenue stamp, effect where none on policy, 28. risk essential, 14. standard policy, 24, 200, et seq. risks insured against, 221. excluded risks, pp. 206, 215. statute requiring policies to be signed by officers of company, oral contract how affected, 27. subrogation of insurer in fire and marine insurance, 21. See SUB- ROGATION. suspension by operation of war, 128. term of insurance, 208. what constitutes, 8. See ACCIDENT INSUEANCE; EMPLOYERS' LIABILITY INSURANCE; LIFE INSUB- ANCE; STANDARD POLICY; SUBJECT-MATTER OF INSURANCE. CONTRACT OF MARRIAGE, man may make fiancee the beneficiary of a policy or a certificate in a benefit society, 66. CONTRIBUTION, as affected by pro rata clause, 338. CONVEYANCE OF REAL ESTATE, defeasible conveyances, 269. executory contract of sale, 267. invalid conveyances, 270. voluntary conveyance, no consideration, effect, 270. See ALIENATION; FRAUDULENT CONVEYANCE;, INSURABLE INTEREST; TITLE AND OWNERSHIP. CORPORATION, insurable interest of stockholder, 48. no insurable interest in life of stockholder, 66. CREDIT INSURANCE, construction of policy, amount of recovery, 421. identity of the insured, 422. in general, 420. INDEX. 491 CUSTOM ^References are to Sections.] See USAGE. D DAMAGES, company may recover from agent, when, 166. may be liquidated, 18. See MEASUEE OF DAMAGES; TOTAL Loss; VALUED POLICY. DAUGHTER, insuring life of father, recovery of premiums, 135. See BENEFICIABIES; INSUBABLE INTEREST. DEATH, during suspension from membership, 141. in violation of law or at hands of justice, 373. suicide not within provision, 373. payment of premium after, 131. transfer of title by, 279. See CAUSE OF DEATH; PROOF OF DEATH; SUICIDE. DEBTOR AND CREDITOR, assignment of life policy as security, debt subsequently paid, effect, 60. insurable interest in life of debtor, 58, 66. none in life of his wife, 66. insurable interest of creditor, 48. of judgment creditor, 48. insurable interest of owner in goods concealed from creditor, 48. See ASSIGNMENT OF POLICY; INSURABLE INTEREST. DEFENSES, condition as to incumbrance, estoppel to assert, 188, note 35. condition subsequent, 118. false and material representations, 114. when not, 114. fraud, agreement to waive, 68. in action against reinsurer, 9. incontestable clause, when not a bar, 68. no insurable interest. See INSUBABLE INTEREST. non-compliance with conditions, agent knowing of intent to vio- late, 188. oral promissory representation made in bad faith, 112. violation of statute by company will not avoid policy, 12. waiver by company, when, 181. See CONDITIONS; ESTOPPEL; FRAUD; WAIVER. 492 INDEX. [References are to Sections.] DEFINITIONS, "accident," 391. accident insurance, 7. "apparent or ostensible authority," 158. "beneficiary," 352. "broker," 157. casualty insurance, 7. "cease to be operated," 251. "civil commotion," 229. "concealment," 80. "direct loss or damage by fire," 221. endowment insurance, 7. "estoppel," 175. fidelity insurance, 7. fire insurance, 7. "general agent," 154. guaranty insurance, 7. insurable interest, 42. in lives, 57. insurance, 6. insurance agent, 150. "insurrection," 229. interest policy, 30. "invasion," 229. life insurance, 7. marine insurance, 7. open policy, 30. "other insurance," 246. "proof of loss," 303. representation, 101. "riot," 229. "special agent," 154. time policy, 30. "usurped power," 229. valued policy, 30. voyage policy, 30. wager policy, 30. "waiver," 175, 176. warranty, 102. See CONSTRUCTION OF POLICY; WORDS AND PHRASES. DELIVERY OF POLICY, after accepting note is a payment of the premium, 358. as an assignment, 364. when not necessary, 364. as a waiver of condition as to incumbrance, when, 188, note 35. by clerk of agent, 156. constructive, 31. INDEX. 493 [.References are to Sections.} DELIVERY OF POLICY Continued, mailing is, 358. none, premium unpaid, effect, 31. sufficient consideration for note, 130. to broker, 157. DEMAND, for arbitration, when necessary, 319. DESCRIPTION, ambiguous, parol evidence to explain, 213. goods held in trust, 211. by warehousemen, 213. in general, 210. may cover shifting stock, 212. mistake, correction by agent, 158. mistake of agent in describing property or interest, 213. mutual mistake, reformation, 213. insured accepting without objection, 213. of buildings, 217. of house, evidence to show barn included, 217. of insured in policy, 206. of location renders it material, 219. usage as controlling factor, 219. of merchandise, company presumed to know mercantile meaning of words used, 216. of merchandise, what included, 216. of property as a distillery, not a representation that it is operated as such, 251. of risk, knowledge of agent, 188. of title, what sufficient, 257. when warranties, 215. See APPLICATION; CONSTRUCTION OF POLICY; MISTAKE; WORDS AND PHRASES. DISCRIMINATION, in rates, statutes against, 126. DISEASE, condition as to in accident policies, construction, 399. knowledge of agent, 164. statements as to, in application, 375. See APPLICATION; HEALTH; LIFE INSURANCE POLICY. DIVIDENDS, notice of, 138. payment of premiums with, 129. DIVORCE, See HUSBAND AND WIFE. 494 INDEX. [.References are to Sections.'] DOMESTIC INSURANCE COMPANIES, state has full control over, 12. DOUBLE INSURANCE, See OTHER INSURANCE. DUES, consideration for, 136. See ASSESSMENTS. DWELLING HOUSE, construction of condition as to vacancy, 289. illustrations, 291. use of part as a stable, 218. use of words in a policy, effect, 215. See CONSTRUCTION OF POLICY; DESCRIPTION. B EMPLOYERS' LIABILITY INSURANCE, effect of judgment against insured, 414. in general, 410. injuries while engaged in designated business, 411. notice of injury or claim, 415. violation of statute by assured, 412. when liability accrues, 413. ENDOWMENT INSURANCE, defined, 7. when mutual benefit society can not contract for, 13. ENGLAND, assignee without insurable interest, 63. rule as to concealment, 80. EQUITY, will not release from forfeiture, when, 128. ESTOPPEL, by act of agent, 187. writing erroneous answers, parol evidence, 189. misleading ignorant and illiterate. insured, 188. by knowledge of agent, 188. of false statements in application, 164. definition, 175. does not apply where contract is contrary to law, 188. insured guilty of fraud, no recovery of premiums on void policy, 135. none where applicant and agent are in collusion, 190. of company to assert waiver, 185. INDEX. 495 [References are to Sections.] ESTOPPEL Continued, stockholder in mutual company voting increase of assessment, 136. to assert forfeiture for non-payment of premiums, when, 128. to assert non-return of premium, when, 299. to deny agency of solicitor where policy written upon application, 153. to deny identity of property, 213. to deny liability where property is removed, when, 219. to refuse acceptance of overdue premium, 131. to require proofs of loss, 306. to set up defenses not specified, 181. waived requirement can not be set up to forfeit policy. 143. See ACCEPTANCE; WAIVER. EVIDENCE, expert opinion as to materiality, 117. as to increased danger from vacancy, 255. in action against reinsurer, 9. laws of congress as to stamped instruments, effect, 28. of agency, what is competent, 153. to show actual statements made to agent, 189. to show oral contract, 23. to show persons intended to be insured, 213. to show policy wrongfully in hands of insured, 31. to show trade meaning of term, 216. to show waiver, 159. See BURDEN OF PROOF; PAROL EVIDENCE; PRESCRIPTIONS. EXAMINATION OF INSURED, condition as to, p. 323. rights of parties, 313. EXCLUDED RISKS, condition against prohibited articles, p. 278. construction of condition, 283, 284. death in violation of law or at hands of justice, 373. suicide not within provision, when, 373. exceptions and limitations, 236. explosion, 232. fall of building, 234. generation of illuminating gas, 264. in life insurance, p. 411. invasion, riot, etc., 229. kerosene oil, exception in favor of, 285. lightning, 233. neglect to protect property, 231. residence and occupation, 372. 496 INDEX. / [References are to Sections.] EXCLUDED RISKS Continued, suicide, sane or insane, 368. no provision against, effect, 369. theft, 230. See EXPLOSION; EXPLOSIVES; FIREWORKS; INFLAMMABLE ARTICLES; IN- CREASE OF RISK; PROHIBITED ARTICLES. EXECUTION, levy of not a change in interest, 275. See ALIENATION; INCUMBBANCES. EXECUTION SALE, insurable interest of purchaser at, 48. EXECUTORS AND ADMINISTRATORS, insurable interest, 48. EXHIBITION OF PROPERTY AND RECORDS, condition as to, p. 323. failure to produce records, 314. EXPLOSION, fire resulting from, liability of insurer, 232. powder in another house struck by lightning, insured building de- stroyed, 232. resulting from fire, liability of insurer, 232. See CAUSE OF Loss; EXCLUDED RISKS; FIREWORKS; INFLAMMABLE ARTI- CLES; INCREASE OF RISK; PROHIBITED ARTICLES; STANDARD POLICY. EXPLOSIVES, "fireworks," part of stock of Yankee notion store, 216. use of prohibited, 283, 284. See EXCLUDED RISKS; FIREWORKS; INCREASE OF RISK; PROHIBITED ARTICLES; STANDARD POLICY. EXPOSURE TO DANGER, voluntary and unnecessary, liability of insurer, 398. See ACCIDENT INSURANCE. EXPRESS AGENT, payment of premium to, 129. See AGENTS; POWERS OF AGENTS. EXTERNAL SIGNS OF INJURIES, what are, 396. See ACCIDENT INSURANCE. F FALL OF BUILDING, liability for damages caused by, 234. See ARBITRATION AND APPRAISEMENT; MEASURE OF DAMAGES; TOTAL Loss. INDEX. 497 [.References are to Sections.] FALSE REPRESENTATIONS, See APPLICATION; MISREPRESENTATIONS ; MISTAKE; REPRESENTATIONS AKD WARRANTIES; WARRANTIES. FALSE SWEARING, See FRAUD. FATHER, daughter insuring life of, recovery of premiums, 135. son has no insurable interest in life of arising from relationship, 65. FEDERAL COURTS, assignee without insurable interest, 62. FIDELITY INSURANCE, defined, 7. . in general, 416. knowledge of insured, constructive notice, 418. notice to insurer of default, 416. proof of default, 417. supervision of employe, 103, 419. FIRE, as cause of loss, 221, 222. breaking out after fall of building, liability, 234. resulting from explosion, liability of insurer, 232. See CAUSE OF Loss. FIRE INSURANCE, defined, 7. non-disclosure of facts not asked about, 84. origin, and growth, 5. right of subrogation, 21. See APPLICATION ; CONDITIONS; STANDARD POLICY. FIREWORKS, in Yankee notion store, 216. knowledge of agent of intention to keep, 188, note 35. acquired outside line of duty, 165. storing of increases risk, 253. See EXCLUDED RISKS; EXPLOSIVES; INFLAMMABLE ARTICLES; INCREASE or RISK; PROHIBITED ARTICLES. FIXTURES, covered by policy on building, 217. store fixtures, 236. See CONSTRUCTION OF POLICY ; DESCRIPTION. FLOOD, liability for damages caused by, 233, note 229. See CAUSE OF Loss. 32 ELLIOTT INS. 498 INDEX. [References are to Sections.] FORECLOSURE, as avoiding policy, condition, 263. waiver by local agent, 160a, note 58. See ALIENATION. FOREIGN COMPANIES, contracts with when not authorized to do business in a state, 12, note 39. exclusive right of states to control, 12. restrictions upon, 151. unauthorized, license to represent, 151. unlicensed, liability of agent, 151. FORFEITURE, affirmative action to deny waiver, 205. for alienation of interest, 46. for breach of condition, 205. waiver by agent, 158, note 50. for cessation of operations, 251. for failure to furnish proofs of loss, when, 307. for non-payment of assessments, 138. application of dividends, 138. for non-payment of note, 130. application of dividends to prevent, 129, note 37. for non-payment of premiums, waiver of by-laws, 128. New York law, 134, note 65. for non-payment of premiums at certain time, estoppel to assert, 128. for procuring other insurance, 245, et seq. waiver, 249. for removal of property, waiver, 219. knowledge of agent, company estopped to assert, 188, note 32. none until notice given that premium is due, when, 128. none where condition waived by company, 143. not prevented by part payment, 128. of benefits, unpaid assessments not a debt, 127, 137. parol evidence to show waiver, 189. premiums not paid within specified time, 128. right to, implied waiver, 128. statute repealed, conditions in contract enforced, 134. waiver, effect on policy, 176, note 2. waiver by adjuster, 155, 181, note 16. * by failure to mention among other defenses, 181, note 15. by issuing policy with knowledge of facts, 188, note 35. by local agent, 160a, note 58. by requiring proofs of loss, 181. See CONSTRUCTION OF CONDITION; ESTOPPEL; WAIVER. FRATERNAL SOCIETY, waiver of by-laws as to payment of premiums, 128. See BENEFIT SOCIETIES. INDEX. 499 [References are to Section*.] FRAUD, applicant and agent in collusion, 190. concealment of other insurance does not tend to show, 245, note 8. constructive, misrepresentation as, 85. expectation or belief, untrue statement of, 109. innocent misstatement or a mistake in opinion is not, 228. of agent, recovery of premiums, 67, 135. repudiation by company, 161. of insured, estoppel to recover premiums on void policy, 135. oral promissory representation made in bad faith, 112. waiver by company, 68. See APPLICATION; CONCEALMENT; DEFENSES; MISREPRESENTATION. FRAUDULENT CONVEYANCE, to insured, has unconditional and sole ownership, 259. See ALIENATION; CONVEYANCE OF REAL ESTATE; INSUBABLE INTEREST; TITLE AND OWNERSHIP. G . GENERAL AGENTS, accepting note of third person in payment of premium, 130. application prepared by, 161, 162. powers and limitations, 158, 163. power to waive conditions, 182, 185, 301. waiver of prepayment of premium by, 129. See AGENTS OF COMPANIES; POWERS OF AGENTS. GRANDFATHER AND GRANDSON, insurable interest in lives, 66. GRANTOR AND GRANTEE, under executory contract of sale, insurance on different interests, 246. GUARANTY INSURANCE, defined, 7. GUNPOWDER, in another house struck by lightning, insured house destroyed, 2: See CAUSE OF Loss; EXCLUDED RISKS; EXPLOSION; EXPLOSIVES; INCREASE OF RISK; PROHIBITED ARTICLES. H HABITS, statements as to, in application, 374. See APPLICATION; LIFE INSURANCE. 500 INDEX. T t. [References are to Sections.] HEALTH, certificate of, as condition of reinstatement, 142. good faith answer as to existence of disease, 108. statements as to, 375. See APPLICATION; DISEASE; LIFE INSURANCE. HEIRS, who are, 352. HISTORY OF INSURANCE, sources, 1. insurance in Roman law, 2. development on the continent, 3. growth in England, 4. HORSES, policy covering during ordinary use, 219. See LOCATION; REMOVAL OF PBOPERTY.. HUSBAND AND WIFE, continuity of insurable interest, wife obtaining divorce, effect, 60. husband is sole and unconditional owner of household furniture owned by wife before marriage, 259. insurable interest of husband in property, 48. in life of wife, 66. insured conveying property to wife, 272. policy payable to wife, free from claims of creditors, 66, 354. property of insured sold without her consent, 270. relation imports insurable interest, 65. rights of wife in proceeds of benefit certificate after separation, 352. wife insuring husband's life, recovery of premiums by husband, 135. woman living with man as his wife, insurable interest in his life, 66. See BENEFICIARIES; INSTJBABLE INTEREST; PAYEE OF FIRE INSURANCE; PAYEE OF LIFE INSURANCE; TITLE AND OWNERSHIP. I ILLUMINATING GAS, condition against generation of, 264. See EXCLUDED RISKS; PROHIBITED ARTICLES. ILLUSTRATIVE CASES, accident, 391, 392. affirmative and promissory representations, 110. affirmative and promissory warranties, 103. cessation of operations, 251. continuing warranties, 110. construction of condition against vacancy, 291. construction of condition as to renewal of policy, 293, 294. evidence of agency, 153. INDEX. 501 [References are to Sections.] ILLUSTRATIVE CASES Continued, fall of building, 234. increase of risk, 253. injuries while engaged in designated business, 411. innocent misstatements and mistakes in expressing opinions, policy not avoided for fraud, 228. insurable interest in lives, 66. in property, 48. measure of damages, 337. payment of premium, 358. removal of property from place insured at, 220. sole and unconditional ownership, 259. breach of condition as to, 260. soliciting agent, limitations of authority, 155. use of premises, prohibited articles, 283, 284. voluntary exposure to unnecessary danger, 398. waiver of right to arbitrate, 323. INCONTESTABLE CLAUSE, condition as to, p. 409. construction, 366. when not available to insured, 68. INCREASE OF RISK, condition against, 253. duty of insured to inform company, 253, 254. knowledge of agent, 254. effect, 255. placing and operating engine fifty feet away is not, 256. understatement of age is, when, 360. what is not, illustrations, 253. See EXCLUDED RISKS; PROHIBITED ARTICLES. INCUMBRANCES, chattel mortgages, condition against, 262. defeasible conveyances are, 269. duty to disclose, 258. effect on quality of title, 258. knowledge and consent of company, 258, note 114. knowledge of agent, 188, note 32. waiver, 188, note 35. lease, when is not, 258. lien for purchase-money, when is not, 258. misdescription of in standard policy, effect, 225. misrepresentations as to, 258, note 114. mortgage, not a change in interest, title, or possession, when, 268. new mortgage to discharge old, 258, note 114. See ALIENATION; CONSTRUCTION OF CONDITION; MORTGAGOR AND Mow- GAGEE; TITLE AND OWNERSHIP. 502 INDEX. [References are to Sections.] INFANT, insurance of, 11. power to contract for insurance, 351, note 1. INFLAMMABLE ARTICLES, articles prohibited by standard policy, 283, 284. exception in favor of kerosene oil, 285. paints and varnishes used in finishing furniture, when covered, 216. See EXCLUDED RISKS; PROHIBITED ARTICLES; STANDARD POLICY. INSOLVENCY, insurable interest of debtor in goods held by assignee, 48. INSURABLE INTEREST IN LIVES, assignee of policy, insurable interest, 60. assignee without, policy is a chose in action, 63. recovery of premiums paid, 67. rule in Alabama, Kansas, Kentucky, North Carolina, Pennsyl- vania, Tennessee, Texas, and federal courts, 62. rule in California, Colorado, Georgia, Illinois, Indiana, Mary- land, Massachusetts, Mississippi, New York, Ohio, Rhode Island, South Carolina, Vermont, Wisconsin, England, and Canada, 63. based upon relationship, 64. beneficiary need not have where insured makes contract and pays premiums, 61. common law rule, 55. continuity, must exist when, 60. creditor's insurable interest, 58. daughter insuring life of father, mistake of law, recovery of pre- miums, 135. defined, 57. description, 70. English statute, not in force in this country, 56. Illustrative cases, 66. modern rule, 57. mother none in life of son, 63, note 47. North Carolina rule, 64. pleading and proof, 69. premium paid by beneficiary, no insurable interest, effect, 59. want of as a defense under incontestable clause, 68, 366. wife in life of husband, 65. See ASSIGNEE; ASSIGNMENT OF POLICY; BENEFICIARIES; HUSBAND AND WIFE; PAYEE OF LIFE INSURANCE. INSURABLE INTEREST IN PROPERTY, conditional, 47. contingent, 47. continuity of interest, alienation, 46. INDEX. 503 [.References are to Sections.] INSURABLB INTEREST IN PROPERTY Continued, defined, 42. different interests, 44. insurance on, 246. equitable title, 47. illegal or immoral, 47. illustrative cases, 48. legal title, 47. nature, 41, 43, 47. nature of undisclosed, showing at time of loss, 227. officer in property held at expense of parties, 48, note 70. quality of title, duty to disclose, when, 257. railway company in property along right of way, 47. time of interest, 45. value or condition of need not he stated, 227. See ALIENATION; ASSIGNEE; ASSIGNMENT OF POLICY; HUSBAND AND WIFE; PAYEE OF FIEE INSURANCE; TITLE AND OWNERSHIP. INSURANCE, against embezzlement, see FIDELITY INSURANCE. against loss of rents, 423, note 51. against theft, 423, note 51. definition, 6. history of, see HISTORY OF INSURANCE. kinds, 7. of crops, 45. state control, individuals engaging in business of, 151. See CONTRACT OF INSURANCE; RISK; SUBJECT-MATTEI OF INSURANCE. INSURANCE AGENTS, See AGENTS OF COMPANIES; BROKERS; CLERKS OF AGENTS; GENERAL AGENTS; POWERS OF AGENTS. INSURANCE COMPANIES, control by state, 151. estopped to deny agency, when, 153. INTEMPERANCE, knowledge of agent, 164. See APPLICATION; HABITS; LIFE INSURANCE POLICY. INTEREST POLICY, defined, 30. INTOXICATING LIQUORS, illegally kept for sale, insurance valid, 14. injuries received while under influence of, 402. insuring against fine or forfeiture for selling, 14. statements as to use of, 374. using building for illegal sale of, effect, 255. See APPLICATION; HABITS; LIFE INSURANCE POLICY. 504 INDEX. [References are to Sections.'] IRON SAFE CLAUSE, construction, 315. waiver by general agent, 301. JUDGMENT, alienation by, 276. KEEPING BOOKS, agreement as to, 314. in fireproof safe, 315. waiver by general agent, 301. See RECORDS. KEROSENE, See INFLAMMABLE ARTICLES. L LAPSE, for non-payment of premium, New York law, 134, note 65. on non-payment of premium, premium not a debt, 127. of mutual policy, how revived, 142, note 95. LEGAL REPRESENTATIVES, who are, construction of term, 352. LESSOR AND LESSEE, insurable interest, 48. lease not an incumbrance, when, 258. tenant agreeing to insure, 48, note 68. LICENSE, to act as insurance agent, 151. LIFE INSURANCE, defined, 7. not a contract of indemnity, 19, 41. origin and growth, 5. LIFE INSURANCE POLICY, application, provisions in, 367a. application, statements in, as to age, 361. as to bodily injuries, 376. as to family relationship, 378. as to habits, 374. as to health, 375. INDEX. 505 [References are to Sections. ] LIFE INSURANCE POLICY Continued, as to medical attendance, 377. as to other insurance, 379. as to rejection of former application, 380. assignment of, p. 403. assignability, 362. by assignee, 365. manner of making, 364. notice to company, 363. beneficiary, manner of changing, 356. manner of designation, 352. reservation of right to change, 355. rights of, 354. to fund, 352. transmission of interest, 353. excepted risks, death in violation of law or at hands of justice, 373. residence and occupation, 372. suicide, sane or insane, 368. no provision as to effect of, 369. construction, 370. presumption, burden of proof, 371. incontestable clause, 366. when not available to insured, 68. in general, 350. not a negotiable instrument, 365. parties, 351. payment of premium a condition precedent, p. 395. illustrations, 358. time when due, construction by agent, estoppel, 359. powers of agent, 360. right to proceeds, bankruptcy, 357. special, privileges, 367. See APPLICATION; CONDITIONS; CONSTRUCTION OF CONDITIONS; POLICIES. LIFE TENANT, insurable interest, 48. LIGHTNING, horses killed by while away from home, 219, note 134. liability for damage caused by, 233. LIMITATIONS, as to time of bringing suit on policy, validity, 329. begin to run, when, 330. LLOYDS POLICY, origin, 4. 506 INDEX. [.References are to Sections.} LOAN, insurance taken to procure, recovery of premium, when, 126, note 7. LOCATION OF PROPERTY, change of, effect, 218, 219. condition authorizing change of, p. 293. description, when material, 219. usage as controlling factor, 219. See REMOVAL OF PROPERTY. LOSS, after death, who must make proof of loss, 11. certificate as to amount of, 309. during suspension from membership, 141. notice of to local agent, 165. payment of premium after, 131. premium sent after, burden of proving acceptance, 131, note 50. refusal to pay for specified reason, other defenses estopped, 181. refusal to pay without specifying reason, defenses, 181. See CAUSE OF Loss; NOTICE OF Loss; PROOF OF Loss; TOTAL Loss. LOTTERY TICKETS, insurance on against public policy, 55, note 5. M MACHINERY, not included in term "manufacturing establishment," 251. MAILING, check for premium, 129, 358. notice and proof of loss, 308. notice of other insurance, receipt denied, 249. policy to insured is a delivery, 358. registered letter, completion of notice by, 134, note 66. MANUFACTURING ESTABLISHMENT, "cease to be operated," defined, 251. condition as to operating, 251. condition against vacancy, construction, 290. machinery is not, 251. See NIGHT- WORK. MARINE INSURANCE, by government, 2, note 10. concealment, rule as to, 80. defined, 7. subrogation, 21. MARRIAGE, contract in restraint of, 8. See CONTRACT OF MARRIAGE. INDEX. 507 t0 MATERIAL FACTS, See APPLICATION; CONCEALMENT; FBAUD; MISEEPBESENTATION ; QUKSTIOK FOB JURY; QUESTION OF LAW. MEASURE OF DAMAGES, condition as to, p. 362. for injury received in more hazardous occupation, 395. increase of hazard question for jury, 395. governed by extent of disability, 403. illustrations, 337. in credit insurance, 421. under valued policy, 209, 332, 333. value at date of loss, 337. See TOTAL Loss; VALUE. MECHANIC'S LIEN, insurable interest, 48. MEMBERSHIP, reinstatement, 142. MERGER, of oral representations in written application, 108. MISAPPROPRIATED FUNDS, payment of premium with, 129. MISREPRESENTATIONS, as to incumbrances, effect, 258, note 114. by agent of company, estoppel, 187. rescission by insured, 188. by agent of insured, 92, 113. false representations in proof of loss, knowledge of company, 228. material, policy avoided, when, 114. burden of proof as to materiality, 118. See APPLICATION; CONCEALMENT; FRAUD; INCUMBBANCES; REPRESENTA- TIONS AND WARRANTIES; WARRANTIES. MISTAKE, concealment through, 91. in description of property, correction by agent, 158. reformation, 213. in proof of loss, 228. in warranty, good-faith answer, 108a. naming wrong person as insured, reformation, 206. of agent in describing subject-matter, 187. in writing answers in application, 164, 187. of law, daughter insuring father's life, recovery of premiums, 135. See APPLICATION; DESCRIPTION. 508 INDEX. [References are to Sections.] MORTGAGES, breach of condition as to, 205, notes 15, 16. new one to discharge old, effect, 258, note 114. See ALIENATION; CONSTRUCTION OF CONDITIONS; INCUMBRANCES; STANDABD POLICY. MORTGAGOR AND MORTGAGEE, conditions affecting mortgagee, p. 378. special provisions, 341. different interests, insurance of, 246. insurable interest, 48. mortgagee neglecting to inform company of increased risk, 254. mortgagee not a party to an arbitration, when, 326. mortgagee, when liable for premium, 127, note 10. mortgagor in possession, insurable interest, 48, note 47. policy in name of mortgagor for benefit of mortgagee, mortgagor obtaining other insurance, 246. premium unpaid, when mortgagee can not recover, 127, note 10. MOTHER, as beneficiary, no insurable interest, 63, note 47. MOTHER-IN-LAW, insurable interest in life of son-in-law, 66. MURDER, liability for under accident policy, 400. MUTUAL BENEFIT SOCIETIES, See BENEFIT SOCIETIES. MUTUAL COMPANIES, arbitration, rules governing, 317. assessments in, 136. accepted after death, 141. dividends applied on, 138. ignorance of terms of contract, no recovery of, 135. liability for, 137. liability limited, 133, note 61. nature, payment, 125. non-payment of, effect, 138. paid in anticipation, none made, 138, note 83. stockholder voting to increase, 136. beneficiaries, manner of changing, 356. death or loss during suspension from membership, 141. insolvency, assessments by receiver, 140. organization and status, 136. payment of assessments, waiver of requirements, 143. payment of premiums, 133. premium notes payable absolutely, negotiable, 133. INDEX. 509 {.References are to Sections.] MUTUAL COMPANIES Continued, regulation of, 13. regulations enter into standard policy, p. 381. reinstatement of members, 142. withdrawal of member, liability, 139. See BENEFICIARIES; BENEFIT SOCIETIES. N NEGLIGENCE, concealment through, 91. effect under accident policy, 397. of insured, right of recovery, 22. in protecting property after fire, liability of insurer, 231. of third person, rights of parties, 22. NIECE, insurable interest in life of uncle, 66. NIGHT-WORK, running over hours, construction of condition, 252. knowledge of agent, waiver, 252. See MANUFACTURING ESTABLISHMENT. NON-DISCLOSURE OF MATERIAL FACTS, See CONCEALMENT; FRAUD; MISREPRESENTATION; QUESTION FOR JURY; QUESTION OF LAW; REPRESENTATIONS AND WARRANTIES. NOTICE, of accident or claim, duty to give, 415. of assessment, by mail, date of, 134, note 66. of authority of agent, 186. constructive notice, 161. of condition of title, to clerk of agent, 156. of default, duty to give, 416. of dividends, 138. of limitations contained in application, 160, 161. of other insurance, policy requiring, 245. mailing, receipt denied, 249. to clerk of agent, 156. to agent, when notice to company, 164. to agent's clerks, 156. NOTICE OF CANCELLATION, must be given to the insured, 296. time of, 297. to broker, when not notice to insured, 157. broker employed by insured, 298. what is sufficient, 300. See CANCELLATION; STANDARD POLICT. 510 INDEX. [References are to Sections.] NOTICE OF LOSS, condition as to, p. 309. compliance with condition, what is, 303, 308. failure to give, not waived by retaining proofs of loss, 181, note 16. "immediate" notice, what is, 304. to local agent, 165. to whom must be given, 312. See PBOOFS OF Loss. NOTICE OF MATURITY OF PREMIUMS, custom or usage, 134. duty to give, 128. in New York, 129, note 32. statutory requirement, 134. burden to show compliance with, 134. See PREMIUMS; PAYMENT OF PREMIUMS. OCCUPANCY, breach of condition as to, 205, notes 15, 16. description of, when a warranty, 215. See CONSTRUCTION OF CONDITION; VACANCY; USE OF PREMISES. OCCUPATION OF INSURED, construction of condition in accident insurance, 395. statement as to, in application, 372. OFFICERS, conditions restricting power of, 163. insurable interest in property held under attachment or levy, 48. OPEN POLICY, denned, 30. effect of overvaluation, 228. ORDER, acceptance in payment of premiums, 129. ORDINANCE, refusing permission to repair as affecting total loss, 235. OTHER INSURANCE, benefit certificates, 13, 379. condition against, p. 219. breach of, effect, 205, notes 15 and 16, 245, 248. policy on different interest is not, 246. construction of, 245. waiver of by agent, 183. concealment of fact of, 245, note 3. INDEX. [References are to Sections.} OTHER INSURANCE Continued, consent of company, 249. definition, 246. divisibility of contract, effect, 250. double insurance, what is, 250. expiration of, original policy not reinstated, 245, note 2. knowledge of agent, 164, 188, note 32. of secretary, estoppel, 188, note 35. notice to clerk of agent, 156. procured by stranger, 246. statements as to in application, 379. interpretation of agent, 359, note 75. "valid or invalid," construction, 247. OVEREXERTION, when covered by accident insurance, 391 and note 5. OVERVALUATION, as breach of warranty, 228. as evidence of fraud, 228. effect in open policy, 228. in valued policy, 333. OWNER, agent in possession insuring for, 48, note 39. applicant stating that he is, construction, 227. insurable interest in building in course of erection, 48. note 41. See TITLE AND OWNERSHIP. P PAID-UP POLICY, right to without paying outstanding premium note, 132, note 58. when issued, and conditions of, 132. PARENT AND CHILD, insurable interest in life of minor son, 66. in life of parent, 66. of son in life of father, 65. relation assumed, insurable interest of girl, 66. PAROL EVIDENCE, to explain ambiguous description, 213. to show actual time policy takes effect, 208. to show barn included in description of house, 217. to show truthful answers, 189. to show waiver of conditions, 159. to show waiver of forfeiture, 189. See BURDEN OF PROOF; EVIDENCE; PRESUMPTIONS. 511 512 INDEX. [References are to Sections.] PARTICEPS CRIMINIS, applicant in collusion with agent, 190. PARTIES, description in policy, 206. relations in contract of reinsurance, 9. to arbitration, mortgagee is not, when, 326. to contract of insurance, 10. to life insurance contract, 351. who may be insured, 11. who may contract to insure, 12. See CONTBACT OF INSURANCE; LIFE INSURANCE POLICY; STANDARD POLICY. PARTITION, as change in interest, 277. See ALIENATION. PARTNERSHIP, insurable interest in each other's lives, 66. in firm property, 48. policy in firm name, dissolution, 259. sale by one partner to another not an increase of risk, 253. transfers by and between partners, 273. transfers between partners jointly insured, 280. PAWNBROKERS, insurable interest, 47. PAYEE OF FIRE INSURANCE, mortgagee as assignee or beneficiary of policy, 341. policy payable to appointee as interest may appear, 206. See ASSIGNEE; ASSIGNMENT OF POLICY; BENEFICIARIES; INSUBABLE INTEREST. PAYEE OF LIFE INSURANCE, beneficiaries, manner of designation, construction, 352. insurable interest unnecessary where insured makes contract and pays premiums, 61. no insurable interest, paying premiums, recovery when, 61. See ASSIGNMENT OF POLICY; BENEFICIARIES; INSUBABLE INTEREST. PAYMENT OF LOSS, condition as to time of, p. 357. construction, 328. PAYMENT OF PREMIUMS, acceptance of promissory note, 130. a condition precedent, effect, 128. illustrations, 358. after loss or death, 131. agent collecting and retaining, 184. INDEX. 5X3 [References are to Sections.] PAYMENT OF PREMIUMS Continued, agent waiving prompt payment, 159. by beneficiary or one not a beneficiary, rights, 352. no insurable interest, effect, 59. condition as to, p. 395. days of grace, 131. in casb, waiver by agent, 184. waiver by soliciting agent, effect, 186. in gross, contract not severable, when, 225, note 188. Missouri rule, 225. New York rule, 225, note 189. in mutual companies, 133. notice of time when due, 128. paid-up policies, 132. part payment will not prevent forfeiture, 128. required within specified time, forfeiture for non-payment, 128. statute repealed, conditions in contract enforced, 134. suspension of contract during non-payment, 128. time, manner, ahd place, 129. extension of time, 128. must be made before loss, 128. time when due, construction by agent, estoppel, 359. to agents, 358. to clerk of agent, 156. waiver by clerk of agent, 156. waiver of by-laws as to, 128. See NOTICE OF MATURITY OF PREMIUMS; PREMIUMS; PREMIUM NOTES; PROMISSORY NOTES. PENALTY, for issuing other than prescribed form of policy, 203. PLATE GLASS, not excepted from contract of insurance, 237. PLEADING, condition subsequent need not be pleaded, 118. value at date of loss need not be stated in complaint on policy, 337. PLEADING AND PROOF, insurable interest, 69. insurer must allege and prove falsity of warranty in Minnesota. 118. insurer must allege warranty and prove materiality, 118. POLICIES, acceptance does not imply assent to new conditions, when, 129. cancellation, conditions as to, p. 298. classified and defined, 30. 33 ELLIOTT INS. 514 INDEX. [References are to Sections.'] POLICIES Continued, construction, rule of, 204. as to standard policy, 204. countersigned by agent, 32. delivery, completion of contract, 31. delivery to broker, 157. description of insured in, 206. facts to defeat known to company, 187. form controlled by law, 200. form disregarded, when, 59. invalid, knowledge of agent, 188. limitations as to prepayment of premium, 186. Lloyds policy, 4. misdescription in corrected by agent, 158. reformation, 295. renewal, condition as to, p. 293. construction of condition, 293, 294. required by statute to be signed by corporate officers, oral contract, how affected, 27. restrictions in on powers of agents, 159. revenue stamp, failure to affix, effect, 28. statutory provisions in, can not be waived, 180. void at initio, recovery of premiums, 135. waiver of forfeiture, effect, 176, note 2. See ASSIGNMENT OF POLICY; CANCELLATION; CONSTRUCTION OF POLICY; DELIVERY OF POLICY; LIFE INSURANCE POLICY; REFORMATION; STANDARD POLICY. POWERS OF AGENTS, adjuster, 155. "apparent or ostensible authority," 158. authorization in writing, 223. authority to cancel policy, 298. collecting agent, 155. conditions as to, p. 401. construction of, 160a. correcting misdescription in policy, 158. delegating authority to clerks, 156. exceeding authority, 154. limitations on, 159, 160. constructive notice, 161. duty of insured to learn, 155. medical examiner, 155, note 21. presumptions as to, 154. secret instructions in derogation of, 158, 160. soliciting agent, 155. special agent, 155, note 21. INDEX. 515 [References are to Sections.} POWERS OF AGENTS Continued, statutory restrictions, 151. to receive proofs of loss, 312. to waive conditions, 158, 182, 301. against other insurance, 183. insured relying upon, 183. to waive forfeiture, 158, note 50, 360. to waive incumbrances, 258, note 114. to waive prepayment of premium, 360. See ADJUSTERS; AGENTS OF COMPANIES; BBOKEBS; CLERKS OF AGENTS. PREMIUM NOTES, assessments on in mutual company, liability limited, 133, note 61. in mutual company, payable absolutely, negotiable, 133. liability of maker, termination, 133. limit of liability on, 136. not enforceable when policy void ab initio, 135. obligation to pay, 127. not affected by insolvency of company, 140. outstanding, right to paid-up policy without paying, 132, note 58. part of capital stock, when, 133. payable on contingency, non-negotiable, 133. PREMIUMS, acceptance of as waiver of condition against removal, 183. acceptance of does not ratify unauthorized act of agent in issuing policy, 166. assignee without insurable interest protected as to money ad- vanced for, 62. increase or reduction of rate, 126. custom or usage as determining, 126. in general, 125. nature of, 126. not a debt, when, 127. obligation to pay, 127. payment a condition precedent, effect, 128. rate of inserted in policy, 126, 207. recovery by assignee without insurable interest, 67. recovery of, loan on policy refused, when, 126, note 7. recovery of when risk does not attach, 126. return of when policy canceled, 299. right of insured to recover, 135. unpaid, insurance does not attach, 126. no recovery by mortgagee, when, 127. policy not delivered, effect, 31. See PAYMENT OF PREMIUMS. 516 INDEX. [References are to Sections.} PRESUMPTIONS, against fact of suicide, burden of proof, 371. as to powers of agents, 154. of knowledge to establish waiver, 177. of waiver from mere silence, 179. that agent is familiar with construction of building insured, 214. that arbitration is waived, 319. that award of appraisers is valid, 322. that company knows mercantile meaning of words used in descrip- tion, 216. that company knows nature of stock and method of doing business, 214. that party accepting policy knows its contents, 245. that written application contains all material representations, 108. See BURDEN OF PROOF; EVIDENCE; PAROL EVIDENCE. PRINCIPAL AND AGENT, limitations on authority of agent, 160. See APPLICATION; AGENTS; POWERS OF AGENTS. PROMISSORY NOTES, acceptance in payment of premiums, conditions, 130. agent accepting and discounting and receipting for premium, 130. execution of, when not payment of premium, 129. given to pay premium, 358. of third persons, acceptance in payment of premiums, 130. PROOF, of agency, 153. PROOFS OF DEATH, within definite time, waiver, 180, note 10. PROOFS OF LOSS, certificate of magistrate, 309. condition as to, p. 309. compliance with, what is, 303, 308. not waived by submitting question of amount to appraisers, 301. waiver by soliciting agent, 155, note 27. condition precedent, when, 307. failure to furnish, excuses for, 306. fidelity insurance, 417. knowledge of company as to falsity of assertion, 228. misstatements made by mistake, 228. objections to, specifying particular defect, 311. plans and specifications, 310. preliminary, waiver by adjuster, 155. requiring, waiver of forfeiture, 181. retaining, does not waive failure to give notice of loss, 181, note 16. waiver, 311. See Loss; NOTICE OF Loss. INDEX. 517 [References are to Sections.] PRORATING LOSS, condition as to, p. 370. construction, 338. PROXIMATE AND REMOTE CAUSE, application of rule in fire insurance cases, 222. See CAUSE OF Loss. PUBLIC POLICY, contracts against, 8. insurance on lottery tickets, 55, note 5. Q QUESTION FOR JURY, as to increase of risk from change of occupation, 395. as to materiality of facts, 90. as to materiality of representations, when, 116. as to materiality of statements, when, 123. QUESTION OF LAW, as to insurable interest, 69. as to materiality of representations, when, 116. as to materiality of statements, when, 123. E RATES, change of in assessment company, 126. discrimination in, rebates, 126. increase or reduction, 126. inserted in policy, 126, 207. RATIFICATION, of additional insurance by accepting benefits, 246. REBATES, prohibited by statute, 126. RECEIVER, right to levy assessments, 140. RECORDS, agreement to keep, 314. in fireproof safe, 315. waiver by general agent, 301. failure to produce, 314. right of company to examine, p. 323. RECOVERY OF PREMIUMS, See PREMIUMS; PAYMENT or PREMIUMS. 518 INDEX. [.References are to Sections.] REFORMATION, of policy, 295. wrong person named as insured, 206. REINSTATEMENT, conditions, 142. other insurance taken for short term, expiration does not reinstate original policy, 245, note 2. REINSURANCE, amount, 9. condition as to, p. 376. contract not within statute of frauds, 25. is a contract of indemnity, 18. parties and their rights, 340. relations of parties, 9. RELATIONSHIP, as basis of insurable interest, 64. "relatives," who included, 352. stepfather is, and may be beneficiary of benefit certificate, 66. statements as to in application, 378. RELIGIOUS SOCIETY, no insurable interest in life of member, when, 66. REMAINDER-MAN, insurable interest, 48. REMOVAL OF PROPERTY, agent consenting to, effect, 183. condition authorizing, p. 293. effect, 218, 219. illustrations, 220. See LOCATION OF PROPERTY. RENEWAL, agreement for by soliciting agent, 155. by clerk of agent, 156. by parol, 26. condition as to, p. 293. construction, 293, 294. reformation of new policy, 295. RENTS, insurance against loss of, 423, note 51. REPAIRS, city authorities refusing permission to make, effect as to total loss, 235. condition as to, construction, 256. right of insurer to make, p. 353. election to make, effect, 327. INDEX. 519 [References are to Sections,] REPRESENTATIONS AND WARRANTIES, affirmative and promissory representations, 110. affirmative and promissory warranties, illustrative case, 103. agreement to keep a watchman, 107, note 23. breach of warranty, effect, 104. by broker, 157. construction of, 107. statutory provisions as to, 100, 119, 123. in Massachusetts, 120. in Minnesota, 120, note 73. in Pennsylvania, 121. in Georgia, Iowa, Kentucky, Maine, Maryland, Michigan, Missouri, New Hampshire, Ohio, and Virginia, 122. construction of statements in application, 106. continuing warranties, 110. distinguished, 102. expectation or belief, statement of, 109. falsity known to agent, 164. materiality of representations, tests, 116. inquiry into, when precluded, 116. opinion of experts, 117. when question for jury, 116, 117, 123. when question of law, 116, 123. oral promissory representations, 111. oral representations, 108. positive statements, binding force, 109. presumption that written application contains all material repre- sentations, 108. promissory representations must be in writing to be available, 112. "representation" defined, 101. representations must be substantially true, 115. See APPLICATION; CONCEALMENT; FBAUD; MISREPRESENTATIONS ; WARRANTIES. RESCISSION, by insured for fraudulent representations by agent, 188. RESIDENCE, construction of condition as to, 372. REVENUE STAMPS, failure to affix on policy, effect, 28. RIDERS, use of, 202. RISK, assumption of necessary to collection of premium, 135. not attaching, recovery of premium, 126. 520 INDEX. [References are to Sections.] RISK Continued, description of, knowledge of agent, 188. description of interest, 70. effect on rate of premium as determining materiality, 253. essential to contract of insurance, 14. interest in an illegal business, 14. must be incurred before contract binding, 16. what may be subject-matter of insurance, 14. See CONTBACT OF INSURANCE; EXCLUDED RISKS; PROHIBITED ARTICLES; SUBJECT-MATTER OF INSURANCE. RISKS OF TRAVEL, See ACCIDENT INSURANCE. RUNNING OVER HOURS, See NIGHT- WORK. s SISTER, See BROTHER AND SISTER. SMOKE DAMAGE, resulting from defective stovepipe, 221. See CAUSE OF Loss. SON, See PARENT AND CHILD. SON-IN-LAW, no insurable interest in life of dependent mother-in-law, 66. SPECIAL PRIVILEGES, condition as to, p. 411. SPECIFIC PERFORMANCE, of oral agreement, 27, 29. STABLE, when included in term "dwelling house," 217. See CONSTRUCTION OF POLICY; WORDS AND PHBASES. STANDARD POLICY, amount, 209. application a part of the policy, 224. arbitration, award, invalidity, 322. resubmission, 324. condition precedent, 320. demand for, 319. as admission of liability, 325. disagreement, 316. in case of total loss, 318. INDEX. 5JJ1 [References are to Sections.] STANDARD POLICY Continued, revocation of condition, 321. right of mortgagee, 326. validity of provision, 317. waiver of right, 323. assignment of policy, 282. authorization of agent, 223. binding clause, 203. breach of condition, effect, 205. cancellation of policy, authority of agent to cancel, 298. in general, 296. return of premium, 299. time of, 297. what constitutes, 300. change in interest, title, or possession, assignment and bankruptcy proceedings, 278. change of possession, 280. conveyance to wife of insured, 272. defeasible conveyances, 269. executory contract of sale, 267. incumbrances, 268. invalid conveyances, 270. judgment, 276. lease of property, 281. legal process or judgment, 275. partition, 277. sale with purchase-money mortgage, 271. scope of provision, 265. transfer by death, 279. transfer of part interest, 266. transfers by and between partners, 273. between joint owners, 274. conditions affecting mortgagees, special provisions, 341. construction of terms, 204, 342. description of buildings, 217. of merchandise, 216. of property, in general, 210. ambiguous, reformation, 213. descriptions, when warranties, 215. excluded property, exceptions and limitations, 236. plate glass, frescoes and decorations, 237. excluded risks, city ordinances, 235. explosions, 232. fall of building, 234. invasion, riot, etc., 229. 522 INDEX. [References are to Sections.'] STANDARD POLICY Continued, lightning, 233. neglect to protect property, 231. theft, 230. exhibition of property and records, examination of party, 313. failure to produce books, 314. iron safe clause, 315. goods held in trust, 211. in general, 200, 302. interest in and care of property, building on leased ground, 261. changes in adjoining property, 254. "different interests," definition, 246. foreclosure proceedings, 263. generation of illuminating gas, 264. increase of risk, effect, 255. Incumbrances, 258. illustrations, 259. breach of condition, illustrations, 260. chattel mortgage, 262. operation of manufacturing establishment, 251 running over hours, 252. increase of risk, 253. other insurance, 245. consent of company, waiver, 249. "whether valid or invalid," construction, 247. where words do not appear, 248. ownership, 257. policy covering part of property, 250. repairs, employment of mechanics, 256. location of property, in general, 218. authorized change of, 292. is material, 219. illustrations, 220. measure of damages, illustrations, 337. in general, 332. total loss, meaning, 335. total loss to frame buildings within fire limits, 336. valued policy legislation, 333. constitutionality of, 334. misconduct of insured in procuring, concealment and misrepresentation, 226. entirety of contract, 225. fraud and false swearing, 228. statement of interest, 227. Massachusetts form, where used, 201. INDEX. 523 [References are to Sections.] STANDARD POLICY Continued, mutual companies, 342. New York form, where used, 202. notice and proof of loss, certificate of magistrate, 309. compliance, 303. what is, 303, 308. condition precedent, when, 307. definition, 303. failure to furnish proofs, excuses, 306. "immediate" notice, 304. plans and specifications, 310. separation of goods "forthwith," 305. to whom notice must be given, 312. waiver, 311. other conditions, indorsement, p. 381. parties, 206. premium, 207. prescribed by statute, 24. presumption as to nature of business, 214. prohibited articles, kerosene, exception in favor of, 285. use of property, prohibited articles, 283, 284. prorating loss, 338. proximate cause of loss, electric wires, 222. reinsurance, 340. renewal of contract, in general, 293. illustrations, 294. reformation of policy, 295. right to repair, rebuild, or replace, option reserved, 327. risks insured against, 221. shifting stock, may cover, 212. subrogation, 339. term of insurance, 208. time of bringing suit, limitation begins to run when, 330. validity of condition, 329. time within which loss is payable, 328. vacancy, building, contents, vacancy, 290. condition as to, p. 285. construction of, 287. illustrations, 291. when applied to dwelling house, 289. in general, 286. "vacant" and "unoccupied" not synonymous, 2! waiver, limitations upon power of, 301. 524 INDEX. [References are to Sections.! STATE CONTROL, of insurance companies and agents, 12, 151. STATUTE OF FRAUDS, contract of insurance not within, 25. STATUTE OF LIMITATIONS, application in insurance contracts, 329. STATUTES, abolishing distinction between general and special agents, 154. fixing amount of assessments, 137. forbidding discrimination in rates, 126. providing rules of construction for representations and warranties, constitutionality, 119. controlling force, 123. relating to insurance agents, 151. construction of, 152. repeal of, enforcement of conditions in contract, 134. requiring notice of maturity of premiums, 134. violation of by company no defense in action on policy, 12. STEPFATHER, is a "relative," and may be beneficiary of benefit certificate, 66. STEPSON, no insurable interest in life of stepfather, 66. STOCKHOLDERS, corporation no insurable interest in life of, 66. SUB-AGENTS, See CLERKS OF AGENTS. SUBJECT-MATTER OF INSURANCE, description of merchandise, what included, 216. interest necessary, wager policy prohibited, 30. interest of person named in policy, 206. mistake of agent in describing, 187. plate glass, frescoes and decorations, 237. presumption as to company's knowledge of, 214. value need not be proved under valued policy, 30. what may be, 8, 14, 40. See CONTRACT OF INSURANCE; EXCLUDED RISKS; EXCLUDED PROPERTY; PROHIBITED ARTICLES; RISK. SUBROGATION, condition as to, p. 372. general principles, 339. of insurer to rights of mortgagee, 341. when allowed, and measure of insurer's rights, 21. INDEX. 525 [References are to Sections.} SUICIDE, construction of condition, 370. no provision against, effect, 369. of insured, beneficiary how affected, 369. presumption against, burden of proof, 371. sane or insane, 368. See LIFE INSURANCE POLICY. SUNDAY LAW, insured injured while violating, 401. SUNSTROKE, is a disease, 392, 399. exception, 392. SURETIES, liability on agent's bond, 166, note 90. on distiller's bond, insurable interest in whisky, 48. SURRENDER VALUE, paying to trustee for benefit of creditors, 357. SUSPENSION, during absence of property from place insured at, 219. illustrations, 220. during breach of condition, 205. from membership, death or loss during, ^141. for non-payment of assessments, 138. application of dividends, 138. for non-payment of note, 130. for non-payment of premium, 128. of contract by alienation of interest, 46. by operation of war, 128. of work in manufacturing establishment temporarily, 251. T TENANT BY CURTESY, insurable interest, 48. TENANTS IN COMMON, insurable interest, 48. TENDER, of unearned premium, when not sufficient to cancel policy, 299. THEFT, insurance against, 423, note 51. liability for, 230. 526 INDEX. {References are to Sections.] TIME OF PAYMENT, date of maturity of premiums reckoned from, 129. See COMPUTATION OF TIME. TIME POLICY, defined, 30. TITLE AND OWNERSHIP, applicant stating that he is the "owner," construction, 227. condition as to, 257. illustrations of compliance with, 259. of breach, 260. condition against building on leased ground, 261. condition of, notice to clerk of agent, 156. description of in policy, 70. knowledge of agent as to state of, 188. nature of to be disclosed, when, 257. quality of, how affected by incumbrances, 258. what is sufficient title, 257. who is sole and unconditional owner, illustrations, 259. who is not, illustrations, 260. See APPLICATION; CONSTRUCTION OF CONDITIONS; INCUMBRANCES; INSUB- ABLE INTEREST; OWNER. TITLE INSURANCE, construction of policy, 423. TOTAL DISABILITY, what is, 403. TOTAL LOSS, arbitration and appraisement, 318. under valued policy, 318. damage to foundation not considered, 335. frame building within fire limits, 235, 336. insurer electing to rebuild, 327. effect of valued policy, 327. meaning, 335. recovery under valued policy, 209, 333. See Loss. TRADE, contract in restraint of, 8. TRUSTS, beneficiary without interest, Texas rule, 62. insurable interest of trustee and cestui que trust, 48. INDEX. 527 [References are to Sections.} U USAGE, as controlling materiality of location, 219. as determining rate, 126. as to giving notice of maturity of premiums, 134. testimony of insurance expert as to, on question of materiality, 117. USE OF PREMISES, breach of condition as to, 205, notes 15, 16. change in, alterations by mechanics, effect, 256. description of, when a warranty, 215. prohibited articles, 283, 284. exception in favor of kerosene oil, 285. See EXCLUDED PROPERTY; EXCLUDED RISKS; INCREASE OF RISK; OCCU- PANCY; PROHIBITED ARTICLES; VACANCY. V VACANCY, condition against, p. 285. breach of, 205, notes 15, 16. construction of, 287. illustrations, 291. in case of a dwelling house, 289. in case of building and contents, 290. effect on rate of premium, expert evidence, 255. increased danger of fire from, expert evidence, 255. temporary, effect, 286. "vacant" and "unoccupied" distinguished, 288. what Is, 287. See OCCUPANCY. VALUE, at date of loss, measure of damage, 337. false statement as to, effect, 228. proof unnecessary under valued policy, 30. stated in application, company not bound by, 337. See CERTIFICATE OF Loss; MEASURE OF DAMAGES. VALUED POLICY, defined, 30. insurer's right to rebuild under, 327. legislative provisions, 333. constitutionality of, 334. measure of damages, 209. overvaluation, effect, 228, 333. 528 INDEX. {.References are to Sections.] VALUED POLICY Continued, submitting amount of loss to arbitration not a waiver of statutory benefits, 318, note 119. total loss, arbitration and appraisement, 318. measure of damages, 333. where in force, 333. VENDOR AND VENDEE, insurable interest, 48. VENDOR'S LIEN, for purchase money, effect on quality of title, 258. See ALIENATION; INCUMBBANCES ; TITLE AND OWNERSHIP. VOID OR VOIDABLE, condition broken as to other insurance, 245. VOYAGE POLICY, defined, 30. w WAGER CONTRACT, form of policy not allowed to cover and protect, 59. WAGER POLICY, defined, 30. prohibited, 30. WAIVER, basis of, 178. company estopped to assert, when, 185. condition as to, p. 305. definition, 143, note 98, 175, 176. factory running over hours, issuing policy with knowledge, 252. in writing only, construction of condition, 185. knowledge and intent essential, 177. limitations upon power of, 301. not inferred from mere silence, 179. of condition against other insurance, 249. of condition against removing stock, 183. of condition requiring certificate of nearest notary public, 180, note 10. of conditions by president and secretary, provision against, 163. of conditions in policy, 180. evidence to show, 159. power of agents, 182. of defenses, 181. of failure to give notice of loss, when not, 181, note 16. INDEX. 529 [References are to Sections. J WAIVER Continued, of forfeiture, 205. affirmative action to deny, 205. effect on policy, 176, note 2. parol evidence to show, 189. for breach of condition by agent, 158, note 50. for removal of property, 219. of fraud, 68. of imperfection in answer to inquiry, 87. of incumbrances by agent, 258. of iron safe clause by general agent, 301. of limitations as to time of bringing suit, 359. of notice of assignment of policy, 363, note 94. of prepayment of premium, 130, 358. by agent, 159, 184, 359. by clerk of agent, 156. by general agent, 129. of proofs of loss, what is, 311. of provision in policy by oral agreement to renew, 26. of right to arbitrate, what is, 323. to second arbitration, 324. to forfeiture, implied, 128. to rebuild, 180, note 10. of time of payment of assessments, 143. of premiums, 128. presumption of knowledge, 177. See ACCEPTANCE; ESTOPPEL. WAR, suspension of contract by, 128. WAREHOUSEMEN, insurable interest, 47. WARRANTIES, application and survey, in standard policy, 224. are conditions in the policy, 79. as to space between buildings, knowledge of agent, 188. condition precedent, 118. not in Minnesota, burden of proof as to falsity, 118. defined, 102. descriptions construed as, when, 215. incorrectly written by agent, 188, note 40. oral evidence to show incorrectness, 189. irresponsive answers are not, 88. mistake, good faith answer, 108a. not created by implication, 106. 34 ELLIOTT INS. 530 INDEX. [References are to Sections.] WARRANTIES Continued, not favored in law, 107, note 23. overvaluation as a breach of, 228. statements in application as, 367a. See CONCEALMENT; FRAUD; MISREPRESENTATIONS; MISTAKE; RKFRESENTA- TIONS AND WARRANTIES. WATCHMAN, employment of while factory idle, 251. WATER DAMAGE, resulting from fire, policy covers, 221. See CAUSE OF Loss. WEARING APPAREL, when covered by policy, 220. WILL, power to change beneficiary in, 354. in mutual company, 356. WORDS AND PHRASES, "any use or custom of trade or manufacture to the contrary," 283. "apparent or ostensible authority," 158. "as his interest may appear," 259. "bodily infirmity," 399. "brick building," 215. "cease to be operated," 251. "children," policy payable to, 352. "date of notice," 134, note 66. "dependent," 66, 352. "direct loss or damage by fire," 221, 222. "disease," 399. "dwelling," construed as description, not warranty, 215. "forthwith," separation of goods, 305. "good health," 375. "grain," 216. "guano," 216. "heirs," 352. "household furniture," 216. "immediate" notice, 304. "insurable interest," 42, 57. "insurance," 6. "insurance agent," 150. "insured," p. 381. "interest" broader than title, 227. "live stock," 216. "loss," p. 381. "machinery," 216. . INDEX. 1 [References are to Sections.] WORDS AND PHRASES Continued, "material fact," 90. '"merchandise," 216. "plate," 236. premium "to be paid in advance to the company," 129. "rags and old metals," 216. "relatives," who included, 352. includes stepfather, 66. "self-destruction in any form," 394, note 38. "serious illness," 375. "stock in trade," 216. "storage," 236. "store" construed as shop, 217. "store fixtures," 236. "storehouse," 215. "tools," 216. "total disability," 403. "total loss," 335. "true" and "untrue" answers, 108a. "vacant or unoccupied," meaning, 288. "valid or invalid," other insurance, 247, 248. "void" construed as voidable, 203. "voluntary exposure to unnecessary danger," 398. See CONSTRUCTION OF POLICY; DEFINITIONS. Whole number of pages, 587. LAW LIBRARY UNIVERSITY OF CALIFORNIA LOS ANGELES 000 689 995 9 I