^ THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW w A SELECTION OF CASES ON THE LAW OF INSUEANCE ESPECIALLY FIRE, LIFE, ACCIDENT, MARINE AND EMPLOYERS' LIABILITY WITH AN APPENDIX OF FORMS, ETC. ALSO A SUPPLEMENT OF CONDENSED CASES WITHOUT DECISIONS BY GEORGE RICHARDS, M. A. OF THE NEW YORK BAR, FORMERLY LECTURER ON INSURANCE LAW IN THE SCHOOL OF LAW OF COLUMBIA UNIVERSITY AND THE NEW YORK LAW SCHOOL SECOND EDITION THE BANKS LAW PUBLISHING CO. NEW YORK 1922 T C(ypyright, 1910 By Geoeoe Richahdb Copyright, 1913 By George Richabds PREFACE This is a true case book. From the officially reported cases, as here reprinted, the student is expected to deduce for himself the precise rulings of the courts, which together constitute a compre- hensive summary of the law of insurance. The brief headnotes indicate the topics or questions involved, but give no clue to the decisions of the courts. The statements of fact, also, have, in most instances, been rewritten. As an aid to an interesting discussion and profitable development of certain doctrines, a case on either side of the border line is reproduced. In Part I general principles are considered; and, in Part II, the more significant clauses of the policies, in the sequence in which they occur in the several instruments. Definitions, explanations, subsidiary points, numerous condensed cases and citations of selected authorities to date are given in finer print. Some such supplementary treatment by way of amplification or explanation is almost a necessity. Many t)f tlie ilecisions in in- surance law are highly exceptional or arbitrary in tiieir character. A few cases, culled here and there from thirty thousand, if unqualified, are too apt to be occasions of stumbling as well as of support. We are satisfied to train our students to reason, provided only they reason in terms of sound law. Otherwise they must fall short of attaining success in their professional career. If the class is to study the cjise of Home Mutual Ins. Co. v. Tompkies, or similar ruling, they must also compare with it the case of Brighton Beach Racing Assn. v. Home Ins. Co., for not even an export might confidently infer that the courts would draw the dividing linc^ betw(>(Mi the two. To por- tray with measurable accuracy the law of insurable interest or of waiver or of general average requires either hundreds of pages of IV PREFACE cases as reported in extenso, or a few suggestive cases together with a complementary statement. If. aided by my long and varied experience as a counselor in the law of insurance, I have succeeded in providing the right help for the use of those who are striving to master the elementary principles of a difficult branch of the law, my extended labors in the prepara- tion of this book will find an ample recompense. G. R. September, 1910. TABLE OF CONTENTS PART I General Principles of Insurance Law CHAPTER I PAGE Introductory "^ Nature of Insurance and Insurance Companies CHAPTER II General Principles of Insurance Law 18 Nature and Characteristics of the Contract, Including Insurable Interest, Contribution, Subrogation, Assignability, Rights of Beneficiaries and Creditors, etc. CHAPTER III General Principles— Continued 70 Consummation and Construction of the Contract CHAPTER IV General Principles — Continued 87 Representations and Concealments CHAPTER V General Principles— Continued 99 Warranties CHAPTER VI General Principles — Continued 132 Nature of Waiver and Estoppel CHAPTER VII General Principles — Continued 139 Doctrine of Waiver and Estoppel Further Illustrated V VI CONTENTS CHAPTER VIII PAGE General Principles — Continued 147 Waiver and Estoppel by Agents CHAPTER IX Cenehal Principles — Continued 178 Marine Insurance— Seaworthiness, Deviation, Illegality, Total Loss, Measure of Recovery, etc. CHAPTER X General Average — Marine 198 PART II Meaning and Legal Effect of the Clauses of the Policies Statutory Forms of Fire Insurance Policies 207 CHAPTER XI Clauses of the Standard Fire Policy 213 Loss by Fire, Description of Property and Interest, Measure of Re- covery, Option to Rebuild, Divisibility of Contract, Fraud, etc. CHAPTER XII Clauses of the Standard Fire Policy — Continued 228 Other Insurance, Cessation of Operations, Increase of Hazard, Uncon- ditional Oumership, Waiver by Omitting to Make Inquiry, etc. CHAPTER XIII Clauses of the Standard Fire Policy — Continued 239 Alienation, Prohibited Articles, Vacancy, Excepted Causes, etc. CHAPTER XIV Clauses of the Standard Fire Policy — Continued 269 Cancellation, Mortgagee Clauses, etc. CHAPTER XV Clauses of the Standard Fire Policy — Concluded 267 Service of Proofs, Magistrate's Certificate, Examination Under Oath, Appraisal, Contribution, Limitation of Time to Sue, etc. CONTENTS Vll CHAPTER XVI PAOE Life Insurance Policy 275 CHAPTER XVII Life Insurance Policy — Concluded 288 CHAPTER XVIII Accident Insurance Policy 311 CHAPTER XIX Marine Insurance Policy 335 CHAPTER XX Marine Insurance Policy — Concluded M2 CHAPTER XXI Guarantee, and Liability Insurance .■ 35S Appendix 361 Forms, and Material Relating to Adjustments Index 373 SUPPLEMENT Condensed Cases without Decisions 381 TABLE OF CASES fin addition to the cases reprinted in the text this table includes with n prefixed to the page number the cases condensed or cited in the notes.] Page Accident Ins. Co. v. Bennett n. 307 V. Crandal 297, n. 313 Achard v. Ring n. 203 Adair v. Southern Mut. Ins. Co. n. 129. n. 232 Adams v. N. Y. Bowery Ins. Co. n. 2G9, n. 271 JEtna Life Ins. Co. v. Fallow n. 155, n. 17t> V. Fitzgerald n. 314 V. France n. 286, n. 287 V. Parker n. 57 Aitchison v. Lohre n. 350 Alabama Gold L. Ins. Co. v. Johnston 109 Albert v. Mut. L. Ins. Co n. 131 Alexander v. Germania F. Ins. (^o. n. 123 V. Parker n. G8, n. 285 V. Sun Mut. Ins. Co n. 356 Allen V. Dutchess Co. Ins. Co n. 273 V. Hartford L. Ins. Co n. 40 V. Mil. Mech. Ins. Co n. 209 Allgeyer v. Louisiana n. 17 Alsop V. Commercial Ins. Co n. 88 American .\cc. Co. v. Reigart n. 314 American Cent. Ins. Co. v. Bass. . .n. 271 American Surety Co. v. Pauly n. 359 American Union L. Ins. Co. v. Judge n. 93 Ames-Brooks Co. v. ^Etna Ins. Co. . .n. 71 Amick V. Butler n. 40 Anderson v. Fitzgerald n. 109 V. Life Ins. Co. of Va n. 68 Angior et al. v. Western Assur. Co. . . 230 Arcangelo v. Thompson n. 350 Arkansas Ins. Co. v. Luther n. 107 Arlington Mfg. Co. v. Colonial Ins. Co n. 218 V. Norwich Union F. Ins. Co. .n. 218 Armenia Ins. Co. v. Paul n. 92 Armour v. Transatlantic F. Ins. Co..n. 93 Armstrong v. Agri. Ins. Co. n. 143, n. 145, n. 265 Arnold v. Pac. Mut. Ins. Co n. 186 Asfar & Co. v. Blundoll et al 194 Ashenfelder v. Emp. Liab. Assur. Corp n. 331 Atkinson v. Gt. Western Ins. Co.. .n. 345 Atlantic Mut. L. Ins. Co. v. Gannon. n. 69 Auctil I'. Ins. Co n. 310 V. Mfg.'s Life Ins. Co 139 Ayres v. Order of United Workmen . . n. 8 Bacon v. U. S. Mut. Ace. Assoc 319 Bailey v. Interstate Cas. Co. n. 313, n. 325 Page Bainbridge v. Neilson n. 196 Baker v. Mfrs. Ins. Co n. 344 Baldwin v. Pha-nix Ins. Co n. 71 liancn^ft v. Home Ben. Assn. . . . * . .n. 287 Bank of Tarboro v. Fidelity & Dep. Co n. 359 Barnard v. Adams n. 204 Barnes v. Association n. 94 V. Heckla F. Ins. Co n. 21 ■ V. Heckla Ins. Co n. 272, n. 273 V. L. L. & G. L. Ins. Co n. 40 V. People n. 14 Barry Lunib. Co. v. Citizens' Ins. Co n. 273 Barry v. U. S. Mut. Ace. Assn n. 319 Bartling v. (Jcr. Mut. Ins. Co n. 241 Bartram v. Hopkins n. 69 Bateman v. I uniliermen's Ins. Co. .n. 272 V. Travelers' Ins. Co n. 332 Bates v. Brit. -Am. Ins. Co n. 271 V. Equi. Ins. Co n. 265 Baumgarth v. Firemen's Fund Ins. Co n. 271 Baxter v. New Eng. Ins. Co 49 Beebe v. Ohio F. Ins. Co n. 166 Beekman r. Ins. Assn n. 58 Behrens v. CJerniania F. Ins. Co 224 Belcher v. (\ipital F. Ins. Co n. 232 Bell V. Kinneer n. 285 Beiiesh V. Mill (Owners' Ins. Co n. 245 Benjamin r. Mut. R. Fund Assn.. . .n. 291 BcniiintrliotT v. .Atrri, Ins. Co n. 244 Bernajs v. V. 8. Mut. Ace. Assn.. .n. 287 Bernhard v. Rochester Ger. Ins. Co. n. 177, n. 270 Berry v. Am. Central Ins. Co n. 20 V. Ins. Co n. 142 Bertrand v. Franklin L. Ins. Co.. . .n. 120 Berwind v. Greenwich Ins. Co n. 182 Beyer r. St. Paul F. & M. Ins. Co.. n. 218 Bierman r. Ins. Co n. 160 Bigelow V. Ins. Co n. 299, n. 300 Biggar v. Rock Life Assur. Co n. 160 BiMmyer v. Ins. Co n. 271 Birkley v. Pr(>sgrave n. 203 Bishop V. Pentland n. 42 Black V. Travelers' Ins. Co n. 287 Blackburn r. Haslam n. 89 1'. \'igors n. 89 Blackhur.-^t r. Cockell 113 Blackstone v. Alemannia F. Ins. Co. n. 273 r. Standard, etc., Ins. Co n. 313 TABLE OF CASES Page Blasser v. Ins. Co n. 66 Blood V. Howard F. Ins. Co u. 123 Blower r. Gt. W. R. Co n. 354 Boak Fish Co. v. Manchester F. Assur. Co n. 217 Board of Education v. Alliance Ins. Co n. 258 Bobbitt V. L. & L. & G. Ins. Co n. 109 Borrodaile v. Hunter n. 299 Boruzweski i'. Ins. Co n. 144 Boston Ins. Co. v. Globe Fire Ins. Co. n. 40 Boudrett v. Heutigg n. 195 Boughnian v. Camden Mfg. Co. . . . n. 244 Bouillon V. Lupton n. 187 Boulton V. Houlder Bros n. 145 Bound Brook Fire Ins. Co. v. Nelson n. 45 Box V. Lanier n. 307 Boyd V. Insurance Co 142 1'. Miss. Home Ins. Co n. 218 V. Thuringia Ins. Co. . .n. 264, n. 265 Boyden v. Mass. Masonic L. Assn. . n. 286 Bradie v. Maryland Ins. Co n. 195 Bradley v. Ins. Co n. 307 o.'Mut. Ben. L. Ins. Co n. 307 Bradshuw v. Mut. Life Ins. Co n. 09 V. Agri. Ins. Co n. 269 Breeyear v. Rockingham Far. M. F. I. Co n. 265 Brickell V. Atlas Assur. Co n. 244 Brighton Beach Race Asso. i'. Home Ins. Co 241 Brink v. Hanover F. Ins. Co n. 137 V. Guar. Mut. Ace. Assn n. 287 Brit.-Am. Ins. Co. v. Wilson n. 71 Britton v. Supreme Council n. 285 B. Roth Tool Co. V. New Amsterdam Cas. Co n. 359 Brown v. St. Nicholas Ins. Co. n. 256, n. 350 Browning v. Home Ins. Co n. 123 Bryce v. Lorrilard F. Ins. Co n. 218 Buck V. Chesapeake Ins. Co n. 89 V. PhfX'uix Ins. Co n. 113 Burbage v. Windley n. 32 Burgess v. Equi. Mar. Ins. Co. n. 183, n. 186 Burkhard v. Travelers' Ins. Co 328 Burleigh v. Gebhard F. Ins. Co 115 Burt V. Union Cent. L. Ins. Co n. 307 Busk V. Royal Exc. A.ssur. Co n. 42 Butero v. Travelers' Ace. Ins. Co.. .n. 326 Butler V. Grand Lodge n. 290 V. Michigan Mut. L. Ins. Co. .n. 160 V. Wildman n. 203 Cady V. Fidelity & Caa. Co. n. 359, n. 303 Cahen v. Ins. Co n. 273 California Ins. Co. v. Union Com- press Co n. 26. n. 42, n. 272 Calkins ». Angell n. 291 Campbell V. Fid. & Cas. Co n. 332 V. .Supreme Conclave n. 68 Canada Sug. Ref. Co. v. Ins. Co. . . .n. 196 Cannon v. Farmer.^' Mut. Ins. Co. .n. 244 Capital Citv Mut. F. Ins. Co. v. Boggs n. 291 Capital Fire Ins. Co. v. King 99 V. Montgomery n. 161 Carey v. Home Ins. Co n. 21 Cargill V. Millers' Ins. Co n. 217 Carlston v. St. Paul F. & Mar. Ins. Co n. 270 Carpenter v. Centennial Mut. L. Assn n. 107 V. Ins. Co n. 264 V. Prov. Wash. Ins. Co. n. 40, n. 44 V. U. S. Life Ins. Co n. 29 CarroUton Fur. Co. v. Am. Credit Co n. 90 Carson v. Jersey City F. Ins. Co. . .n. 126 — — - V. Mar. Ins. Co n. 197 V. Vicksburg Bank n. 285 Carter v. Boehm n. 88, n. 89 Casler v. Conn. Mut. L. Ins. Co. . . . n. 287 Cassimus v. Scottish U. & N. Ins. Co n. 142 Castellain 1). Preston n. 18, 45, n. 62 Castner 2). Farmers' Mut. Ins. Co..n. 145 Central Nat. Bk. v. Hume n. 29, n. 68, n. 69 Chadsey v. Guion n. 190 Chainless Cycle Co. v. Security Ins. Co n. 269 Chandler v. Ins. Co n. 272 Chapman v. Pole 222 ■ • V. Rockford Ins. Co. . . n. 219, n. 270 Chase v. Hamilton Ins. Co n. 123 Cheevis v. J. H. Anders, Admr 36 Chicago R. Co. v. Pullman Car Co. . .n. 53 Chippewa L. Co. v. Phoenix Ins. Co. n. 269 Chismore v. Anchor F. Ins. Co n. 165 Christenson v. Fidelity Ins. Co n. 265 Cincinnati Ins. Co. v. Dufiield n. 356. n. 196 Citizens' Ins. Co. v. Doll n. 245 City of N. Y. V. Brooklyn F. Ins. Co. n. 21 City of St. Jo.seph v. Ry. Co n. 359 Claflin V. Commonwealth Ins. Co. . n. 269 Clapp V. Mass. Ben. Assoc n. 286 Clark V. Ins. Co n. 91, n. 93 V. Union Mut. Ins. Co n. 90 Clarke v. Equi. L. Assur. Soc n. 299 Cleaver v. Mut. Reserve Fund Assn. n. 68 Clement v. Ins. Co n. 310 Cleveland Oil Co. v. Norwich Ins. Co n. 71 Cline V. Western Assur. Co n. 40 Clinton v. Norfolk Mut. F. Ins. Co. n. 40, n. 241 Clover V. Greenwich Ins. Co n. 219 Cluff V. Mut. Ben. L. Ins. Co n 307 Coe V. Wash. F. & M. Ins. Co 78 Cogswell V. Chubb 104 Cohen v. Mut. L. Ins. Co n. 107 Cohn V. Virginia F. & M. Ins. Co. . . .n. 23 Coles V. N. Y. Cas. Co n 322, n. 326 Collins V. Bankers' Ace. Ins. Co.. . .n. 331 V. Met. L. Ins. Co n. 307 V. St. Paul F. & Mar. Ins. Co. . . 232 Collinsville Sav. Soc. v. Boston Ins. Co n. 265 Columbian Ins. Co. v. Ashby 199 V. Catlett n. 187 V Lawrence n 88 Commercial F. Ins. Co. v. Allen. . .n. 219 V. Morris n. 71 Commercial Mut. Ins. v. Union Mut. Ins. Co n. 272 Commonwealth v. Eq. Ben. Assn. . . . n. 7 V. Prov. Bicycle Assn n. 7 TABLE OF CASES XI Page Commonwealth v. Roswcll n. 17 Concordia V. Ins. Co. v. Hcffron. . . .n 71 Conn. V. Ins. Co. v. Buchanan. . . n. 138 V. Curnahan n. 2G9 V. Cohen n. 270 V. Tilloy n. 253 Conn. Mut. Life Ins. Co. » Schaefer n. 40 Conal. Houl Kst. Co. v. Cashow. . . .n. 273 Continental ("as. Co. v. Colvin. . . .n. 31H ■ V. Jcnnin&s. , n. 332 .. Wade n. 318 Continental F. Ins. Co. v. Bnoks n. IGl, n 17G Continental Ins. Co. v. Carrett. . . .n. 270 V. Munns n. G6, n. 245 I!. Whittuker n. 2G9 Convis V Ins. CJo n. 58 Conway v. Supreme Council C. K. A. n. G9 Cooper V. Mass. Mut. L. In.s. Co. . . n. 299 Corkey v. Security Ins. Co n. 272 Corley v. Travelers' Protcc. Assn. . . n. 327 Cornwall v. Frat. Ace. Assn n. 332 Cory V. Boylston F. & M. Ins. Co..n. 354 Cottingham v. Ins. Co n. 244 Cotton ti. Fid. & Cas. Co n. 287 Cotton States L. Ins. Co. v. Scurry n. 155 Couch V. Farmers' Ins. Co n. 252 Covenant Mut. L. Assn. v. Kent- ner n. 292 Coyle V. Ken. Grangers' Mut. Ben. L. Soc n. 291 Cozine v. Grimes n. G9 Cravens v. N. Y. L. Ins. Co n. 291 Creed v. Sun Fire Office n. 21 Crickelair v. Ins. Co "• U"^ Cromie v. Ky., etc., Ins. Co n. 272 Cronin v. Supreme Council n. 292 V. Vermont Life Ins. Co 30 Crook V. N. Y. L. Ins. Co n. 290 Cross V. Nat. F. Ins. Co n. 91 Crotty V. Union Mut. Ins. Co. n. 40 Cummings v. Cheshire Co. Mut. F. Ins. Co n. 218 Cummins v. German-Am. Ins. Co..n. 219 Cushman v. U. S. Life Ins. Co. n. 109, 280 D'Aguilar v. Tobin n. 187 Daniels v. Equi. F. Ins. Co n. 232 V. Hudson River F. Ins. Co. n. 91, n. 95 Darrell v. Tibbits n. 55 Davidson v. Burnand n. 41- V. German Ins. Co n. 2tJ4 V. Hawkeye Ins. Co n. 244 Davis I). Ins. Co n. 258 V. New Eng. F. Ins. Co n. 40 V. Supreme Council n. G8 Day I'. Conn. G. Life Ins. Co n. 28G Dedercr v. Delaware Ins. Co n. 345 De Frece v. Nat. Life Ins. Co "■ ^% De Grove v. Met. Ins. Co n. 83 De Hart v. Compania, etc ^' 'irJ Delaware Ins. Co. v. Greer n. 205 Deming v. Merchants' Cotton, etc., Co ^-42 Denniston v. Lillie V^"" ^^ Des Moines Ice Co. v. Niagara F. Ins. Co n.232 Dettratt v. Kestner n. 291 Page Devitt V. Prov. Wash. Ins. Co. . 186, n. 190 Dewees v. Manhattan Ins. Co 1G7 Dick V. Franklin Fire Ins. Co n. 45 Dilleber v. Home L. Ins. Co n. 126 Dixon V. Sasler n. 42. 178 Dohson V. Hartford F. Ins. Co n. 137 DoUutT V. Phu'nix Ins. Co 226 Donald V. C, B. . Phaniix Ins. Co 263 Scott I'. Security F. Ins. Co n. 219 r. Thompson n. 187 Scottish U. & N. Ins. Co. v. En- campment Smelting Co n. 174 Scripture i-. Lowell Mut. F. Ins. Co. n. 254 Scull r. .Etna L. Ins. Co n. 285 Seaton v. Heath n. 87 Security L. Ins. Co. v. Prewitt n. 139 Seidel v. Equi. L. .\ssur. Soc n. 297 Senor r. West. Millers' Ins. Co n. 265 Sewell V. Underbill n. 47 Shader v. Assur. Co n. 326 Shadgett v. Phillips & Crew Co n. 62 Page Shanberg v. Fid. & Cae. Co n. 316 Sharpless v. Ins. Co n. 218 Shea V. Mass. Ben. Assn n. 291 Shipman v. Home Circle n. 68 vSilloway v. Neptune Ins. Co n. 356 .Simmons v. West. Travelers' Assn. n. 319 Skinner Shipbldg. Co. v. Houghton n. 244 Slafter v. Ins. Co n. 225 Smith V. Aitnsi L. Ins. Co n. 332 V. German Ins. Co n. 250 V. Mech. & Trad. F. Ins. Co.. n. 123 V. Scott 41 V. Supreme Tent n. 285 & Wallace Co. v. Prus. Nat. Ins. Co n. 71 Sneed v. Brit.-Am. Ins. Co n. 107 Snow V. Carr n. 26 V. Merchants' Mar. Ins. Co. . . .n. 95 Snowden v. Guion n. 4, n. 6 Snyder v. Commercial Ins. Co n. 264 V. Farmers' Ins. & Loan Co.. . . 107 V. Mut. L. Ins. Co n. 287 Soelberg v. West. Assur. Co. n. 195, n. 196, n. 356 .Southard v. Minn., etc., R. Co n. 57 Southern F. Ins. Co. i'. Knight n. 130, n. 273 Southern Ins. Co. v. Estes n. 91 V. Knight n. 269 Spinetti v. Atlas S. Co n. 345 Springfield, etc., Co. v. Traders' Ins. Co n. 176 Springfield F. & M. Ins. Co. r. Payne n. 271 S. S. Balmoral Co. v. Marten n. 203 Standard L. & Ace. Co. v. Langston n. 333 V. Martin n. 287 w. Sale n. 287 Standard Leather Co. v. Ins. Co. . . . n. 264 Standard Sew. Mach. Co. r. Royal Ins. Co n. 219 Starling!'. Supreme Council n. 10 Starr v. .^tna L. Ins. Co n. 315 State V. Alley n. 7 V. Fed. Investment Co n. 28 V. Hogan 3 V. Pittsburg n. 7 V. Stone n. 7 State Ins. Co. r. Taylor n. 218 Steen v. Niagara In.s. Co n. 245 Steinbach v. Diopenbrock n. 40 Steinnmn v. Angier Line n. 345 Stenmier v. Scottish U. Ins. Co n. 271 Stenzel !'. Penn. F. Ins. Co n. 218 Stephenson v. Ins. Co n. 272 Sternaman r. Mut. L. Ins. Co n. 160 Stevens v. Conti. Cas. Co n. 326 Stockton, etc., Wks. v. Glens Falls Ins. Co n-271 Stone V. Hawkeye Ins. Co n. 160 )'. Marine Ins. Co n. 341 St. Paul F. & M. Ins. Co. v. Owens .n. 269 V. Pac. Cold Stor. Co 354 Stoughton V. Gas Co n. 45 Stout V. Phoenix Ins. Co n. 270 Stranipe r. Ins. Co n. 212 Strange r. Supreme Lodge n. 285 Strauss v. Mut. R. Fund .Assoc n. 292 V. Union Cent. L. Ins. Co n. 290 Streeter v. West. Union Mut. L. Ins. Co n-300 xvm TABLE OF CASES Page Strobe v. Meyers Bros. Drug. Co. ... n. 40 Strome r. Lon. Assur. Corp n. 270 Stronge v. Supreme Lodge n. 68 Stuart r. Reliance Ins. Co n. 240 Suffolk Fire Ins. Co. et al. v. Boyden 43 Sun Fire Office v. Ayerst n. 219 Sun Lis. Office v. Mcrz n. 40 Sun Mut. Ins. Co. v. Ocean Ins. Co. n. 87, n. 88 Supreme Commandery v. Hughes ... n. 7 Supreme Council i'. Jordan n. 10 Supreme Lodge v. Beck n. 145 V. Crenshaw n. 300 V. Dickson n. 94 V. Gelbke n. 299, n. 300 V. Wellenvoss n. 7 Susquehanna Mut. F. Ins. Co. v. Staats n. 94 Sussex Co. Mut. Ins. Co. v. Wood- ruff n. 57 Sutherland v. Ins. Co n. 176 Svensden v. Wallace n. 202, n. 203 Swedish Am. Ins. Co. v. Knutson. .n. 142 Sweeny v. Franklin n. 21 Sweet V. Citizens' Mut. Relief Soc. n. 286 Syndicate Ins. Co. v. Bohn n. 264 Taber v. China Mut. Ins. Co n. 196 Tabbut V. Am. Ins. Co n. 58 Talcott V. Field n. 29 Tanenbaum v. Simon n. 40 Tasker v. Cunningham n. 186 Tate V. Building Assn n. 29 Tatham v. Burr n. 345 Taunton Co. v. Ins. Co n. 203 V. Royal Ins. Co n. 258 Taylor v. Dunbar n. 344 V. Ins. Co. of N. A n. 264 V. Security Mut. F. Ins. Co. . .n. 232 V. Supreme Lodge n. 145 Temple v. Niagara Ins. Co n. 86 Thames & Mersey Mar. Ins. Co. v. Hamilton n. 344 Thebaud v. Great West. Ins. Co n. 182 Thibert v. Supreme Lodge n. 292 Thomas v. Masons' Frat. Ace. Assn., n. 332 V. Montauk Ins. Co n. 45 Thompson v. Adams 73 V. Ins. Co n. 107 V. Knickerbocker L. Ins. Co. . .n. 142 Thomson v. Weems n. 120 Times F. Assur. Co. v. Hawke n. 219 Tisdell V. N. H. Fire Ins. Co 260 Title Guar. & Sur. Co. v. Bank of Fulton n. 73 Titus V. Glens Falls Ins. Co 143 Town.send v. Greenwich Ins. Co.. . .n. 271 Traders' Ins. Co. v. Newman n. 66 Train v. Holland Purchase Ins. Co. . n. 71 Traiser v. Com. F. E. Ace. Assn.. . .n. 359 Travelers' Ins. Co. v. Dunlap n. 326 V. McConkey n. 326 V. MeUck n. 314 V. Murray n. 314 V. Myers n. 176 V. Randolph n. 331 V. Seaver n. 307 V. Selden n. 314 Trenton Pass. Ry. Co. v. Guar. Indem. Co n. 42 Page Trinity College v. Travelers' Ins. Co. n. 18 Trippe v. Prov. Fund Soc n. 359 Tucker v. Ins. Co n. 332 Tuttle V. Travelers' Ins. Co 326 Tyler v. Ideal Ben. Assn n. 287 Tyree v. Virginia F. & M. Ins. Co.. . .n. 21 Tyrie v. Fletcher 63 Uhrig V. Williamsburgh City F. Ins. Co n. 270 Underwood, Ex'r, v. Greenwich Ins. Co n. 145 Union Assur. Soc. v. Nails n. 91 Union Cent. L. Ins. Co. v. Buxer. . .n. 68 V. Fox n. 310 V. Hollowell n. 299 Union Frat. League v. Walton n. 40 Union Ins. Co. v. Smith n. 42, n. 182 Union Mutual Ins. Co. v. Mowry. . . 140 V. Wilkinson 151 United Brethren Mut. Aid Soc. v. McDonald n. 40 V. White n. 286 United States v. Am. Tobacco Co. n. 21, n. 55 United Underwriters' Ins. Co. v. Powell n. 4 Ursula Bright v. Amsinck n. 356 U. S. Casualty Co. v. Kacer n. 68 U. S. Mut. Ace. Assn. v. Barry. . . .n. 313 V. Mueller n. 292 Uzielli V. Boston Mar. Ins. Co n. 356 Vale V. Phoenix Ins. Co 87 Vandalia Mut. Co. F. Ins. Co. t). Beasley n. 292 Vankirk v. The Citizens' Ins. Co. ... 91 Van Tassel v. Greenwich Ins. Co. of N. Y 257 Van Valkenburgh v. Amer. Pop. L. Ins. Co n. 287 Van Zandt v. Mut. Ben. Ins. Co n. 299 Vernon Ins. Co. v. Maitlen n. 270 Viele V. Germania Ins. Co n. 138 Vincent v. German Ins. Co. n. 270, n. 271 Virgin v. Marwick n. 285 Virginia-Carolina Chem. Co. v. Ins. Co n. 245 Wadsworth v. Pac. Ins. Co n. 189 Waldum v. Homstad n. 69 Walker v. Giddings n. 5 V. Maitland n. 42 Wall V. Piatt n. 57 Waring v. Ind. F. Ins. Co n. 27 Warner v. Modern Woodmen n. 285 Warnock v. Davis n. 40 Washburn, etc., Co. v. Merchants', etc., Ins. Co n. 272 Washburn & Moen Mfg. Co. v. Re- liance Mar. Ins. Co 189, n. 356 Washington Cent. Bank v. Hume. .n. 285 Washington Fire Ins. Co. v. Kelly ... n. 57 Washington Gas Co. v. Dist. of Columbia n. 360 Washington Mills Mfg. Co. v. Wey- mouth Ins. Co n. 90 Waters v. Mer. Ins. Co n. 350 TABLE OF CASES XIX Page Waukan Milling Co. v. Citizens' Mut. F. Ins. Co n. 176 Wavortrei' Sailing S. Co. v. Love. . .n. 204 Way V. Modigliani n. 186 Waynesboro Mut. F. Ins. Co. v. Creaton n. 218 Weber v. Supreme Tent n. 10 Weed V. Hamburg-Bremen Ins. Co. n. 142 Wellman v. Morse n. 203 Wells V. Calnan n. 47 Welch V. In.s. Co n. 310 Welsh V. London Assur. Corp n. 145 West V. Farmers' Mut. Ins. Co n. 217 West Branch L. Exch. v. Amer. Cent. Ins. Co n. 230 V. Columbian Ins. Co n. 186 Westchester F. Ins. Co. v. Ocean View Pleasure Pier Co. et al 106 Westenhavcr v. Ger.-Am. Ins. Co. .n. 270 Western Assur. Co. ». Decker n. 270 V. Doole n. 196 B.Hall n. 270 V. Mohlman n. 258 Western Ins. Co. v. Southwestern Transp. Co n. 42, n. 197 Westfield Cigar Co. v. Ins. Co. of No. Am n. 218 Wheaton v. China Mut. Ins. Co n. 204 V. Ins. Co n. 94 Wheeland v. Atwood n. 36 Wheeler d. Ins. Co n. 264 White ». Prudential Ins. Co n. 303 Whitfield V. ^tna L. Ins. Co n. 131 Whiting V. Birkhardt n. 265 Whorf w. Equi. Mar. Ins. Co n. 345 Wiggin V. Suffolk Ins. Co n. 42 Wilber v. Supreme Lodge n. 285 V. Williamsburgh City F. Ins. Co n. 161 Page Wilder v. Continental Cas. Co n. 161 Wildcy Cas. Co. ». Sheppard n. 145, n. 146 Wild-Rice Lumber Co. v. Royal Ins. Co n. 212 Wilkin.son v. Conn. Mut. L. Ins. Co. 283 Williams v. Shee 182 V. U. S. Mut. Ace. Assn n. 332 Wilson V. Assur. Co n. 176 V. Hakes n. 245 II. Mutual Ins. Co n. 245 Wingate v. Foster n. 183 Winne v. Niagara F. Ins. Co 84 Wolfstern v. Penn. R. Vol. Rel. Dept. n. 7 Wolverine Lumber Co. v. Palatine Ins. Co n. 217 Wood V. Hartford F. Ins. Co n. 109 V. Hartford Ins. Co .n. 109 Woodmen's Ace. Assn. v. Hamilton n. 68 Woods V. Olson n. 203 Woodside v. Globe Mar. Ins. Co.. .n. 346 Woolverton v. Fid. & Cas. Co n. 359 Worachek v. New Denmark Mut. Home F. Ins. Co 220 Worthington v. Charter Oak L. Ins. Co n. 107 Wright V. Minn. Mut. L. Ins. Co.. n. 292 V. Mut. Ben. L. Assn n. 139 V. Mut. Ben. Assoc, of Amer. . . 308 V. Supreme Comd n. 292 Wyandotte Brewing Co. v. Hartford F. Ins. Co * n. 241 Wynkoop v. Niagara F. Ins. Co.. . n. 219 Wytheville Ins. Co. v. Stultz n. 91 Yoch V. Home Mut. Ins. Co 248 Zearfoss i'. Switchmen's Union . . . . n. 303 PARTI GENERAL PRINCIPLES OF INSURANCE LAW CASES ON INSURANCE PART I GENERAL PRINCIPLES OF INSURANCE LAW CHAPTER I Introductory Nature of Insurance and Insurance Companies STATE V. HOGAN Supreme Court of North Dakota, 1899. 8 N. Dak, 301 What is a contract of insurance? ' HoGAN was arrested for transacting the business of insurance without a certificate of authority as required by State statute, violation of which was made a misdemeanor. While in the custody of the sheriff, he petitioned for a writ of habeas corpus, alleging illegal restraint. The State demurred. Hogan was an agent for the Realty Revenue Guaranty Company, organ- ized "to guaranty certain rental and produce income from lands and tene- ments." On behalf of his company he negotiated a contract with one Fergu- son. By this contract, in consideration of a payment by Ferguson of S55.00, the company agreed to purchase his entire crop of wheat and other grain at $5.00 per acre, grown during the season of 1899. It was further agreed that Ferguson was in no manner bound to sell said crop to the said company, except at his own option. Bartholomew, J. Is or is not the Realty Revenue Guaranty Company, in fact or in effect, an insurance company? If it be, then clearly the peti- * A contract, if one of insurance, is subject to certain special doctrines of the com- mon law. Moreover, in every State there is a body of statutory law governing the conduct of insurance companies and likewise many statutory provisions aflFecting the insurance contract. 4 STATE V. HOGAN [CHAP. I tioner was properly held; otherwise, he should be discharged. Our statute (sec. 4441, Rev. Codes) defines insurance as follows: "Insurance is a con- tract whereby one undertakes to indemnify another against loss, damage or liability arising from an unknown or contingent event." * Necessarily in defining insurance in a single sentence, only the most general terms can be used, and any general definition must be extended to cover the ever-changing phases in which the subject is pre-sented to the public.^ > Other definitions are given in People v. Rose, 174 111. 310, 51 N. E. 246, 44 L. R. A. 124. * Nature of Insurance. — Insurance may be described as a system for dis- tributing losses. Its principal branches are fire, life (including also accident) and marine insurance. A general fund is obtained by imposing a comparatively small contribution or premium upon the many insured who are exposed to the common hazard, out of which the few who actually suffer may be indemnified. This descrip- tion is measurably true, even of life insurance, if we regard premature death as the hazard insured against. Kinds of Policies. — The contracts, called policies, are very diversified in form and contents. Thus the term " open policy " is sometimes employed to indicate a general form of insurance frequently used where the insured is likely to efifect many successive insurances from the same company. Imperial Shale Brick Co. v. Jewett, 169 N. Y. 143, 62 N. E. 167; Snowden v. Guion, 101 N. Y. 458, 5 N. E. 322 (marine). For example, it may cover such goods, at such amounts of insurance, in such store- houses and places, and at such rates of premiums, as from time to time shall be agreed upon and indorsed on the policy or in a book attached thereto, the purpose being to obviate the necessity of executing a fresh policy for every transaction. A floating policy also is a general form of insurance, intended to cover property which cannot well be described specifically because of its fluctuating quality and location; as, for example, merchandise in freight trains, warehouses or lighters. The amount of goods covered by such a policy is ascertainable at the moment of loss only, Golde V. Whipple, 7 App. Div. 48, 39 N. Y. Supp. 964. An excess policy, usually a floater, attaches only to property or to an excess of value not covered by the specific insurance. United Underwriters' Ins. Co. v. Powell, 94 Ga. 359, 21 S. E. 565. Insur- ance is said to be in the blanket form, as contrasted with specific, when different buildings or different classes of property are insured in an aggregate amount without apportionment; for example, a policy of $5,000 on a factory plant in its entirety, including buildings, machinery and stock. While a policy of $5,000 on one of the buildings alone is called specific. A rent policy is an insurance on rents, usually, but not of necessity, in favor of the landlord. A use and occupancy policy is adapted to indemnify one in occupation of mill, factory, hotel, store, or other business premises, for loss of commercial use or earning capacity during the period after a fire and before reinstatement. The phrase "use and occupancy" being somewhat indefinite and such a policy being almost always valued, it is difficult to ascertain or define with precision the subject-matter of this class of insurance, Michael v. Prussian Nat. Ins. Co., 171 N. Y. 25, 63 N. E. 810. The contract may be said in general to be intended to furnish indemnity for loss of estimated earnings or some part thereof which would have ac- crued from the business except for the fire. It is analogous to rent insurance or in- Burance on profits, and must be carefully distinguished from insurance on buildings, or their contents. The regular old-style life policy is payable on the death of the person insured, and the payment of premiums continues annually throughout life. The limited payment policy is payable at the death of the person insured, but the payment of premiums ceases after a certain limited period, say ten, fifteen or twenty years. An endowment policy is payable at the expiration of the endowment period or upon the earlier de- cease of the insured. A regular life policy is in the nature of an investment by the CHAP. l] STATE V. HOGAN 5 What was the object of this contract and what was its legal effect? The petitioner says it was an option contract of sale of a crop. We cannot con- ceive that the farmer's primary object was to sell his crop. Ordinarily a man does not pay a premium for the privilege of selling his produce. Nor insured usually for the benefit of his family, or some member of it, while an endow- ment policy is intended as a contingent investment for his own benefit, being payable to himself if alive at the expiration of the period named, Walker v. Giddings, 103 Mich. 344, 01 N. W. 512. A term policy is one taken for a limited number of years, the policy being payable only in case of the death of the insured within that period. If he is alive at the end of the term, the insurance ceases altogether. A joint-life policy is one payable on the earliest death of two or more persons insured. A survivorship policy is one payable on the death of the survivor of two or more persons. A tontine policy is one in which it is agreed that certain accumulations or profits of the business shall be apportioned among those of the insured of a certain class surviving, at certain intervals; for example, every ten, fifteen or twenty years. Equi- table L. Assur. Soc. v. Winne (Ky., 1910), 126 S. W. 153; N. Y. Life Ins. Co. v. Miller, 22 Ky. L. Rep. 230, 56 S. W. 975. The lapsed policies of the class forfeit their ^e8e^ve and dividends to the survivors. A tontine dividend is the distribution of such profits among the survivors who are entitled to it after the given period. A semi-tontine policy is one in which it is agreed that the dividends only shall be apportioned among the survivors of the class, Everson v. Equitable Life Assur. Co., 68 Fed. 258; Langdon V. Northwestern Mut. L. Ins. Co. (1910), 199 N. Y. 188. In marine insurance a time policy is one in which the duration of the risk is defined at the beginning and at the end, by fixed dates, as, for example, from noon of Janu- ary 1, 1907, until noon of January 1, 1908. A voyage policy is one in which, irrespective of time, the duration of the risk is established by geographical termini ; as, for example, from New York to Liverpool. To meet modern demands of commerce a marine policy is sometimes altered to include certain specified risks or all kinds of risks by land and by water between certain termini, Schloss Bros. v. Stevens (1906), 2 K. B. 665. Reinsurance. — A feature of insurance business which has developed into great magnitude is the practice of reinsurance. Where a company finds itself in embarrassed circumstances, or for any reason desires to limit its liability in certain classes of risks, or in certain localities, or under a particular policy, it secures, if possible, reinsurance from one or more companies, Ins. Co. of N. A. v. Hibernia Ins. Co., 140 U. S. 565, 11 S. Ct. 909, 35 L. Ed. 517. The entire business of an insurance company is not infrequently absorbed in this way by some stronger competitor. The owner of an important risk, for example, a warehouseman or common carrier, often prefers to deal exclusively with one insurance company of high standing, rather than with many companies. This course of procedure greatly simplifies for a railway company and other classes of assured the serious business of adjusting numerous losses. Accord- ingly, one policy may be obtained by the assured from the company of his choice, to the full amount required, sometimes millions of dollars. But every prudent insurance company must limit its liability upon any one risk, and limits are also imposed by statute. The company issuing the original policy, called the straight or direct insur- ance, must therefore assume the burden of dividing up the excess of liability, if large, among many other companies, and this it docs by taking out from them in its turn policies of reinsurance, each for some share of this liability. The term "reinsurance" must not be confounded with the phrase "renewal of insurance," which means the continuance of insurance between the same parties for a further term. Thus the Illinois court says: "A renewal of a policy is in effect a new contract of insurance, and, unless otherwise expressed, on the same terms and conditions as were contained in the original policy," Hartford Fire Ins. Co. v. Walsh, 54 III. 164, 167. Reinsurance must also be distinguished from "double insurance," which refers to two or more existing policies on the same interest, Prov. Waah. F. Ins. Co. v. Atlanta, etc., Ine. Co.. 166 Fed. 548. 6 STATE V. HOGAN [CHAP. I was it the primary purpose of the company to purchase the crop. From the very terms of the contract it is certain that it must lose money upon all the grain it buys under the contract. Moreover, grain is bought and sold by the bushel, and not by the acre. We think the contract was the identical con- tract which the articles of incorporation authorize the company to enter into. It was a contract by which the guarantor undertook to guaranty or assure to the farmer a certain revenue from his land. How did the parties proceed to execute such a contract? It was well known to both parties that an acre of land in this State, farmed as the farmer contracts to farm it in this case will produce a crop of a value far in excess of five dollars, and the value can be reduced to or below that figure only by the happening of one or more contingencies hereinbefore mentioned. But such contingencies may happen, and to be absolutely assured that his land will yield him at least five dollars per acre, the farmer is willing to pay something; and the corporation expect- ing to do business over a wide scope of country, believes that it can with profit to itself assure the farmer a crop worth five dollars per acre for the compensation which the farmer is willing to pay therefor. But what is this in substance except a contract to indemnify the farmer against loss arising from the happening of a contingent event, and that is our statutory defini- tion of insurance. The farmer was seeking and paying for protection, and the corporation was seeking to make a profit by extending this protection for the consideration paid by the farmer. True, it is not all loss that is in- sured against. The contingencies named may reduce the value of a crop from twenty dollars per acre until, in the judgment of the owner, it barely exceeds five dollars per acre, and there is no liability under the contract. It is the loss below five dollars per acre that is insured against. The effect of the contract is very like that of a valued policy of insurance.^ When the contingency happens that creates a liability under the policy, then the full amount of the policy must be paid, but the insured is entitled to all the salvage. It is doubtless true that there has been a studied effort to keep this cor- poration outside the operation of our insurance laws; ^ but the purpose and effects of its contracts are too clear to admit of doubt. They exactly meet the requirements of an insurance contract, and the corporation for which petitioner acted as agent is an insurance company. The act charged in the ' A valued policy is one which specifies an agreed value of the subject-matter in- sured; for example, a policy of $5,000 on "the ship Argus, valued at $10,000." In case of total loss of property, such a valuation, if not dishonest, furnishes the basis of adjustment, Patapsco Ins. Co. v. Biscoe, 7 Gill & J. 293, 28 Am. Dec. 219; Snowden p. Guion, 101 N. Y. 458, 5 N. E. 322. An unvalued, sometimes called an open policy, is one in which the value of the subject insured is not specified, but is left to be ascer- tained in case of loss, Ins. Co. v. Butler, 38 Ohio St. 128. Policies on lives are akin to valued policies. Policies on ships are usually valued. Fire policies on contents of buildings are usually unvalued and, in the absence of valued policy laws, so are fire policies on buildings. * Every State has its insurance department to which insurance companies au- thorized to do business within the State must render stated reports under oath, and which also has a visitorial power over the insurance companies. CHAP. l] STATE V. HOGAN 7 complaint is a crime under our statutes, and there is reasonable and probable cause to believe the petitioner guilty of committing the act. He is therefore properly held. The writ issued in this case is discharged, and petitioner remanded to custody of the sheriff of Foster County. All concur.^ * An American Lloyd's is an insurance company, State v. Stone, 118 Mo. 388, 24 8. W. 164, 25 L. R. A. 243, 40 Am. St. R. 388. A scheme for mutual protection against fire losses by a lumbermen's association was held to be insurance, Whitfield, C. J., dissenting. State v. Alley (Miss., 1910), 51 So. 467 (many cases cited). An association issuing a contract to its members in consideration of a specified annual payment to re- pair or replace bicycles injured or destroyed by accident, or stolen, was held not to be an insurance company. Commonwealth v. Provident Bicycle Assn., 178 Pa. St. 636, 36 Atl. 197, 36 L. R. A. 589. The relief department of railway companies organized to collect and manage a common fund from the wages of the employes and to make payments from it upon the death or injury of members, is held under the statutes of certain States not to be an insurance company, Donald v. C, B. & Q. R. Co., 93 la. 284. 61 N. W. 971, 33 L. R. A. 496; State v. Pittsburg, etc., Ry. Co., 68 Ohio St. 9. 67 N. E. 93, 64 L. R. A. 405, 96 Am. St. R. 635. An opposite conclusion is arrived at under the phraseology of other statutes, Wolfstern v. Penn. R. Vol. Relief Department (N. J.. 1909). 74 Atl. 533. Fraternal beneficiary associations. Orders, Knights and eimUar organizations are in most States classed as insurance companies. Modern Woodmen v. Coleman, 68 Neb. 660 (1903), 94 N. W. 814. 96 N. W. 154; but not so in all States, Commonwealth v. Eq. Ben. Assn., 137 Pa. St. 412, 18 Atl. 1112 (benevolent associations) . The constitution, by-laws and certificate of such societies together constitute the contract. People v. Grand Lodge, 156 N. Y. 533. 51 N. E. 299. A Federal court says, "They did not issue policies of insurance, strictly speaking, but the benefit certificate is a contract of insurance none the less," Supreme Lodge v. Wellenvoss, 119 Fed. 671, 674. 66 C. C. A. 287. Such fraternal beneficiary organizations usually have a dual nature. In the first place, they are so-'ial clubs with a lodge system. Supreme Com- mandery v. Hughes, 114 Ky. 175, 70 S. W. 405; and, in the second place, they furnish life insurance or similar benefits. To procure a fund with which to pay death or loss claims, assessments are levied upon the members, Lawler v. Murphy, 58 Conn. 294, 20 Atl. 457, 8 L. R. A. 113. Some of the regular life insurance companies issue what is known as industrial insurance for the benefit more especially of the working classes, the policies being for comparatively small amounts, usually with weekly premiums, Reiss V. Prudential Life Ins. Co., 176 N. Y. 178, 180, 68 N. E. 252, 98 Am. St. R. 966. 8 AYRES V. ORDER OF UNITED WORKMEN [CHAP. i AYRES V. ORDER OF UNITED WORKMEN Court of Appeals of New York, 1907. 188 N. Y. 280 Subsequent changes in the by-laws as affecting the terms of the insurance contract. Action on a certificate of a beneficiary society. Defense: that the insured member engaged in the business of selling liq- uors in violation of a by-law adopted subsequent to the issuance of his cer- tificate. In March, 1885, the defendant issued a certificate to Emory D. Fuller, entitling him "to all the privileges of membership and to participate in the beneficiary fund of the Order to the amount of $2,000." The certificate further stated that it was "issued upon the express condition that he shall in every particular comply with all the laws, rules and requirements." In his application for membership Mr. Fuller agreed "to strictly comply with the constitution, laws and regulations which are, or may hereafter be enacted." The appUcation gave his occupation as "moulder." The cer- tificate was payable to Walter H. Ayres, the plaintiff. When Mr. Fuller joined the order there was no restriction as to occupation and any member might engage in selling liquor either at wholesale or retail. Between 1898 and 1902 the defendant adopted the following by-law: "Any member of the Order who shall, after March 1st, 1897, have entered into the business or occupation of selling, by retail, intoxicating liquor as a beverage, shall stand suspended from any and all rights to participate in the beneficiary fund of the Order and his certificate shall become null and void." January 1st, 1904, Fuller began to carry on a hotel at Weedsport, New York, in connection with a copartner, and the firm employed a bartender who sold intoxicating liquors in the usual way over the bar. Said hotel business was continued by the firm under licenses issued pursuant to State and Federal statutes until June 28th, 1904, when Mr. Fuller died. Vann, J. This case cannot be distinguished in principle from a long line of cases decided by this court. It is well established by these authorities "that a general power reserved either by statute or by the constitution of a society to amend its by-laws does not authorize an amendment impairing the vested rights of members." An amendment of by-laws which form part of a contract is an amendment of the contract itself, and when such a power is reserved in general terms the parties do not mean, as the courts hold, that the contract is subject to change in any essential particular at the election of the one in whose favor the reser- vation is made. It would be not reasonable and hence not within their con- templation, at least in the absence of stipulations clearly specifying the sub- jects to be affected, that one party should have the right to make a radical CHAP. l] AYRES V. ORDER OF UNITED WORKMEN 9 change in the contract, or one that would reduce its pecuniary value to the other. A contract which authorizes one party to change it in any respect that he chooses would in effect be binding upon the other party only and would leave him at the mercy of the former, and we have said that human language is not strong enough to place a person in that situation. (Industrial & General Trust, Limited, v. Tod, 180 N. Y. 215, 225.) While the defendant may doubtless so amend its by-laws, for instance, as to make reasonable changes in the methods of administration, the manner of conducting its business and the like, no change can be made which will de- prive a member of a substantial right conferred expressly or impliedly by the contract itself. That is beyond the power of the legislature as well as the association, for the obligation of every contract is protected from State interference by the Federal Constitution. (Art. I, §10.) The defendant promised by the contract which it made with the assured to pay to the beneficiary designated by him upon his death the sum of §2,000. The obligation of that contract was not limited by the occupation of the assured, for in the absence of any restriction made by the parties he had an absolute right to engage in any lawful business that he might select. After this contract had been in force for more than twelve years and he had paid all the assessments as they became due and had complied with all the rules and regulations of the defendant, an attempt was made to restrict him in the choice of an avocation by amending the by-laws to that effect without his consent. When he had been insured for over nineteen years and had reached an age when other insurance could not be procured without a decided increase in cost, and perhaps not at all, he engaged in a new business re- quiring less strength and activity and died within a few months thereafter. He continued to pay his dues after he made the change, and, as the trial court expressly found, the duly authorized officer of the defendant knew when he received such dues that the insured "was engaged in the hotel business." The amended b5^-law, if enforced according to its terms, would deprive him of a right which he acquired by contract nearly twenty years before, and which he had preserved by paying to the defendant substantial sums of money every year during that ueriod. The reservation of a general power to amend the by-laws, without reserving the specific right to so amend them as to restrict the occupation, did not permit an amendment in that respect, and the attempt made without the consent of the assured was be- yond the power of the defendant and absolutely void as to him. The effort was not to reduce the amount of insurance, but to destroy it altogether, unless the assured would conform to a by-law passed in violation of a vested right, for the privilege, allowed because not forbidden, of engag- ing in any lawful business was a vested right. It was an immediate right, open to enjoyment at all times during the existence of the contract, which the insured paid for when he joined the association, as well as every time he met an assessment. It was a natural right, of which he could not be de- prived without his consent, and he never consented. It was a right which had pecuniary value, for it left the door open to change of employment by 10 PAIN V. SOC. ST. JEAN BAPTISTE [CHAP. I which more money could be made. The assured was not obliged to continue at manual labor all his life, but when he had acquired capital enough to go into business and employ others to work for him, he had the right to do so, and the right was obviously of such value as to constitute a vested right, within the meaning of that term as known to the law. We think that the amendment as made was without effect upon the con- tract, and that the promise of the defendant to pay the sum of $2,000, was in full force at the death of the assured. While a different rule prevails in some States, the law in the State where the defendant was organized does not permit, as to existing contracts, such an amendment of its by-laws as it now pleads to defeat this action. The judgment appealed from should be affirmed, with costs. CuLLEN, Ch. J., Gray, Werner, Willard Bartlett and Hiscock, JJ., concur; Chase, J., not sitting. Judgment affirmed.^ PAIN V. SOCIETE ST. JEAN BAPTISTE Supreme Judicial Court of Massachusetts, 1899. 172 Mass. 319 Subseqtient changes in the by-laws as affecting the terms of the insurance contract. Action on a certificate of a beneficiary society. Defense based upon the subsequent amendment of the by-laws. Hammond, J. The defendant society is a beneficiary organization, char- tered in 1884, under Pub. Sts., c. 115, and ever since its incorporation the plaintiff has been a member in good standing. In June, 1890, the plaintiff by reason of sickness became unable to work, and has so continued to the present time, and during that time he has received benefits at the rate of 85.00 per week for thirteen weeks of each year, down to July 7, 1896; and since the latter date he has received benefits at the rate of only $1.00 per » Peterson v. Gibson, 191 111. 365. 61 N. E. 127, 64 L. R. A. 836, 85 Am. St. R. 263; Starling v. Supreme Council, 108 Mich. 440, 66 N. W. 340, 62 Am. St. R. 709 (defini- tion of "total disability" changed by subsequent by-law); Hall v. Western Trav. Ace. Assn., 69 Neb. 601, 96 N. W. 170. The Iowa court gives an elaborate presen- tation of authorities bearing on different aspects of this subject. Fort v. Iowa Legion (la., 1909), 123 N. W. 224. It has repeatedly been held that it is not permissible for the company to change the amount payable from $5,000 to $2,000, Supreme Council v. Jordan, 117 Ga. 808, 45 S. E. 33; Porter v. American Legion, 183 Mass. 326, 67 N. E. 238; Langdon V. Supreme Council, 174 N. Y. 266, 66 N. E. 932. It is clear that the contract cannot be changed by subsequent amendment of constitution or by-laws in those cases where no such right is expressly reserved, Weber v. Supreme Tent, 172 N. Y. 490, 65 N. E. 258, 92 Am. St. R. 753. CHAP. l] PAIN V. SOC. ST. JEAN BAPTISTE 11 week for thirteen weeks of each year. This suit is brought to recover the additional $4.00 per week for a period of nine weeks. Whether the plaintiff can recover depends upon the construction and ef- fect of the amendment of the by-laws which was passed on July 7, 1896. If it is applicable to him, he cannot recover, if not, he can. The by-law of 1893, which, so far as the plaintiff is concerned, was not materially different from that of 1889, under which the plaintiff was receiv- ing aid at the time of the amendment in question, was as follows: "Every member who shall belong to the society for twelve consecutive months, who has paid his dues, contributions, fines or other sums assessed by vote or by- law of the society, shall have a right to SS.OO per week if he becomes unable to work, in consequence of sickness or accident, during a period not exceed- ing thirteen weeks in each year, beginning from the date of the first applica- tion for benefits." And the amendment of July 7, 1896, was as follows: "Provided that when a member has received thirty-nine weeks of sick bene- fits, or one hundred ninety-five dollars, for the same or a different period of disability, then he shall not hereafter receive more than one dollar per week, instead of five dollars, for thirteen weeks of each year, if his sickness shall so long continue; and that during a period of five years, aggregating sixty-five dollars of benefits. Each year reckons from the date of the first application for benefits. If after that period of five years he is still unable to work, he is then entitled to five dollars per week for thirteen weeks of each year for three years, as at first. This partial suspension of benefits is established so as to allow as much as possible all the members to sliare more equitably in the disability funds." The plaintiff concedes that the amendment was duly passed, but in hi.s brief contends, in the first place, that " the defendant society cannot by such an amendment, under the circumstances of this cas(>, .so change its obligation to the plaintiff," because his "originally contingent right to receive benefits as stated became vested upon the happening of the contingency, i. e., his dis- ability to work, June 7, 1890, and from that time no act of the society, by amendment to its by-laws, could divest him of that right"; and in the second place, that even if his rights "were not vested and could be taken away by amendment of the bj'-laws, such amendment could have no retroactive force," and that "to hold that payments of benefits made before the adoption of the amendment can be applied to benefits accruing under the amendment will make such amendment retroactive in force, and will i)lace the plaintiff in a worse position than the other members of the society at the time of the adoj)- tion of the amendment." The plaintiff's contention, more briefly expressed, is that the defendant had no power to amend its by-laws so as to affect his rights to future bene- fits under a disability then existing, and even if it has such power this amend- ment fairly construed does not affect such rights. The rights of the plaintilT are determined by the nature of the contract between him and the society, as interpreted by the by-laws under which it was made and in the light of the surrounding circumstances. The general purpose of the society was to give 12 PAIN V. SOC. ST. JEAN BAPTISTE [CHAP. I pecuniary aid to its sick or disabled, and in case of the death of a member to provide for the reUef of his family. The fund for this purpose was to be raised by monthly dues, and, in case of death, by an assessment upon the survivors. Of course the amount of benefits which the society, with due regard to the interest of the sick as well as that of the other members, could properly pay depended upon many circumstances, such as the number of its members, the actual or relative number of the sick, the promptness with which dues were paid, and others of similar nature; and, as these various circumstances might and probably would change from time to time, it might be regarded, not only as prudent, but as necessary for the successful management of the society, that there should exist the power to make such corresponding changes in the by-laws as the circumstances for the time being seem to require. The power to amend the by-laws was reserved, and there is no limit to the reservation. After certain preliminary proceedings, its by-laws could be amended at any time and in any reasonable way. All this the plaintiff well knew from the first, and he was present at the meeting of July 7, 1896, and spoke against the adoption of the amendment. There being a power of amendment reserved, the contract between the plaintiff and the society was liable to changes with regard to future bene- fits to which a disabled member might be entitled, as well as in other matters, and the plaintiff had agreed that these changes duly made in compliance with the rules of the society should be binding upon him, not as a new con- tract, but as a part of the old contract and under its provisions. But the plaintiff contends that there is an implied limitation to this power of amendment, that it cannot be made so as to deprive him of a vested right, and that his right to the benefit became fixed by his disability, and can never be changed during that disability. But how does the right become fixed? There is no such restriction contained in the words expressing the power of amendment. To thus restrict the power would be to divide the society into two classes, one comprising those like the plaintiff, who could not be af- fected by any reduction of future benefits, and the second comprising the well members, who would be affected by such reduction. And no matter how many of these preferred pensioners there might be, this society, whose right to graduate payment according to varying circumstances has been reserved so carefully, and in language so general and comprehensive, and which is so plainly necessary to the purposes for which it was incorporated, is powerless to do what might be necessary even to its own existence. There can be no right to future benefits vested in one member more than in an- other. The right of a sick member to future benefits which becomes vested in the plaintiff at the time of the disability is not a right to receive so long as such disability continues the future benefits provided by the by-law exist- ing at the time the disability begins, but simply a right to receive them subject to such changes as may be made by the society, and it is no violation of such a vested right to make the changes at any time. Such a change is not a repudiation of the terms of the contract, but on the contrary is in accordance with them. CHAP. l] NUTTING V. MASSACHUSETTS 13 As was said in Smith v. Galloway (1898), 1 Q. B. 71, 77, "Where ... the original contract . . . provides for alteration of the rules, he is bound by any subsequent alteration that may be within the power of alteration, what- ever the extent of that alteration may be." Such an interpretation of the contract seems to be in accordance with the provision for amendments, and to be the only one reasonably calculated to subserve the interests of all, and to enable the society to accomplish the objects for which it was incor- porated. We are aware that the doctrine herein enunciated is inconsistent with some decisions in other States, but we are satisfied that it is sustained by the bet- ter reasoning and the weight of authority. Of course, no amendment could change the amount of any benefit which under any by-law has passed from a possible to that of a future benefit and has become a deb!. The right becomes vested absolutely as the time expires for which the benefit is granted. As to the second contention of the plaintiff, it is sufficient to say that we think the by-law applies to the case of the plaintiff. The language is broad enough to cover his case. The plaintiff had received more than "thirty- nine weeks of sick benefits," and it was provided that such a person shall "not hereafter receive more than one dollar per week." We have no doubt the construction put upon the amendment by the officers of the society was the one intended and justified by the language. Judgment affirmed.^ NUTTING V. MASSACHUSETTS Supreme Court of The United States, 1901. 183 U. S. 553 How far ynay the State constitutionally prevent the insured or his broker from dealing with nonadmitted foreign companies.^ This was an indictment on the statute of Massachusetts of 1894, c. 522, § 98, for negotiating and transacting insurance with a foreign insurance company not admitted to do business in Massachusetts. Agreed facts: The defendant was a licensed insurance broker in Boston, 1 Knights of Pythias v. Knight, 117 Ind. 489, 3 L. R. A. 409; Monger v. New Era Assn. (1909), 156 Mich. 645; Loeffler v. Modern Woodmen, 100 Wis. 79. A by-law subsequently enacted which changed the definition of "broken leg" wae held reasonable and operative, Russ v. Modern Brotherhood, 120 la. 692, 95 N. W. 207; and where by subsequent bj'-law the occupation of switchman was added to the extra hazards, the court held that the amendment was legitimate and bind- ing upon the members, Gilmore i>. Knights of Columbus, 77 Conn. 58, 58 Ati. 223. * State statutes prohibit the transaction of business with nonauthorized insurance companies. The authorized or admitted companies whether domestic or foreign pay taxes, submit themselves to the laws of the State and to the supervision of the insurance department. 14 NUTTING V. MASSACHUSETTS [CHAP. I and at some time prior to November IS, 1898, solicited from one William McKie, a shipbuilder in Boston, and likewise a citizen of Massachusetts, the business of procuring insurance upon a vessel then in process of construc- tion in his Boston shipyard; and, as agent for Johnson & Higgins, average adjusters and insurance brokers, having an office in Boston in charge of the defendant, and their principal place of business in New York, secured the authority of McKie to the placing of a contract of insurance for £4,124 upon the vessel. Thereupon the defendant transmitted an order for the insurance to Johnson & Higgins in New York, and they at once wrote to their Liver- pool agents, John D. Tyson & Co., to procure the aforesaid insurance. Ac- cordingly, Tyson & Co. procured a policy from the London Lloyds, to be delivered to Tyson & Co. in Liverpool, dated November 18, 1898, for a year from November 16, 1898, on the aforesaid vessel, for the sum of £4,124, the policy running in favor of Johnson & Higgins "on account of whom it may concern." Tyson & Co., at the time of receiving the policy, paid the pre- miums thereon for account of Johnson & Higgins, and received a commission upon the insurance from Lloyd's for themselves and for Johnson & Higgins. Tyson & Co. sent the policy to Johnson & Higgins in New York; they, after indorsing it, forwarded it by mail to the defendant in Boston; and he, on November 18, 1898, sent it by mail to McKie. The policy was procured from the London Lloyd's in the usual course of the business of the defendant, of Johnson & Higgins and of Tyson & Co. None of them were agents of the London Lloyd's, except in so far as the facts agreed constituted them agents. The London Lloyds were individual insurers, citizens of England, associated as principals in the business of insurance, under and by authority of the government of the United Kingdom of Great Britain and Ireland, and car- rying on the business in England on the Lloyd's plan,i by which each as- sociate underwriter becomes hable for a proportionate part of the whole amount insured by a policy. The London Lloyd's has not complied with any of the requirements imposed by the laws of Massachusetts upon foreign insurance companies, and had not been admitted to do insurance business in the Commonwealth, according to law. The defendant requested the court to instruct the jury that so much of the Massachusetts statute as purported to make illegal such acts as were done by the defendant was contrary to the Fourteenth Amendment of the ' Lloyd's was originally a coffeehouse in London, a celebrated resort of marine un- derwriters. Though the society of Lloyd's is now incorporated, nevertheless its members underwrite policies as individuals, though sometimes in groups, and the underwriting transacted there has extended to many branches of insurance. It is the most famous headquarters in the world for maritime underwriting and for the collection and diffu- sion of maritime information. Many unincorporated associations have been formed in this country, known as American Lloyd's, with individual underwriters, modeled in a measure in imitation of English Lloyd's, each of the underwriters on a policy being liable only to the extent of the amount subscribed by him, Barnes v. People, 168 111. 425, 48 N. E. 91 ; Imperial Shale Brick Co. v. Jewett, 43 App. Div. 586, 60 N. Y. Supp. 35. If the policy so provide, the insured must bring test suit against the agent before suing the underwriters. Enterprise Lumber Co. v. Mundy, 62 N. J. L. 16, 42 Atl. 1063, 55 L. R. A. 193. CHAP. l] NUTTING V. MASSACHUSETTS 15 Constitution of the United States, and as such was unconstitutional and void. The request was refused; and the court instructed the jury that upon the facts above stated they would be warranted in finding the defendant guilty. To all of this the defendant duly excepted, and being found guilty, his ex- ceptions were overruled by the Supreme Judicial Court of Massachusetts. 175 Mass. 154. He was thereupon sentenced m the Superior Court, and sued out this writ of error. Mr. Justice Gray delivered the opinion of the court. A State has the undoubted power to prohibit foreign insurance companies from making con- tracts of insurance, marine or other, within its limits, except upon such con- ilitions as the State may prescribe, not interfering with interstate commerce. A contract of marine insurance is not an instrumentality of commerce, but a mere incident of commercial intercourse. The State, having the power to impose conditions on the transaction of business by foreign insurance com- panies within its limits, has the equal right to prohibit the transaction of such business by agents of such companies, or by insurance brokers, who are to some extent the representatives of both parties. Hooper v. California, 155 U. S. 648; Allgeyer v. Louisiana, 165 U. S. 578. The statute of Massachusetts of 1894, c. 522, on which this indictment is founded, besides requiring foreign insurance companies, as conditions prec- edent to doing business in the State, to appoint agents within the State, and to deposit a certain sum in trust for their policy holders and creditors, pro- vides, in § 3, that "it shall be unlawful for any person as insurance agent or insurance broker to make, negotiate, solicit or in any manner aid in the transaction of" insurance on or concerning any property, interest or lives in Massachusetts, except as authorized by the act; and in § 98, that any person "who shall act in any manner in the negotiation or transaction of unlawful insurance" (evidently intending insurance declared unlawful by § 3) "with a foreign insurance company not admitted to do business in this Commonwealth," shall be punished by fine. The acts of negotiation or transaction by the defendant in Massachusetts, admitted in the facts agreed by the parties, are that he solicited from McKie the business of procuring insurance upon his vessel in Boston, and, as agent of Johnson & Higgins of New York, having an office in Boston, secured the authority of McKie to the placing of a contract of insurance for a certain sum in pounds sterling upon the vessel, and transmitted an order for that insurance to Johnson & Higgins in New York; whereupon they, acting ac- cording to the usual course of business of the defendant, of themselves and of their agents in Liverpool, obtained from the London Lloyd's, who had not been admitted to do business in Massachusetts, a policy of insurance for that amount on the vessel; and the defendant afterwards, in Massachusetts, received from Johnson & Higgins that policy, and sent it by mail to McKie, which tends to show that the policy obtained from the foreign insurance company was the insurance which he had originally solicited. These facts clearly convict the defendant of negotiating and transacting in Massachu- 16 NUTTING V. MASSACHUSETTS [CHAP. I setts unlawful insurance with a foreign insurance company in violation of the statute, if that statute is constitutional. In Hooper v. California, 155 U. S. 648, Hooper, the agent in California of the same Johnson & Higgins of New York, obtained from them a policy of marine insurance of a Massachusetts insurance company on a vessel in California, owned by a citizen of California, to whom he deUvered the policy in California. It was held that a statute of California, by which Hooper was guilty of procuring insurance for a resident of California from a foreign insurance company which had not given bond as required by the laws of California, was constitutional. In Allgeyer v. Louisiana, 165 U. S. 578, the insurance was not obtained through an agent or broker, but by the assured himself; and the point de- cided was that a statute of a State punishing the owner of property for ob- taining insurance thereon in another State was unconstitutional. In that case the decision in Hooper's case was expressly recognized and distinguished; and Mr. Justice Peckman, speaking for the court, and repeating the words of Mr. Justice White in Hooper's case, observed: "It is said that the right of a citizen to contract for msurance for himself is guaranteed by the Fourteenth Amendment, and that, therefore, he cannot be deprived by the State of the capacity to so contract through an agent. The Fourteenth Amendment, however, does not guarantee the citizen the right to make within his State, either directly or indirectly, a contract, the making whereof is constitution- ally forbidden by the State. The proposition that, because a citizen might make such a contract for himself beyond the confines of his State, therefore he might authorize an agent to violate in his behalf the laws of his State within her own limits, involves a clear 7ion sequitur, and ignores the vital distinction between acts done within and acts done beyond a State's juris- diction." 155 U. S. 658, 659; 165 U. S. 587, 588. As was well said by the Supreme Judicial Court of Massachusetts, "While the legislature cannot impair the freedom of McKie to elect with whom he .will contract, it can prevent the foreign insurers from sheltering themselves under his freedom in order to solicit contracts which otherwise he would not have thought of making. It may prohibit not only agents of the insurers, but also brokers, from soliciting or intermeddling in such insurance, and for the same reasons." 175 Mass. 156. We are of opinion that the case at bar comes within Hooper v. California, and not within Allgeyer v. Louisiana; and that § 98 of the statute of Massa- chusetts, under which the plaintiff in error has been convicted, is not con- trary to the Constitution of the United States. Judgment affirmed. Mr. Justice Harlan, dissenting. In my opinion this case does not differ in principle from Allegeyer v. Louisiana, 165 U. S. 578; and so thinking I cannot concur in the opinion and judgment in this case.* ' To be effective, ought the prohibitory statute of the State to be directed against the insured or rather against his broker as regards insurance with foreign nonad- CHAP, t] nutting V. MASSACHUSETTS 17 mitted companies on risks located outside the State? Are such statutes constitu- tional? Aligeyer v. Louisiana, 165 U. S. 578; Commonwealth v. Roswell, 173 Mass. 119, 53 N. E. 132. The underwriters at London Lloyd's are not authorized to do business in this coun- try. Their encroachments within the domain of our authorized companies, especially in connection with marine and fire risks, present a practical question of rapidly in- creasing proportions in New York State and elsewhere. 18 HAYES V. MILFORD MUTUAL FIRE INS. CO. [CHAP. II CHAPTER II General Principles of Insurance Law Nature and Characteristics of the Contract, including Insurable Interest, Contribution, Subrogation, Assignability, Rights of Beneficiaries and Creditors, etc. HAYES V. MILFORD MUTUAL FIRE INSURANCE COMPANY Supreme Judicial Court of Massachusetts, 1898. 170 Mass. 492 Insurable interest, property.^ Lathrop, J. The plaintiff, by virtue of a contract with the Atlas Mutual Insurance Company, made on February 27, 1895, was constituted its sole agent, and was to have charge of placing all risks on behalf of said company. He was to receive as compensation for his services "A sum equivalent to twenty per cent of all sums received from the assured for or on account of all the policies issued on behalf of the company; and also a sum equivalent to ten per cent of the net profits of the business of the company." It is agreed by the parties that the plaintiff did not determine the character of the risks taken by the Atlas Insurance Company, but this duty was per- formed by the secretary of the company, under a vote of the directors. While this contract was in force the defendant issued to the plaintiff the policy declared on. This was on a printed blank of a Massachusetts standard policy, with a rider attached. It insures "Lorenzo Burge, Hayes & Co." (the name under which the plaintiff did business) against loss or damage by fire or lightning to the amount of twenty-five hundred dollars, as per form ' Insurance is essentially a contract of indemnity, Castellain v. Preston, 11 Q. B. D. .380, 407. The main object sought to be accomplished must be protection to some pecuniary interest, either actual or presumed. Life Ins. Co. v. O'Neill, 106 Fed. 800, 803, 45 C. C. A. 641, 54 L. R. A. 225. Important considerations of public policy demand that compensation for a real loss rather than a purely speculative venture should be the aim of the insured. Trinity College v. Travelers' Ins. Co., 113 N. C. 224, 18 S. E. 175, 22 L. R. A. 291. The policy of the law is to preserve life, health and property, and not to encourage their impairment or destruction. Ruse v. Mut. Ben. Life Ins Co., 23 N. Y. 516. Consonant with this cardinal principle of indemnity are many distinctive features of the insurance contract such as the rule requiring an insurable interest, the doctrine of double insurance contribution and the right of subrogation accruing to the insurer on payment of a loss on property. CHAP. Il] HAYES V, MILFORD MUTUAL FIRE INS. CO. 19 attached to and made the descriptive part of this pohcy. Then follows the rider, signed by the secretary of the company, and reading as follows: "Lorenzo Burgc, Hayes & Co. On their interest in jjrofits under contract with the Atlas Mutual Insurance Company of Boston, i)rovided the follow- ing conditions arc complied with: First. The Atlas Mutual Insurance Com- pany must sustain losses by fire between midnight of September 30, 1895, and midnight of December 31, 1895, amounting to 825,000. Second. No claim for loss can be made against the Milford Mutual Fire Insurance Com- pany until the assured presents a statement from the secretary of the Atlas Mutual Insurance Comjiany, under oath, stating that the Atlas Mutual Insurance Company has suffered loss in excess of §25,000 by and in conse- quence of fires occurring during the term above specified. The above two conditions having been complied with, the Milford Mutual Fire Insurance Company hereby agrees to pay to the assured 50% of its policy; then if it is shown in the same manner that the losses of said Atlas Mutual Insurance Company have amounted to §30,000 for the same period, the Milford Mu- tual Fire Insurance Company pays a total loss undo- its jjolicy." The insurance was from September 30, 1895, at midnight, until Decem- ber 31, 1895, at midnight. The Atlas Insurance Company sustained losses by fire between midnight of September 30, 1895, and midnight of Decem- ber 31, 1895, in excess of $30,000. Before the date of the writ in this case the plaintiff presented to the defendant a statement under oath from the secretary of the Atlas Insurance Company, setting forth that that company had sustained losses by and in consequence of fires occurring between mid- night of September 30, 1895, and midnight of December 31, 1895, amount- ing to more than .130,000. 1. The first question which arises in the case is whether the jilaintiff had an insurable interest in the property insured bj^ the Atlas Insurance Com- pany; and we have no doubt that he had such an interest. By virtue of his contract with the Atlas Insurance Company, he was entitled to a certain portion of the net profits of that companj'- during the period specified in the policy. As, in estimating the net profits, losses were to be deducted, the plaintiff would have been benefited by the continued existence of the prop- * erty, insured by the Atlas Insurance Company, and would have been injured by its destruction. In Eastern Railroad v. Relief Ins. Co., 98 Mass. 420, 423, it is said by Mr. Justice Gray: "By the law of insurance, any person has an insurable interest in property, by the existence of which he receives a benefit, or by the destruction of which he will suffer a loss, whether he has or has not any title in, or lien upon, or possession of the property itself." Many other cases might be cited to the same effect. 2. The next question is whether the description of the subject-matter of the insurance, namely, the tangible property covered by policies of the Atlas Insurance Company during the time specified, is sufficiently definite. The words "on their interest in profits" are to be taken in connection with the rest of the policy, and with the contract of the plaintiff, in determining 20 HAYES V. MILFORD MUTUAL FIRE INS. CO. [CHAP. II what is meant. Preceding the rider are the words " against loss or damage by fire or lightning." These words have reference to tangible property rather than to an intangible interest. The first and second conditions of the rider show the intention of the parties that the payment of the insurance should depend on the destruction or damage of tangible property by fire or light- ning. It also clearly appears in the contract between the plaintiff and the Atlas Insurance Company that a portion of the plaintiff's compensation for his services was dependent on the continued existence of property insured by that company. We are therefore of opinion that the subject-matter of the insurance was sufficiently described. Judgment of the Superior Court must be reversed. So ordered} ^The United States Supreme Court says: "It is well settled that any person has an insurable interest in property by the existence of which he will gain an advantage or by the destruction of which he will suffer a loss whether he has or has not any title in, or lien upon or possession of the property itself," Harrison v. Fortlage, 161 U. S. 57, 65, 16 S. Ct. 488, 40 L. Ed. 616; Doyle v. Am. F. Ins. Co., 181 Mass. 139, 63 N. E. 394; Berry v. Am. Central Ins. Co., 132 N. Y. 49, 30 N. E. 254, 28 Am. St. R. 548. " Interest can hardly be defined exhaustively, and probably the criterion proposed by Lawrence, J., a century ago, cannot be improved upon: 'Interest,' he says, 'does not necessarily imply a right to the whole or a part of a thing, nor necessarily or ex- clusively that which may be the subject of privation; but the having some relation to or concern in the subject of insurance, which relation or concern, by the happening of the perils insured against, may be so affected as to produce a damage, detriment, or prejudice to the person insuring. ... To be interested in the preservation of a thing, is to be so circumstanced with respect to it as to have benefit from its existence, prej- udice from its destruction,' Lucena v. Crauford (1806), 2 B. & P. at p. 302, cited and approved by Lord Blackburn in Lloyd v. Fleming (1872), L. R. 7 Q. B. at p. 302." Chalmers & Owen, Mar. Ins. Act (1906) p. 12. Sir M. D. Chalmers drafted the famous British marine insurance code. The definition sometimes given that the inter- est must be an estate or right in or Hability as to the thing which is the subject-matter of the insurance is rather misleading, fails to harmonize with many of the decisions, and is inconsistent with certain valid forms of policies. Thus, the New York court has repeatedly said, "An insurable interest may exist without any estate or interest in the corpus of the thing insured. It was enough that there be a pecuniary interest in the preservation and protection of the property, and that one might sustain a loss by its destruction," Rohrbach v. Germania F. Ins. Co., 62 N. Y. 47, 20 Am. Rep. 451, citing to like effect Springfield F. & M. Ins. Co. v. Allen, 43 N. Y. 389; Herkimer ». Rice, 27 N. Y. 163. This is the useful and practical test, though in very rare instances it may require some qualification. A stockholder has an insurable interest though no title in the corporate property, Riggs V. Commercial Mutual Ins. Co., 125 N. Y. 7, 25 N. E. 1058, 10 L. A. R. 684. Any legal or equitable estate in property will confer an insurable interest. A. defea- sible interest is insurable, McCutchen v. Ingraham, 32 W. Va. 378, 9 S. E. 260; as also is a contingent, Feun v. New Orleans Mut. Ins. Co., 53 Ga. 578; or inchoate, Patapsco Ins. Co. V. Coulter, 3 Pet. (U. S.) 222, 7 L. Ed. 659 (profits) ; Sawyer v. Dodge Co., 37 Wis. 503 (future crops) ; or partial interest, Moitke v. Mut. Mich. Ins. Co., 113 Mich. 166, 71 N. W. 463. But it is said that a mere expectancy as by an heir in the prop- erty of the ancestor who ia yet alive will afford no basis for an insurable interest, Lucena V. Crauford, 3 B. & P. 75; see, however. Home Ins. Co. v. Mendenhall, 164 111. 458, 45 N. E. 1078, 36 L. R. A. 374. It is said that a mere trespasser or intruder on property CHAP. Il] farmers' MUT. INS. CO. V. NEW HOL. TURN. CO. 21 FARMERS' MUTUAL INSURANCE CO. v. NEW HOLLAND TURN- PIKE CO. Supreme Court of Pennsylvania, 1888. 122 Pa. St. 37 Insurable interest, property. Action on plaintiff's policy of fire insurance on a bridge belonging to Lancaster Co., Pa., towards the cost of the construction of which the plain- tiff, the turnpike company, had voluntarily contributed, inasmuch as the bridge was a necessary link on the line of its public highway. Defense, lack of insurable interest. It was stated in the application, "This bridge is about four miles from Lancaster and about eight miles from New Holland and was erected at the expense partly of the County of Lancaster and partly of the Turnpike Co.; insured for the benefit of the Turni)ike Co. in the name of its president at the sum of four thousand dollars." During the period required for the reconstruction of the bridge after the fire, its disuse caused a diminution of more than three thousand dollars in the plaintiff's highway toll receipts. For this amount the plaintiff sought a recovery under the policy. has no insurable interest in it, Sweeny v. Franklin Ins. Co., 20 Pa. St. 337, and see Pope V. Glens Falls Ins. Co., 136 Ala. 670, 34 So. 29. But compare cases in which there was possession coupled with beneficial use. City of N. Y. v. Brooklyn F. Ins. Co., 41 Barb. 231, aff'd 4 Kcyes, 465. An insurable interest is not disturbed by reason of the fact that sourcesof indemnification are available to the insured, independent of his policy. Thus, the owner of unused revenue stamps has an insurable interest in them, though they are redeemable from the government if lost, U. S. v. American Tobacco Co., 166 U. S. 468, 17 S. Ct. 619, 41 L. Ed. 1081; so also has a mortgagee, regardless of the amount of his other security. Excelsior Fire Ins. Co. v. Ins. Co., 55 N. Y. 343, 14 Am. Rep. 271. A lien upon property carries with it an insurable interest in the property, Ins. Co. v. Stinson, 103 U. S. 25, 26 L. Ed. 473, but a simple contract creditor having no judgment and no lien has no insurable interest in the property of the debtor. Creed v. Sun Fire Office, 101 Ala. 522. 14 South. 323, 23 L. R. A. 177, 46 Am. St. R. 134. And sec Leight v. Ins. Co., 169 Pa. St. 310, 32 Atl. 439, 47 Am. St. R. 904. Possession of property coupled with use though without right or title may carry an insurable interest; thus, it is held that a husband and wife, either separately or jointly, have an insurable interest in the furniture and household effects, regardless of whose money paid for the articles, or to whom they may belong, Lenagh r. Commer- cial Union Ass. Co., 77 Neb. 649, 110 N. W. 740. As to whether a husband has an insurable interest in the separate estate of his wife see Tyree r. Virginia F. & M. Ins. Co., 55 W. Va. 63, 46 S. E. 706, 66 li. R. A. 657; Carey v. Home Ins. Co., 97 la. 619, 66 N. W. 920. Liability with respect to the property of another confers an insurable interest. Upon this principle an insurer may reinsure with another company, Barnes V. Hcckla F. Ins. Co., 56 Minn. 38, 57 N. W. 314, 45 Am. St. R. 438. It must be ob- served that under the terms of most forms of fire policies any limited interest must be specified in order to comply with the requirement of an express warranty. 22 farmers' MUT. ins. CO. v. new HOL. turn. CO. [chap. II Mk. Justice Green: We cannot understand upon what principle evidence was admitted to prove loss of tolls on the turnpike road of the plaintiff. The contract in suit was a policy of fire insurance on a bridge. The bridge having been destroyed by fire, if there was liability on the part of the msur- ance company, the measure of that liability would be the value of the loss, which would consist of the injury to the bridge. If the bridge was totally destroyed, the loss would be the total amount of the insurance, but if only partially destroyed, it would be the value of the injury. In no circumstances can there be a legitimate measure of liability on a fire insurance policy which represents the loss of profits of a business which might be carried on at the structure destroyed if it were standing. Such is not the contract of the par- ties. Neither is there any liability as for rent of the premises destroyed or for any other advantage which may have been derived from its use. If a period of time elapses before the building is restored, or if it is never restored, the liability of the insurer is not for a loss of the use or rental of the building, but for the value of the loss with interest on the same until payment is made. These fundamental principles which are inherent in the contract of insur- ance were disregarded when the plaintiff was permitted to prove the loss of tolls for nonuser of the bridge while it was being rebuilt. For this reason we sustain the fourth assignment of error. The more important question, however, is, whether the turnpike company had any insurable interest in the bridge. It is a novel question, but perhaps not difficult of solution. The basis, upon which the insurable interest is claimed to exist, is the fact that the turnpike company contributed $5,500 to the cost of erecting the bridge, being one-third its total cost, $16,500. If this contribution was compulsory— that is, legally compulsory— it would perhaps have to be admitted that an interest in the bridge, legal or equitable, would necessarily flow from it. For it cannot be supposed that the law would oblige any person or corporation to contribute directly to the cost of erect- ing a structure, without conferring an interest in the structure which the law would recognize and enforce. While saying this, we do not of course refer to that kind of contribution which is accomplished by the payment of taxes. Such contribution is, of course, for public use, and confers no title or interest upon the taxpayer in structures which may be erected with pub- lic funds. But in this case there is no pretense of any compulsion upon the turnpike company. There is absolutely no testimony to prove why or upon what considera- tion, or for what purpose or reason, the turnpike company paid any part of the cost of erecting the bridge. It is not difficult to imagine a reason, since, as the company's road crossed the stream over which the bridge was erected, it would be quite desirable for them to have a bridge over which persons using the road could travel. But while that might be a reason for the com- pany building a bridge of its own, it was still the fact that the bridge was a public county bridge, free to all travel, built many years before by a private person who transferred it to the county, and hence the property of the county exclusively. Being thus a free, public bridge, there could not possibly be CHAP. Il] farmers' MUT. INS. CO. V. NEW HOL. TURN. CO. 23 any private estate or ownership in it. The turnpike company could charge '^o tolls for passing over it. They could exercise no rights of ownership over it. They could not obstruct it nor take it down, even if to rebuild it, without the consent of the county, and perhaps not even with such consent, as it was a part of the public highway. The only injury the plaintiff has sustained by the fire, is in being deprived of the use of the bridge, not as its own, but as a part of the public highway, during the period of the reconstruction of the bridge. But, for that injury the defendant was not responsible in any sense, and it never assumed an obli- gation to make compensation for it. What then remains to impose any liability upon the defendant? The bridge is restored without any expense to the plaintiff. Every right which the plaintiff enjoyed before the fire is enjoyed since, so far as the bridge is concerned, without any additional cost to the plaintiff. It may be remarked in passing that the right of the plaintiff in the bridge is only the public and common right of its patrons as citizens, to use the bridge as a part of the public highway. It is therefore not a right peculiar to the plaintiff in any sense. It may well be questioned, even if the plaintiff had an insurable interest in the bridge, whether any injury has been sustained to that interest, suffi- cient to impose any liability upon the defendant us an insurer. Suppose a recovery is permitted, and the plaintiff recovers the amount of the insurance money. As they are not obliged to expend the money in reconstruction, and yet reconstruction has been accomplished without cost to them, they simply get back and keep the money they voluntarily contributed in 1868 to the construction of the bridge. But if the bridge had not burned down, that money could not have been recovered. How then were they injured by the fire? They have the bridge as they had it before, without cost to them, and the diminution of their tolls during the period of reconstruction cannot be compensated in an action on the policy. For this reason, therefore, if for no other, we cannot discover any cause of action against this defendant. There was clearly no interest in the bridge belonging to the turnpike company, which could be recognized or enforced either at law or in equity. There could not be any right of property of any kind, nor of possession, nor of custody. Even the use of it was not a use by the plaintiff in its corporate capacity, but a mere right of passage over it which belonged to all citizens in common. The money which was contributed to its construction by the plaintiff, was a mere gratuity, which it was not bound to give and which it could never recover. In such circumstances there was no interest or propcrtj'^ in the bridge as a structure and hence no insurable interest capable of protection and enforcement. Judgment reversed. * Assume that instead of the policy in suit, the turnpike company had disclosed at the trial a valued policy for loss of the use of the bridge, what should have been the deci- sion of the court? Cohn v. Virginia F. & M. Ins. Co., 3 Hughes, 272, Fed. Cas. No. 2,970; Graham v. Fire Ins. Co., 48 S. C. 195, 26 S. E. 323, 59 Am. St. K. 707. 24 HAGEDORN V. OLIVERSON [CHAP. II HAGEDORN v. OLIVERSON Court of King's Bench, 1814. 2 M. & S. 485 Insurance in a representative capacity. Assumpsit on a policy of assurance tried before Lord Ellenborough, C. J. A verdict was found for the plaintiff for £200, the amount of the defendant's subscription, subject to the opinion of the court on the following case: The policy was effected by the plaintiff, a London broker, August 2d, 1810, as well in his own name as for and in the name and names of all and every other person and persons to whom the same doth, may, or shall ap- pertain, etc., in the usual form, upon the ship Fiesco valued at £2,300, at and from Gluckstadt, and any port and ports in the river Elbe, to any port or ports in the United Kingdom, with liberty to carry simulated papers, etc., sail under any flag, etc. The declaration averred the interest to be in F. S. Schroeder, and a loss by capture. At the time of effecting the policy Schroeder was and is a subject of the King of Denmark, then and now at war with Great Britain. In order to legalize the voyage the plaintiff had pro- cured a license, on behalf of himself or other British or neutral merchants, permitting a vessel bearing any flag except the French to proceed with a cargo from within certain specified hmits, within which Gluckstadt was, to any port of this kingdom north of Dover, etc. The ship was loaded at Gluck- stadt in July, 1810, with a cargo on British and neutral account, and sailed from thence under Danish colors for London on the 26th of that month, and was captured by enemies, carried into a port of Holland, and condemned. The policy was effected for the benefit of Schroeder, but no letter or order was proved from Schroeder before the loss, but a letter from him to the plaintiff, dated the 26th of July, 1812, before the commencement of this action, was produced, wherein he adopted the insurance in the following terms: "I may now, I hope, expect that you have effected a final settlement with the underwriters per Fiesco, and request you to lay out the amount for me in coffee." No other evidence was given of the connection of Schroeder with this policy. Tlie question for the opinion of the court is whether the plaintiff is entitled to recover: if the court shall be of that opinion, the verdict is to stand; if not, a nonsuit is to be entered. Lord Ellenborough, C. J. The difliculty in this case arises from the situation of Schroeder, because he might by refusing to adopt the policy in case the ship had arrived have got clear of the premium, for if the plaintiff had brought an action against him to recover it, I do not see how he could have succeeded. That constitutes something of an anomaly, because in one event, namely, that of a loss, he might secure himself and nevertheless might have avoided the payment of the premium in the other event of the CHAP. Il] HAGEDORN V. OLIVERSON 25 ship's arrival by declaring that he chose to stand his own insurer. But I do not think that consideration governs the case now before us between this plaintiff and the underwriter. The plaintiff had a right to effect an insurance on the chance of its being adopted for the benefit of all those to whom it might appertain, which are the words of the policy. He might insure for those who were actually interested and possibly for those who might be in- terested. Schroeder was interested, and might become privy to the benefit of this insurance by subsequent adoption, according to Lucena v. Craufurd, 2 B. & P. N. R. 269, and Routh v. Thompson, 13 East, 274. He has adopted it and now it is made a question whether he can become privy to the benefit of it. It appears to me upon those authorities that he may, and may make use of the name of the person at the head of the policy as the person who had given the order to effect the insurance which will sati.sfy the stat. 28 G. 3, c. 56. It seems to me, therefore, that this action is maintainable for the benefit of Schroeder who was interested at the time and has become privy by adoption. Le Blanc, J. The difficulty thrown in the way of the iilaintiff has been this, that if Schroeder in the event of the ship's arrival had chosen to repudiate instead of adopt the contract, he might nave done so and th(-re would have been no means of coming upon him for the premium. But this policy was effected for the benefit of all persons interested and Schroeder was a person interested, and I take it that after the ship sailed on the voyage insured, the plaintiff was bound by the insurance and could not have recovered back the premium from the underwriter by averring that this was a policy without interest; the answer would have been Schroeder is interested, and he may elect to adopt the insurance. I therefore conceive the underwriter would have had a right to retain the premium. Then Routh v. Thompson is, I think, an authority to show that Schroeder being interested might subse- quently adopt the insurance made by the plaintiff. There the crown adopted it after a loss; and the distinction taken in that case that the party making the insurance was appointed by the captors who had no insurable interest and therefore that he stood in relation of agent on the part of the crown whose agents the captors were, does not, I think, make any difference. Here, the plaintiff was not unconnected with the insurance ; he obtained a license and made insurance for the benefit of the owners, though without communicat- ing with them. Schroeder who is an owner afterwards adopted it. That case is an authority to show that he might afterwards adopt it. This it must be remembered is a question between the plaintiff and the underwriter and not Schroeder and the underwriter; and unless we saw that the under\\Titer would have been entitled to retain the premium we cannot say that the plaintiff is not entitled to his contract, unless it could be shown that this is a mere gaming policy. Bayley, J. I think this is a case in which the defendant ought to pay and the plaintiff ought to receive for a loss under the policy. A loss has happened 26 HAGEDORN V. OLIVERSON [CHAP. II upon which the defendant undertook to pay and if the premium could not have been recovered back from the defendant, there is not any circumstance here which should exonerate him from liability. I think the plaintiff never could have recovered back the premium from the underwriter, because of the uncertainty whether Schroeder would adopt the assurance, in respect of which the underwriter would have incurred the risk. While the contract was in fieri, there was not any disposition on the plaintiff's part to have the policy vacated, and if there had been, it would have been an answer to him, that Schroeder might have adopted it. Then comes the question whether Schroeder is entitled to take the benefit of this insurance. It is stated that it was effected for his benefit, therefore it was intended to cover his specific interest at the time. Schroeder had an interest at the time and although there was not any specific communication at the time, yet as Schroeder was con- nected in the concern it was reasonable for the plaintiff to expect that Schroe- der would adopt an act which could be done with no other view than for his benefit. Schroeder must be considered as under a moral, if not a legal, obli- gation, to adopt it although the ship arrived. Being under that obligation in all events, he thinks that he is warranted in adopting it even after a loss, and he has adopted it. The case of Routh v. Thompson shows that if a policy be effected with reference to the benefit of a person interested, an adoption of it by such person after the loss will be sufficient. Dampier, J. The plaintiff placed himself in an awkward situation by advancing his money for the premiums upon the expectation that Schroeder would adopt his act, which Schroeder might have refused to do in the event of the ship's arrival ; and if he had, I do not see that the plaintiff could have recovered back the premiums. The question then is whether he had an in- terest in the policy. He was owner of the ship and the policy was effected for his benefit; that seems to me to give him an interest. If he had an in- terest his subsequent adoption will be good. Routh v. Thompson is a full and clear authority to that point; there the agency was only a constructive agency, and it does not appear to me to afford any distinction because the insurance did not come within the scope of his agency. Therefore, it seems to me to govern this case; there is no distinction in reason though there may be a difference. All the averments in this declaration are certainly fully proved, and, therefore, the plaintiff is entitled. Judgment for the plaintiff} ^ Where the insured is intrusted with the goods of other persons, as in the case of a common carrier, warehouseman, commission merchant, wharfinger, agent, or factor, he may either insure his own interest or his own liability in respect to the property, or he may insure the property for the benefit of all concerned, provided the policy properly describes the interests intended to be covered, Cal. Ins. Co. v. Union Comp. Co., 133 U. S. 387, 10 S. Ct. 365, 33 L. Ed. 730; Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S. 527; Home Ins. Co. v. Peoria, etc., R. Co., 178 111. 64, 52 N. E. 862. In fire insurance a phrase often employed for this purpose is as follows: "on property their own or held in trust or on commission," Snow v. Carr, 61 Ala. 363; Hough «. People's CHAP. IlJ LOOMIS V. EAGLE LIFE, ETC., INS. CO. 27 LOOMIS, ADMINISTRATOR, v. EAGLE LIFE AND HEALTH IN- SURANCE CO. Supreme Judicial Court of Massachusetts, 185G. 72 Mass. 396 Insurable interest, life. The policy dated February 2, 1849, was for seven years for the sum of $700 upon the hfe of Freedom Keith, a minor son of Bela M. Keitli, the plaintiff's intestate, to whom this policy was made. Freedom was twenty years old January 6, 1849. He worked with his father in a factory, the father receiving his wages towards the family support. On February 17, 1849, Freedom sailed for California, having on the 8th of January previous made an agreement in writing with Aaron Cook, in con- sideration of the sum of S300 paid by Cook into the treasury of a trading and mining company of which Freedom was a member, to devote his serv- ices to said.company during its continuance, and to pay half of his share of the profits to Cook; and his father assented to this agreement, and re- linquished any claim to his services, so far as Cook was concerned; and sup- plied Freedom with an outfit, out of his former earnings. Freedom died on board of the ship on December 1, 1849, soon after arriving in California. Shaw, C. J. We understand that the law of Connecticut (where the par- ties resided) is similar to that of Massachusetts, and that by the law of both States a father who supports, maintains and educates a son, under twenty- one years of age and not emancipated, is entitled to the earnings of such son, and may maintain an action for them. But, upon broader and larger grounds, we are of opinion that, independ- ently of the fact that the son was a minor, and the assured had a pecuniary interest in his earnings, the assured had an insurable interest sufficient to maintain this action. In discussing the question in this commonwealth, we are to consider it solely as a question at common law, unaffected by the St. of 14 G. 3, c. 48, passed about the time of the commencement of the Revolution, and wqxqv Fire Ins. Co., 36 Md. 398. The phrase, "for whom it may concern," is frequently used in the marine policy, Hagan v. Scottish Ins. Co.. 186 U. S. 423, 22 S. Ct. 862. The other persons for whose benefit the insurance is taken may adopt and ratify it, even after loss, although the insurance may have been taken out without their au- thority. Hooper v. Robinson, 98 U. S. 528; Larsen v. Thuringia Am. Ins. Co., 208 111. 166, 70 N. E. 31 r Ferguson v. Pckin Plow Co., 141 Mo. 161, 42 S. W. 711; Waring V. Ind. F. Ins. Co., 45 N. Y. 606, 6 Am. Rep. 146; Herkimer v. Rice, 27 N. Y. 163, 179. In such a case the insured will hold any balance of recovery above his own interest as trustee for the other parties in the interest. Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S. 527, 23 L. Ed. 868; Roberts v. Firemen's Ins. Co., 165 Pa. St. 55, 30 Atl. 450. 28 LOOMIS V. EAGLE LIFE, ETC., INS. CO. [CHAP. II adopted in this State. All therefore which it seems necessary to show, in order to take the case out of the objection of being a wager policy, is that the insured has some interest in the life of the cestui que vie; that his temporal affairs, his just hopes and well-grounded expectations of support, of pat- ronage, and advantage in life will be impaired; so that the real purpose is not a wager, but to secure such advantages, supposed to depend on the life of another; such, we suppose, would be sufficient to prevent it from being regarded as a mere wager. Whatever may be the nature of such interest, and whatever the amount insured, it can work no injury to the insurers, because the premium is proportioned to the amount, and whether the in- surance be to a large or small amount, the premium is computed to be a precise equivalent for the risk taken. Perhaps it would be difficult to lay down any general rule as to the nature and amount of interest which the assured must have. One thing may be taken as settled, that every man has an interest in his own life to any amount in which he chooses to value it, and may insure it accordingly. We cannot doubt that a parent has an interest in the life of a child, and vice versa, a child in the life of a parent; not merely on the ground of a pro- vision of law that parents and grandparents, children and grandchildren, are bound to support their lineal kindred when they may stand in need of relief, but upon considerations of strong morals, and the force of natural affection between near kindred, operating often more efficaciously than those of positive law. We beheve it is now conceded, that before that statute a policy on life was good at common law, and that the object of that statute was to pro- hibit wager policies. That it was not a declaratory act, but introduced a new law, was decided in the Irish court of Exchequer Chamber, in British Ins. Co. V. Magee, Cook & Alcock, 182, approved and confirmed by the case hereafter stated. In this state of the question, the case of Godsall v. Boldero, 9 East, 72, was decided, in 1807. It was a policy upon the life of Mr. Pitt, in favor of the plaintiffs, coachmakers, to whom he was largely indebted; after Mr. Pitt's death, by the gratuitous act of the nation, a fund was raised by act of parliament, and furnished to the executors, by whom the plaintiffs were paid their debt. That case was decided in favor of the defendants, on the specific ground that the policy was in effect a security for the payment of the debt only; that if the debt was fully paid by the executors, either from the assets of the deceased, or from funds gratuitously furnished them, it put an end to all claim of loss on the policy. We now come to the case of Dalby v. India & London Life Assurance Co., decided in the Exchequer Chamber, 15 C. B. 365. By that case, Godsall v. Boldero is directly drawn in question and overruled. It decides that a policy of life insurance is not a contract of indemnity,' but a contract in a certain ' It is, however, a contract of indemnity in one sense: namely, that an insurable interest must be shown in order to give validity to the contract, State v. Fed. Invest- ment Co., 48 Minn. 'JO, 111 ; Miller v. Eagle Life & H. Co., 2 E. D. Smith (N. Y.). 268, CHAP, llj LOOMIS V. EAGLE LIFE, ETC., INS. CO. 29 event to pay a certain sum in consideration of an annual premium; that when a policy effected by a creditor on the life of his debtor is valid at the time it is entered into, the ceasing of that interest before the death does not in- validate the insurance under St. 14 G. 3, c. 48. Prima facie the plaintiff in the present case has an interest in the life of his son, the policy of insurance was a valid one, and the plaintiff is entitled to recover upon it. Exceptions overruled. 295. The U. S. Supreme Court by Chief Justice Fuller says: "Life insurance is also a contract of indemnity," Cent. National Bank v. Hume, 128 U. S. 195, 205, 9 S. Ct. 41, 32 L. Ed. 370. Life insurance, however, partakes of the nature of an investment, Mutual Life Ins. Co. v. Allen, 138 Mass. 24, 52 Am. Rep. 245. Especially is this true of an endowment policy, Talcott v. Field, 34 Neb. 611, 615, 52 N. W. 400. The value of human life cannot be estimated. Every one, therefore, is presumed to have an in- surable interest in his own life, and to any amount, Fidelity Mut. Life Assn. t;. Jeffords, 107 Fed. 402, 410, 46 C. C. A. 377; Provident Life Ins. Co. v. Baum, 29 Ind. 236. But when one takes out a policy on the life of another person, to sustain the contract he must show that he had some insurable interest in the life of that person. Among the innumerable decisions on this subject the following cases should be read: Farmers' & Traders' Bank v. Johnson, 118 la. 282, 91 N. W. 1074 (daughter in father's life); Me- chanics' Nat. Bk. V. Comins, 72 N. H. 12, 55 Atl. 191, 101 Am. St. R. 650 (one pecuni- arily interested in a corporation may have an insurable interest in the life of the promoter); Henton v. Mut. Reserve F. & L. Assn., 135 N. C. 314, 47 S. E. 474, 65 L. R. A. 161, 102 Am. St. R. 545; Ovcrhiscr v. Overhiser, 63 Ohio St. 77, 50 L. R. A. 552, 57 N. E. 965, 81 Am. St. R. 612 (interest survives divorce); Carpenter v. U. S. Life Ins. Co. 161 Pa. St. 9, 28 Atl. 943, 23 L. R. A. 571, 41 Am. St. R. 880 (a poor girl held to have an insurable interest in the life of her benefactor) ; Tate v. Building Assn., 97 Va. 74, 33 8. E. 382, 45 L. R. A. 243, 75 Am. St. R. 770 (principal in life of surety) ; Opitz V. Karel, 118 Wis. 527, 95 N. W. 948 (fiance). In a New York case a nephew, an agent for life insurance companies, agreed with his uncle and his uncle's children to take out and maintain $25,000 of insurance upon the uncle's life, the children to have any balance of insurance money after return to the nephew of the amount of all the premiums and interest thereon, together with a bonus to him of $5,000. The uncle joined in and signed the application and also gave to the nephew promissory notes under seal, not for a past indebtedness, but as appar- ent evidence of an insurable interest in favor of the nephew. The policy sued upon, $10,000 in amount, was in terms payal)le to the nephew alone, and was taken out by him two years after execution of the agreement in order to replace policies of like amount in bankrupt companies payable to him and his cousins and taken out under the arrange- ment above described. By that time the nephew had actually paid out about $2,000 for premiums under the agreement, in part performance of which the new insurance was obtained. The court held that while the mere relationship of nephew gave no insurable interest, nevertheless the policy was valid and that the children, all of whom had intervened in the action brought by the nephew against the insurance company, were entitled to their share of the proceeds of the insurance, and that the nephew was entitled to his share in pursuance of the family arrangement described, Reed v. Prov. S. L. Asaur. Soc, 36 App. Div. 250, 55 N. Y. Supp. 292, aff'd 190 N. Y. 111. 30 CRONIN V. VERMONT LIFE INS. CO. [CHAP. II CRONIN V. VERMONT LIFE INS. CO. Supreme Court of Rhode Island, 1898. 20 R. I. 570 Insurable interest: relationship, coupled with dependency. Assumpsit on a policy of insurance issued upon the life of the plaintiff's niece. Heard on demurrer to the declaration setting up lack of insurable interest. Stiness, J. This action is brought to recover insurance on the life of the plaintiff's niece, and the main question raised by the defendant to the dec- laration is whether the plaintiff had an insurable interest in the life of her niece. The English act of 1774, 14 Geo. Ill, c. 48, § 1, prohibited insurance on the life of a person in which the beneficiary shall have no interest, or by way of gaming or wagering. Although the statute has never been taken as a part of our law, its rule was generally followed in this country, as declaratory of the common law. But, in defining the term "interest," the tendency of the decisions, both in England and in this country, has been inclusive rather than exclusive. There has even been some question whether insurance with- out interest should be held to be void on the ground of public policy; but, in this State, we think it has been understood to be settled, since Mowry v. Home Ins. Co., 9 R. I. 346, that some insurable interest must exist. This, too, is the generally accepted rule. In Clark v. Allen, 11 R. I. 439, it was held that a policy, valid in its inception, could be transferred to a bona fide purchaser, even though he had no interest in the life, and some of the ob- jections to such insurance on the ground of public policy were considered and shown to be fanciful and not applied to other branches of law. For example, the element of chance enters into annuities, and the temptation to shorten hfe in order to hasten the possession of a remainder-man, after a life estate in real property, is as strong as in the case of a beneficiary under a hfe policy. But these things have never been considered to be contrary to public policy. Still, upon principle, a purely speculative contract on the life of another is as objectionable on the grounds of public policy as a like contract in re- gard to grain or stocks. In fact, it is more so, and such a contract may properly be held to be void. But the case is quite different when one, by his own contract, or even in the name of another, or upon the ground of debt, affection, or mutual interest procures insurance for the benefit of an- other, which is really to stand in the place of a testamentary gift. And so, kinship and debt have come to be recognized as sufficient grounds of in- terest. Recent decisions have gone further, looking more to the situation of the parties than to these relations alone. CHAP. Il] CRONIN V. VERMONT LIFE INS. CO. 31 In Warnock v. Davis, 104 U. S. 775, Field, J., said: "It is not easy to define with precision what will 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 ob- taining 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." We think that this states a reasonable rule and that it is now substantially the accepted rule. The demurrer in this case being to the whole declaration, we need not examine the counts in detail. The important facts are that the niece lived with the aunt from early childhood at different times, amounting to years; that their relations were as those of mother and daughter; that the plaintiff supported her niece, the insured, and that a debt, both of affection and of money, was due to the plaintiff for which she expected and had a right to ex- pect return from the insured. Does this not set out an insurable interest? We do not understand the word "debt" as here used to mean a debt re- coverable at law, but a moral obligation from which the plaintiff had the right to expect care and kindness from the niece, in case of need. Taken in this view we think it shows an insurable interest, under the principles above laid down. In ^tna Ins. Co. v. France, 94 U. S. 561, a case between brother and a married sister, not dependent, Bradley, J., goes so far as to say: "Any person has a right to procure insurance on his own life and to assign it to another, provided it be not done by way of cover for a wager policy; and where the relationship between the parties, as in this case, is such as to constitute a good and valid consideration in law for any gift or grant, the transaction is entirely free from any such imputation. The direction of payment in the policy itself is equivalent to such an assignment." In Elkhart v. Houghton, 103 Ind. 286, the insurable interest of a grand- son in the life of a grandfather, with whom he lived, was upheld. It has also been sustained where there was no kinship, as in the case of a woman who was engaged to be married to a man, Chisholm v. Nat. Capitol Ins. Co., 52 Mo. 213; and in the case of a widow and her son-in-law, who lived together, Adams v. Reed, 38 S. W. Rep. (Ky.) 420. 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 a mutual interest and to rebut the presunii)tion of a mere wager. The contract is complete 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 objec- tionable on the ground 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 32 RITTLER V. EMELIE SMITH [CHAP. II the aunt, could onlj' be supplied by insurance on her life. This is no more speculation than a husband's provision for his wife in the same way. It is natural and reasonable and in accordance with modern business methods. In short it is security for an insurable interest. We therefore think that the contract set out in the declaration is valid, since it falls within the proper line of distinction between valid contracts, where there is mutual interest, and invalid contracts which are evidently mere speculation. The demurrer to the declaration is overruled} RITTLER V. EMELIE SMITH, ADMX. OF VICTOR SMITH Court of Appeals of Maryland, 1889. 70 Md. 261 Creditor insurance on the life of the debtor. Miller, J. In June, 1886, Victor Smith was indebted to William H. Rittler in the sum of about $1,000 and Smith being insolvent, Rittler took out certificates of insurance on Smith's life, in four several mutual aid associa- tions, aggregating on their face the sum of S6,500. These certificates were all in favor of Rittler and he paid all the premiums or assessments thereunder. Smith died in March, 1887, and Rittler collected from these insurances the sum of S2, 124.82, which appears to have been all that could have been collected, according to the terms of the certificates and the financial condition of the associations. Deducting from this sum the debt and interest due Rittler, the premiums he had paid, and the costs and expenses of effecting the insurances, there remained a balance of $474.53, as of the 1st of June, 1887. On the third of October following letters of administration on Smith's estate were granted to an administratrix, who thereupon filed her bill claim- ing this balance as belonging to the estate of the decedent. In his answer Rittler denied this claim, and insisted that the money belonged to him. The case was heard on bill and answer, and the court below decreed in favor of the complainant. From this decree Rittler has appealed. The question as thus presented is an interesting one, is of first impression ' If no insurable interest were required to give the contraot a valid inception, not only would beneficiaries be tempted to shorten the life insured, but unscrupulous persons would constantly be seeking to defraud insurance companies by taking out policies upon risks believed by the applicants, for reasons undisclosed, to be bad. The whole business would thus be thrown into confusion, Burbage v. Windley, 108 N. C. 357, 12 S. E. 839, 12 L. R. A. 409; Gilbert v. Moose, 104 Pa. St. 74, 80, 49 Am. Rep. 570. The doctrine of the necessity of an insurable interest has not been adopted for the benefit of the insurance company, but out of regard to the public welfare, Reed v. Prov. Savings L. Assur. Soc, 36 App. Div. 250, 65 N. Y. Supp. 292. CHAP. Il] RITTLER V. EMELIE SMITH 33 in this State, and has been very ably argued. On the part of the appellant it is contended that where a creditor with his own money and for his own account, effects and keeps up an insurance on the life of his debtor, the whole of the proceeds belong to him unless it appears that he lias gone into it for the mere purpose of speculation, which in this case is expressly negatived by the answer, the averments of which must be taken as true, the case having been heard on bill and answer. On the other hand, counsel for the appellee contend that where the creditor receives more than enough to reimburse him for his debt and outlay, with interest, he will, as to the balance, be re- garded as a trustee for the personal representative of the debtor; that the law says to the creditor in such a case, "you may protect yourself; you may by insuring your debtor's life secure your debt with all outlay and expenses; you may make yourself whole, but you shall not speculate on his death; you shall not have a greater direct pecuniary interest in his death than you may have in his life." There have been numerous decisions upon this subject, some of which are conflicting. On many points, however, bearing upon the question, there is a general concurrence of judicial opinion and authority. For instance, it is generally held by the courts in this country that one who has no insurable interest in the life of another cannot insure that life. Such insurances are considered gambling contracts, and for that reason void at common law apart from any statute forbidding them. In England they were held valid at common law, but were prohibited as introducing a "mischievous kind of gaming," by the first section of statute 14 Geo. Ill, cf. 48. The effect of this section, as construed by the English courts, is to make the law of Eng- land, by Act of Parliament, the same as it has been held to be by the courts in this country without such an act. In some American cases they have been denounced as void not simply because they tend to promote gambling, but because they are incentives to crime. The force of this latter suggestion has been, and may well be, doubted. It means that one not related or con- nected by consanguinity or marriage, who may have a direct pecuniary interest in the speedy death of another, will thereby be tempted to murder him, though he knows that hanging is the penalty for such a crime. This doctrine carried to its logical result has a far-reaching effect. It strikes down every legacy to a stranger which may become known to the legatee, as is frequently the case, before the death of the testator. It makes void every similar limitation in remainder after the death of a life tenant. Every like conveyance of property in consideration that the grantee shall support the grantor during his life, falls under the same condemnation. Yet we know of no case in which a court has declared such testamentary dispositions or conveyances to be void on this ground. Other instances in which the same result would follow from the application of this doctrine, could be readily suggested, but we need not pursue the subject further. All the authorities also concur in holding that a creditor has an insurable interest in the life of his debtor. In England it was at one time held that though the creditor had an insurable interest at the time the policy was 3 34 RITTLER V. EMELIE SMITH [CHAP. II issued, yet if his debt was paid in the lifetime of his debtor, and his interest had therefore ceased, he could not recover, because the contract of life in- surance like insurances of property, was one of indemnity. But this doctrine has long since been repudiated, and the settled rule in England now is thct a life insurance in no way resembles a contract of indemnity, but is an agree - ment to pay a certain sum of money upon the death of the j^erson insurct', in consideration of the due payment of a certain fixed annual sum or premiun. , during his life, and hence if the contract be valid at the time it was enterc; into, notwithstanding the fact that the interest of the creditor has cease during the life of his debtor, he may still recover on the policy, though tl . result may be that he will be twice paid for his debt, once by his debtor and again by recovery on the policy, Dalby v. Life Ins. Co., 15 Com. Bench, 365. The same construction of the contract has been approved and adopted by this court. Emerick v. Coakley et al., 35 Md. 193; Whiting v. Inde- pendent Mutual Ins. Co., 15 Md. 326. In support of the view taken by the appellee's counsel, cases have been cited in which it has been held that the assignee of a life policy, who has no insurable interest in the life, stands in the same position as if he had originally taken out the policy for his own benefit. In other words, the contention is that the assured himself can make no valid absolute assignment of his policy to one who has no insurable interest in his life. But our own decisions are opposed to this. It is settled law in this State that a life insurance policy is but a chose in action for the payment of money, and may be assigned as such under our Act of 1829, c. 51, New York Life Ins. Co. v. Flack, 3 Md. 341; Whitridge v. Barry, 42 Md. 150. It is quite a common thing for the bond or promissory note of a private individual to be sold through a broker to a bona fide purchaser for less than its face value; and when the latter takes an assignment of it, without recourse, he becomes its absolute owner, and is not bound to refund to the vendor anything he may recover upon it over and above what he paid for it. So a life policy being a similar chose in action may be disposed of and assigned in the same way, provided the assent of the insurer is obtained where it is so stipulated in the instrument. In such case the assignee must of course keep the policy alive by the due pay- ment of premiums if he wishes to realize anything from it. Such an assign- ment is valid in this State if it be a bona fide business transaction, and not a mere device to cover a gaming contract. Such is also the English rule, Ashley v. Ashley, 3 Sim. 149. These considerations prevent us from adopt- ing some of the reasoning of the Supreme Court in Warnock v. Davis, 104 U. S. 775. It seems to us, with great deference, that from the facts in that case the association, which was the assignee, could well be regarded as stand- ing in the same position as if it had taken out the policy in its own name, and having no insurable interest in the life, it clearly became a wager policy. The assignment was made the day after the policy was issued in pursuance of an agreement to that effect made the day of its issue. The assignment was evidently a mere device to cover up a gaming transaction. In the preceding case of Cammack v. Lewis, 15 Wallace, 643, the debt due the CHAP. Il] RITTLER V. EMELIE SMITH 35 creditor was only $70 and the policy was for $3,000. It was taken out by the debtor, who was in bad health, at the suggestion of the creditor, and was assigned to him immediately after it was made out, he at the same time taking a note from his debtor for $3,000 confessedly without consideration. In view of these facts the court well said, "it was a sheer wagering policy and probably a fraud on the insurance company. To procure a policy for $3,000 to cover a debt of $70 is of itself a mere wager. The disproportion between the real interest of the creditor and the amount to be received by him, de- prives it of all pretense to be a bona fide effort to secure the debt, and the strength of this proposition is not diminished by the fact that Cammack was only to get $2,000 out of the $3,000, nor is it weakened by the fact that the policy was taken out in the name of Lewis and assigned by him to Cam- mack." It was "under these circumstances" that the court held that Cammack could hold the policy only as security for the debt due him when it was QiSsigncd, and such advances as he might afterwards make on account of it. If such then be the nature of a life insurance contract, and if a bona fide assignee for value, though a stranger, may recover and hold the whole amount for his own use, why may not a creditor who in pursuance of a bona fide effort to secure payment of his debt, insures the life of his debtor and takes the policy in his own name or for his own benefit, be entitled to hold all he can recover? He is in fact the owner of the policy, takes the risk of the continued solvency of the insurance company, and is obliged to keep the policy alive by paying the annual premiums during the life of the debtor, and the latter is under no obligation to do anything, and in fact does nothing in this respect. If he pays the debt to his creditor he has only discharged his duty, and what interest has he in the policy, or in what his creditor may recover upon it? In a recent English case it was held that a creditor who had insured the life of his debtor could retain all the sums he had received from the policies, without accounting for them to the representatives of the debtor, unless there was distinct evidence of a contract, to the effect that the cred- itor had agreed to effect the policy, and that the debtor had agreed to pay the premiums, in which case only will the policy be held in trust for the debtor, Bruce v. Garden, Law Rep., 5 Chancerj^ Appeals, 32. This is the latest English authority to which we have been referred, and was decided by Lord Chancellor Hatherley on appeal. In that case the amount received from the policies by the creditor was nearly twice as much as the debt due him by his debtor. We agree that there may be such a gross disproportion between the debt and the amount of the policy as to stamp the transaction as indicating upon its face want of good faith, and as a mere speculation or wager. The case of Cammack v. Lewis affords an instance of such gross disparity, but no general rule on this subject has as yet been laid down by the courts, and it is probably better to leave each case to depend on its own circum- stances. On the whole we are of opinion the weight of reason as well as of authority 36 CHEEVES V. J. H. ANDERS [CHAP. II sustains the appellant's claim. We shall therefore reverse the decree appealed from and dismiss the appellee's bill. Decree reversed and bill dismissed.^ CHEEVES V. J. H. ANDERS, ADMINISTRATOR Supreme Court of Texas, 1894. 87 Tex. 287 Creditor insurance on the life of the debtor. Brown, Associate Justice. J. H. Anders, as administrator of L. B. Chil- ton, brought this suit in the District Court of Falls County to recover the amount of a policy issued by the New York Life Insurance Company for $10,000, payable to Cheeves and Chilton, or their administrators or assigns, making the insurance company and Cheeves defendants. The insurance company did not deny liabihty, and the contest was between the plaintiff and Cheeves as to the right to receive the proceeds from the policy. Cheeves filed an answer in which he pleaded that he was entitled to the proceeds of the policy as against the company, and plaintiff, because at the time of is- suing the said policy, on the 17th day of May, 1889, he and the deceased, L. B. Chilton, were partners engaged in a mercantile business in Falls County, and that the said partnership procured the issuance of the said policy of insurance upon the life of the said Chilton and paid the premium thereon, $590, out of and with the money and assets of said firm, and that thereafter, on April 23, 1890, the said firm paid out of its assets another premium of S590 upon said policy, which kept it in force until the death of Chilton. It is alleged in the answer, that at the same time another policy was is- sued by the said insurance company, payable to Cheeves and Chilton, or their administrators or assigns, upon the death of T. A. Cheeves, and for the like sum of $10,000, upon which premiums were paid out of the assets of the said firm amounting to an equal sum as that paid upon the policy in suit. That on September 23, 1890, the firm of Cheeves & Chilton was dissolved, and Chilton, for a consideration of about $20,500, by writing conveyed to Cheeves all of his right and claim in and to all of the partnership property and rights of every kind, the language being set out broadly enough to include all interest that the firm had in the policy at the time of the transfer. Chilton died November 7, 1890, and proofs of loss were duly furnished. Cheeves claims that he was interested in the life of Chilton as his partner ' By the Pennsylvania rule a creditor may insure his debtor's life to an amount equal to the debt plus premiums according to Carlisle Tables of expectancy and also interest on debt and premiums, Wheeland v. Atwood, 192 Pa. St. 237, 44 W. N. C. 386, 43 Atl. 946, 73 Am. St. R. 803. See criticism of the Pennsylvania rule in Exchange Bank v. Lob, 104 Ga. 446, 31 S. E. 459, 44 L. R. A. 372. CHAP. Il] CHEEVES V. J. H. ANDERS 37 at the time the policy was issued, and also that Chilton transferred the policy to him. He closed his answer with a prayer for general relief. There is no allegation in the answer that L. B. Chilton was indebted to the firm of Cheeves & Chilton, or to Cheeves, or in what resi^ect Cheeves had any in- terest in the life of Chilton, except simply that he wa.s a partner when the Ijolicy was issued. Plaintiff filed a general demurrer to the answer, which the court sustained, and upon trial without a jury gave judgment for the plaintiff against both defendants for the whole amount of the policy, which judgment was by the Court of Civil Appeals affirmed. It is against the public policy of this State to allow anyone who has no insurable interest to be the owner of a policy of insurance upon the life of a human being. Price v. Knights of Honor, 68 Texas, 361; Schonfield v. Tur- ner, 75 Texas, 329; In.s. Co. v. Hazlewood, 75 Texas, 351. In some States it is held that an element of wagering likewise enters into such contracts, which has led, as we believe, to inconsistencies in the deci- sions m some of the courts. Our court has placed the inhibition against such contracts upon the higher and sounder ground that the public, independent of the consent or concurrence of the parties, has an interest that no induce- ment shall be offered to one man to take the life of another. Making this the test in every phase of such cases, there can be no inconsistency in our decisions, and the public good will be better guarded. Applying this salutary rule, the conclusion has been reached by our courts that such policy cannot be beneficially owned by anyone not interested in the life insured, whether the policy be taken out in the first instance by the noninterested party, with or without the consent of the insured, or whether he acquired the policy by assignment from the person whose life is insured, or from another who had an insurable interest. A man may insure his own life, making the policy payable to his legal representatives, and afterwards assign it to anyone, or he may procure such policy and make it payable to any person that he may name, but in either case, if the person to whom it is assigned or who is named in the policy has no insurable interest, he will hold the proceeds as a trustee for the benefit of those entitled by law to receive it. Price v. Knights of Honor; Schonfield v. Turner, cited above. The law permits one who is interested in the life of another to become the owner of insurance upon the life of such other person, either by contracting with the insurance company, or by contract made by the party whose life is insured, or by assignment of the policy after it is issued. If, however, the interest is of a definite character, as that of a creditor of the insured, or of one who may from the life of the insured reap some pecuniary advantage of a definite nature, the interest of the holder of such policy will be limited to the amount of such liability at the death of the insured, together with such amount as he has paid to preserve the policy, with interest thereon, and the remainder will be given to the estate of the party insured. Price v. Knights of Honor, 68 Texas, 361; Schonfield v. Turner, 75 Texas, 324; Ins. Co. v. Hazlewood, 75 Texas, 338; Goldbaum v. Blum, 79 Texas, 638. If the in- 38 CHEEVES V. J. H. ANDERS [CHAP. II terest of the policy holder should cease before the death of the insured, or if the debt and premiums advanced should be paid, then the whole of the policy will go to the estate of the insured. When an insurance company has issued a policy upon the life of a person, paj-able to one who has no insurable interest in the life insured, or when a policy has been assigned to one having no such interest, the insurance com- })auy must nevertheless paj'^ the full amount of the policy, if otherwise liable, because it has so contracted, and it is no concern of the insurer as to who gets the proceeds, except to see that it is paid to the proper parties under its agreement. It is simply required to perform its contract, and the law will dispose of the money according to the rights of the parties, Ins. Co. v. Williams, 79 Texas, G37, and authorities cited. This rule does no wrong to the insurance company. It having agreed to pay the money on the death of a named person, ought not to be permitted to avoid liability upon its contract upon the ground that it has made an unlaw- ful agreement, when that contract can be enforced in favor of a person who is in nowise concerned in the unlaAvful part of the transaction. It is held by the courts of this and other States, that when one secures a policy upon his own life and transfers it to another who has no insurable interest, the want of insurable interest cannot be set up as a defense by the insurance company; the policy or the assignment is not void as to the insurance company, but will be enforced. If this be correct, then why should it be said that the policy issued by the company contrary to law should be held void as to it? The reason would seem to be equally strong to enforce the contract in favor of one who was entirely innocent of participation, as in favor of him who voluntarily places the insurance in the name of one who cannot lawfully receive it. If the insurance company may set up the illegality of such a contract, then the object of the law will be frustrated and the making of •such unlawful agreements by insurance companies will be encouraged, for they would thus be enabled to reap the benefit, without incurring the risk of such business. If the insurer is held liable, and the payee in a pohcy is denied its benefits when unlawfully obtained, both parties to the unlawful contract will be denied relief, and the beneficial objects of insurance upon the life be attained by giving the benefits to the estate of the insured, and no inducement will be offered to destroy the life upon which the risk is placed. It is generally held, that where one having an interest in the life of another obtains a policy upon such life, and the interest ceases before death, the per- son named in the contract as payee or the assignee of such policy may main- tain suit against the insurance company, Ins. Co. v. Allen, 138 Mass. 24; Ins. Co. V. Schafer, 94 U. S. 457; McKee v. Ins. Co., 28 Mo. 383. These cases do not determine as to how the proceeds shall be distributed, and are not in conflict with the former decisions of this court. It has, however, been held that where the interest existed at the time of making the contract, but ceased before death, the person to whom the policy is made payable may re- cover and hold the entire amount of the policy as against the claim of the representatives of the insured, Scott r Dickson, 108 Pa. St. 6; Rittler v. CHAP. Il] CHEEVES V. J. H. ANDERS 39 Smith, 70 Md. 261; Amick v. Butler, 111 lad. 578. This we regard a^ op- posed to the paramount reason for holding such insurance to be unlawful, that is, the danger in offering an inducement to destroy human life. If the inhibition against such transactions be that they arc considered wagering contracts, as appears to be the ground upon which the decisions cited are placed, it is consistent to hold as in the cas(« quoted. If, however, the mak- ing of such agreements be j)laced upon the ground that it is against public policy for one to be interested in the death of another when he has no interest in the continuance of his life, the decisions cannot be sustained upon principle. The want of insurable interest is just as absolute where it has ceased as where t never existed, and the hulucement to destroy the life insured, for gain, is |ust as strong in one case as in the other. We cannot disregard the sound principles established by our courts and follow a line of decisions to the con- trary, ho^wever eminent the courts or numerous the cases. We therefore hold that in this case the interest which Cheeves may have had in the policy as partner, aside from his interest which was joint with Chilton and therefore belonged to the partnership, ceased at the dissolution of the firm, and will not sustain his claim to the proceeds of this policy. The language of the assignment made by Chilton to Cheeves is sufficient to convey to the latter all the interest of the firm in this policy. This brings us to the inquiry as to what interest the firm of Cheeves & Chilton had in this policy at the date of the dissolution. We will not undertake to enumerate the different phases of facts in which the firm might be interested in such a policy, nor when it might be regarded as assets of the firm for the whole amount. It is sufficient to saj' that no such state of facts is alleged as gives to the firm such right, nor to the claim- ant Cheeves any right by reason of a liabihty for the debts of the firm. The answer shows that Chilton did not owe the firm any remaining debt, and that the property was more than sufficient to pay all firm debts, for Cheeves assumed all such debts, and in addition paid to Chilton several thousand dollars for his interest therein. The firm had no right to the policy as such. The answer, however, does allege that the premiums upon the policy to amount of $1,180 were paid by the firm out of its assets, and this would create a charge upon this policy in favor of the firm, with the right to be re- imbursed with interest, out of the proceeds of the policy, the same as if it had been paid by a creditor whose debt had been paid, or when the debt was lot equal to the amount named in the policy. This right existed in the firm at dissolution, and by the transfer of Chilton passed to Cheeves. The facts upon which the right arises are alleged in the answer, and there is a prayer for general relief, which was sufficient to entitle Cheeves to what- ever the law would accord him upon the alleged facts. It was error to sus- tain the general demurrer to this answer because it showed a right in the defendant Cheeves to some relief, although not to the whole amount in con- troversy. The insurance company does not complain of the judgment, and it will be affirmed as to the New York Life Insurance Company. Because of the error 40 CHEEVES V. J. H. ANDERS [CHAP. II of tlie District Court in sustaining a deniurrer to the answer of T. A. Cheeves, and the error of the Court of Civil Appeals in failing to reverse said judgment for that error, the judgments of both courts are reversed as to plaintiff J. H. Anders, administrator of L. B. Chilton, and defendant Cheeves, and this cause is remanded to the District Court for further proceedings in ac- cordance with this opinion, to ascertain the rights of the said Anders, ad- ministrator, and Cheeves in the proceeds of said policy. Reversed and remanded.^ ' Morris v. Georgia L. S. & B. Co., 109 Ga. 12, 34 S. E. 378, 46 L. R. A. 506; Strobe V. Meyer Bros. Drug Co., 101 Mo. App. 627, 74 S. W. 379. P.\YEE8, Assignees. — By the prevailing rule, a person taking out insurance on his own life may lawfully designate any person as beneficiary, whether such beneficiary have an insurable interest or not, Allen v. Hartford L. Ins. Co., 72 ConH. 693, 45 Atl. 955; Union Fraternal League v. Walton, 109 Ga. 1, 34 S. E. 317, 77 Am. St. R. 350, 46 L. R. A. 424; Reed v. Prov. Sav. L. Assur. Soc, 190 N. Y. 111. Contra, see Crotty V. Union Mut. Ins. Co., 144 U. S. 621, 623, 12 S. Ct. 749, 36 L. Ed. 566; GUbert v. Moose, 104 Pa. St. 74, 78, 49 Am. Rep. 570. In like manner, under the prevailing rule, many courts have held that a person taking out insurance upon his own life may subsequently assign the policy in good faith to anyone, either for value or by way of gift, whether the assignee have an insurable interest or not, Gordon v. Ware Nat. Bk., 132 Fed. 444; Rylander v. Allen, 125 Ga. 206, 53 S. E. 1032; Mut. Life Ins. Co. v. Allen, 138 Mass. 24, 52 Am. Rep. 245; Steinbach v. Diepenbrock, 158 N. Y. 24, 52 N. E. 662. 44 L. R. A. 417, 70 Am. St. R. 424. Contra, see Warnock v. Davis, 104 U. S. 775, 26 L. Ed. 924; U. B. Mut. Aid Soc. v. McDonald, 122 Pa. St. 324, 15 Atl. 439, 1 L. R. A. 238, 9 Am. St. R. 111. When Must Insurable Interest Exist. — If a marine policy is taken out in good faith and an interest exists at the time of loss, it is not essential that any interest should have been actually acquired at the time of the issuance of the policy, Boston Ins. Co. V. Globe Fire Ins. Co., 174 Mass. 229, 54 N. E. 543, 75 Am. St. R. 303; Barnes v. L. E. & G. L. Ins. Co., L. R. (1892) 1 Q. B. D. 864. The same rule should be applicable to fire insurance. Sun Ins. Office v. Merz, 64 N. J. L. 301, 45 Atl. 785, 52 L. R. A. 330; Boston Ins. Co. v. Globe Fire Ins. Co., 174 Mass. 229, 54 N. E. 543, 75 Am. St. R. 303; Davis V. New England F. Ins. Co., 70 Vt. 217, 39 Atl. 1095, although it has often been declared with reference to fire insurance that an insurable interest must exist at the time of making the contract as well as at the time of loss, Sadler's Co. v. Babcock, 2 Atk. 554, 556; Carpenter v. Prov. Wash. Ins. Co., 16 Pet. (U. S.) 495, 503, 10 L. Ed. 1044; Ohio Farmers' Ins. Co. v. Vogel, 30 Ind. App. 281 (1903), 65 N. E. 1056; Clinton V. Norfolk Mut. F. Ins. Co., 176 Mass. 486, 489, 57 N. E. 998, 50 L. R. A. 833, 79 Am. St. R. 325. If a policy of life insurance is valid when taken out, for instance by a creditor, on the life of the debtor, the cessation of interest will not invalidate the policy. Conn. Mut. Life Ins. Co. v. Schaefer, 94 U. S. 457, 24 L. Ed. 251 ; Amick v. Butler, 111 Ind. 578, 12 N. E. 518, 60 Am. St. R. 722. TEMPOR.A.RY Suspension Does Not Avoid. — If there is no provision in the contract prohibiting a change of interest, a temporary suspension of the interest of the insured does not vitiate a policy of insurance, but only suspends its operation. Lane v. Maine Mut. Fire Ins. Co., 12 Me. 44, 28 Am. Dec. 150; Clinton v. Norfolk Mut. F. Ins. Co., 176 Mass. 486, 57 N. E. 998, 79 Am. St. R. 325. Insurance Does Not Always Grant Full Indemnity. — Only such damages as are caused proximately by the specified perils are covered by the policy, Cline v. Western Assur. Co., 101 Va. 496, 498, 44 S. E. 700. This doctrine excludes, for ex- ample, the incidental loss of trade, or of the use of a building or a ship while being re- paired, or of prospective profits. Where, however, the parties do in fact expressly take into their account these more remote items of damage they may make them the subject of a valid insurance. Thus, the loss of use and occupation, Tanenbaum v. CHAP. Il] SMITH V. SCOTT 41 SMITH V. SCOTT Court of Common Pleas, 1811. 4 Taunt. 126 Effect of negligence of the assured or others contributing to the loss. This was an action upon a policy of insurance upon the ships Helena and Merlin, at and from the bay of Honduras to their port or ports of discharge in Great Britain, and a loss was averred to have happened to the Helena by circumstance, that, while she was proceeding on her voyage, a certain other ship on the high seas, by and through the force of the winds and waves, was carried and sailed against the Helena, without any neglect or default of the persons on board the Helena, and the Helena became lost and stranded by the perils of the seas. Upon the trial of the cause, at the London sittings, after Trinity term 1811, before Mansfield, C. J., the evidence was, that a ship named the Margaret ran foul of the Helena by the grossest neglect; for when, upon the shock being given, some of the Helena's crew went on board the Margaret, they found only one man on the deck, and he was asleep. Hereupon it was objected by the counsel for the defendant, that the occasion of the injury was not the perils of the seas, but the gross negligence of the crew of the Margaret, and that this was a fatal variance from the loss averred. The jury, however, found a verdict for the plaintiff, subject to this point, which the chief justice reserved. Accordingly, Lens, Serjt., on this day moved for a rule nisi to set aside the verdict and enter a nonsuit, adding that the plaintiff had his remedy against the owners of the Margaret. Mansfield, C. J. I do not know how to make this out not to be a peril of the sea. What drove the Margaret against the Helena? The sea. What was the cause that the crew of the Margaret difl not prevent her from run- ning against the other? Their gro.ss and culpable negligence; but still the sea did the mischief. It is reasonable enough that the plaintiffs should per- mit the defendant to use their names as plaintiffs against the owners or crew of the Margaret, so as to recover whatever the plaintiffs would be entitled to as against the Margaret, and to apply it in diminution of their loss; but it would lead to endless discussion if it were required that no cause except the cause of loss alleged in the declaration should be conducive to the loss. Heath, J. If this doctrine were to prevail, it might go still further, and Simon. 81 N. Y. Supp. 655, 40 Misc. 174, aff'd 84 App. Div. 642; or expected profits, PatapBco Ins. Co. r. Coulter. 3 Pet. (U. S.) 222, 7 L. Ed. 659, may be specifically in- sured as such and frequently is. 42 SMITH V. SCOTT [CHAP. II it might be contended that, if a master conducts his ship so unskillfuUy as to run it on a rock, that is not a peril of the sea, but a peril of the unskillfulness of the master. Rule refused.^ 1 Union Ins. Co. v. Smith, 124 U. S. 405, 8 S. Ct. 534; Gove v. Farmers' Mutual Fire Ins. Co., 48 N. H. 41, 97 Am. Dec. 572; Mathews v. Howard Ins. Co., 11 N. Y. 21; Holdsworth v. Wise, 7 B. & Cr. 794 (captain negligently sailed home in leaky ship); Dixon v. Sadler, 5 M. & W. 405, 8 id. 895 (captain negligently but not bar- ratrously heaved ballast overboard causing wreck) ; Busk v. Royal Exchange Assur. Co., 2 B. & Aid. 72 (negligence of mate is not extinguishing fire); Walker v. Maitland 5 B. & .\ld. 171 (seamen all asleep); Bishop v. Pentland, 7 B. & Cr. 219 (gross neglect of mate in not using rope strong enough to fasten boat to pier) ; Redman v. Wilson, 14 M. & W. 476 (unskillful loading on home voyage) ; Davidson v. Burnand, L. R. 4 C. P. 117 (damage by sea water from leaving machinery valves open). Insurance is not void on the ground that it encourages negligence; and this is the rule even in the case of a liability policy running in favor of a common carrier, Trenton Pass. Ry. Co. v. Guarantors', etc., Indem. Co., 60 N. J. L. 246, 37 Atl. 609, 44 L. R. A. 213. Rule of Indemnity Qualified in Marine — Insured When a Coinsurer. — The rules of recovery applicable to fire and marine insurance, respectively, differ in an important particular. In fire, in the absence of a coinsurance clause, or other express restriction, the assured recovers his damage up to the amount of the insurance, but in marine, where the assured is insured for an amount less than the insurable value, or, in the case of a valued policy, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of the uninsured balance, Egan v. Ins. Co., 193 111. 295, 61 N. E. 1081; Western Ins. Co. v. Southwestern Transp. Co., 68 Fed. 923; Nicolet v. Ins. Co., 3 La. 366, 23 Am. Dec. 458; Natchez, etc., Co. v. Louisville Underwriters, 44 La. Ann. 714, 11 So. 54. Thus, if a man takes out fire insurance for $5,000 on furniture worth $10,000, and a loss of S2,500 occurs, he may recover his loss in full; but if he has marine insurance for $5,000 on his cargo worth $10,000, which sustains a loss of $2,500, he will recover only $1,250. So also, if a ship worth $100,000 is insured for $10,000 only, by ten underwriters, each subscribing for $1,000, and a loss of $500 occurs, each underwriter wiU be liable only for $5.00. Nine-tenths of the loss will fall upon the insured, although his aggre- gate insurance largelj' exceeds the amount of loss. Double Insurance CoNTumuTioN. — Growing out of the doctrine of indemnity is the rule that where the assured is overinsured by double insurance, each insurer is bound as between himself and the other insurers to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. Doming v. Merchants' Cotton, etc., Co., 90 Tcnn. 306, 350, 17 S. W. 89. Where two or more policies are effected on behalf of the assured on the same risk and interest, or any part thereof, and the sums insured exceed the indemnity allowed by law, the assured is said to be overinsured by double insurance, Cal. Ins. Co. v. Union Compress Co., 133 U. S. 387, 420, 10 S. Ct. 365, 33 L. Ed. 730. Except for the usual contract limitation called the contribution or pro rata clause, the insured might recover his loss in frll against any of the coinsurcrs, but not exceeding the amount of the policy, leaving tlie insurers to apportion the lf)ss by subsequent contribution among themselves, Wiggin V. Suffolk Ins. Co., 18 Pick. (Mass.) 145. Such circuity of action is prevented by the usual contribution clause of the fire policy. The doctrine of double insurance con- tribution is not applicable to the ordinary life insurance policy, payable to the in- sured or his relatives. As before stated, the law has prescribed no method for ascer- taining the value of a human life. Hence no matter how many policies, no matter how great the amount of insurance, existing at the time of the death of the assured, the fact of overinsurance cannot be established. Where, however, the value of the insured interest is ascertainable, as, within the views of some tribunals, is the case CHAP. IlJ SUFFOLK FIRE INS. CO. V. BOYDEN 43 THE SUFFOLK FIRE INS. CO. AND ANOTHER v. BOYDEN Supreme Judicial Court of Massachusetts, 1864. 91 Mass. 123 Subrogation — Insurance by a mortgagee for his own benefit. Bill in equity by the in.suruncc company to be subrogated to the rights and remedies of the insured under the mortgage upon payment of the loss under the poHcy of fire insurance. The mortgagee insured his interest eo nomine, at his own ex})cnsc, and for his own benefit. Hoar, J. We do not think it expedient or desirable to revise the case of King V. State Ins. Co., 7 Cush. 1, or to restate the argument so fully presented by the late chief justice in giving the opinion of the court. That case was very fully considered; and although it has been subjected to some adverse criticism, we find no reason for dissatisfaction with its principles or conclu- sions. On the contrary, the objections which have been urged against it seem to us to rest upon misapprehension, and we think that the doctrines there stated are and ought to be the settled law of this commonwealth. It was decided upon the ground that an insurance by a mortgagee of his interest in the mortgaged property is not an insurance of the debt, although the amount of the debt is the measure of his insurable interest in the property. There is no privity of contract between the insurer and the mortgagor, but each has a contract with the mortgagee separate and indejicndcnt from the other. The mortgagee cannot charge to the mortgagor the premiums which he pays for insurance; and it is conceded that e converse, the mortgagor can derive no benefit from the insurance in case of loss, White v. Brown, 2 Cush. 416. But why should not the mortgagor have the benefit of the insurance? The equitable argument in his favor would seem to be at least as strong as that in favor of allowing the insurer the advantage of a subrogation of the debt. The whole interest of the mortgagee in the property, in its inception, and while it continues, is only for the purpose of indemnity. He takes it as a security from which he may recover what is due to him, if the debt is not paid. If the insurer pays a loss by fire, equal to the whole debt, the mort- gagee receives, through his title to the property held as a security, the amount of his debt, excepting only the premium i^aid, which may be a very trifling proportion of it. The mortgagor has lost the same amount. Why should not the mortgagor pay the premium and be entitled to treat the debt as canceled? The sufficient answer is, because the insurance is a wholly col- lateral contract, which the law allows the mortgagee to make, and with the result of which the mortgagor has no concern. The whole consideration pro- with creditor insurance, it ha.s been held that other insurance must be brouRht into the account, and recovery limited to the loss actually sustained by the creditor, Hcbdon V. West, 3 Best & Smith. 579. 44 SUFFOLK FIRE INS. CO. V. BOYDEN [CHAP. II ceeds from the mortgagee. If there is no loss by fire, he loses the whole amount of premiums paid, without any claim upon the mortgagor for com- pensation. The premiums paid are intended to be a just equivalent for the sum to be received on the happening of the contingent event. The larger sum to be received if the event happens, is fixed in a just proportion to the chances that it will not happen, and that the premium will have been paid 'vithout any return. It would be manifestly unjust that the mortgagor ,sI:ould have the advantage of an indemnity, when he has borne no part of '.le expense of obtaining it. On the other hand, the insurer has received a full equivalent for the loss which he is called on to pay. Why should he receive his premium, and sub- ject the mortgagee to the loss of it if no fire occurs, giving him no correspond- ing advantage in case a fire happens? The debt, as between the insurer and the mortgagee is as purely a collateral contract as is the insurance when con- sidered in relation to the mortgagee and the mortgagor. It is urged that in- surance is a contract of indemnity. But what is an indemnity must be de- termined by a correct application of the word to the subject-matter. The insurance is against a loss by fire of property in which the insured has, at the time of the insurance and at the time the loss happens, an insurable interest. If the insurer pays no more than the value of the property destroyed, no more than the sum insured upon it, and no more than the interest of the in- sured at the time of the loss, he pays no more than an indemnity under his contract. That the loss may, by means of other contracts of a collateral character, or indirectly, give the insured an advantage, is of no consequence. Could there be a more exact indemnity in any case of loss b}'' fire, than if the insurer should replace the propertj'' burned when its value does not exceed the sum insured, nor the insurable interest of the holder of the poHcy? Yet, what claim would the insurer who should rebuild have to an assignment to him of the mortgage debt? Again, there are incidents to a mortgagee's estate, which may give him, as the proceeds of his mortgage, a larger value than his mere debt. He may foreclose his mortgage, and thus acquire an absolute title to property of far greater value than the amount due him. But, without extending the discussion, it is sufficient to say, that the doc- trine which we now reaffirm was one of the grounds upon which the decision in King v. State Ins. Co. was expressly made to rest; that the conclusion that the insurer has no interest in the mortgage debt, is as decisive against his claim in equity as at law; and that if the title of the insured was that of a mortgagee, it is immaterial whether it was insured eo nomine or otherwise. The agreement in the policies that in case of the payment of a loss the in- sured will assign to the insurers "all his rights to recover satisfaction therefoi from any other person or corporation," does not affect this case, because the mortgage debt is not in any sense a right to recover satisfaction for the loss by fire. Bill dismissed with costs .^ ' The view in most jurisdictions seems to be at variance with that of the Massa- thusetts court, Carpenters. The Providence Washington Ins. Co., 16 Pet. (L. S.) 495, CHAP. Il] CASTELLAIN V. PRESTON 45 CASTELLAIN v. PRESTON Court of Appeal, 1883. L. R. 11 Q. B. D. 380 Whether the insurer on paying the insured under the policy is entitled to be szib- rogatcd to contract rights.^ Appeal of the plaintiff from the judgment of Chitty, J., in favor of the defendants. The plaintiff sued on behalf of the Liverpool and London and Globe In- surance Companj^, to recover a sum, £330 with interest since the 25th of September, 1878. On the 25th of March, 1878, the defendants, as owners of certain lands and buildings in Liverpool, effected an insurance on the build- ings against loss by fire, and they kept the policy on foot by payment of the premiums until after the fire hereinafter mentioned occurred. The policy was in the usual form, giving the insurers the option of reinstating the prop- erty. On the 31st of July, 1878, the defendants contracted to sell the land and the buildings to their tenants, Messrs. Rayner, for the sum of £3,100, and they received a deposit. The contract provided that the time of the 10 L. Ed. 1044; Excelsior Ins. Co. v. Royal Ins. Co., 55 N. Y. 343, 359, 14 Am. Rep. 271 ; Thomas v. Montauk Ins. Co., 43 Hun (N. Y.), 218; Norwich F. Ins. Co. v. Boomer, 62 111. 442, 4 Am. Rep. 618; Dick v. Franklin Fire Ins. Co., 10 Mo. App. 384. aff'd 81 Mo. 103; Bound Brook Fire Ins. Co. v. Nelson, 41 N. J. Eq. 485. Where the mort- gagor has any interest in the policy, either by payment of premiums or by agreement with the mortgagee, there will be no subrogr.tion in favor of the insurers, for the latter take only such rights as the assured can give, Pearman v. Gould, 42 N. J. Eq. 4, 5 Atl. 811; Kernochan v. N. Y. Bowery Fire Ins. Co., 17 N. Y. 441; Louden v. Waddle. 98 Pa. St. 242. ' Subrogation — Other Contract Rights. — The doctrine of subrogation in favor of an insurer is easily applied where the claim for ultimate liability is directed against a tort feasor who ought equitably to be held responsible for a loss which he has caused, Stoughton V. Gas Co., 165 Pa. St. 428, 30 Atl. 1001. Thus, the United States Supreme Court says: "In fire insurance as in marine insurance, the insurer, upon paying to the assured the amount of a loss of the property insured, is doubtless subrogated in a corresponding amount to the assured's right of action against any other person re- sponsible for the loss. But the right of the insurer against such other person does not rest upon any relation of contract or of privity between them. It arises out of the nature of the contract of insurance as a contract of indemnity, and is derived from the assured alone, and can be enforced in his right only. By the strict rules of the common law, it must be asserted in the name of the assured. In a court of equity or admiralty, or under some State codes, it may be asserted by the insurer in his own name; but in any form of remedy the insurer can take nothing by subrogation but the rights of the as- sured, and if the assured has no right of action, none passes to the insurer," St. Louis, I. M. & S. Ry. Co. V. Commercial Union Ins. Co.. 139 U. S. 223, 235, 11 S. Ct. 554. 35 L. Ed. 154; but where the underwriter, without express stipulation in the policy, asks to be subrogated to contract rights belonging to the insured against third parties, the questions presented are difficult of solution, and the views of the courts are con flicting. 46 CASTELLAIN V. PRESTON [CHAP. II completion should be such day within two years from the date as the vendors should name. On the 15th of August in the same year, a fire occurred, damaging part of the buildings. A claim was made on behalf of the defendants, and after negotiation as to the sum to be paid, the amount of the claim was ultimately fixed at £330, and that sum was in fact paid on the 25th of September, 1878, by the insurers, who were at that time ignorant of the existence of the con- tract for sale. On the 25th of March, 1879, the defendants named the 5th of May as the day of completion, and on the following 12th of December the conveyance was executed and the balance of the purchase money paid.^ Brett, L. J. In this case the action is brought by the plaintiff as represent- ing an insurance company against the defendants, in respect of money which has been paid by that company to the defendants on account of the loss by fire of a building. The defendants were the owners of property consisting partly, at all events, of a house, and the defendants had made a contract of sale of that property with third persons, which contract, upon the giving of a certain notice as to the time of payment, would oblige those third persons, if they fulfilled the contract, to pay the agreed price for the sale of that prop- erty, a part of which was a house, and according to the peculiarity of such a sale and purchase of land or real property the vendees would have to pay the purchase money, whether the house was, before the date of payment, burnt down or not. After the contract was made with the third persons, and be- fore the day of payment, the house was burnt down. The vendors, the de- fendants, having insured the house in the ordinary form with the plaintiff's company,^ it is not suggested that, upon the house being burnt down, the defendants had not an insurable interest. They had an insurable interest, as it seems to me; first, because they were at all events the legal owners of the property; and, secondly, because the vendees or third persons might not carry out the contract, and if for any reason they should never carry out the contract, then the vendors, if the house was burnt down, would suffer the loss. Upon the happening of the fire the defendants made a claim on the insurance company represented by the plaintiff, and were paid a certain sum which represented the damage done to the house. After that, the con- 1 Observe that at the time of settlement and payment under the policy of insurance any right of subrogation to the purchase money had not yet accrued. If in order to let in a right of subrogation, a settlement between the in.surers and the insured may be opened within two years, may such a settlement for like purpose be opened at any time within ten years or twenty years? 2 If an executory vendor intends by his fire insurance to cover both the interest of himself and of the executory vendee he is at liberty to do so provided the phraseology of the policy sufficiently indicates that intention, Ins. Co. v. Updegraff, 21 Pa. St. 513; Keefer v. Phojnix Ins. Co., 26 Ontario App. 277. But if the policy fails to indicate that intention and insures the vendor as the sole party in interest then it is obvious that by extending the benefit of the insurance to a third party without the consent of the in- surance company the vendor would be acting counter to the express warranties con- tained in the New York standard and similar policies, cither the warranty of sole and unconditional ownership, or the warranty against change of interest. CHAP. Il] CASTELLAIN V. PRESTON 47 tract of sale between the defendants and the third persons, the vendees of the property, was carried out, and the full amount of the purchase money was paid by the third persons to the defendants notwithstanding the fire.' Under those circumstances, the plaintiff representing the insurance company brings this action; I do not say that he brings it to recover back the money which has been paid by the insurance company (for that expression of opin- ion would rather interfere with the form of the action), but he brings the action in respect of that money. 1 ie question is whether this action is maintainable. The case was tried before Chitty, J., and he in a very careful and elaborate judgment (8 Q. B. D. 613) has come to the conclusion that the insurance company cannot re- cover against the defendants in respect of the money paid by them. It seems to me that the foundation of his judgment is this, that he considers that the doctrine of subrogation of the insurer into the position of the assured is con- fined within limits which prevent it from extending to the present case. I must now consider whether I can agree with him. In order to give my opinion upon this case, I feel obliged to revert to the very foundation of every rule which has been promulgated and acted on by the courts with regard to insurance law. The very foundation in my opinion, of every rule which has been applied to insurance law is this: namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. That is the fundamental principle of insurance; and if ever a proposition is brought forward which is at variance with it — that is to say, which either will prevent the assured from obtaining a full indemnit}', or which will give to the assured more than a full indemnity — that proposition must certainly be WTong.* In the course of this discussion many propositions and rules well known in insurance law have been glanced at. For instance, to speak of marine insur- ance, the doctrine of a constructive total loss originated solely to carry out the fundamental rule which I have mentioned. It was a doctrine introduced for the benefit of the assured; for, as a matter of business, a constructive total loss is equivalent to an actual total loss; and if a constructive total loss could not be treated as an actual total loss, the assured would not reco\er a full indemnity. But grafted upon the doctrine of constructive total loss came the doctrine of abandonment, which is a doctrine in favor of the insurer or underwriter, in order that the assured may not recover more than a full indemnity. The doctrine of constructive total loss, and the doctrine of notice of abandonment ingrafted upon it, were invented or promulgated for the purpose of making a policy of marine insurance a contract of indemnity ' As to whether the purchaser was obliged to complete the purchase, see Phinizy p. Guernsey, 111 Ga. 346, 36 S. E. 796, 78 Am. St. R. 207, 50 L. R. A. 680; Wells r. Calnan, 107 Mass. 514; Sewcll v. Underhill, 197 N. Y. 168. * The court does not allude to the well established rule that when marine insur- ance 18 short of value, the insured becomes a coinsurer. 48 CASTELLAIN V. PKESTON [CHAP. II in the fullest sense of the term. I may point out that the doctrine of notice of abandonment is most difficult to justify upon principle; it was introduced rather as a matter of justice in favor of the underwriters, so as to prevent the assured from obtaining by fraud more than a full indemnity. That doctrine is to a certain extent technical; that is to say, although the assured has in reality suffered a constructive total loss, and although he is upon general principles entitled to recover, nevertheless he must fail unless he has given a notice of abandonment. I suppose that the doctrine of notice of abandon- ment was originally introduced by meroiiants and underwriters, and after- wards adopted as part of the law as to marine insurance; but at first sight it seems a mere encroachment of the judges. I have mentioned the doctrine of notice of abandonment for the purpose of coming to the doctrine of subrogation. That doctrine does not arise upon any of the terms of the contract of insurance; it is only another proposition which has been adopted for the purpose of carrying out the fundamental rule which I have mentioned, and it is a doctrine in favor of the underwriters or insurers, in order to prevent the assured from recovering more than a full indemnity; it has been adopted solely for that reason. It is not, to my mind, a doctrine applied to insurance law on the ground that underwriters are sureties. Underwriters are not always sureties. They have rights which sometimes arc similar to the rights of sureties, but that again is in order to prevent the assured from recovering from them more than a full indemnity. But it being admitted that the doctrine of subrogation is to be applied merely for the purpose of preventing the assured from obtaining more than a full indemnity, the question is, whether that doctrine as applied in insur- ance law can be in any way limited. Is it to be limited to this, that the underwriter is subrogated into the place of the assured so far as to enable the underwriter to enforce a contract, or to enforce a right of action? Why is it to be limited to that, if when it is limited to that, it will in certain cases enable the assured to recover more than a full indemnity? The moment it can be shown that such a limitation of the doctrine would have that effect, then, as I said before, in my opinion, it is contrary to the foundation of the law as to insurance, and must be wrong. And, with the greatest deference to my Brother Chitty, it seems to me that that is the fault of his judgment. He has by his judgment limited this doctrine of subrogation to placing the insurer in the position of the assured only for the purpose of enforcing a right of action, to which the assured may be entitled. In order to apply the doctrine of subrogation, it seems to me that the full and absolute meaning of the word must be used, that is to say, the insurer must be placed in the position of the assured. Now it seems to me that in order to carry out the fundamental rule of insurance law, this doctrine of subrogation must be carried to the extent which I am now about to endeavor to express, namely, that as between the underwriter and the assured the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being iDsisted on or already insisted on, or in any other right, whether by way of CHAP. Il] CASTELLAIN V. PRESTON 49 condition or otherwise, legal or equitable, which can be or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer in the name of the assured, by the exercise or acquiring of which right or condition the loss against which the assured is insured, can be or has been diminished. That seems to me to put this doctrine of subrogation in the largest possible form, and if in that form, large as it is, it is short of fulfilling that which is the fundamental condition, I must have omitted to state something which ought to have been stated. But it will be observed that I use the words "of every right of the assured." I think that the rule does require that limit. In Burnand v. Rodocanochi, 7 Ap]). Cas. 333, the foundation of the judgment to my mind was, that what was paid by the United States Government could not be considered as salvage, but must be deemed to have been only a gift. It was only a gift to which the assured had no right at any time until it was placed in their hands. I am aware that with regard to the case of reprisals, or that which a person whose vessel has been captured got from the English Government by way of reprisal, the sum received has been stated to be, and perhaps in one sense was, a gift of his own Government to himself, but it was always deemed to be capable of being brought within the range of the law as to insurance, because the English Government invariably made the "gift," so invariably that as a matter of business it had come to be considered as a matter of right. This enlargement, or this explanation, of wliat I consider to be the real meaning of the doctrine of subrogation, shows that in my opinion it goes much further than a mere transfer of those rights which may at any time give a cause of action either in contract or in tort, because if upon the happening of the loss there is a contract between the assured and a third person, and if that contract is immediately fulfilled by the third person, then there is no right of action of any kind into which the insurer can be subrogated. The right of action is gone; the contract is fulfilled. In like manner, if upon the happening of a tort the tort is immediately made good by the tort feasor, then the right of action is gone; there is no right of action existing into which the insurer can be subrogated. It will be said that there did for a moment exist a right of action in favor of the assured, into which the insurer could have been sub- rogated. But he cannot be subrogated into a right of action until he has paid the sum insured and made good the loss. Therefore innumerable cases would be taken out of the doctrine, if it were to be confined to existing rights of action. And I go further and hold that if a right of action in the assured has been satisfied, and the loss has been thereby diminished, then, although there never was nor could be any right of action into which the insurer could be subrogated, it would be contrary to the doctrine of subrogation to say that the loss is not to be diminished as between the assured and the insurer by reason of the satisfaction of that right. I fail to see at present, if the present defendants would have had a right of action at any time against the purchasers, upon which they could enforce a contract of sale of their property whether the building was standing or not, why the insurance company should not have been subrogated into that right of action. But I am not prepared 4 50 CASTELLAIN V. PRESTON [CHAP. II to say that they could be, more particularly as I understand my learned brother, who knows much more of the law as to specific performance than I do, is at all events not satisfied that they could. I pass by the question without solving it, because there was a right in the defendants to have the contract of sale fulfilled by the purchasers notwithstanding the loss, and it was fulfilled. The assured have had the advantage, therefore, of that right; and by that right, not by a gift which the purchasers could have declined to make, the assured have recovered, notwithstanding the loss, from the purchasers, the very sum of money which they were to obtain whether this building was burnt or not. In that sense I cannot conceive that a right, by virtue of which the assured has his loss diminished, is not a right which, as has been said, affects the loss. This right, which was at one time merely in contract, but which was afterwards fulfilled, either when it was in contract only, or after it was fulfilled, does affect the lose; that is to say, it affects the loss by enabling the assured, the vendors, to get the same money which they would have got if the loss had not happened. ^ While I am applying the doctrine of subrogation which I have endeavored to enunciate, I think it due to Chitty, J., to point out what passages in his judgment require some modification. I find him readiing this passage: "I know no foundation for the right of underwriters, except the well-known principle of law, that where one person has agreed to indemnify another, he will, on making good the indemnity, be entitled to succeed to all the ways and means by which the person indemnified might have protected himself against or reimbursed himself for the loss." That is a quotation from Lord Cairns, in Simpson v. Thomson, 3 App. Cas. 284. The learned judge then goes on: "What is the principle of subrogation? On payment the insurers are entitled to enforce all the remedies, whether in contract or in tort, which the insured has against third parties, whereby the insured can compel such third parties to make good the loss insured against." That is, as it seems to me, to confine this doctrine of subrogation to the principle that the insurers are entitled to enforce all remedies, whether in contract or in tort. I should venture to add this: "And if the assured enforces or receives the advantage of such remedies, the insurers are entitled to receive from the assured the advantage of such remedies." Then, when we come to this illustration, "Where the landlord insures, and he has a covenant by the tenant to repair, the insurance office, on payment in like manner, succeeds to the right of the landlord against his tenant;" I would add this: "And if the tenant does repair, the insurer has the right to receive from the assured a benefit equivalent to the benefit which the as.sured has received from such repair." Then, dealing with the case of Burnand v. Rodocanochi, 7 App. Cas. 333, the learned judge cites the opinion of Bramwell, L. J. He says that Bramwell, L. J., in his judgment ' But the selling price and the actual value of the property sold are not necessarily the same. Vendors often fall into bad bargains. Assume that the selling price of the property and the insurance money or, say, a portion of the insurance money combined do not exceed the fair value of the property before the fire loss. Shall the doctrine of subrogation be so applied as to defeat the indemnity stipulated for? CHAP. Il] CASTELLAIN V. PRESTON 51 held that it was not salvage, but "that in the circumstances the sum received by the ship-owner was but a pure gift, and there was no right on the part of the insurers to recover any part of it over against him." I, for myself, venture to add this as the reason: "Because there was no right in the assured to de- mand the compensation from the American Government." There was no right to demand it; it was bestowed and received as a pure gift. Darrell v. Tibbitts, 5 Q. B. D. 5G0, seems to me to be entirely in favor of the plaintiff in this case. I shall not retract from the very terms which I used in that case. It seems to me that in Darrell v. Tibbitts the insurers were not subrogated to a right of action, or to a remedy. They were not subrogated to a right to enforce the remedy, but what they were subrogated into was the right to re- ceive the advantage of the remedy which had been applied, whether it had been enforced, or voluntarily administered by the person who was bound to administer it. That seems to me to be the doctrine. Then with regard to the passage: "The doctrine is well established that where somethmg is insured against loss, either in a marine or a fire policy, after the assured has been paid by the insurers for the loss, the insurers are put into the place of the assured with regard to every right given to him by the law respecting the subject- matter msured," I wish to explain that that was a distinct clause, and it was so intended by me when I stated it. I then mentioned contracts: "And with regard to every contract which touches the subject-matter insured, and which contract is affected by the loss or the safety of the subject-matter insured by reason of the peril insured against." I fail to conceive any contract which gives a right over the thing insured, which is not affected by the loss or safety of it, and if it is necessary to bring the present case within those terms, it seems to me that the contract of purchase and sale was affected by that loss. I will not go further with the judgment of Chitty, J., except to say this, that at the end my learned brother has put it thus, that "the only principle applicable is that of subrogation as understood in the full sense of that term." There I agree with him, only my view of the full sense is larger than that which he adopted. "And that where the right claimed is under a contract between the insured and third parties, it must be confined to the case of a contract relating to the subject-matter of the insurance, which entitled the insurers to have the damages made good." I think it would be better expressed in this way: "Which entitles the assured to be put by such third parties into as good a position as if the damage in- sured against had not happened." If it is put in that sense, it seems to me to be consistent with the proposition which I laid down at the beginning of what I have said, and to cover this case. I will repeat it: "Which entitles the assured to be put by such third parties into as good a position as if the damage insured against had not happened." The contract in the present case, as it seems to me, docs enable the assured to be put by the third party into as good a position as if the fire had not happened, and that result arises from this contract alone. Therefore, according to the true principles of in- surance law, and in order to carry out the fundamental doctrine, namely, that the assured can recover a full indeninity, but shall never recover more, except, 52 CASTELLAIN V. PRESTON [CHAP. II perhaps, in the case of the suing and laboring clause under certain circum- stances, it is necessary that the plaintiff in this case should succeed. The case of Darrell v. Tibbitts, 5 Q. B. D. 560, has cut away every technicality which would prevent a sound decision. The doctrine of subrogation must be carried out to the full extent, and carried out in this case by enabling the plaintiff to recover. Cotton, L. J. — In this case the appellant's company insured a house belonging to the defendants, and before there was any loss by fire the de- fendants sold the house to certain purchasers. Afterwards there was a fire, and an agreed sum was paid by the insurance office to the defendants in re- spect to the loss. The appellant apparently seeks to recover the sum which the office paid to the defendants, and if the plaintiff's claim could be shaped only in this form, I think my opinion would be against him. The plaintiff's claim may be treated in substance in another way; namely, the company seek to obtain the benefit, either wholly or partly, of the amount paid by them out of the purchase money which the defendants have received since the fire from the purchasers. In my opinion, the plaintiff is right in that contention. I think that the question turns on the consideration of what a policy of insurance against fire is, and on that the right of the plaintiff de- pends. The policy is really a contract to indemnify the person insured for the loss which he has sustained in consequence of the peril insured against, which has happened, and from that it follows, of course, that as it is only a contract of indemnity, it is only to pay that loss which the assured may have sustained by reason of the fire which has occurred. In order to ascertain what that loss is, everything must be taken into account which is received by and comes to the hand of the assured, and which diminishes that loss. It is only the amount of the loss, when it is considered as a contract of indemnity, which is to be paid after taking into account and estimating those benefits or sums of money which the assured may have received in diminution of the loss. If the proposition is stated in that manner it is clear that the office would be entitled to the benefit of anything received by the assured before the time when the policy is paid, and it is established by the case of Darrell V. Tibbitts, 5 Q. B. D. 560, that the insurance company is entitled to that benefit, whether or not before they pay the money they insist upon a calcu- lation being made of what can be recovered in diminution of the loss by the assured; if they do not insist upon that calculation being made, and if it afterwards turns out that in consequence of something which ought to have been taken into account in estimating the loss, a sum of money, or even a benefit, not being a sum of money, is received, then the office, notwithstand- ing the payment made, is entitled to say that the assured is to hold that for its benefit, and although it was not taken into account in ascertaining the sum which was paid, yet when it has been received it must be brought into account, and if it is not a sum of money, but a benefit that has been received, its value must be estimated in money. Now Lord Blackburn, in the case of Bumand v. Rodocanochi, 7 App. Cas. 339, states the principle in these wordB: CHAP. Il] CASTELLAIN V. PRESTON 53 "The general rule of law (and it is obvious justice) is that where there is a contract of indemnity (it matters not whether it is a marine policy or a policy against fire on land, or any other contract of indemnity), and a loss happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the indemnifier is bound to pay; and if the indemnifier has already paid it, then if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it becomes an equity that the person who has already paid the full indenmity is entitled to be recouped by havnig that amount back.'" In Darrell v. Tibbitts, to which I have already referred, the question which we had to consider was whether the insurance office was entitled to the benefit produced in consequence of a covenant to repair if the building should be damaged by an explosion of gas. In my opinion it was not intended in any way to limit the right of the insurer, as an insurer, to cases where the contract in respect of which benefit had been received related to the same loss or damage as that against which the contract of indemnity was created by the policy. That was what was before this court in that case, and undoubtedly expressions do occur as to a contract relating to the loss or affecting the loss; but the principle was not limited to contracts. The principle which I have enunciated goes further, and if there is a money or any other benefit received which ought to be taken into account in di- minishing the loss or in ascertaining what the real loss is against which the contract of indemnity is given, the indemnifier ought to be allowed to take advantage of it in order to calculate what the real loss is, even although the benefit is not a contract or right of suit which arises and has its birth from the accident insured against. Of course, the difficulty is to consider what ought to be taken into account in estimating that loss against which the insurer has agreed to indemnify, and we have been pressed in argument with many difficulties. One which possibly was put to us most strongly, was that the contract of sale has nothing to dc with destruction by fire, and if any part of the purchase money is to be taken into account, why is a gift not to be taken into account? That may be said to diminish the loss as well as a con- tract of sale. The answer is that when a gift is made afterwards in order to diminish the loss, it is bestowed in such terms as to show an intention to bene- fit the assured, and to give the insurer the benefit of that would be to divert the gift from its intended object to a different person. That really was what was decided in Burnand v. Rodocanochi. There the money bestowed, not as a matter of right, but as a gift, was intended to benefit the assured beyond the amount which they had got in consequence of any insurance. There is another ground which may possibly exclude gifts. It may be that the right of the insurer to have a sum brought into account in diminution of the loss, against which he has given a contract of indemnity, is confined to that which is a right or other incident belonging to the person insured, as an incident of the property at the time when the loss takes place. This definition would not include a sum subsequently bestowed on the assured by way of gift, for ' This language has been adopted with approval by the United States Supreme Court, Chi., etc., R. Co. v. Pullman Car Co., 139 U. S. 79, 88, 11 S. Ct. 490. 54 CASTELLAIN V. PRESTON [CHAP. II it can in no way be said to have been appertaining to him as owner of the property at the time when the loss took place. But, in the present case, what we have to consider is whether the contract of sale is not an incident of the property, belonging to the owners at the time of the loss in such a way that it ought to be brought into account in estimating the loss, against which the in- surer has undertaken to indemnify. What was the position of the parties? The defendants' house was insured, and there was a loss from fire, the damage caused by the fire being estimated by the parties at £330. Ultimately, the property having been already agreed to be sold at a fixed price, the assured re- ceived the whole amount of that price. Now they did that in respect of a con- tract relating to the subject insured, the house; and, to my mind, if they re- ceived the whole amount of the price which they previously had fixed as the value of the house, that must of necessity be brought into account when it was received, for the purpose of ascertaining what was the ultimate loss against which they had concluded a contract of indemnity with the insurance office. Here the purchasers have paid the money in full, and as the property was valued between the vendors and the purchasers at £3,100, the vendors got that sum in respect of that which had been burned, but which had not been burned at the time when the contract was entered into. They had fixed that to be the value, and then any money which they get fi'om the purchasers, and which together with £330, the sum paid by the office, exceeds the value of the property as fixed by them under the contract to sell, must diminish, and in fact entirely extinguishes the loss occasioned to the vendors of the property by the fire. Therefore, though it cannot, to my mind, be said that the insurers are entitled, because the purchase is completed, to get back the money which they have paid, yet they are entitled to take into account the money subsequently received under a contract for the sale of the property existing at the time of the lo.ss, in order to see what the ultimate loss was against which they gave their contract of indemnity. On the principle of Darrell v. Tibbitts, when the benefit afterwards accrued by the completion of the purchase, the in- surance company were entitled to demand that the money paid by them should be brought into account. Therefore the conclusion at which I have arrived is, that if the purchase money has been paid in full, the insurance office will get back that which they have paid, on the ground that the sub- sequent payment of the price which had been before agreed upon, and the contract for payment of which was existing at the time, must be brought into account by the assured, because it diminishes the loss against which the insurance office merely undertook to indemnify them. In my opinion, there- fore, the decision below was erroneous. I think Chitty, J., based it upon this, that in this case there was no right of subrogation, no contract which the office could have insisted upon enforcing for their benefit. I think it im- material to decide that question, because the vendors have exercised their right to insist upon the completion of the purchase. ' Judgment reversed.^ ' Here follows a long and intorestinR opinion by Bowen, L. J., to similar effect. ' Phcenix Aeeur. Co. v. Spooner (1905), 2 K. B. 753; Packham v. German F. Ins. CHAP. Il] FOLEY V. MANUFACTURERS* INS. CO. 65 FOLEY V. MANUFACTURERS' FIRE INS. CO. OF N. Y. Court of Appeals of New York, 1897. 152 N. Y. 131 The doctrine of indemnity as related to subrogation. Action on insurance policy to recover fire loss to three dwelling houses in process of construction for the plaintiffs. Verdict and judgment in favor of plaintiffs. Andrews, Ch. J. The sole question in this case is whether the plaintiffs had an insurable interest equal to the full value of the incomplete buildings in course of construction on their lot when the fire occurred. It is the con- tention on the part of the defendant that, as the houses were being con- structed under a contract by which the contractors were to furnish the ma- terials and build the houses (above the foundations), and to complete them by a time specified, which had not expired at the time of the fire, for a speci- fied sum to be paid within ten da3's after their completion, the plaintiffs had no interest to protect in the structures while in their incomplete state, since their destruction by fire would be the loss of the contractors and not of the owners, whose obligation to build and complete the houses, as the con- dition of payment, would continue after as before the fire. It may be ad- mitted that the contractors would remain bound by the contract, notwith- standing the destruction of the buildings by fire, and that the owners would not be bound to paj^ for the work done or materials supplied up to the time Co., 91 Md. 515, 523, 46 Atl. 1066. In another case, a landlord held insurance cover- ing injury by explosion, but he also had the benefit of a covenant by his tenant to make repairs. Loss by explosion occurred. The insurance company paid to the landlord £750, the amount of loss. Subsequently the tenant reinstated the premises. The insurance company then sued the insured to recover back the £750, and obtained judgment for that amount, Darrcll i-. Tibbitts, L. R. 5 Q. B. D. 560, 42 L. T. (N. S.) 797, 50 L. J. Q. B. 33. Take the familiar instance where a tenant rents a furnished house for the summer or winter months, stipulating to make good any loss or injury to the property. If the house burns down without his fault, must he pay the entire loss, and the owner's insurers go free, subject not even to liability to contribute pro rata with the tenant to the payment of the loss? The doctrine of .subrogation received consideration by the United States Supreme Court under the following circumstances: The American Tobacco Company had been paid by its insurers for a large loss by fire. Among the items of total loss aa adjusted with the companies were several thousand dollars worth of unused internal revenue stamps, the full value of which, under the provisions of the United States Revised Statutes, was recoverable or redeemable from the United States authorities. The underwriters having paid the loss claimed that they were subrogated to the remedy of the insured for reimbursement from the Government under the terms of the statute. To enforce this claim action was instituted, in the name of the insured, and a judgment of recovery was obtained in the Court of Claims, which, on appeal, was aflSrmed, United States v. Am. Tobacco Co., 166 U. S. 468. 17 S. Ct. 619. 56 FOLEY V. manufacturers' INS. CO. [CHAP. IK of the fire. (Tompkins v. Dudley, 25 N. Y. 272.) The contention of the defendant rests upon a misconception of the insurer's contract and as to the insurable interest of the plaintiffs in the structures. The defendant, by its contract, undertook to insure the plaintiffs against loss by fire, not exceeding the sum specified to the "described property," the loss or damage to be as- certained "according to the actual cash value" of the property at the time of the fire. The parties by this contract made the value of the property in- sured, withhi the limit, the measure of the insurer's liability. It is an un- doubted principle in fire insurance that there must be an insurable interest in the insured, or an msurable interest which he represents in the subject of insurance, existing at the time of the happening of the event insured against to enable him to maintain an action on a fire policy. This flows from the nature of the contract of fire insurance, which is a contract of indemnity; and where there is no interest there is no room for indemnity. The plaintiffs had an interest in the subject of insurance both at the inception of the con- tract and at the time of the fire. They owned the land upon which the struc- tures were being erected. They themselves had constructed the foundations of the buildings, and in describing the property insured the foundations were specifically named. They were in possession of the premises, and the owner- ship of the fee of the land on which the contractors were erecting the buildings carried with it the ownership of the structures as they progressed, which, according to the general rule of law, became part of the realty by annexation. It is not claimed, nor could it upon the evidence be claimed, that there was any intention either on the part of the owners or the contractors to sever the ownership of the structures from the ownership of the land while the work was in progress or that the contractors should retain title to the materials put into the buildings until their completion. The defendant is compelled to admit that the loss sued for is within the exact terms of the policy. It is conceded that the recovery does not exceed the property loss occasioned by the fire, and if counsel can be deemed to have denied that the legal ownership of the structures was in the owners of the land at the time of the fire, the denial is very indistinct and certainly is not justified by the facts or the law. The defense comes to this: That as the plaintiffs, by their contract with third persons, have imposed upon them the risk and expense of furnishing complete structures, and have assumed no liability until the structures are completed, they had no insurable interest and have sustained no loss. But the contract relations between the plaintiffs and the contractors is a matter in which the defendant has no concern. When the policy was issued it could not be known whether the contractors would perform their contract. If they abandoned it the owners would derive such advantage as would accrue from the partial construction of the buildings prior to such abandonment. It is possible that if the defendant is compelled to pay the policy the plain- tiffs may, if they insist upon their rights against the contractors, get double compensation, unless they should be adjudged to hold the fund recovered for the contractors. But, however this may be, the owners had an insurable interest to the whole value of the buildmgs on their land, and the defendants CHAP. Il] FOLEY V. MANUFACTURERS' INS. CO. 57 neither can compel the plaintiffs to put the loss on the contractors, nor can they resort to the terms of the building contract to diminish the liability for an actual loss within the terms of the policy. The fact that improvements on land may have cost the owner nothing, or that if destroyed by fire he may compel another person to replace them with- out expense to him, or that he may recoup his loss by resort to a contract liability of a third person, in no way affects the liability of an insurer, in the absence of any exemption in the policy. The judgment should be affirmed. All concur, except Martin and Vann, JJ., not sitting. Judgment affirrried.^ * After paying the loss, would the insurance company be subrogated to a right of action to that extent against the contractors if the latter refused to rebuild? Assume that the builders had repaired the entire loss before the trial of the action against the insurance company, what should have been the decision of the court? The Foley case is cited in Wall i'. Piatt, 169 Mass. 398, 405. The Michigan court seems to regard the doctrine of subrogation as applicable only against a party primarily liable for the loss. Farmers' F. Ins. Co. v. Johnston, 113 Mich. 426, 71 N. W. 1074. In a New York case where the assured, a grain elevating company, joined with other elevators in a pooling arrangement whereby in spite of a fire totally incapaci- tating the elevator, it was to have its full percentage of the earnings of the pool, it has been held that the insurers of u-se and occupancy upon paying the loss are not sub- rogated to the rights of the assured against the pool, or to the money actually received from the pool during the period required for reinstatement, Michael v. Prus. Nat. Ins. Co., 171 N. Y. 25, 63 N. E. 810, but in that case the total value of the subject- matter of insurance was not proved. The equitable principle of subrogation is not to be applied to prevent the insured from receiving a full indemnity, Washington Fire Ins. Co. V. Kelly, 32 Md. 421, 444, 3 Am. Rep. 149. Nor is the doctrine of subrogation applicable to life insurance. Two reasons may be assigned to explain why the life in- surance company upon making payment under its policy, is not subrogated to any right of action against the wrongdoer, responsible for the death of the insured. First, because at common law a personal action died with the person. The statutes creating a right of action for death by wrongful act bestow the right not upon the deceased, but upon his representatives. It is only rights of the insured that are the subject of subro- gation, Ins. Co. V. Brame, 95 U. S. 754, 24 L. Ed. 58. Second, the value of the life insured being indeterminate, the insurance money and the damages recovered from the tort feasor combined may amount to no more than full indemnity, iEtna L. Ins. Co. V. Parker, 30 Tex. Civ. App. 521, 72 S. W. 621. Similarly it has been held that the doctrine of subrogation does not apply to accident insurance, iEtna L. Ins. Co. v. Parker, 96 Tex. 287, 72 S. W. 168, 621. Effect of Stipulation in Bill of Lading for Benefit of Insurance. — Liverpool &. Gt. West. S. Co. V. Pha:;nix Co., 129 U. S. 397, 9 S. Ct. 469. Special Clause in Policy to Preserve Subrogation. — Inman ». So. Car. R. Co., 129 U. S. 128, 9 S. Ct. 249; Southard v. Minn., etc., R. Co., 60 Minn. 382, 62 N. W. 442; Fayerweather v. Phoenix Ins. Co., 118 N. Y. 324, 23 N. E. 192. Release of Party Primarily Liable. — The insurer's right of subrogation does not accrue until after loss has occurred, Sussex Co. Mut. Ins. Co. v. Woodruff, 26 N. J. L. 541, but from that date any act of the insured in releasing the party primarily liable, if without the insurer's consent, will discharge the insurer pro tanto. Hall r. RaUroad Co., 13 Wall. 367, 20 L. Ed. 594. Insurable Interest as Related to Measure of Indemnity. — In the law of fire and marine insurance, the doctrine governing the amount, if any, to be recovered under the policy may be summed up generally, though not in all instances accurately, 58 RAYNER V. PRESTON [CHAP. II RAYNER V. PRESTON SuPHEME Court of Judicature, 1881. L. R. 18 Ch. D. 1 Whether insurance runs with the title of the property insured. This was an appeal from a judgment of Jessel, Master of the Rolls, dis- missing the action. The plaintiffs purchased from the defendants a messuage and workshops. Between the date of the contract and the time fixed for completion, the buildings purchased were injured by fire. The vendors had before the contract insured the buildings against fire, but there was not in the contract any mention of this fact or of the policy. The plaintiffs brought an action to establish their right to a sum received by the vendors from the insurance office, or to have it applied in or towards reinstating the buildings injured. The Master of the Rolls decided against their claim, and from this decision the plaintiffs appealed. It was contended by the appellants that they were entitled to the moneys (1) on general principles, irrespective of any special circumstances alleged to exist in the case; (2) under the provisions of the Act 14 Geo. Ill, c. 78, either alone or with the aid of the special circumstance of this case. Brett, L. J. For a reason which will presently appear (viz., the different opinion of Lord Justice James), I give with some fear the result of the (I must say) very clear opinion which I have in this case. This action is brought by the plaintiffs against the defendants to recover money which is in the hands of the defendants; and, therefore, if the action had been brought at common law, it would have been an action for money had and received. That action was always treated at common law as being founded upon equity, and therefore it seems to me that the decision in this case, whatever it ought to be, would be the same whether it should be con- sidered to be a decision at common law or in equity. It seems to me that the question raised between the plaintiffs and the by the phrase, "indemnity to the insured, commensurate with his insurable interest as existing at the time of loss, and limited by the amount as well as by the terms of the policy," Monroe v. Southern Mut. Ins. Co., 63 Ga. 669; Tabbut v. Am. Ins. Co., 185 Mass. 419, 70 N. E. 430, 102 Am. St. R. 353. There are many exceptions and qualifi- cations to the doctrine of indemnity as a measure of recovery, including statutory and contract provisions and modifying rules of law. A lessee or life tenant is entitled to recover only for the value of his term, Beekman r. Ins. Assn., 66 App. Div. 72, 73 N. Y. Supp. 110; contra, Convis v. Ins. Co., 127 Mich. 616, 86 N. W. 994; Home Ins. Co. v. Gibson, 72 Miss. 58, 17 So. 13. In other juris- dictions, however, it has been held that the life tenant or lessee may insure and re- cover the value of the fee, but must either rebuild or will be held to be a trustee for the remainder-man or lessor as to the balance of insurance moneys over and above his own interest. Green v. Green, 56 S. C. 193, 34 S. E. 249, 46 L. R. A. 525; Samson v. Grogan, 21 R. I. 174, 42 Atl. 712, 44 L. R. A. 711. CHAP. Il] RAYNER V. PRESTON 59 defendants calls upon us to consider, first of all, the nature of a policy of fire insurance; and, secondly, what was the relation with regard to the policy and to the property between the i)laintiffs and the defendants in this case. Now, in my judgment, the suljject-matter of the contract of insurance is money, and money only. The subject-matter of insurance is a dilferent thing from the subject-matter of the contract of insurance. The subject-matter of in- surance may be a house or other premises in a fire policy, or may be a ship or goods in a marine policy. These are the subject-matter of insurance, but the subject-matter of tlic contract is money, and money only. The only result of the policy, if an accident which is witliin the insurance happens, is a payment of money. It is true that, under certain circumstances, in a fire policy there may be an oj)tion to spend the money in rebuilding the premises; but that does not alter the fact that the only liability of the insurance com- pany is to pay money. The contract, therefore, is a contract with regard to the payment of money, and it is a contract made between two persons, and two persons only, as a contract. In this case there was a contract of insurance made between the defendants and the insurance company. That contract was made by the defendants, not on behalf of any undisclosed principal, not on behalf of anyone interested other than themselves. The contract was made by the defendants solely and entirely on their own behalf, and at a time when they had no relation of any kind with the plaintiffs. It was a personal contract between the de- fendants and the insurance office, to which thej^ were the sole parties. It is true that under certain circumstances a policy of insurance may, in equity, be assigned so as to give another person a right to sue upon it; but in this case the policy of insurance, as a contract, never was assigned bj- the defend- ants to the plaintiffs. It would have been assigned by the defendants to the plaintiffs if it had been included in the contract of purchase, but it was not. Any valuation of the policy, any consideration of increase of the price of the premises in consequence of there being a policy, was wholly omitted. There was nothing given by the plaintiffs to the defendants for the contract. The contract, therefore, neither expressly nor impliedlj^, was assigned to the plaintiffs; and, so far as regards the contract of insurance, there never was any relation of any kind between the plaintiffs and the defendants. But there did exist a relation between the plaintiffs and the defendants, not with regard to the subject-matter of the contract, but with regard to the subject-matter of the insurance. There was a contract of purchase and sale between the plaintiffs and the defendants in respect of the premises insured. It becomes necessary to consider accurately, as it seems to me, and to state in accurate terms, what is the relation between the two people who have contracted together with regard to premises in a contract of sale and pur- chase. With the greatest deference, it seems wrong to say that the one is a trustee for the other. The contract is one which a court of equity will enforce by means of a decree for specific performance. But if the vendor were a trustee of the property for the vendee, it would seem to me to follow that all the product, all the value of the property received by the vendor from the GO RAYNER V. PRESTON [CHAP. II time of the making of the contract ought, under all circumstances, to belong to the vendee. What is the relation between them, and what is the result of the contract? Whether there shall ever be a conveyance depends on two conditions: first of all, whether the title is made out, and, secondly, whether the money is ready; and unless those two things coincide at the time when the contract ought to be completed, then the contract never will be com- pleted and the property never will be conveyed. But suppose at the time when the contract should be completed, the title should be made out and the money is ready, then the conveyance takes place. Now it has been sug- gested that when that takes place, or when a court of equity decrees specific performance of the contract, and the conveyance is made in pursuance of that decree, then by relation back the vendor has been trustee for the vendee from the time of the making of the contract. But, again, with deference, it appears to me that if that were so, then the vendor would in all cases be trustee for the vendee of all the rents which have accrued due and which have been received by the vendor between the time of the making of the con- tract and the time of completion ; but it seems to me that that is not the law. Therefore, I venture to say that I doubt whether it is a true description of the relation between the parties to say that from the time of the making of the contract, or at any time, one is ever trustee for the other. They are only parties to a contract of sale and purchase of which a court of equity will under certain circumstances decree a specific performance. But even if the vendor was a trustee for the vendee, it does not seem to me at all to follow that anything under the contract of insurance would pass. As I have said, the contract of insurance is a mere personal contract for the payment of money. It is not a contract which runs with the land. If it were, there ought to be a decree that upon the completion of the purchase the policy be handed over. But that is not the law. The contract of insurance does not run with the land; it is a mere personal contract, and unless it is assigned no suit or action can be maintained upon it except between the original parties to it. I therefore, with deference, think that the plaintiffs here cannot recover from the defendants, on the ground that there was no relation of any kind or sort between the plaintiffs and the defendants with regard to the pohcy, and therefore none with regard to any money received under the policy. James, L. J. I am unable to concur in affirming the judgment of the Master of the Rolls. According to my view of the case, the plaintiff's con- tention is founded not only on what I may call the natural equity which com- mends itself to the general sense of the lay world not instructed in legal principles, but also on artificial equity as it is understood and administered in our system of jurisprudence. I am of opinion that the relation between the parties was truly and strictly that of trustee and cestui que trust. I agree that it is not accurate to call the relation between the vendor and purchaser of an estate under a contract while the contract is in fieri the relation of trustee and cestui que trust. But that is because it is uncertain whether the contract will or will not be performed, CHAP. Il] RAYNER V. PRESTON 61 and the character in which the parties stand to one another remains in sus- pense as long as the contract is in fieri. But when the contract is performed by actual conveyance, or performed in everything but the mere formal act of sealing the engrossed deeds, then that completion relates back to the con- tract, and it is thereby ascertained that the relation was throughout that of trustee and cestui que trust. That is to say, it is ascertained that while the legal estate was in the vendor the beneficial or equitable interest was wholly in the purchaser. And that, in my opinion, is the correct definition of a trust estate. Wherever that state of things occurs, whether by act of the parties or by act or operation of law, whether it is ascertained from the first or after a period of suspense and uncertainty, then there is a complete and perfect trust, the legal owner is, and has been a trustee, and the beneficial owner is, and has been a cestui que trust. This being the relation between the parties, I hold it to be an universal rule of equity that any right which is vested in a trustee — any benefit which accrues to a trustee, from whatever source or under whatever circumstances, by reason of his legal ownership of the property — that right and that benefit he takes as trustee for the beneficial owner. If the policy of insurance in this case were a collateral contract, such as the policy which a creditor effects on the life of his debtor, the case would be wholly different. But the policy of fire insurance is not, in my opinion, a collateral contract, it is not a wagering contract, a contract that if a fire happens then a certain sum of money shall be paid to the insurer; it is in terms and in effect a contract that, if the prop- erty is injured then the insurance company will make good the actual dam- age sustained by the property. That damage, and that damage only, gives the right and is the measure of the right, and it seems to me impossible to say that it is not by reason of the legal ownership, and in respect solely of the injury done to that legal ownership, that the right to recover from the insurance company accrued to the insured. If the fire in this case had hap- pened through the wrongful or negligent act of a third person while the con- tract was in fieri the legal right to sue for the damage would be in the vendor; but on the completion of the contract the purchaser would be entitled to use the name of the vendor as his trustee to sue for the damage so sustained, or, if the damages had actually been recovered in the interval, to recover the damages from the vendor. And it ajipears to me that there is no distinction in principle between this right and the right to use the vendor's name in an action on the contract of indemnity against loss by fire which the policy of insurance is. It is not, in my view of the case, at all material to consider what would be the case if after actual conveyance and during the currency of the policy a fire had occurred. The vendor in that case would have no right as between him and the insurance office, and the purchaser would have no right of action, because one of the conditions of the policy excludes it, and, independently of that condition, the policy would, or might probably be held not to run with the land in the hands of the subsequent owner, and in that case there would not be that which is the foundation of the right— legal ownership and right in one person, and equitable ownership in another. 62 RAYNER V. PRESTON [CHAP. II No doubt it is a mere accident that there was such a policy, and there was euch a right. The vendee could not have complained if there had been no insurance. But that has occurred in a great variety of cases in which equi- table rights have arisen. Where there is a creditor, a debtor, and a surety, und the surety finds out that by something to which he was not privy, and of which he had never heard, somebody else had become surety, or the creditor 6ad obtained security, the surety has a right to obtain contribution from such surety, or to obtain such security as the case may be, and the creditor releasing such surety or parting with such security would probably find him- self in considerable peril. In the same city in which this controversy has arisen there occurred, some years ago, a great destruction of property by reason of an explosion of gun- powder, caused by a fire. Houses were damaged, not by fire, but by the explosion caused by a fire in another neighboring place. The insurance offices thought that it was for their interest to be very liberal, and treat the damage from the explosion as a damage by fire within the policies, and to pay accordingly. This was a mere act of liberality. They thought it was for their permanent benefit commercially to be liberal, and they were liberal accordingly. See Taunton v. Royal Insurance Company, 2 H. & M. 135. I cannot myself doubt, that if a trustee, or a vendor who had become trustee by the completion of his contract, had received this bounty, he would have received it by reason of his trusteeship, and would have had to give it up to his cestui que trust or purchaser. Brett, L. J. I should like to add to what I have said, that I feel very great doubt whether, as between the defendant s and the insurance company, the defendants can keep the moneys.^ Judgment affirmed. ^ See Castellain v. Preston, growing out of same facts and reported supra. Hunt V. Springfield F. & M. Ins. Co., 196 U. S. 47, 50, 25 S. Ct. 179. Upon closing a sale or conveyance, it is of consequence to the vendee to see that new policies are taken out, or that the proper indorsements consenting to the transfer are made by the insurers upon the old policies, Germania F. Ins. Co. v. Home Ins. Co., 144 N. Y. 195, 39 N. E. 77, 26 L. R. A. 591, 4.3 Am. St. R. 749; Shadgett v. Phillips & Crew Co., 131 Ala. 478, 483, 56 L. R. A. 461, 90 Am. St. R. 95, 31 So. 20; Kase v. Hartford Ins. Co., 58 N. J L. 34, 32 Atl. 1067. CHAP. Il] TYKIE V. FLETCHER 63 TYRIE V. FLETCHER Court of King's Bench, 1777. Cowp. 666 Premium — When returnable or apportionable. This was an action on the case, for money had and received to the plain- tiff's use, brought by the plaintiff, the insured in a policy of insurance, against the defendant the underwriter, for a return of part of the premium. The cause was tried before Lord Mansfield, at Guildhall, at the sittings after last Trinity term, when, by consent, a verdict was found for the plain- tiff, subject to the opinion of the court upon the question, whether, under the circumstances of the case, a proportionable part ought to be returned or not. If the court should be of opinion that a proportionable part of the pre- mium ought not to be returned, then a nonsuit was to be entered. It now came before the court, upon a rule to show cause why a nonsuit should not be entered; and the cause, as it appeared from the report, was shortly this: The policy of insurance was upon the ship Isabella, at and from London to any port or place where or whatsoever, for twelve months, from 19th of August, 1776, to 19th of August, 1777, both days inclusive, at £9 per cent, warranted free from captures and seizures by the Americans, and the consequences thereof. In all other respects it was in the common form, against all perils of tlie sea, etc. The ship sailed from the port of London, and was taken by an American privateer about two months afterward. Lord Mansfield, C. J. It was very proper to save this case for the opin- ion of the court, because in all mercantile transactions certaintj' is of much more consequence than which way the point is decided, and more especially so in the case of policies of insurance; because, if the parties do not choose to contract according to the established rule, they are at liberty between themselves to vary it. This case is stripped of ever)'' authority. There is no case or practice in point; and therefore we must argue from the general principles applicable to all policies of insurance. And, I take it, there are two general rules established applicable to this question. The first is, that ichcrc the risk has not been run, whether it not having been run was owing to the fault, pleasure, or u'ill of the insured, or to any other cause, the premium shall be returned, because a policy of insurance is a contract of indemnity. The underwriter receives a premium for running the risk of indemnifying the insured ; and whatever cause it be owing to, if he does not run the risk, the consideration for which the premium or money was put into his hands fails, and therefore he ought to return it. (2) Another rule is, that if that risk of the contract of indemnity has once com- 64 TYRIE V. FLETCHER [CHAP. II menced, there shall be no apportionment or return of premium afterward. For though the premium is estimated, and the risk depends upon the nature and the length of the voyage, yet if it has commenced, though it be only for twenty-four hours or less, the risk is run; the contract is for the whole entire risk, and no part of the consideration shall be returned; and yet it is as easy to apportion for the length of the voyage, as it is for the time. If a ship had been insured to the East Indies agreeably to the terms of the poHcy in this case, and had been taken, twenty-four hours after the risk was begun, by an American captor, there is not a color to say that there should have been a return of the premium. So much, then, is clear, and indeed perfectly agree- able to the ground of determination in the case of Stevenson v. Snow, 3 Burr. 1237 ; for in that case the intention of the parties, the nature of the contract and the consequences of it, spoke manifestly two insurances and a division between them. The first object of the insurance was from London to Halifax, but if the ship did not depart from Portsmouth with convoy (particularly naming the ship appointed to be convoy), then there was to be no contract from Portsmouth to Halifax. Why, then, the parties have said, "We make a contract from London to Halifax, but on a certain contingency it shall only be a contract from London to Portsmouth." That contingency not happen- ing reduced it, in fact, to a contract from London to Portsmouth only. The whole argument turned upon that distinction. Mr. Yates, who was for the plaintiff, put it strongly upon that head; and all the judges, in delivering their opinion, lay the stress upon the contract comprising two distinct con- ditions, and considering the voyage as being, in fact, two voyages: and it was the equitable way of considering it; for, though it was at first consoUdated by the parties, there was a defeasance afterwards, though not in words. I think Mr. Justice Wilmot put it particularly upon that ground, but it was the opinion of the whole court. There was a usage, also, found by the jury in that case, that it was customary to return a proportionable part of the pre- mium in such-like cases, but they could not say what part. The court rejected this as a usage for the uncertainty; but they argue from it, that there being such a custom plainly showed the general sense of merchants as to the pro- priety of returning a part of the premium in such cases. And there can be no doubt of the reasonableness of the thing. There has been an instance put of a policy where the measure is by time, which seems to me to be very strong, and apposite to the present case; and that is an insurance for a man's life for twelve months. There can be no doubt but the risk there is constituted by the measure of time, and depends entirely upon it; for the underwriter would demand double the premium for two years that he would take to insure the same life for one year only. In such policies there is a general exception against suicide. If the person puts an end to his own life the next day, or a month after, or at any other period within the twelve months, there never was an idea in any man's breast that part of the premium should be returned. A ca.se of general practice was put by Mr. Dunning, where the words of the policy are, "At and from , provided the ship shall sail on or CHAP. Il] TYRIE V. FLETCHER 65 before the 1st of August;" and Mr. Wallace considers, in that case, that the whole policy would depend upon the ship sailing before the stated day. I do not think so; on the contrary, I think, with Mr. Dunning, that cannot be. A loss in port before the day appointed for the ship's departure can never be coupled with a contingency after the day; but if a question were to arise about it, as at present advised, I should incline to be of opinion that it would fall within the reasoning of the determination in Stevenson v. Snow, and that there were two parts or contracts of insurance, with distinct conditions. The first is, I insure the ship in port, provided she is lost in port before the 1st of August; and secondly, if she is not lost in port, I insure her then during her voyage from the 1st of August till she reaches the port specified in the policy. The loss in port must happen before the risk on the voyage could commence; and, vice versa, the risk in port must cease the moment the risk upon the voyage began. Let us see, then, what the agreement of the parties is in the present case. They might have insured from two months to two months, or in any less or greater proportion, if they had thought proper so to do. But the fact is, that they have made no division of time at all; but the contract entered into is one entire contract from the 19th of August, 1776, to the 19th of August, 1777, which is the same as if it had been expressly said by the insured, "If you, the underwriter, will insure me for twelve months, I will give you an entire sum; but I will not have any apportionment." The ship sails, and the underwriter runs the risk for two months: no part of the premium then shall be returned. I cannot say, if there had been a recapture before the expira- tion of the twelve months, that the policy would not have revived. Aston, J. This case depends upon the words of the policy, and I am of opinion it is one entire contract at a oertain gross sum of £9 per cent for a certain period of time — viz., twelve months— and that no division is to be implied. The determination in Stevenson v. Snow went expressly upon this consideration, that there were two distinct voyages, and no consideration re- ceived by the insured for the premium upon the second voj-age; and there certainly was not, for there never was any point of time when any risk was run from Portsmouth. In Bond v. Nutt, the losses insured against were dis- tinct, and unconnected with each other: 1st, a loss of the ship in port, if any should happen there; 2d, a loss in her passage home, provided she sailed on a certain day. The risk in some policies may be distinct and divisible in its nature. In the case of an insurance upon a life, the sum is lumped, and the time is lumped for the year. So in this case, I think, the contract is one entire contract, and therefore that there ought to be no return of premium. Mr. Justice Willes and Mr. Justice Ashurst were of the same opinion. Nonsuit.^ • n the contract is void ab initio without fraud on the part of the assured, he can recover back the premium unless the policy otherwise provides, Jones r. Ins. Co., 90 Tenn. 604, 18 S, W. 260, 25 Am. St. R. 706. If the assured has been guilty of fraud 5 66 ESTATE OF BREITUNG [CHAP. II ESTATE OF BREITUNG Supreme Court of Wisconsin, 1890. 78 Wis. 33 Rights of third party beneficiaries — How far vested? Final accounting of the executor of the insured. Herman W. Breitung in his Hfetime insured his life for the sum of $3,500, of which $2,000 was b}' tlie terms of the poHcies payable to his wife, and $1,500 payable to his son and daughter equally. By his will, however, the said Herman W. Breitung bequeathed $2,000 of the insurance money to his wife and $1,500 thereof to his Son, making no mention of his daughter. Cole, C. J. The question of law presented on this appeal is really not an open one in this court. That question is: Can a person who has procured a policy of insurance on his own Hfe for the benefit of another, and has paid the premiums thereon as they became due, dispose of the insurance money by will to the exclusion of the beneficiary named in the policy during the life- time of such beneficiary? This question was in effect answered in the af- firmative in Clark v. Durand, 12 Wis. 224, decided thirty years ago. In the present case the deceased effected an insurance upon his life by three different policies for the benefit of "his widow and surviving children." At his death he left surviving him a widow and two children. Shortly before avoiding the policy, he cannot recover back the premium, Blasser v. Ins. Co., 37 Wis. 31, 19 Am. Rep. 747, except as the policy otherwise provides. Premium When Apportionable — Marine. — In marine insurance when the con- sideration for the payment of the premium is apportionable and there is a total failure of any apportionable part of the consideration, a proportionate part of the premium is thereupon returnable to the assured, provided there has been no fraud or illegality on his part, Eng. Mar. Ins. Act (1906), §84; Holmes v. United Ins. Co., 2 Johns. Cas. 329. The values of buildings and contents are so uncertain, and contents are so fluctuating both in amount and in value, that rarely has this doctrine been recognized in fire insurance. Assignment of Policies. — Before loss a fire policy is not assignable without the consent of the insurer, Traders' Ins. Co. v. Newman, 120 Ind. 54, 22 N. E. 428, and after loss only to the extent of the claim therefor, Roger Williams Ins. Co. v. Carring- ton, 43 Mich. 252, 5 N. W. 303; Nease v. Ins. Co., 32 W. Va. 283, 9 S. E. 283, since the contract is peculiarly personal, but unless expressly prohibited by the terms of the contract, a marine or life policy may be as.signed without permission of the un- derwriters. Earl V. Shaw, 1 .Johns. Cas. (N. Y.) 314, 1 Am. Dec. 117 (marine); N. Y. Mut. Life Ins. Co. v. Armstrong, 117 U. S. 591, 6 S. Ct. 877, 29 L. Ed. 997 (life). Often, however, in the policy of life insurance, an assignment is made ineffectual until after written notice thereof is given to the company. If with the consent of the insurance company a policy is assigned to a purchaser of the property insured, it has been held that this amounts to a new contract with the assignee as to any prior grounds of forfeiture, unless the policy provides otherwise, Continental Ins. Co. v. Munns, 120 Ind. 30; Hall v. Niagara Ins. Co., 93 Mich. 184. This rule does not apply where the assignment is simply as collateral security for a debt, 111. Mut. F. Ins. Co. v. Fix, 53 111. 151. CHAP. Il] ESTATE OF BREITUNG 67 he died he made a will by which he gave one child all the insurance money which would by the policies have gone to both. The question is, could he make such a disposition of the fund to the exclusion of the beneficiary named in the policy? If he could, the order of the Circuit Court must be reversed, and the order of the county court, directing the respondent to pay the sum of $750 of insurance money remaining in his hands to the general guardian of the minor, Bernard P. Breitung, must be affirmed. We have already stated that, according to the established rule of this court, where one person pro- cures a policy on his own life for the benefit of another and pays the premiums thereon, he may disi)ose of the insurance money by will or otherwi.so to the exclusion of the beneficiary named in the policy. Now it is said that this doctrine is opposed to the great weight of authority, and we are urged to change our decision on the subject so as to bring it in harmony with the de- cisions elsewhere. In answer to this suggestion, we observe that we feel bound to adhere to the rule which has been so long established in this State. If that rule is found not to be salutary or wise it is within the power of the legislature to change it, and it is much better that the change come that way than that this court depart from a rule which has so long been acted upon as settled. But it is further said that the beneficiary was living when the insured at- tempted by his will to dispose of the insurance money, and that this fact distinguishes the case from those which have heretofore been decided by the court. We think, however, there is no ground for a distinction. Our de- cisions go upon the principle that the beneficiary has no such vested pecuniary interest in the policy as deprives the insured of all power to dispose of it as he thinks proper. Certainly, the insured might let the policy lapse by fail- ing to pay the premiums as they become due, and thus all the interest of the beneficiary might be forfeited and lost. In reason and principle it would seem that a contract of this character was subject to such changes and disposition as the insured might see fit to make and that the benefits expected from it were liable to be lost and defeated by the acts of the insured, who retains control of the policy, and may see fit to make a different disposition of the fund. Cassoday, J. I think the case at bar is clearly distinguishable from Clark V. Durand, 12 Wis. 223, and Kerman v. Howard, 23 \Aiis. 108, and should be affirmed upon the well-recognized principles of law applicable to Foster V. Gile, 50 Wis. 603, notwithstanding such affirmance would be in conflict with some things said in the opinions in those cases. The common law as well as truth is always in harmony with itself. As- sumed evidences of it, in the shape of judicial decisions, may be in conflict, and sometimes are. It is more important to preserve the law in its integrity than an erroneous interpretation of it. The repetition of an exposed error is more destructive than the original. No decision should take rank as an evi- dence of law which is not in harmony with the logic of the law, — especially when sanctioned by the great weight of authority. 68 ESTATE OF BREITUNG [CHAP. II It is unnecessary to add that I dissent from the decision in this case. By the Court : The order of the Circuit Court is reversed, and the order of the county court is affirmed, and the cause is remanded for further proceed- ings according to law.^ ' As stated by the dissenting judge, the great weight of authority sanctions the op- posite view, Central Nat. Bank v. Hume, 128 U. S. 195, 206, 9 S. Ct. 41, 44, 32 L. Ed. 370; Shipnian i\ Home Circle, 174 N. Y. 398, 67 N. E. 85, 63 L. R. A. 347; U. S. Casu- alty Co. II. Kacer, 169 Mo. 301, 69 S. W. 370, 55 Cent. L. J. 127, 58 L. R. A. 436. But a beneficiary named in the policy will not be permitted to recover if he intentionally brings about the death of the insured, N. Y. Mut. Life Ins. Co. v. Armstrong, 117 U. S. 591, 6 S. Ct. 877, 29 L. Ed. 997; Anderson v. Life Ins. Co. of Va. (N. C, 1910), 67 S. F. 53; Cleaver v. Mutual Reserve Fund Assn. (1892), 1 Q. B. 147 (case of Mrs. May- brick). In such event, however, if the insured has committed no breach of contract a resulting trust in the insurance money is inferred in favor of the estate of the insured, Schmidt v. Life Assn., 112 Iowa. 41, 83 N. W. 800, 51 L. R. A. 141, 84 Am. St. R. 323; Ryan v. Rothweilcr, 50 Ohio St. 595, 35 N. E. 681. In a Massachusetts case, a member of a mutual benefit association had named the plaintiff, who was his wife, beneficiary in a certificate which was silent regarding sui- cide. As the appointment was revocable, she had no vested rights in the insurance. The insured committed suicide by shooting himself while he was of sound mind. The court declared it to be settled, upon sound principles, and by a great weight of author- ity that, although a policy contains no suicide clause, there is no liability under it to the legal representatives of the insured, if his death is intentionally caused by himself when of sound mind. The court further concluded that the same result must follow where the insured had named the claimant as in that case by an appointment which was revocable, Davis v. Supreme Council (Mass., 1907), 81 N. E. 294 (citing Federal, State and English cases). On the other hand, about three months earlier in the same year, the Nebraska court adopted the opposite view, and held broadly that, where a policy or certificate of life insurance is taken out in good faith, suicide will not defeat recovery by a third party beneficiary, unless the contract so provides in express terms, Lange v. Royal Highlanders, 75 Neb. 188, 110 N. W. 1110. The highest court of New Jersey also had previously come to the same conclusion, presenting opinions discussing both sides of the question, but holding by a majority vote, that it is immaterial whether the rights of the beneficiary are vested or revocable, Campbell v. Supreme Conclave, 66 N. J. L. 274, 49 Atl. 550, 54 L. R. A. 576. It is important to observe that although the interest of third party beneficiaries is vested, nevertheless actual payment of the insurance money must await the maturity of the policy, and a right to such payment is also subject to the fulfillment by the in- sured of its conditions precedent and warranties, McCoy v. Relief Assoc, 92 Wis. 577, 66 N. W. 697, 47 L. R. A. 681. Compare Union Central Life Ins. Co. v. Buxer, 62 Ohio St. 385, 391, 57 N. E. 66, 49 L. R. A. 737. If the sole beneficiarj' named in the policy die before the insured, it has been held that the insured may make a fresh appointment, Foster v. Oile, 50 Wis., 603, 7 N. W. 555, 8 N. W. 217, but on this point the courts divide, Franklin Life Ins. Co. v. Galli- gan. 71 Ark. 295, 73 S. W. 102, 100 Am. St. R. 73; Harley v. Heist, 86 Ind. 196, 45 Am. Rep. 285. Right to Change Beneficiary Expressly Reserved. — Oftentimes by statute or by the express provision of the contract the right to change the beneficiary is ex- pressly reserved, Hoeft v. Supreme Lodge, 113 Cal. 91, 45 Pac. 185, 33 L. R. A. 174; Woodmen's Ace. Assn. v. Hamilton, 70 Neb. 24, 97 N. W. 1017. But the rights of a beneficiary who has paid a valuable consideration cannot be disturbed, Stronge v. Su- preme Lodge, etc., 189 N. Y. 346, 82 N. E. 433, 12 L. R. A. (N. S.) 1206, 121 Am. St. R. 902. Restrictions as to the classes of permitted beneficiaries contained in the certificate, charter or by-laws of the association, Alexander v. Parker, 144 111. 355, 33 N. E. 183. 19 L. R. A. 187; Ryan v. Firemen's Mut. Assn. (N. J , 1909), 72 Atl. 63; CHAP. Il] ESTATE OF BREITUNG 69 Re Globe Mut. Ben. Assn., 135 N. Y. 280, 32 N. E. 122. 17 L. R. A. 547, or in any statute, Waldum v. Hon.stad, 119 Wis. 312, 96 N. W. 806, must he observed. Mode of Chanoino Beneficiary. — The appointment of a new beneficiary can be accomplished only in compliance with any prescribed formalities. The association may rely upon its regulations, regardless of the intent of the insured, Conway v. Supreme Council C. K. A., 131 Cal. 437, 63 Pac. 727; Masonic Mut. Hen. Soc. V. Burkhart, 110 Ind. 189, 10 N. E. 79, UN. E. 449; or may waive them, Atlantic Mut. L. Ins. Co. V. Gannon, 170 Mass. 291, 60 N. E. 933. But as to relief against failing to observe technical formalities, see Grand Lodge v. Noll, 90 Mich. 37, 61 N. W. 268, 15 L. R. A. 350, 30 Am. St. R. 419; Lahey v. Lahey, 174 N. Y. 146. 66 N. E. 670, 95 Am. St. R. 554. Relation.s Between Insurer and Insured — Life. — The policy holder is not a cestui que trust of the company and hence, in the absence of fraud, cannot call upon the company to disclose to him their affairs in general, or to render an account for his share of dividends or profits, Equitable Life Assur. Soc. v. Brown, 213 U. S. 25, 29 S. Ct. 404; Greff v. Eq. L. Ass. Soc, 160 N. Y. 19, 30, 54 N. E. 712, 46 L. R. A. 288, 73 Am. St. R. 659. Compare Pierce v. Eq. Assur. Soc, 145 Mass. 56, 12 N. E. 858. 1 Am. St. R. 433; Ellison v. Straw. 119 Wis. 502. 97 N. W. 168. Rights of Creditors to the Life Insurance of Their Debtors. — Some of the courts hold that in the absence of actual fraud it is not presumptively in fraud of creditors even at common law for an insolvent charged with the duty of supporting wife and children to make moderate provision for their future by taking out or keeping up insurance in their favor as beneficiaries. Central Nat. Bk. v. Hume. 128 U. S. 195. 9 S. Ct. 41, 32 L. Ed. 370. Other authorities take a modified view, Bartram v. Hopkins, 71 Conn. 505, 42 Atl. 645; Fearn v. Ward, 80 Ala. 555, 2 So. 114. Statutes in some States define a limit of insurance exempt as against creditors, Estate of Brown, 123 Cal. 399, 55 Pac. 1055, 69 Am. St. R. 74; Cozine v. Grimes, 76 Miss. 294, 24 So. 197. For example, under the N. Y. Domestic Relations Law, Bradshaw v. Mut. Life Ins. Co., 187 N. Y. 347, 80 N. E. 203; Matter of Thompson, 185 N. Y. 574, 78 N. E. 1113; B. c, 184 N. Y. 36, 40, 76 N. E, 870; Kittel v. Domeyer, 176 N. Y. 205, 67 N. E. 433. 70 FAUNCE V. STATE MUT. LIFE ASSUR. CO. [CHAP. IH CHAPTER III General Principles — Continued Consummation and Construction of the Contract FAUNCE V. STATE MUTUAL LIFE ASSURANCE CO. Supreme Judicial Court of Massachusetts, 1868. 101 Mass. 279 Delivery of the policy as related to the completion of the contract. Action on policy of life insurance. Judgment for defendant. By parole it was shown that the policy was never delivered and was not to be delivered except upon a condition which was not fulfilled. Hoar, J. This case is very simple. It is an action on a policy of life in- surance. The plaintiff has no such policy. She undertook to show that the defendants agreed to issue such a policy, and that the terms on which it was to be issued were fully comphed with; that the policy was written and ex- ecuted, and thereby became a valid contract; and therefore, though the paper was not dehvered, and remained in the hands of the defendants or their agents, that it is her property, and will support her action. To meet this case, the defendants proved by parole that it was agreed be- tween the parties that the policy should issue, not in addition to, but as a substitute for, a policy previously made, which was to be surrendered; that the earlier policy was not surrendered, but has been enforced and paid. This is a perfect defense to the action. The plaintiff contends that the applica- tion and policy together constitute the contract; and that it is not competent to show by parole any variance from the terms of the contract contained in the writing. But this doctrine has no application to the case. The writing remained under the control of the defendants. There was no delivery of it, as a complete and perfected agreement. And if it were true that, without delivery, a complete execution of all the terms agreed on to constitute the contract would be sufficient to make it binding, it is first to be determined whether all these terms were complied with. This may be shown by parole testimony, because the evidence is not to vary the contract, but to prove whether any contract was made. No written contract passed from one party to the other; and the point in controversy is, whether the parties agreed that a certain paper, without more, should be the contract. This must, of course, CHAP. Ill] FAUNCE V. STATE MUT. LIFE ASSUR. CO. 71 be proved by parole. The defendants voted to issue the policy; but they did so upon the agreement that the former policy was to be surrendered. This condition was not embraced in their vote, but it was understood and agreed to by both parties, and the policy retained until the condition should be per- formed. No vote or assent of the defendants tp the contract was commu- nicated to the other party, except with this condition. The plaintiff has not a delivered instrument, the evidence of a complete agreement, not to be qualified or varied in its legal effect by parole testi- mony; and it does not appear that the parties have ever agreed that the written paper should become a contract, except upon a condition which has not been performed. Exceptions overruled^ ' Requisites of Complete Conthact. — The essential terms which must be agreed upon to make a valid policy of insurance are said to be these: The names or descrip- tion of the parties, the rate of premium, the property or life insured, the risk insured against, the term or duration of the insurance, and the sum or sums insured, Eames v. Ins. Co., 94 U. S. 621, 629, 24 L. Ed. 298; Commercial F. Ins. Co. v. Morris, 105 Ala. 498, 18 So. 34. Whether the contract is written or by parol, these same rules apply, Cleve- land Oil Co. V. Norwich Ins. Co., 34 Oreg. 228, 55 Pac. 435. The closing of the contract and liability for premiums are usually concurrent, Hardwick v. State Ins. Co., 20 Oreg. 547, 26 Pac. 840; but the time for payment of the premium may be postponed, and fre- quently is, in the case of fire and marine insurance, without disturbing the binding effect of the contract. King v. Cox, 63 Ark. 204, 37 S. W. 877; Jones v. N. Y. Life Ins. Co., 168 Mass. 245, 47 N. E. 92. The British marine insurance code omits rate from the list of essentials which must be expressly agreed upon, reasonable rate being pre- sumed, if no rate is stated. Mar. Ins. Act (1906), §§ 23, 31. Indeed, either by trade cus- tom or by previous course of dealing between the parties numerous important partic- ulars of the insurance contract may be understood without specific mention. Thus the following are often presumed, especially in connection with fire insurance: the usual form of policy, Newark Mach. Co. v. Kenton Ins. Co., 50 Ohio St. 549, 35 N. E. 1060, 22 L. R. A. 768; the statutory form of policy. Hicks v. Brit. -Am. Assur. Co., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424; the market rate of premium. Train v. Holland Purchase Ins. Co., 62 N. Y. 598; Cleveland Oil Co. v. Norwich Ins. Co., 34 Oreg. 228, 55 Pac. 435; a reasonable rate of premium, Brit. -Am. Ins. Co. t>. Wilson, 77 Conn. 559; Smith & Wallace Co. v. Prussian Nat. Ins. Co., 68 N. J. L. 674, 54 Atl. 458; the same rate of premium as before, Baldwin v. Phoenix Ins. Co., 107 Ky. 356, 54 S. W. 13, 92 Am. St. R. 362; the same terms and conditions as before, Ames-Brooks Co. V. .^tna Ins. Co., 83 Minn. 346, 86 N. W. 344; Ruggles v. Am. Central Ins. Co., 114 N. Y. 418, 21 N. E. 1000. Almost all mercantile fire poUcies run for one year, and that length of term may be easily inferred, Concordia F. Ins. Co. v. HefiFron, 84 lU. App. 610. 72 PORTER V. MUTUAL LIFE INS. CO. [CHAP. Ill PORTER V. MUTUAL LIFE INS. CO. OF NEW YORK Supreme Court of Vermont, 1898. 70 Vt. 504 Delivery of the -policy as related to the completion of the contract. Assumpsit upon a policy of life insurance. Defense, that there was no completed contract. J. MuNSON. The first question is whether there was a completed contract of insurance between the applicant and the company. By the terms of the application the premiums were to be paid semiannually, and the contract was not to take effect until the first premium was paid. The application recites the payment to the soliciting agent of an amount equal to one-half the annual premium and acknowledges the delivery to the applicant of a binding receipt therefor, signed by the secretary of the company and making the insurance in force from the date of the application, provided the appli- cation should be approved, and the policy be signed by the secretary. The premium was not paid otherwise than by the delivery of a note, which stated that it was given for the premium, and was to be void if the company de- cUned to issue the policy. This note was payable to the order of the solicit- ing agent, who delivered it to the local agent for whom he was working, by whom it was afterward retained. This agent sometimes accepted notes for first premiums, and at the end of each month he remitted in cash to the general agent for all first premiums received. The company accepted this application and issued a policy to the applicant, bearing date September 17, 1895, and forwarded the same through the customary channel to the local agent who retained it until November 8th without notifying the applicant that it had been issued, and without being applied to by the applicant in regard to it. On that day the agent saw the applicant, and asked him to pay the note and take the policy, which he declined to do, and both note and policy remained in the agent's hands until the applicant's death. The is- suance of the pohcy upon an application which recited that the premium had been paid to the agent is sufficient proof that the agent had authority to receive the premium. And it is said in May, Ins., §§ 134, 360, that an agent authorized to receive payment of premiums has a discretion as to the mode of payment, and may accept a note instead of the money; and that if he arrange with the applicant to become responsible to the company for the premium, and to hold the applicant as his personal debtor therefor, this will be a waiver of the provision that the policy shall not be valid until the premium is paid. It is not necessary to inquire whether these propositions are fully sustained by the cases cited in their support, for upon the findings in this case it must be held that the company received the first premium in the next monthly remittance of the agent, and, this being the case, the com- CHAP. Ill] THOMPSON V. ADAMS 73 pany cannot complain that the payment was not made by the insured. Ostr., Ins., § 37. But, if the findings were to be construed to limit the agent's re- mittances to the cash receipts, this would not change the result. If he did not remit for the notes, the remittances would not correspond with the poli- cies issued, and this would show that credits were given; and the authorities are clear that, when such a practice is known, the company will be liable. It was not necessary to the completion of the contract that the policy should be actually delivered to the insured. The issuance of a policy in accordance with the terms agreed upon and its transmission to the agent for unconditional delivery to the insured arc tantamount to a delivery. The applicant was entitled to the control and possession of the policy from the mom.ent it was received by the agent, and the custody of the latter must be treated as that of the insured. May, Ins., § 60; Ostr., Ins., §§ 45, 71. If the policy is in accordance with the terms proposed, it is clear that upon tender- ing the policy to the applicant, the agent could have enforced collection of the note when due, and, that if the applicant had died after the policy was transmitted to the agent, and before the interview between them, the com- pany would have been liable. There had been such a payment of the premium and such a delivery of the policy as completed the contract. This completed contract between the applicant and the company could not be rescinded without the consent of both parties. The case shows no assent on the part of the agent to the attempted rescission of the insured. He continued to hold the note and demand its payment. It is obvious that he could have enforced its collection as against every objection that was urged. The contract remained unchanged until the moment of the in- sured's death, and the companj^ could not afterwards do what it had re- fused to permit the insured to do. Judgment reversed, and judgment for plaintiff for §1,000, with interest from March 13th, 1896. » THOMPSON V. ADAMS Supreme Court of Judic.vture, 1889. L. R. 23 Q. B. D. 361 The effect of a biriding slip. Mathew, J. This was an action brought to recover the sum of £100, which it was alleged by the plaintiffs the defendant had agreed to cover by an insurance against fire upon the goods of the plaintiffs in premises of theirs in New Zealand. The action was resisted on the ground that there had been no contract of insurance, or in the alternative, if there had been a contract * Title Guaranty & Surety Co. v. Bank of Fulton (Ark., 1909), 117 S. W. 537; N. Y. Life Ins. Co. v. Babcock, 104 Ga. 67, 30 S. E. 273, 42 L. R. A. 88, 69 Am. St. R. 134. 74 THOMPSON V. ADAMS [CHAP. Ill of insurance, that it was subject to conditions which had not been fulfilled, and, therefore, that the underwriters were not liable. The plaintiffs are merchants carrying on business in New Zealand, and they were represented in this country by a firm of Geard & Sons, who acted for them under a power of attorney. They instructed Geard & Sons to effect insurances upon goods on their premises in New Zealand; and Messrs. Geard & Sons, for that purpose, about the month of October, 1886, placed them- selves in communication with a firm of insurance brokers of high standing, Messrs. Collins & Co., who undertook to endeavor to effect insurances to the amount of £20,000. Now, insurances had been effected in the same way previously, and amongst the insurances previously effected were some at Lloyd's. It appears, within the last four or five years the underwriters at Lloyd's have undertaken, in addition to their ordinary business, the business of insurances against risks on land— against fire risks— and insurances had for this period been effected at Lloyd's by Messrs. Thompson; and Mr. Adams, the present defendant, it appeared, had taken a line on some of the previous policies. Messrs. Collins & Co., not being members of Lloyd's, had placed themselves in communication with Mr. Bray, an insurance broker, who was entitled to effect insurances at Lloyd's; and Mr. Bray, in accordance with the usual course of business, prepared a sUp containing the particulars of the proposed insurances, and showing the risk in the same way as if it were a marine risk to the underwriters at Lloyd's. Amongst others the risk was shown to the defendant, who initialed the slip on behalf of others whom he represented for £300, of which £100 represented the amount of his insurance. In the ordinary course with reference to risks of this description, as well as with reference to maritime risks, the slip is followed by a policy of insurance. In the particular case the slip was initialed in October, 1886. The policy ought to have been put forward through the broker and signed by the under- ^Titers; but, strange to say, no policy was tendered for signature down to the end of the month of February following. On February 28th news reached this country that the premises of the plaintiffs had been burnt down on the previous day, and a quantity of their goods destroyed. Up to this time, as no policy had been issued, no premiums had been paid, but upon March 1st the premiums upon all the insurances were paid by the plaintiffs to Messrs. Collins & Co. The defendant, however, with other underwriters, refused to accept the premium, or to sign a policy, or to pay the amount for which the slip had been initialed. Upon that the claim was put forward against the defendant upon the slip, and it was asserted by the plaintiffs that the slip was a sufficient insurance under the circumstances, and that the fact that no policy had subsequently been signed was immaterial. The defendant set up as a defense the absence of the policy, and declined to pay. Under those circumstances it was that the action was brought against him. Now several fines of defense were adopted by the defendant before me, and were argued with great ability on his behalf. In the first place it was said there was no policy of insurance. In the second place it was said, as I CHAP. Ill] THOMPSON V. ADAMS 75 have already mentioned, that if there were any contract of insurance, it was a contract subject to the condition that a policy should be subsequently issued. Thirdly, it was said that in the particular case the conduct of the plaintiffs antl tiicir agents showed that they had abandoned the insurance, and elected not to complete it by a policy, and, therefore, that the defendant was not liable. It was said that it was a breach of good faith on the part of the plaintiffs to put forward a policy which never would have been put for- ward if the fire had not occurred. It was said that this alleged contract was onlj' to be gathered from the slip initialed by the underwriters, but that the slip was no contract; that it was only an honorary undertaking on the part of the underwriters to make a contract subsequently, and that being so, the underwriters chose in the pres- ent case not to be bound by it. It was alleged that it was right and fair, under the circumstances, that they should not be bound by it, and that, therefore, there was an end of the matter. I had evidence laid before me with reference to this curious point, for it strikes one at first glance that it was certainly a most extraordinary course of business that the underwriters were setting up. They were suggesting that it should be talvcn that this slip was procured, not for the purpose of securing protection to the assured, but of getting a piece of paper with some writing upon it, which had no meaning whatever in point of law. That did not seem verj^ likely. One knows how important it is that there should be a prompt insurance in respect of goods against fire risks. Considering how great the risk is to an individual, and how small a premium he has to pay, the great object is to get himself ingured against damage by fire, and according to this theory no man could efTect a prompt insurance at Lloj'd's against damage by fire. There must be an in- terval between the slip and the subsequent j)olicy, and that interval would leave the underwriter free, if he thought proper not to accept the risk. Ap- proaching the consideration of the evidence by the light of common sense, I was prepared for the result. The plaintiff's witnesses all said that the slip was a contract, and regarded as a binding legal contract to effect a subse- quent insurance. There is no statutory difficulty in tb.e waj', and no reason why the slip should not be a binding contract, and there is everj'' reason for supposhig that such would be the intention of the person presenting the slip to be initialed in respect of the risk. On the other hand, there was the evi- dence of the underwriters, and the underwriters sought to set up a custom to treat these slips as honorary undertakings only. It has become manifest that they could not rely upon a single fact to prove the existence of the al- leged custom, and that they were only treating me with what a judge has so often to hear, an opinion — a strong oj^inion — of the witnesses on the one side as to the merits of the case, and of what the result of the litigation ought to be. All these gentlemen thought it was very wrong under the circumstances of this case that this slip should be anything more than an undertaking, out of which the underwriter could get if he thought fit. Some light was thrown upon the value of their oj)inion by the evidence of one of the principal wit- nesses, who said: "I regard this slip against fire risks in the same way as a 76 THOMPSON V. ADAMS [CHAP. Ill slip against marine risks, and a slip against marine risks is only an undertak- ing in honor, because the statute forbids that it should be more, and I con- sider the statute applies to an insurance against fire, and therefore it is to be treated exactly as the same thing, and that is the custom at Lloyd's." Unfortunately, the reasoning broke down, because the statute does not apply, and there is no reason why a contract should not be entered into by the slip ; there is every reason, indeed, to suppose that the parties would intend it to be a contract, and upon that point I am against the defendant. I think there was a binding contract to insure, and that the contract contained in the slip is not one from which the underwriter could escape on the ground that it was only optional whether or not he should go on with the contract, and per- fect it by a policy of insurance. Then there was an alternative point, and it was that to which Mr. Barnes bent all his energy; he said, assuming that this slip is to be treated as a pro- tecting note, like that which is ordinarily issued by an insurance company (for insurance companies recognize the necessity for prompt insurance, and before the policy is issued they will issue a protecting note which will have all the effect of a policy until the document has been prepared), still there ought to be read into this slip an implied condition. An imphed condition is a condition to be proved by circumstantial evidence, not by anything that passes in a particular case in terms between the plaintiff and the defendant, but a contract to be inserted because the conduct of the parties shows it is the basis of the whole arrangement. The proviso, said Mr. Barnes, that I ask to rea,d in is this: the contract contained in the slip is to be upon the con- dition, that within a reasonable time the policy is put forward for signature, and if it be not put forward within a reasonable time the insurance is to be at an end. That was the proviso that I was asked to insert, as it were, in this sUp; and really the sole ground upon which that argument rested ap- peared to me to be that there is an interval ordinarily between the date of the slip and the time when the policy is sent. The course of business is, that, after the slip has been completely initialed, the policy should be prepared by the broker (Mr. Bray in this case), and submitted to the different under- writers; and when they have signed the policy, as a matter of business, the amount of the premium appears for the first time in the accounts, and the contract is supposed to be complete in all formal particulars. Now, that is in- evitable. That delay between the slip and the policy it is impossible 1o avoid. In the first place, it is not because a particular underwriter initials a slip, that the matter is completed at Lloyd's, or completed anywhere else. The broker has to go round and got all the risk covered; but, further, he has to obtain in many cases precise information as to the nature of the risk — what is called technically the wording — and when the property insured is property abroad, the interval would be longer, necessarily, than if it were at home. On this point again I had a great body of evidence laid before me on each side. The plaintiff's witnesses said the delay is nothing; the matter is complete when the slip is initialed. That is the business view of the affair. The imderwriters are none the worse off for any delay: they very often do not CHAP. Ill] THOMPSON V. ADAMS 77 trouble themselves very much as to the time the policy comes forward; and in support of that view the plaintiffs produced a number of slips, some initialed by the defendant himself, in which it appeared there had been a long interval, of weeks and months in some instances, between the date of the slip and the date of the policy. On the other hand, witnesses were called for the defendant, who said that the understanding was that the policy was to be put forward promptly, and if it was not put forward the transaction ought to be regarded as being at an end. But, again, no single instance could be adduced by any of those witnesses to throw light on a supposed course of business, and I am satisfied that the defendant's contention upon this point is wrong. See what the consequences would be of adopting their view. If such a clause was to be written into the policy, there must necessarily be an interval of time between initialing the slip and the completion of the policy, during which preparations would be made for laying the policy before the underwriters for their signature. What is the position of the underwriter meanwhile? Clearly he is on the risk. Then, according to the argument, if the policy be put forward within a reasonable time he is bound to sign it, legally bound to sign it. Then, in the interval, he is upon the risk; but, according to the defendant's argument, this proviso would enable the assured, at the expiration of a reasonable time, to be off. Having kept the underwriter on the risk, and the interval being so ended, he could say: I avail myself of that proviso, which is to be treated as part of the slip, and I get rid of my liability to pay the premium. When the defendant's witnesses were exam- ined, thej'- were compelled to prove a course of conduct which was totally inconsistent with such a state of things, because it was proved, that, when there was delay, repeated demands were made by the underwriters them- selves as to the reason for the delay. There was one answer of the defendant which really put him out of court on this matter. He was asked : "Now, if no fire had occurred in this case, and the premium had been tendered to you in the month of February, would you have taken it?" "Yes," he said, "I should have regarded the tender of the premium as an indication of good faith, and I should have signed the policy." That seems to me to make an end of that point which had been made by the defendant. From the evidence, I find, as a fact, that there is necessarily an interval between the slip and the policy in all these cases; and I am satis- fied that it would be most unreasonable to read such an implied contract into the slip. There must be judgment for the plaintiffs upon the issues tried before me. Judgment for the plaintiffs.^ ' Important fire risks, whether on mercantile or other properties, and whether lo- cated in city or country, are often put in charge of city brokers. To procure insurance the broker or clerk from his placing department, having prepared a binder, presents it to the application clerk of an insurance company, together with a brief application slip, which customarily the broker fills up in pencil at the counter of the company, giving certain essentials of the contract, — name of the insured, location of the property, amount of insurance wanted, and indicating whether the property is building, or con- tents, or other insurable interest. The counter clerk turns to his insurance map, and, 78 COE V. WASHINGTON FIRE & MAR. INS. CO. [CHAP. Ill COE V. WASHINGTON FIRE & MARINE INS. CO. CiKCUiT CouKT OF EssEX CouNTY, N. J., 1888. 17 Ins. L. J. 717 The effect of a binding slip. Depue, J. The case of Charles D. Coe v. Washington Fire & Marine In- surance Company of Boston is brought to recover for the loss arising from the destruction by fire of a barn and shed belonging to the plaintiff, the fire occurring in August, 1887. The single question on which the case turns was whether the plaintiff had against the defendants an available contract of insurance. The proof in the case shows that in October, 1886, the plaintiff applied to Mr. Canon, the agent of the insurance company in this city, for insurance on the property that was destroyed. The property not being rated, the rating being done by what is known as the Board of Underwriters in if he accepts the application, he adds to the binder the name of his company and the amount accepted, and signs the binder with his name or initials under the printed word "accepted." If nothing is written or said about premium or term, market or reasonable rate, Machine Co. v. Ins. Co., 50 Ohio St. 549, 35 N. E. 1060, 22 L. R. A. 768. and one year, Concordia Fire Ins. Co. v. Heffron, 84 111. App. 610, are by usage of the trade understood. The broker usually hastens off with his binder, leaving the application slip. There are no copies exchanged or book entries made, and there is no time for making them. The broker continues the rounds of the insurance offices until the gross amount at the head of the binder is covered. Credit for premium is given by the company. The policies may not be prepared and issued for weeks. Though they may all cover in identical terms the one risk, they may be dehvered at different times, and just as the convenience of the underwriters may dictate. If the insurance is taken at a local agency, the agent after filling out and executing the policy, sends to the head office of the company an exact transcript of the written part, including the description and special clauses. Both in England and in this country, marine insur- ances are usually closed by binding slips or covering notes through the intervention of agents or brokers. Unless the relationship is changed by statute an insurance broker as such is agent of the insured, Parish v. Rosebud M. & M. Co., 140 Cal. 635, 74 Pac. 312; Crown Point Iron Co. v. JEtna Ins. Co., 127 N. Y. 608, 28 N. E. 653, 14 L. R. A. 147. He is, however, a middle man between the insured and the company, Arff v. Ins. Co., 125 N. Y. 57, 25 N. E. 1073, 10 L. R. A. 609, 21 Am. St. R. 721. Unless made so by statute or custom, payment of the premium to the broker is not payment to the company, Pottsville Mut. Fire Ins. Co. v. Improvement Co., 100 Pa. St. 137. The broker receives a commission out of the premium and earns full commission though the policy be canceled before expiration. Am. Steam Boiler Co. v. Anderson, 130 N. Y. 134, 29 N. E. 231 ; contra, dictum, in Devereux v. Ins. Co., 98 N. C. 6, 3 S. E. 639. He owes to the insured, his principal, the duty of an expert, Milliken v. Woodward, 64 N. J. L. 444, 450, 45 Atl. 796, and must furnish insurance in authorized and solvent companies, Landusky v. Bierne, 80 App. Div. 272, 80 N. Y. Supp. 238, aff'd 178 N. Y. 551, 70 N. E. 1101; or give timely notice of his inability to do so, Fries-Brcslin Co. v. Bergen (U. S. Cir. Ct.), 38 Ins. L. J. 177. If the broker is negligent in preparing the "forms," or in accepting policies with inappropriate clauses, he is personally liable, Walker v. Block. 216 Pa. St. 395, 65 Atl. 799. CHAP. Ill] COE V. WASHINGTON FIRE & MAR. INS. CO. 79 this city, no contract could be concluded, and a paper was signed which is called a "binder," a form of contract that seems to be quite usual with in- surance companies, so usual that it is stated by one of the witnesses that in this city, at the time of the trial, there was at least a quarter of a million dollars out on these binders; and it is that circumstance that has given im- portance to this case and made me anxious to reach a proper result. I have stated the circumstances under which the paper was given — the property not having been rated, and the rate of insurance, the premium not having been ascertained. This paper was signed: Newark, N. J., October 5, 1886. This is to certify that the Washington Fire & Marine Insurance Company hold good to C. G. Coe & Co. $400, covering barn and shed in rear of Orange and Nesbitt Streets until policy can be delivered. William S. Canon, Manager. The evidence further shows that a day or two afterwards, I think the next day, Canon applied to the Board of Underwriters and got a rating for this building. Nothing further took place between these parties, and ten and a half months after this paper was signed the fire occurred. It is on that paper as a contract of insurance that this suit is brought, and the ques- tion is the validity of a contract of this character in its inception and its duration. Now, I take it that where there is a complete contract for in- surance — a contract in which the property insured, the premium payable and the term for which the insurance is to continue, are stated, when it is made by parole or by a writing of this character, such a contract is good. The evidence shows that that is the usual custom with insurance companies, and I think usage and custom are competent for the purpose of showing the manner in which these papers are issued and recognized by persons engaged in the business of insurance. But the inquiry arises as to how long these binders are in force. There was a great deal of proof in this case regarding the usage of insurance companies, and they all agreed that a binder of this character was simply a temporary expedient. It is not a contract of insurance to last an indefinite time or forever; but it is a contract of insurance that is pre- liminary to the issuing of a polic}', or, as expressed in this paper, " until policy can be delivered." And it is such a contract as the courts have regarded as valid where the contract of insurance has been so perfected that nothing remains but to fill out the policy, deliver it, and receive the premium. It is simply a method of obtaining an insurance which shall date, when the policy issues, back to the time when the original contract of insurance was made, and binding until the policy is delivered and made; in the contemplation of the parties and in contemplation of the law for the purpose of tiding over the time that may elapse between the making of such contract and the mak- ing out of a policy of insurance, which is the contract contemplated between the parties; and such an arrangement as that, I think, extends only for a reasonable time and that reasonable time has regard to the reasonable neces- sity of obtaining the rating, to ascertain the premium, and to procure a policy from the office. That is the object of it, to tide over and to continue 80 LIPMAN V. NIAGARA FIRE INS. CO. [CHAP. Ill the insurance until that time. I think it only continues for a reasonable time, and in my judgment ten and a half months, where the original applica- tion was for insurance for a year, is not a reasonable time, and I find no warrant in law for the converting of these temporary expedients into con- tracts of insurance. I think the poHcy of the law and public poUcy, inde- pendent of the evidence as to usage, would require the construction to be put upon an arrangement of this character such as I have indicated; that it is a temporary expedient to continue only for a reasonable time, and that the party insured is under an obligation to see to it that the policy is issued, or to know the reason why after such a time elapses that it might be con- sidered in the view of persons engaged in this insurance business, as a reason- able time, and that a delay longer than that time would be evidence that the original understanding has been abandoned. On these grounds I find a verdict in this case in favor of the defendant.* LIPMAN V. NIAGARA FIRE INS. CO. New York Court of Appeals, 1890. 121 N. Y. 454 The contract, closed by parol or binding slip, is subject to what terms? Appeal from judgment of the General Term of the Supreme Court entered upon an order which affirmed a judgment in favor of plaintiff entered upon a verdict. This was an action upon an agreement of insurance evidenced by what is termed by insurance men a "binding slip," which was in these words: "Pell, Wallack & Co., Insurances, "55 Liberty Street, New York, September 2, 1885. "The undersigned do insure for account of Shaped Seamless Stocking Co. amounts as specified below at 13. Monte- fiore, L. R. 2 Q. B. 611. 90 HARTFORD PROTECTION INS. CO. V. HARMER [CHAP. IV arises, the fact must be material to the risk; that is, it must increase the chances of loss. If it was not in truth material, could his erroneous suspicions make it so? It was not pretended that he knew the cause, or had received any information, either true or false, which he failed to communicate. Under such circumstances the marine rule is, that "the assured is not bound to communicate his own expectations and opinions, and speculations upon facts," 1 Phil, on Ins. 315. The balance of the instruction upon the subject of conceahnent is not complained of; but although not necessary to the decision of the case, I cannot let it pass without expressing my decided con- viction that the law was laid down too favorably to the underwriter, and too strongly against the assured. It is not now true, whatever may be thought of the older authorities, that there is no difference in this respect, between marine and fire insurance; nor that a failure to disclose every fact material to the risk, upon which information is not asked for, or suppressed with a fraudulent intent, will avoid a policy of the latter description. The reason of the rule, and the policy in which it was founded, in its application to marine risks, entirely fail when appUed to fire policies. In the former, the subject of insurance is generally beyond the reach, and not open to the inspection of the underwriter, often in distant ports or upon the high seas, and the pe- culiar perils to which it may be exposed, too numerous to be anticipated or inquired about, known only to the owners and those in their employ; while in the latter it is, or may be, seen and inspected before the risk is assumed, and its construction, situation and ordinary hazards, as well appreciated by the underwriter as the owner. In marine insurance the underwriter, from the very necessities of his undertaking, is obliged to rely upon the assured, and has therefore the right to exact a full disclosure of all the facts known to him, which may in any way affect the risk to be assumed. But in fire insur- ance, no such necessity for reliance exists, and if the underwriter assumes the risk without taking the trouble to either examine or inquire, he cannot very well, in the absence of all fraud, complain that it turns out to be greater than he anticipated. And so are the latest and best authorities. We are all of opinion that the judgment of the District Court should be affirmed. ^ 1 A Federal Circuit Court sustained a submission to the jury of two questions: (1) Was the fact which the plaintiff omitted to disclose material? (2) Was it known or should it have been known, to him to be a material fact, Pelzer Mfg. Co. v. St. Paul F. & M. Ins. Co., 41 Fed. 271. In regard to contracts of life and fire insurance it is generally laid down as the law in this country that the concealment of a material fact, when not made the sub- ject of express inquiry by the insurers, must be intentional to avoid the policy; and this is partly on the ground that insurers have been in the habit of propounding ques- tions upon points except those in respect to which they are content to rely upon their own independent means of information, and partly because fire policies, and often life policies, make a multitude of particulars material by virtue of express warranties, German-American Mut. L. Assn. v. Farley, 102 Ga. 720, 29 S. E. 615; Washington Mills Mfg. Co. V. Weymouth Ins. Co., 135 Mass. 503. Within this rule concealment is said to be the designed withholding of any fact material to the risk which the in- Burcd in honesty and good faith ought to communicate, Clark v. Union Mut. Ins. Co., CHAP. IV] VANKIRK V. THE CITIZENS' INS. CO. 91 VANKIRK, RESPONDENT, v. THE CITIZENS' INS. CO. OF PITTSBURGH, APPELLANT Supreme Court of Wisconsin, 1891. 79 Wis. 627 Concealment. Action on a policy for $400 on a barn. Defense, concealment of a material fact. At the time the policy issued, there was a mortgage on the barn. The insured made no mention whatever of this circumstance. No written appli- cation for the policy was made, and the agent of the insurance company made no inquiry regarding incumbrances. Lyon, J. It is maintained on behalf of the company that a fact material to the risk, to wit, the existence of the mortgage upon the insured property, was concealed from the company by Collier, and hence that the policy is void. Collier not having been questioned concerning incumbrances on the property, and it having been found by the court on sufficient evidence that he did not intentionally or fraudulently suppress the fact, it must be held on the au- thority of Alkan v. N. H. Ins. Co. 53 Wis. 136, that his failure to disclose the existence of the mortgage does not invalidate the policy. The rule there adopted and which is applicable here is thus stated in Wood on Insurance, 388: "When no inquiries are made, the intention of the assured becomes material, and to avoid the policy it must be found, not only that the matter was material, but also that it was intentionally and fraudulently concealed." By the Court — Judgment affirmed.^ 40 N. H. 333, 77 Am. Dec. 721; Daniels v. Hudson River F. Ins. Co., 12 Cush. (Mass.) 416, 59 Am. Dec. 192. In England the rule is made applicable to all kinds of insurance, that the nondisclosure of a material fact, whether intentional or unintentional, will avoid the contract, London Ass. Co. v. Mansel, L. R. 11 Ch. D. 363. 1 Where the insurer makes special inquiries, as by requiring the execution of an application, it may generally be assumed that the information a.sked for is all that is required, Clark v. Ins. Co., 8 How. (U. S.) 235, 240, 12 L. Ed. 1061; Cross v. National Fire Ins. Co., 132 N. Y. 133, 30 N. E. 390; Pelzer Mfg. Co. v. Sun Fire Office, 36 S. C. 213, 270. 15 S. E. 562; Union Assur. Soe. v. Nails, 101 Va. 613, 44 S. E. 896, 99 Am. St. R. 923. Other incidental matters relating to the risk or particulars about the title, or nature and extent of interest not asked for, need not be volunteered unless believed to be material, Graham v. American Fire Ins. Co., 48 S. C. 195, 26 S. E. 323, 59 Am. St. R. 707; Southern Ins. Co. v. Estes, 106 Tenn. 472, 62 S. W. 149, 52 L. R. A. 915. 82 Am. St. R. 892; Wytheville Ins. Co. v. Stultz. 87 Vir. 629, 13 S. E. 77. This in practice constitutes an important modification of the general rule requiring a full disclosure of all material facts, inasmuch as a written application is almost invariably made the basis of a life policy, and the fire policy by its own terms provides for certain disclosures. Parsons v. Lane, 97 Minn. 98, 106 N. W. 485. A question of concealment may arise because of a nondisclosure of a material fact in connection with the oral or prelimiuary negotiation, or it may be baaed upon the contentfl of the written ap- 92 FREEDMAN V. FIRE ASSN. OF PHILA. [CHAP. IV FREEDMAN v. FIRE ASSOCIATION OF PHILADELPHIA Supreme Court of Pennsylvania, 1895. 168 Pa. St. 249 Representations as to facts. The policy of insurance upon which suit was brought was upon a stock of general merchandise in a country store. It was insured as the property of R. Freedman. It was owned by Rosa Freedman, a married woman, and was in charge of her brother-in-law, Louis Freedman, who conducted the business at the store. She resided with her husband some fifty miles distant from the place where the business was carried on, and gave it no supervision whatever. The evidence on the trial was uncontradicted that the insurance had been procured by her agent on the representation made to the agent of the insur- ance company that " R. Freedman was a successful business man," and that the policy was issued under the behef based upon representations made that the company was insuring a stock of goods owned by a business man who was personally conducting the business, and that the risk would not have been accepted had the truth been known. It was also undisputed that the agents of the company had no knowledge that the representations were incorrect until after the loss. The court, however, allowed the jury to find a verdict for the plaintiff on the ground of waiver. Mr. Justice Fell. The jury was instructed that if the defendant accepted the risk because of these representations, and would not otherwise have done 80, the policy was void because of the fraud practiced. It was clearly an imposition upon the company to procure a policy upon the representation that the property insured was owned by and in charge of a successful business man, when in fact the title was in a married woman who exercised no super- vision over it. The actual business risk because of the want of personal supervision by the owner, and the moral risk, were both greater. Whether greater or less, they were different. It was important to the company to know whose property it was insuring, in whose charge it was, and every fact which affected the risk; and any fraud or imposition in these matters went directly to the foundation of the contract. The charge in this case is a very clear and fair presentation of the issues plication as part of the contract, where the insurer claims that an answer is not com- plete. By the terms of the usual fire and life policy a concealment of a material fact generally amounts also to the breach of an express warranty. An applicant for fire insurance must not withhold the information that a fire is raging near his property, Orient Ins. Co. v. Peiser, 91 111. App. 278, and the applicant for a life insurance policy must disclose the fact that he is about to fight a duel, Armenia Ins. Co. v. Paul, 91 Pa. St. 520, 36 Am. Rep. 676. CHAP. IVJ HUBBARD V. GLOVER 93 involved, but we regard the testimony as to a waiver insufficient to sustain a finding for the plaintiff. Judgment is reversed.^ HUBBARD V. GLOVER King's Bench at Nisi Prius, 1812. 3 Camp. 313 Representations of opinion, expectation or belief. Tms was an action on a policy of insurance on the ship A lexander, at and from Petersburgh or Cronstadt to London, at a premium of 20 guineas per cent to return 10 for arrival. The policy was subscribed by the defendant on the 13th of June, 1811. Before subscribing it he wished a warranty to be introduced, that the ship should sail before the first of August; upon which the broker observed, "There is no occasion for that; the ship has sailed some time, and must now be at Gottenburgh. There is a cargo ready for her; and she is sure to be an early ship." In point of fact, she had reached Gottenburgh some days before this con- ' A representation is an oral or written statement of facts or circumstances made at the time of or before the closing of the contract and relating to the proposed ad- venture, upon the faith of which the agreement is made, Clark v. Ins. Co., 8 How. (U. S.) 235, 12 L. Ed. 1061. It is important to observe that, unlike warranties, mere representations of fact need be only substantiallj' correct, Jeffrey v. United Order, 97 Me. 176, 53 Atl. 1102. Thus, a broker in offering a risk to an underwriter, showed the latter his written instructions, which comprised a statement respecting the vessel, that "she mounts twelve guns and twenty men," in point of fact the vessel had not this precise force on board; but she had an armament of guns and swivels, with a crew of men and boys, which in both particulars was equivalent to, though not identical with, the force specified. It was held that the statement made to the underwriter, being a representation, was satisfied by the substantial fulfillment, though, had it been a warranty, nothing less than a strict and literal fulfillment would have sufficed, Pawson V. Watson, Cowp. 785. A policy on ship and goods from Na.ssau to the Clyde was effected on June 18, 1814. The broker showed the underwriters a letter, dated April 2, in which it was stated the Brilliant, the ship insured, "will sail on the 1st of May." In fact, the ship had sailed on April 20th, and on May 11th had been captured by an American privateer. These facts were wholly unknown to the parties by whom the representation was made, j'et it was held that the policy was avoided for mis- representation, Dennistoun v. Lillic, 3 Bligh P. C. 202. In a New York case, the in- sured innocently represented that he had two hundred thousand dollars of other fire insurance upon his property; whereas, in reality, his other insurance amounted to only thirty thousand dollars; the court was of opinion that this overestimate was material as a matter of law, .ind that though unintentional, it would avoid the contract, .Armour ti. Transatlantic Fire Ins. Co., 90 N. Y. 4.50. And where an applicant erroneously stated that no other company had refused to grant him life insurance, it was held to be a material misrepresentation and good ground for decreeing a cancellation of the policy, Am. Un. Life Ins. Co. v. Judge, 191 Pa. St. 484, 43 Atl. Rep. 374. 94 BAXTER V. NEW ENGLAND INS. CO. [CHAP. IV versation, and she performed her voyage to Cronstadt without any accident or delay. The captain from his arrival there was ready to take the cargo on board; but the first part of it was not sent alongside till the 8th of September. On the 30th of the same month the ship sailed on the homeward voyage, and after h-ing some time for convoy at Matwick, was wrecked on the Uth of November off the coast of Denmark. Before she sailed from Cronstadt the winter risk had begun, and the current premium had risen to 30 guineas to return 10. Lord Ellenborough. Had the desired warranty been introduced into the policy, that would have been falsified and the underwriters would have been discharged. But I find no misrepresentation here upon the falsity of which they can defend themselves. The broker said, the ship had sailed some time, and must then have reached Gottenburgh; that a cargo was pro- vided for her; and that she must be an early ship. Of these circumstances, only the first could be considered as within his own knowledge; and that was true. The next was likewise true, although only matter of probable conjec- ture; for the ship had reached Gottenburgh some days before. He said in unqualified terms that a cargo was ready; but this from its very nature was only the subject of expectation and belief. Neither he nor his principal could be supposed to have been at Cronstadt or Petersburgh to see the cargo in a warehouse or on the wharf there; and I believe it is by no means an unusual thing to have a cargo of Russian produce prepared for any particular ship before she sails on the outward voyage. All the broker could be understood to mean was, that a cargo had been ordered for the ship in question, and that there was every reason to suppose it would be ready for her by the time of her arrival, so that she might be expected to be an early ship. We have no evi- dence that this representation does not perfectly accord with the truth. The defendant, instead of insisting upon the warranty, chose to speculate upon probabilities. He erred in his calculation; but that is no reason why he should not pay the loss. Verdict for the plaintiff.^ BAXTER V. THE NEW ENGLAND INSURANCE CO. Circuit Court of the United States, 1822. 3 Mason, 96 The test of materiality. Assumpsit on a policy of insurance dated on the 28th of September, 1821, whereby Aaron Baldwin, "for whom it may concern, and payable to him ' Estimates of value are usually matter of opinion, Whcaton v. Ins. Co., 76 Cal. 415; Susquehanna Mut. F. Ins. Co. v. Staats, 102 Pa. St. 529; as to the age of a build- ing, PhcEnix Ins. Co. v. Wilson, 132 Ind. 449, 25 N. E. 592; representations as to the cause of death of relatives. Supreme Lodge v. Dickson, 102 Tenn. 255, 52 S. W. 862; and sometimes representations regarding one's good health in applying for life insur- ance, Bamea v. Association, 191 Pa. St. 618, 43 Atl. 341, 45 L. R. A. 264. CHAP. IV] BAXTER V. NEW ENGLAND INS. CO. 95 in case of loss," procured insurance of "S4,000 on property on board the brig Robert, at and from Kingston, Jamaica, to St. Andrews (N. B.), four per cent on specie, and two per cent on merchandise." Loss averred to be on the 24th of August, 1821, by pirates, of certain gold on board. Defense, misrepresentation . On the 6th of August, 1821, the plaintiff (who was the ma.ster of the Robert) wrote to C. Curry (the agent in procuring the insurance through Baldwin), "I shall leave this on the 12th inst." On September 20th Curry wrote to Baldwin for the insurance, and added in a postscript, "Mr. Patterson's brig James has arrived with specie and produce, in thirty-two days." On the next day Curry wrote to Baldwin, "I am informed to-day by the master of the James that she (the brig Robert) would not sail until four days after the James." Upon the communication of these letters the insurance was pro- cured. In fact, the James sailed from Kingston on August 20th; the brig Robert sailed three or four days before that time; and the brig Robert wa.s to sail three or four days after the James. ♦ It was proved that the difference of time, whether the brig Robert sailed before or after the James, whether on the 12th or 24th of A-ugust, was very material to the risk, as the very delay in her passage would give rise to sus- picion of her being captured by pirates. Story, J. I think upon this evidence the plaintiff is not entitled to re- cover. There has been a material misrepresentation, and whether it be in- nocent or otherwise does not vary the legal result. It was represented in the first letter that the brig Robert would sail on the 12th of August; in the second, that she would not sail until the 24th of August. In point of fact, she had sailed about the 16th of August. And this difference of time is proved to be material to the risk. Plaintiff nonsuit.^ * A representation is material which would influence the judgment of a prudent insurer in fixinp; the premium or determining whether he will assume the risk, Matteon V. Modern Samaritans, 91 Minn. 434, 98 N. W. 330. Accordingly, it will be observed that the materiality of a concealment or representation of fact depends, not on the ultimate influence of the fart upon the risk or its relation to the cause of loss, but on the immediate influence upon the party to whom the communication is made, or is due, in forming his judgment at the time of efTecting the contract. The party thus sought to be influenced is generally the insurance company. Though the loss should arise from causes totally unconnected with the material fact concealed or misrepre- sented, the policy is void, because a true disclosure of the fact might have led the company to decline the insurance altogether, or to accept it only at a higher premium, Daniels r. Hudson R. F. Ins. Co., 12 Cush. (Mass.) 416, 59 Am. Dec. 192. Refers to Wh.\t Time. — The closing of the contract is the time to which a mis- representation or concealment must be presumed to refer, and any material facts coming to the knowledge of either party pending the negotiations must be communi- cated, even after written proposals have been submitted. Snow v. Merchants' Mar. Ins. Co., 61 N. Y. 160. If the contract has been closed by a written or oral binding, as, for example, by the usual binding .slip, that date controls, and not a subsequent date when the policy may chance to be signed or delivered, lonides r. Pacific Ins. Co., L. R. 6 Q. B. 685. Materiality and Substantial Trcth: Questions of Fact. — Whether a represen- 96 RICE V. NEW ENGLAND MARINE INS. CO. [CHAP. IV RICE ET AL., ADMINISTRATORS, v. NEW ENGLAND MARINE INSURANCE CO. Supreme Judicial Court of Massachusetts, 1827. 4 Pick. 439 Same subject: facts similar to those of the last case. Assumpsit upon a policy of insurance made by the defendants on the 2Sth of September, 1821, on property belonging to Baxter, the plaintiff's intestate, on board the brig Robert, of which Baxter was master, at and from Kingston, Jamaica, to St. Andrews, New Brunswick. The loss was admitted, the vessel having been piratically assailed on the voyage described in the policy, and plundered of the property. The defense was that there was a misrepresentation as to the time of the vessel's sailing from Kingston; and it was satisfactorily proved that the fact supposed to have been misrepresented was material to the risk undertaken by the defendants. On this point it was proved by Aaron Baldwin, who procured the policy, that on the morning of the day on which it was obtained, he received from one Currie, of Campo Bello, the agent of Baxter, two letters, one dated the 20th of September, in which he desires Baldwin to procure insurance, and states that Baxter expected to sail on the 12th of August, the other dated the 21st of September, in which he mentions the arrival of the James after a passage of thirty-two days from Kingston, and that he was informed by Hewett, the master of the Javies, that the Robert would not sail until four days after the James. Baldwin testified that both of these letters were handed by him to Hall, the president of the company, who read them, and with the witness calculated from the facts therein stated, the probable time of the Robert's sailing from Kingston to be about the 24th of August, which would leave her out twenty-nine days, which was within the ordinary pas- sage from Kingston to St. Andrews; whereupon the words, "Expected to sail about the 24th ult.," were inserted in the margin of the policy. Currie, before writing this letter of the 20th of September, had received a letter from Baxter, dated the 6th of August, saying, " I shall leave Kingston on the 12th ; " and the vessel did, in fact, sail on the 12th, so that when the policy was ef- fected she would have been out forty days, which was out of time. She did in fact arrive at St. Andrews on the 22d of September, but her arrival was not known. tation be material or not, and whether substantially true or not, are essentially ques- tions of fact, and ordinarily are to be determined by the jury, Carrollton Furniture Co. V. Am. Credit, etc., Co., 124 Fed. 25, 59 C. C. A. 545; but when the testimony in its entirety, relating to a question of fact, is such that to a reasonable mind only one inference is dcducible from it, the issue becomes one of law, and is to be deter- mined by the court, Donahue v. Ins. Co., 56 Vt. 380. CHAP. IV] RICE V. NEW ENGLAND MARINE INS. CO. 97 The cause was submitted to the jury on the question whether the facts stated in Currie's letter of September 21st, of the Robert's having been left at Kingston when the James sailed from that port, and that she was to sail four or five days after the James, were in truth communicated to Currie by Hewett by mistake, or whether Currie misappreliended Ilewett and stated the facts in his letter by mistake. The defendants contended that as the information was in fact not true, the policy which was obtained ui)on it was void, although Currie truly stated the information he had received; but in this they were overruled, and the Chief Justice instructed the jury, that if they were satisfied from the evidence that Hewett did state to Currie the facts as related in Currie's letter, the contract was valid, notwithstanding the facts proved not to be true. Verdict for the plaintiffs. Parker, C. J. We are to take it as proved, that the information obtained from Hewett was truly and correctly represented to the president of the office; and if this be so, although the fact thus communicated was not true, there was no misrepresentation, for the insured or his agent is bound only to communicate all the information he has; and if the insurer is not satisfied with that, he may require a warranty. Nor do we think the case proves a misrepresentation in the other point which has been urged in argument. Baxter wrote to Currie, his agent, from Kingston, and, in a postscript, stated that he should sail on the 12th of the month. Currie, in his letter of the 20th of September to Baldwin, whom he desires to procure insurance, says that he (Baxter) expected to sail on the 12th. We think that the statement of the day on which a vessel will sail, is substantially nothing more than stating an expectation that she will sail on that day. The most positive intentions to sail on any future day amount only to a strong expectation, for it must depend on the elements and other causes affecting the sailing of vessels whether such intention shall be ex- ecuted or not. And if the time of sailing be material to the risk, the insurer would be as likely to require a warranty that the vessel would sail or had sailed on the day proposed, if it were stated positively, as if stated only as an expectation. We do not think that a representation that a vessel will sail on a future day is, under the circumstances of this case, a fact, but an expectation. But even if we had not come to this opinion, the case would stand well for the plaintiffs, for the insurance was not at all influenced by the supposed misrepresentation of Baxter's information in the letter to Currie. It was on the letter of Currie of the 21st of September, in which he gives the informa- tion obtained from Captain Hewett, that the president and Baldwin made their calculations, in consequence of which the memorandum was made in the margin of the policy, "Expected to sail about the 24th of August." This necessarily superseded the prior information, because, if true, it es- tablished the fact that the vessel had not sailed until several days after the 12th, and created a probability that she would sail about the 24th; and it 7 98 RICE V. NEW ENGLAND MARINE INS. CO. [CHAP. IV was upon the expectation founded on this probability that the policy was effected. We are satisfied that, though this is an unfortunate case for the othce, there is no principle of the law of insurance upon which they can be exon- erated from the loss. Judgment according to verdict. CHAP. V] CAPITAL FIRE INS. CO. V. KING 99 CHAPTER V General Principles — Continued Warranties CAPITAL FIRE INS. CO. v. KING Supreme Court of Arkansas, 1907. 82 Ark. 400 Nature of an express warranty. Policy of fire insurance for $1,200 on a dwelling house. Defense, breach of warranty. Among the questions asked and answered in the application was the fol- lowing: What did the house cost? A. $2,000. The application was ex- pressly made part of the policy and it was warranted to contain a full and true description and statement of the condition, situation, value and occupa- tion and title of the property proposed to be insured. It was also warranted that the answers to each question were true, full and complete and correct. On the trial the plaintiff testified that the house cost $1,700. Plaintiff recovered judgment for $1,200. Battle, J. In Providence Life Assurance Society v. Reutlinger, 58 Ark. 528, 25 S. W. 835, this court said: "As a general rule, a warranty is a stipula- tion expressly set out, or by inference incorporated, in the policy, whereby the assured agrees ' that certain facts relating to the risk are or shall be true, or certain acts relating to the same subject have been or shall be true, or certain acts relating to the same subject have been or shall be done.' Its purpose is to define the limits of the obligation assumed by the insurer, and it is a condition which must be strictly complied with, or literally fulfilled, before the right to recover on the policy can accrue. It is not necessary that the fact or act warranted should be material to the risk, for the parties by their agreement have made it so. Lord Eldon says: 'It is a first principle in the law of insurance that, if there is a warranty, it is a part of the contract that the matter is such as it is represented to be. The materiality or im- materialitj' signifies nothing.' Mechanics' Insurance Co. v. Thompson, 57 Ark. 279, 21 S. W. 468; Western A.ssurance Company v. Altheimer, 58 Ark. 565, 25 S. W. 1067. On the other hand, representations are no part of the contract of insurance, but are collateral or preliminary to it. When made to the insurer at or before the contract is entered into, they form a basis upon which the risks proposed to be assumed can be estimated. They operate as the inducement to the contract. Unhke a false warranty, they will not in- validate the contracts, because they are untrue, unless they are material to 100 CAPITAL FIRE INS. CO. V. KING [CHAP. V the risks, and need only to be substantially true. They render the policy void on the ground of fraud, 'while a non-compHance with a warranty oper- ates as an express breach of the contract.' " The agreements which are set out in the application were made a part of the policy and conditions of the insurance. In incorporating them into the poHcy, they were expressly made warranties. They thereby became what are denominated affirmative warranties, and their truth, exactly as stated, was made a condition upon which the insurance company would become liable for losses by fire without which the assured was not entitled to recover. He warranted that the house insured cost $2,000. It cost only $1,700, ac- cording to his own testimony. The warranty was thereby broken, and the pohcy made void. Reversed and remanded for a new trial. Hill, C. J. (dissenting). The pohcy contains this provision: "This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning the insurance or the subject thereof; or, if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any matter relating to insurance, or the subject thereof, whether before or after the loss." There is a misrepresentation in writing of the cost of the house, it being put in at $2,000, when in fact it was $1,700, according to King's testimony; but that is not a material misrepresentation. The policy on the house was for $1,200. The house was as easily subject to a $1,200 risk on a valuation of $1,700 as on a valuation of $2,000, and the pohcy becomes a liquidated demand in case of loss, Kirby's Dig., § 4375. There was ample margin to make the $1,200 risk a sound one. It is true that parties may foolishly con- tract to warrant the veracity or accuracy of immaterial matters, and the courts must enforce the contracts as written; but, where a contract contains such a clause as the one above quoted, then it becomes clear that misrepre- sentations and concealments of material matters are the ones contracted to avoid the policy, and not immaterial matters. It is not good construction to limit this clause to misrepresentations and concealments which are not warranties. Where the misrepresentation or concealment is material, then, under this -clause, it avoids the policy; when it is not material, then it does not. Where a matter is contracted to be a warranty, and does not fall within this clause as a misrepresentation or concealment, then the warranty provision alone prevails; when it falls, as does this one, within both clauses, the familiar rule of construction that these printed and fixed contracts be most strongly construed against the makers of them renders this clause controlling, and unless the misrepresenta- tion is material, should not avoid the contract. RiDDiCK, J., concurs in this dissent.^ * It has already been shown that facts material to the risk must be disclosed with substantial accuracy before the contract is closed and that the contract of insurance CHAP. VJ GAINES V. FIDELITY & CASUALTY CO. 101 GAINES, APPELLANT, v. THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, RESPONDENT Court of Appeals of New York, 1907. 188 N. Y. 411 Nature of an express warranty. Action on a policy of accident insurance. Gaines, the insured, warranted in answer to a question as to the relation- ship of the payee, that she was his wife. The insured was killed by a pistol shot fired by another. The company defended on the ground that there had been a breach of warranty in that the plaintiff was not the wife of the insured. It proved in evidence that at the time of the issuance of the policy the plaintiff was living with the insured and had gone through the form of a marriage with him, but that in fact she had a prior husband living. Gray, J. The argument of the appellant, in substance and effect, is that the representation of the assured that Lottie Gaines was his wife was not material and should be considered as matter of description and not of warranty. This was, however, a distinctly expressed warrantj^ the truth of which was a condition of liability, and was of the basis of the contract itself. The effect of making the statement a part of the policy and of warranting ia one of highest good faith, but questions of materiality and good faith naturally belong to the jury for consideration. It is obvious, therefore, that from the applica- tion of such general principles of law, the underwriter can obtain no very definite criterion by which to form a scientific estimate of the extent of the hazard in a par- ticular instance, but where provisions relating to the risk have been expressly in- corporated into the contract, the court has been led to adopt the stringent doctrine of warranties, and to hold that such provisions must be literally fulfilled. This strict doctrine of warranties in the law of insurance is in contrast with the rule applied in certain other cases; for example, in the case of a building contract, Flaherty v. Miner, 123 N. Y. 382. Warranties are sometimes classified as aflSrmative and promissory, the affirmative relating to a situation or state of facts prior to, or contemporaneous with, the inception of the insurance, and promissory relating to something to be done or omitted during the pendency of the contract; but it must be carefully noted that both classes are stipulations, and that neither class are merely representations, unless made so by statute. By the recent codification of marine insurance law in England, both of these kinds of warranties are classified as promissory, Eng. Marine Ins. Act (1906), § 33. The implied warranty of seaworthiness is affirmative. The implied warranty that there shall be no deviation from the usual course of a voyage is promis- sory. In the New York standard fire policy the express warranties regarding con- cealment and misrepresentation, the statement of the interest of the insured in the property, and the character of his ownership, are affirmative. The express warranties regarding increase of hazard, employment of mechanics, change of interest, title or possession, vacancy or unoccupancy, proceedings after loss, and others, are promissory. The express warranties regarding fraud and false swearing, other insurance and chattel mortgages, are both afiSrmative and promissory. 102 FOWLER V. JETNA FIRE INS. CO. [CHAP. V it to be true was, in law, to induce the defendant's agreement to insure and the statement became material. It is a general rule and one which the de- cisions of this court have asserted, that the materiality of the fact stated by the assured is of no consequence, if the contract be that the matter is as represented, and that unless it prove so, whether from fraud, mistake, negli- gence or other cause, not proceeding from the insurer, or the intervention of the law, or the act of God, the assured can have no claim. The parties to this contract had the right to make any statements of fact material thereto and conditions precedent to any liability thereupon, all things being equal at the time in their attitude to each other, and if the}^ proved false, the con- tract was avoided. The insurer was entitled to know the actual relationship, which the person, for whom the assured desired the benefit of the insurance contract, sustained to him; for it bore upon the risk which it was to assume. The inquiry related to the risk; the statement in the answer was made a warranty to be contained in the policj^ and, it having been determined that the statement was untrue, the right to recover upon the contract was for- feited. CuLLEN, Ch. J., Edward T. Bartlett, Haight, Werner and His- cocK, JJ., concur; Willard Bartlett, J., not sitting. Judgment affirmed. FOWLER V. THE .ETNA FIRE INSURANCE COMPANY Supreme Court of New York, 1827. 6 Cow. 673 7s it material that no fraitd or evil design is disclosedf Plaintiff's policy covered their stock in trade described as contained in a two story frame house filled in with brick, situated at number 152 Chatham Street New York City. On the trial it appeared that in fact the house was a wooden building with hollow walls and not filled in with brick. The defendants insisted that the description of the goods, as being in a house filled in with brick, was a warranty which must be strictly complied with. The judge so considered it; but he received evidence to show that the wrong description was either a mistake of the plaintiffs, or the agent of the defendants; and charged the jury, that if the plaintiffs made no representation of the character of the property insured, but the agent of the company took it upon himself to describe it, the plaintiffs were not bound to answer for the error. That if the plaintiffs did make the description, but not fraudulently, for the purpose of getting insurance at a reduced rate, but through mistake, still they were entitled to recover. The defendants' counsel excepted to the decisions and charge of the judge. Verdict for the plaintiffs for $3,042.80. On the bill of exceptions. CHAP. V] FOWLER V. JETNA FIRE INS. CO. 103 Curia, per Savage, Ch. J. I think it very immaterial as regards this action, whether the error in description arose from design or mistake. The question is, did this description amount to a warranty that the property answered the description? The judge at the circuit so considered it; and it was admitted on the argument, that if the principles of marine insurance are applicable to fire insurance, it is a warranty. In the case of Stetson v. Mass. Mutual Fire Ins. Co. (4 Mass. Rep. 337), Sewall, justice, lays down tlio law thus: "The estimate of the risk undertaken by an insurer must gener- ally depend upon the description of it made by the insured or his agent. A mistake or omission in his representation of the risk, whether wilful or acci- dental, if material to the risk insured, avoids the contract." For this, he cites 1 Marsh, on Ins. 335, 339. That writer states that a warrranty being in the nature of a condition precedent, must be fulfilled by the insured, before performance can be enforced against the insurer; and whether the thing warranted was material or not, whether the breach of it proceeded from fraud, negligence, misinformation, or any other cause, the consequence is the same. (1 Marsh. 347.) In relation to the sale of personal proi)erty, it is held that a bill of parcels is not a warranty that the goods are what they are represented to be. (2 Caines, 48, and other cases down to the 20 John. 198.) But in relation to policies of insurance, it is held that a description of a vessel, is a warranty. For instance, the description of a vessel as Swedish, is a warranty of her national character. (Phil, on Ins. 125, and the cases there cited, 8 John. 237, 319.) No cases have been produced, to show that a description of property insured by a policy against fire, is to be construed differently from a de- scription in a marine policy. I can perceive no reason why there should be a difference. "Insurance," says Lord Mansfield, "is a contract upon spec- ulation." (3 Burr. 1909.) "The special facts upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only; the underwriter trusts to his representation," etc. He says the insured need not state what the insurer knows; but the keeping back the true state of the property, is a fraud. In this case, the plaintiffs ought to have known the true state and condition of their house, and have truly represented it. Not having done so, they fail in their action. The property burned is not the property insured. This is not a case in which equities should be considered. It is a sort of gambling, a speculating upon chances; and the parties must be held strictly and literally to their contract. I think the judge misdirected the jury, and that a new trial should be granted. New trial granted. 104 COGSWELL V. CHUBB [CHAP. V COGSWELL V. CHUBB Appellate Division, Supreme Court of New York, 1896 1 App. Div. 93, aff'd 157 N. Y. 709 Miist a breach of warranty to be fatal contribute to the loss? Does a breach avoid the contract or simply suspend its application during the continuance of the breach? Patterson, J. The defendants in this action were underwriters on a policy of marine insurance on the steam yacht Fieseen, the property of the plaintiff. The insurance for the term of one year, beginning April 10, 1893, was for $21,000, at which sum the vessel was valued, and these defendants were by the terms of the policy to pay the one-hundredth part of any loss or damage occasioned by any of the perils insured against. On the 9th of September, 1893, while in the lower New York bay and under way and in tow of another j'-acht, she came into collision with a steamship and was damaged to the extent of about SI 6,000, and this action was brought to recover the one-hundredth part thereof. The trial resulted in a direction to the jury to find a verdict for the defendants, from the judgment entered upon which, and from an order denying a motion for a new trial, the plaintiff has appealed. A stipulation of the policy, written in between printed portions thereof, is in the following words: "Warranted to navigate only the inland waters of the United States and Canada, and not below the Thousand Islands." It appears in the record that on the 9th day of September, 1893, the Fieseen, before the collision referred to, went out upon the high seas, beyond the Sandy Hook and Scotland lightships, and into the open waters of the Atlantic Ocean; and that fact is set up as a breach of warranty, avoiding the pohcy and pre- venting a recovery thereon. There does not appear to be any doubt on the evidence that the vessel, on the 9th of September, had been on the open ocean, at least ten miles off from the Sandy Hook lighthouse, to the southward and eastward, as testified by Captain Wicks of the Electra, and she was south and southeast of the Scot- land light. The effect of the whole evidence is that the vessel went out of inland waters. Such waters are canals, lakes, streams, rivers, watercourses, inlets, bays, etc., and arms of the sea between projections of land. That ordinary and accepted signification of the words "inland waters" must be considered the sense in which the parties used them in their contract of insur- ance, unless by agreement or understanding some other was assigned to them; and there is nothing in the record to show that a different or wider meaning was intended to be given them. Going to the open ocean and then returning was a plain breach of the warranty, the consequence of which was to avoid CHAP. V] COGSWELL V. CHUBB 105 the policy, for, hard as the artificial rule may be, it is too firmly settled to be questioned that the breach of an express warranty, whether material to the risk or not, whether a loss happens through the breach or not, absolutely determines the policy and the assured forfeits his rights under it. It is claimed, however, on the part of the appellant, that the words "inland waters," as used in the policy, are not limited to their ordinary signification, but that a usage existed respecting the waters frequented by yachts, such as the Fieseen, in view of which usage the policy was written, anfl that the warranty should be construed by that usage, and a broader meaning applied to the words, one that would include in the category of inland waters the roadstead outside of Sandy Hook and as far as the yacht went out upon the sea on the 9th of September. Evidence of usage to explain, or rather to give effect to the meaning of the policy, is very commonly resorted to in ca.=es of this character; and as said by Mr. Phillips (1 PhiUips on Ins. 73, 119) : "The subject-matter of marine insurance and other written mercantile contracts makes it necessary to go out of the written instruments in order to interpret them, more frequently than in most other contracts." But before usage can be appealed to, there must be proof that there really is a usage; something existing, and in connection with which the underwriter is assumed to have taken the risk. All that is in evidence on the subject is, that it is customary for many yachts and other craft of large and small dimensions, whenever an international yacht race takes place, to accompany the competing boats over an ocean course. This scarcely establishes a usage of the character to qualify an express warranty. International yacht races are of infrequent occurrence. That yachts covered by insurance go upon the ocean to follow them does not appear. This policy was written April 11, 1893. It is not shown that an international yacht race was in contemplation for the year during which the poUcy was to run. Attending the yacht race at Newport, and the custom of yachts to assemble at that port in the summer for the squadron races, does not establish a usage for the same reasons. All of this testimony is insufficient to prove that the parties contracted for anything other than what is expressed in the plain and accepted meaning of the words of the warranty. The further contention is made that, the loss happening after the policy attached, and the breach of the warranty in no wise producing or contribut- ing to the loss, but it Ix'ing occasioned by independent causes, the plaintiff may recover, notwithstanding the breach. The learned counsel for the plain- tiff admits that the English authorities are against this view, as they very decidedly are. The American cases of breaches of implied warranties of seaworthiness cited on the argument and in the appellant's brief do not establish a contrary rule affecting the express warranty contained in this policy. The judgment and order appealed from must be affirmed, with costs. Van Brunt, P. J., Barrett, Williams and O'Brien, JJ., concurred. Judgment and order affirmed, with costs. 106 WESTCHESTER FIRE INS. CO. V. PIER CO. [CHAP. V WESTCHESTER FIRE INS. CO. v. OCEAN VIEW PLEASURE PIER CO. ET AL. Supreme Court of Appeals of Virginia, 1907. 106 Va. 633 Effect of acts of a tenant of the insured without the knowledge of the insured. Action on a policy of fire insurance issued to the plaintiff, the owner of the insured building, located upon a pier in Chesapeake Bay. The owner had rented the building to one Livingstone who had subrented a portion to Ingle- man. A day or two before the fire, one Otto Wells approached Ingleman and asked for permission to set off fireworks upon the pier, and Ingleman told him he had no right to grant him the permission, but that he would see Livingstone about it, which he did, and Livingstone told him that Wells might use the pier for that purpose, if he would be careful. In pursuance of this permission Wells caused the fireworks to be set off from the pier on the 4th day of July, 1904, and the pier caught fire and was destroyed. The owner of the building had no knowledge that fireworks were to be used upon the pier. Keith, P. It is provided that the 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, benzole, dj'namite, ether, fireworks, gasoline, Greek fire, gunpowder," etc. The defendant in error insists that this condition has not been violated for two reasons: First, because the defendant in error is not responsible for the act of its tenant in permitting fireworks to be exhibited upon the pier; and, secondly, because the exhibition of fireworks upon the pier was not a viola- tion of the condition that fireworks were not to be "kept, used or allowed" on the premises. With respect to the first proposition, if authority be needed, the case of Liverpool & London & Globe Ins. Co. v. Gunther, 116 U. S. 113, 6 Sup. Ct. 306, 29 L. Ed. 57.5, would seem to be conclusive. The fact that the defendant in error had no knowledge that fireworks wrrc to be used upon the pier is of no consequence. In Fire Assn. v. Williamson, 26 Pa. St. 196, it is said: "Neither is it material that the landlord did not know that his tenant kept gunpowder. His contract with the insurance company was that it should not be kept without permission, and it was his business to .see that his tenants did not violate the contract in this respect." There is no doubt that in this case the condition was broken, and that its breach was the direct cau.se of the loss, and under the authorities just cited, we think there is equally as little doubt that the defendant in error was re- sponsible for the act of its tenant in permitting the prohibited articles to be used upon the premises. It was not only permitted by the tenant, but per- CHAP. V] SNYDER V. FARMERS' INS. & LOAN CO. 107 mittcd with actual knowledge that he had no right to grant the pernriission, and only after he had taken, as he thought, due precautions for his own pro- tection from loss. Reliance is placed by defendant in error, also, upon London, etc., F. Ins. Co. V. Fischer, 92 Fed. 500, 34 C. C. A. 50.3, in which the opinion was de- livered by Judge Taft. In that case, the condition of the policy wa.s that it should be void if "there be kept, used, or allowed gasoline" on the premises. It was held that the word "allowed" was to be construed as meaning "al- lowed to be kept or Uvsed," and that the condition was not violated by per- mitting gasoline to be carried through the building on the premises. But here the prohibited article was carried on the premises, not through them, and was used upon the premises, and the prohibited use was the sole cause of the loss sustained. It was a lawful condition clearly expressed and reck- lessly violated, and if it be not sufficient to protect the insurance company against loss, it would seem to be an idle task to write conditions into a policy. We are of the opinion that the judgment should be reversed. Reversed.^ SNYDER V. THE FARMERS' INSURANCE & LOAN COMPANY Supreme Court of New York, 1834. 13 Wend. 92 What reference to an extraneous paper will avail to incorporate it into the con- tract as a warranty? , The plaintiff was insured $4,000 on his stock of merchandise contained "in the stone building with shingle roof, occupied by himself and others, ' Inability to Fulfill no Excuse. — The inability of the insured to comply with the reriuircments of his warranties offers no excuse, unless the insurers arc in some way responsible for the omission, .Johnson v. Casualty Co., 73 N. H. 259, 262, 60 Atl. 1009. The insurers have promised to pay only upon condition that the in.sured shall fulfill the contract upon his part, not upon condition that he shall find it convenient or possible to do so. School District v. Dauchy, 25 Conn. 530. Sickness, insanity, death, Thompson v. Ins. Co., 104 U. S. 252; Carpenter v. Centennial Mut. Life Assn., 68 la. 4.53; and according to some authorities, even war, Worthington r. Charter Oak Life Ins. Co., 41 Conn. 401, will furnish no excuse for the violation of a condition in the policy. But the United States Supreme Court and other courts have adopted the rule, that a war overrides the ordinary obligations of the policy, and simply suspends them until the war is terminated, N. Y. Life Ins. Co. v. Statham, 93 U. S. 24; Cohen V. Mut. Life Ins. Co., 50 N. Y. 610. As regards the provisions of the policy applicable to proceedings after the capital event insured against has occurred, the strictness of the rule is somewhat modified. It is presumed that in such a case the parties did not intend to require impossibilities, Ins. Cos. v. Boykin, 12 Wall. (U. S.) 433, 20 L. Ed. 442; Sergent v. L. & L. & G. Ins. Co., 155 N. Y. 349, 355, 49 N. E. 935; Evans r. Craw- ford Co., etc., Ins. Co. 130 Wis. 189, 109 N. W. 952. Only substantial compliance with the iron-safe clause, used in the south, is required by certain courts, Snecd r. British-Am. Ins. Co., 73 Miss. 279; McMillan v. Ins. Co., 78 S. C. 433, 58 S. E. 1020. But the warranty must be reasonably fulfilled, Arkansas Ins. Co. v. Luther (Ark., 1908), 109 S. W. 1022. 108 SNYDER V. farmers' INS. & LOAN CO. [CHAP. V situated at, etc., more particularly described in application and survey fur- nished by himself, filed No. 928, in this office," i. e., the office of the defendants. The property was insured for one year, and within the term the building mentioned in the pohcy, with its contents of merchandise, was burnt and destroyed by fire. The survey mentioned in the policy was in these words: "Survey of a building at Bolton, etc., 56 by 35 feet, built of stone, shingled roof, one story high, garret over the whole, thick stone partition running lengthwise through the building to the roof; one part occupied by Alexander Snyder, the other part by Charles MTnty as a storeroom." It was proved on the part of the defendants that the gable ends of the building were of stone, that the roof was on the building lengthwise, coming down to the side walls, which rose about five feet above the chamber floor, and on them the eaves of the roof rested. There was a stone partition lengthwise through the store, dividing it into two apartments, one of 18, and the other of 16 feet, one of which was occupied by Snyder; this partition did not extend higher than the chamber floor, and on the partition the beams of the chamber floor rested, and there was no partition in the garret. The judge charged the jury that the sicrvey was not a part of the policy so as to become a warranty; that the misdescription of the building in regard to the partition wall was not in itself a bar to the action; that it would be for the jury to determine whether there was any fraudulent misrepresentation or concealment in re- spect to the survey, or whether the risk or hazard was increased by the facts or circumstances in regard to which the building was misdescribed, and that if they should find either of those points in the affirmative, the verdict should be for the defendant, otherwise for the plaintiff. The jury found for the plaintiff, and assessed his damages at $3,452. The defendants, having ex- cepted to the charge of the judge, moved for a new trial. By the Court, Savage, Ch. J. The only question in this case is, whether the survey furnished by the plaintiff is to have the effect of a warranty, or of a representation. This question must be considered as settled on authority in this court. It arose and was decided in The Jefferson Ins. Co. v. Cotheal, 7 Wend. 72. That cause came into this court by writ of error, and the opinion of the court was given by Mr. Justice Sutherland, who examined the cases on the point, and came to the conclusion that a warranty is never to be created by construction— must appear on the face of the policy, that there may be unequivocal evidence of a stipulation, the noncompliance with which is to have the effect of avoiding the contract. The only exception to the generality of this proposition is, that the proposals and conditions at- tached to the policy form part of the contract. In the case of Dow v. Whetton, 8 Wendell, 166, the chancellor says, the policy itself is the only legal evidence of the agreement between the parties. Vice Chancellor M'Coun has also clearly stated the difference between a warranty and a representation. The former is the affirmation of a fact asserted in the policy, and forming a con- dition which must be .strictly complied with; the latter the statement of some collateral circumstances not embodied in the policy, though made before CHAP. Vj ALABAMA GOLD LIFE INS. CO. V. JOHNSTON 109 the contract was completed, 1 Edwards, 74. This subject has been much considered in the Superior Court of the city of New York, 2 Hall, 608, 627, 628. Chief Justice Jones says, it is a general rule that a representation, to have the effect of a warranty, must bo contained in the deed or policy itself. And Mr. Justice Oakley says, "In determining what shall constitute a war- ranty, and what shall be a representation merely, the general principle seems to be well settled that an express warranty must appear on the face of the l)olicy, and that any instructions for insurance, unless inserted in the instru- ment itself, do not amount to a warranty." Again: "the insurers having a description of the property in their possession, are presumed to insert in the policy itself as much of that description as they deemed material; and by omitting any part of it, they showed that they are content to take such part as a representation merely, and to look to it only for estimating the risk." It is not necessary to deny that a separate paper may by express stipulation be made part of the policy; but there is no such reference in the present policy as to authorize the court to give the survey the force of a warranty; indeed, from the manner of referring to it, it would seem that the defendants were satisfied to look to it only for the purpose of estimating the risk. The only question which we decide now is, that the survey referred to in the policy must be considered a representation mcrelj'^, and not a warranty. New trial denied.^ ALABAMA GOLD LIFE INS. CO. v. JOHNSTON Supreme Court of Alabama, 1886. 80 Ala. 467 Warranties contrasted with representations. SoMERViLLE, J. The question of most importance which is raised by the rulings of the court in this case is, whether the answers made by the assured ^ Especially in cities the brief written application for fire insurance usually is not made part of the contract. Applications for life insurance almost always are incorpo- rated into the contract. A warranty may be inserted on the margin of the policy, or across the lines, Wood v. Hartford Ins. Co., 13 Conn. 533, 35 Am. Dec. 92; Mc- Laughlin V. Atlantic Mut Ins. Co., 57 Me. 170; Patch v. Phoenix Ins. Co., 44 Vt. 481; or on a slip attached to the policy, Home Ins. Co. v. Gary, 10 Tex. Civ. App. 300, 31 S. W. 321; or on a separate paper expressly referred to in the policy, and made part thereof. Wood v. Hartford Fire Ins. Co., 13 Conn. 533, 545, 35 Am. Dec. 92. The words "see back" will not avail to incorporate the indorsement on the back of a policy, The Majestic, 166 U. S. 375, 17 S. Ct. 597. Where an application for life in- surance was described as "part of the contract," the answers were held to be in- corporated into the contract as warranties, Cushman r. U. S. Life Ins. Co., 63 N. Y. 404, so also where policy described the application as "the basis of the contract," Bobbitt V. L. & L. & G. Ins. Co., 60 N. C. 70, 8 Am. Rep. 494; Anderson v. Fitzgerald. 4 H. L. Cas. 484. No Special Form Necessary. — To constitute a warranty no particular form of words is necessary. Neither the presence nor the absence of the word "warranted" is at all conclusive. Thus the phrase "warranted free of capture" in a marine policy indicates simply an exception to the underwriters' liability. It does not mean that 1 10 ALABAMA GOLD LIFE INS. CO. V. JOHNSTON [CHAP. V to the questions contained in the application for insurance are to be construed as absolute warranties, or in the nature of mere representations. The distinction between a warranty and a representation in insurance is frequently a question of difficulty, especially in the light of more recent de- cisions, which recognite the subject as one of growing importance in its re- lations particularly to life insurance. As a general rule it has been laid down that a warranty must be a part and parcel of the contract of insurance, so as to appear, as it were, upon the face of the policy itself, and is in the nature of a condition precedent. It may be affirmative of some fact or only prom- issory. It must be strictly compUed with, or literally fulfilled, before the assured is entitled to recover on the policy. It need not be material to the risk, for whether material or not its falsity or untruth will bar the assured of any recovery on the contract, because the warranty itself is an implied stip- ulation that the thing warranted is material. It further differs from a repre- sentation in creating on the part of the assured an absolute Uability whether made in good faith or not. A representation is not, strictly speaking, a part of the contract of in- surance, or of the essence of it, but rather something collateral or prelimi- nary, and in the nature of an inducement to it. A false representation, unlike a false warranty, will not operate to vitiate the contract or avoid the policy, unless it relates to a fact actually material, or clearly intended to be made material by the agreement of the parties. It is sufficient if representations be substantially true. They need not be strictly or literally so. A misrepre- sentation renders the policy void on the ground of fraud; while a noncom- pliance with a warranty operates as an express breach of the contract. The mere fact that a statement is referred to or even inserted in the policy itself, so as to appear on its face, is not alone now considered as conclusive of its nature as a warranty, although it was formerly considered otherwise. Whether such statement shall be construed as a warranty or a representation depends rather upon the form of expression used, the apparent purpose of the insertion and its connection or relation to other parts of the application and policy, construed together as a whole, where legally these papers con- stitute one entire contract, as they most frequently do. Bliss on Insurance, §§ 43 et seq.; Price v. Phoenix Mut. Ins. Co. (17 Minn. 497), s. c, 10 Amer. Rep. 166. In construing contracts of insurance, there are some settled rules of con- struction bearing on this subject which we may briefly formulate as follows: (1) The courts being strongly inclined against forfeitures, will construe all the conditions of the contract, and the obligations imposed, liberally in favor of the assured and strictly against the insurer. (2) It requires the clearest and most unequivocal language to create a warranty and every statement or engagement of the assured will be con- strued to be a representation and not a warranty, if it be at all doubtful in meaning, or the contract contains contradictory provisions relating to the the iDBurance in other respects will be vitiated, but only that the underwriter will not be reeponsible for a loss occasioned by that cause. CHAP. V] ALABAMA GOLD LIFE INS. CO. V. JOHNSTON 1 1 1 subject, or be otherwise reasonably susceptible of such construction. The court, in other words, will lean against that construction of the contract which will impose upon the assured the burdens of a warranty, and will neither create nor extend a warranty by construction. (3) Even though a warranty in name or form be created by tlie terms of the contract, its effect may be modified by other parts of the policy, or of the application, including the questions and answers, so that the answers of the assured, so often merely categorical, will be construed not to be a war- ranty of immaterial facts, stated in such answers, but rather a warranty of the assured 's honest belief in their truth — or in other words, that they were stated in good faith. The strong inclination of the courts is thus to make these statements, or answers, binding only so far as they are material to the risk, where this can be done without doing violence to the clear intention of the parties expressed in unequivocal and unqualified language to the con- trary. Many early adjudications may be found, and not a few recent ones also, in which contracts of insurance, and especially of life insurance, have been construed in such manner as to operate with great harshness and injustice to policy holders, who, acting with all proper prudence, as remarked by Lord St. Leonards, in the case of Anderson v. Fitzgerald, 4 IL L. C. 507 (s. c, 24 Eng. L. & Eq. 1), had been "led to suppose that they had made a provision for their families by an insurance on their lives, when, in point of fact, the policy was not worth the paper on which it is written." The rapid growth of the business of life insurance in the past quarter of a century, with the tendency of insurers to exact increasingly rigid and technical conditions, and the evils resulting from an abuse of the whole system, justify, if they do not necessitate, a departure from the rigidity of our earlier jurisprudence on this subject of warranties. And such, as we have said, is the tendency of the more modern authorities. There are, it is true, in this case, some expressions in both the policy and the application (which taken together, constitute the contract of insurance), that indicate an intention to make all statements by the assured absolute warranties. The application consisting of a "proposal" and a "declaration" is declared to "form the basis of the contract " of insurance, and the policy is asserted to have been issued "on the faith" of the application. It is further provided that if the declaration or any part of it made by the assured shall be found "in any respect untrue," or "any untrue or fraudulent answers" are made to the questions propounded, or facts suppressed, the policy shall be vitiated, and all payments of premiums made thereon shall be forfeited. So, if there were nothing in the contract to rebut the implication, it might, perhaps, be held that the parties had made each answer of the assured mate- rial to the risk by the mere fact of propounding the question to which such answers were made, and that this precluded all inquiry into the question of materiality. Price v. Phcenix Mut. Life Ins. Co., 10 Amcr. Rep. 166, supra. On the contrary, the policy purports to be issued "in consideration of the representations" made in the application and of the annual premiums. The 112 ALABAMA GOLD LIFE INS. CO. V. JOHNSTON [CHAP. V answers are nowhere expressly declared to be warranties, nor is the applica- tion, in so many words, made a part of the contract, so as to clearly import the answers into the terms and conditions of the pohcy. Among numerous other questions, the assured was asked whether he had been affected since childhood with any one of an enumerated list of complaints or diseases, in- cluding "fits or convulsions"; and whether he had "ever been seriously ill," or had been affected with "any serious disease." To each of these ques- tions he answered "No." The concluding question is as follows: "32. Is the party aware that any untrue or fraudulent answers to the above queries, or any suppression of facts in regard to the party's health will vitiate the policy, and forfeit all payments made thereon?" To this was given the answer "Yes." It is significant, as observed in a recent case before the New York Court of Appeals, that the assured "is not asked whether he is aware that any unintentional mistake in answering any of the host of questions thrust at him, whether material to the risk or not, will be a breach of warranty and vitiate his policy," Fitch v. The American, etc.. Insurance Co. (59 N. Y. 557), s. c, 17 Amer. Rep. 372, supra. Then follows a declaration that "the assured is now in good health, and does ordinarily enjoy good health," and that in the proposal of insurance he "had not withheld any material cir- cumstance or information touching the past or present state of health or habits of life" of the assured with which the company "should be made acquainted." One part of the contract thus tends to show an intention to constitute the answers warranties, while the other describes and treats them as repre- sentations. There is thus left ample room for construction. Our conclusion is that the following is a just and fair construction of the contract of insurance under consideration : (1) That the answers of the assured were not absolute warranties, but in the nature of representations; or, if warranties, they are so modified by other parts of the contract as to be warranties only of an honest belief of their truth. (2) That any untrue statement or suppression of fact, material to the risk assured will vitiate the policy, and thus bar a recovery, whether intentional, or within the knowledge of the assured or not. (3) If immaterial, such statement, to avoid the policy, must have been untrue within the knowledge of the assured — that is, he must either have known it, or have been negligently ignorant of it. (4) The terms of the contract rebut the implication that all symptoms of diseases inquired about were intended to be made absolutely material, un- less they had once existed in such appreciable form as would affect soundness of health, or have a tendency to shorten life, and thus affect the risk. It is very obvious that the rulings of the Circuit Court conformed to these principles, and for this reason, we are of opinion that they are free from error. The judgment is, therefore, affirmed.^ ' As previously shown, a representation, technically speaking, is a collateral induce- ment which, if substantially true, or if immaterial in its influence upon the mind of the CHAP. Vl BLACKHURST V. COCKELL 113 BLACKHURST v. COCKELL Court of King's Bench, 1789. .3 T. R. 360 Interpretation of a warranty. Goods were insured from the lading of them on board the .ship "lo.st or not lost," and warranted well on a particular day; the ship wa,s lost on that day before the i)olicy was underwritten; and it was holden that the under- underwriter, will furnish no ground for avoiding the contract, while a warranty is a stipulation of the contract itself, to bo rigidly enforced according to its terms; but the bare mention of these propositions in the abstract fails to explain or to lay proper emphasis upon a distinction of great practical moment to be drawn between a repre- sentation and a warranty. This distinction is better defined in the statement that, if the decisive issue on trial involve an inquiry either as to the substantial truth or as to the materiality of a representation, the right to determine the case is apt to be taken from the court and carried over to the jury. Very much the same result often follows where the decisive statement or representation, although made part of the contract itself, because of some special phraseology connected with it is construed by the court to fall short of a warranty. Thus, under the standard fire policy, jjersonal property is warranted free of any chat- tel mortgage without written permit. The property in a given instance is so incum- bered. The fact is indisputable, for the defendant on the trial produces from the rec- ord a certified copy of the mortgage. In this situation of the case the trial judge has no discretion. He mu.st dismiss the complaint of the assured, Crikelair r. lus. Co., 168 111. 309, 48 N. E. 167, 61 Am. St. II. 119, or direct a verdict for the defendant as matter of law, Olney v. German Ins. Co., 88 Mich. 94, 26 Am. St. R. 281, 50 N. W. 100, since a warranty has been broken. So also if the policy by express incorporation of an application contain a warranty, shown to be untrue, that the building is unin- cumbered, Gould V. York County Mut. Ins. Co., 47 Me. 403. But the New York standard fire policy by its own terms contains no warranty respecting incumbrances upon real estate, therefore the materiality of any innocent misrepresentation regard- ing a real estate mortgage or other lien on a building, whether uttered orally, Buck v. Phoenix Ins. Co., 76 Me. 586, or appearing in a written application which is not incor- porated into the contract as a warranty, Lebanon Mut. Ins. Co. v. Losch, 109 Pa. St. 100, must, in general, be submitted to the decision of the jury. Fidelity & Cas. Co. v. Alpert, 67 Fed. 460, 14 C. C. A.. 474, 28 U. S. App. 393, unless the misstatement is so important and so erroneous as to be unquestionably misleading, Ryan v. Springfield F. & M. Ins. Co., 46 Wis. 671. Again, the application for a life policy often contains many inquiries respecting the haliits of the insured, and the physical condition, past or present, of himself and relatives, the answers to which, written in by the company's agent, are often more or less erroneous. Piedmont & A. L. Ins. Co. v. Ewing, 92 U. S. 377, 23 L. Ed. 610. Where the accuracy of the answers is warranted by the terms of the policy, the plaintiff's case, in the absence of an incontestable clause or of a waiver, is frequently hopeless, but the jury, if allowed to pass upon the question, is apt to re- gard such innocent mistakes as immaterial, no matter how influential they may in real- ity have been with the underwriters. Therefore, if the court is able to rule that under the terms of the contract in its entirety, the misstatements are to be construed as representations rather than warranties, Moulor v. Am. Life Ins. Co., Ill U. S. 335, 4 S. Ct. 466, the plaintiiT may look forward with considerable confidence to a recov- ery, Fitch V. Am. Popular Life Ins. Co., 59 N. Y. 577, 17 Am. Rep. 372; McGowan 8 114 BLACKHURST V. COCKELL [CHAP. ^' writer was liable; for the warranty is complied with, if the ship were safe at any time of that day. This was an action on a policy of insurance on goods from the lading of them on board the ship at London, to Liverpool, "lost or not lost"; at the bottom of the policy was added "warranted well, December 9th, 1784." At the trial at the last Guildhall sittings before Lord Kenyon, it appeared that the defendant underwrote the policy between one and three o'clock in the afternoon of that day, and that the ship was lost about eight o'clock the same morning. A nonsuit was entered, with liberty for the plaintiff to move to enter the verdict for him, in case the court should be of opinion that he was en- titled to recover on the above facts. A rule to that effect having been obtained, Lord Kenyon, Ch. J. The single question is whether the warranty at the bottom of the policy means warranted well at the time when the defend- ant subscribed it or any time on that day. And we are all of opinion that if the ship were well at any time of that day, it is sufficient; and the under- writer is consequently liable. AsHURST, J. This is the only way of giving effect to all the words of the policy. The underwriter insured the goods on board the ship "lost or not lost"; but the assured engaged that she was safe on some part of that day. Duller, J. The nature of a warranty goes a great way to determine this question. It is a matter of indifference whether the thing warranted be or be not material, but it must be literally complied with; and if it be so, that is sufficient. Here the ship was warranted safe on the 9th of December, and there was great reason for inserting those words, because they protected the underwriter against all losses before that day; to which he would otherwise have been liable, as the policy was on the goods from the lading of them on board the ship. Grose, J. If this were not the true construction of the warranty, one underwriter might bo liable and another not, though they both executed the same policy on the same day. Rule absolute. V. Supreme Court, 104 Wi.s. 173, 80 N. W. 603 (the jury excused many misstatements in the last two cases, although some of them were serious). An important illustration of this distinction is to he found in a Massachusetts case, in which the court concluded that the usual sprinkler clause frequently made a part of the standard fire policy, is not a warranty, but a mere representation to the effect that due diligence shall be exercised by the assured to keep up the sprinkler equipment. Accordingly, there also the jury was allowed to find for the plaintiff, although the facts relating to the unsat- isfactory condition of the equipment were substantially without dispute, Fuller v. N. Y. Fire Ins. Co., 184 Mass. 12, 67 N. E. 879. CHAP. V] BURLEIGH V. GEBHARD FIRE INS. CO. 115 HIDE V. BRUCE The Court op Kino's Bench, 1783. 3 Doug. 213 Interpretation of a warranty. This was an action upon a policy of insurance on goods, lost or not lost, at and from Leghorn to Gibraltar. There was a warranty in the policy that the ship had twenty guns. It appeared in evidence that she had twenty guns, but only twenty-five men, and that it required sixty men to man twenty guns. It was contended for the defendant that the warranty implied that there should be a proportionable number of men. A verdict was given for the plaintiff, and a rule having been obtained for a new trial, Wallace, A. G., and Lee, showed cause. There is no implied warranty as to men, nor could it be so intended, for the ship was in a foreign port, and the captain could not get as many men as he pleased. The construction con- tended for on the other side would make a warranty extend to implications. Cowper, contra. This was a warranty that the ship was a ship of the force of twenty guns. Was she a ship of that force? It is not necessary to contend that this was a warranty of guns, and also a warranty of men; but it was a warranty of the number of guns, and a representation that she had a reason- able quantity of men in proportion to the guns. For the purposes of fighting, twenty-five men were quite useless, for seventeen or eighteen would be neces- sary to work the ship while in action. Yet, in consequence of this warranty of force, she is permitted to chase and go into danger, to take prizes, and to weaken herself still further. There has therefore been a misrepresentation by which the policy is avoided. Lord Mansfield. A warranty makes a contingency, without which the contract is void. But a representation, if true, is not to have the same effect unless there is fraud. WiLLES, AsHURST, and Buller, Justices, were of the same opinion. Rule discharged. BURLEIGH V. GEBHARD FIRE INS. CO. Court of Appeals of New York, 1882. 90 N. Y. 220 Interpretation of a warranty. Trial by court without jury upon two policies of in.surance issued to plaintiffs. The property insured was personal, and its location is described as follows: "All contained in their frame .«torehou.«e with slate roof, situate. 116 BUBLOGH :. GEBHAILD TIRE INS. CO. [cHAP. T .5etached at least one hundred feet, on *uhe east side of Lake Cliainplain, in ihe zo-Kn of Shoreham. Vt." "Hie court found from the evidence that a little shanty or office, standing sevenrr-nve feet distant from the storehouse in -which the propem- insured Ts-Si STuated, containing a '=;m5LTI quantitj of gunpowder, did not incre-ase the risk nor create any additional exposure of the laner to the fire, and re- fused to find the contrary. The court also found and de::iei tla: the words contained in each policy, above quoted, did not constirate a i:^j"c;^.:,.. on the part of the insured, that the building was one hundred feet from the small shanty called an office; that the eidstenc* of the =^»TI building within seventy-five feet of the store- house containing the property insured did not in fact increase the risk. YzscE-, J. We r"- — V the statement contained in the policies isued by the defendants, describing the building which contained the personal property insured as " detached at least one hundred feet." is a warranty. We cannot hold h: to be a mere description of the building for the purpose of identifyiog the pfr«n««] property insured contained within k. The phra^ is not adapted to any boA purpose. It adds nothing to the identity of the storehouse, al- ready aoffitkstly described by hs ownership and situation on the lake. In Wall r. The East River Mut. Ins. Co.. 7 N. Y. 370. the personal property in- sured was described as " contained in the brick building with tin roof, occupied as a storehrruse. situated on the northerly side of and about forty-two feet distant from their ropewalk at Bushwick." The court said that the identity erf the building was distinctly ascertained by other facts of the description, and that the phrase " oc-cupied as a storehou-se '" related to the risk and could not be otherwise applied. The language in the policies before us, as to the detarfaed character of the building, applies fitly to the risk, and is entirely bappnfpn&te as matter of description. We must hold, therefore, what in- deed wim not denied in the disenting opinion at General Term or on the argomeait at our bar, that the phrase in question is not merely descriptive of idmtity, but relates to the character of the risk. Thus understood and ap- pearing on the face of the policy, it amounts to a warranty, Alexander r. Germania Yu^ Ins. Co., 66 N. Y. 4^; Richards r. Protection Ins. Co., 30 Me. 27.3; Parmelee r. Hoffman Fire Ins. Co.. bi N. Y. 193. Such result is, bowevCT, disputed upon the ground that the language is that of the insurers and is vague and void for ambiguity. The argument is that to avoid a for- feiture the words used must be most strongly construed against the insurer; - ord "detached" will not be defined so as to destroy the contract; - sense of 3ep>arate, or disengaged from, the policy does not add from what; that it may mean "detached at least one hundred feet" from "earth, sea, or dcy," or from "Lake Champlain;" and that if it means from any bnfldiiig, it must be construed to mean any building which constitutes an exposore and increaaeg the risk, which was not true of the office building, since the trial judge found as a fact that it did not so increase the risk. We do not thmk the language is so vague or ambiguous as to make the warranty CHAl'. V] BURLEIGH V. GEBHARD FIRE INS. CO. 117 void. The fair import of the words and the intent of the parties indicated by the terms of their agreement must guide the construction, Higgins r. Phoenix Mut. Life Ins. Co., 74 N. Y. 6. It cannot be doubted that both parties perfectly understood the meaning of the phrase to be that the store- house stood by itself as a detached or separate building, and apart from other buildings at least a distance of one hundred feet. The expression, although brief, is not meaningless, but to the common understanding, and especially in connection with an insurance against fire, convej'S unmistakably the idea we have expressed, and must have been so understood by each of the con- tracting parties. If it did not mean that, it meant nothing, and what was intended as a serious business transaction becomes an idle play with words. But the further contention, that the language must be held to mean, de- tached one hundred feet from any other building of such character as to con- stitute an exposure and increase the risk, seems to us a sensible and just con- struction. The brevity of the language requires that something be added to complete and elucidate the meaning. The phrase may mean, detached one hundred feet from any other building, whatever its size or character. This would be a rigorous and severe interpretation, most favorable to the insurer and operating harshly upon the insured. So construed, it would make any- thing which could be deemed a building, however small or insignificant, as an icehouse, or privy, or open shed, within the prescribed distance, operate as a breach of the warranty. If a construction so literal or severe is intended by the insurer, he should at least saj^ so by apt and appropriate language, and not ask the courts to supply it by intendment. If it be granted that such small and insignificant structures were not meant, and should be treated as if they did not exist, the question would remain, how small and how insignifi- cant must they be to be disregarded, and how large and of what character to justify a conclusion of breach of the warranty, and where and upon what principles is the line to be drawn between buildings strictly such, but proper to be disregarded, and those whose presence breaks the warranty. These questions can be wisely answered in but one way. The test must be whether the building within the distance named is or is not an exposure which in- creases the risk. One which does not can scarcely be supposed to come within the warranty, unless such result is indicated by exphcit language which will bear no other reasonable interpretation. Xo such language is contained in these policies, and when the courts are asked to supply a de- fect and complete an imperfect phrase, they should remember that the neces- sity is the fault of the insurer, and construe the language in view of the nat- ural understanding of the parties, and with justice to both. Declining to hold the phrase in the policy to be meaningless and void, we are compelled to choose between two constructions; the one rigorous and hard and produc- ing a forfeiture, and the other natural and reasonable and supporting the obligation. We have heretofore decided that in such case the latter con- struction is to be preferred, Balcy r. Homestead Fire Ins. Co., 80 X. Y. 21; 36 Am. Rep. 570. We hold, therefore, that the warranty in this case was that no other building, of such size and character as to constitute an ex- 118 KNECHT V. MUTUAL LIFE INS. CO. [CHAP. V posure and increase the risk, stood within one hundred feet of the store- house. Thus construed, it is apparent that the warranty was not broken. The findings of fact, taken together, show that the only building within the pre- scribed distance of one hundred feet was the small office. This was described as being ten by twelve feet on the ground, and seven feet high; a frame building clapboarded and ceiled inside; having a chimney, but no stove in it; used sometimes as an office, and at the time of the fire containing a quan- tity of gunpowder, temporarily stored. The evidence showed, or at least tended to show, that this building, standing seventy-five feet from the sub- ject of insurance, was not an exposure and did not affect the risk, and the trial court found that fact substantially, and refused to find the contrary. It follows that there was no breach of the warranty, and that the General Term erred in so deciding and in reversing the judgment. All concur, except Rapallo, J., dissenting, and Miller, J., not voting. Orders reversed.^ KNECHT V. MUTUAL LIFE INS. CO. Supreme Court of Pennsylvania, 1879. 90 Pa. St. 118 Statement of opinion, expectation or belief. Assumpsit on a policy of life insurance. Defense, breach of warranty. Mr. Justice Paxson. It is not alleged that in his application for insur- ance the insured made any false representation of an existing fact. What ' In a Texas case, the application for life insurance, made a part of the contract, warranted the answers "to be full, complete and true, and without suppression of any circumstance wnich would tend to influence the company in issuing a policy." The insured was asked to give the name and address of each physician who had prescribed for him within the past five years. He named his regular physician only. Dr. McEl- roy. In fact, during a short portion of the period, from October 22 to the eleventh of the next month, he had frequently been attended by a Dr. Miller. By the uncon- tradicted testimony, therefore, his answer was not complete. But the court, while conceding that a warranty must be strictly fulfilled, nevertheless, as a matter of con- struction, fastened upon the qualifying words chosen by the underwriter, "without suppression of any circumstance which would tend to influence the company," and held that they converted the answers into representations, involving only the necessity of a substantial compliance in good faith, Rcppond v. Nat'. Life Ins. Co., 100 Tex. 519, 101 S. W. 786. In a Nebraska case the written application, executed by the insured, provided Lhat suicide, sane or insane, within three years from date, would render the certificate null and void. The certificate, however, issued by the association, provided that it would bo incontestable after two years from date. More than two years, but less than three years thereafter, the insured, while temporarily insane, took his own life. The court construed the ambiguity against the company, and allowed the widow to recover, by virtue of the incontestable clause, Harr v. Highland Nobles, 78 Neb. 175, 110 N. W. 713. CHAP. V] KNECHT V. MUTUAL LIFE INS. CO. 119 he did declare was, "that he is not now afflicted with any disease or disorder, and that he does not now, nor will he, practice any pernicious habit that obviously tends to the shortening of life." The case stated sets forth: "That at the times of making the aforesaid application for insurance, the said Abram F. Fangboncr was of correct and temperate habits; that some years after the issuing of said policy he became addicted to the use of intoxicating drinks, from the immoderate use of which he was attacked with delirium tremens, from which he died." The policy issued in pursuance of said ap- plication contained this provision: "If any of the statements or declarations made in the ajjplication for this policy, upon the faith of which this policy is issued, shall be found in any respect untrue, then and in every such case this policj' shall be null and void." It is unnecessary to discuss the question as to whether the declarations of the insured as to existing facts in his applica- tion, constitute a warranty. The authorities are by no means uniform upon this point. Our own recent case of the Washington Life Insurance Co. v. Schaible, 1 W. N. C. 369, holds that they do not con.stitute such warranty. Where, however, the policy has been issued upon the faith of such representa- tions, and they are false in point of fact, the better opinion seems to be that the policy is avoided. 7\nd this is so even where the false statement is to a matter not material to the risk, JefTries v. The Life Insurance Co., 22 Wal- lace, 47. In such case the agreement is that if the statements are false, there is no insurance; no policy is made by the company, and no policy is accepted by the insured. In the case in hand the policy attached. There was nothing to avoid it ab initio. Were the mere declarations by the insured in his appli- cation, as to his future intentions, and his failure to carry out his declara- tions, or to comply with his intentions as to his future conduct, sufficient to work subsequent forfeiture of the policy? In no part of the application did the assured covenant that he would not practice any pernicious habit. Nor did he promise, agree or warrant not to do so. He declared that he would not. To declare is to state: to assert; to publish; to utter; to announce; to announce clearly some opinion or resolution; while to promise is to agree; "to pledge one's self; to engage; to assure or make sure; to pledge by con- tract." — Worcester. There is no clause in the policy which provides that if the assured shall practice any pernicious habit tending to shorten life, the policy shall ipso facto become void. There is only the stipulation that, "if any of the statements or declarations made in the application . . . shall be foimd in any respect untrue, this policy shall be null and void. This evi- dently referred to a state of things existing at the time the policy was issued. As to such matters, as I have already said, there was no untrue statement. But the assured declared, as a matter of intention, that he would not practice any pernicious habit. Was this declaration of future intention false? There is no allegation, much less proof, that it was so. The assured might well have intended to adhere to his declaration in the most perfect good faith, yet in a moment of temptation have been overcome by this insidious enemy. In the absence of any clause in the polic.y avoiding it in case the a.ssured should practice any such habit, and of any covenant or warranty on his part 120 o'neil v. buffalo fire ins. CO. [chap. V that he would not do so, we do not think his mere declaration to that effect in the application sufficient to avoid the policy. The judgment is reversed, and judgment is now entered in favor of the plaintiff and against the defendant for the sum of $1,500, with interest from June 26th, 1S70. Mr. Justice Trunkey dissented. ' O'NIEL V. THE BUFFALO FIRE INSURANCE COMPANY Court of Appeals of New York, 1849. 3 N. Y. 122 Whether warranty of present condition or use is a warranty of continuance. Action on a fire insurance policy. Defense, a breach of warranty as to occupancy. RuGGLES, J., delivered the opinion of the court. The defendants insured the plaintiff, John O'Niol, against loss or damage b}'' fire, to the amount of two thousand dollars, on his two-story frame build- ing fronting on Ridout and Market streets, in the town of London, Canada West, occupied by the Hon. George J. Goodhue, as a private dwelling. The insurance was for one year from the 26th of April, 1847, on which day the policy bears date. The house was destroyed by fire on the 6th of December of the same year. Goodhue, wlio occupied the house at the date of the policy, removed from and ceased to occupy it about three weeks before the fire. Assuming that there was a written application by the plaintiff, describing the house as occupied by Goodhue, the description in the poHcy must be ^ Owen, the insured, died about a month after procuring a life policy from the Metro- politan Life Insurance Co. Defense was made on the ground that, in his application, he had warranted that he had never had heart disease. The case was devoid of evi- dence to show that any knowledge of the existence of this obscure disease had ever been brought home to the applicant, although there was evidence indicating that in fact his heart was seriously affected prior to his proposals. The court concluded that only good faith was required of Owen, and that the jury were at liberty to find that his answer in the defendant's application paper was given according to his bona fide belief and opinion, and that the policy was not avoided, Owen v. Metropolitan Life Ins. Co., 74 N. J. 770. But it is held that a warranty of temperate habits relates to a matter of fact rather than of opinion, Thomson v. Weems (1884), 9 App. Cas. 671. And a warranty of "sound health," or of absence of specific diseases or disorders is often to be construed as relating to matter of fact. Met. Life Ins. Co. v. Moravec, 214 III. 186, 73 N. E. 415 (heart disease); Bertrand v. Franklin Life Ins. Co., 119 La. 423, 44 So. 186 (erroneous statement, "no chronic or persistent cough "); Meyers v. Wood- men of the World, 193 Pa. St. 470, 44 Atl. 563 (warranted "no serious illness "; in fact a severe attack of typhoid) ; Mut. Life Ins. Co. v. Simpson, 88 Tex. 333, 31 S. W. 501, 28 L. R. A. 765, 53 Am. St. R. 757 ("no headache — severe, protracted or frequent"); Schofield V. Met. Life Ins. Co., 79 Vt. 161, 64 Atl. 1107 (consumption). CHAP. V] o'nEIL V. BUFFALO FIRE INS. CO. 121 regarded as a warranty of the fact that he was the occupant at the date of the policy, and nothing more. The description imports nothing more.' The defendant insists that the description warrants not only that he was the occupant at the date of the policy, but that he was to remain the occupant during the continuance of the risk. But the parties have not tliought proper to express themselves to that effect. A warranty may be either affirmative, as where the insured undertakes for the truth of some positive allegation; or promissory, as where the insured undertakes to perform .some executory stipulation. (Marsh, on Ins. 347.) Here was an affirmative stipulation, that the house was then occupied by Goodhue, but not a promissory agree- ment that he should continue to occupy it. If it had been the intention of the parties to make it a condition that he should remain the occupant during the term of the insurance, it would have been easy to say so, and there is no good reason in this case for supposing the parties intended what they have not expressed. The defendants, in support of their construction of the contract, refer us to the cases of marine policies. In those cases, if the vessel insured is de- scribed as a Swedish, American or Spanish ship, the description is in most cases held to be a warranty, not only that the vessel is Swedish, American or Spanish, accordingly, but that her documents and papers are in con- forniity with her nationality, and that she is to remain and be navigated in that character, as long as the risk continues. A marine policy is a commercial contract, and it is construed according to the import of the words as they are understood among merchants. (Marsh. 347.) Without the proper docu- ments and papers the ship insured would have no national character, and the possession of such papers is, therefore, a part of what is warranted; and the continuance of that character is manifestly material to the risk, and in- deed the main object of the warranty; and for that reason it is held to be implied for the purpose of carrying out the clear intention of the parties. If a fact be in plain terms expressly warranted, its materiality to the risk is of no importance; it becomes a condition precedent, although entirely immate- rial. But where a circumstance is sought to be included by implication in the warranty, it never can be supposed that the parties intended to include it unless it be manifestly material to the risk. In the case of a marine policy where the vessel was described as a British brig, and the insurance was against the -perils of the sea only, and the risk to terminate on capture, it was held that the description in the policy was not a warranty that the brig had a British register and other pajiers necessary to a national character, because it was in that case immaterial to the risk whether she had or not. (jMackie V. Pleasants, 2 Binn. 363.) The judgment of the Supreme Court must be affirmed with costs. Judgtnent affirmed.^ ' Where the policy, as in case of the standard fire policy, contains an unoccupancy clause, a different question is presented. ' The United States Supreme Court were of opinion that a warranty in a contract of fire insurance, that smoking was not allowed, if true when the representation was 122 PHCENIX LIFE INS. CO. V. RADDIN [CHAP. V PHCENIX LIFE INS. CO. v. RADDIN U. S. Supreme Court, 1886. 120 U. S. 183 Questions unanswered or partially answered in the application. Action on a policy of life insurance. Defense, untrue answers in the appli- cation, and fraudulent suppression of material facts, in that the applicant had made applications for other insurance in addition to the amount dis- closed in the application. This was an action brought by Sewell Raddin, and prosecuted by his administrator, upon a policy of life insurance, dated April 25, 1872, the ma- terial parts of which were as follows : "This policy of insurance witnesseth, that the Phccnix Mutual Life In- surance Company of Hartford, Conn., in consideration of the representations made to them in the application for this policy, and of the sum of," etc., "do assure the life of Charles E. Raddin, of Lynn, in the county of Essex, State of Massachusetts, in the amount of ten thousand dollars, for the term of his natural life." "This policy is issued and accepted by the assured upon the following express conditions and agreements;" namely, among others, that "if any of the declarations or statements made in the application for this policy, upon the faith of which this policy is issued, shall be found in any respect untrue, this poHcy shall be null and void." The application was signed by Sewell Raddin, both for his son and for himself, and contained twenty-nine printed "questions to be answered by the person whose life is proposed to be insured, and which form the basis of the contract," two of which, with the written answers to them, and the con- cluding paragraph of the appHcation, were as follows: "28. Has any application been made to this or any other company for assur- ance on the life of the party? If so, with what result? What amounts are now as- SIO.OOO, Equitable Life Assurance So- Bured on the life of the party, and in what ciety. companies? If already assured in this company, state the number of policy. "29. Is the party and the applicant aware that any untrue or fraudulent an- swers to the above queries, or any sup- pression of facts in regard to the health, Yes. habits or circumstances of the party to be assured, will vitiate the policy, and for- feit all payments thereon? made, would not be broken though the assured or others smoked afterwards on the premises, Hosford v. Germania Fire Ins. Co., 127 U. S. .399. 8 S. Ct. 1199, 32 L. Ed. 196. So also where the policy of insurance described the property insured as being » two-stor;/ ,'rame building used for winding and coloring yarn and for the storing CHAP. V] PHCENIX LIFE INS. CO. V. RADDIN 123 "It is hereby declared that the above are fair and true answers to the foregoing questions, and it is aekiiowledKed and agreed by the undersigned that this appUcation shall form the basis of the eontract for insurance, which c(nitraet shall be completed only by delivery of policy, and that any untrue or fraudulent answers, any suppression of facts," etc., "shall and will render the policy null and void, and forfeit all payments made thereon." It was admitted at the trial, that Charles E. Raddin died July 18, 1881; and that at the date of this policy he had an endowment policy in the Equi- table Life Assurance Society for $1(),{)()(), which was afterwards paid to him. One of the defenses relied on at the trial was that the answer to question 28 in the application was untrue, and that there was a fraudulent suppression of facts material to the insurance, because the plaintiff, bj^ his answer to that question, "$10,000, Equitable Life Assurance Society," intended to have the defendant understand that the only application which had been made to any other companj'- for assurance upon the life of his son was one made to the Equitable Life Assurance Society, upon which that society had issued a policy of $10,000; whereas in fact the plaintiff, within three weeks before the application for the policy in suit, had made applications to that society and to the New York Life Insurance Company for additional insurance upon the son's life, each of which had been declined. The defendant offered to prove that the two other applications were made and declined as alloped, and that the facts as to the making and the rejection of both those applications were known to the plaintiff, and intentionally concealed by him, at the time of his application to the defendant; and upon these offers of proof asked the court to rule, First, that the answer to question 28 was untrue, and therefore no recovery could be had on this policy; second, that there was a suppression of facts by the plaintiff, and therefore he could not recover; and, third, "that the answer to question 28 must be construed to be an answer to all the clauses of that question, and as such was mislead- ing, and amounted to a concealment of facts which the defendant was en- titled to know and the plaintiff was bound to communicate." But the court excluded all the evidence so offered, declined to give any of the rulings asked for, and ruled "that if the answer to one of the ijiter- rogatories of question 28 was true, there would be no breach of the warranty; that the failure to answer the other interrogatories of question 28 was no breach of the contract; and that if the company took the defective applica- tion, it would be a waiver on their part of the answers to the other inter- rogatories of that question." of spun yarn, it did not warrant that such building was to continue to be thu.s used. Smith V. Mechanics' & Traders' Fire Ins. Co., 32 N. Y. 399; and see Blood v. Howard Fire Ins. Co., 12 Cush. (Mass.) 472. But a warranty that a house was of stone when in reality it was partly stone and partly wood. Chase i'. Hamilton Ins. Co., 20 N. Y. 52, or that the building insured was a dwelling house, or occupied as a dwelling, when in fact it was not, would avoid the policy, Alexander v. Germania Fire Ins. Co., 66 N. Y. 464, 23 Am. Rep. 76. If the warranty were simply that the house was a dwelling, that would not necessarily mean that it was occupied as a dwelling at that time, Brown- ing V. Home Ins. Co., 71 N. Y. 508. 124 PHCENIX LIFE INS. CO. V. RADDIN [CHAP, V The jury having returned a verdict for the plaintiff in the full amount of the policy, the defendant's exceptions to the refusal to rule as requested and to the rulings aforesaid present the principal question in the case. Mr. Justice Gray delivered the opinion of the court. The rules of law which govern the decision of this question are well settled, and the only difficulty is in applying those rules to the facts before us. Answers to questions propounded by the insurers in an application for insurance, unless they are clearly shown by the form of the contract to have been intended by both parties to be warranties, to be strictly and literally complied with, are to be construed as representations, as to which substantial truth in everything material to the risk is all that is required of the applicant, Moulor V. American Ins. Co., Ill U. S. 335; Campbell v. New England Ins. Co., 98 Mass. 381; Thompson v. Weems, 9 App. Cas. 671. The misrepresentation or concealment by the assured of any material fact entitles the insurers to avoid the policy. But the parties may by their con- tract make material a fact that would otherwise be immaterial, or make im- material a fact that would otherwise be material. Whether there is other insurance on the same subject, and whether such insurance has been applied for and refused, are material facts, at least when statements regarding them are required by the insurers as part of the basis of the contract. Carpenter V. Providence Washington Ins. Co., 16 Pet. 495; Jeffries v. Life Ins. Co., 22 Wall. 47; Anderson v. Fitzgerald, 4 H. L. Cas. 484; Macdonald v. Law Union Ins. Co., L. R. 9 Q. B. 328; Edington?;. ^tna Life Ins. Co., 77 N. Y. 564, and 100 N. Y. .536. Where an answer of the applicant to a direct question of the insurers pur- ports to be a complete answer to the question, any substantial misstatement or omission in the answer avoids a policy issued on the faith of the applica- tion. Cazenove v. British Equitable Assurance Co., 29 Law Journal (N. S.), C. P. 160, affirming s. c, 6 C. B. (N. S.) 437. But where upon the face of the application a question appears to be not answered at all, or to be imper- fectly answered, and the insurers issue a policy without further inquiry, they waive the want or imperfection in the answer, and render the omission to answer more fully immaterial, Connecticut Ins. Co. v. Luchs, 108 U. S. 498; Hall v. People's Ins. Co., 6 Gray, 185; Lorillard Ins. Co. v. McCulloch, 21 Ohio St. 176; American Ins. Co. v. Mahone, 56 Mississippi, 180; Carson V. Jersey City Ins. Co., 14 Vroom, 300, and 15 Vroom, 210; Lebanon Ins. Co. V. Kepler, 106 Pa. St. 28. The distinction between an answer apparently complete, but in fact in- complete and therefore untrue, and an answer manifestly incomplete, and as such accepted by the insurers, may be illustrated by two cases of fire in- surance, which are governed by the same rules in this respect as cases of life insurance. If one applying for insurance upon a building against firo. is asked whether the property is incumbered, and for what amount, and in his answer di.scloses one mortgage when in fact there are two, the policy issued thereon is avoided, Towne v. Fitchburg Ins. Co., 7 Allen, 51. But CHAP. V] PHCENIX LIFE INS. CO. V. RADDIN 125 if to the same question he merely answers that the property is incumbered, without stating the amount of incumbrances, the issue of the poHcy without further inquiry is a waiver of the omission to state the amount, Nichols v. Fayette Ins. Co., 1 Allen, 03. In the contract before us, the answers in the application are nowhere called warranties, or made part of the contract. In the policy those answers and the concluding paragraph of the application are referred to only as " the declarations or statements upon the faith of which this policy is issued;" and in the concluding paragraph of the application the answers are declared to be "fair and true answers to the foregoing questions," and to "form the basis of the contract for insurance." They must therefore be considered not as warranties which are part of the contract, but as representations collateral to the contract, and on which it is based. The 28th printed question in the application consists of four successive interrogatories, as follows: "Has any application been made to this or any other company for assurance on the life of the party? If so, with what re- sult? What amounts are now assured on the life of the party, and in what companies? If already assured in this company, state the number of policy." The only answer written opposite this question is "$10,000, Equitable Life Assurance Society." The question being printed in very small type, the answer is WTitten in a single line midway of the opposite space, evidently in order to prevent the ends of the letters from extending above or below that space; and its position with regard to that space, and to the several interrogatories combined in the question, does not appear to us to have any bearing upon the construction and effect of the answer. But the four interrogatories grouped together in one question, and all re- lating to the subject of other insurance, would naturally be understood as all tending to one object— the ascertaining of the amount of such insurance. The answer in its form is responsive, not to the first and second interroga- tories, but to the third interrogatory only, and fully and truly answers that interrogatory by stating the existing amount of prior insurance and in what company, and thus renders the fourth interrogatory irrelevant. If the in- surers, after being thus truly and fully informed of the amount and the place of prior insurance, considered it material to know whether any unsuccessful applications had been made for additional insurance, they should either have repeated the first two interrogatories, or have put further questions. The legal effect of issuing a policy upon the answer as it stood was to waive their right of requiring further answers as to the particulars mentioned in the 28th question, to determine that it was immaterial, for the purposes of their con- tract, whether any unsuccessful applications had been made, and to estop them to set up the omission to disclose such applications as a ground for avoiding the policy. The insurers, having thus conclusively elected to treat that omission as immaterial, could not afterwards make it material by prov- ing that it was intentional. For these reasons, our conclusion upon this branch of the case is that there 126 KYTE V. COMMERCIAL UNION ASSUR. CO. [CHAP. V was no error of which the company had a right to complain, either in the refxisals to rule, or in the rulings made. Judgment affirmed.^ KYTE V. COMMERCIAL UNION ASSURANCE CO. Supreme Judicial Court of Massachusetts, 1889. 149 Mass. 114 Whether a temporary breach of warranty avoids or only suspends the contract. CoNTXRACT upon two poHcies of fire insurance in the Massachusetts stand- ard form, one upon a dwelling house and the other upon a barn. The defense was, that the policy was rendered void by an increase of risk, before the fire occurred. The dwelling house, which was in process of erec- tion when the policy upon it was issued, contained sixteen rooms, one of which was finished and furnished by the plaintiff as a barroom, and was occupied by him as a hotel; and the barn was situated near it. There was evidence tending to show that from April, 1882, to July, 1883, the hotel was used by the plaintiff for the illegal sale and keeping for sale of intoxicating liquors, such liquors being seized on the premises on April 7, 1882, and duly forfeited, and the plaintiff being convicted for the illegal sale of such liquors in April, 1883, and again in June of the same year. The defendant offered evidence tending to show that there was a custom among fire insurance companies doing business in Massachusetts, for many years past, to charge a higher rate of premium for insurance on a building occupied by a person engaged in the business of a common victualer than on a dwelling house; that a building occupied for the purpose of carrying on the business of a common victualer, and one occupied as an ordinary dwelt^ ing house, belonged to different classes, it being the general custom of in- surance companies doing business in this commonwealth to charge two or three times as much premium on the former as on the latter, and that a much higher premium would be charged for instiring a building in which intoxicat- ing liquors were illegally sold than on one of the same class in which they were not sold. The judge gave the following instructions, among others, to the jury: " If it be assumed (and it may be, for the purposes of this trial) that such illegal use would vitiate the policy and deprive the plaintiff of the right to maintain an action for a loss by fire while the building was being so used, still, if, upon all the evidence in the case, you find that that use was tempo- rary, not contemplated at the time when the policy was taken by the plain- tiff, and that such illegal use ceased from and after the time when the plaintiff » Carson v. Jersey City Firo Ins. Co., 43 N. J. L. .306; Dillcbor v. Home Ins. Life Co., 69 N. Y. 2.56, 25 Am. Rep. 182; Halet). Life, etc., Co., 65 Minn. 548, 68 N. W. 182. CHAP. V] KYTE V. COMMERCIAL UNION ASSUR. CO. 127 had a license authorizing him to .sell intoxicating liquors, the fact that lie made an illegal use of the premises in 1882 will not deprive the plaintiff of the right to maintain the action. His right under the policy, if it was sus- pended while the illegal use of the building was being made, would revive when he ceased to use the building illegall3^" The defendant requested the judge to charge, among other things: "If you find that, by the illegal sale of intoxicating liquors in this building by the plaintiff Kyte, or by others with his consent and knowledge, for a certain portion of the time for which these policies were issued, the risk was for that period increased— this policy is void as to the plaintiff Kyte's in- terest, and he cannot recover, although this increase was not permanent and did not cause the fire." This request was refused. The jury returned a verdict for the plaintiff, and the defendant alleged exceptions. C. Allen, J. These policies were in the form of the Massachusetts stand- ard policy, and each provided that, "This policy shall be void ... if, with- out such assent [namely, the assent in writing or in print of the company], the situation or circumstances affecting the risk shall, by or with the knowl- edge, advice, agency, or consent of the insured, be so altered as to cause an increase of such risks, ... or if gunpowder or other articles subject to legal restriction shall be kept in quantities or manner different from those allowed or prescribed by law." Various other circumstances were enumerated which would also avoid the policy. At the beginning of the trial, the defendant waived every defense except increase of risk. The defense of the illegal keep- ing of intoxicating liquors, as a separate and distinct defense, was therefore waived. We have to consider, in the first place, whether th(> instructions requested by the defendant were given in substance. The plaintiff contends that they were. The learned judge before whom the case was tried adopted in sub- stance the third and fifth instructions asked for by the defendant, and thus instructed the jury, that if they should find, that during the time for which these policies were issued, the plaintiff Kyte, by obtaining a common vict- ualer's license and making use of this building under said license, and legally or illegally selling intoxicating liquors therein, increased the risk, then this policy became void as to the plaintiff Kyte, and he could not recover for his interest therein; and if they should find, that while these policies were in force intoxicating liquors were kept and sold in this building by the plaintiff Kyte, or with his consent or knowledge, and that thereby the risk was in- creased, this policy became void as to his interest, and he could not recover. This was a general and broad instruction, including the increase of risk by using the premises as a common victualing place or as a place for selling in- toxicating liquors, legally or illegally, and well covered the general (juestion of the effect of an increase of risk. From this instruction, taken alone, a jury might well have inferred that the policy would be void in case of any 128 KYTE V. COMMERCIAL UNION ASSUR. CO. [CHAP. V such increase of risk at any time during the time covered by the policies and before the fire. But the defendant, in the fourth request for instructions, asked for a special instruction, adapted to the case of a temporary increase of risk which had ceased before the time of the fire; that is to say, that if the jury should find that, by the illegal sale of intoxicating liquors in this building by the plaintiflf Kyte, or by others with his consent and knowledge, for a certain portion of the time for which these policies were issued, the risk was for that period in- creased, this poHc}^ would be void as to Kyte's interest, and he could not re- cover, although this increase was not permanent. The judge declined to give this ruling, and instructed the jury, in substance, that, if that illegal use was temporary, not contemplated at the time when the policy was taken by the plaintiff, and ceased before the fire, then the fact that he had made an illegal use of the premises in 1882, which was during the time covered by the policy, would not deprive the plaintiff of the right to maintain the action; and that his right under the poUcy, if suspended while the illegal use of the building continued, would revive when he ceased to use it illegally. This instruction did not in express terms mention the subject of an increase of risk by the illegal use of the premises for selling liquor; but the instruction was given in place of the fourth request for instructions, and that request was refused, the judge saying that he had given what would be entirely in- consistent with it. The question is thus presented, whether the provision of the policy that it shall be void in case of an increase of 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 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 ralate to the time of issuing the policy, and others could not arise till afterwards. They are of different degrees of importance, some of them going to the essential matters of the contract, and others being comparatively trivial in character. The language of the policy is the same in respect to them all, that the policy shall be void. We think an increase of risk entitles the insurer to avoid the policy ab- solutely. The contract of insurance depends essentially upon an 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 a misrepresentation of the condition of the property. If the provision stood alone, that in case of an}' material misrepresentation as to the risk or any voluntary increase of risk afterwards the policy should be void, it could hardly be doubted that the words should be taken in their nat- ural, obvious meaning. The fact that with this are coupled the other pro- visions above referred to does not change its meaning with reference to the effect and consequence of an increase of risk. An increase of risk which is substantial, and which is continued for a considerable period of time, is a CHAP. V] MERRILL V. AGRICULTURAL INS. CO. 129 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 ca.se of an increase of risk which is consented to or known by the assured, and not dis- closed and the assent of the insurer obtained, the poHcy shall be void, we do not feel at liberty to qualify the meaning of these words by holding that the policy is only suspended during the continuance of such increa.se of risk, Lyman v. State Ins. Co., 14 Allen, 329; Mead v. Northwestern Ins. Co., 7 N. Y. 530. It follows, therefore, that the fourth instruction which was requested, or something in sub.stance like it, should have been given. Upon the facts stated and assumed, the increase of risk, if there was one, continued for fifteen months, and could not be treated as a casual, inadvertent, or inevitable thing. Exceptions sustained.^ MERRILL V. THE AGRICULTURAL INSURANCE CO. Court of Appeals of New York, 1878. 73 N. Y. 452 To avoid forfeiture when is the contract to be construed as severable or divisible? Action on a policy of fire insurance on dwelling house, barn and contents, the premium being one lump sum, but the amount of the insurance being expressly apportioned with a separate amount on each item of property. The policy contained a condition that if the property insured was incum- bered by mortgage, the policy should be void until written consent of the company was obtained. It appeared upon the trial that the buildings, but not the personal property, were incumbered by mortgage at the time of the insurance. FoLGER, J. It is claimed by the defendant that not only was the policy avoided as to the buildings insured, but as to the chattel property as well. This depends upon whether the contract was entire or severable; whether a condition admitted to have been broken as to a part of the whole subject of insurance, was thereby broken as to each subject of insurance. When there are several subjects of insurance (as there are fourteen here) .separately valued, on which a gross sum is insured not exceeding the aggre- gate of that valuation, for the insurance of which a premium in gross is paid, it is easy to see what is the rate of premium on the whole valuation, and what is the amount of premium on each subject insured. This being so, it seems * " Where a warranty is broken, the assured cannot avail himself of the defense that the breach has been remedied and the warranty complied with before loss," Eng. Mar. Ins. .\ct (1906), §34 (2). In certain jurisdictions a contrary doctrine is recog- nized, Adair i-. So. Mut. Ins. Co., 107 Ga. 297, 33 S. E. 7!S, 45 L. R. A. 204, 73 Am R. 122. d 130 MEERILL V. AGRICULTURAL INS. CO. [CHAP. V fanciful to say, that if the facts thus easily reached were stated in detail in the contract it would be severable, while not being specifically spread out it is entire. If there were anything in the terms or nature of the particular contract, or in the circumstances of the case, or in the nature of the different subjects of the insurance, from which it was to be inferred that the insurer would not have been likely to have assumed the risk on one or several of them, unless induced by the advantage and profit of having a risk on all, that would be a rational cause for deeming the contract entire. But when for aught that appears, when indeed it is as likely that the insurer would have taken a risk upon anj'onc, or any few, of the subjects insured, at the same rate of premium as upon the whole, and has in the policy so separated the subjects, and so singled them out by a specific valuation, as that there is no difficulty in distinguishing one of the subjects from the rest, and closing the contract as to that separately, and carrying forward the contract as to the rest, it does result that the contract is severable in practical operation and hence in law. And so also, that though there may have been some conduct of the in- sured as to some of the property, not evil in itself, but working a breach of a condition in its letter, the effect of that breach may be confined to the in- surance upon that property, the contract as to that be held avoided, and as to the other subjects held valid. There is another rule that in construing the consideration as entire or distributed, the law will be guided by a respect to general convenience and equity, and by the good sense and reasonableness of the particular case; for it must be supposed that it was the intention of the parties that such construction should take place, in the occurrence of contingencies not contemplated and provided for at the making of the con- tract. These considerations lead us to the conclusion that the contract of insur- ance before us is not entire; that it is divisible; and that the breach of the condition made by the plaintiff applied only to the class of property insured, which was the immediate subject of the act of incumbrance which constituted that breach. It follows that the judgment appealed from should be affirmed. All concur except Miller, J., absent. Judgment affirmed.^ ' In consequence of this line of cases, a phrase has been adopted for the New York standard fire policy and many others, "this entire policy shall be void," etc., which will be considered hereinafter. With reference to the divisibility of the contract, many authorities on the one side and on the other are cited in the opinion in Phoenix Ins. Co. V. Pickel, 119 Ind. 155, 21 N. E. 546, 12 Am. St. R. 393. If the breach as to one item or class increases the risk on the rest, the liberal rule of construction under consideration will not apply, and the policy will be altogether avoided. Southern F. Ins. Co. V. Knight, 111 Ga. 622, 36 S. E. 821, 52 L. R. A. 70, 78 Am. St. R. 216. The Iowa court has held that if the premium is indivisible, the contract is not severable, Kahler v. Iowa State Ins. Co., 106 Iowa, 380, 76 N. W. 7.34. In a New York case it ia held that misstatements regarding title, liens and incumbrances affecting real estate avoid the policy only as to the insured real estate, but that a misstatement that the insured had no reason to fear incendiarism is a breach of warranty affecting the entira contract on real and personal property alike, Donley v. Glens Falls Ins. Co., 184 N. Y. CHAP. V] MERRILL V. AGRICULTURAL INS. CO. 131 107, 76 N. E. 914. To initigate the severity of the rinid common-law rule rcHiKcting warrantiea, many States have passed statutes varying somewhat in application and phraseology, but the dominant provision in most of which is, that in the absence of fraud, no misstatement or breach by the insured shall efTect forf"iture of his policy unless it relate to a matter material to the risk or contribute to the loss. The decisive issue is thus often in effect relegated to the determination of the jury, Kenton Ins. Co. V. Wigginton. 89 Ky. 3,30, 12 S. W. fiG8, 7 L. R. A. 81 ; Albert v. Mut. L. Ins. Co., 122 N. C. 92, 30 S. E. 327, 65 Am. St. 41. 093. Such statutory provisions are constitu- tional and controlling, John Hancock M. L. Ins. (Jo. v. Warren, 181 U. S. 73, 21 S. ("t. 535, 45 L. Ed. 955; McCJannon v. Ins. Co., 127 Mich. 639, 87 N. W. 02, 54 L. R. A. 739. Accordingly, even statutes excluding suicide as a defense to the company in life insurance, although regarded by the highest Federal court as inconsistent with public policy are nevertheless held to be obligatory upon a party to the contract, Whitfield v. .^tna L. Ins. Co., 205 U. S. 489, 27 S. Ct. 57S. 132 INSURANCE COMPANY V. EGGLESTON [CHAP. VI CHAPTER VI General Principles — Continued Nature of Waiver and Estoppel INSURANCE COMPANY v. EGGLESTON Supreme Court of the United States, 1877. 96 U. S. 572 Nature of waiver and estoppel; course of business. Action on a policy of life insurance. Defense, forfeiture for failure to pay the last premium. The insured, residing in Mississippi, received his policy from a local agent in that State, and prior to the due date of the last premium, had always received notice from the defendant stating where the premium should be paid. One or another of the local agencies within the State had so been named. No notice was given respecting the last premium. The home office of the insurance company was in New York City. Mr. Justice Bradley: We have recently in the case of Insurance Com- pany V. Norton, 96 U. S. 234, shown that forfeitures are not favored in the law; and that courts are always prompt to seize hold of any circumstances that indicate an election to waive a forfeiture, or an agreement to do so on which the party has relied and acted. Any agreement, declaration, or course of action on the part of an insurance company, which leads a party insured honestly to believe that by conforming thereto, a forfeiture of his policy will not be incurred, followed by due conformity on his part, will and ought to estop the company from insisting upon the forfeiture, though it might be claimed under the express letter of the contract. The company is thereby estopped from enforcing the forfeiture. The representations, declarations or acts of an agent, contrary to the terms of the policy, of course will not be sufficient, unless sanctioned by the company itself, Insurance Company v. Mowry, 96 U. S. 544. But where the latter has, by its course of action, ratified such declarations, representations, or acts, the case is very different. In the present ca.se, it appeared that the company had discontinued its agency at the place of residence of the insured soon after the policy was issued; and had given him notice by mail from time to time, as the premium installments became due, where and to whom to pay then— sometimes at Savannah, several hundred miles, and sometimes at Vicksburg, a hundred and fifty miles from his residence. Such notice, it would seem, had never CHAP. Vl] INSURANCE COMPANY V. EGGLESTON 133 been omitted prior to the maturity of the last installment. The effect of the judge's charge was, that if this was the fact, and if no such notice had been given on that occasion, and the failure to pay the premium was solely due to the want of such notice, it being ready, and being tendered as soon as notice was given, no forfeiture was incurred. We think the charge was correct under the circumstances of this case. The insured had good reason to expect and to rely on receiving notice to whom and where he should pay that install- ment. It had always been given before; the office of the company was a thousand miles away; and they had always directed him to pay to an agent, but to different agents at different times. Although, as we held in the case of Insurance Company v. Davis, 95 U. S. 425, the legal effect of a policy, when nothing appears to the contrary, may be that the premium is payable at the domicile of the company; yet it cannot be expected or understood by the parties that the policy is, in or- dinary circumstances, to be forfeited for a failure to tender the premium at such domicile, when the insured resides in a distant State, and has been in the habit, under the company's own direction, to pay an agent there, and has received no notice that the contrary will be required of him. He would have a just right to say that he had been misled. Let us look at the matter as it stands. The business of life insurance is in the hands of a few large companies, who are generally located in our large commercial cities. Take a company located, like the plaintiff in error, in New York, for example. It solicits business in every State of the Union where it is represented by its agents, who issue policies and receive premiums. Could such a company get one risk where it now gets ten, if it was expected or understood that it was not to have local agents accessible to the parties insured, to whom premiums could be paid, instead of having to pay them at the home office in New York? The universal practice is otherwise. Local agents are employed. The business could not be conducted on its present basis without them. Now, suppose the local agent is removed, or ceases to act, without the knowledge of the policy holders, and their premiums become due, and they go to the local office to pay them, and find no agent to receive them; are these policies to be forfeited? Would thg plaintiffs in error or any other company of good standing have the courage to say so? We think not. And why not? Simply because the policy holders would have the right to rely on the general understanding produced by the previous course of business pursued by the company itself, that payment could be made to a local agent and that the company would have such an agent at hand, or reasonably accessible. We do not say that this course of business w^ould alter the written contract, or would amount to a new contract relieving the parties from their obligation to pay the premium to the company, if they can find no agent to pay to. That obligation remains. But we are dealing with the question of forfeiture for not paying at the very day; and, in reference to that question, it is a good argument in the mouths of the insured to say: "Your course of business led us to believe that we might pay our premiums at home, and estops you from exacting the penalty of forfeiture without giving us reason- 134 ROWLEY V. THE EMPIRE INS. CO. [CHAP. VI able notice to pay elsewhere." The course of business would not prevent the company if it saw fit, from discontinuing all its agencies, and requiring the payment of premiums at its counter in New York. But, without givmg reasonable notice of such a change, it could not insist upon a forfeiture of the policies for want of prompt payment caused by their failure to give such notice. In the case of Insurance Co. v. Davis cited above, the agent's powers were discontinued by the occurrence of the war, of which all persons had notice; and the law of nonintercourse between belligerents prevented any payment at all; and the poHcy became forfeited and ended without any fault attributable to either of the parties. That case, therefore, was entirely differ- ent from the present; and it was in consequence of such forfeiture in the absence of fault that we held, in the case of New York Life Insurance Co. v. Statham et al, 93 U. S. 24, that the msured was entitled to recover the equitable value of his policy. In the present case it seems to us that the charge of the judge was in sub- stantial conformity to the principles we have laid down. The insured, re- siding in the State of Mississippi, had always dealt with agents of the com- pany, located either in his own State, or within some accessible distance. He had originally taken his poHcy from, and had paid his first premium to, such an agent; and the company had always, until the last premium became due, given hun notice what agent to pay to. This was necessary, because there was no permanent agent in his vicinity. The judge rightly held, that, under the circumstances, he had reasonable cause to rely on having such notice. The company did not itself expect him to pay at the home office; it had sent a receipt to an agent located within thirty miles of his residence; but he had no knowledge of this fact— at least, such was the finding of the jury from the evidence. We think there was no error in the charge, and the judgment of the Circuit Court must be Affirmed.^ ROWLEY V. THE EMPIRE INS. CO. Court of Appeals of New York, 1867. 36 N. Y. 550 Where the act of the insurance company constitutes the breach of contract. Action on a fire insurance policy. Defense, breach of warranty for mis- statements in the application forming part of the contract. FuLLERTON, J. If this court follows the decision in the case of Plumb v. The Cattaraugus County Mutual Insurance Company, 18 N. Y. 392, this ' The practitioner during the trial of insurance cases is very frequently confronted with Bome question of waiver or estoppel. CHAP. Vl] ROWLEY V. THE EMPIRE INS. CO. 135 judgment must be affirmed. That this case; has changed the rule which has hitherto prevailed in this State relating to warranties in policies of insurance will be made apparent by a brief reference to it. In that case, one Ide, in making out the application for insurance, acted as the agent and surveyor of the company. It was proved that he called upon Henr^', the assured, with a printed blank application, and solicited him to effect an insurance with the defendant's company. Henry expressed a desire to postjjone mak- ing the application, but told the agent, Ide, that if he insisted upon taking the application that day, he must get along alone and act on his own re- sponsibility. Ide then proceeded to make the survey alone; after which he filled up the application, and stated to Henry that it was all right and just as it should be. Henry, without any particular examination as to the state- ment of the distances between, and relative situation of the buildings, told Ide that upon his representations and statements he would sign, and there- upon did sign the application, and paid the premium. This testimony was objected to and taken under exception. On the trial of the action brought upon the policy, the insurance company, under objection, proved that there were material errors in the survey, as to the relative positions and distances of surrounding buildings, and gave testimony tending to show that the risk was increased thereby. The judge at the circuit directed a verdict for the plaintiff, and, after affirmance by the General Term, the judgment was appealed to this court, where it was held that the company was estopped from showing a breach of the warranty as to the relative situation of the buildings. This decision was put on the ground that the insurance agent, acting within the scope of his authority, bound the principal in making the survey and filling up the application, and consequently the company could not be per- mitted to show that the contract was other than the writing expressed. Mr. Justice Pratt, in delivering the opinion of the court, saj's: "But when the party through whose acts and representations the other party was induced to enter into the contract claims the right to show the facts were different from what he had represented them to be, for the purpose of showing a breach of the warranty, and thus avoiding what would otherwise be a binding con- tract and escaping its obligations, I cannot discover why the doctrine of estoppel may not justly be applied to him, and he be precluded from denying what he once asserted. It presents, I think, the precise case for the appli- cation of the doctrine of estoppel in pais as defined in the cases." It must be conceded that this case goes the whole length of establishing the doctrme that, although an application for insurance contains a false statement as to a material matter, the writing must still be held to express the contract between the parties, and that neither party can insist that the contract is other than what the writing expresses, provided such false state- ment is chargeable to the agent of the company in making the survey and filling up the application, while acting within the line of his duty. That this is in conflict with the rule as it has heretofore existed is apparent. (Brown v. The Cattaraugus County Mutual Insurance Co., 18 N. Y. 385; 136 ROWLEY V. THE EMPIRE INS. CO. [CHAP. VI Jennings v. The Chenango County Mutual Insurance Company, 2 Denio, 75; Vandervorst v. The Columbian Insurance Company, 2 Caines, 155; Cheriot V. Barker, 2 Johns. 346; Higginson v. Dall, 13 Mass. 96, 172; Weston v. Ernes, 1 Taunt. 115; Atherton v. Brown, 14 Mass. 152; Parks v. General Insurance Company, 5 Pick. 34; Flinn v. Tabrin, 1 Moody & Malk. 367.) This brings me to the examination of the facts in the present case. The written appointment of the agent Dean shows that he was the agent of the defendant "to take applications for insurance in the company, and receive the cash percentage to be paid thereon," Acting under this authority, the agent received the plaintiff's application for insurance. The manner of doing it was as follows: Rowley stated verbally to the agent the facts necessary to meet the requirements of the rules of the company, and, among other things, informed him that the premises were incumbered by mortgage. An applica- tion was then signed in blank by the plaintiff, and given to the agent; he promising to insert over the signature thus obtained, the particulars thus furnished him, as a basis of the insurance, on his return to his residence. The agent Dean was a witness on the trial of the case, and in giving the mterview between himself and Rowley, at this time, says: "He" (Rowley) "made no objection to my taking 'it'" (the application) and filling it up at "Horseheads, if it would he all right." The just and natural inference from this language is that this unusual mode of doing the business was at the suggestion or request of the agent. But, be that as it may, for some reasoii unexplained, the agent, on his return, in filling up the application, inserted what was not the fact, and in violation of his instruction; that there was no incumbrance on the premises. The defendant now seeks to avoid its liability on the policy, alleging that this statement was a warranty on the part of the assured and that it was false. The appellant's counsel contends that Dean, in filling up this application, was the agent of the plaintiff, and that the company is in no wise responsible for the mistake. I am aware that he is sustained in this position by the opinion of Mr. Justice Balcom in Smith v. The Empire Insurance Co. (25 Barb. 497) ; but I do not think this court should adopt that rule in this case. Considering the authority of Dean in its most limited sense, "to take appli- cations for insurance," I think he must be considered the agent of the in- surer rather than of the assured in filling up the application. His duty to his principal was to take the application for insurance. It cannot be said that that duty was performed when he received the blank paper signed by Rowley because the application was then in an inchoate state. The conditions of insurance plainly contemplate that it should be in writing, and such was the intention of the parties. When, therefore, was the duty which the agent owed to the company at an end, so that he ceased to bind his principal? It is not establishing a harsh or unreasonable rule in reference to insurance companies, to hold that their agents, authorized "to take applications for insurance" are acting within the scope of their authority in everything which they do, which may be necessary to complete such applications. I must therefore regard Dean as in the act of taking the application when CHAP. Vl] ROWLEY V. THE EMPIRE INS. CO. 137 he was filling up the blank signed by the plaintiff, and therefore acting on behalf of the defendant. Any other rule would be fraught with mischief. Insurance companies send out an army of agents to solicit business. Property holders are waited upon by them at their residences; and it is not going too far to say that many of the applicants would be unable to make a proper application and survey to meet the rigid and elaborate requirements of these corporations, while experience shows that they are not expected to do so. Hence, these agents render such services as are necessary, to enable the con- tracting parties to attain their respective objects, the one to insure, and the other to become insured against fire. To hold that in performing these preliminary labors, touching the very business which must necessarily be transacted before a policy can be effected, the insurance broker becomes the agent of the applicant for insurance, would seem to be an unnecessary and undesirable refinement. I repeat that in performing these preliminary labors, the agent is engaged in taking the application, which is strictly within his duty, and the principal should be held responsible for any error he may com- mit; especially when the error consists in recording a false statement over the signature of a confiding applicant which, it is claimed, vitiates the whole contract. Rowley in this case told the truth m regard to the incumbrances on the property, and in that respect discharged his duty. That satisfied the claims of morality and fair dealing, and ought to meet the requirements of the law. {Vide Masters v. Madison County Insurance Company, 11 Barb. 624.) If these views are concurred in, then the defendant, on the principle of Plumb V. The Cattaraugus Insurance Company, 18 N. Y. 392, is estopped from showing its own error to defeat its contract. The judgment should be affirmed, with costs. All concur, except Bockes, J., not voting, and Grover, J., dissenting. AffirmaJ.^ 1 Election Once Made Is Final. — If with knowledge of a forfeiture the insurer electa to revive the contract, and evinces his election by an unequivocal and positive act of confirmation, or by conduct amounting to an estoppel he cannot thereafter insist upon the past breach, Masonic Mutual Ronefit Asso. v. Beck, 77 Ind. 20.':?, 40 Am. Rep. 295; Brink v. Hanover Fire Ins. Co., 80 N. Y. 108. But a waiver as to one breach does not of necessity imply a similar indulgence as to breaches in future, Thomp- son V. Ins. Co., 104 U. S. 252, 20 L. Ed. 7G5. Whether New Consideication Requihed. — To support a waiver or an estoppel the insured need pay no fresh consideration for the indulgence granted, provided he can show that in reliance upon the statement or conduct of the insurers he has been misled to his detriment, Kiernan v. Dutchess Co. Mut. Ins. Co., 150 N. Y. 190, 44 N. E. 698. Mutual promises afford evidence of a sufficient consideration, so also loss to a promisee is as effective in establishing consideration as advantage to a promisor, De Frece v. Nat. Life Ins. Co., 136 N. Y. 144, 151, 32 N. E. 556. And, if the act of waiver or estoppel occur before loss, it may be presumed that except for reliance upon it the insured might have protected himself by taking out other insurance, Manchester V. Guardian Assur. Co., 151 N. Y. 8S, 92, 45 N. E. 381, .56 Am. St. R. 600 (citing cases). So also if it have to do with formalities relating to the proofs of loss, or time for in- stituting action, it may be presumed that except for misleading conduct of the insurer the insured would have governed himself by the strict technicalities of the contract, Dobson r. Hartford F. Ins. Co., 86 App. Div. 115, 83 N. Y. Supp. 456 aff'd 179 N. Y. 138 ROWLEY V. THE EMPIRE INS. CO. [CHAP. VI 557. In case, however, there is no element of estoppel or of new consideration, then, by the weight both of reason and authority, the act of waiver, unless it be evidenced by an executed written statement or agreement, Gibson El. Co. v. L. & L. & G. Ins. Co., 159 N. Y. 418, 426, 54 N. E. 23; Viele v. Germania Ins. Co., 26 Iowa, 9, 57, 06 Am. Dec. 83, is not binding upon the insurer, Ins. Co. v. Wolff, 95 U. S. 326, 333, 24 L. Ed. 387; United Firemen's Ins. Co. v. Thomas, 82 Fed. 406, 27 C. C. A. 42, 47 L. R. A. 450 (cited with approval, 183 U. S. 340) ; Morris v. Orient Ins. Co., 106 Ga. 472, 475, 33 S. E. 4.30; Northwestern Mut. L. Ins. Co. v. Amerman, 119 111. 329, 10 N. E. 225, 59 Am. Rep. 799. Otherwise the sanction of the written contract is virtually destroyed by parol, Northern Assur. Co. v. Grand View Bldg. Asso., 183 U. S. 308, 361, 22 S. Ct. 133, 46 L. Ed. 213; Conn. F. Ins. Co. v. Buchanan, 141 Fed. 877, 889 (citing many cases). CHAP. VIl] ANCTIL V. MANUFACTURERS' LIFE INS. CO. 139 CHAPTER VII General Principles — Continued Doctrine of Waiver and Estoppel Further Illustrated ANCTIL V. MANUFACTURERS' LIFE INS. CO. House of Lords, 1899. App. Cas. 604 Waiver as applied to insxirahle interest. The plaintiff was "the protector of the deceased whenever he stood in need of protection," and chiimed that that rehitionship gave him an insurable interest in the life of the deceased within the meaning of the Civil Code of Lower Canada, which in Art. 2590 provides "the insured must have an in- surable interest in the life upon which the insurance is effected." The policy provided that the instrument should become incontestable after the period of a year or upwards, during which i)rcmiums should be regularly paid. Lord Watson. The question remains whether that clause of the policy which provides that the instrument shall become "incontestable" on the lapse of a period of a year or upwards, during which premiums are regularly paid, furnishes a good answer to the o])jcction founded on the terms of the Code. Upon that point, their Lordshii)s concur in the opinion expressed l>y the majorities of the Supreme Court and of the Superior Court sitting in re- view. The rule of the Code appears to them to be one which rests upon general principles of public policy or expediency, and which cannot be de- feated by the private convention of the parties. Any other view \\o\M lead to the sanction of wager j)olicies. Their Lordships will, therefore, humbly advise Her Majesty to afhrm the judgment appealed from and to dismiss the appeal. ' ' Compare Wright v. Mut. Ben. Life Assn., 118 N. Y. 237, 23 N. E. 186. 16 Am. St. R. 740, L. R. A. 7.31; Light v. Mut. Fire Ins. Co., 169 Pa. St. 310, 32 Atl. 439. 47 Am. St. R. 904. The provisions of remedial statutes in general eannot be waived; thus the usual statutes that a life policy shall not he forfeit(>cl for nonpayment of a premium without the preserihed notice to warn the assured, Mut. Life Ins. Co. r. Cohen, 179 U. S. 262; or a valued policy law. Orient Ins. Co. v. Daggs, 172 U. S. 557; or a law providing that license shall be revoked if insurer removes a eai;e to Federal court. Security Mut. L. Ins. Co. v. Prcwitt, 202 U. S. 246. New Subject or New Peril Not to Be Introduced by Waiver. — The doctrine of waiver and estoppel is not to be extended so far as to introduce into the contract an entirely new subject-matter, Sanders v. Cooper, 115 N. Y. 279, 22 N. E. 212, or a new peril, McCoy v. Northwestern, etc., Assoc, 92 Wis. 677, 66 N. W. 697, 47 L. R. A. 681. 140 UNION MUTUAL LIFE INS. CO. V. MOWKY [cHAP. VII UNION MUTUAL LIFE INS. CO. v. MOWRY United States Supreme Court, 1877. 96 U. S. 544 Effect of an oral promise of the insurers or their agent, made at the time of or before the making of the contract. Action upon a policj' of life insurance. Defense, forfeiture for nonpay- ment of premium. There was a verdict for the plaintiff; and, judgment having been rendered thereon, the defendant sued out this writ of error. Mr. Justice Field delivered the opinion of the court. The insurance effected was from the 9th of March, 1867, and the policy- recited the paj'ment of the first annual -premium on that day, and stipulated for the paj'ment of the subsequent premiums on the same day of that month each year. The payment of the insurance money, after notice and proof of the death of the insured, was made dependent upon the punctual payment, each year, of the premium. The policy, in terms, declared that it was made and accepted by the insured and the nephew, upon the express condition that if the amount of any annual premium was not fully paid on the day and in the manner provided, the policy should be "null and void, and wholly for- feited." And it declared that no agent of the company, except the president and secretary, could waive such forfeiture, or alter that or any other condi- tion of the policy. The second premium, due on the 9th of March, 1868, was not paid, and the insured died on the 8th of April following. Forty-five days after it was due, and fifteen days after the death of the insured, this premium was tendered to the company, and was refused. The question for determination is, whether a tender of the premium at that time was sufficient to hold the company to the payment of the insurance money. By the express condition of the policy, the liability of the company was released upon the failure of the insured to pay the premium when it matured ; and the plaintiff could not recover, unless the force of this condition could in some way be overcome. He sought to overcome it by showing that the agent who induced him to apply for the policy represented to him, in answer to suggestions that he might not be informed when to pay the premiums, that the company would notify' him in season to pay them, and that he need not give himself any uneasiness on that subject; that no such notification was given to him before the maturity of the second premium, and for that reason he did not pay it at the time required. This representation before the policy was is.sued, it was contended in the court below, and in this court, constituted an estoppel upon the company against insisting upon the forfeiture of the policy. CHAP. VIl] UNION MUTUAL LIFE INS. CO. V. MOWRY 141 But to this position there is an obvious and complete answer. All previous verbal arrangements were merged in the written agreement. The understand- ing of the parties as to the amount of the insurance, the conditions upon which it should be paj'able, and the premium to be paid, was there expressed for the very purpose of avoiding any controversy or question rcsijecting them. The entire engagement of the parties, with all the conditions upon which its fulfillment could be claimed, must be conclusively presumed to be there stated. If, by inadvertence or mistake, provi-sions other than those intended were inserted, or stipulated provisions were omitted, the parties could have had recourse for a correction of the agreement to a court of equity, which is competent to give all needful relief in such cases. But, until thus corrected, the policy must be taken as expressing the final understanding of the a.ssured and of the insurance company. The previous representation of the agent could in no respect operate as an estoppel against the company. Apart from the circumstance that the policy subsequently issued alone expressed its contract, an estoppel from the representations of a party can seldom arise, except where the representa- tion relates to a matter of fact — to a present or past state of things. If the representation relate to something to be afterwards brought into existence, it will amount only to a declaration of intention or of opinion, liable to modifi- cation or abandonment upon a change of circumstances of which neither part}' can have any certain knowledge. The only case in which a representa- tion as to the future can be held to operate as an estoppel is where it relates to an intended abandonment of an existing right, and is made to influence others, and by which they have been induced to act. An estoppel cannot arise from a promise as to future action with respect to a right to be acquired upon an agreement not yet made. The doctrine of estoppel is applied with respect to representations of a party, to prevent their operating as a fraud upon one who has been led tc rely upon them. They would have that effect, if a party, who, by his state- ments as to matters of fact, or as to his intended abandonment of existing rights, had designedly induced another to change his conduct or alter his condition in reliance upon them, could be permitted to deny the truth of his statements, or enforce his rights against his declared intention of abandon- ment. But the doctrine has no place for application when the statement relates to rights depending upon contracts yet to be made, to which the per- son complaining is to be a party. He has it in his power in such cases to guard in advance against an}'^ consequences of a subsequent change of in- tention and conduct by the person with whom he is dealing. For compliance with arrangements respecting future transactions, parties must provide by stipulations in their agreements when reduced to writing. The doctrine carried to the extent for which the assured contends in this case would subvert the salutary rule that the written contract must prevail over previous ver- bal arrangements, and open the door to all the evils which that rule was in- tended to prevent. The learned judge who tried this case in the Circuit Court instructed the 142 BOYD V. INSURANCE CO. [CHAP. VII jurj', in substance, that if they could find from the language of the agent that there was an agreement between him and the assured, made before the policy was executed, that the latter should have notice before he should be required to pay the annual premium, then that the company, not having given such notice, was estopped from setting up the forfeiture stipulated by the policy for nonpayment of the premium when due. For the reasons we have stated, we think the court erred in this instruction. There is nothing in the record which shows that the agent was invested with authority to make an insurance for the company. In representing him- self as an agent, he onl}^ solicited an application by the assured to the com- pany for a polic3^ That instrument was to be drawn and issued by the com- pany, and it shows on its face that the authority to the agent was limited to countersigning it before delivery and to receiving the premiums. But even if the agent had possessed authority to make an insurance for the company, and he made the agreement pretended, still the assured was bound by the terms of the policy subsequently executed and accepted by him. The judgment must be reversed, and the cause remanded for a new trial; and it is So ordered.^ BOYD V. INSURANCE COMPANY SuPKEME Court of Tennessee, 1891. 90 Tenn. 212 Effect of demanding proofs of loss. Action upon a policy of fire insurance on a dwelling house, stated in the policy to be occupied by good tenants. Defense, overinsurance and va- cancy. 'Thompson v. Knickerbocker Life Ins. Co., 104 U. S. 252; but certain courts in their anxiety to avoid forfeiture, do not give strict adherence to this rule. Thus, an oral consent by the agent of the insurance company to a subsequent procuring of other insurance in violation of the terms of the policy, was held to be binding upon the company. Havens v. Home Ins. Co., Ill Ind. 90, 93, 12 N. E. 1.37, 60 Am. Rep. 689. So also an oral promise that the iron-safe clause warranty would not be insisted upon in certain instances. Berry v. Ins. Co. (1909), 83 S. C. 13. Silence Not a Waiver. — Mere inaction by the insurers after knowledge of forfeiture is held to constitute no waiver, Iowa Life Ins. Co. v. Lewis, 187 U. S. 335, 350, Keith V. Ins. Co., 117 Wis. 531, 94 N. W. 295. Other courts take the opposite view, Cassimus V. Scottish U. & N. Ins. Co., 135 Ala. 2.56, 33 So. 163; Swedish Am. Ins. Co. v. Knut- 8on, 67 Kan. 71, 72 Pac. 526, 100 Am. St. R. 382. A retention by the insurance com- pany, however, without objection of proofs of loss is a waiver of defects contained in them that might have been corrected upon notice, Weed v. Hamburg-Bremen Ins. Co., 1.33 N. Y. 394, 31 N. E. 231; Kiernan v. Dutchess Co. Mut. Ins. Co., 150 N. Y. 190, 44 N. E. 698. Certain courts have gone so far as to infer waiver unless the insurer upon learning of a ground of forfeiture, during the term of the policy, within a reason- able time thereafter informs the insured or serves notice of cancellation upon him; for example, Kalmutz v. Northern Mut. Ins. Co., 186 Pa. St. 571, 40 AtL 816; Morrison CHAP, VIl] TITUS V. THE GLENS FALLS INS. CO. 143 It appeared that the policy wus forfeited for unoccupancy, but the jjluintiff contended that the defendant had waived tlie forfeiture by requiring the insured to go to the trouble and expense of furnishing proofs of loss, as re- (juircd by the policy. LuRTON, J. The third and last assignment is upon the refusal of the court to charge that if after the loss and knowledge of the facts by the company a negotiation for a settlement of the loss was begun, "by which Boyd was required to go to expense and trouble in getting up an estimate of his loss, or of the value of the house dcstroj'ed," that this would operate as a waiver of the defenses heretofore considered. It was not error to refuse this. The company did not admit the amount of the loss, and claimed overinsurance in addition to the defenses growing out of breach of warranty of occui)ation. The policy required that the assured should furnish evidence of his loss, and, if required, plans and specifications of the building destroyed. The require- ment of such evidence, even if it did involve expense, is not a waiver of other defenses. It is inconceivable, that there should be authority for the position that, if the insurer after a loss requires proof of loss, it thereby waives all right to set up as a defense that it is not liable by reason of the fact that it never had a valid contract at all. Waiver is generally but another term for estoppel. There can be no estoppel where the assured has not been misled to his prejudice. This defense was one to the whole demand. Its assertion might waive defects in proof, or want of notice, but the demand of estimates of loss in no way misled plaintiff, for he knew that not only was all liability denied, but that, if any existed, the amount of his demand was contested. The judgment must he affirmed.^ TITUS V. THE GLEN FALLS INS. CO. Court of Appeals of New York, 1880. 81 N. Y. 410 Effect of requiring additional proofs of loss. Action on a fire insurance policy. Defense, breach of warranty by the commencement of foreclosure proceedings. V. Ins. Co., 69 Tex. 353; and sec Norris v. Hartford Fire Ins. Co., 57 S. C. 358, 35 S. E. 572. Denial of All LL\BiLiTy Waives the Condition Requiring Proofs of Loss. — Royal Ins. Co. v. Martin, 192 U. S. 149, 48 L. Ed. 385; Hegson v. North River Ins. Co. (N. C, 1910), 67 S. E. 509; Miller v. Sovereign Camp. 140 Wis. 505. > Armstrong v. Agricultural In.s. Co., 130 N. Y. 560, 567, 29 N. E. 991; Phoenix Ins. Co. V. Flemming, 65 Ark. 54, 44 S. W. 464; Freedman v. Ins. Co., 175 Pa. St. 350, 34 Atl. 730; Rundell v. Anchor F. Ins. Co., 128 la. 575, 101 N. W. 517. Other courts have expressed the view that a demand for proofs of lo.ss amounts to a waiver by the insurance company of any known forfeiture, Planters' Mut. Ins. Co. v. Loyd, 67 Ark. 684. 56 S. W. 44, 77 Am. St. R. 136; German Fire Ins. Co. v. Grunert, 112 111. 68; Reiner V. DwcUing-House Ins. Co., 74 Wis. 89, 42 N. W. 208. 144 TITUS V. THE GLENS FALLS INS. CO. [CHAP. VII Defendant's policy provided that the insured should "if required submit to an examination under oath." It also contained a condition declaring it void in case foreclosure proceedings were commenced against the insured property. It was shown on the trial that foreclosure of a mortgage on the insured premises was commenced and judgment obtained prior to the fire. It also appeared that the defendant had learned of the foreclosure proceedings be- fore making demand upon the insured to submit to an examination under oath regarding his loss, as provided for by the policy. The plaintiff recovered judgment. Earl, J. We are of opinion that the claim of the plaintiff is well founded, that the forfeiture caused by the foreclosure proceedings was waived by the defendant. After the fire and after the defendant had notice of the proceed- ings, it required the insured to appear before a person appointed by it for that purpose to be examined under the clause in the policy hereinbefore mentioned, and he was there subjected to a severe inquisitorial examination. It had the right to make such examination onlJ^by virtue of the policy. When it required him to be examined, it exercised a right given to it by the pohcy. It then recognized the validity of the policy, and subjected the insured to trouble and expense, after it knew of the forfeiture now alleged, and it cannot now, therefore, assert its invalidity on account of such forfeiture. When there has been a breach of condition contained in an insurance policy, the insurance company may or may not take advantage of such breach and claim forfeiture. It may, consulting its own interests, choose to waive the forfeiture, and this it may do by express language to that effect, or by acts from which an intention to waive may be inferred, or from which a waiver follows as a legal result. A waiver cannot be inferred from its mere silence. It is not obliged to do or say an3rthing to make the forfeiture ef- fectual. It may wait until claim is made under the policy, and then, in denial thereof, or in defense of a suit commenced therefor, allege the for- feiture. But it may be asserted broadly that if, in any negotiations or trans- actions with the insured, after knowledge of the forfeiture, it recognizes the continued validity of the policy, or does acts based thereon, or requires the insured by virtue thereof to do some act or incur some trouble or expense, the forfeiture is as matter of law waived; and it is now settled in this court, after some difference of opinion, that such a waiver need not be based upon any new agreement or an estoppel. The judgment should be affirmed. All concur. Judgment affirmed.^ iReplogle V. Am. Ins. Co.. 1.32 Ind. 360, 31 N. E. 947; Grubbs v. North Carolina Home Ins. Co., 108 N. C. 472, 13 S. E. 236, 23 Am. St. R. 62; McMillan v. Ins. Co., 78 S. C. 433, 58 S. E. 1020 (adjuster called for certified copies of invoices). Contra, Freedman v. Ins. Co., 175 Pa. St. 350. It is very doubtful to what extent this rule may be pronounced sound, Phoenix Ins. Co. v. Flcmming, 65 Ark. 54; Boruszweski v. Ins. Co., 186 Mass. 589; although it has been followed by the courts of many States. CHAP. VIl] TITUS V. THE GLENS FALLS INS. CO. 145 A jury in such instances rarely discriminates between full knowledge of the facts con- stituting forfeiture and a mere suspicion on the part of the insurance company, and the companies, through fear of waiving their defenses, are often induced to forego the benefit of the contract methods of investigating the facts to which they are fairly entitled. If it turns out that the insurance company erroneously assumed a certain ground of forfeiture to exist, then it is also made clear that the company was justly entitled to pursue the contract methods of investigating the facts before being com- pelled to pay the loss. It has been stated that no implication of waiver should arise from acts done in accordance with the contract, Parker v. Knights Templars, 70 Neb. 2G8, 97 N. W. 281; Hare v. Headlcy, 54 N. J. Eq. 545, 555, 35 Atl. 445. Indeed, the English court concludes that it is a natural incident of any insurance contract that the insured is under obligations to furnish reasonable information after loss, even though there be no express promise to do so, Harding v. Bussell (1905), 2 K. B. 83; Boulton V. Houlder Bros. (1904), 1 K. B. 784. One embarrassment connected with the doctrine of waiver in this connection is that a jury is apt to be so far prejudiced in favor of the insured that it often finds knowledge of forfeiture in the company when in fact its representatives possess no such information. Where, as in the New York standard policy, there is an express provision that proceedings on appraisal and examination shall cause no waiver, effect should be given to this nonwaiver agree- ment, Pha-nix Ins. Co. v. Flomming, 65 Ark. 54, 44 S. W. 464, 39 L. R. A. 789, 67 Am. St. R. 900; Oshkosh Match Works v. Manchester Fire Assur. Co., 92 Wis. 510, 66 N. W. 525. It is obvious, however, that an acceptance and retention of proofs of loss by the insurer constitutes a waiver of such mistakes and defects in the proofs as the insured could have remedied upon notice, Wildey Cas. Co. v. Sheppard, 61 Kan. 351, 59 Pac. 651, 47 L. R. A. 650; Hutton v. Patrons' Mut. F. I. Co., 191 Pa. St. 369, 43 Atl. 219. Claimant Not Concluded by Statements in Proof of Loss. — Statements in the proofs of loss are evidence against the claimant because they are in the nature of admissions, Ins. Co. v. Newton, 22 Wall. (U. S.) 32, 35; but where it appears that the proofs contain erroneous statements or estimates, those may usually be corrected on the trial. Supreme Lodge v. Beck, 181 U. S. 49. The essential elements of estoppel are lacking, except in the very rare instances in which the companj' is able to prove that it defended solely because of the wrong statement set forth in the proofs. A striking instance of the general rule is furnished by the Van Tassel case, where after taking the defendant to the Court of Appeals the plaintiff was allowed to increase his claim from five thousand to ten thousand dollars and ultimately to recover judgment for the latter amount. Underwood as Ex'r v. Greenwich Ins. Co., 28 App. Div. (N. Y.) 163, 151 N. Y. 130, 45 N. E. 365, 184 N. Y. 607. It will be observed, however, that proofs of loss are not evidence on behalf of the claimant to prove the truth of their contents, but simply to prove his compliance with the clause of the policy requiring the preparation and service of proofs, Lundvick v. Ins. Co., 128 Iowa, 376, 104 N. W. 429. Company May Defend on Other Grounds Than Those First N.\med. — Stating to the assured after loss certain reasons or grounds for refusing payment is in general no waiver of other grounds of forfeiture, nor will the company be thereby cstopi)rd when it subsequently comes to litigation from setting up any other defenses that it may have. A number of decisions to the contrary, for example, Taylor v. Supremo Lodge, 135 Mich. 231, 97 N. W. 680; Castner v. Farmers' Mut. Ins. Co., 50 Mich. 273. 275, 15 N. W. 452, are opposed to the weight of authority and find slender support in reason, Armstrong v. Agricultural Ins. Co., 130 N. Y. 560. 29 N. E. 991; Welsh r. London Assur. Corp., 151 Pa. St. 607, 619, 25 Atl. 142, 31 Am. St. R. 786; Findlay v. Union Mut. F. Ins. Co., 74 Vt. 211, 52 Atl. 429. 93 Am. St. R. 8S5. Elements of estoppel are generally lacking in such a case. There is no breach of contract obligation by the insurer, nor is there any misleading conduct to the prejudice of the assured. In no one of the cases here cited, on the one side or the other, was it estalilished that the assured would have abandoned his claim and refrained from instituting action if 10 lij TITUS t'. THE GLENS FALLS INS. CO. [CHAP. VII the insurer had remained altogether silent until litigation. The company owes no duty, until it interposes its defenses in a lawsuit, to assign its reasons for not paying. An assignment of reasons is not only gratuitous, but often largely a matter of lay opinion. The claimant generallj' knows more about the facts than the company does at all stages of the preliminary investigation, and much more at the outset. And if he has not undertaken the litigation solely as a result of fraudulent or deceitful mis- representations of fact by some agent duly authorized to stand in the place of the company, it is difficult to see how any adequate basis of estoppel has been established. This rule in favor of the insurance company, however, must not be extended to apply to an undisclosed defense which might upon timely notice after loss have been met and remedied. Nor does the rule apply to the subject of amendments of pleadings after action is begun and after the issues therein have been framed. Every court exercises its own discretion to withhold the privilege of setting up new defenses, or to grant it, and with or without the imposition of terms, as seems to it reasonable, Penn- sylvania Fire Ins. Co. v. Hughes, 108 Fed. 497, 502, 47 C. C. A. 459; Wildey Cas. Co. V. Sheppard, 61 Kan. 351, 59 Pac. 651, 47 L. R. A. 650. CHAP. VIIl] KICKERBOCKER LIFE INS. CO. V. NORTON 147 CHAPTER VIII General Principles — Continued Waiver and Estoppel by Agents KNICKERBOCKER LIFE INS. CO. v. NORTON United States Supreme Court, 1877. 96 U. S. 234 Authority of agents to waive. This action was brouslit by PIia>be A. Norton on a policy of insurance, issued by the Knickerbocker Life Insurance Company of New York, on tlio life of Jes.se 0. Norton, for the benefit of his wife and chiklren. The policy contained the following condition: "IF the said premium shall not be paid on or before twelve o'clock, noon, on the day or days al)ove mentioned for the payment thereof, at the office of the company in the city of New York (un- less otherwise expressly agreed in writing), or to agents when they produce receipts signed by the ]-)rcsident or secretary, or if the principal of or interest upon any note or otlier obligation given for the premium ujwn said j)olicy shall not be paid at the time the same shall become due and jjayable, then, and in every such case, the company shall not be liable to pay the sum as- sured, or any part thereof; and said policy shall cea.se and be null and void." By an indorsement on the policy, it was declared that "agents of the com- pany are not authorized to make, alter, or abrogate contracts, or waive for- feitures." The insured died on the 3d of Augu.st, 1875; and the company refused to pay the in.surance, on the ground that the policy was forfeited by reason of the nonpayment of certain notes given for the last premium, which was due April 20, 1875. It was conceded that all the other premiums had been paid. It appeared on the trial that the premium in question was settled by the payment of .?50 in cash, and the balance in two promissory notes given by Jesse O. Norton to the insurance company, payable respectively in two and three months, and maturing, one on the 20th of June, the other on the 20th of July, 1875. Each note contained a clau.se declaring that if it were not paid at maturity the policy would be void— this being the usual form of premium notes. On the issue as to extension of time on the notes, and the authority of the agent to grant it, the plaintiff i)roduced three witnesses— Randall, agent of the company down to March, 1874; Frary, his successor, who was agent at 148 KNICKERBOCKER LIFE INS. CO. V. NORTON [CHAP. VIII the time in question; and Martin Norton, son of the insured, who acted in behalf of his father in reference to the alleged extension, and to the tender of pajTuent. The testimony of these witnesses tended to show that formerly the com- pany had allowed their agent to extend time on premium notes for a period of ninety days; that this indulgence was afterwards reduced to sixty days, and then to thirty; and that, at the period in question, the agent was re- quired, as a general thing, to return the notes in his hands if not paid by the loth of the month following that in which they became due. As to what took place with reference to the notes in question, there is some conflict in testimony between Martin Norton and the agent Frary. The former testified, in substance, that he called on the agent, in behalf of his father, in June, 1875, a few days after the first note became due, and told him that his father wished it extended for thirty days; to which the agent agreed — his answer being, "All right." That he called again on or about the 8th of July, to request an extension of the other note, which would become due on the 20th of that month, and a further extension of the first note to the 10th of August. That the agent said he would have to write to the company about this. That, on the 13th, he called again, and told the agent that his father had concluded to pay both notes; and the agent gave him the figures, showing what was due on them. That he called again on the 15th, prepared to pay the notes, when he was informed by the agent that he could not re- ceive the monej'^, having received orders from the company to return all the papers to New York, and he had done so. That he then made a legal tender of the amount due on the first note, which was refused. Frary testified that he had no recollection of the first interview, or of agreeing to extend the first note. As to the rest, they did not materially differ. In addition to the testimony relating to the general practice of the agents in granting extensions of time for the payment of premium notes, evidence was given tending to show that Norton, the insured, had usually received more or less indulgence of that kind. The counsel for the defendant moved to strike out the testimony touching the usages of the company as to nonpayment of prior premium notes by Norton, and prior indulgence thereon to him, as incompetent, and in conflict with the terms of the policy, and as showing no authority in Frary to give the alleged extension; which was without consideration, if made, and after the forfeiture had occurred. The counsel for the defendant also moved to strike out that portion of Martin Norton's testimony relative to an agreement for an extension of the premium notes, such agreement being without authority on the part of the agent, etc. The court overruled the latter motion; and, as to the first, di- rected the jury to disregard so much of Randall's testimony as tended to show the conduct of the defendant and plaintiff in regard to former payments; but allowed to stand so much of Randall's and Frary's testimony as tended to show the powers of the agents in reference to giving extensions on premiums or premium notes. This ruling was excepted to. CHAP. VIIl] KNICKERBOCKER LIFE INS. CO. V. NORTON 149 In charging the jury, the court left it to them to say, from the evidence, whether the agent of the defendant had power to waive a strict comphance with the terms of the agreement as to the time of paying the notes given for the premium; and, if he had such power, whether such a waiver was in fact made: if it was, and if the insured offered to pay the notes within the time to which they were extended, and the company refused to receive pay- ment, that then the plaintiff was entitled to recover. The jury were further instructed that the power vested in Randall, the previous agent, was only pertinent as it tendctl to throw light on the powers vested in his successor, Frary. The defendant's counsel excepted to the charge, and submitted several instructions, the purport of them being, in substance, that, in view, of the express provision of the policy, the evidence was utterly irrelevant and incompetent to show any authority in the agent to grant any indulgence as to the time of paying the notes, and to waive the forfeiture incurred by their nonpayment at maturit}^; or to show that any valid and legal extension was, in fact, granted, or that the forfeiture of the policy was waived. These instructions were refused. There was a judgment for the plaintiff, whereupon the com])any sued out this writ of error. Mr. Justice Bradley, after stating the case, delivered the opinion of the court. The material question in this case is, whether, in view of the express pro- visions of the i^olicy, the evidence introduced by the assured was relevant and competent to show that the company had authorized its agent to grant indulgence as to the time of paying the premium notes, and waive the for- feiture incurred by their nonpayment at maturity; or to show that any valid extension had, in fact, been granted, or the forfeiture of the policy waived. The written agreement of the parties, as embodied in the policy and the indorsement thereon, as well as in the notes and the receipt given therefor, was undoubtedly to the express purport that a failure to pay the notes 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 condition or stipulation made in his own favor. The com- pany 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 agents had no power to make agreements or waive forfeitures; but might, at an}' time, at its option, 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 to 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 evidence, as well as by writing, for the obvious reason that it could be done without writing. 150 KNICKERBOCKER LIFE INS. CO. V. NORTON [CHAP. VIII That it did authorize its agents to take notes, instead of money, for premi- ums, is perfectly evident, from its constant practice of receiving such notes when laken by them. That it authorized them to grant indulgence on these notes, if the evidence is to be believed, is also apparent from like practice. It acquiesced in and ratified their acts in this behalf. For a long period it allowed them to give an indulgence of ninety days; after that, of sixty; then of thirty days. It is in vain to contend that it gave them no authority to do this, when it constantly allowed them to exercise such authority, and always ratified their acts, notwithstanding the language of the written instruments. We think, therefore, that there was no error committed by the court below in admitting evidence as to the practice of the company in allowing its agents to extend the time for pajmient of premiums, and of notes given for premiums, as indicative of the power given to those agents; nor any error in submitting it to the jury, upon such evidence, to find whether the defendant had or had not authorized its agent to make such extensions, nor in submitting it to them to say whether, if such authority had been given, an extension was made in this case. Much stress, however, is laid on the fact that the extension claimed to have been given in this case was not given, or applied for, until after the first note became due and the forfeiture had been actually incurred. But we do not deem this to be material. The evidence does not show that any distinction was made in granting extensions before or after the maturity of the notes. The material question is, whether the forfeiture was waived; and we see no reason why this may not be done as well by an agreement made for extending the note after its maturity, as by one made before. In either case, the legal effect of the indulgence is this: the company say to the insured. Pay your note by such a time, and your policy shall not be forfeited. If the insured agrees to do this, and does it, or tenders himself ready to do it, the forfeiture ought not to be exacted. In both cases, the parties mutually act upon the hypothe- sis of the continued existence of the policy. It is true, if the agreement be made before the note matures and before the forfeiture is incurred, it would be a fraud upon the assured to attempt to enforce the forfeiture, when, rely- ing on the agreement, he permits the original day of payment to pass. On the other hand, if the agreement be made after the note matures, such agree- ment is itself a recognition, on the company's part, of the continued existence of the policy, and, consequently, of its election to waive the forfeiture. It is conceded that the acceptance of payment has this effect; and we do not see why an agreement to accept, and a tender of payment according to the agree- ment, should not have the same effect. Both are acts equally demonstrative of the election of the company to waive the forfeiture of the policy. Grant that the promise to extend the note is without consideration, and not binding on the company— which is perhaps true as well when the promise is made before maturity as when it is made afterwards— still it does not take from the company's act the legitimate effects of such act upon the forfeiture of the policy. Perhaps the note might be sued on in disregard of the extension; but if it could be, that would not annihilate the fact that the company elected CHAP. VIIl] UNION MUTUAL INS. CO. V. WILKINSON 151 to waive the forfeiture by entering into the transaction. If it should repu- diate its agreement, it could not repudiate the waiver of the forfeiture, with- out at least giving to the assured reasonable notice to pay the money. Forfeitures are not favoretl in the law. They are often the means of great oppression and injustice. And, where adequate compensation can be made, the law in many cases, and equity in all cases, discharges the forfeiture, upon such compensation being made. It is true, we held in Statham's Case, 93 U. S. 24, that, in life insurance, time of payment is material, and cannot be extended by the courts against the assent of the company. But where such assent is given, the courts should be liberal in construing the transaction in favor of avoiding a forfeiture. We find no error in the record, and the judgment of the Circuit Court is AJfirmed. Mr. Justice Swayne, Mr. Justice Field, and Mr. Justice Strong dissented. Mr. Justice Strong. I dissent from the judgment given in this case. The insurance efTected by the policy became forfeited by the nonpayment ad diem of the premium note. The policy then ceased to be a binding contract. It was so expressly stipulated in the instrument. Admitting that the com- pany could afterwards elect to treat the policy as still in force, or, in other words, could waive the forfeiture, the local agent could not, unless he was so authorized by his principal. The policy declared that agents should not have authority to make such waivers. And there is no evidence in this case that the company gave to the agent parol authority to waive a forfeiture after it had occurred. They had ratified his acts extending the time of payment of premium notes, when the extension was made before the notes fell due. But no practice of the company sanctioned any act of its agent done after a policy had expired, by which new life was given to a dead contract. UNION MUT. INS. CO. v. WILKINSON United States Supreme Court, 1871. 13 Wall. 222 Authority of agents to waive. The Union Mutual Insurance Company, of Maine, insured the life of Mrs. Malinda Wilkinson in favor of her husband. Both husband antl wife, prior to the rebellion, had been slaves, and the husband came to Keokuk, Iowa, from Missouri. The company did business in Keokuk (where the application was made and the policy delivered), through an agent, one Ball, to whom it furnished blank applications. The mode of doing business appeared to have 152 UNION MUTUAL INS. CO. V. WILKINSON [CHAP. VIII been that the agent propounded certain printed questions, such as are usual on appHcations for insurance on hves, contained in a form of appHcation, and took down the answers; and when the apphcation was signed by the applicant, the friend and physician forwarded it to the company, and if ac- cepted, the policy was returned to this agent, who delivered it and collected and transmitted the premiums. On this form of application were the usual questions to be answered by the person proposing to effect the assurance; and by the terms of the policy it became void if any of the representations made proved to be untrue. Among them: "Question. Mother's age, at her death? Answer. 40. Question. Cause of her death? Ansioer. Fever." Mrs. Wilkinson having died, and the company refusing to pay the sum insured, Wilkinson, the husband, brought suit in the court below to recover it. The defense was that the answers as above given to the questions put were false; that the mother had not died at the age of 40, but at the earlier age of 23, and had died not of fever but of consumption. Evidence having been given by the defendant tending to show that she died at a much younger age than 40 years, and of consumption, the plaintiff in avoidance of this, was permitted (under the defendants' objection and exception) to prove that the agent of the insurance company, who took down the answers of the applicant and his wife to all the interrogatories, was told by both of them that they knew nothing about the cause of the mother's death, or of her age at the time; that the wife was too young to know or. remember anything about it, and that the husband had never known her; and to prove that, there was present at the time the agent was taking the application, an old woman, who said that she had knowledge on that subject, and that the agent questioned her for himself, and from what she told him he filled in the answer which was now alleged to be untrue, without its truth being affirmed or assented to by the plaintiff or the wife. This the jury found in their special verdict, and found that the mother died at the age of 23; did not die of consumption; and that the applicant did not know when the application was signed how the answer to the question about the mother's age and the cause of her death had been filled in. In charging the jury the court said that if the applicant did not know at what age her mother died, .and did not state it, and declined to state it, and that her age was inserted by the agent upon statements made to him by others in answer to inquires he made of them, and upon the strength of his own judgment, based upon data thus obtained, it was no defense to the action to show that the agent was mistaken, and that the mother died at the age of 23 years. \'erdict and judgment having gone for the plaintiff, the insurance company brought the case here on error. Mr. Justice Miller delivered the opinion of the court. The defendant excepted to the introduction of the oral testimony regarding the action of the agent, and to the instructions of the court on that subject; CHAP. VIIl] UNION MUTUAL INS. CO. V. WILKINSON 153 and assigns the ruling of the court as error on the ground that it permitted the written contract to be contradicted and varied by parol testimony. The great value of the rule of evidence here invoked cannot be ea.sily over- estimated. As a means of protecting those who are honest, accurate, and prudent in making their contracts, against fraud and false swearing, against carelessness and inaccurancy, by furnishing evidence of what was intended by the parties, which can always be produced without fear of change or liability to misconstruction, the rule merits the eulogies it has received. But experience has shown that in reference to these very matters the rule is not perfect. The written instrument does not always rei)resent the intention of both parties, and sometimes it fails to do so as to either; and where this has been the result of accident, or mistake, or fraud, the principle has been long recognized that under proper circumstances, and in an appropriate proceed- ing, the instrument may be set aside or reformed, as best suits the purposes of justice. A rule of evidence adopted by the courts as a protection against fraud and false swearing would, as was said in regard to the analogous rule known as the statute of frauds, become the instrument of the very fraud it was intended to prevent, if there did not exist some authority to correct the universality of its application. It is upon this j)rinciplc that courts of equity proceed in giving the relief just indicated; and though the courts, in a common-law action, may be more circumscribed in the freedom with which they inquire into the origin of written agreements, such an inquiry is not always forbidden by the mere fact that the party's name has been signed to the writing offered in evidence against him. In the case before us a paper is offered in evidence against the plaintiff containing a representation concerning a matter material to the contract on which the suit is brought, and it is not denied that he signed the instrument, and that the representation is untrue. But the parol testimony makes it clear beyond a question, that this party did not intend to make that rep- resentation when he signed the paper, and did not know he was doing so, and, in fact, had refused to make any statement on that subject. If the writing containing this representation had been prepared and signed by the plaintiff in his application for a policy of insurance on the life of his wife, and if the representation complained of had been inserted by himself, or by some one who was his agent alone in the matter, and forwarded to the principal office of the defendant corporation, and acted upon as true, by the officers of the company, it is easy to see that justice would authorize them to hold him to the truth of the statement, and that as they had no part in the mis- take which he made, or in the making of the instrument which did not truly represent what he intended, he should not, after the event, be permitted to show his own mistake or carelessness to the prejudice of the corporation. If, however, we suppose the party making the insurance to have been an individual, and to have been present when the application was signed, and soliciting the assured to make the contract of insurance, and that the in- surer himself wrote out all these representations, and was told by the plain- tiff and his wife that they knew nothing at all of this particular subject of 154 UNION MUTUAL INS. CO. V. WILKINSON [CHAP. VIII inquiry, and that they refused to make any statement about it, and yet knowing all this, wrote the representation to suit himself, it is equally clear that for the insurer to insist that the policy is void because it contains this statement, would be an act of bad faith and of the grossest injustice and dishonesty. And the reason for this is that the representation was not the statement of the plaintiff, and that the defendant knew it was not when he made the contract; and that it was made by the defendant, who procured the plaintiff's signature thereto. It is in precisely such cases as this that courts of law in modern times have introduced the doctrine of equitable estoppels, or, as it is sometimes called, estoppels in pais. The principle is that where one party has by his rep- resentations or his conduct induced the other party to a transaction to give him an advantage which it would be against equity and good conscience for him to assert, he should not in a court of justice be permitted to avail himself of that advantage. And although the cases to which this principle is to be applied are not as well defined as could be wished, the general doctrine is well understood and is applied by courts of law as well as equity where the technical advantage thus obtained is set up and relied on to defeat the ends of justice or establish a dishonest claim. It has been applied to the precise class of cases of the one before us in numerous well-considered judgments by the courts of this country. Indeed, the doctrine is so well imderstood and so often enforced that, if in the transaction we are now considering, Ball, the insurance agent, who made out the application, had been in fact the under- writer of the policy, no one would doubt its applicability to the present case. Yet the proposition admits of as little doubt that if Ball was the agent of the insurance company, and not of the plaintiff, in what he did in filling up the application, the company must be held to stand just as he would if he were the principal. Although the very well-considered brief of counsel for plaintiff in error takes no issue on this point, it is obvious that the soundness of the court's in- structions must be tested mainly by the answer to be given to the question, "Whose agent was Ball in filling up the application?" This question has been decided differently by courts of the highest re- spectability in cases precisely analogous to the present. It is not to be denied that the application, logically considered, is the work of the assured; and if left to himself, or to such assistance as he might select, the person so selected would be his agent, and he alone would be responsible. On the other hand, it is well known — so well that no court would be justified in shutting its eyes to it— that insurance companies organized under the laws of one State, and having in that State their principal business office, send these agents all over the land with directions to solicit and procure applications for policies, furnishing them with printed arguments in favor of the value and necessity of life insurance, and of the special advantages of the corpora- tion which the agent represents. They pay these agents large commissions on the premiums thus obtained, and the policies are delivered at their hands to the assured. The agents are stimulated by letters and instructions to CHAP. VIIl] UNION MUTUAL INS. CO. V. WILKINSON 155 activity in procuring contracts, and the party who is in this manner induced to take out a policy rarely sees or knows anything about the company or ita officers by whom it is issued, but looks to and relics upon the agent who has persuaded him to edect insurance as the full and complete representative of the company, in all that is said or done in making the contract. Has he not a right to so regard him? It is quite true that the reports of judicial de- cisions arc filled with the efforts of these companies, by their counsel, to establish the doctrine that they can do all this and yet limit their responsi- bility for the acts of these agents to the simi)le receipt of the premium and delivery of the policy, the argument being that, as to all other acts of the agent, he is the agent of the assured. This proposition is not without support in some of the earlier decisions on the subject; and at a time when insurance companies waited for i)arties to come to them to seek assurance, or to forward applications on their own motion, the doctrine had a reasonable foundation to rest upon. But to apply such a doctrine in its full force to the sj'stem of selling policies through agents, which we have described, would be a snare and a delusion, leading, as it has done in numerous instances, to the grossest frauds, of which the insurance corporations receive the benefits, and the parties supposing them.selves insured are the victims. The tendency of the modern decisions in this country is steadily in the opposite direction. The powers of the agent are, prima facie, coextensive with the business intrusted to his care, and will not be narrowed by limitations not communicated to the person with whom he deals. An insurance companj'^, establishing a local agency, must be held responsible to the parties with whom they transact business for the acts and declarations of the agent, within the scope of his employment, as if they proceeded from the principal. The modern decisions seem to us founded in reason and justice, and meet our entire approval. This principle does not admit oral testimony to vary or contradict that which is in writing, but it goes upon the idea that the writ- ing offered in evidence was not the instrument of the partj' whose name is signed to it; that it was procured under such circumstances by the other side as estops that side from using it or relying on its contents; not that it may be contradicted by oral testimony, but that it may be shown by such testimony that it cannot be lawfully used against the party whose name is signed to it. Judgment affirmed.^ 1 ^tna Life Ins. Co. v. Fallow, 110 Tonn. 720, 77 S. W. 937. Customarily a mere solicitor whether of a life or a fire insurance company is never expressly authorized by his principal either to make or to alter the insurance contract. Cotton States Life Ins. Co. V. Scurry. 50 Ga. 48; Elliott v. Farmers' Ins. Co., 114 la. 153, 86 N. W. 224. Many States, however, have passed statutes in substance making the solicitor agent for the insurance company, no matter what the policy provides. 156 RYAN V. WORLD MUTUAL LIFE INS. CO. [CHAP. VIII RYAN V. WORLD MUTUAL LIFE INS. CO. Connecticut Supreme Court op Errors. 1874. 41 Conn. 168 Authority of agents to waive. Carpenter, J. This is an action on a policy of life insurance. The policy is expressed to be "in consideration of the representations, declara- tions and covenants contained in the application therefor, to which reference is here made as a part of this contract, etc." It is further declared that "This policy is issued and accepted on the following express conditions and agreements: First. That the statements and declarations made in the ap- plication therefor, and on the faith of which it is issued, are in all respects true, etc." The application, therefore, is a part of the policy; and the plain- tiff's agreements therein contained are warranties, and, if not true, she can- not recover, unless there has been a waiver by the defendants, or under the circumstances they are estopped from denying their truth. In the application arc the following questions and answers: "12. Has the party ever had any of the following diseases [naming a long list of diseases, and among them]: bronchitis, consumption, spitting of blood, or any serious disease? "—" None of these." "17. Has the party had during the last seven years any severe sickness or disease? If so, state the particulars, and the name of the attending physician who was consulted and prescribed."— "No." "25. Has the party employed or consulted any physician? Please answer this yes or no. If, yes, give name or names and resi- (jgnce." "No." "27. Has any previous examination or application been made for assurance on the life proposed?"— "No." "Has any company declined to issue a policy for the party?" — "No." . Upon the trial the plaintiff offered to prove, not that the above answers were true, but that different answers were in fact given, both by himself and the insured, and that the answers were wrongly written by the local agent of the defendants without the knowledge or consent of the plaintiff or her husband. Aside from the claim that the defendants are responsible for the conduct of their local agent, this is merely an attempt to substitute for a part of the written contract declared on, a different parol contract; for the rep- resentations and warranties of the plaintiff contained in the written agree- ment, oral representations and warranties of an entirely different character. It requires no argument to show that this cannot be done. But the plaintiff claims that truthful answers having been given to each interrogatory, and the incorrect answers contained in the application being there by the sole act of the agent, the defendants are bound by the answers as written, and are precluded from denying their truth. Whether this is so or not depends upon the extent of the agent's authority. It must be admitted that the express authority of the agent was limited to receiving the application, forwarding it to the home oflace, receiving, CHAP. VIIlJ RYAN V. WORLD MUTUAL LIFE INS. CO. 157 countersigning, and delivering tin; policy and collecting the premiums. The courts in this State have construed the powers of these agents liberally, and extended them somewhat by implication. Thus it has been held that in writing the application, and explaining the interrogatories and the meaning of the terms used, he is to be regarded as the agent of the company. In this case we are asked to go further than any case has yet gone, and clothe the agent with an authority not given him in fact, and to hold the principal responsible for an act which could not by any possibility have been contemplated as being within the scope of the agency. In most, if not in all, of the cases in which the act of the agent has been regarded as the act of the principal, the act has been the natural and probable result of the relations existing between the parties, or so connected with other acts expressly au- thorized as to afford a reasonable presumption that the principal intended to authorize it. But it cannot be supposed that these defendants intended to clothe this agent with authority to perpetrate a fraud upon themselves. That he deliberately intended to defraud them is manifest. He well knew that if correct answers were given no policy would issue. Prompted by some motive he sought to obtain a policy by means of false answers. His duty required him not only to write the answers truly as given by the applicant, but also to communicate to his principal any other fact material to the risk which might come to his knowledge from any other source. His conduct, in this case, was a gross violation of duty, in fraud of his principal, and in the interest of the other party. To hold the principal responsible for his acts, and assist in the consummation of the fraud, would be monstrous injustice. When an agent is apparently acting for his principal, but is reallj'- acting for himself, or third persons, and against his principal, there is no agency in respect to that transaction, at least as between the agent himself or the person for whom he is really acting and the principal. The principal reason urged for holding the defendants liable in this case is the one suggested in the argument, that when one of two innocent per- sons must suffer by the fraud, negligence, or unauthorized act of a third, he who clothed the third with the power to deceive or injure must be the one. Our answer is, in the first place, that this is not exactly a case in which one of two innocent persons must necessarily suffer. There is no absolute loss for us to determine on whom it shall fall. If the plaintiff fails to recover she sustains no pecuniary loss, except the premium paid, nor that even if she is innocent and the law is so that she can recover it back on the ground that there was a failure of consideration. It is unlike a case of fire insurance. Nearly all property may be insured at some rate, if not in one office in another. But in this case the plaintiff's husband was not an insurable subject. His situation was such that one company had rejected him, and but for the aid of fraud neither this nor any other company would have accepted him. Had the truth been stated no policy would have issued, and as she would have had no better success probably with other companies we cannot see that she has been misled to her prejudice except in relation to the premium, which ia comparatively a small matter. 158 RYAN V. WORLD MUTUAL LIFE INS. CO. [CHAP. VIII In the second place, if the rule is to be applied to this case it is by no means certain that it will aid the plaintiff. The fraud could not be perpetrated by the agent alone. The aid of the plaintiff or the insured, either as an accom- plice or as an instnmient, was essential. If she was an accomplice, then she participated in the fraud, and the case falls within the principle of Lewis v. The Phcenix Mutual Life Ins. Co., 39 Conn. 100, If she was an instrument, she was so because of her own negligence, and that is equally a bar to her right to recover. She says that she and her husband signed the application without reading it and without its being read to them. That of itself was inexcusable negligence. The application contained her agreements and repre- sentations in an important contract. When she signed it she was bound to know what she signed. The law requires that the insured shall not only, in good faith, answer all the interrogatories correctly, but shaU use reasonable diligence to see that the answers are correctly written. It is for his interest to do so, and the insurer has a right to presume that he will do it. He has it in his power to prevent this species of fraud and the insurer has not. Courts should never extend by implication the power of an agent except to carry into effect the probable intention of the parties, or to prevent third persons dealing with the agent from being misled to their injury. In this case there is no ground for the supposition that the defendants ever intended to authorize the agent to act directly contrary to their interests ; and if the plaintiff has been deceived, her own neghgence at least materially contrib- uted to it. We need not enlarge upon the evils necessarily resulting from holding in- surance companies liable for such acts of their agents. The question is vital to the insurance interests of the country. The insured no less than the in- surers are deeply interested in it. If this verdict is sustained it will tend to establish a principle fraught only with mischief. Every life insurance com- pany in this country, and to some extent the fire insurance companies, will be at the mercy of their agents. A door will be open to fraud, collusion, and legal robbery, unprecedented in the history of jurisprudence. In view of the probable consequences of such a principle — evils coextensive almost with the magnitude of the interests involved — we ought to pause and consider well before extending the doctrine of some of the modern cases to a case like this. We are constrained therefore to hold that a limited agency in a case of life insurance will not be extended by operation of law to an act done by the agent in fraud of his principal, and for the benefit of the insured, espe- cially where it is in the power of the insured by the use of reasonable diligence to defeat the fraudulent intent. The court very properly instructed the jury that "an untrue or fraudulent statement or denial made by the applicant of a fact material to the risk to induce the issuance of a policy will prevent the policy from taking effect as a valid contract, unless the insurer has in some way waived or estopped him- self from relying upon such misstatement to avoid the policy. This waiver, to be effectual, must be made by an officer of the company authorized to CHAP. VIIl] RYAN V. WORLD MUTUAL LIFE INS. CO. 159 make it. If there has been no evidence of any waiver except by a medical examiner of the company, or by a local agent, there must be additional proof of specific authority given them, or the company will not be bound." Some of the cases cited by the plaintiff are cases of fire insurance, in which the agents were intrusted with blank policies, signed by the president and secretary, and had full power to fill up and issue the same without referring the application to the home office. In such cases the corporation contracts solely by its agent. The acts and knowledge of the agent are the acts and knowledge of the cori)oration, and there is a manifest propriety in holding the corporation liable accordingly. This court has held that in writing the answers to the interrogatories in the application, the agent is to be regarded as the agent of the company rather than the agent of the insured. We do not question the propriety of those decisions, considering the circumstances of the cases in which they were made; but we cannot regard them as establishing an inflexible rule of law applicable to all cases. A brief reference to some of the cases will illustrate the distinction which we make. When the applicant stated fully and truthfully the circumstances relating to the title to the property insured, and the agent, knowing all the facts, but for the sake of convenience, stated the title incorrectly and issued a policy, it was held that the company could not take advantage of it. The court regarded the transaction as equivalent to an agreement that, for the purpose of the insurance, the title should be considered as it was stated to be by the agent, Peck v. New London County Mutual Ins. Co., 22 Conn. 575. See also Woodbury Savings Bank v. Charter Oak Ins. Co., 31 Conn. 517. When the applicant answered the interrogatory, "Is a watch kept on the premises during the night?" by stating the facts, and the agent wrote the answer, "Watchman till 12 o'clock," which answer was not strictly true, it was held that the company was bound by it. Malleable Iron Works v. Phccnix Ins. Co., 25 Conn. 465. See also Beebe r. Hartford County Mut. Fire Ins. Co., 25 Conn. 51; Hough v. City Fire Ins. Co., 29 Conn. 10. The case before us is a case of life insurance. The power of the agent was in fact limited. He has no power to issue policies. The terms of his agency conferred no authority to waive conditions or forfeitures, or to agree to false and fraudulent answers to any of the interrogatories, or to make any other contract to bind the company. Presumptively the insured and the plaintiff knew all this before paying the premium; for the printed policy, which was in their hands for several days, contained at the bottom this note: "The presi- dent and secretary of the company are alone authorized to make, alter or dis- charge contracts, or to waive forfeitures." The jury then were correctly told that "there must be additional proof of special authority given them," (the local agent and the medical examiner), "or the company will not be bound." The jury found such special authority. But we look through the record in vain to find any evidence to support such a finding. 160 RYAN V. WORLD MUTUAL LIFE INS. CO. [CHAP. VIII The verdict was manifestly against the evidence, and justice requires that it should be set aside and a new trial awarded.^ 1 Knights of Pythias v. Withers, 177 U. S. 260; Sternaman v. Mut. L. Ins. Co., 170 N. Y. 13, 62 N. E. 763. 88 Am. St. R. 625, 57 L. R. A. 318 (agents of company). Rinker r. ^tna Life Ins. Co. of Hartford, 214 Pa. St. 608. In an English case, Big- gar, the insured, was canvassed by the insurance company and was induced to send in a proposal for insurance against accidents. Cooper, the soliciting agent of the company, instead of consulting Biggar as to the answers to be given, filled them in as best he might, and then invited Biggar to sign the paper, which he did without reading it. The answers inserted by Cooper were false in many particulars, but Biggar did not know it. The proposal contained a declaration by which the applicant agreed that its statement should form the basis of the policy, and the policy contained the usual proviso that it was granted on the condition of their truthfulness. The King's Bench Division, in rendering judgment for the company, decided that the company's so- licitor, in filling up the application, acted as agent for Biggar. The English court also approved and adopted the views of the United States Supreme Court as expressed in New York Life Ins. Co. v. Fletcher, 117 U. S. 509, 6 S. Ct. 837, 29 L. Ed. 934, and held that the insured in allowing another to fill up his proposal, and in neglecting to read it, became responsiljlc for its contents, Biggar v. Rock Life Assur. Co. (1902), 1 K. B. 516. Agent's Ii>rTERPRETATiON of the Contract. — Many courts hold the insurance company to the solicitor's interpretation of the meaning of the questions in the ap- plication or terms of the contract as explained by him to the applicant, McMaster v. N. Y. Life Ins. Co., 183 U. S. 25, 38, 22 S. Ct. 10; Equitable Life Ins. Co. v. Hazel- wood, 75 Tex. 338, 12 S. W. 621, 16 Am. St. R. 893, 7 L. R. A. 217. Notice to the Insured of Restriction in the Authority of Solicitor. — In a California case Iverson, the insured, warranted that he had never had paralysis. The soliciting agent of the defendant at the time the application was signed by Iverson, knew that he had had a stroke of paralysis. The officers of the company had no knowledge of this. In the application was a stipulation that only the officers had authority to determine whether the policy should issue, and that no statements of the solicitor should be binding unless presewted in writing to the officers. The court held that the issuance of the policy was not a waiver of the forfeiture, that the solicitor's knowledge was not knowledge by the company and that the solicitor had no authority to waive the forfeiture, Iverson v. Met. Life Ins. Co., 151 Cal. 746, 91 Pac. 609; Butler V. Michigan Mut. L. Ins. Co., 184 N. Y. 337, 77 N. E. 398. On the other hand, in a later case, the South Carolina court, with the California case before it, takes the opposite view, and conclud(>s that the knowledge of the solicitor, acquired in the course of his work for the company, is imputable to the company, no matter what the policy says. The applicant, Rearden, made a false answer in his application regarding his fainting fits, but the soliciting agent knew the facts. The application provided that tlie company should not be bound by knowledge of the solicitor not contained therein. The court held that the company was estopped from setting up the breach of warranty. Here, however, the solicitor affirmatively advised the applicant that his fainting .spells amounted to nothing, Rearden v. State Mut. Life Ins. Co. (S. C, 1908), 00 S. E. 1100; Globe Mut. Life Ins. Assoc, v. Ahern, 191 111. 167, 60 N. E. 806; Bierman v. Ins. Co., 142 Iowa, 341. A crucial question in respect to which the courts differ is this, whether the policy restriction on the one hand, or the character and requirements of the business in- tnisted to the agent on the other, shall be the prevailing factor in determining the extent of his authority to waive, Northern As.sur. Co. v. Grand View Bldg. Asso., 183 U. S. 308, 22 S. Ct. 133, 46 L. Ed. 213 (policy stipulation); Hicks v. Brit.-Am. Assur. Co., 162 N. Y. 284, .56 N. E. 743, 48 L. R. A. 424 (policy stipulation) ; Sternaman v Met. Life Ins. Co., 170 N. Y. 13, 62 N. E. 763, 88 Am. St. R. 625 (character of busi- ness, medical examiner) ; Stone v. Hawkeye Ins. Co., 68 la. 737, 28 N. W. 47, 56 Am, CHAP. VIIt] forward V. CONTINENTAL INS. CO. 161 FORWARD V. THE CONTINENTAL INSURANCE COMPANY Court of Appeals of New York, 1894. 142 N. Y. 382 Effect of knoivledge by the company's agent of a ground of forfeiture at the time Uie policy is issued. O'Brien, J. The judgment in this case was recovered upon a policy of insurance, issued April 2'.i, 1891, at one year, upon a store and the goods therein, which were owned by the plaintiff. The entire property was de- stroyed by fire on the 27th of September, 1891. The only defense interposed by the answer or urged upon the argument of the appeal in this court was a breach on the part of the plaintiff of one or perhaps two of the conditions contained in the following clause of the policy: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void ... if the interest of the insured be other than unconditional, sole ownership, ... or if the subject of insurance be personal property, and be or become incumbered by a chattel mort- gage. ... In any matter relating to this insurance, no person, unless duly Rep. 870 (character of business). If the agent in fact has real or apparent power to accomplish a waiver, then as the Mississippi court and others declare a peremptory rule of law, superior to the erroneous recitals or stipulations of the policy, seems to intervene to fasten responsibility upon the principal for the result of acts done on its behalf and for its benefit, within the natural scope of the business transacted, Home Ins. Co. V. Gibson, 72 Miss. 58, 17 So. 13; Continental Fire Ins. Co. i'. Brooks, 131 Ala. 614, 30 So. 876; German Ins. Co. v. Gray, 43 Kan. 497, 23 Pac. 637, 8 L. R. A. 70, 19 Am. St. R. 150. And as bearing upon the apparent power of the agent to affect the warranties and answers of the application it makes a material difference in the estimate of many courts whether the restrictive stipulation is contained in the applica- tion itself or only in the policy which is not delivered or disclosed to the assured until after the application has been executed. Wilder v. Continental Cas. Co., 150 Fed. 92; Kausal v. Ins. Co., 31 Minn. 17, 16 N. W. 430, 47 Am. Rep. 776; Kenyon v. Knights Templars, 122 N. Y. 247, 25 N. E. 299; Kister v. Lebanon Mut. Ins. Co., 128 Pa. St. 653, 18 Atl. 447, 15 Am. St. R. 690, 5 L. R. A. 646. Contra, Wilber v. Williamsburgh City F. Ins. Co., 122 N. Y. 443; McCoy v. Met. L. Ins. Co., 133 Mass. 82. Illiterate Applicant.s. — If the assured cannot read or is ignorant and illiterate and has given correct oral answers, the company, regardless of policy stipulations, is held responsible for errors of its agent in transcribing. Capital F. Ins. Co. v. Mont- gomery, 82 Ark. 90, 100 S. W. 749. Peter O'Brien on becoming a member of a benefit society signed the usual application, and by it, among other things, asserted that he had never had rheumatism and had never been attended by a physician. Both these answers were untrue, but O'Brien could neither read nor write, and the application, which waa warranted to be the basis of the contract, and full, complete and true, whether written by his own hand or not, was filled in by an agent of the society. The defendant's witnesses testified that the answers as written, correctly recorded O'Brien's statements, but there was some testimony to the contrary which carried that issue to the jury. The verdict for the plaintiff was unanimously affirmed by the New York Court of Appeals, O'Brien v. Home Benefit Society, 117 N. Y. 310, 22 N. E. 954. 11 162 FORWARD V. CONTINENTAL INS. CO. [CHAP. VIII authorized in writing, shall be deemed the agent of this company. . . . This policy is made and accepted subject to the foregoing stipulations and con- ditions, together with such other provisions, agreements or conditions as may be indorsed hereon or added hereto, and no officer, agent or other representa- tive of this company shall have power to waive any provision or condition of this policy, except such as, by the terms of this policy, may be the subject of agreement, indorsed hereon or added hereto; and, as to such provisions and condiiions, no officer, agent or other representative of this company shall have such power, or be deemed or held to have waived such provisions or conditions, unless such waiver, if any, shall be written upon or attached hereto. Nor shall any privilege or permission affecting the insurance under the policy exist or be claimed by the insured unless so written or attached." It was shown at the trial that the plaintiff, about two months before the policy had been issued to him, had executed and delivered to his brother an instrument in the form of a bill of sale upon the stock of goods, furniture and fixtures in the store, which, on March 3, 1891, was filed in the town clerk's office. This instrument purports, in consideration of $500, to transfer the plaintiff's interest in the property absolutely to his brother. The proof at the trial tended to show that there was in fact no consideration for the trans- fer. That it was colorable merely and made between the two brothers with reference to some litigations pending or threatened against the plaintiff. The brother never in fact paid anything as a consideration for the transfer, and no debt was due or owing to him by the plaintiff. There was also proof that the existence of this bill of sale, its true consideration, character and purpose were disclosed to the defendant's agent before the policy was issued or de- livered. The verdict was in favor of the plaintiff, and hence all the disputed facts material to the questions of law must be deemed to be established in the plaintiff's favor. It has uniformly been held by this court that a con- dition of this character in a contract of insurance will not operate to avoid it after a loss, providing the company, before delivering the policy, had knowledge of the fact that the insured, notwithstanding the warranty, or the statement and the condition, was not the sole owner or that it was in- cumbered. In such cases the company is deemed to have waived the con- dition, or by the delivery of the policy with the condition avoiding it in case the insured is not the sole owner, or that the property is incumbered, and accepting the premium, is held estopped from setting upon the condition as a defense. It was never supposed that such a condition was intended to apply to a state of facts in regard to which the company had been fully in- formed when it accepted the risk. The cases on this point are numerous, and it is impossible to make any distinction in principle between the con- ditions considered and that involved in the case at bar. (Van Schoick v. Niagara Falls Ins. Co., 68 N. Y. 434; Whited v. Germania Ins. Co., 76 N. Y. 415; Woodruff v. Imperial Ins. Co., 83 N. Y. 134; Short v. Home Ins. Co., 90 N. Y. 16; McNally v. Phoenix Ins. Co., 137 N. Y. 389; Carpenter v. German Ins. Co., 135 N. Y. 298; Cross v. National Fire Ins. Co., 132 N. Y. 133; Berry V. American Central Ins. Co., 139 N. Y. 49.) CHAP. VIIl] FORWARD V. CONTINENTAL INS. CO. 163 In these cases it was held, either that the company had waived the con- dition, or was estopped by the delivery of the policy and the receipt of the premium, since, under such circumstances, it could not be supposed that it intended to deliver to the insured a policy which it knew to be void. When the underwriter, before the inception of the contract, is informed by the owner that the property is incumbered, but still delivers the policy with the condition cinhodiod in it, then, as it seems to me, it is not so much a question of waiver or estoppel as a question whether the condition ever attached or operated upon the facts thus disclosed. It can, of course, operate in the future upon transfers or incumbrances as the facts arise, and then the question is one of waiver. But when the facts are all known before any contract is made, a condition against a state of things known by all the parties to exist cannot be deemed to be within their intention or purpose. This case cannot be taken out of the rule by any possible distinction unless it be the character and powers of the agent of the defendant, to whom, upon the finding of the jury, the facts were communicated. It is urged that the cases cited do not apply for the reason that the waiver there was by a general agent. That may be true with respect to the four cases last cited. But it does not seem to me to be so much a question of power or authority in an agent to waive a condition in the contract as of knowledge by the company through its agent of the real facts. In the Carpenter case (supra) the information as to the true state of the title wa-s given to a mere clerk of the general agent, and we held that such knowledge was imputable to the company, through the general agent, for whom the clerk acted in soliciting the insurance, and that a condition of this character remaining in the policy did not avoid it. Now, the powers of the agent in this case were certainly much broader than those of the clerk in the case referred to. In this case the person to whom the information was communicated was certainly an agent appointed by the defendant itself, while in that, the person had no authority directly from the company, but was a mere servant or clerk acting for and solely under the authority of the agent. The agent in this case and the clerk in the other were engaged in precisely the same duty and performing the same service when they acquired the knowledge as to the condition of the property and the state of the title. They were both soliciting insurance and ascertaining the character and con- dition of the property upon which the risk was about to be taken, and I am unable to suggest any reason for imputing knowledge in the one case and not in the other. Moreover, the record is entirely silent as to any facts tend- ing to show that in this case the agent was acting in i)ursuance of a special or limited power. On the face of the policy he aj^jj^ears to be the duly authorized agent of the defendant and actually did grant special permits and waive conditions in the policy. He certainly had power to waive conditions, pro- viding it was done in the manner stipulated in the policy, that is to say, in writing. He had power to solicit insurance, collect premiums and deliver policies. There is no proof in the record that the plaintiff ever made any formal application for this policy, written or otherwise, or that he touched the company at any point or in any form except through this agent. The 164 FORWAED V. CONTINENTAL INS. CO. [CHAP. VIII fair inference from the proof is, that the defendant furnished the agent with poUcies duly executed, which he filled up and delivered at his discretion, reporting the facts to the company. There is nothing on the face of the policy and nothing was communicated to the plaintiff to lead him to believe that the powers of the agent were special or restricted. Insurance companies doing business by agencies at a distance from their principal place of business, are responsible for the acts of the agent, within the general scope of the business intrusted to his care, and no limitations of his authority will be binding on parties with whom he deals which are not brought to their knowl- edge. I am unable to discover in the record any basis for the contention that the knowledge of the agent as to the existence and purpose of the bill of sale is not the knowledge of the defendant. On the contrary, his knowledge of the facts is, I think, imputable to his principal. So far as appears, the plaintiff dealt with him as the representative of the company. If there were in fact any limitations or restrictions on his powers as an ordinary agent it was for the defendant to show it. His commission was not put in evidence nor any proof given tending to show that he was not what he was described in the complaint, the defendant's duly authorized manager or agent at the place where the contract was made. There were no other means of communication between the plaintiff and the defendant employed. So far as appears he made this contract for his principal, and the knowledge that he obtained in the course of the business v/as the knowledge of the defendant. ^ There is another view of the question that deserves some notice. Con- ditions in contracts of insurance against liability when the property is in- cumbered or where the title is not absolute in the insured are inserted for the purpose of guarding against the moral hazard involved. When the transfer or incumbrance is merely colorable or nominal and not real or ef- fective the reasons that induced the stipulation do not apply. Was there any real sale or transfer of this property within the meaning of the policy? Nothing was done except to execute and file a paper. There was no intention in fact to transfer the title or vest any beneficial interest in the nominal vendee. There was no debt to be enforced, no consideration passed, and the use and possession remained unchanged. The filing of the paper added nothing to its validity. It was not a mortgage nor intended as security for any debt. It was a mere paper transfer without consideration and without delivery of possession, and while it had the form it had none of the legal elements necessary, even between the parties, to constitute a valid contract of sale. In legal effect it was, I think, the same as an unexecuted gift. The ' The usual local countersigning agent is said to be a general agent, Hagan v. Scottish Union Ins. Co., 186 U. S. 423, 433, 22 S. Ct. 862; Grabbs v. Farmers' Mut. F. Ins. Assoc, 125 N. C. 389, 397, 34 S. E. 503. His written commission grants him "full power to receive proposals for insurance in a certain locality, to fix the rates of pre- miums, to receive moneys, and to countersign, issue, and renew policies of insurance signed by the president and attested by the secretary or signed by the manager, sub- ject to the rules and regulations of the company and to such instructions as may from time to time be given by the officers." CHAP. VIIl] HOME INS. CO. OF N. Y. V. GIBSON 1G5 worst that can be said of it is that it was intended to defraud creditors, but if that be true the moral hazard which was the basis of the condition of the policy would still be absent, since the plaintiff's interest in the property at the time of the insurance was in fact the same as before the paper was exe- cuted. There is no legal ground upon which this court can properly disturb the verdict, and the judgment should, therefore, be affirmed. Finch and Peckham, JJ., concur. Andrews, Ch. J., and Bartlett, J., concur on ladt ground mentioned in opinion. Earl, J., dissents on first ground and concurs on last ground. Gray, J., dissents. Judgment affirmed.^ HOME INSURANCE CO. OF NEW YORK v. GIBSON Supreme Court of Mississippi, 1894. 72 Miss. 58 Effect of knowledge by the company's agent of a ground of forfeiture at the time the policy is issued. Action on a policy of fire insurance on a building. Whitfield, J. The two grounds of defense mainly relied on are: First, that the appellee was not the owner in fee simple of the ground on which the building, the subject of insurance, was situated, and second that the interest of the insured was "other than the unconditional and sole ownership" of the building. It is insisted that the waiver of the requirement that appellee's real interest should be set out in the policy, by the conduct of its agent, W. A. Drennan, Jr., who issued the policy and received the premium, after he was fully informed of all the lease showed, cannot be shown by parole, and cannot bind the company. This contention has been thorouglily considered by this court and settled adversely to appellant in Sheffy's Case, 71 Miss. 919, and in Matthews' Case, 65 Miss. 301; Rivara's Case, 62 Miss. 727; Bowdre's Case, 67 Miss. 631. The very pith of the true reasoning on this subject is condensed into this single sentence of the Supreme Court of Michigan, 33 Mich. 143,- quoted with approval by Judge Campbell in Matthews' Case: "There can 1 Observe that less than a majority of the court approved the first ground. But there was no dissent in Robbins v. Springfield F. & M. Ins. Co.. 149 N. Y. 477, 44 N. E. 159; German Ins. Co. v. Shader. 68 Neb. 1, 93 N. W. 972, 60 L. R. A. 918 (citea corroborating decisions from some twenty-seven States); Raulet v. Northwestern Nat. Ins. Co. (Cal., 1910), 107 Pac. 292; Chismore v. Anchor F. Ins. Co., 131 la. 180, 108 N. W. 230; Miller v. Prussian Nat. Ins. Co., 158 Mich. 402, 122 N. W. 1093; McMillan ti. Ins. Co.. 78 S. C. 433. 58 S. E. 1020; Ins. Co. v. Richmond Mica Co., 102 Va. 429, 46 S. E. 463, 102 Am. St. R. 846; Medley v. Ins. Co.. 55 W. Va. 342. 47 S. E. 101. 166 HOME INS. CO. OF N. Y. V. GIBSON [CHAP. VIII be no more force in an agreement in writing not to agree by parol, than in a parol agreement not to agree in writing. Every such agreement is ended by the new one which contradicts it." And this is true as well of the provisions which relate to the formation and binding force of the contract while running, as to those provisions relating to what has to be done after a loss. 11 Am. & Eng. Enc. L. 343, note 1, and page 338, paragraph 4, and authorities in note 2, p. 339. The case of Cleaver v. Insurance Co., 65 Mich. 527, whilst properly distinguishing the case of Insurance Co. v. Earle, 33 Mich. 143, in no way conflicts with the doctrine which the last named case announces, and which we approve. In Cleaver's case, the stipulation in the policy was that (p. 528), "the agent of this company has no authority," etc. Here the stipula- tion is that "no officer, no agent and no other representative shall," etc. That this distinction was the foundation of Cleaver's case, is clearly shown in 39 N. W. R. 571, where the case was reversed in favor of the assured, on its being shown that R. T. Smith, the secretary, had waived the stipulation otherwise than by indorsement on the policy. It is vain to say that this clause does not seek to prevent the corporation itself from waiving a stipulation. The corporation acts only through agents; and if "no agent, no officer, and no other representative" can waive a stipu- lation, who is left to waive it fof the corporation? This clause is a species of refinement by which the corporation withdraws within its invisible and intangible ideality when liability is sought to be imposed upon it, bound by the acts of no agent, officer, or other representative, but reaches forth there- from with Briarean hands to receive the profits and avails of these same acts performed by these same "agents," as against those with whom these same agents have dealt. The refinement is too subtle for the practical affairs of actual life, and we repudiate it. It may be noted too that in Cleaver's case (p. 531), the premium had been received after the agent knew of the ground of forfeiture. The provision relied on here is in the exact words of the stipulation relied on in Lamberton v. Insurance Co., 39 N. W. Rep. 76, decided by Supreme Court of Minnesota in 1888, respecting which the court says in a very clear and strong opinion: "That is to say, in other words, that one of the parties to a written contract, which is not required by law to be in writing, cannot, subsequent to the making of the contract, waive by parol agreement pro- visions which had been incorporated in the contract for his benefit. If this provision is effectual at all as a limitation of the power of future action, it limits the power of every agent, officer, and representative of the company, and hence practically that of the corporation," and it was held that "this provision, not being a limitation upon the authority of any particular agent or class of agents, but in effect upon the capacity of the corporation for future action," could not be imposed, but was void. We find no error in the record, and the judgment is Affirmed.^ ' Beebe v. Ohio F. Ins. Co., 93 Mich. 514, 53 N. W. 818, 18 L. R. A. 481, 32 Am. Bt. R. 519. CHAP. VIIl] DEWEES V. MANHATTAN INS. CO. 167 DEWEES V. MANHATTAN INS. CO. New Jersey Court of Errors and Appeals, 1872. 6 Vroom, 366 Effect of knowledge by the company's agent of a ground of forfeiture at the time the 'policy is issued. Assumpsit on a jiolicy of insurance. Beasley, Chief Justice. The contract between these litigants, on the point which I shall discuss, is clear and unambiguous. The defendants agreed to insure a building occupied as a country store, and the stock of goods, consisting of the usual variety of a country store. This, by the plain meaning of the terms employed, is a warranty on the part of the insured that the building was used, at the date of the agreement, for the purpose specified. It was a representation, on the face of the policy, touching the premises in cjuestion, and which afTcctcd the risk; and such a representation, according to all the authorities, amounts to a warranty. Formal words are not neces- sary for the creation of an obligation of this character, and, in fact, it usually arises from words of description which limit the risk contained in the written contract. For example, in a marine insurance the words "to sail on such a day," or "in port," or "all well on such a day," are plain warranties, demand- ing a literal fulfillment, and are quite as efficacious as would be a formal clause framed to effect the same purpose. Referring to a fire insurance, the court in Wood v. The Hartford Fire Ins. Co., 13 Conn. 533, says any state- ment or description, on the part of the insured, on the face of the policy, which relates to the risk, is an express warranty, and such a warranty, being a condition precedent, must be strictly complied with, or the insurance is void. The same doctrine is maintained by the Court of Appeals of New York, in the case of Wall v. The East River Mutual Insurance Company, 3 Seld. 370, the policy in that instance being declared void on the ground that the building was described as being "occupied as a storehouse," and it ap- peared it was used also for another purpose. The cases are numerous and decisive upon the subject — so much so that it does not appear to me to be necessary to refer to them in detail, as, in my opinion, the character of a representation of this kind is apparent upon its face. It can be intended for no other purpose than to characterize the use of the building at the date of the insurance; for, unless this is done, there can be no restriction on the use of the property by the insured during the running of the risk. Unless this description has the force thus attributed to it, the premises could have been used for any of the most hazardous purposes. A building described in a policy as a "dwelling-house" could, except for the rule above stated, be con- verted into a mill or factory. I think it is incontestably clear that the de- scription of the use of the premises in this case was meant to define the char- acter of the risk to be assumed by the defendants. 168 DEWEES V. MANHATTAN INS. CO. [CHAP. VIII But, besides this, it is plain that the written contract was violated in a fatal particular bj' the assured. By the express terms of one of the stipula- tions of the insurance, it is declared that, if the premises should be used "for the purpose of carrjdng on therein any trade or vocation, or for storing or keeping therein any articles, goods, or merchandise denominated hazardous, or extra hazardous, or specially hazardous, in the second class of the classes of hazards annexed to this policy, etc., from thenceforth, so long as the same shall be so used, etc., the policy shall be of no force or effect." Among the extra hazardous risks, that of keeping a "private stable" is enumerated; and it was shown on the trial, and was not denied, that at the date of the policy, and at the time of the fire, a part of the building insured was applied by the plaintiff to this use. It cannot be denied, then, that if we take into view these conditions of the case alone, the plaintiff's action must fall to the ground. He did an act which, by force of his written agreement, had the effect to suspend, tempo- rarily, his insurance. As this fact, having this destructive effect, could not be disputed, it became necessary, in order to save the plaintiff's action, to avoid the effect of the written contract; and this burden was assumed, on the argument, by the counsel of the plaintiff. The position taken with this view was, that the pohcy was obtained for the plaintiff by the agent of the defendants, and that he knew that the building in question was, in part, used as a stable. The plaintiff's claim appears to be a meritorious one, and on this account, and in the hope that there might be found some legal ground on which to support this action, the case was allowed by me at the circuit to go to the jury, and the questions of law were reserved for this court. But the consid- eration which I have since given the matters involved has excluded the faintest idea that, upon legal principles, this suit can be successfully carried through. In my opinion, that end can be attained only by the sacrifice of legal rules which are settled, and are of the greatest importance. Let us look at the proposition to which we are asked to give our assent. The contract of these parties, as it has been committed to writing, is, that if the plaintiff shall keep a stable on the premises insured, for the time being the policy shall be vacated. But, it is said, the agent of the defendants who procured this contract was aware that the real contract designed to be made was that the plaintiff might apply the premises to this use. This knowledge of the agent of the defendants, and which, it is conceded, will bind the de- fendants, is to have the effect to vary the obligations of the written contract. Upon what principle is this to be done? There is no pretense of any fraud in the procurement of this policy. The only ground that can be taken is, that the agent, knowing that the premises were to be, in part, used as a stable, should have so described the use in the policy. The assumption is, and must be, that the warranty, in its present form, was a mistake in the agent. But a mistake cannot be corrected, in conformity with our judicial system, in a court of law. No one can doubt that in a proper case of this kind an equitable remedy exists. It is possible, CHAP. VIIl] DEWEES V. MANHATTAN INS. CO. 169 therefore, that in this case, in equity, the present contract might be reformed so as to contain a perrniHsion for the plaintiff to keep his stable in this build- ing; but I think it has never before been supposed that this end could be reached in this State by proof before the jury in a trial at the circuit. The principle would cover a wide field, for, if this mistake can be there corrected, so can every possible mistake. If the plaintiff can modify the stipulation with respect to the restricted use of the premises, on the plea of a mistake in such stipulation, on similar grounds it would be open to the company to modify the policy with respect to the amount insured. I am at a loss to see how, on the adoption of the principle claimed, we arc to keep separate the functions of our legal and equitable tribunals. Nor do I think, if this court should sustain the present action, that it could be practicable to preserve, in any useful form, the great primary rule that written instruments are not to be varied or contradicted by parol evi- dence. The knowledge of the agent, in the present transaction, is important only as showing what the tacit understanding of the contracting parties was. Suppose, instead of proof of such tacit understanding, the plaintiff had of- fered to make a stronger case, by showing that the agent expressly agreed that the building might be used not only as a country store, as the policy stated, but also as a stable, and that the restraining stipulation did not ap- ply to the extent expressed. Can anyone doubt that, according to the practice and decisions in this State, such proof should have been rejected? A rule of law admitting such evidence would be a repeal of the principle giving a controlling efficacy to written agreements. The memory and un- derstanding of those present at the formation of the contract would be quite as- potent as the written instrument. I have not found that it is anywhere supposed that this general rule which illegalizcs parol evidence, under the conditions in question, has been relaxed with respect to contracts for insurance. Decisions of the utmost authority, both in England and in this country, propound this doctrine as applicable to policies in the clearest terms. Chief Justice Parker, in his opinion in Higginson v. Dall, 13 Mass. 96, says that "policies, though not under seal, have, nevertheless, ever been deemed instruments of a solemn nature, and subject to mo.st of the rules of evidence which govern in the case of sjiocialties. The policy is itself considered to be the contract between the parties, and whatever proposals are made, or conversations had, prior to the sub- scription, they are to be considered as waived, if not inserted in the policy, or contained in a memorandum annexed to it." Atherton v. Brown, 14 Mass. 152, is, upon this point, of the same complexion, and has close pertinency to the case under consideration with respect to the application of the rule of evidence. The description was of property insured "on board the Spanish brig Neio Constitutio)}," and the vessel was captured, and, with her cargo, was condemned as American property; and it was held that the description in the policy amounted to a warranty that the vessel was Spanish, and that it was not competent for the assured to show that the underwriters were in- formed, at the time of their subscription, that she was, in fact, &n American 170 DEWEES V. MANHATTAN INS. CO. [CHAP. VIII vessel. The court said that parol evidence of what was within the knowledge of the underwriters was not admissible. The following are cases which es- tablish the same proposition: Vandervoort v. The Columbia Insurance Com- pany, 2 Caines' R. 155, Weston v. Emes, 1 Taunt. 115; Parks v. General Int. Assur. Co., 5 Pick. 34; Fhnn v. Tobin, 1 Mood. & Malk. 367; Jennings V. The Chenango Mut. Ins. Co., 2 Denio, 75; Angell on Fire and Life Ins., §§20,21. There are several reported decisions which I do not think are distin- guishable with respect to legal rules and their application, from the present. Among these is that of Jennings v. The Chenango Mutual Insurance Com- pany, 2 Denio, 75. There the property insured was described as a "grist-mill," and it was proved that carpenters' work was accustomed to be done in it, with instruments and fixtures which were kept there. One of the principal questions in the case was whether it was competent to prove, that, at the time the application was made for this poUcy, the agent for the defendants was informed that these fixtures were in use in the mill. This proof was re- jected, and the policy held void; the ground of rejection being the general rule of evidence, which places written instruments above the level of parol testimony. Quite as strong in favor of the same doctrine is the case of Ken- nedy V. The St. Lawrence County Mutual Insurance Company, 10 Barbour, 285. The application of the insured, which formed a part of the policy, described erroneously the buildings which were within a certain distance of the premises. Here the same circumstance was relied on as a defense which has been set up in the present case; namely, that the agent of the defendants had full knowledge of the situation of the premises and its neighborhood, and that he drew the application, and specified in it such buildings as he chose. This defense was overruled, and the defendants had judgment. With respect to the case of Plumb v. The Cattaraugus County Mutual Insurance Company, 18 N. Y. 392, to which we were referred by counsel, my answer is twofold: first, that I cannot assent to the doctrine on which that judgment is founded; and, in the second place, that doctrine, if correct, could have no application to the facts now under consideration. In the case from New York here referred to, there was, in the application for the policy, a misdescription of the distance of the adjacent buildings from the premises insured, and to this defense the reply was, that the agent of the company had made the measurements, and had obtained the signature of the plaintiff on the assurance "that the application was all right, and jtist as it should be." The court decided that this declaration of the agent could not be offered for the purpose of altering or contradicting the written contract, but that it was admissible as an estoppel in pais. Now, it is at once obvious that, by force of that view, the agreement in question was enforced, not in the sense of the written terms, but in the sense of the oral evidence, and that the practical result was precisely the same as though the instrument had been reformed in conformity to such evidence at the trial. I think there is no doubt that this application of the doctrine of estoppel to written contracts is an entire novelty. In the long line of innumerable cases which have pro- CHAP. VIIl] DEWEES V. MANHATTAN INS. CO. 171 cecded and been decided on the ground that parol evidence is not admissible as against a written instrument, no judge or counsel ha.s ever intimated, as it is believed, that the same result could be substantially obtained by a resort to this circuity. It is true that, if there be a substantial ground in legal prin- ciple for its introduction, the fact that it is new will not debar from its adop- tion; but I have not been able to perceive the existence of such substantial ground. In my apprehension, the doctrine can be made to appear plausible only by closing the cj'cs to the reason of the rule which rejects, in the presence of written contracts, evidence by parole. That reason is, that the common good requires that it shall be conclusively presumed in an action at law, in the absence of deceit, that the parties have committed their real understand- ing to writing. Hence, it necessarily follows, that all evidence merely oral is rejected, whose effect is to vary or contradict such expressed understand- ing. Such rejection arises from the consideration that oral testimony is un- reliable in comparison with that which is written. It is idle to say that the estoppel, if permitted to operate, will prevent a fraud or inequitable result; most parol evidence contradictory of a written instrument has the same tendency; but such evidence is rejected not because, if true, it ought not to be received, but because the written instrument is the safer criterion of what was the real intention of the contracting parties. In the case now criticised, the party insured stipulated against the existence of buildings within a def- inite number of feet from the insured property; by the admission of parol testimony, this stipulation was restricted and limited in its effect. This re- sult, ijo doubt, was strictly just, if we assume that the parol evidence was true; but, standing opposed to the written evidence, the law presumed the reverse. The alternative is unavoidable; it is a choice between that which is written and that which is unwritten. In the case cited, the effect of the rule adopted l)y the court was to give a different effect to the written terms from that which they intrinsically possessed, a result induced by the admission of oral evidence. This, I cannot but think, was a palpable alteration of the agreement of the parties. The mistake of the court ai)pears to liave been in regarding sinijily the legal effects of the facts which were proved by parole. Receiving that testimony into the case, a clear estoppel was made out; but the error consisted in the circumstance that such oral evidence was, on rules well settled, inadmissible. The question presented was purely one as to a rule of evidence, but it was treated as a prol^lem relating to the ajiplication of general legal principles to an admitted state of facts. The case was not decided by a unanimous court; three judges dissented, and, in my judgment, that dissent was based on satisfactory grounds. But it lias liecn already observed, that, even if the doctrine of the adjudi- cation should be received by this court, such result could have no effect on our decision of the present case. The reason is, that the facts now before us do not present the elements of an estoppel. Such a defense rests on a miscon- ception as to a state of facts, induced by the party against whom it is set up. The person who seeks to take advantage of it must have been misled by the words or conduct of another. Now, in the present case, the agent did not 172 NORTHERN ASSUR. CO. V. GRAND VIEW B. ASSN. [CHAP. VIII make any statement nor did he do anything which led the plaintiff to alter his condition. The most that can be laid to his charge is, that from careless- ness he omitted properly to describe the use of the premises insured. But this was not a misstatement of a fact on which the plaintiff acted, because the plaintiff was aware of the circumstance that the building was put to another use. The alleged error in the description is plain on the face of the policy, and the law incontestably charges the defendant with knowledge of the meaning and legal effect of his own written contract. Certainly the entire state of things was as well known to the plaintiff as it was to the agent of the defendants. To found an estoppel on the ignorance of the plaintiff of the plainly expressed meaning of his own contract, would be absurd. Being of opinion that the plaintiff's case, on this first point, cannot stand, I have not thought it necessary to look into the other grounds of objection raised on the part of the defense. NORTHERN ASSURANCE COMPANY v. GRAND VIEW BUILDING ASSOCIATION United States Supreme Court, 1901. 183 U. S. 308 Effect of knowledge by the compam/s agent of a ground of forfeiture at the time the 'policy is issued. Action on policy of fire insurance which as in the Forward case, supra, was in New York standard form. One of its clauses is as follows: "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." In fact, plaintiff without written permit of the defendant had obtained a policy from another company on the same property, but, on the trial plain- tiff's witnesses testified that the countersigning agent of the defendant had knowledge of the other subsisting insurance at and before the delivery of the policy in suit. Defendant's witness denied this. Verdict and judgment in favor of the plaintiff. Mr. Justice Shiras delivered the opinion of the court. After a discus- sion of many cases, English and American, the court said: What, then, are the principles sustained by the authorities, and applicable to the case in hand? They may be briefly stated thus: That contracts in writing, if in unam- biguous terms, must be permitted to speak for themselves, and cannot by the courts, at the instance of one of the parties, be altered or contradicted by parol evidence, unless in case of fraud or mutual mistake of facts; that CHAP. VIIl] NORTHERN ASSUR. CO. V. GRAND VIEW B. ASSN. 173 this principle is applicable to cases of insurance contracts as fully as to con- tracts on other subjects; that provisions contained in fire insurance policies, that such a policy shall be void and of no effect if other insurance is placed on the property in other companies, without the knowledge and consent of the company, are usual and reasonable; that it is reasonable and competent for the parties to agree that such knowledge and consent shall be manifested in writing, either by indorsement upon the policy or by other writing; that it is competent and reasonable for insurance companies to make it matter of condition in their policies that their agents shall not be deemed to have au- thority to alter or contradict the express terms of the policies as executed and delivered; that where fire insurance policies contain provisions whereby agents may, by writing indorsed upon the policy or by writing attached thereto, cx{;)rcss the company's assent to other insurance, such limited grant of authority is the measure of the agent's power in the matter, and where such limitation is expressed in the policy, executed and accepted, the insured is presumed, as matter of law, to be aware of such limitation; that insurance companies may waive forfeiture caused by nonobservance of such condi- tions; that, where waiver is relied on, the plaintiff must show that the com- pany, with knowledge of the facts that occasioned the forfeiture, dispensed with the observance of the condition; that where the waiver relied on is an act of an agent, it must be shown either that the agent had express authority from the company to make the waiver, or that the company subsequently, with knowledge of the facts, ratified the action of the agent. . . . The plaintiff's case, at its best, is based on the alleged fact that the agent had been informed, at the time he delivered the policy and received the premium, that there was other insurance. The only way to avoid the defense and escape from the operation of the condition, is to hold that it is not competent for fire insurance companies to protect themselves by conditions of the kind contained in this policy. So to hold would, as we have seen, entirely sub- vert well-settled principles declared in the leading English and American cases, and particularly in those of this court. This case is an illustration of the confusion and uncertainty which would be occasioned by permitting the introduction of parol evidence to modify written contracts and by approving the conduct of agents and persons ap- plying for insurance in disregarding the express limitations put upon the agents by the principal to be affected. It should not escape observation that preserving written contracts from change or alteration by verbal testimony of what took place prior to and at the time the parties put their agreements into that form, is for the benefit of both parties. In the present case, if the witnesses on whom the plaintiff relied to prove notice to the agent had died, or had forgotten the circum- stances, he would thus, if he had depended to prove his contract by evidence extrinsic to the written instrument, have found himself unable to do so. So, on the other side, if the agent had died, or his memory had failed, the defendant company might have been at the mercy of unscrupulous and in- terested witnesses. 174 GRAY & CROZIER V. GERMANIA FIRE INS. CO. [CHAP. VIII Besides the importance of such considerations to the parties immediately concerned in business transactions, the community at large have a deep in- terest in the welfare and prosperity of such beneficial institutions as fire insurance companies. It would be very unfortunate if prudent men should be deterred from investing capital in such companies by having reason to fear that conditions which have been found reasonable and necessary to put into poUcies to protect the companies from faithless agents and from dis- honest insurers, are liable to be nullified by verdicts based on verbal testi- mony. Increased importance should be given to the rules involved in this discussion by the fact that, in latter times and in most, if not all, of the States, statutory changes have opened the courts to the testimony of the very par- ties who have signed the written instrument in controversy. The jtidgment of the Circuit Court of Appeals is reversed. The judgment of the Circuit Court is likewise reversed, and the cause remitted to that court with directions to proceed in conformity with this opinion. The Chief Justice, Mk. Justice Harlan and Mr. Justice Peckham dissented.! GRAY & CROZIER v. THE GERMANIA FIRE INS. CO. OF NEW YORK New York Court of Appeals, 1898. 155 N. Y. 180 Present knowledge of an intended future violation of the contract. The action was upon a policy of fire insurance for one thousand dollars, issued by the defendant October 1, 1892, insuring the goods of the plaintiffs in their store at Haverstraw, N. Y. It was a New York standard policy, and prohibited other insurance unless the consent of the company was indorsed thereon. It also provided that none of its agents should have power to waive any of its provisions except by a written indorsement on the policy. The defendant's agent applied to the plaintiffs to insure their goods. They » This case has since repeatedly been approved by the Federal Supreme and Circuit Courts. Penman v. St. Paul F. & M. Ins. Co., 216 U. S. 311, 30 S. Ct. 312; Scottish U. & N. Ins. Co. V. Encampment Smelting Co., 166 Fed. 231; Harris v. N. Am. Ins. Co., 190 Mass. 361; Martin v. Ins. Co., 57 N. J. L. 623; L. & L. & G. Ins. Co. v. Richardson Lumber Co., 11 Okla. 585, 69 Pac. 938; Maupin v. Tns. Co., 53 W. Va. 557, 45 S. E. 1003 (but see 55 W. Va. .342). The sequel to the famous Northern Assur. Co. Case (183 U. S. 308) is instructive. After being defeated in the United States Supreme Court in the action on the contract the plaintiff instituted a fresh action in the State court for reformation of the policy and was allowed a recovery notwithstanding the expiration of the one-year limitation of the policy which the Nebraska court regarded as contrary to public policy, Grand View Bldg. Assoc, v. Northern Assur. Co., 73 Neb. 149, 102 N. W. 246. This recovery baaed on reformation was subsequently left undisturbed by the United States Supreme Court on appeal to that court, 203 U. S. 106, 27 S. Ct. 27. CHAP. VIIl] GRAY & CROZIER V. GERMANIA FIRE INS. CO. 175 informed him of their intention to procure insurance to the amount of three thousand dollars in three difTerent companies, and permitted him to write a policy for one thousand dollars in the defendant company. When the policy was delivered the agent, in answer to an inquiry of the plaintiffs, stated that it was correct. They subsequently obtained two other policies upon the property insured, one for seven hundred dollars and the other for one thou- sand dollars. The defendant's agent had power to issue jjolicies and to in- dorse permission for other insurance. But no such indorsement was made upon the policy in suit. Martin, J. The only question we are called upon to determine in this case is whether the knowledge of the defendant's agent that the plaintiffs intended to procure other insurance upon the property covered by the de- fendant's policy constituted a waiver of the provision therein prohibiting other insurance without the indorsement upon the policy of an agreement to that effect. The courts below have so held. This conclusion was based upon the theory that as the defendant's agent knew that the plaintiffs in- tended to procure other insurance when the policy in suit was issued, and delivered it with that knowledge, it constituted a waiver of its provision as to other insurance. Manifestly, this theory cannot be sustained. It is well settled in this State that where an insurance company issues a policy, with full knowledge of facts which would render it void in its inception if its pro- visions were insisted upon, it will be presumed that it by mistake omitted to express the fact in the policy, waived the provision or held itself estopped from setting it up, as a contrary inference would impute to it a fraudulent intent to deliver and receive pay for an invalid instrument. But it is manifest that that principle has no application to the facts in this case. When the defendant's policy was delivered neither of the other policies had been issued, but were subsequently obtained. Consequently, the defendant's policy was valid in its inception. If it became invalid it was by the act of the plaintiffs in subsequently procuring additional insurance, without obtaining an indorsement upon the policy of the defendant's con- sent. As the defendant issued to the plaintiffs a policy which was valid when delivered, the fact that they informed the defendant's agent of their intention to subsequently procure other insurance was insufficient to justify the courts below in holding that there was a waiver of that condition, or that the defendant was estopped from insisting upon it. The distinction between the knowledge of an existing fact which renders a policy void when delivered and the omission of the insured to give notice of and procure the required consent to a subsequent act, which, by its con- ditions invalidated it, although previously consented to, was clearly pointed out in the authorities cited. The decisions of the courts below are at variance with the principle that written contracts cannot be controlled or varied bj' oral evidence, and that a written instrument must be regarded as the receptacle of the entire contract between the parties, and merges all previous oral agreements in it. 176 GRAY & CROZIER V. GERMANIA FIRE INS. CO. [CHAP. VIII Nor do we think the contention of the respondents, that they were en- titled to recover upon a parol contract of insurance, made with the agent, can be sustained. There was no proof that the defendant's agent ever agreed to issue a policy different from the one delivered, or that he agreed that other insurance might be procured without the indorsement required. It is man- ifest that this action was upon the policy issued by the defendant, and was not based upon any other agreement between the plaintiffs and the agent of the defendant. The judgment of the General Term and of the trial court should be re- versed and a new trial granted, with costs to abide the event. All concur, except Gray, J., absent. Judgment reversed.^ * Present Knowledge of Existing Facts Which will Shortly Constitute Breach. — The rule that issuing the policy with knowledge of a ground of forfeiture constitutes a waiver has been extended to the case where the general or counter- signing agent knew at the inception of the contract that the property was unoccupied, and understood that the unoccupancy was likely to continue for more than the stipu- lated period of ten days, Mill Mechanics' Ins. Co. v. Brown, 3 Kan. App. 225, 44 Pac. 35. Compare Hartley v. Penn. F. Ins. Co., 91 Minn. 382, 98 N. W. 198 (use of gaso- line); Waukan Milling Co. v. Citizens' Mut. F. Ins. Co., 130 Wis. 47, 109 N. W. 937 (cessation of milling operations) . Thus, where on account of the great coal strike of 1905 the tenant of the insured, just before issuance of policy had left his furniture and per- sonal effects in the insured house in the country and had moved to a New York City hotel with his family for a few weeks, the company's local countersigning agent, his near neighbor, being at all times fully cognizant of the facts, the company was held es- topped, N. Y. Mut. Savings & Loan Assn. v. Westchester Fire Ins. Co., 110 App. Div. 760, 97 N. Y. Supp. 436, aff'd 189 N. Y. 525. By the weight of authority, however, the policy restriction upon the authority of the countersigning agent is conclusive as regards the effect of his declarations and acts after the policy is issued, unless the assured can show an actual authority of broader extent, Iowa Life Ins. Co. v. Lewis, 187 U. S. 335, 348, 23 S. Ct. 126; Continental F. Ins. Co. v. Brooks, 131 Ala. 614, 30 So. 876; Hunt v. State Ins. Co., 66 Neb. 121, 92 N. W. 921. Thus, where during the term of a standard policy the assured informed the local agent of a change of owner- ship and got the reply, "I will see that the insurance is all right," held no waiver, because no written consent was indorsed, Northam v. Dutchess Co. Ins. Co., 166 N. Y. 319, 322, 59 N. E. 912, 82 Am. St. R. 655. And see Kirkman v. Farmers' Ins. Co., 90 la. 457, 57 N. W. 952, 48 Am. St. R. 454; Sutherland v. Ins. Co., 110 Mich. 668, 68 N. W. 985; Travelers' Ins. Co. v. Myers, 62 Ohio St. 529, 57 N. E. 458; Oshkosh Match Works v. Manchester F. Assur. Co., 92 Wis. 510, 66 N. W. 525. But compare the views of other courts. Orient Ins. Co. v. McKnight, 197 111. 190, 64 N. E. 339; Springfield, etc., Co. v. Traders' Ins. Co., 151 Mo. 90, 52 S. W. 238, 74 Am. St. R. 521; Wilson V. Assur. Co., 51 S. C. 540, 29 S. E. 245. Overt Act with Authority to Perform the Act. — Many courts draw a dis- tinction between a mere declaration or promise made by the countersigning or other agent and an overt act done by him with authority, if such act is consistent only with the continued validity of the policy. Under these circumstances it has been held that where the assured relies upon the act to his prejudice an estoppel is established as a paramount, inexorable inference of law, no matter what the policy provides in respect to the agent's authority to waive or to the method of waiver. Thus where an agent, whose duty it is to collect premiums, and make written indorsements, actually collects a premium or makes an indorsement with knowledge of previous forfeitures for which no written consent is given, the company is held to be estopped, jEtna Life Ins. Co. v. Fallow, 110 Tenn. 720, 77 8. W. 937 (citing numerous cases). The same rule has been CilAP. VIIl] GRAY & CROZIER V. GERMANIA FIRE INS. CO. 177 applied whore the premium was not collected until after loss, Mechanics' & T. Ins. Co. V. Smith, 79 Miss. 142, 30 So. 3G2 (tender hack after trial begun is too late). AcT.s OF Adju.ster ah Bearing on Waivkr.— Georgia Home Ins. Co. v. Allen, 119 Ala. 436, 24 So. 399; Bernhard v. Rochester German Ins. Co., 79 Conn. 388, 65 Atl. 134; Matthie v. Globe F. Ins. Co., 174 N. Y. 489, 07 N. E. 57; McMillan v. Ins Co 78 S. C. 433, 58 S. E. 1020. 1'^ 178 DIXON V. SADLER [CHAP. IX CHAPTER IX General Principles — Continued Marine Insurance — Seaworthiness, Deviation, Illegality, Total Loss, Measure of Recovery, etc. DIXON V. SADLER Court of Exchequer, 1839. 5 M. & W. 405 Warranty as to seaworthiness. Assumpsit on a policy of insurance, dated the 22d of January, 1838, on the ship John Cook, and cargo, at and from the 17th of January, 1838, until the 17th of July, 1838, at noon, in port and at sea, at all times and in all places, being for the space of six calender months. The declaration averred the loss of the ship to have taken place on the 19th of May, 1838, by perils of the sea. The defendant pleaded, first, that the vessel was not lost by the perils of the sea; secondly, the following special plea: "That, though true it is that the said vessel was by the perils of the sea wrecked, broken, damaged, and injured, and become and was wholly lost to the plaintiffs, for plea, nevertheless, the defendant says that the said wreck- ing, breaking, damaging, and injuring the said vessel, and the loss of the same by the perils of the sea, as in the said first count mentioned, was occasioned wholly by the willful, wrongful, negligent, and improper conduct (the same not being barratrous) of the master and mariners of the said ship, whilst the said ship was at sea, as in the said first count mentioned, and before the same was wrecked, broken, damaged, injured, or lost, as therein mentioned, to wit: on the 19th of May, 1838, by willfully, wrongfully, negligently, and im- properly (but not barratrously) throwing overboard so much of the ballast of the said ship, that by means thereof she then became and was top-heavy, crank, unfit to carry sail, and wholly unseaworthy, and unfit and unable to endure and encounter the perils of the sea which she might and would other- wise have been able to have safely encountered and endured; and by means and in consequence of the said willful, wrongful, negligent, and improper (but not barratrous) conduct of the said master and mariners, the said ship became and was wrecked, broken, damaged, injured, and lost by the perils of the sea, which perils, but for the said conduct of the said master and mariners, she could and would have safely encountered and overcome without being so wrecked, broken, damaged, injured, and lost, as in the said first count is mentioned." CHAP. IX] DIXON V. SADLER 179 The plaintiff replied, "That the said wrecking, breaking, damaging, in- juring the said vessel, or the loss of the same by the perils of the sea, as in the first count mentioned, was not so occasioned by such conduct of the master or mariners of the said ship, in manner and form as in the said plea is alleged," etc. At the trial before Parke, B., at the last Spring Assizes for Xorthumber, land, it appeared that the plaintiff was a shipowner residing at Sunderland, and was tlie owner of the John Cook, and had effected the policy in question with the d(>fendant, an underwriter at Lloyd's. The vessel left Rotterdam for Sunderland properly ballasted and equipped on the 15th of May, and arrived on the 19th of May opposite a point called Seaham, which was about four miles from the port of Sunderland. On arriving there, and havmg a pilot on board, the master commenced heaving part of the ballast overboard, as was proved to be usual on such occasions. Whilst this was going on the vessel drifted to the northward, and a strong squall coming on, the vessel drifted to the southeast, the ship was upset on her broadside, and her masts lay on the water. Every endeavor was made to right her, but in vam. She after- wards sank, off Ryhope, drifted on shore, and became a total wreck. If the crew had not removed the ballast, the ship would most hkely have stood the squall. It was objected at the trial that this was not a risk which the under- writer had undertaken to indemnify agamst. The learned judge was of opinion that the word "willful" in the plea meant that the ballast was know- ingly thrown overboard, and in a neghgent manner, but said he would reserve that question for the opinion of the court. And his Lordship left two ques- tions to the jury: First, was it negligent conduct to throw the ballast over- board before arriving in harbor? Secondly, did they think the master exer- cised a reasonable discretion in throwing overboard? They found, as to the first question, that they did think it negligent generally to throw over the bal- last; secondly, that the master did right, supposing the practice itself au- thorized him. A verdict was thereupon entered for the defendant on the second issue, the learned judge giving the plaintiff liberty to move to enter a verdict on that issue, if the court should be of opinion that his construc- tion of the meaning of the word "willful," as used in the plea, was incorrect. Parke, B.— In this case the defendant, to a declaration upon a time policy for six months, stating a loss by perils of the seas, pleaded three pleas, on each of which issue was joined. On the first and third, the verdict was found for the plaintiff; on the second, for the defendant. This plea stated, "that, though the vessel was lost by perils of the sea, yet that such loss was oc- casioned wholly by the willful, wrongful, negligent, and improper conduct of the master and mariners of the ship, by willfully, wrongfully, negligently, and improperly throwing overboard so much of the ballast that the vessel became unseaworthy, and was lost by the perils of the sea, which otherwise she would have safely encountered and overcome." On a motion for a judgment non obstante veredicto, it occurred to the court to be questionable whether the plea was not at all events bad, inasmuch as the terms of it did not ex- ISO DIXON V. SADLER [CHAP. IX elude the case of a loss by barratry, for which the underwriters would be clearly Hable, and that on this declaration, and, as the fact certainly was, that the crew were not guilty of barratry, it was very properly agreed that the plea should be amended by inserting the words "but not barratrously " after the words "negligently and improperly." And the plea, therefore, in its present shape raises the question whether the underwriters are liable for the willful but not barratrous act of the master and crew, in rendering the vessel unseaworthy before the end of the voyage, by casting overboard a part of the ballast. The case was very fully and ably argued, during the course of the last and present term, before my brothers, Alderson, Gurney, Maule, and myself. We have considered it, and are of opinion that the plea is bad in substance, and that the plaintiff is entitled to judgment, notwith- standing the verdict. The question depends altogether upon the nature of the implied warranty as to seaworthiness or mode of navigation between the assured and the under- writer on a time policy. In the case of an insurance for a certain voyage, it is clearly established that there is an implied warranty that the vessel shall be seaworthy, by which is meant that she shall be in a fit state as to repairs, equipment, and crew, and in all other respects, to encounter the ordinary perils of the voyage insured at the time of sailing upon it. If the assurance attaches before the voyage commences, it is enough that the state of the ship be commensurate to the then risk. And, if the voyage be such as to require a different complement of men, or state of equipment, in different parts of it (as, if it were a voyage down a canal or river and thence across to the open sea), it would be enough if the vessel were, at the commencement of each stage of the navigation, properly manned and equipped for it. But the assured makes no warranty to the underwriters that the vessel shall continue seaworthy, or that the master or crew shall do their duty during the voyage; and their negligence or misconduct is no defense to an action on the pohcy, where the loss has been immediately occasioned by the perils in- sured against. This principle is now clearly established by the cases of Busk V. Royal Exchange Company, 2 B. & Aid. 72; Walker v. Maitland, 5 B. & Aid. 171; Holdsworth v. Wise, 7 B. & C. 791; Bishop v. Portland, id. 219, and Shore v. Bentall, id. 798, n.; nor can any distinction be made be- tween the omission by the master and crew to do an act which ought to be done, or the doing an act which ought not, in the course of the navigation. It matters not whether fire which causes a loss be lighted improperly, or, after being properly lighted, be neghgently attended; whether the loss of an anchor, which renders the ship unseaworthy, be attributable to the omission to take proper care of it, or to the improper act of shipping it, or cutting it away; nor could it make any difference whether any other part of the equip- ment were lost by mere neglect, or thrown away or destroyed in the exercise of an improper discretion, by those on board. If there be any fault in the crew, whether of omission or commission, the assured is not to be responsible for its consequences. The only case which appears to be at variance with this principle is that CHAP. IXj DIXON V. SADLER 181 of Law V. Hollingsworth, 7 T. R. 160, in which the fact of the pilot, who had been taken on board for the navigation of the River Thames, having quitted the vessel before he ought (under what circumstances is not distinctly stated) appears to have been held to vitiate the insurance. In this respect, we can- not help thinking that the case, although attempts were made to distinguish it in some of the decided cases, must be considered as having been over- ruled by the modern authorities above referred to; and that the absence, from any cause to which the owner was not privy, of the master or any part of the crew, or of the pilot (who may be considered as a temporary master), after they had been on board, must be on the same footing as the absence, from a similar cause, of any part of the necessary stores or equipments originally put on board. The great principle established by the more recent decisions is, that, if the vessel, crew, and equipments be originally sufficient, the assured has done all that he contracted to do, and is not responsible for the subsequent deficiency occasioned by any neglect or misconduct of the master or crew; and this principle prevents many more and difficult inquiries, and causes a more complete indemnity to the assured, which is the object of the contract of insurance. If the case, then, were that of a policy for a particular voyage, there would be no question as to the insufficiency of the plea; and the only remaining point is, whether the circumstance of this being a time policy makes a dif- ference. There are not any cases in which the obligation of the assured in such a case, as to the seaworthiness or navigation of a vessel, is settled; but it may be safely laid down, that it is not more extensive than in the case of an ordinary policy, and that, if there is no contract as to the conduct of the crew in the one case, there is none in the other. Here it is clear that no objection arises on the ground of seaworthiness of the vessel until that un- seaworthiness was caused by throwing overboard a part of the ballast, by the improper act of the master and crew; and, as the assured is not respon- sible for such improper act, we are of opinion that the plea is bad in substance, and the plaintiff entitled to our judgment. Rule absolute to enter judgment for the plaintiff, non obstante veredicto.^ ' A ship is seaworthy when reasonably fit in all respects to encounter the ordinary perils of the seas incident to the adventure insured, Eng. Mar. Ins. Act (1906), § 38 (4) ; The Southwark, 191 U. S. 1,8, 24 S. Ct. 1. This includes manning, equipnaent and stowage. The schooner Caroline Mills was insured in California for one year, subject to the provisions of the California Civil Code "to be engaged as an inter-island trader among the Sandwich Islands." The Code provides that when the insurance is for a specified length of time, there is an implied warranty that the ship shall be seaworthy at the commencement of every voyage she may undertake during that time. Before the vessel started on her voyage, the owners, knowing that the chain cables attached to her anchor were old and weak, had them rcenforced with six-inch hawsers. This, however, the experts on the trial showed to be an improper and unskillful method of strengthening iron cables for use among the coral reefs of the Hawaiian Islands, be- cause rope hawsers are liable to become chafed and cut by the rocks on the bottom. During a heavy swell, but without the existence of any storm or ext-raordinary violence of the elements, when anchoring a couple of miles off Honokoa, the chains and hawsers on both anchors of the vessel parted, as she surged upon them, impelled by the swell, 182 WILLIAMS V. SHEE [CHAP. IX WILLIAMS V. SHEE Court of King's Bench, 1813. 3 Camp. 469 Implied warranty as to deviation. This was an action on a policy of insurance on goods by the ship Sir Sid- ney Smith, "at and from London to Berbice, with hberty to touch and stay at any ports and places whatsoever and wheresoever, and for all purposes whatsoever, particularly to land, load, and exchange goods, without being deemed a deviation." The vessel sailed from Portsmouth on the 25th of September, 1812, with a fleet for the West Indies, under convoy of his Majesty's ship Narcissus. They arrived off Madeira on Saturday the 17th of October. The Sir Sid- ney Smith had taken in a quantity of goods for that island, which the captain had been ordered to land there, and for which wines were to be sent on board. He began to land the goods as soon as he arrived, but, not being allowed to and thereupon she was driven ashore by the wind and totally lost. Judge Hoffman decided that the warranty of seaworthiness was not fulfilled and dismissed the libel on the policy of insurance, Pope v. Swiss Lloyd Ins. Co., 4 Fed. 153. In an English case, cocoanut oil, value to include ten per cent advance on invoice and charges was insured at and from any port or ports in Cochin, to Marseilles. The insurer defended the action brought on the policy for a total loss with the plea that the goods insured were not seaworthy for the voyage at the time the ship set sail. To this plea the plain- tiff demurred on the grounds, "that there is no implied warranty of the seaworthiness of the goods insured by a policy; and that the plea does not allege that the loss was attributable to the condition of the goods." The demurrer was sustained and judg- ment rendered for the plaintiff, Koebel v. Saunders, 17 C. B. (N. S.) 71. The steamer Dos Herinanos when the policy issued was in process of construction at Philadelphia for use as a river steamer near Frontera, Mexico. The voyage from Philadelphia to Frontera was insured, and the use for which the vessel was designed was made known to the underwriters. Though provided with suitable crew and proper equipment for the voyage, the steamer was not, in the character of her construction, seaworthy for ocean transit. After leaving the port of Philadelphia, she took the inside course through canals and bays as far as possible, but below Fort Macon it became necessary to go outside upon the open sea, and shortly afterwards the vessel was lost. The verdict of the jury in favor of the plaintiff was sustained on appeal, Thebaud v. Great West. Ins. Co., 155 N. Y. 516, 50 N. E. 834. It will be observed that the warranty of seaworthiness applies not only to insurance on the ship, but also to insurance on cargo or other interest embarked in the ship. In a voyage policy on goods or other moval)lf.s there is an implied warranty, that, at the commencement of the voyage, the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other movables to the destination contemplated by the policy. The Maori King (1895), 2 Q. B. 5.50, 558 (frozen meat); The Southwark, 191 U. S. 1, 24 S. Ct. 1. As to whether a warranty of seaworthiness is to be implied in a time policy, see Gibson v. Small, 4 H. L. Cas. 353; Union Ins. Co. v. Smith, 124 U. S. 405, 8 S. Ct. 534, 31 L. Ed. 497; Hoxie v. Home Ins. Co., 32 Conn. 21, 85 Am. Dec. 240; Hoxie v. Pacific Mut. Ins. Co., 7 Allen (Mass.), 211; Merchants' Ins. Co. v. Morri-son, 02 111. 242, 14 Am. Rep. 93; Berwind v. Greenwich Ins. Co., 114 N. Y. 231, 21 N. E. 151. CHAP. IX] KETTELL V. WIGGIN 183 work on the Sunday, he had not got the wines on board till the Monday at noon. The Narcissus, with the greatest part of the fleet, had sailed away the preceding day, and was then too far off to be overtaken. Seven or eight otiier ships belonging to the fleet, however, were left behind at Madeira, and they all agreed to sail together for mutual protection. With this view, the Sir Sidney Smith remained at Madeira till the 24th of October. She finally parted company with them off Barbadoes, and on the 19th of Novem- ber was captured b.y an American privateer on her way to Berbice. The owner of the goods insured was on board during the voyage. Garrow, A. G., contended that the underwriters were discharged, on two grounds: First, the ship, by putting into Madeira, and staying behind there when the rest of the fleet had sailed, had been guilty of a deviation; secondly, the captain had willfully deserted the convoy, and as this was done with the privity of the owner of the goods, who was on board, the policy was vacated. Park, for the plaintiff", insisted. First, that the ship had a right to put into Madeira, and to stop there in the manner she had done, under the liberty given by the policy to touch and stay at all ports and places to land, load, and exchange goods; socondl}', the captain could not be .said willfully to have deserted the convoy, for he was anxious, if possible, to enjoy its protection; and the convoy had rather deserted him. Lord Ellendorgugii. I am of opinion that the underwriters are dis- charged on the ground of deviation. The libertj'' in the policj^ must be con- strued with reference to the main scope of the voyage insured. I am inclined to think this was not a willful desertion of convoy within the meaning of the act, as the captain appears to have acted bona fide, and not to have been aware of the precise time when the convo}' sailed away from Madeira. How- ever, it is unnecessary to determine that point now; for upon well-established principles the ship was guilty of a deviation by putting into Madeira and voluntarily staying behind there for the purposes of trade when the rest of the fleet had sailed away in the prosecution of the voyage. Plaintiff nonsuited. KETTELL v. WIGGIN AND OTHERS Supreme Judicial Court of Massachusetts, 1816. 13 Mass. 67 Implied warranty as to deviation. Assumpsit on a policy of marine insurance upon the schooner Pocahontas. Defense, deviation. On arrival of the vessel at the Isle of May, which was within her course, she found so many vessels there that she mu.st have waited four or five weeks for her turn to take in her cargo of salt. On the proposal of the governor of 1S4 KETTELL V. WIGGIN [CHAP. IX the island, she went to two other of the Cape de Verd Islands, and brought for him a cargo of provisions, he engaging that on her return, she should be immediately dispatched on her voyage, and by this means, she was ex- pedited sooner than she otherwise would have been. The policy gave liberty to proceed to the Cape de Verd Islands for salt. Parker, C. J. The touching at St. Jago, on the voyage home, was relied upon by the defendants as a deviation which destroys the action. But, it being in evidence that vessels from the Isle of May usually touch at St. Jago for supplies, which are not always to be obtained at the Isle of May, the touching there was justifiable, and no deviation. But the vessel went an intermediate voyage after her arrival at the Isle of May, under a contract with the governor of that island; and the ques- tion is, whether that act is justifiable. The vessel is insured from Gibraltar to the United States, with liberty to touch at St. Ubes or the Cape de Verd Islands for salt. Under this policy she might have sailed from one to another of those islands and successively to all of them for salt; but her arrival at any one of them where salt was to be obtained, and where the cargo was in- tended to be taken on board, determined the voyage to those islands, and the vessel could not proceed from thence to another for the purpose of earning a freight or for any other purpose under the policy. Now, the Isle of May is one of the Cape de Verd Islands at which the vessel might touch; she did touch there, and it was determined to take on board a cargo there; but she went thence to St. Jago and Fuego, not for the purpose of procuring salt, but on a contract with the governor, to get provisions for the island, and then returned to the Isle of May to prosecute her homeward voyage. This was undoubtedly a deviation, unless it can be shown to have been necessary for the safe prosecution of the voyage. Mere purposes of convenience will not excuse a deviation, nor will anything but actual necessity. It is contended that this voyage was necessary, because there was a scar- city of provisions and water, and the crew of the vessel might have suffered. This, perhaps, would be a sufficient excuse, if the necessity on which it is founded did not arise from the negligence of the master; if it did, the owners cannot avail themselves of it, to excuse a deviation. The voyage from Gibraltar was to the United States, with liberty to touch at the Cape de Verds. The vessel should have been sufficiently found at Gibraltar to enable her to stay and load at the Isle of May, without depending upon procuring provisions there. Indeed, the necessity, which is alleged, seems to prove that the ship was not seaworthy at the time the policy was to take effect. But it was confidently insisted that, as the effect of this expedition, at the request of the governor, was to shorten the duration of the voyage, by en- abling the master to obtain his cargo much sooner than he otherwise could, it ought to be considered as done for the benefit of all concerned, and not as amounting to a deviation. But masters have not a right to speculate in this manner upon the possible advantages of pursuing a route which does not belong to the voyage. They CHAP. IX] KETTELL V. WIGGIN 185 are to pursue the usual course, and let the consequences fall where they may. In this case, the master probably thought he was advancing the interest of his employers, of the underwriters, and of all concerned, by getting his vessel loaded several weeks sooner than would have been his turn; and yet it is almost certain that his very success in being able to commence his homeward voyage so soon, was the cause of the disaster which befell his vessel. Cer- tainly, had he arrived at St. Jago a week later, he would have avoided the immediate cause of the loss. Notwithstanding it is established by the verdict that the voyage was in fact expedited by the intermediate voyage to St. Jago and Fuego, we are of opinion that voj'age was, under the circumstances, an unjustifiable devia- tion. To test this, let us inquire whether the vessel was at the risk of the underwriters, from the Isle of May to Fuego and back. It was not within the terms of the policy; it was not necessary, unless it had become so by the culpable neglect of the master. Had the vessel been lost upon that voyage, the underwriters could not have been held answerable. The polic_y, then, had ceased to protect the vessel; and it is not possible that anything subse- quent should restore the obligations of the underwriters. We are all of opinion that the verdict must be. set aside, and a New trial granted^ ^ A deviation is a voluntary departure, without necessity or reasonable cause, from the usual and regular course of the voyage contemplated by the policy, Hostetter v. Park, 1.37 U. S. 30, 40, 11 S. Ct. 1. Whether an increase of the risk is occasioned, Maryland Ins. Co. v. Leroy, 7 Cranch, 26, .3 L. Ed. 257, or whether the ship may have regained her route before loss, or whether the deviation may have contributed to the loss, is immaterial. Burgess v. Equitable Marine Ins. Co., 126 Mass. 70, 30 Am. Rep. 654, the insurer is discharged from liability as from the time of deviation, Wingate V. Foster (1878), 3 Q. B. D. 582. In a leading case in which reformation of the policy was prayed for, a policy in favor of Hearne for So, 000 insured the bark Maria Henry, under his charter partj-, valued at $16,000, "at and from Liverpool to port in Cuba, and at and thence to port of discharge in Europe." The insured vessel, loaded with coal, proceeded to St. lago dc Cuba and discharged her outward cargo there. Thence she went to Manzanillo, another port in Cuba, where she took on board a cargo of native woods. On the homeward voyage she was lost by perils of the sea. The com- pany refused to pay the charterer on the ground that the voyage from St. lago de Cuba to Manzanillo was a deviation from the voyage described, inasmuch as the policy specified "port" and not "ports." The court sustained the defense and also held that the testimony produced by the plaintiff tending to show a trade usage incident to such voyages to go to two ports in Cuba, one for discharge of outward cargo, and another for shipping a return cargo, was not sufficient to establish a mutual mistake of the parties in the contract as written, and would not avail for reformation of the policy, Hearne v. Marine Ins. Co., 20 Wall. 488, 22 L. Ed. 395. A vessel named Christie John- stone was insured "at and from Plymouth to the Banks, cod-fishing, and at and thence back to Pljmiouth." She took the usual quantity of bait, insufficient, however, for the trip, the practice being to rely principally on catching squid on the Banks to use for bait. This year the squid, though formerly plenty, were very scarce, and in order to procure bait, the master was obliged to go one hundred miles from the Banks to the port of St. Peters, the trip thither with return to the Banks occupying about a week. Subsequently, while fishing on the Banks, the vessel sprung a leak in a severe gale and was totally lost. The insurance company claimed that the success of the fishing ad- venture was of no concern to it, however important it might be to the insured, and 186 DEVITT V. PROVIDENCE WASHINGTON INS. CO. [CHAP. IX DEVITT V. PROVIDENCE WASHINGTON INS. CO. Supreme Court of New York, 1901. 61 A. D. 390; Aff'd 173 N. Y. 17 Total Loss. Insurance on a cargo of potatoes shipped on a canal boat from Brock- port, N. Y., to Yonkers, N. Y., with a warranty "free of particular average," that if the insured proposed either to fish or catch bait in other waters than those specified, he should have insured the fresh adventure. The court held that while the plaintiff's vessel might have delayed for any reasonable time upon the Banks for the purpose of the voyage, including, for example, the occupations of fishing or getting bait, without being guilty of deviation, yet, to depart from the specified route, though necessary to the successful conduct of the trip, was an unwarranted deviation which avoided the policy in suit, Burgess v. Equitable Mar. Ins. Co., 126 Mass. 70, 30 Am. Rep. 654. A mere plan or intention to deviate without the overt act does not avoid, Arnold V. Pac. Mut. Ins. Co., 78 N. Y. 7; until the deviation begins the policy is still in force. Marine Ins. Co. v. Tucker, 3 Cranch, 357, 2 L. Ed. 466. But a mere deviation, with intention to return to the course and complete it, must be distinguished from a change of voyage, since the rules of law applicable are not precisely the same in both cases. There is a change of voyage, where, after the commencement of the risk, the destina- tion of the ship is voluntarily changed from the destination contemplated by the policy; and, in the latter case, according to the law of Great Britain, the insurer is discharged from liability as from the time when the determination to change is manifested, al- though the ship may not in fact have left the regular course when the loss occurs, Mar. Ins. Act (1906), § 45; Tasker v. Cunningham (1819), 1 Bligh. 87. The same dis- tinction seems to be recognized in this country Merrill v. Boylston F. & M. Ins. Co., 3 Allen (Mass.), 247. If the ship originally set sail from a place of departure, or to a destination, other than that specified in the policy, the risk does not attach at all, since the insurance is then avoided from the inception of the contract, Way v. Modig- liani (1787), 2 T. R. 30. Deviation by Delay. — Unjustifiable delay in the prosecution of the adventure under a voyage policy amounts to a deviation, and the insurer is discharged from liability as from the time when the delay becomes unreasonable, Arnold v. Pac. Mut. Ins. Co., 78 N. Y. 7. In a Federal case, the defendant had insured the plaintiff $500 by valued policy "on his commissions as supercargo of the Leonidas from Alexandria to Pcrnambuco, until landed." The vessel arrived off Pcrnambuco at 9 a. m., but instead of going directly into port, she came to anchor in the outer roadstead, while the master went to town for several hours to inquire about the market. A storm came on; the anchor dragged, and the vessel drifted ashore. The court instructed the jury that if the vessel could have proceeded to port without coming to anchor in the outer road, the stopping there was a deviation which discharged the underwriters. The insurance company got a verdict from the jury, West v. Columbian Ins. Co., 5 Cranch (C. C), 309, Fed. Cas. No. 17,421. In an early case, the insurance was on goods on board the Margaret and Anne from Iceland to England. A total loss happened by fire, but prior to the loss, while the vessel still lay at Iceland, the captain of an English warship lying near by, ordered the master of the Margaret and Anne to go out to sea to examine a strange sail. No vio- lence or threats accompanied the order, but the master without remonstrance or protest, perhaps with a hope of sharing prize money put out to sea, fired two guns at CHAP. IX] DEVITT V. PROVIDENCE WASHINGTON INS. CO. 187 that is, of partial loss. A certificate coveriiiR this shipment was attached tc the policy which was an open policy of marine insurance. The boat was the strange sail, and upon discovery that she was a neutral, returned to his moorings. Lord Ellenborcmgh decided that there was no duress, either physical or moral, exer- cised by the naval commander or his crew; and that however laudable might have been the purpos(! of the master in obeying the direction of the captain of the warship, the deviation being without legal excuse, the voyage insured was at an end, and the policy forfeited, Phelps v. Auldjo (1809), 2 Camp. 350. A policy insured the vessel Samuel Cumming at and from Jamaica, and Trinidad in the Island of Cuba, to any port or ports of her discharge in the United Kingdom. In an unsuccessful quest for convoy, the captain deviated slightly from the regular course, went around near Havana and made a call of an hour at Moro Castle. Chief .Justice Gibbs said that whatever is necessary for the safety of the ship, the captain may do as agent to the underwriters, and that it may be as justifiable to seek convoy as to avoid an enemy. The court held that the insured was entitled to recover for the loss of his ship by capture, D'Aguilar v. Tobin (1816), Holt N. P. 185; O'Reilly v. Gonne (1815), 4 Camp. 249. In f'.n English case the plaintiffs chartered the defendants' steamship Olympiaa to carry a cargo of wheat from Cronstadt to the Mediterranean. Whilst on her voyage thither, the defendants' captain sighted the Arion in distress, and for £1,000 agreed to tow her into the Texel, which was out of his direct course. Whilst so doing, the Olymjnas stranded, and ultimately with her cargo was totally lost. To save the Arion and her cargo, it was necessary to take her to the Texel, but the deviation was not necessary to the safety of those on board her. Consequently, it was held that there was a fatal deviation, and that the plaintiffs were entithsd to recover the value of their cargo against the defendants as owners of the ship in fault, Scaramanga v. Stamp (1880). 5 C. P. D. 295, 49 L. J. C. P. 674. In the following instances, on the other hand, the delay was held to be justifiable: where a ship was detained for six weeks by a belligerent cruiser, Scott v. Thompson (1805), 1 B. & P. N. R. 181; where an Ameri- can ship was delayed because of the impossibility of getting an American crew in a French port. Grant v. King (1802), 4 Esp. 175; where a ship was detained more than four months for repairs, and by insufficient depth of water to cross the bar. Smith v. Surridgc (1801), 4 Esp. 25; where a ship was delayed at an intermediate port to make it seaworthy for the next stage of the voyage. Bouillon v. Lupton (1863), 15 C. B. (N. S.) 113, 33 L. J. C. P. 37; where, in pursuance of a known usage of the trade, the ship stopped a reasonable time for selling out her cargo, Columbian Ins. Co. v. Catlett, 12 Wheat. 383, 6 L. Ed. 664. With respect to justifiable deviation the British Marine Insurance Code sums up the law as follows: "(1) Deviation or delay in prosecuting the voyage contemplated by the policy is excused: (a) Where authorized by any special term in the policy; or (b) where caused by circumstances beyond the control of the master and his employer; or (c) where rea-sonably necessary in order to comply with an express or implied war- ranty; or (d) where reasonably necessary for the safety of the ship or subject-matter insured; or (e) for the purpose of saving human life, or aiding a ship in distress where human life may be in danger; or (f) where reasonably necessary for the purpose of obtaining medical or surgical aid for any person on board the ship; or (g) where caused by the barratrous conduct of the master or crew, if barratry be one of the perils in- sured against," Eng. Mar. Ins. Act (1906), § 49. Illegality. — Besides the implied warranties as to seaworthiness and deviation, there is a third implied warranty understood in every contract of marine insurance, that the adventure insured is a lawful one. This doctrine is frequently applied to smuggling voyages, but this prohibition has been held not to apply to trading ad- ventures taken in violation of the revenue laws of other nations, Fracis v. Sea Ins. Co., 8 Asp. Mar. Cas. 418; Parker v. Jones, 13 Mass. 173. The defendant insurance com- pany insured for whom it might concern, in the sum of 820,000 the ship Avon, valued at $28,000 for one year. She sailed from Maine to New Orleans, thence to Natchea, 188 DEVITT V. PKOVIDENCE WASHINGTON INS. CO. [CHAP. IX sunk in \he canal by striking a hidden obstruction. Subsequently the boat was detained by ice, and the cargo frozen. A portion of the cargo arrived at Yonkers in specie, but in bad condition. The total expenses of salvage exceeded the amount of the gross proceeds of the sale of the rescued cargo. Goodrich, P. J. In construing any contract, it is usually important to scrutinize the surrounding circumstances and to have regard to the object sought to be subserved. The vegetables shipped by the plaintiff in the canal boat constituted the entire shipment, and the sole subject of the in- surance. The contemplated voyage covered by the insurance was confined to inland and shallow waters. Perils from jettison, theft, robbery, barratry and many other causes, ordinarily insured against, are altogether excepted by the terms of this policy. It was practically impossible for the boat in the prosecution of this voyage to reach foreign seas or foreign territory, or to traverse deep waters. It was practically impossible that during the prosecu- tion of this voyage the entire cargo should be irretrievably lost in specie by the only perils insured against in the policy. It is almost inconceivable that such a result could be brought about in these shallow waters, either by fire or by a wreck or a foundering of the boat. If the boat had been de- stroyed by fire or sunk in the middle of the Hudson River, the merchantable value of the cargo might have been entirely lost, but it is hardly supposable that expert wreckers could not have recovered some portion of a cargo of nearly 7,000 bushels of potatoes. The voyage at every point was easily accessible to the representatives of the underwriters. It must be assumed that the insurance company acted in good faith in accepting the premium, and in delivering this certificate of insurance. If the policy is inoperative in the case at bar on the ground that some portion of the cargo was ultimately delivered to the consignee in specie, then under the same doctrine, we find it difficult to conceive of any probable contingency under which the assured could successfully claim a recovery. The distinctions between an actual and a constructive total loss, laid down in the law of insurance, may not be satisfactory or altogether pertinent when applied to an inland marine policy covering a voyage by a canal boat, in the terms of the policy before us. and on her passage thence for Liverpool was totally lost by perils of the seas. The master, Arthur Child, was employed for the owners to obtain certain rigging and equipment for the ship. It was his intention to change a hempen cable for one of iron. While at New Orleans, Child, without privity of the owners, substituted for the hempen cable, an iron cable, worth more than $400, which had been smuggled in and secretly put aboard the Avon at night, Child's object being to avoid payment of duties to the United States. Justice Story decided that, inasmuch as the policy was founded in no illegality as to its inception, the plaintiffs were entitled to recover $20,000 for a total loss, Clark v. Protection Ins. Co., 1 Story, 109, Fed. Cas. No. 2,832. The doctrine regarding the illegality of the adventure insured is applicable to fire insur- ance, Lawrence v. Ins. Co., 127 Mass. 557; Boardman v. Ins. Co., 8 Cush. (Mass.) 583 (building used for lottery). But in practice this principle rarely avails as a defense to the insurer in the absence of a breach of an express warranty, Erb v. German-Am. tns. Co., 98 la. 606; .Johnson v. Ins. Co., 127 Mass. 555; Miller v. Prussian Nat. Ins Co. (Mich., 1909), 122 N. W. 1093 (liquor business without hcense). CHAP. IXj WASHBURN, ETC., CO. V. RELIANCE MAR. INS. CO. 189 The important inquiry is this: not whether the plaintiff's loss should be classi- fied technically as an absolute or a constructive total loss, as those phrases are used in other forms of policies, but whether this loss was not a total loss within the purpose and fair intendment of this contract. Since the argument of this appeal, our attention has been called to the recent decision of the United States Supreme Court in the case of Washburn & Moen Mfg. Co. v. Reliance Ins. Co. (179 U. S. 1). That court referred to the fact that the Supreme Court of Massachusetts in Kettell v. Alliance Ins. Co. (10 Gray, 144) had announced a contrary rule, and it also recognized inferentially the binding force of the decisions of the State courts over con- tracts made within the State, but declared its own liberty to construe a marine policy, depending on questions of general commercial law, without regard to the decisions of the State in which the action arose. Equally we are justified in holding that as that case differs in some respects from the Wallerstein Case (44 N. Y. 204) there is no reason why we should follow it, and thus differ from the decision of the highest court of this State upon the same subject. For these reasons, the judgment should be affirmed. All concurred: Hirschberg and Jenks, JJ., in result. Judgment affirmed, toith costs. WASHBURN & MOEN MFG. CO. v. RELIANCE MARINE INS. CO. Supreme Court of the United States, 1900. 179 U. S. 1 Total loss. The insured cargo of wire was warranted by the memorandum clause of the policy "free from average unless general," etc.,i and by a special clause on the margin of the policy "free of particular average, but liable for absolute total loss of a part if amounting to five per cent." The carrying vessel was stranded in the course of the voyage, but most of the cargo was saved and reached the port of destination in specie, a portion being damaged and a substantial part uninjured. There was a constructive total loss, inasmuch as the cost of saving the cargo and the incident exi)cnses exceeded the sum realized at the forced sale, and the plaintiff contended that the cost of sal- vage was much more than the value of the cargo. A verdict was directed for S2,500, which was the actual total loss of parts of the cargo. Mr. Chief Justice Fuller delivered the opinion of the court. The memorandum and marginal clauses were in pari materio, and to be read together. They were not contradictory, and the rider merely operated 1 This warranty moans that the underwriter is exempt from liability with respect to the property subject to the warranty for anything less than a total loss, except where the loss is of the nature of seneral average, but for general average loss the underwriter is hable notwithstanding the restriction, Wadsworth ». Pacific Ins. Co., 4 Wend. (N. Y.) 33; Price i). A 1 Ships, etc., Assoc, 22 Q. B. D. 580, 5S4. 190 GREAT WESTERN INS. CO. V. FOGARTY [CHAP. IX to qualifj' the memorandum by allowing recovery for an actual total loss in part, which could not otherwise be had. In other words, the qualification was manifestly inserted so that, while conceding that under the memorandum clause, no liability was undertaken for a constructive total loss, but only a liability for an actual total loss, the insurers might be held for an actual total loss of a part. The contracting parties thus recognized the rule that articles warranted free of particular average or free from average unless general are insured only against an actual total loss. The warranty or memorandum clause was introduced into policies for the protection of the insurer from liability for any partial loss whatever on certain enumerated articles, re- garded as perishable in their nature, and upon certain others, none under a given rate per cent. This was about 1749, and since then in the growth of commerce, the hst of articles freed by the stipulation from particular average has been enlarged so as to embrace many which though they may not be inherently perishable, are in their nature peculiarly susceptible to damage. The general rule is firmly established in this court, that the insurers are not liable on memorandum articles, except in case of actual total loss, and that there can be no actual total loss where a cargo of such articles has ar- rived in whole or in part in specie at the port of destination, but only when it is physically destroyed or its value extinguished by a loss of identity. It is said that a different rule has been laid down in Massachusetts by the Supreme Judicial Court of that commonwealth, Kcttell v. Alliance Ins. Co., 10 Gray, 144; Mayo v. India Mut. Ins. Co., 152 Mass. 172. We are not, however, persuaded that the cases cited justify the asserted conclusion as respects articles specifically included in the memorandum. It would sub- serve no useful purpose to attempt a review of the English cases on this subject. If, in England, a plaintiff may recover for a constructive total loss of memorandum articles, it is when they are so injured as to be of no sub- stantial value when brought to the port of destination. Judgment affirmed.^ GREAT WESTERN INS. CO. v. FOGARTY United States Supreme Court, 1878. 19 Wall. 640 Total loss; warranted free of particular average. Error to the Circuit Court for the Southern District of New York. Fogarty sued the Great Western Insurance Company on a policy of marine > Compare with the last case Devitt v. Providence Washington Ins. Co., 173 N. Y. 17, 65 N. E. 777, in which the court says, of the phrase "free of particular average," "if the underwriters wish to limit their liability to actual total loss, it is very easy to eay so instead of using terms of different signification in different jurisdiction.^. Much as we hesitate to place our view of the law even in apparent opposition to that of the Supreme Court of the United States, wc feel constrained to adhere to the doctrine in Chadsey v. Guion (97 N. Y. 3.33), that for a constructive loss on the whole of the articles insured, the underwriter is liable." CHAP. IX] GREAT WESTERN INS. CO. V. FOGARTY 191 insurance, and recovered a judgment for $2,611.95 and costs. The policy was an open one, and llie indorsement procurerl by tlie plainlifT on it was of insurance for $2,250 on machinery on board the bark I'Jlla Adcte, at and from New York to Havana, free from particular average. The memorandum clause of the policy i)rovidcd that machines and machinery of every de- scription were warranted by the assured free from average unless general. The machinery insured consisted of the various parts necessary for a complete sugar-packing machine, including, as part of it, three sets of truck-irons, and also other extra truck-irons. It was described in the bill of lading and invoice as eight pieces and eight boxes, composing one sugar-packer and three trucks. The vessel on which these articles were being transported from New York to Havana, just before reaching the latter city, was driven on rocks in a violent gale, was filled with water, and finally became a total wreck, and was abandoned to the underwriters. Their agent at Havana took possession, and was engaged about a month in raising the cargo. A large number of the pieces composing the plaintiff's machinery was recovered and tendered to him at Havana, which he refused to receive, on the ground that the insurance company was liable to him as for a total loss. They denied that under the circumstances of the case there was a total loss within the meaning of the policy; and the soundness of the instruction to the jury on that point, given and refused by the Circuit Court on the trial, was the only question now be- fore this court. There was very little conflict of testimony as to what was recovered, and what was its condition when tendered to plaintiff. It was all of iron. About half of it in weight was saved, and the remainder left at the bottom of the sea. That which was saved was entirely useless as machinery, and was of no value except as old iron, for which purpose it would sell for about S50. The machinery in working order was worth S2,250. That Avhich was saved was much broken and rusted, so that it would cost more to repair it, i)olish it, and put it in order for use than to buy a new machine. Upon the testimony offered by the plaintiff the counsel for the defendant moved the court to instruct the jury that the action could iiot be sustained, because it showed that there was not a total loss. The court declined to do this, and the request was renewed at the conclusion of the defendant's evi- dence, and again declined. Several prayers for instruction were then pre- sented by the defendant, based upon the leading proposition, that if any of the pieces of the machinery insured was recovered and tendered in specie to the assured, there was no total loss. These were refused and exceptions taken to all these refusals, on which error is assigned here. An exception was also taken as to the charge of the court laying down the law by which the jury were to decide the question of total loss submitted to them. That charge was in the following words: "The meanhig of the term 'free from particular average,' used in the policy, was that the defendants should be liable only for a total loss of the subject insured; that the subject insured was not machines but machinery, 192 GREAT WESTERN INS. CO. V. FOGARTY [CHAP. IX by which is generally understood the several parts or portions of machines, adapted and fitted to be put together so as to constitute a machine (in this case a sugar-packing machine), and, applying the rule of law as to what constitutes a total loss to this particular subject insured, the jury will find whether any piece or portion of the machinery insured arrived at its destina- tion in a perfect condition, so that it could have been used with its corre- sponding or connecting pieces had they also arrived in good condition; in that case the plaintiffs could not recover, as the loss would not be total; but that if every piece of the machinery was so damaged by the perils insured against as to be entirely unfit for use on being supplied with its corresponding or connecting pieces, then there was a total loss of the subject insured as machinery, although the material itself might still exist; and if they so found, they would find a verdict for the plaintiff for the sum named in the policy, with interest from the tenth day of September, 1868." Verdict and judgment having gone for the plaintiff, the insurance company brought the case here. Mr. Justice Miller dehvered the opinion of the court. The question presented in this case for consideration has been often in the courts, and the discriminations between what is total loss and what is not are frequently very nice and delicate. The authorities are by no means uniform or consistent with each other, when, as in the present case, the fine of distinction is very narrow. Several cases bearing upon the one before us have been decided in this court, and perhaps a short review of them may aid us here better than a more extended examination of the numerous other authorities on the subject. In the case of Biays v. Chesapeake Ins. Co. (7 Cranch, 415), the plaintiff was insured upon hides, the whole number of which was 14,565. Of these, 789 were totally lost by the sinking of a lighter, and 2,491 of those sunk were fished up in a damaged condition and sold. The hides were memo- randum articles, and this court held that inasmuch as less than 800 hides insured as part of a much larger number of the same kind was lost, it could not be a total loss, and overruled the argument that it was a total loss as to the 789 hides. In the case of Marcardicr v. Chesapeake Ins. Co. (8 id. 47), it is said that "it seems to be the settled doctrine that nothing short of a total extinction either physical or in value of memorandum articles at an intermediate port would entitle the insured to term the case a total loss, where the voyage if capable of being performed. And perhaps even as to an extinction in valu/* where the commodity spccificalhj remains, it may yet be deemed not quite settled whether, under like circumstances, it would authorize an abandon- ment for a total loss." In the case of Morean v. The United States Ins. Co. (1 Wheaton, 219), more than half of a cargo of corn was thrown overboard and lost. The re- mainder was saved in a damaged condition, and sold at about one-fourth the market value of sound corn. This was held not to be a total loss, be- CHAP. IX] GREAT WESTERN INS. CO. V. FOGARTY 193 cause part of the corn was saved, and though damaged was of some value. It was, therefore, only a partial loss. The next case is that of Hugg v. The Augusta Insurance Co., 7 Howard, 595. The question there arose on an insurance of jerked beef of four hundred tons, part of which was thrown into the sea and part of the remainder so seriously damaged that the authorities of the city of Nassau refused to allow more than 150 of it to he landed. This was wet and heated, and not in a condition for reshipmcnt. In answer to a question on this subject, certified to this court by the judges of the Circuit Court, it was replied, "that if the jury found that the jerked beef was a perishable article within the meaning of the- policy, the defendant is not liable as for a total loss of the freight, unless it appears that there was a destruction in specie of the entire cargo so that it had lost its original character at Nassau, or that a total destruction would have been inevitable from the damage received if it had been re- shipped before it could have arrived at Matanzas, the port of destination." And though there are some very strong expressions of the judge who de- livered the opinion as to the necessity of the total destruction of the thing insured to establish a total loss in memorandum articles, no doubt the language here certified is the true expression of the court's opinion. And it will be observed that in this case, as in the case of Marcardier v. Chesapeake Insurance Co., the destruction spoken of is destruction as to species, and not mere physical extinction. Indeed, philosophically speaking, there can be no such thing as absolute extinction. That of which the thing insured was composed must remain in its parts, though destroyed as to its specific identity. In the case of the jerked beef, for instance, it might remain as a viscid mass of putrid flesh, but it would no longer be either beef or jerked beef. And when the case went back for trial in the circuit, the charge of Taney, C. J., to the jury places this point in a very clear light. Taney's Decisions, 168. He says there was not a total loss at Nassau, because a part of the jerked beef remained in specie, and had not been destroyed by the disaster. And if there was reasonable ground for believing that a portion of this beef could, by repairing the vessel, have been transported to Matanzas, although it might arrive there in a damaged condition, but yet retaining the character of jerked beef, there was no total loss. The jury found there was a total loss. The case of Judah v. Randal (2 Caine's Cases, 324), where a carriage was insured, and all was lost but the wheels, is another illustration of the prin- ciple. A part of the carriage — namely, the wheels— a very important part, was saved; but the court held that the thing insured— to wit, the carriage — was lost; that it was a total loss. Its specific character as a carriage was gone. In the case of Wallerstein v. The Columbian Insurance Co. (44 N. Y. 204), the whole doctrine is ably reviewed with a very full reference to previous decisions; and it is there shown that there is far from unanimity in the lan- guage in which the rule is exi)resscd, and the extreme doctrine of an absolute extinction or destruction of the thing insured is not the true doctrine, or, at least, is not applicable in all cases as a criterion of total loss. 13 194 ASFAR & CO. V. BLUNDELL [CHAP. IX The Circuit Court was right in holding that what was insured was ma- chinery — pieces or parts of a machine — pieces made and shaped to unite at points with other pieces so as to make a sugar-packing machine. If parts of them were absolutely lost, and every piece recovered had lost its adaptability to be used as part of the machine — had lost it so entirely that it would cost as much to buy a new piece just like it as to repair or adapt that one to the purpose — then there was a total loss of the machinery. If no piece recovered was of any use, or could be applied to any use connected with the machine of which it was a part, without more expense on it than its original cost, then there was no part of the machinery saved, however much of rusty iron may have been taken from the wreck. The court went quite as far in behalf of the defendant as the law justified, when it told the jury that the plaintiff could not recover if any piece or portion of the machinery insured arrived at its destination in a condition so perfect that it could have been used with its corresponding or connecting pieces, had they also arrived in good con- dition. We are of the opinion that the charge of the court put the case very fairly to the jury, as we understand the law, and the judgment is, therefore, Affirmed. ASFAR & CO. V. BLUNDELL ET AL. Court of Appeal, 1896. 1 Q. B. D. 123 Total loss. The plaintiffs, merchants at Bussorah, entered into a charter party with the owners of the steamship Govino for the hire of said ship from Bussorah to London. The plaintiffs insured "£2,000 on profit on charter . . . war- ranted free from all average." Before arriving at her discharging dock in the Thames River, the Govino was run into by another vessel and became submerged for two or three tides. The cargo of dates, being saturated with sewerage and fermented, were condemned by the sanitary authorities as unfit for food, and were not allowed to be landed in London. Although un- merchantable as dates, a large proportion of them retained the appearance of dates and were sold for £2,400 for purposes of distillation into spirits. The lump freight of £3,900 became payable to the shipo\vners under the charter party. The total of the bill of lading freights, payable on the part of the cargo which was delivered to the consignees was less than £3.900. The court below gave judgment for the plaintiff for £750, being the differ- ence between the charter party freight and the total amount of the bill of lading freight, which would have been payable to the plaintiff had the whole of the cargo been duly delivered in London. CHAP. IX] ASFAR & CO. V. BLUNDELL 195 Lord Esher, M. R. I am of opinion that this appeal should be dismissed. The first point taken on behalf of the defendants, the underwriters, is that there has been no total loss of the dates, and therefore no total loss of the freight on them. The ingenuity of the argument might commend itself to a body of chemists, but not to business men. We are dealing with dates as a sul)jcct-matlor of commerce, and it is contended that, altliough those dates were under water for two days, and when brought up were simply a mass of pulpy matter impregnated with sewage and in a state of fermentation, there had been no change in their nature, and they still were dates. There is a perfectly well-known test which has for many years been applied to such cases as the present — that test is whether, as a matter of business, the nature of the thing has been altered. The nature of a thing is not necessarily altered because the thing itself has been damaged; wheat or rice may be damaged, but may still remain the things dealt with as wheat or rice in business. But if the nature of the thing is altered, and it becomes for busi- ness purposes something else, so that it is not dealt with by business people as the thing which it originally was, the question for determination is whether the thing insured, the original article of commerce, has become a total loss. If it is so changed in its nature by the perils of the sea as to become an un- merchantable thing, which no buyer would buy and no honest seller would sell, then there is a total loss. That test was applied in the present case by the learned judge in the court below, who decided as a fact that the dates had been so deteriorated that they had become something which was not merchantable as dates. If that was so, there was a total loss of the dates. What was the effect of this upon the insurance? If they were totally lost as dates, no freight in respect of them became due from the consignee to the person to whom the bill of lading freight was payable — that is, to the char- terers — and there was a total loss of the bill of lading freight on these dates. Appeal disfnissed.^ ' Similarly in the case of damaged hides, the condition of which was such that they would have become wholly putrid if carried on to destination, Roux v. Salvador, 3 Bing. N. C. 2G6. Actual Total Loss. — A loss may be total or partial. A total loss may be actual or constructive. An actual total loss occurs where the subject-matter insured is destroyed or irreparably damaged, or where the assured is irretrievably deprived of it, Soolberg v. Western Assur. Co., 119 Fed. 23, 55 C. C. A. 601. Thus, for instance, where a vessel founders in mid-ocean in a gale, Ogden v. N. Y. Mut. Ins. Co., 35 N. Y. 418, or is captured by an enemy and condemned as a prize, Rhinelander v. Ins. Co., 4 Cranch (U. S.), 29, or where goods taken ashore from a wreck are plundered by the inhabitants of the coast, Boudrett v. Heutigg, 1 Holt's Cas. (N. P.) 149. If a ship is so injured by the perils of the sea as to be incapable of repair, the loss is actual, Irving v. Manning, 1 H. L. Cas. 287; though her materials survive, Merchants' S. Co. v. Commer- cial Mut. Ins. Co., 51 N. Y. Sup. Ct. 444. Constructive Total Loss, United States. — In the United States for convenience and certainty, an arbitrary rule has been adopted to determine whether the insured 18 entitled to claim a constructive total loss, Ins.. Co. of N. A. v. Canada Sug. Rcf. Co., 87 Fed. 491, 493, 5 U. S. App. 22, 31 C. C. A. 65. Reversed on another ground, 175 U. S. 609, 20 S. Ct. 239. Whore the cost of repairs or expenditures will exceed fifty per cent of the value of the ship or cargo when repaired or restored, by the rule pre- 196 ASFAR & CO. V. BLUNDELL [CHAP. IX vailing in this country, a constructive total loss is established entitling the assured to abandon the subject of insurance to the underwriters, Bradlie v. Maryland Ins. Co., 12 Pet. (U. S.) 378, 9 L. Ed. 1123, Soelberg v. West. Assur. Co., 119 Fed. 23. 31. Notice of Abandonment. — Where there is a constructive total loss, the assured may either treat it as a partial loss, or abandon the subject-matter insured to the in- surer, and treat the loss as if it were an actual total loss. Western Assur. Co. v. Poole (1903), 1 K. B. 376, 384. There is no compulsion upon the assured to abandon. Mason V. Marine Ins. Co., 110 Fed. 452, 460, 49 C. C. A. 106, but upon exercising an election to avail himself of this privilege, he must, speaking generally, with reasonable dili- gence after receipt of reliable tidings of the loss, Taber v. China Mut. Ins. Co., 131 Mass. 239; Harvey v. Detroit F. & M. Ins. Co., 120 Mich. 601, 79 N. W. 898, give to the insurer a notice of abandonment, so that the latter may have opportunity to take any proper steps to recover the property or realize any salvage that may be obtainable, Rankin v. Potter, L. R. 6 H. L. 83, 119. An actual abandonment, however, if ac- cepted by the underwriter, dispenses with the necessity of formal notice of abandon- ment, Canada Sugar Ref. Co. v. Ins. Co., 175 U. S. 609, 618, 20 S. Ct. 239. When notice of abandonment is accepted, the abandonment is irrevocable. The acceptance by the insurer of the notice of abandonment conclusively admits liability for the loss under the policy, and the sufficiency of the notice, Richelieu & O. Nav. Co. v. Boston M. Ins. Co., 136 U. S. 408, 10 S. Ct. 934, 34 L. Ed. 398. The right to abandon, it has been said by the United States Supreme Court, is to be determined by the situation at the time of the abandonment and the rights of the assured turn upon the probabilities as reasonably to be gathered from the existing circumstances and not of necessity upon the actual result. Orient Mut. Ins. Co. v. Adams, 123 U. S. 67, 75, 31 L. Ed. 63, 8 S. Ct. 68 (subsequent result though evidence is not decisive); Peele v. Merchants' Ins. Co., 3 Mason, 27, 19 Fed. Cas. 98 (Story, J.). In England a notice of abandonment in order to be effective must have been justified *by the state of affairs existing not only at the time when it was given but also at the time of action brought, Ruys v. Royal Exch. Ass. Corp. (1897), 2 Q. B. 135, 66 L. J. Q. B. 534; Sailing Ship Blairmore v. Macredie (1898), App. Cas. 593, 67 L. J. P. C. 96. For example, in case of capture, Bainbridge v. Neilson (1808), 10 East, 329. Effect of Abandonment. — Where there is a valid abandonment the insurer is entitled to take over the interest of the assured in whatever may remain of the subject- matter insured, and all proprietary rights incidental thereto. Mason v. Mar. Ins. Co., 110 Fed. 452, 49 C. C. A. 106, 54 L. R. A. 700. If there are several underwriters, they share in the transfer of the interest in pro- portion to the amount of their several subscriptions, Gilchrist v. China Ins. Co., 104 Fed. 566. And where the assured is insured for an amount less that the insurable value, or in the case of a valued policy, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of the uninsured balance, and therefore is entitled to his share of salvage, Egan v. Brit. F. & Mar. Ins. Co., 193 111. 295, 61 N. E. 1081, 86 Am. St. R. 342; Cincinnati Ins. Co. v. Duffield, 6 Ohio St. 200. After abandonment, any acts subsequent to the casualty, performed by the assured or his agents in respect to the subject of insurance, are at the risk of the insurer and enure to his benefit, if done reasonably and in good faith, Rankin v. Potter (1873), L. R. 6 H. L. 119; Jumel v. Mar. Ins. Co., 7 Johns. (N. Y.) 412, 413. 5 Am. Dec. 283. The doctrine of abandonment in marine insurance law must not be confused with that of subrogation. The doctrine of abandonment applies only to a total loss, whether actual or constructive, and involves a change of property in the thing insured which thus passes from the insured to the insurer, but subrogation, on the other hand, in- volves no such change of property, and occurs whether the loss is total or partial, De Hart & Simey, Ins. (1907), 90. The insurers' right by subrogation is limited in amount to a recoupment for their payment to the insured, The Livingston, 130 Fed. 746. Adjustments. — The business of adjuisting marine losses is often complicated and in practice very largely falls into the hands of experts known as average adjusters. CHAP. IX] ASFAR & CO. V. BLUNDELL 197 If the policy is a valued policy the aRreed valuation is conclusive in the absence of fraud, Patapsco Ins. Co. v. Biscoe, 7 Gill & J. 29.1, 28 Am. Dec. 219. If the policy is not valued the measure of indemnity is the insurable value of the subject-matter. Thus, the value of a ship is computed as of the time of the commence- ment of the risk, Carson v. Mar. Ins. Co., 5 Fed. Cas. 178; Leavenworth v. Delafield, 1 Caines (N. Y.), 573, 2 Am. Dec. 201. The insurable value of goods is the market value at the time and place of lading which in practice is measured by the invoice or cost price, Pleasants v. Maryland Ins. Co., 8 Cranch, 55, 3 L. Ed. 480. As to the method for computing the mesiaure of indemnity where the goods arrive at destination in whole or in part, see London Assur. v. C'ampanhia de, etc., 107 U. S. 149, 171, 17 S. Ct. 785, 42 L. Ed. 113; Lamar Ins. Co. v. McCjla.shen, 54 111. 513, 5 Am. Rep. 162. Where there is a loss recoverable under a marine policy, the insurer, or each insurer, if there be more than one, is liable for such proportion of the measure of indemnity as the amount of his subscription bears to the value fixed by the policy, in the case of a valued policy, or to the insurable value in the case of an unvalued policy, Lohre v. Aitchison (1878), 3 Q. B. D. 564, 565; Western Assur. Co. v. Southwestern Trans. Co., 68 Fed. 923, 16 C. C. A. 65. Liability for Successive Losses may Sometimes Exceed Amount of Policy. — The rule obtains in marine insurance that if a partial loss is repairc^d or adjusted and there is a subsequent partial or total loss under the same policy, the insurer is liable for both, though exceeding the total amount underwritten, McArthur, Ins. (2d ed.), 206, 210. This rule, peculiar to marine insurance, secures only reasonable protection to the insured, who in the case of partial loss to his property on a distant voyage is likely to receive no prompt report of the extent of loss and cost of restoration, and may, therefore, be in no position to take out further insurance to equal the cost of re- pairs until, by reason of a subsequent total loss, it is too late. The chance of added liability occasioned by this recognized doctrine of law is not forgotten by the under- writer when he estimates the rate of his premium. One-Third off New for Old. — In the case of a partial loss of a ship or its equip- ments, the old materials are to be applied toward payment for the new, and, in general, a deduction of one-third from the cost of repairing or replacing the damage is made after deducting the value or proceeds of the old materials, and the marine insurer is liable for two-thirds of the balance of the cost, Eager i'. Atlas Ins. Co., 14 Pick. (Mass.) 141. See Appendix for list of customary deductions. 198 PRICE V. NOBLE [CHAP. X CHAPTER X General Average — Marine PRICE ET ALS. v. NOBLE ET AL. Court of Common Pleas, 1811. 4 Taunt. 123 General average loss and contribution. The English ship Brothers was captured by a French privateer. The English captain and most of the crew were taken out and replaced by a French prize crew. On the way to Marseilles, in a heavy storm, the French- man after consulting the English mate, necessarily threw overboard the ship's guns, anchors, chains and a quantity of stores from the middle deck, in order to lighten the laboring vessel. Before reaching Marseilles, the ship was recaptured by the English mate with the aid of others aboard, and brought to Gibraltar. The owner of the ship made a claim on the owner of the cargo for contribution to the jettison. Mansfield, C. J. What has been urged respecting the underwriters can make no difference in the liability of the defendants. The question then merely is, whether a part of the goods being thrown over for the benefit of the proprietors of the residue, the owners of the part that is lost, shall not have contribution against them. Whatever the law might be in a case where there was any evidence that the goods were grossly and ignorantly thrown over, that is not this case; for, looking on the testimony of the mate, I see that his expression was, "We met with bad weather and were obliged to throw these articles overboard. It was necessary to do it. I should not have thrown the stores overboard if I could have got at the cargo. It was necessary to the preserving our lives." So it seems that the French had so much better an opinion of the judgment of the mate than of their own, that they consulted him, and intrusted him with the navigation, and the stores seem to have been thrown over by his own individual direction. I think therefore that the verdict is right. Heath, J. The property was not altered by the capture; there was a apes recuperandi, and the property still remained in the former owners, as no condemnation had taken place. The law of average and contribution had existed for ages before the practice of insurance was known. Rule refused. CHAP. X] COLUMBIAN INS. CO. V. ASHBY 199 COLUMBIAN INS. CO. v. ASHBY Supreme Court of the United States, 1839. 13 Pet. 331 General average loss and conlrihulion. The plaintiffs Ashby and others, owners of the brig Hope, brought this action for the purpose of ascertaining whether they were entitled to recover against the cargo of the brig a contribution for an average loss. The Co- lumbian Insurance Company were the underwriter of the cargo. The brig Hope bound for Barbadoes was assailed by a hurricane in Chesa- peake Bay. She was steered towards a point in the shore for safety, and anchored in three fathoms of water. Sails were furled, and all efforts made by use of cables and anchors to prevent her going on shore. The gale in- creased, the brig struck adrift and dragged three miles; the windlass was ripped up, and the chain cable parted. The vessel then brought up below Craney Island, where she thumped on the shoals, and her head swinging round brought her broadside to the sea. The captain finding no possible means of saving the vessel and cargo, and preserving the lives of the crew, ran her on shore. After the storm she was left high and dry on a bank. The vessel was substantially a total loss; the lives aboard and the whole cargo were saved. Mr. Justice Story delivered the opinion of the court. The main question in the case is, whether the voluntary stranding of a ship in a case of imminent peril, for the preservation of the crew, the ship and cargo, followed by a total loss of the ship, constitutes a general average, for which the property saved is bound to contribution. It is admitted on all sides that the rule as to general average is derived to us from the Rhodian law, as promulgated and adopted in the Roman juris- prudence. The Digest states it thus. If goods are thrown overboard in order to lighten a ship, the loss incurred for the sake of all shall be made good by the contribution of all. Dig. lib. 14, tit. 2, e. 1. That the case of jettison was here understood to be put as a mere illustration of a more general principle, is abundantly clear from the context of the Roman law, where a ransom paid to pirates to redeem the ship is declared to be governed by the same rule. Dig. lib. 14, tit. 2, c. 2, § 3. The same rule was applied to the case of cutting away or throwing overboard of the masts or other tackle of the ship to avert the impending calamity, Dig. lib. 14, tit. 2, c. 3, c. 5, § 2; and the incidental damage occasioned thereby to other things. Without citing the various passages from the Digest which authorize this statement, it may be remarked that the Roman law fully recognized and enforced the 200 COLUMBIAN INS. CO. V. ASHBY [CHAP. X leading limitations and conditions to justify a general contribution, which have been ever since steadily adhered to by all maritime nations. First, that the ship and cargo should be placed in a common imminent peril ; secondly, that there should be a voluntary sacrifice of property to avert that peril; and thirdly, that by that sacrifice the safety of the other property should be presently and successfully attained. Hence, if there was no imminent danger or necessity for the sacrifice, as if the jettison was merely to lighten a ship too heavily laden by the fault of the master in a tranquil sea, no contribution was due. So, if the ship was injured or disabled in a storm, without any voluntary sacrifice; or if she foundered or was shipwrecked without design, the goods saved were not bound to contribution. On the other hand, if the object of the sacrifice was not attained; as if there was a jettison to prevent shipwreck, or to get the ship off the strand, and in either case it was not attained, as there was no deliverance from the common peril, no contribu- tion was due. In Bradhurst v. The Columbian Insurance Company, 9 Johns. Rep. 9, the Supreme Court of New York held that where a ship is voluntarily run ashore for the common good, and she is afterward recovered and performs the voyage, the damages resulting from this sacrifice are to be borne as a general average. But that where the ship is totally lost, it is not a general average. The ground of this opinion, as pronounced by Mr. Chief Justice Kent, seems mainly to have been that this was the just exposition of the Rhodian and Roman law, and that the weight of authority among foreign jurists clearly supported it. With great respect for the learned court, we have felt our- selves compelled to come to an opposite conclusion as to the true interpreta- tion of the Roman text and of the continental jurists. We agree with the learned court that when a ship is voluntarily run ashore, it does not, of course, follow that she is to be lost. The intention is not to destroy the ship, but to place her in less peril, if practicable, as well as the cargo. The act is hazardous to the ship and cargo, but it is done to escape from a more pressing danger; such as a storm, or the pursuit of an enemy, or pirate. But then, the act is done for the common safety; and if the salvation of the cargo is accomplished thereby, it is difficult to perceive why, because from inevitable calamity the damage has exceeded the intention or expectation of the parties, the whole sacrifice should be borne by the shipowner, when it has thereby accomplished the safety of the cargo. If one mast is cut away, and thereby another mast is unexpectedly and unintentionally also carried away by the falling of the former, it has never been supposed that both did not come into the common contribution. If in the opening of the hatches and the jettison of some goods to lighten the ship, other goods are unexpectedly and unin- tentionally, but accidentally, injured or destroyed, it has never been doubted that the latter were to be brought into contribution, to the extent of the loss or damage done to them. It is not like the case of saving from a fire, tanquam ex incendio, save who can. But it is like the saving of the cargo from destruc- tion by fire, by the scuttling and submersion of the ship. Upon principle, therefore, we cannot say that we are satisfied that the doctrine of the Su- CHAP. X] COLUMBIAN INS. CO. V. ASHBY 201 preme Court of New York can be maintained; for the general principle cer- tainly is, that whatever is sacrificed voluntarily for the common good is to be recompensed by the common contribution of the i)roperty benefited thereby. But the same question has come before other American courts, and has there, with the full authority of the New York decision before them, re- ceived a directly opposite adjudication. Our late brother Mr. Ju.stice Wa.sh- ington, than whom few judges had a clearer judgment or more patient .spirit of inquiry, had the very point before him in Caze v. Reilly, 3 Wash. Cir. C. Rep. 298; and after the fullest argument and the most extensive research into foreign jurisprudence, he pronounced an opinion that there was no difference between the case of a ])artial and that of a total loss of the ship by a voluntarj' stranding, and that both constituted equally a case of general average. The Supreme Court of Pennsylvania had a short time before, in Sims V. Gurne}^, 4 Bin. Rep. 513, adopted the same doctrine; and again in Gray v. Wain, 2 Serg. and Rawle, 229, upon a rcargumcnt of the whole mat- ter, with all the subsequent lights which could be brought before it, adhered to that opinion; and this has ever since been the established law of that court. We have examined the reasoning in these opinions, and are bound to say that it has our unqualified assent; and we follow without hesitation the doctrine as well founded in authority and supported by principle, that a voluntary' stranding of the ship, followed by a total loss of the .ship, but with a saving of the cargo, constitutes when designed for the common safety, a clear case of general average. Having disjiosed of the main question, it now remains to say a few words as to some minor points suggested at the argument. In the first place, as to the objection, that here the stranding does not appear to have been made after a consultation with the officers and crew, and with their advice. There is no weight in this objection. A consultation with the officers may be highly proper in cases which admit of delay and delil)eration, to repel the imputation of rashness and unnecessar}' stranding 1)}' the master. But if the propriety and necessity of the act are otherwise sufficiently made out, there is an end of the substance of the objection. Indeed, in many if not most of the acts done on these mclanchol}' occasions, there is little time for delibera- tion or consultation. What is to be done must often, in order to be success- ful, be done i)romptly and instantly by the master, upon his own judgment and responsibilit}'. The peril usually calls for action and skill, and intrepid personal decision, without discouraging others bj' timid doubts or hesitating movements. Upon the whole, our opinion is that the judgment of the Circuit Court ought to be affirmed, with costs. ^ ' Similarly tho same court bold that a voluntary stranding because of a smoldering but exten.sivo firo in the hold of the ship wa.s a good general average act although the master had no knowledge of the existence of the particular reef upon which the vessel grounded, Star of Hope, 9 Wall. 203, 19 L. EH. 638. A voluntary stranding is not allowed as a general average act by English practice 202 COLUMBIAN INS. CO. V. ASHBY [CHAP. X in the absence of express agreement, Arnould, Mar. Ins. (7th ed.), § 938. The English rule is said to be defended mainly upon two grounds. (1) That the stranding is not a sacrifice at all, nor the result of any selective discrimination between different inter- ests, but rather the result of an attempt to put both ship and cargo into a situation of less peril; and (2) that in practice it is impossible to distinguish between damages received by the ship and cargo prior to stranding, which are admittedly particular and not general average, and losses sustained after or in consequence of stranding. The schooner Major William H. Tantum, loaded with a cargo of iron, went for refuge inside the Delaware breakwater. The bad weather developed into a great storm, and the vessel gradually dragged her anchors until but a single anchor chain remained, and the vessel was drifting towards the beach broadside on. The master, fearing for the lives of those on board, determined to slip his cable and run ashore, head on. The cable was accordingly slipped, the vessel, without canvas, paid off and went head on the beach. Afterwards she turned broadside to the sea and became a total loss. Part of the cargo was saved and forwarded to destination. The court concluded that while the master by slipping his cable, hastened the inevitable result, and also bettered the chance of safety to those aboard, yet, as no benefit accrued to the cargo, no case for general average was established by the shipowner, The Major William Tantum, 49 Fed. 252, 1 C. C. A. 236. A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice, Eng. Mar. Ins. Act (1906), § 66 (1). Any extraordinary sacrifice or ex- penditure, voluntarily and reasonably made or incurred, in time of danger, for the purpose of preserving the property imperiled in the common adventure, is a general average act, provided it be done by the master or one in his stead authorized to act, Ralli V. Troop, 157 U. S. 386, 400, 403, 404, 15 S. Ct. 657. The party on whom the general average loss falls is entitled, subject to the conditions imposed by maritime law, to a ratable contribution from the other parties interested, and this is called a general average contribution, Svensden v. Wallace (1885), 10 App. Cas. 415. General Average — Related to Insurance. — General average losses, incurred to avert a peril insured against are held by legal inference to be within the scope of the marine policy. Thus, while in the first instance, the owner of ship or of cargo, regard- less of whether his interest is insured, is obligated to make contribution in proportion to the value of his property saved by a general average sacrifice or expenditure, yet by virtue of insurance law, if he is so fortunate as to be insured, he may reclaim from his underwriters, the amount of this contribution, McArthur, Mar. Ins. (2d ed.), 206. Obligation Rests upon Law Rather than Contract. — The right to general average and its correlative obligation are not founded necessarily upon contract, but arise from the common law of the sea, which is applicable to all who are engaged in maritime commerce, Ralli v. Troop, 157 U. S. 386, 400, 15 S. Ct. 657. Therefore the right and the obligation exist as between the owners of ship, freight and cargo whether their interests are insured or not insured, The Brigella (1893), Prob. 195, 7 Asp. Mar. Cas. 404. Origin of General Average. — The earliest trace of this ancient rule of maritime law is to be found in an extract from the Rhodian law which is incorporated in the Roman civil law. Thence it found its way into the common law of England and of the United States and became an implied condition both in the contract of affreight- ment and the policy of marine insurance, Ralli v. Troop, 157 U. S. 386, 393, 15 S. Ct. 657. Negligence Cause of Sacrifice. — A party whose negligence has made the sacrifice necessary cannot claim contribution in general average, Ralli v. Troop, 157 U. S. 386, 403, 15 S. Ct. 657; and the shipowner may be responsible in this respect for the neg- ligent acts of his master and crew. The City of Para sailed from Aspinwall for New York with a general cargo, valued at .$232,561.76. Through the negligence of the master, she stranded upon a reef at the southwest corner of Old Providence Island. After ineffectual attempts to get her off, the master justifiably jettisoned part of the CHAP. X] COLUMBIAN INS. CO. V. ASHBY 203 cargo and flooded the ship for the benefit of both ship and cargo. The ship and re- maining cargo were salved. The court held that these measures were general average acts, and that the owners of the cargo jettisoned, but not the shipowners, were entitled to a general average contribution, Pac. Mail S. Co. v. N. Y., etc.. Mining Co., 74 Fed. 564, 20 C. C. A. 349. General Average Losses. — For the benefit of the common adventure imperiled, a carrier by water may scuttle the ship itself, Achard v. Ring, 31 L. T. 647, 2 Asp. Mar. Cas. 422, or cut away any of her appurtenances, Birkley v. Prcsgrave, 1 East, 220; The Mary Gibbs, 22 Fed. 463, or jettison the whole or any part of the cargo, Ralli V. Troop, 157 U. S. 380, 393, or incur expcases with like purpose. Thus it will be seen that the principal kinds of losses for which a general average contribution is api)ropriate are naturally classified under three heads: sacrifices of parts of the ship, sacrifices of cargo, and extraordinary expenses, Lowndes, Gen. Av. (1888) 20. Where the captain of a Spanish ship, on the point of being boarded by an enemy, threw overboard a bag containing .^100,000, not to avert a common danger, but to i^rcvent the enemy from getting the money, the insurers of the money paid the loss without claiming the benefit of general average, Butler v. Wildman, 2 B. & Aid. 398. Deck Load. — In the United States and England the courts allow a jettison of deck load to be included in the general average, provided a custom of the trade can be shown justifying the loading of the goods on deck, Taunton Co. v. Ins. Co., 22 Pick. (Mass.) 108; Harris v. Moody, 30 N. Y. 266, 86 Am. Dec. 375. But, if no such custom is proved, a claim for jettison of deck load cannot be allowed in general average. The John H. Cannon, 51 Fed. 46, although if a deck load is saved bj' a general average act, it must itself contribute. The Adcle Thackera, 24 Fed. 809. Port of Refuge and Other Expenses. — The most frequent cause of general average expenses occurs where a vessel in peril puts into a port of refuge for repairs to enable her to continue the voyage. The general practice in such case in the United States differs in some particulars from the rules prevailing in England, Svendscn v. Wallace (1885), 10 App. Cas. 404. By the law of this country, wages and provisions of the crew are allowed, in general average, from the time of deviating from the voyage for the purpose of putting into a port of refuge, until the voyage is resumed, or until the cargo and vessel arc separated, or until there is no longer a reasonable prospect that the voyage will be continued, Hobson v. Lord, 92 U. S. 397. The expenses of entering the port, and of unloading, warehousing, and reloading the cargo, are allowable, provided the voyage is resumed, or so long as there is a fair prospect of its continuance, The Joseph Farwell, 31 Fed. 844. Before actually selling or pledging the cargo, however, in a port of refuge, the master is bound to communi- cate with its owners if it is possible, in order to take their instructions, The Julia Blake, 107 U. S. 418. Goods or money paid for ran.som from capture. Woods r. Olson, 99 Fed. 451, or for salvage, S. S. Balmoral Co. v. Marten (1901). 2 K. B. 890, or for other services rendered for the common benefit, are also allowed in general average. Thus the necessary expense for tugs to release a stranded vessel, Magdala S. 8. Co. r. H. Baars Co., 101 Fed. 303, or the necessary expense to extinguish fire. The Strathdon, 101 Fed. 600. But if the expense is not incurred for the conmion safetj% then it is chargeable, in particular average, to that interest which it was intended to benefit, McGaw V. Ocean Ins. Co., 23 Pick. (Mass.) 405. The Lien for Contribution. — After a .sacrifice, the master has a maritime lien for the contributory amounts due from the interests that have been saved and still in his possession, Dupont de Nemours & Co. v. Vance, 19 How. (U. S.) 162. Although this contributory sum cannot be ascertained until after discharge, the lien is enforce- able before parting with the goods, and the master is authorized to exact security in the form of a general average bond, Wcllman d. Morse, 76 Fed. 573. The execution of such a bond is not an admission of liability. It merely stands as a security in place of the goods. The Adjustment. — It is the duty of the shipowner and his agents to take such steps as may be reasonable, and within a reasonable time, to provide that all general 204 COLUMBIAN INS. CO. V. ASHBY [CHAP. X average contributions whether due to himself or others are adjusted and collected, Wavertree Sailing S. Co. v. Love. 66 L. J. P. C. 77, 76 L. T. 576 (1897), App. Cas. 373. The sacrifices and expenses allowed in general average are apportioned over the ag- gregate value of the property saved, as computed at the time and place of adjustment, Mc Arthur, Mar. Ins. (2d ed.) 196; but the property which has been sacrificed must bear its share as a contributor no less than if it had been saved, for, in legal theory, general average contribution is to be so regulated as to make it in result immaterial to each interest at risk, whose property shall in the first instance have been taken, whose money spent, or whose credit pledged, for the safety of all, Lowndes, Gen. Av. 38. The practical effect of such an adjustment is that the party upon whom the general average loss most heavily falls in the first instance receives the benefit of the general average contribution, and the payment is thus made proportionate to the benefit re- ceived, Harris v. Moody, 30 N. Y. 266; Wheaton v. China Mut. Ins. Co., 39 Fed. 879. The proper time for adjustment is the time of the completion of the voyage, or of the separation of the interests. An adjustment made at the end of the voyage, if valid there, is, in general, valid anywhere. Any port reached, subsequent to the general average act, at which the interests are separated, may be the end of the voyage for this purpose, Barnard v. Adams, 10 How. (U. S.) 270, 13 L. Ed. 417; Eliza Lines, 102 Fed. 184. York-Antwerp Rules. — The rules of practice for the adjustment of general average losses vary greatly in detail in different countries and in different ports. The regulations most frequently used by agreement are the York-Antwerp rules, adopted at Antwerp in 1877 by the Association for the Reform and Codification of the Law of Nations, and amended at their Liverpool conference in 1890, De Hart v. Compania, etc. (1903), 1 K. B. 109. Contributory Value of Freight. — In respect to the contributory value of the freight interest, which cannot always be easily ascertained, an arbitrary rule has been adopted in New York. While the full amount of freight is contributed for in general average where the loss of freight is total, only fifty per cent of that amount is called upon for contribution, Rathbone v. Fowler, 6 Blatch. (U. S. C. C.) 296. That is sup- posed to be a rough estimate of its net value at the end of the voyage, after expenses have been deducted from gross freight. Other ports in the United States deduct one- third, Humphreys v. Union Ins. Co., 3 Mason, 429 (1824). The usage in England is to compute the net freight interest for contribution by deducting the estimated amounts saved, such as wages and port charges, instead of relying on any arbitrary ratio, 2 Arnould, Ins., § 989, and this is also the provision of the York-Antwerp Rules, Rule XVII. PART II MEANING AND LEGAL EFFECT OF THE CLAUSES OF THE POLICIES STATUTORY FORMS OF FIRE INSURANCE POLICIES Standard Form of Fire Insurance Policy for New York State The Insurance Company, in consideration of the stipulations herein named and of dollars premium, docs insure for the term of from the day of , 19 . . , at noon, to the day of , 19 . . , at noon, against all direct loss or damage by fire, except as hereinafter provided, to an amount not exceeding dollars, to the following described property while located and contained as described herein, and not elsewhere, to wit: — (Description of property insured, and special clauses.) 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 deprecia- tion 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 qualitj'; said ascertainment or estimate shall be made by the insured and this company, 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 satisfactory proof of the loss have been received by this company in accordance with the terms of this policy. It shall be optional, however, with this company to take all, or any part, of the articles at such ascertained or appraised value, and also to repair, rebuild, or replace the property lost or damaged with other of like kind and quality within a reasonable time on giving notice, within thirty days after the receipt of the proof herein required, of its intention so to do; but there can be no abandonment to this company of the property described. This entire policj'^ shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss. This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy; or if the subject of insurance be a manufacturing establish- ment, 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 em- ployed in building, altering, or repairing the within described premises for more than fifteen days at any one time; or if the interest of the insured be other than uncondi- tional 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 incumbered by a chattel mortgage; or if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property covered by this policy by virtue of any mortgage or trust deed; or if any change, other than by the death of an insured, take place in the interest, title, or possession of the subject of insurance (except change of occupants without increase of hazard), whether 207 208 STATUTORY FORMS OF FIRE INSURANCE POLICIES by legal process or judgment or by voluntary act of the insured, or otherwise; or if this policy be assigned before a loss; or if illuminating gas or vapor be generated in the described building (or adjacent thereto) for use therein; or if (any usage or custom of trade or manufacture to the contrary notwithstanding) there be kept, used, or al- lowed on the above described premises, benzine, benzole, dynamite, ether, fireworks, gasoline, greek fire, gunpowder exceeding twenty-five pounds in quantity, naphtha, nitroglycerine or other explosives, phosphorus, or petroleum or any of its products of greater inflammability than kerosene oil of the United States standard (which last may be used for lights and kept for sale according to law, but in quantities not exceed- ing five barrels, provided it be drawn and lamps filled by daylight or at a distance not less than ten feet from artificial light) ; or if a building herein described, whether intended for occupancy by owner or tenant, be or become vacant or unoccupied and BO remain for ten days. This company shall not be liable for loss caused directly oji indirectly by invasion, insurrection, riot, ci%al 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 property is endangered by fire in neighboring premises; or (unless fire ensues, and, in that event, for the damage by fire only) by explosion of any kind, or lightning; but liability for direct damage by lightning may be assumed by specific agreement hereon. If a building or any part thereof fall, except as the result of fire, all insurance by this policy on such building or its contents shall immediately cease. This company shall not be liable for loss to accounts, bills, currency, deeds, evi- dences of debt, money, notes, or securities; nor, unless liability is specifically assumed hereon, for loss to awnings, bullion, casts, curiosities, drawings, dies, implements, jewels, manuscripts, medals, models, patterns, pictures, scientific apparatus, signs, store or office furniture or fixtures, sculpture, tools, or property held on storage or for repairs; nor beyond the actual value destroyed by fire, for loss occasioned by ordinance or law regulating construction or repair of buildings, or by interruption of business, manufacturing processes, or otherwise; nor for any greater proportion of the value of plate glass, frescoes, and decorations than that which this policy shall bear to the whole insurance on the building described. If an application, survey, plan, or description of property be referred to in this policy, it shall be a part of this contract and a warranty by the insured. In any matter relating to this insurance, no person, unless duly authorized in writ- ing, shall be deemed the agent of this company. This policy may by a renewal be continued under the original stipulations, in con- sideration of premium for the renewed term, provided that any increase of hazard must be made known to this company at the time of renewal or this policy shall be void. 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. If this policy shall be can- celed as hereinbefore provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate; except that when this policy is canceled by this company by giving notice it shall retain only the pro rata premium. If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto. If property covered by this policy is so endangered by fire as to require removal to a place of safety, and is so removed, that part of this policy in excess of its propor- tion of any loss and of the value of property remaining in the original location, shall, STATUTORY FORMS OF FIRE INSURANCE POLICIES 209 for the ensuing five days only, cover the property so renaoved in the new location; if removed to more than one location, such excess of this policy shall cover therein for such five days in the proportion that the value in any one such new location bears to the value in all such new locations; but this company shall not, in any case of removal, whether to one or more locations, be liable beyond the proportion that the amount hereby insured shall bear to the total insurance on the whole property at the time of fire, whether the same cover in new location or not. If fire occur the insured shall give immediate notice of any loss thereby in writing to this company, protect the property from further damage, forthwith separate the damaged and undamaged personal property, put it in the best possible order, make a complete inventory of the same, stating the quantity and cost of each article and the amount claimed thereon; and, within sixty days after the fire, unless such time is ex- tended in writing by this company, shall render a statement to this company, signed and sworn to by said insured, stating the knowledge and belief of the insured as to the time and origin of the fire; the interest of the insured and of all others in the property; the cash value of each item thereof and the amount of loss thereon; all incumbrances thereon; all other insurance, whether valid or not, covering any of said property; and a copy of all the descriptions and schedules in all policies; any changes in the title, use, occupation, location, possession, or exposures of said property since the issuing of this policy; by whom and for what purpose any building herein described and the several parts thereof were occupied at the time of fire; and shall furnish, if required, verified plans and specifications of any building, fixtures, or machinery destroyed or damaged; and shall also, if required, furnish a certificate of the magistrate or notary public (not interested in the claim as a creditor or otherwise, nor related to the insured) living nearest the place of fire, stating that he has examined the circumstances and believes the insured has honestly sustained loss to the amount that such magistrate or notary public shall certify. The insured, as often as required, shall exhibit to any person designated by this company all that remains of any property herein described, and submit to examina- tions under oath by any person named by this company, and subscribe the same; and, as often as required, shall produce for examination all books of account, bills, invoices, and other vouchers, or certified copies thereof if originals be lost, at such reasonable place as may be designated by this company or its representative, and shall permit extracts and copies thereof to be made. In the event of disagreement as to the amount of loss the same shall, as above pro- vided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss; stating separately sound value and damage, and, failing to agree, shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of such loss; the parties thereto shall pay the appraiser respectivelj- se- lected by them, and shall bear equally the expenses of the appraisal and umpire. This company shall not be held to have waived any provision or condition of this policy or any forfeiture thereof by any requirement, act, or proceeding on its part relating to the appraisal or to any examination herein provided for; and the loss shall 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 Ijy appraisers when appraisal has been required. This company shall not be liable under this policy for a greater proportion of any loss on the described property, or for loss by and expense of removal from premises endangered by fire, than the amount hereby insured shall bear to the whole insurance, whether valid or not, or by solvent or insolvent insurers, covering such property, and the extent of the application of the insurance under this policy or of the contribution to be made by this company in case of loss, may be provided for by agreement or condition written hereon or attached or appended hereto. Liability for reinsurance shall be as specifically agreed hereon. 14 210 STATUTORY FORMS OF FIRE INSURANCE POLICIES If this company shall claim that the fire was caused by the act or neglect of any person or corporation, private or municipal, this company shall, on payment of the loss, be subrogated to the extent of such payment to all right of recovery by the insured for the loss resulting therefrom, and such right shall be assigned to this company by the insured on receiving such pa>Tnent. 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 commenced within twelve months next after the fire. 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 damage." If this policy be made by a mutual or other company having special regulations lawfully applicable to its organization, membership, policies, or contracts of insurance, such regulations shall apply to and form a part of this policy as the same may be written or printed upon, attached, or appended hereto. This policy is made and accepted subject to the foregoing stipulations and conditions, together with such other provisions, agreements, or conditions as may be indorsed hereon or added hereto, and no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed hereon or added hereto, and as to such provisions and conditions no officer, agent, or re.presentative shall have such power or be deemed or held to have waived such provisions or condi- tions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached. In Witness Whereof, this company has executed and attested these presents, but this policy shall not be valid unless countersigned by the duly authorized agent of the company at , this day of , 19 . . . The Massachusetts Standard Fire Policy. (Corporate name of the company or association; its principal place or places of business.) This company shall not be liable beyond the actual value of the insured property at the time any loss or damage happens. In consideration of dollars to them paid by the insured, hereinafter named, the receipt whereof is hereby acknowledged, do insure and legal representatives against loss or damage by fire, to the amount of dollars Bills of exchange, notes, accounts, evidences and securities of property of every kind, books, wearing apparel, plate, money, jewels, medals, patterns, models, scientific cabinets and collections, paintings, sculpture and curiosities are not included in said insured property, unless specially mentioned. Said property is insured for the term of beginning on the day of in the year nineteen hundred and at noon, and continuing until the day of , in the year nineteen hundred and , at noon, against all loss or damage by fire originating from any cause except invasion, foreign enemies, civil commotions, riots, or any military or usurped power whatever; the amount of said loss or damage to be estimated according to the actual value of the insured property at the time when such loss or damage happens, but not to include loss or damage caused by explosions of any kind unless fire ensues, and then to include that caused by fire only. This policy shall be void if any material fact or circumstance stated in writing has not been fairly represented by the insured, — or if the insured now has or shall here- STATUTORY FORMS OF FIRE INSURANCE POLICIES 211 after make any other insurance on the said property without the aHsent in writing or in print of the company, — or if, without such assent, the said property ehall be re- moved, except that, if such removal siiail be necessary for the preservation of the property from fire;, this policy shall be valid without such assent for five days there- after, — or if, without such assent, the situation or circumstances affecting the risk shall, by or with the knowledge, advice, agency or consent of the insured, be so altered as to cause an increase of such risks, or if, without such assent the said property shall be sold, or this i)oli<'y assigned, or if the premises hereby insured shall become vacant by the removal of tli(! (nvner or occupant, and so remain vacant for more than thirty days without such assent, or if it be a manufacturing establishrm nt, running, in whole or in part, extra time, except that such establishment may run, in whole or in part, extra hours not later than nine o'clock p. M., or if such estaljlisliment shall cease operation for more than thirty days without permission in writing indorsed hereon, or if the insured shall make any attempt to defraud the company either before or after the loss, — or if gunpowder or other articles subject to legal restriction shall be kept in quantities or manner different from those allowed or prescribed by law, — or if cam- phene, benzine, naphtha, or other chemical oils or burning fluids shall be kept or used by the insured on the jjremiscs insured, except that what is known as refined petroleum, kerosene or coal oil, may be used for lighting, and in dwelling houses kerosene oil stoves may be used for domestic purposes, — to be filled when cold, by daylight, and with oil of lawful fire test only. If the insured property' shall l)e exposed to loss or damage by fire, the insured shall make all reasonai)le exertions to save and protect the same. In case of any loss or damage under this policy, a statement in writing, signed and sworn to by the insured, shall be forthwith rendered to tin? company, setting forth the value of the property insured, the interest of the insured therein, all other insur- ance thereon, in detail, the purposes for which and the persons by whom the building insured, or containing the property insured, was used, and the time at which and manner in which the fire originated, so far as known to the insured. The company may also examine the books of accounts and vouchers of the insured, and make ex- tracts from the same. In case of any loss or damage, the company, within sixty daj-s 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 nut aorvvd upon shall be ascertained by award of referees as hereinafter provided, or replace the property with other of the same kind and goodness, — or it may, within fifteen days after such statement is sub- mitted, 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 rebuild or repair the same with reasonable expedition. It is moreover understood that there can be no abandonment of the property insured to the company, and that the company shall not in any ease be liable for more than the sum insured, with interest thereon from the time when the loss shall become payable, as above provided. If there shall be any other insurance on the property insured, whether prior or sub- sequent, the insured shall recover on this policy no greater proportion of the loss sustained than the sum hereby insured bears to the whole amount insured thereon. And whenever the company shall pay any loss, the insured shjUl assign to it, to the extent of the amount so paid, all rights to recover satisfaction for the loss or damage from any person, town or other corporation, excepting other insurers; or the insured, if requested, shall prosecute therefor at the charge and for the account of the company. If this policy shall be made payalile to a mortgagee of the insured real estate, no act or default of any person other than such mortgagee or his agents, or those claiming under him, shall affect such mortgagee's right to recover in case of loss on such real estate: provided, that the mortgagee shall, on demand, pay according to the established scale of rates for any increase of risks not paid for by the insured; and whenever this company shall be liable to a mortgagee for any sum for loss under this policy, for 212 STATUTORY FORMS OF FIRE INSURANCE POLICIES which no liability exists as to the mortgagor, or owner, and this company shall elect by itself, or with others, to pay the mortgagee the full amount secured by such mort- gage, then the mortgagee shall assign and transfer to the companies interested, upon such payment, the said mortgage, together with the note and debt thereby secured. This policy may be canceled at any time at the request of the insured, who shall thereupon be entitled to a return of the portion of the above premium remaining, after deducting the customary monthly short rates for the time this policy shall have been in force. The company also reserves the right, after giving written notice 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 expiration of ten days from such notice, and no mortgagee shall then have the right to recover as to such risks. In case of loss under this policy and a failure of the parties to agree as to the amount of loss, it is mutually agreed that the amount of loss shall be referred to three dis- interested men, the company and the insured each choosing one out of three persons to be named by the other, and the third being selected by the two so chosen ; the award in writing by a majority of the referees shall be conclusive and final upon the parties as to the amount of loss or damage, and such reference unless waived by the parties shall be a condition precedent to any right of action in law or equity to recover for such loss; but no person shall be chosen or act as a referee, against the objection of either party, who has acted in a like capacity within four months. No suit or action against this company for the recovery of any claim by virtue of this policy shall be sustained in any court of law or equity in this commonwealth unless commenced within two years from the time the loss occurred. In Witness Whereof, etc. The Minnesota court says: "The Massachusetts and New York standard policies went into effect about the same time and have formed the models for the legislation in other States," Wild-Rice Lumber Co. v. Royal Ins. Co., 99 Minn. 190, 108 N. W. 871. The use of the standard policy, including its provisions and type, is, in general, made obligatory by the statute upon all corporations, and in some States a penalty is imposed for violating the act, but any policy, though in purport inconsistent with the provisions of the act, is nevertheless binding upon the company issuing it, and may be enforced against the company according to its terms as written, Hewins v. London Assur. Corp., 184 Mass. 177, 68 N. E. 62, 64; Strampe v. Ins. Co., 109 Minn. 364. The New York standard policy is used either by statutory enactment or by custom in the great majority of the States of this Union, but certain of the standard forms of policies follow more closely the Massachusetts form, while a few States, for example California, Iowa, Michigan, South Dakota and Wisconsin have statutory policies in which certain clauses differ substantially both from the New York and the Massa- chusetts policies. PART II MEANING AND LEGAL EFFECT OF THE CLAUSES OF THE POLICIES CHAPTER XI Clauses of the Standard Fire Policy Loss hy Fire, Description of Property and Interest, Measure of Recovery, Option to Rebuild, Divisibility of Contract, Fraud, etc. O'CONNOR V. QUEEN INS. CO. OF AMERICA Supreme Court of Wisconsin, 1909. 140 Wis. 388 What constitutes fire? Action upon a fire insurance policy. The servant of plaintiff built a fire in the furnace with paper and cannel coal, not used or intended to be used for such purpose, which fire developed within a few moments to such a degree of fury as to fill the house with groat volumes of smoke, soot and excessive and intense heat, and damaged the personal property therein to the amount as found by the jury, $562. The only question submitted to the jury was the amount of damages, and the court directed a verdict for the plaintiff" for the amount of damages found by the jury. Judgment was entered for the plaintiff accordingly, from which this appeal was taken. Kerwin, J. (after stating the facts as above). The policy in this case being the Wisconsin standard form, insured the plaintiff "against all direct loss and damage by fire"; and the controversy is as to whether the loss and damage was caused by anything insured against by the defendant company. The question arises whether the fire which caused the damage was a fire within the meaning of the policy. The plaintiff lived in a rented house, heated by a furnace. His servant built a fire in the furnace of material not for use therein or intended so to be used, and of such a highly inflammable character as to cause intense heat and great volumes of smoke to escape through the registers leading into the rooms and greatly damage plaintiff's property. The heat was so intense as to char and injure furniture and the 213 214 O'CONNOR V. QUEEN INS. CO. [CHAP. XI great volumes of smoke and soot greatly injured the furnishings and per- sonal property of the plaintiff. It does not appear from the evidence that there was any ignition outside of the furnace, although the fire was so in- tense as to overheat the chimney and flues and char furniture in the rooms. The evidence shows that the chimney was so hot it seemed as though it was on fire, that the fire was burning fiercely in the furnace, around the mop boards was burned and the mop boards bhstered, the wall paper charred and burned, and the chimney cracked from the excessive heat. It is the conten- tion of appellant that the damage occasioned by heat, smoke and soot is not covered by the policy where the fire is confined within the furnace. This position involves the construction of the words of the policy "direct loss or damage by fire," and leads to a consideration of what fires are within the contemplation of the policy. No limitation is placed upon the word "fire" by the language of the policy itself, but it is said that "contracts of insurance are to be construed according to the sense and meaning of the terms which the parties have used, and, if they are clear and unambiguous, the terms are to be taken and understood in their plain," ordinary and proper sense." No doubt this is the general rule, but it must also be remembered in apply- ing the rule that this and other courts have construed contracts of insurance favorably to the insured. Appellant insists that a fire confined within the limits of a furnace, although producing damage by smoke and heat, is not a fire within the meaning of the policy in question, and rehes mainly upon the case of Austin v. Drew, 4 Gamp. 361. In that case, the plaintiff was the owner of a sugar factory several stories high with pans on the ground floor for boiling sugar and a stove for heating. A flue extended to the top of the building ^vith registers on each floor connecting with the flue to introduce heat. Because of the negligence of a servant in not opening a register at the top of the flue or chimney, used to shut in the heat during the night, the smoke, sparks and heat from the stove were intercepted, and, instead of escaping through the top of the flue, were forced into the rooms, in conse- quence of which the sugar was damaged. The flames were confined within the stove and flue, and no actual ignition took place outside thereof, and it was held that the loss was not covered by the policy. The Lord Chief Jus- tice said that there was no more fire than always existed when the manu- facture was going on, and which continued to burn without any excess. The case seems to turn upon the point that the fire was the usual and ordinary fire, never excessive and always confined within its proper limits. We shall briefly refer to other cases, cited by appellant on this point. Samuels v. Continental Ins. Co., 2 Pa. Dist. R. 397, was a claim for damages caused by smoke and soot from a lamp whose flame flared up above the lamp. Wood on Insurance (2d ed.), § 103, it is true, lays down the general rule that no liability arises where the fire is confined within the limits of the agencies employed, referring to the case of Austin v. Drew, supra, with the observa- tion that the doctrine of that case had been considerably misconceived by courts and text-writers. Case v. Hartford F. Ins. Co., 13 111. 676, discusses Austin V. Drew, 4 Camp. 361, and discards the idea that there can be no CHAP. Xl] o'cONNOR V. QUEEN INS. CO. 215 loss by fire without actual ignition. American Towing Co. v. German F. Ins. Co., 74 Md. 25, 21 Atl. 553, was a ca.so of overheated boiler owing to the absence of water. Austin v. Drew, supra, is referred to and it was hold dam- age not covered by tJie policy. Cannon v. Pha;nix Ins. Co., 110 Ga. 563, 35 S. E. 775, 78 Am. St. Rep. 124, is a case where the fire was an ordinary fire in a stove. The fire was what is termed in law books a "friendly" and not a "ho.stile" fire. In this case, the stovepipe became disarranged, and smoke and soot escaped, together with the water used in cooling the ceiling, causing the damage. Austin v. Drew, supra, is cited in support of the opinion. It will be seen from the foregoing cases relied upon by appellant that the cases in this country in any way tending to support appellant's contention, rest upon the doctrine of Austin v. Drew, which has not been extended, but lim- ited to the particular facts of the case, and the doctrine enunciated therein criticised in some well-considered cases. We shall refer briefly to some of the authorities. In Scripture v. Lowell M. F. Ins. Co., 10 Cush. (Mass.) 356, 57 Am. Dec. Ill, the doctrine of Austin v. Drew is explained, and the court says that lack of study of the case by courts and text-writers has caused it to be misapplied, and refers to the language of the Chief Justice in Austin V. Drew, to the effect that the fire was an ordinary one and no more than always existed when the manufacturing was going on. Singleton et al. v. Phoenix Ins. Co., 132 N. Y. 298, 30 N. E. 839, is a case where a boat was loaded with quicklime in barrels. The boat was found to be on fire through the slacking of the lime. It was towed into the river and suiik to prevent total destruction. It was claimed that some water in the boat must have caused the slacking of the lime; held, that the loss was by fire within the meaning of the policy. Further intimated that it may not be necessarj' to show actual ignition or combustion to establish a loss by fire. In Way v. Abington M. F. Ins. Co., 166 Mass. 67, 43 N. E. 1032, 32 L. R. A. 608, 55 Am. St. Rep. 379, fire in the stove ignited the soot in the chim- ney, and the smoke and soot from the burning chimney escaped into the room and damaged property. Held, that such damage was covered by the i)olicy insuring against all loss or damage by fire. The case seems to have turned upon the fact that the fire in the chimney was a "hostile" fire; therefore the damage caused by such fire was covered by the policy. In Russell v. German F. Ins. Co., 100 Minn. 528, 111 N. W. 403, 10 L. R. A. (N. S.) 326, it is held that, to render a fire the immediate or proximate cause of the loss or damage, it is not necessary that any part of the insured property was actually ignited or was consumed by fire. In Ermentrout et al. v. Girard F. & M. Ins. Co., 63 Minn. 305, 65 N. W. 635, 30 L. R. A. 346, 56 Am. St. Rep. 481. the case was on a policy insuring plaintiff "against all direct loss or damage by fire," and the policy further provided that if the building fell "except as result of fire," the insurance on the building should immediately cease. There was evidence tending to prove that a building adjacent to the one insured caught fire and was partially consumed, ami as a result of such fire, fell, carrying down with it a partition wall and a part of the insured building. Held, that the fall of the insured building was "the result of fire" and "a direct loss or 216 o'cONNOR V. QUEEN INS. CO. [CHAP. XI damage by fire," although no part of it ignited or was consumed by fire. Cameron in his work on the Law of Fire Insurance in Canada, p. 51, dis- cusses the effect of the word "direct" in poHcies providing against "direct loss or damage by fire," and says that the word has no significance or value, and, whether used or not the fire must be the proximate cause of the loss or damage. See also Richards on Insurance Law (3d Ed.), § 231, where it is said that the word "direct" in a policy means immediate or proximate as (.listinguished from remote, but that the proximate results of fire may in- clude other things than combustion, as, for example, the resulting fall of a building, injuries to insured property by water, loss of goods by theft, exposure of goods during fire. The foregoing cases we think fully show that Austin v. Drew is not au- thority against plaintiff here. There the fire was under control, not excessive, and suitable and proper for the purpose intended. It was in the language of the books, a "friendly" and not a "hostile" fire. In the case before us the fire was extraordinary and unusual, unsuitable for the purpose intended, and in a measure uncontrollable, besides being inherently dangerous because of the unsuitable material used. Such a fire was we think a "hostile" fire and within the contemplation of the policy. Ordinarily the question in such cases is for the jury. New York & B. D. E. Co. et al. v. Traders' & M. Ins. Co., 132 Mass. 377, 42 Am. Rep. 440; s. c, 135 Mass. 221; Richards, Ins. (3d Ed.), § 231. But in this case the evidence being practically un- disputed we think no error was committed in directing a verdict for the plaintiff. The judgment of the court below is affirmed. Marshall, J., dissenting on the ground that there being no ignition, ex- cept in the furnace and the only injury one of charring and discoloration from radiated heat and smoke the judgment should be reversed. ^ 1 In a Massachusett.s case, the plaintiff had insured its building and machinery against loss by fire. A fire occurred in the tower of the building. It was confined to the tower and did only slight damage there. Through this tower, however, wires for electric lighting were carried. The fire acted upon the wires in such a way that a con- nection called a short circuit was made between lightning arresters. The electricity, because of the short circuit, affected the dynamo in such a way as to cause greater resistance to the machinery. This resistance, transmitted to a pulley through a belt, in turn destroyed the pulley, which destruction in turn disturbed the main shaft and ruptured other pulleys. By reason of pieces flying from the jack-pulley, or other similar cause, the fly wheel of the engine was destroyed, the governor broken, and the machinery disrupted generally. The disruption and damage to the machinery oc- curred in a part of the building remote from any fire or combustion. The court held, however, that the whole loss was by fire, and that " fire was the direct and proximate cause " within the meaning of the Mas.sachusctts standard policy, Lynn Gas & Elec. Co. V. Meriden Fire Ins. Co., 158 Mass. 570, 3.3 N. E. 690, 29 L. R. A. 297, 35 Am. St. R. 540. As to whether earthquake or fire should be regarded as the proximate cause of loss, where the California earthquake broke the water mains and prevented the fire department from extingui.shing the fire, see Pac. Union Club v. Commercial Union Assur. Co. (Cal., 1910), 107 Pac. 728. CHAP. Xl] KENNISTON V. MERRIMACK CO. MUT. INS. CO. 217 KENNISTON v. MERRIMACK COUNTY MUT. INS. CO. Superior Court of Judicature of New Hampshire, 1843. 14 N. H. 341 Loss by lightning. Action on a policy insuring against loss or damage by fire. The plaintiff was allowed a recovery. To sustain his claim the plaintiff offered evidence tending to show that on a certain day his house was struck by lightning, and different parts of it materially injured, and also articles of crockery, glass and tin ware broken or destroyed. His witnesses also testified that the boards and timber near one of the windows where the lightning struck, exhibited marks or traces of fire, being discolored and rendered of a dark brown color, as if affected by a blaze of fire. One witness testified that he saw on these boards and timbers where fire burned, and he had no doubt that the house would have been burned had not the water been admitted through the window which was broken out by the lightning. Parker, C. J. There must be a new trial. On the facts stated the court cannot determine whether the loss is or is not within the risks of the policy. If the damage was from lightning without any combustion, it is clearly not within the terms of the contract of insurance. The policy does not pro- vide against every damage which may arise from the action of the electric fluid. The terms of the policy were to pay within a certain time after the destruc- tion "by reason or by means of fire." Fire is the one loss hisured against; and lightning, though not excepted from the sources of fire, is nowhere, either in the charter or policy itself, directly provided against. It is true that there was evidence tending to show that the building, in- sured in the policy now in question, was set on fire by the lightning; and if such was the fact, this action is well brought. But this fact is not made cer- tain by the evidence, and the question must be submitted to a jurj'. New trial ordered.^ ' The Following Described Property. — The description of the property covered is usually brief and often informal. The rule of construction must be inclusive rather than exclusive, Rickeraon v. Hartford Fire Ins. Co.. 149 N. Y. 307, 313; Grayhill v. Penn Township Mut. F. Ins. Asso., 170 Pa. St. 75, 32 Atl. 632. Thus a furnace and boiler were held to be part of the house insured, West v. Farmers' Mut. Ins. Co., 117 Iowa, 147, 90 N. W. 523. An annex to the building was held to be covered by the policy on the building, Boak Fish Co. v. Manchester F. Assur. Co., 84 Minn. 419, 87 N. W. 932. And the word "sheds" may mean not only those adjoining a mill or factory insured but also more distant sheds. Wolverine Lumber Co. v. Palatine Ins. Co., 139 Mich. 432. As to the meaning of the word "additions" which is often em- ployed in connoction with a description of buildings in policies, see Cargill v. Millers' 218 GERMANIA FIRE INS. CO. V. SCHILD [CHAP. XI GERMANIA FIRE INS. CO. v. SCHILD Supreme Court of Ohio, 1903. 69 Ohio St. 136 Entirety or divisibility of contract. Action on a policy of fire insurance for the sum of $625, distributed as follows: $200 on office furniture; $250 on surgical instruments; $75 on sur- Ins. Co., 33 Minn. 90, 22 N. W. 6; Home Mut. Ins. Co. v. Roe, 71 Wis. 33, 36 N. W. 594- Arlington Mfg. Co. v. Colonial Ins. Co., 180 N. Y. 337, 73 N. E. 34. Contra, Arlington Mfg. Co. v. Norwich Union F. Ins. Co., 107 Fed. 662, 46 C. C. A. 542 (facts the same as in the last case). Fluctuating Stock, etc. — A policy upon merchandise in a store applies to the stock successively in the store from time to time during the term of the policy, Man- chester F. a. Co. v. Feibclman, 118 Ala. 308, 23 So. 759; Hoffman v. ^tna Ins. Co., 32 N. Y. 405. The same rule applies to machinery, furniture and clothing, Cummings V. Cheshire Co. Mut. F. Ins. Co., 55 N. H. 457; and to implements generally, Johnson V. Farmers' Ins. Co., 126 Iowa, 565, 102 N. W. 502; and to vehicles, Beyer v. St. Paul F. & M. Ins. Co., 112 Wis. 138, 88 N. W. 57. Location. — While located and contained as described herein and not elsewhere. Place is ordinarily material to the contract and of the very essence of the risk, Bryce v. Lorrilard Fire Ins. Co., 55 N. Y. 240; Lyons v. Providence Washington Ins. Co., 14 R. I. 109, 51 Am. Rep. 364. With varying location the risk is apt to vary, and whether it does or not the insurers have the right to know what risk they are assuming, Ohio Farmers' Ins. Co. v. Burgct, 65 Ohio St. 119, 122, 61 N. E. 712, 55 L. R. A. 825, and often decline an insurance because of the amount already placed by them upon, or in, the same building. If a permit for removal is obtained, goods are not protected in transit Goodhue v. Ins. Co., 84 Mass. 41, 67 N. E. 645, unless the policy so provides, Kratzenstein v. Western Assur. Co., 116 N. Y. 54, 22 N. E. 221. 5 L. R. A. 799, but are protected in the old place until removed, Kunzze v. Amer. Exch. Fire Ins. Co., 41 N. Y. 412; Sharplcss v. Ins. Co., 140 Pa. St. 437. But it has been held that where the clause in the policy is simply in the words, "the following described property contained in" a certain building, the location is not material, if the nature of the property makes it clear that it must have been the intention of the parties to protect it by the policy whether in the particular place or not. In that event a designation of place is looked upon as merely descriptive and to be controlled by the necessary use of the thing insured, Boyd v. Miss. Home Ins. Co., 75 Miss. 47, 21 So. 70S; Niagara Fire Ins. Co. V. Elliott, 85 Va. 962, 9 S. E. 694; Haws v. Fire Asso., 114 Pa. St. 431; Longucville v. West. Assn. Co., 51 Iowa, 553, 33 Am. Rep. 146. This clause is not a part of the Massachusetts standard policy, Westficld Cigar Co. v. Ins. Co. of North Am., 169 Mass. 382, 47 N. E. 1026; Ijut the Massachusetts court limits location to the premises as described in the policy, Westfield Cigar Co. v. Ins. Co. of N. A., 165 Mass. 541, 43 N. E. 504. Measure of Damages.— A^o< liable beyond actual cash value of the property at the time of loss, with proper deduction for depreciation, however caused. This in express terms excludes remote damages, such as loss from interruption of business, prospective rent or profit, except as these are specially insured; it also excludes any pretium af- fectionis. The actual cash or market value at the time of the fire rules, Stenzel v. Penn. Fire Ins. Co., 110 La. 1019, 35 So. 271; and the purchase price is relevant, if at all, only as bearing upon that, Waynesboro Mut. Fire Ins. Co. v. Creaton, 98 Pa. Bt. 451, 42 Am. Rep. 618. Market value governs more clearly in case of certain kinds of personal property. State Ins. Co. v. Taylor, 14 Colo. 499, 24 Pac. 333. The purchase CHAP, Xl] GERMANIA FIRE INS. CO. V. SCHILD 219 gical operating chair and $100 on medical library. The policy provided "this entire policy shall be void if the interest of the insured in the property be not truly stated heroin, or if the interest of the insured be other than un- conditional and sole ownership." On the trial it appeared that the surgical operating chair had been bought by the insured on a conditional purchase, and had not been fully paid for when the policy was issued. Davis, J. It has been twice adjudged by this court that policies of insur- ance, like other contracts, should be reasonably construed, so as to give ef- fect to the express words of the parties and not to defeat their intention. And this rule of construction should be observed notwithstanding the rule that when a policy is open to two interpretations which are equally fair, that one should be preferred which would give to the insured the greater indem- nity. There is no ambiguity in this policy; and it is not contended that it is ambiguous. Counsel for the defendant in error insists that the words: "This entire policy shall be void," etc., have no more force than if the word "entire" were omitted, and that therefore this case is controlled by Coleman & Co. V. Insurance Co., 49 Ohio St. 310. There is much force in the argument that price, if not at too remote a period, often furnishes some evidence of present value, Johnston v. Farmers' Ins. Co., 106 Mich. 90, 64 N. W. 5. But the insured is entitled to the actual cash value of articles destroyed though they may have cost him nothing, Chapman v. Rockford Ins. Co., 89 Wis. 572, 62 N. W. 422, 28 L. R. A. 405. "Actual cash value" does not mean what the property would bring at a forced sale. Sun Fire Office V. Ayerst, 37 Ncv. 184, 55 N. W. 635. A usual test to be applied to a manu- facturer is what it would cost him to reconstruct. Standard Sewing Machine Co. v. Royal Ins. Co., 201 Pa. St. 645, 51 Atl. 354; but see Mitchell v. St. Paul F. Ins. Co., 92 Mich. 594, 52 N. W. 1017. He is not entitled to his selling price since that would include profits. Niagara Ins. Co. v. Heflin, 22 Ky. L. R. 1212, 60 S. W. 393. Cost of replacing often furnishes the fair criterion for estimating the amount of loss, Cummins V. German-Am. Ins. Co., 192 Pa. St. 359, 43 Atl. 1016; Clover v. Greenwich Ins. Co., 101 N. Y. 277, 283. 43 N. E. 724. But not in case of an old building for which de- preciation must be allowed, Scott v. Security F. Ins. Co.. 98 Iowa, 67, 71; Gcrmier v. Springfield F. & M. Ins. Co., 109 La. 341, 33 So. 361. Valued Policy Laws: Total Loss of Building. — As to what constitutes a total loss of a building under the valued policy laws .see Northwestern Mut. L. Ins. Co. v. Rochester Gcr. Ins. Co., 85 Minn. 48, 88 N. W. 265; Liverpool & L. & G. F. Ins. Co. v. Heckman, 64 Kan. 388; 67 Pac. 879; Palatine Ins. Co. v. Weiss, 109 Ky. 464, 59 S. W. 509; Royal Ins. Co. v. Mclntyre, 90 Texas, 170, 37 S. W. 1068. Reinstatement Clause. — If the insurance company elects to rebuild or replace the property lost or damaged, the contract between the parties becomes a new and independent undertaking on the part of the insurer to restore the property to its former condition, and this supersedes the engagement to pay the cash value. Hartford Ins. Co. V. Peeblc's Hotel Co.. 82 Fed. 546. 27 C. C. A. 223; Commercial F. Ins. Co. v. Allen, 80 Ala. 571, 1 So. 202; Wynkoop v. Niagara Fire Ins. Co., 91 N. Y. 478, 43 Am. Rep. 686. Whether the work is done properly and within a reasonable time must generally present a question for the jury, Haskins v. Hamilton Mut. Ins. Co., 5 Gray (Mass.), 432; Henderson v. Sun Mut. Ins. Co., 48 La. Ann. 1031, 20 So. 164. An exercise of the option by the insurer cither to reinstate or not to reinstate and made known to the insured is final, Fire Assn. v. Rosenthal, 108 Pa. St. 474, 1 Atl. 303; Times Fire Assur. Co. v. Hawke, 1 Fost. & F. 406. 220 WORACHEK V. MUT. HOME FIRE INS. CO. [cHAP. XI the clauses, "This poUcy shall become void" and "This entire policy shall become void," mean the same thing; but by no legitimate construction can the latter clause be restricted to less than the whole policy and whatever is mcludcd in it, and, therefore, the strength of the argument, if it has any, goes to the soundness of the decision in Coleman & Co. v. Insurance Co. The two cases, however, are plainly distinguishable. In the former case, the language used in the policy, whether ambiguous in itself or not, had frequently been the subject of construction and ingenious debate, resulting in diametrically opposite conclusions in the courts. In this case, the parties, no doubt with knowledge of previous controversies, seem to have endeavored to put the indivisible character of their contract beyond controversy by in- serting the word "entire"; and in our judgment they succeeded in their pur- pose. Unless we reject this controlling word and thus make a new contract for the parties, the policy means precisely what it says and cannot be valid in part and void in part. The parties have agreed that it should not be a severable risk, and they have clearly expressed that intention. The judgments of the Circuit Court and the Court of Common Pleas are Reversed.^ BuRKET, C. J., Shauck, Price and Crew, JJ., concur. WORACHEK, RESPONDENT, v. THE NEW DENMARK MUTUAL HOME FIRE INS. CO., APPELLANT Supreme Court of Wisconsin, 1899. 102 Wis. 88 Fraudulent statement relating to a portion of the property insured. The plaintiff in his proofs of loss, knowingly made a false statement under oath, as to the quantity of a portion of the property insured and destroyed by the fire. Marshall, J. The sole question for decision on this appeal is, Where a policy of insurance against loss by fire covers a building and personal property 1 A policy of $2,000 issued to Knowlcs for a single premium, insured $1,200 on hops grown in 1889, and $800 on hops grown in 1890, separately stored in one hophouse. Without the required written permit from the company, the crop of 1889 was incum- bered by a chattel mortgage; the court decided, though, "with hesitation" that the breach of warranty avoided the insurance only as to the crop of 1889, Knowles v. American Ins. Co., 66 Hun, 220, 21 N. Y. Supp. 50, aff'd 142 N. Y. 641, 37 N. E. 567. In a later case the court intimates a doubt as to the soundness of this rule on the merits, 184 N. Y. 111. Parsons, Rich & Co. took out a policy for $1,000 apportioned over building, machinery, stock, supplies, etc. Without permit of the insurer, the building stood on leased ground, and not on ground owned by the insured in fee simple. The court concluded that by reason of the breach the moral hazard was increased on the contents of the building as well as on the building itself, and therefore the entire contract was avoided. Parsons v. Lane, 97 Minn. 98, 106 N. W. 486. *jflAP. XlJ WORACHEK V. MUT. HOME FIRE INS. CO. 221 located therein, the premium being distributed part to the realty and part to the personalty, and tlu; building is totally destroyed by fire and the per- sonal property injured or destroyed as well, and the i)olify provides that any false swearing by the insured in relation to the quantity, quality, description or value of the property destroyed or damaged shall forfeit all claim under such policy and bar all remedies thereon, and there is such false swearing as to the personalty, can the assured, nevertheless, recover as to the realty? The learned trial court decided that in the affirmative on the strength, evi- dently, of Loomis V. Rockford Ins. Co., 77 Wis. 87. There the court held that a change in the title to one of several buildings, covered by an insurance policy, such buildings being situated some distance from each other, does not render the policy void as to the other buildings because of a clause in the policy to the effect that any change of the title to the insured property with- out consent of the company shall render the policy void. Following deci- sions elsewhere, and construing the language of the policy strictly against the insurance company, a conclusion was satisfactorily reached that it was within the reasonable meaning of the language of the policy to say that the contract of insurance was divisible according to the distinct risks covered by it. The court, however, did not go so far as to hold that a building and its contents could be considered distinct risks. On the contrary, the decision was expressly limited to cases where the property insured is so located that the risks assumed are separate and distinct, the situation being such that the destruction of one portion of the property will not be liable to injure or destroy the other. The previous decisions of this court, Hinman v. Hart- ford F. Ins. Co., 36 Wis. 159, and Schumitsch v. Am. Ins. Co., 48 Wis. 26, to the effect that insurance on a building and its contents is indivisible, were expressly approved. The subject was again referred to in Burr v. German Ins. Co., 84 Wis. 76, and again in Carey v. German-Am. Ins. Co., 84 Wis. 80, the court saying that insurance on a building and contents with the risk dis- tributed to the different species of property is a single indivisible contract, and, under a general forfeiture clause, a circumstance barring a recovery for a loss on part of the property will bar a recovery for any. These decisions are decisive of the question raised here, and arc in accordance with numerous authorities elsewhere, none of which need be referred to, as the cases in our own court are amply clear and all one way. The fact that false swearing as to a building totally destroyed is not prejudicial to the insurance company, and so does not work a forfeiture under the rule stated in F. Dohmen Co. V. Manufacturers' & B. F. Ins. Co., 96 Wis. 57, to the effect that false swear- ing must be such as will be liable to work an injury to the insurance company, in order to make the contract for forfeiture operative, does not apply here. It is not necessary that injury by false swearing actually take place. It is sufficient if there be false swearing to the actual prejudice of the insurance company, or which is liable to work that way. The contract of insurance being single, if any part of it is such that false swearing in reference to it would be liable to injure the company, and there be such, according to the plain language of the contract under consideration all claims by virtue of it 222 CHAPMAN V. POLE [CHAP. XI are forfeited and all remedies upon it barred. The court cannot, by judicial construction, work any exception into such plain language. By the Court. The judgment of the Circuit Court is reversed, and the cause remanded with directions to render judgment for the defendant. Bardeen, J., took no part. CHAPMAN V. POLE Kingston Surrey Spring Assizes, 1870. 22 L. T. (N. S.) 306 Fraud and overvaluation. Action against the Sun Insurance Company, on a fire policy. Plea, "that there appeared to be, and was, fraud in the claim made by the plaintiff upon the company, for and in respect of the said alleged loss and damage, etc., on account of the said loss or damage delivered to the company's office." The poUcy was effected in February, 1866. The fire occurred in the fol- lowing September, and the claim was made forthwith for £418 as for a total loss, but no particulars were delivered until required under the conditions. The particulars of the claim when delivered appearing — on comparison with the salvage and debris — grossly exaggerated, payment was refused. In No- vember this action was brought, and in February, 1867, interrogatories were delivered to the plaintiff, which, not being answered, the action was stayed until, in January, 1870, they were answered, and the action proceeded. After the plaintiff made a claim of damage to the amount of £418, further particulars being required, in October particulars of claim were delivered, claiming large sums for specific articles to each room. The plaintiff also made a statutory declaration in the usual form, "that the said estimate or account contains, to the best of my knowledge and belief, a true and faith- ful account of the loss and damage sustained by me in my said goods and chattels, all of which were my own property, and were in and upon the said house when the fire happened, and were burned, lost, or damaged by the fire; and that my real and just loss on the said goods and chattels occasioned by the fire amounts to £418; and I make this solemn declaration conscien- tiously believing the same to be true." It had appeared, however, on the report of the inspector cOS to salvage and debris, that it was impossible there could have been the quantity and value of the goods represented; and in one of the rooms remaining unconsumed, the contents, valued at £30 were not worth £3; and in the bedrooms the remains of cheap iron bedsteads, worth a few shillings, were found in the place of mahogany stated as worth £15; while the df^bris of crockery, etc., found would only represent a few shillings' worth, instead of £33, the value stated; and other heads of claim were found in the same proportion to exceed the real value. The company, however, having disputed the claim, and having in this CHAP. Xl] CHAPMAN V. POLE 223 action interrogated the plaintiff as to the mode in which he had acquired the goods insured, he stated in his answer that he had purchased the greater part of them at sales, and had tliem many years before the policy, though some of them were given to him, and some by one Bennett, an attorney, now dead. Being cross-examined as a witness, he stated that he had pur- chased them nearly all from Bennett, and had given him between £300 and £400 for them. He also stated that in July he had assigned the goods to one Walker for advances to the amount of £400. The plaintiff was called, with Walker, in support of his claim, but could give no particulars or vouchers. Strong evidence, however, was given on the part of the company to show that the furniture was of the poorest description — not worth above £50; that a great part had been removed in June, so that at the time of the fire the things in the house were not worth more than £30. CocKBURN, C. J., to the jury. In consequence of the observations which have been made upon the conduct of the insurance company, I feel it to be my duty to say that I consider, that, in insisting on a -full and searching ex- amination into the case in a court of justice, the defendants, the Sun Fire Insurance Society, have only discharged their duty to their shareholders and the public. Beyond all doubt, this is a case deserving of such an exam- ination and inquiry; for, whatever may be its result, from l)eginning to end the case presents itself under circumstances of grave suspicion, and calling for searching inquiry. The issue for you to determine in substance upon :his case is whether the plaintiff has made an honest or dishonest claim: the issue is fraud or no fraud. If the defendants have failed to satisfy you that the claim was fraudulent, the plaintiff is entitled to recover; and, in that case, the only question will be, what was the real value of the goods de- stroyed? for that is all he is entitled, in any event, to recover. But if you think the defense is made out, and that, in point of fact, with reference either to the quantity or value of the goods, the plaintiff knowingly preferred a claim he knew, to be false and unjust, then he is entitled to recover nothing. That is one of the conditions in the policy, and the company are entitled to stand upon the defense. And considering how exposed they are to deception, and how rarely they are able to establish it by proof, in my opinion when they have a case in which they are honestly convinced that fraud has been per- petrated, and that they have sufficient evidence of it to submit to a jury to establish it, then they are not only fairly entitled, but they are bound to do so. For you will do well to bear in mind that the rate of insurance is cal- culated upon the average of losses as compared with profits, and the more the company is subjected to deception and fraud, the higher the rate of pre- mium which they are obliged to charge. Therefore, the public have an in- terest in such cases, and the company is bound to defend them, when they have fair ground for so doing, as they certainly have in this instance. We must start in such a case with certain principles. It is not, certainly, a ques- tion of mere accuracy or inaccuracy. A man may make a mistake in his claim, and it may be quite honestly. If, for instance, a man either fails to 224 BEHRENS V. GERMANIA FIRE INS. CO. [CHAP. XI recollect the precise quantit}^ of goods he has on his premises at the time of the fire, or mistakes the value of those of which he was in possession, and thus he presses a claim according to what he believes honestly to be true, but which may in the end turn out to be mistaken, the only consequence which ensues is, that, inasmuch as the contract of insurance is simply a contract of indemnity, he can only recover to the extent of the real value of the goods he has actually lost. You must not run away with the notion that a policy of insurance entitles a man to recover according to the amount represented as insured by the premiums paid. It is essentially a contract of indemnity. If a man chooses to insure goods worth £100 at a rate of premium which represents a value of £500, he can only recover the real and actual value of the goods. The law will not allow of gambling in the form of insurance. Insurance companies are subject to fraud enough as it is, and, if persons were allowed to insure goods to a greater amount than the real value, it is obvious that a door would be open to fraud and wickedness of the most abominable description. Therefore, in all the cases the only question — supposing the claim to be honest — is, what was the real and actual value of the goods de- stroyed. But beyond that, although the insured has not caused the fire, yet if he has made a fraudulent claim, then, on such a condition as is con- tained in this policy, he must fall by the fraud he has thus attempted to per- petrate, and is not entitled to recover at all. Such being the legal principles on which the question to be determined arises, it is for you to determine upon the evidence. If you believe the evidence for the defense, it is clearly established, and it is a gross and scandalous case of fraud. According to that evidence the claim was grossly excessive not only in point of value, but as to the quantity and character of the furniture insured; and it is not easy to conceive of such gross exaggeration being honest. A man may be somewhat mistaken as to the exact value or the precise number of the articles of fur- niture he possesses, but he can scarcely be so grossly ignorant of the furniture of the rooms in which he lives and sleeps as honestly to represent articles worth a few shillings or pounds as worth large sums of money. If, then, you believe the evidence for the defense, it is your duty to find for the de- fendant, as in that view a more scandalous fraud never was attempted. Verdict for the defendant. BEHRENS V. GERMANIA FIRE INS. CO. SuPKEME Court of Iowa, 1884. 64 Iowa, 19 Overvaluation to avoid the 'policy must he intentional. Action on a policy of insurance in the usual form, to recover damages sustained by the destruction by fire of the property insured. The defendant pleaded that the plaintiff falsely and fraudulently overvalued the propcrtv CHAP. Xl] BEHRENS V. GERMANIA FIRE INS. CO. 225 insured. There was a trial by jury, verdict, and judgment for plaintiff, and defendant appealed. Seevers, J. I. The court instructed the jury as follows: "As to the defense stated in the third instruction, you arc informed, that, if you find that the preponderance of credible evidence establishes that plaintiff, in getting the policy in suit, made a false statement as to stock purchased and added to that already possessed, or intentionally deceived the agent Deggin- dorf as to the value of his property, and thereby obtained the policy in suit, the defendant is entitled to a verdict. But a mere honest mistake as to value is not sufficient to invalidate the policy, and thereby defeat plaintiff's action." No exception is taken to this instruction, and it therefore must be regarded as the law of the case. The jury found specially that the plaintiff repre- sented the value of the property at the time he obtained the insurance to be two thousand dollars, and that its actual cash value at that time was only twelve hundred and forty dollars, and that the plaintiff at the time of pro- curing the policy "did not knowingly, and with intent to deceive, misrepre- sent the value of the property" insured. It is insisted that this finding is contrary to the evidence. We do not think this is so. We have read the evidence carefully, and are unable to reach the conclusion that the plaintiff purposely and with intent to deceive made a false statement of the value of the property. The policy contains this provi-sion: The "amount of such loss or damage is to be estimated ac- cording to the actual cash value at the time of the loss." Under the terms of the policy, the plaintiff could not possibly gain anything by the over- valuation. The evidence, therefore, of a fraudulent intent should at least be of a satisfying character to warrant us in disturbing the verdict. We cannot say that the evidence fails to sustain the special finding. 11. Substantially, it is insisted that the overvaluation is so great, that, conceding that there was no fraudulent intent, there cannot be a recovery. But, as we have seen, the defendant's liability is not to be measured by the valuation at the time the insurance was effected, but by the actual cash value of the property at the time it was destroyed. Overvaluation by owners of property is a usual occurrence, and made honestly; that is, the owner will place a higher value on his property than his neighbor, and we doubt not this is well understood by insurance companies, and we doubt whether anything short of a fraudulent intent should avoid a policy of the character in question. But, be this as it may, the overvaluation in this case is not so great as to justify us in holding, as a matter of law, that there cannot be a recovery on the policy in question. The decided weight of authority, we think, is in accord with this view. Bonham v. Iowa Central Ins. Co., 25 Iowa, 328; Franklin Ins. Co. v. Vaughan, 92 U. S. 516; Williams v. Phoeni.x Fire Ins. Co., 61 Me. 67; Wood on Insurance, § 426; Dogge v. Northwestern Ins. Co., 49 Wis. 501. Affirmed.^ * Compare Slafter v. Ins. Co., 142 la. 116. 15 226 DOLLOFF V. PHCENIX INS. CO. [CHAP. Xj DOLLOFF V. PHOENIX INS. CO. SAME V. GERMAN-AMERICAN INS. CO. Supreme Judicial Court of Maine, 1890, 82 Me. 266 The effect of fraud which causes no injury. Emery, J. The plaintiff procured of the defendant insurance company a poHcy of fire insurance for $2,000 upon his home buildings and contents, each building being separately valued, and the contents also having a separate valuation. The policy of insurance contained the following stipulation: "Any fraud or attempt at fraud, or false swearing on the part of the assured shall cause a forfeiture of all claims under this policy." The buildings and contents were consumed by fire, and the plaintiff as required by the policy and also by statute (R. S., c. 49, § 21) notified the company of the loss, and delivered to them a written statement on oath, purporting to be a particular account of the loss and damage. In this instrument caUed "proof of loss," the plaintiff, as the jury have found, knowingly and purposely made false statements on oath of some pretended losses which he did not in fact sustain. He contended, however, that his actual losses, throwing out his pretended losses, exceeded the whole amount of the policy, and that consequently the defendant company were not and could not be harmed by his false statement of additional losses, and should pay him his actual loss. His argument was that these false statements of additional losses did not increase the risk or the liability of the company — that the true statements showed a loss of over $2,000, and hence the false statements did no fraud, nor harm. The presiding justice overruled this contention, and instructed the jury to the opposite effect. The verdict being against him, the plaintiff excepted, and his exceptions present substantially this question: When the actual losses, truly stated in a proof of loss, exceed the whole amount of the insurance, will a knowingly and purposely false statement on oath in the proof of loss, of other pretended losses, destroy the plaintiff's claim for his actual losses under such a policy as this? We cannot doubt that it will. The parties stipulated that it should. It is so provided in the contract and it is a lawful provision. The contract of insurance is one of indemnity only. The sole lawful object of obtaining a policy of insurance is to secure simple reimbursement for actual loss. Any purpo.se of making a profit on the part of the assured is unlawful and will vitiate the contract. Such being the nature of the contract, it requires good faith on the part of the assured toward the insurers. Especially is this so in the adjustment of the loss after a fire. It is impracticable for the insurers to ascertain for themselves the extent of the losses, particularly where the contents of a dwelling house and barn are insured, as in this case. The as- CHAP. Xl] DOLLOFF V. PHGENIX INS. CO. 227 Bured and his family or servants are usually the only persons wlio can give a true account of the losses. The insurers therefore usually, as in this policy, require from the assured a detailed statement on oath of such losses, as a necessary preliminary to tlie payment of the indemnity. The statute also requires this (R. S., c. 49, § 21). The statute and the policy both make this statement a necessary preliminary to a right of action on the policy and they both contemplate, of course, a true statement. The demand of the statute and of the policy for such a statement is addressed to his conscience like a bill for discovery. When, therefore, he meets this demand with knowingly false statements of losses he did not sustain, in addition to those he did sustain, he ought to lose all standing in a court of justice as to any claim under that policy. The court will not undertake for him the offensive task of separating his true from his false assertions. Fraud in any part of his formal statement of loss, taints the whole. Thus corrupted, it should be wholly rejected, and the suitor left to repent that he destroyed his actual claim by the poison of his false claim. Claflin v. Insurance Co., 110 U. S. 81; Sleeper v. Insurance Co., 56 N. H. 401; Wall v. Insurance Co., 51 Maine, 32. It is further suggested by the plaintiff that the buildings having been separately valued in the policy, the insurance on them is not affected by any false swearing as to the personal property. The policy of insurance, however, is an entire, single contract, to stand or fall as a whole, so far as fraud, or false swearing is concerned. Barnes v. Insurance Co., 51 Maine, 110. Exceptions overruled. 228 LADD V. JETNA INS. CO. [CHAP. XII CHAPTER XII Clauses of the Standard Fire Policy — Continued Other Insurance, Cessation of Operations, Increase of Hazard, Uncon- ditional Ownership, Waiver by Omitting to Make Inquiry, etc. LADD V. iETNA INSURANCE CO. Court of Appeals of New York, 1895. 147 N. Y. 478 What constitutes cessation of mill or manufacturing operations? Plaintiffs' policy covered a frame water power sawmill and machinery. By subsequent indorsement title was declared vested in King and Trushaw, loss if any payable to plaintiffs as their interest might appear. The property was destroyed by fire January 9, 1892. Bartlett, J. The policy reads as follows, viz.: "This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void ... if the subject of insurance be a manufacturing establishment and ... it cease to be operated for more than ten consecutive days . . . ; or if a building herein described, whether intended for occupancy by owner or tenant, be or become vacant or un- occupied and so remain for ten days." The facts are as follows, viz.: After King and Trushaw entered into con- tract to purchase the insured property they took possession at once and made extensive repairs; King lived near the property and was the sawyer, and Trushaw resided some ten miles away; King, with an assistant, ran the mill until about December 11th, 1891, when he was taken ill and compelled to discontinue work. It further appears by the testimony of Trushaw that he was at the mill on Tuesday, three or four days before the fire, and observed that there was considerable lumber piled up in and around the mill, and there were also logs there; the witness testified that on this occasion he sawed two logs, planed them and drew them home; he also swears that owing to King's continued illness he had promised him to come the next Monday and saw up some hundred or hundred and fifty logs which had been delivered at the mill, but that he was prevented from so doing by the fire. Lucy King, the wife of King, was called as a witness by defendant, and testified that her husband was dead; she corroborated Trushaw as to his CHAP. XIl] LADD V. ^TNA INS. CO. 229 running the mill the Tuesday before the fire; she also swore that during her husband's illness, and up to the time of the fire, logs were drawn to the mill and lumber taken away. Fullerton, King's assistant, was called by plain- tiff, and testified that when King was taken sick they had arranged to begin the next day to get out a bill of lumber from logs already delivered for the purpose; that after King was taken ill he (witness) cut wood for about a week. The learned counsel for the defendant contends that, notwithstanding this array of facts tending to show that the owners of the mill had not ceased to operate it and the premises had not become vacant or unoccupied, there was a plain violation of the provisions of the policy already quoted, for the reason that on account of King's sickness the machinery in the mill was not run for more than ten consecutive days. We are unable to agree with the defendant's contention that this clause of the policy is too clear for argument, and that any temporary cessation of the operation of the machinery in a manufacturing establishment by reason of sickness, breakdown, low water, or other unavoidable cause, although it is not the intent of the insured to cease operating, or to allow the premises to become vacant or unoccupied, is a clear violation of its provisions. We think this clause of the policy should be reasonably construed so as to afford proper protection to both parties, rather than to give to it a mean- mg which must inevitably mislead the insured and do violence to the plain language of the instrument. It does not seem possible that the owner of a manufacturing establishment entering into the covenants and agreements tendered to him by the standard insurance pohcy of this State, would suppose that if the necessary repairs of the machinery of his mill should take over ten days his insurance was for- feited unless the consent of the company was obtained. If it is the intention of the legislature or the insurance companies to force such a hard and un- reasonable contract upon the insured it should be under a provision to that effect worded in clear and unmistakable terms. To give the policy the meaning insisted upon by the defendant is not only to disregard some of the previous decisions of this court construing pro- visions somewhat similar, but is to lose sight of the reason which has led insurance companies to protect themselves against risks on manufacturing establishments which have ceased to be operated and business or residential property which has become vacant or unoccupied, to wit, the increase of the moral hazard. It is a fact well known to underwriters that the probability of loss is greatly increased when property of any kind becomes unproductive; an idle mill and a vacant dwelling house are undesirable risks. It does not follow, how- ever, that a mill is idle by reason of temporary delays incident to the business, nor that a dwelling house is vacant or unoccupied, the owner of which, leaving it fully furnished, has turned the key and left it for a short sojourn elsewhere. This court held that where the insurance was upon a sawmill run by water power, delays and interruptions incident to the business, such 230 ANGIER V. WESTERN ASSUR. CO. [CHAP. XII as low water, diminished custom or derangement of the machinery causing a temporary discontinuance of the active use of the mill, did not come within the terms of the pohcy avoiding it in case the premises become vacant and unoccupied. (Whitney v. Black River Ins. Co., 72 N. Y. 117.) In the case at bar the undisputed facts show that the business at plain- tiff's mill was conducted as usual during the illness of King with the ex- ception of running the machinery; logs were received, lumber delivered and arrangements completed to supply King's place as sawyer. There was no violation of the policy either in letter or spirit, and we think the General Term very properly ordered a new trial. The order appealed from should be aflfirmed, with costs, and judgment absolute ordered for the plaintiff upon appellant's stipulation. All concur. Ordered accordingly.^ ANGIER ET AL. v. WESTERN ASSURANCE CO. Supreme Court of South Dakota, 1897. 10 S. D. 82 Increase of risk. The policy provided "this entire policy shall be void if the hazard be in- creased by any means within the control or knowledge of the insured." The plaintiff Stevens, the insured, in explaining the origin of the fire, ad- ^ Other Insurance Forbidden Without Written Permit. — Other or double insurance exists whore there are two or more policies on the same interest and subject and against the same risk, West Branch L. Exchange v. American Cent. Ins. Co., 183 Pa. St. 366, 385, 38 Atl. 1081. In most jurisdictions the subject need only be in part the same, Kimball v. Howard F. Ins. Co., 8 Gray (Mass.), 33. The Syracuse Screw Company insured its building with the defendant. To the policy was attached the standard mortgagee clause in favor of Everson who held a mortgage upon the building. This clause made the insurance first payable to the mortgagee as his interest might appear, and provided that as to his interest the in- surance should not be invalidated by any act or neglect of the mortgagor. After the issuance of this policy, the insured took out another policy for its own exclusive benefit, without the defendant's consent and without a mortgagee clause. The court held that the mortgagee clause, attached to the first policy, created a distinct contract in favor of Everson. It further held that while the later policy was other insurance in relation to the mortgagor's interest it was not other insurance in relation to the mortgagee's interest, nor would it defeat or affect Everson's right of recovery under the prior policy, Eddy v. London As.sur. Corp., 143 N. Y. 311, 38 N. E. 307, 25 L. R. A. 686. The defendant issued a policy to Johnson on his "farm implements." This description wa.s adequate to embrace certain mowing machines and binders which were subse- quently bought by him and added to his "farm implements." After the purchase and without consent of the deft^ndant Johnson insured his "mowing machines and binders" with another company. This was held to be "other insurance" which avoided the policy in suit, Johnson v. Farmers' Ins. Co., 126 la. 665, 102 N. W. 502. CHAP. XIl] ANGIER V. WESTERN ASSUR. CO. 231 mitted that he took a tomato can, with perhaps a pint of kerosene oil in it, and put some of the oil on kindling in a stove; that after striking a match to set it afire, the flame caught on his celluloid cuffs, and extended to the oil in the stove, and thus occasioned the conflagration which destroyed the in- sured property. Corson, P. J. Keeping kerosene upon the premises in no manner violated the stipulations of the i)ar(ies, and could not therefore be held to constitute an increase of the hazard, within the meaning of the policy. The term "increase of hazard" denotes an alteration or change in the situation or con- dition of the property insured, which tends to increase the risk. These words imply something of duration, and a casual change of a temporary character would not ordinari^ render the policy void, under the stipulations therein contained. First Congregational Church v. Holyoke Mut. Fire Ins. Co., 33 N. E. 572, 158 Mass. 475. In that case the Supreme Court of Massachu- setts held the use of naphtha (the use or keeping of which on the insured premises was prohibited by the policy) for a period of a month, in burning paint from the outside of a wooden church, and causing the burning of the church, constituted such a change or alteration, and was sufficiently long continued to be deemed a change in the situation or circumstances affecting the risk. In Lyman v. Insurance Co., 14 Allen, 329, three weeks was held sufficient. In the case at bar the contention of counsel for appellant that the use of kerosene at only one time, in the manner detailed constituted an increase in the hazard, in the sense in which that term is used in the policy, is not ten- able. It constituted negligence on the part of the plaintiffs, but did not in- crease the hazard in the sense that the term is used in the policies of insur- ance. But, as we have seen, under the provisions of our statute, neither the negligence of the insured nor of his agents or others exonerates the insurer from liability. Comp. Laws, § 4175. This section of the Civil Code, as appears from the revisor's notes to the corresponding provision of the Code prepared for the State of New York, is based largely upon Mathews v. In- surance Co., 11 N. Y. 9; Gates v. Insurance Co., 5 N. Y. 469; Walker v. Maitland, 5 Barn. & Aid. 171; Waters r. Insurance Co., 11 Pet. 213. In the latter case the Supreme Court of the United States, speaking by Mr. Jus- tice Story, says: "This question has undergone many discussions in the courts of England and America, and given rise to opposing judgments in the two countries. As applied to policies against fire on land, the doctrine has for a great length of time prevailed that losses occasioned bj' the mere fault or negligence of the assured or his servants, unaffected by fraud or design, are within the protection of the policies, and, as such, recoverable from the un- derwriters. It is not certain upon what precise grounds this doctrine was originally settled. It may have been from the rules of interpretation applied to such policies containing special exceptions, and not excepting this; or, it may have been, and more probably was, founded upon a more general ground, that, as the terms of the policy covered risks by fire generally, no exception 232 COLLINS V. ST. PAUL F. & M. INS. CO. [CHAP. XII ought to be introduced by construction, except that of fraud of the assured, which, upon the principles of pubhc poHcy and morals, was always to be implied. It is probable too that the consideration had great weight that otherwise such policies would practically be of little importance, since, com- paratively speaking, few losses of this sort would occur which could not be traced back to some carelessness, neglect, or inattention of the members of the family." The facts in the case at bar were undisputed, and we think the court properly directed a verdict in favor of the plaintiff. The judgment of the Circuit Court and order denying a new trial are af- firmed. ' COLLINS V. ST. PAUL FIRE & MARINE INSURANCE CO. Supreme Court op Minnesota, 1890. 44 Minn. 440 Warranty of sole ownership. Action on a fire policy. Defense, breach of warranty. GiLFiLLAN, C. J. This is an action on a pohcy of insurance upon a dwel- ling house and log barn, and sheds connected therewith, situate on section 31, ' The defendant, the Niagara Fire Ins. Company, insured an ice house belonging to the Des Moines Ice Company, and situated on the shore of Lost Island Lake. The ice house was destroyed by fire. The loss was caused by the spread of fire from a bonfire made by the president of the plaintiff company not far away from the ice house, for the purpose of burning up some rubbish, and left burning without anyone to watch it at the noon hour. The court held that though the plaintiff's conduct might have been careless, nevertheless the loss was covered by the policy and that the temporary and incidental increase of risk amounted to no breach of warranty, Des Moines Ice Co. V. The Niagara Fire Ins. Co., 99 Iowa, 193, 68 N. W. 600. In a Georgia case, the defendant insured "the estate of Mrs. Hudson" against fire loss to dwelling house and furniture. The husband of the decedent, in charge and occupancy of the premises, employed the owner of a movable threshing machine run by an engine to bring his machine to the premises temporarily for the purpose of threshing some wheat. The engine, which had no spark arrester, was moved thither and located about eighty-five feet from the dwelling. The work of threshing all told required about two hours. When the job was half done, a sudden and unexpected gust of wind came and carried sparks from the engine to the house, which was in consequence destroyed by fire. The plaintiff was nonsuited below. On appeal, however, the court reversed, holding that the question whether a breach of the warranty had been committed by such a tem- porary and incidental use of the machine was for the jury, Adair v. Southern Mut. Ins. Co., 107 Ga. 297, 33 S. E. 78, 45 L. R. A. 204, 73 Am. St. R. 122. The plaintiff by the terms of the policy was permitted to use one stove. By intro- ducing a second stove he increased the risk. Although this act did not cause or con- tribute to the loss the policy was held to be avoided, Daniels v. Equitable Fire Ins. Co., 48 Conn. 105. In case of doubt any question of increase of risk is for the jury, Taylor v. Security Mut. F. Ins. Co., 88 Minn. 231, 92 N. W. 962; Belcher v. Capital Fire Ins. Co., 78 Minn. 240, 80 N. W. 971. CHAP. XIl] DUPREAU V. THE HIBERNIA INS. CO. 233 townshi;- 114, range 25. Upon the trial the court below directed a verdict for the (iLlVndant, and after such verdict, upon i)laintifT's motion, granted a new trial, and from the order granting it defendant appeals. (Jn the case made at the trial it was impossible for the plaintiff to recover, for the policy provides that the company shall not be lialjlc "if the interest of the assured in the projierty is not one of absolute and sole ownership," and it appeared beyond controversy that the plaintiff had only a life estate in the property. Of course, she had an insurable interest, but that interest was not insured. The policy expressly excluded from its operation any interest other than the absolute and sole ownership. Order reversed.^ DUPREAU V. THE HIBERNIA INSURANCE COMPANY Supreme Court of Michigan, 1889. 76 Mich. 615 Warranty of xmcondiiional and sole ownership, executory vendee in possession. Action on a fire insurance policy procured by the vendee. Defense, breach of warranty regarding unconditional and sole ownership. Long, J. It appears that the plaintiff held the premises upon which the buildings were situate, and the buildings, under a land contract of purchase, dated May 15, 1888. This contract specifically describes the property, and provides for the annual payments of SlOO until the whole amount of the purchase money (.§500) is paid; .§100 being paid down at the time of the purchase. The plaintiff went into the actual possession of the premises immediately upon the execution of this contract. Upon the payment of $100 additional, the contract provided for the execution and delivery of a deed of the premises to the plaintiff. The contract itself provided for the taking of po.ssession of the premises by the plaintiff. On the trial in the court below the court charged the jury that the clause in the policy relative to the title would not violate the policy, as it appeared that the plaintiff was the equitable owner in fee of the premises. The court thereupon directed a verdict in favor of the plaintiff. It does not appear that any representations as to title and ownership were made by the plaintiff at the time of taking the policy, but counsel for the defendant contend that by the terms of the policy itself upon which the ac- tion is brought, the plaintiff cannot recover, as he has no such title in fee as contemplated by the contract. The land contract, under which the plaintiff held, provided that he should keep the buildings thereon insured against loss and damage by fire by insurers, and in amount approved by the first * Phraseology of the standard form differs somewhat. 234 PARSONS, RICH & CO. V. LANE [CHAP. XII party, and should assign the policy and the certificates thereof to the first party. We are satisfied that the court was not in error. The plaintiff had paid quite a sum of money on the purchase price, and entered into an undertak- ing to pay the balance, and was to have immediate possession of the premises under the terms of the contract, and was to keep the buildings thereon in- sured. He was in actual possession at the time of taking the policy, and equitably the owner in fee, and we think he may be said at that time to have been the entire, unconditional and sole owner, within the meaning of the terms of the policy. We think this doctrine is fully supported by numerous decisions. If loss occurred, it would fall upon the insured. He was in possession, having paid part of the purchase price, and under a valid agreement for the payment of the balance, and, by the very terms of his contract, the very party who had the insurable interest in it. This seems to be the settled doctrine in most, if not all, of the States. We find no error in the record. The judgment of the court below must be affirmed, with costs. The other justices concurred. PARSONS, RICH & COMPANY v. LANE AND ANOTHER Supreme Court of Minnesota, 1906. 97 Minn. 98 Whether the insurer waives conditions regarding ownership by failing to make special inquiry. Action on fire insurance policy in standard form, on building and contents. Neither written application nor oral representation was made by the appli- cant, and no special inquiries were made by the company when the applica- tion was made. As matter of fact, the insured building stood on leased ground. Elliott, J. The form of policy now in common use requires the insured to disclose the extent and nature of his interest in the property, as it is a matter which largely influences underwriters in taking or rejecting risks and estimating and figuring premiums. There is no doubt but what a provision to the effect that the policy shall be void if the insured is not the sole and un- conditional owner of the property is reasonable and will be given full force and effect unless it is waived by some act on the part of the insurer. Phoenix V. Public Parks, 63 Ark. 187, 37 S. W. 959; East Texas v. Brown, 82 Tex. 631, 18 S. W. 713; Dow v. Nat. I. Co., 26 R. I. 379, 58 Atl. 999, 67 L. R. A. 479. But it is contended that where the policy is issued by an insurance company, without a written application, the company must be held to have waived the condition of the policy as to title and ownership. This does not appear CHAP. XIl] GLENS FALLS INS. CO. V. MICHAEL 235 to be an open question in this jurisdiction, as we have in two instances held contrary to the ui)pellant's contention. The pohcics themselves, containing, as they did, the contracts that they should be void if the interest of the assured had not been truly stated to the company, or if it was not truly stated in the policy, or if it was not the sole and unconditional ownership, and a description of it was not indorsed on the policy, were pointed inquiries of the assured whether their interest was the sole and unconditional ownership of the property described, and their silence and acceptance of the policies was the answer. Wc are not inclined to restrict the application of the doctrine of waiver as heretofore applied by this court to the conditions contained in insurance contracts. It has been an efficient means by which to prevent insurers from treating the contract as valid when it is to their interest, and repudiating it when called upon to respond to its burdens, thus pla3''ing fast and loose with the insured. But the rule contended for seems to us to require an un- reasonable extension of the doctrine. The written contract says, in language plain and unambiguous, that it shall be of no force and effect unless certain conditions then exist, and the existing facts arc necessarily known to the in- sured. It is argued that the law must assume that all such conditions were known to the company, and, after having assumed this material and essential fact, again presume that it intended to waive any results arising therefrom to its advantage. But the insured knew the condition of his title, and, when he received the policy, must, if he read it, have known that the insurer had entered into the contract upon the understanding that the applicant had full ownership and a fee simple title to the lots upon which the building stood. The modern fire insurance policy is practically free from the stipulations, conditions, and provisions set in infinitesimal type and hidden away in elusive locations, which served as traps for the guileless and unwary of the past generations of insured. But the most of these objectionable features have been effectually eliminated by the courts or legislatures, and there seems to be no good reason why the present insurance contracts, even while giving the insured the benefit of the doubt when ambiguous language is used, should not be treated like other written contracts between responsible parties. The urder appealed from is affirmed. GLENS FALLS INS. CO. v. MICHAEL Supreme Court of Indi.\n.\, 1905. 1G7 Ind. 659 Whether the insurer waives conditions regarding ovmership by failing to make special inquiry. Action on a fire insurance policy in standard form, like the last. Neither written application nor oral representation was made by the applicant, and 236 GLENS FALLS INS. CO. V. MICHAEL [CHAP. XII no special inquiries were made by the company. As matter of fact, the in- sured had only a life estate in the insured buildings. Montgomery, J. We cannot, with any regard for justice, strictly apply to this class of written instruments the rule for the interpretation of written contracts generally. The making of contracts is generally preceded by some negotiations, culminating in a meeting of the minds upon terms mutually agreeable and understood, which are then reduced to writing, and the agree- ment formally executed. Insurance policies are prepared in advance by in- surance and legal experts, having in view primarily the safeguarding of the interests of the insurer against every possible contingency. The insurer not only fully knows the contents of the writing, but also adequately compre- hends its legal effect. The insured has no voice in fixing or framing the terms of his policy, but must accept it as prepared and tendered, usually without any knowledge of its contents, and often without ability to comprehend the legal significance of its provisions. The meeting of the minds ordinarily deemed essential to a valid contract, as to many of its terms and conditions, is wanting in fact, and a mere fiction of law. In this case appellees were not the owners of a fee simple title to the real estate on which the insured buildings stood, but owned only a life estate therein. They had an insurable interest in the property at the time the policy was issued and at the time of the loss by fire. They desired in good faith to obtain insurance upon their interest in the property, and were guilty of no misrepresentation, concealment or fraud. They were ignorant of the in- validating provisions of the policy, and of the materiality of their- exact title to the risk assumed. No change was subsequently made in the title held, nor was any act done increasing the risk of insurance. It is not suggested that the value of their title was not equal to the amount of insurance carried, nor that the fire would not have occurred just as it did, had their title been an unconditional fee simple. They paid the premium charges, which appel- lant accepted and retains, and honestly rested in the belief that they had valid insurance. We must assume that both parties in good faith intended to effect a valid contract, and, if reasonably possible, so construe the policy as to make it effective. The appellant did not require of appellees a written application for insurance, or ask of them any questions concerning the prop- erty to be insured, or concerning their title to the same.' We must therefore presume that appellant or its agent had satisfactory knowledge of the con- dition and surroundings of the property, and of the title to the same, as then existing. Knowledge of the true state of the title on the part of the insurer being, under the circumstances shown, presumed by law, the provisions of the policy with respect to title pleaded in the answers were waived. It fol- lows that the policy was valid at least to the extent of the interest of the insured. Judgment affirmed. ^ A detailed application is now rarely used, and it is a matter of great convenience to the insuring public that it has been dispensed with. The answers in such an ap- plication, when warranted, offered a frequent occasion for forfeiture. CHAP. XIl] GLENS FALLS INS. CO. V. MICHAEL 237 GiLLETT, J. While the rule of contra proferentem ordinarily seems to be applied in all of its vigor in construing insurance contracts, yet I am not aware of any well-considered case which countenances the idea that a party may be relieved upon so unwarranted an excuse as the one which the appel- lees in this case asserted. In Wiercngo v. American Fire Ins. Co., 98 Mich. 621, 626, 57 N. W. 833, 835, it was said: "In this case where there was no written application, nor any terms of the policy agreed upon by parol ex- cept the amount, the insured must be charged with knowledge that the policy he receives contains the contract binding upon him as well as the in- surer. He must know that the policy which is the contract, contains the usual terms of such instruments. He may not lay it aside without reading, and, when he seeks to recover upon it and finds that under its plain provi- sions he cannot recover, say: 'I did not read it. The insurer did not tell me what it contained. I did not know that it was necessary to tell him about the title and condition of my property, and therefore I am not bound by its terms.' Had Mr. Pearson or his principal read the contract, which he could have done in a few moments, they would at once have known these plain and important conditions, which the defendant had the clear right to insert and to make a condition of its validity. Certainly the insured must be held to some degree of diligence in obtaining knowledge of the contracts to which they are parties. Ignorance will not relieve a party from his con- tract obligations. The law only relieves him therefrom in cases of fraud, mistake, waiver or estoppel. An insurer is not required by the law to in- quire into the condition of the title to the property insured, or to inform the insured of all the conditions and terms of the policy to be issued or to read it to him, or inform him of its contents. When received and accepted without objection, he must be held bound by its terms unless these terms are waived by the insurer. This is the law of contracts, and there is not reason or au- thority for holding that an insurance contract is an exception thereto." There are cases which support the view of the majority in this case, but I assert that they are not only comparatively few, but also that it is evident that they owe their origin to a misappUcation of the old doctrine of conceal- ment. Before the adoption of the standard policy, it was the practice to embody the warranties of the assured in an application, and as a result it followed that, in many cases where the company had neglected to take an application, the only defense which the company could assert was conceal- ment. Now, concealment involves the proposition that the assured ought to have made the disclosure, and therefore the courts, in passing on these cases, and the text-writers in discussing them, frequently made reference to the fact that, as the representatives of the insurance company were experts, the assured had a right to suppose that as to the ordinary risks, such as the con- dition of the title, etc., the company had acquainted itself with the facts. It was enough, therefore, so far as the interest of the a.ssured was concerned, that he had an insurable interest. With the incoming of the standard policy, all of this was changed; but a few courts, misapprehending the nonapplica- tion of the doctrine of concealment to a peremptory condition precedent that 238 GLENS FALLS INS. CO. V. MICHAEL [CHAP. XII the ownership must be sole and unconditional, and the title in fee simple, were led into error by the language of the books to which I have referred. The condition in the standard policy provides the manner in which the poUcy may be made to take effect, where the ownership is not sole and uncondi- tional and the title in fee, namely, by procuring a special indorsement to be placed on or added to the policy; and the effect of such a condition as this is to call on the policy holder to make disclosure, and to authorize the company, at least in the absence of notice, to assume that the ownership and title com- ply with the condition. It is a well-known fact that insurance companies issue policies without a formal examination of the title, and, in the face of the stipulation in the policy, the property owner has no right to assume that the company will not stand upon its. rights. The conclusion of the majority is opposed to principle, it is out of accord with the weight of authority, and it involves a disregard of the doctrine of stare decisis. As I have attempted to point out, this holding cannot be main- tained if the court looks to the solemn dispositive agreement of the parties in determining their rights. I cannot give my sanction to a decision that nullifies the most important element in the contract from the standpoint of the company. It is to be remembered that fire losses are in almost every instance paid out of the premiums received, and not out of the capital of the company. Careful people who read their policies are entitled to some consideration, and ought not to have their premiums enhanced by the fact that essential limitations of liability put into insurance policies are disre- garded by the courts. I vote for a reversal. CHAP. XIIlJ GEKMANIA FIKE INS. CO. V. HOME INS. CO. 239 CHAPTER XIII Clauses of the Standard Fire Policy — Continued Alienation, Prohibited Articles, Vacancy, Excepted Causes, etc. THE GERMANIA FIRE INSURANCE CO. v. THE HOME INSURANCE CO. Court of Appeals op New York, 1894. 144 N. Y. 195 Alienation clause. Is the insurance on the firm stock avoided by the introduc- tion of another part7icr into a firm? Action on a fire insurance i)olicy. Defense, breach of alienation clause. Tlio defendant had issucnl a poHcy to Verdicr on his stock of liardware. During the term of the policy, without permit of the insurer, Verdier took in Brown as a copartner, giving him a three-tenths interest in the insured property of the concern, which was subsequently damaged by fire. The policy, though not in the phraseology of the present standard form, provided "or if the property be sold or transferred, or any change takes place in title or possession, this policy shall be void." « Bartlett, J. We think it perfectly clear on principle that the sale of an interest in the insured property by Verdier to Brown and the formation of a copartnership between the two rendered the poHcy void. 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 i)rinciplc of the common law that every man has the right to determine with whom he will enter into contract obligations. An insurance company is induced to issue or withhold its policy after carefully scrutinizing the character 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 possession of the property sought to be insured. It would be a harsh and indefensible rule that required the underwriter, who had insured an individual 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 third interest in the property covered by the policy, without having been afforded the opportunity to examine into the moral aad business characters of two strangers to the original contract. This right of the insurance company was in nowise invaded when this court held 240 GERMANIA FIRE INS. CO. V. HOME INS. CO. [CHAP. XIII 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. The appellant urges that the protection of the policy should be extended to the new partner bj' virtue of the following words contained therein, viz. : "And the said Home Insurance Company hereby agree to make good unto the said assured, his executors, administrators and assigns, all such immediate loss," etc. It is argued that the word "assigns" extends the insurance to the new partner's interest. The policj^ is capable of no such construction; the clause in question is merely a covenant on the part of the company with the insured to pay to him or his legal representatives or assigns, the amount of the loss that may become due to him under the terms of the policy. The judgment and order appealed from should be affirmed, with costs. All concur. Judgment accordingly.^ * The prudent broker in preparing "the forms" to be inserted in a policy for a corporation or copartnership customer is careful to insert the phrase "A. B. & Co., as now or may be hereafter constituted." "The forms" whether printed or type- written constitute what is known as the written part of the policy and contain a description of the property and the special clauses. The insured, the Buffalo Elevating Company, in another New York case, owned and operated a large grain elevator in Buffalo. Besides its insurance on the building, and on the contents of the building, it took out a third class of insurance in forty-six policies, aggregating $7.3,250: to wit, $232.9.3 a day, and known as "use and occu- pancy" insurance, the object of which, as already shown, is to indemnify an owner or occupier for the loss of commercial use during the period required for reconstructing a building destroyed or damaged by fire. Shortly after some of these policies were is- sued, and before the rest of them were issued, the insured, without knowledge or consent of the insurers, joined for the whole active season a secret pool or trust composed of many elevators. This was done, as in former seasons, under a written pooling agreement providing, in substance, among other things, that, after payment of certain operating expenses, the balance, to wit, eighty per cent of the gross earnings of the Buffalo Elevating Company, should be turned over by it absolutely to the pool, to be divided up among the many members together with their earnings, and that, in spite of a fire destroying the elevator in question, the Buffalo Elevating Company should neverthe- less continue to receive its full percentage of the entire pool earnings from the pool. A fire destroyed the plaintiff's elevator, and the insured claimed from the insurers of use and occupancy, $60,328.87: to wit, for an arbitrated period of 259 working days required for rebuilding. The insurance companies of this class, by the same counsel all set up substantially the same defense: namely, that where the policy was issued before the transfer to the pool the insured had violated the warranty against making any change of interest in the subject-matter insured, and that where the policy was issued after the transfer to the pool, the insured had violated the warranty of sole and unconditional ownership of the subject-matter. The case was submitted on an agreed statement of facts, and the plaintiff recovered in full. The court held in substance that the insured under a use and occupancy policy is sole and unconditional owner, and has made no change of interest in the subject-matter insured thereby, although he transfer to another the earnings, Michael v. Prussian Nat. Ins. Co., 171 N. Y. 25, 63 N. E. 810. The Massachusetts and other policies are simpler. They forbid a sale of the property without assent of the company, in writing or in print, Stuart v. Reliance CHAP. XIIl] BRIGHTON B. U. ASSN. V. HOME INS. CO. 241 HOME MUTUAL INSURANCE CO. v. TOMPKIES & CO. Court of Civil Appeals of Texas, 1902. 30 Tex. Civ. App. 404 Alienation clause. Effect of executory contract of sale. GARRErr, Chief Justice. The contract for the sale of the property de- scribed in the pohcy of insurance was an executory contract to convey in the future. No consideration was paid, and there was no change in the pos- session or the right to the possession of the property. Such a contract does not constitute a change in tlie interest or title of the insured jjroperty within the meaning of the stipulation in the jjolicy Ijy which it should become void if any such change should take place. Erb v. Insurance Co., 98 Iowa, 606, 67 N. W. Rep. 585, 40 L. R. A. 845; 1 May on Ins., § 267. It is immaterial whether the new corporation or the promoters would be bound by the con- tract, since there was no change in the title. Reversed and rendered.^ BRIGHTON BEACH RACING ASSOCIATION v. THE HOME INSURANCE COMPANY New York Supreme Court, 1906. 113 A. D. 728, aff'd 189 N. Y. 526 Effect of executory contract of sale coupled with delivery of possession to the executory vendee. The plaintiff, as assignee of one Dunne, seeks to recover a fire loss on a policy of insurance, in the standard form, issued by the defendant upon realty situated in the borough of Brooklyn, owned in fee simple, at the time the policy was issued, by Dunne. The policy contains the following i)ro- vision: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void ... if any change other than by the death of the insured take place in the interest, title or possession of the sub- Ins. Co., 179 Mass. 434, 60 N. E. 929. Under such a provision, so Iohr as the insured retains any insurable interest, the policy will protect it, Clinton v. Norfolk Mat. F. Ins. Co.. 176 Mass. 486, 57 N. E. 998, 50 L. R. A. 833, 79 Am. St. R. 325. » Jones V. Capital City Ins. Co., 122 Ala. 421. 25 So. 790; National Fire Ins. Co. v. Three States Lumber Co., 217 111. 115, 75 N. E. 4.50; Phoenix Ins. Co. r. Caldwell, 18? 111. 73, 58 N. E. 314; Wyandotte Brewing Co. v. Hartford F. Ins. Co., 144 Mich. 440. The Iowa court says, "Nothing .short of a completed sale by the policy holder will be deemed sufficient breach of a condition in a policy against alienation," Bartling v. German Mut. Ins. Co. (la., 1909), 123 N. W. 63 (policy not in standard form). 16 242 BRIGHTON B. R. ASSN. V. HOME INS. CO. [CHAP. XIII ject of insurance (except change of occupancy without increase of hazard) whether by legal process or judgment or by voluntary act of the insured or otherwise." On July 17, 1903, and while the poUcy was still in force, Dunne entered into an executory contract of sale by which he agreed to convey to one Harvey 0. Dobson, or his assigns, a parcel of land containing upwards of forty-three acres, divided, according to the map attached to the contract, into 660 lots, upon one or more of which the insured buildings stood, for a consideration of $109,521.51, $15,000 of which was paid when the contract was signed; S44,463.60, existing mortgage indebtedness, to be assumed by Dobson, and interest thereon from March seventeenth, four months prior to date of the contract, paid by him; a second mortgage of $10,297.15 to be given Dunne, and the balance, $39,760.76, to be paid in cash on July 16, 1904, at which time the deed was to be deUvered. The agreement contained the following clauses : ' And the said party of the second part hereby agrees to pay all taxes and assessments levied against and becoming a hen upon the said real property, subsequent to the dehvery of this contract; . . . and the party of the second part shall have the right to occupy any part of the real property hereunder and before passing title, as tenant of the party of the first part, without any pay or rent thereof, and possession of the said real property shall be so given to the party of the second part on the expiration of the ex- isting tenancy on January 1, 1904." On the day following the execution of this contract, Dobson assigned all his right, title and interest therein to the appellant, who went into the pos- session of the property, in accordance with the contract provisions, and there- after and before the commencement of this action paid the full purchase price and took title to said property. On February 9, 1904, fire destroyed the building, and on November fourth following, Dunne assigned to the plaintiff said policy of insurance and all his rights therein. It appears that defendant had no notice of the contract, or of any change of possession or interest in the insured property, until after the loss. Rich, J. The decisions of courts of sister States unite in the proposition that one in possession of real property under a valid contract of purchase is the sole and unconditional owner thereof, subject only to the enforcement of payment of the price agreed upon by the holders of the legal title; while the courts of this State have held such a vendee to be the equitable owner of the premises, vendible as his, chargeable as his, capable of being incumbered as his; they may be devised as his; they may be assets; they would descend to his heir and while he was living be insurable as his. (Pelton v. West- chester Fire Ins. Co., 77 N. Y. 605, and cases cited; Stewart v. Long Island R. R. Co., 102 id. 601, 624; Beckrich v. City of North Tonawanda, 171 id. 292, 299; Williams v. Haddock, 145 id. 144.) It can hardly be maintained that there can be two sole and unconditional owners of the same property, or two owners legally entitled to exercise the CHAP. XIIl] BRIGHTON B. R. ASSN. V. HOME INS. CO. 243 same solo and exclusive rights therein at the same time; and it is clear that such a change of title was effected by possession given the appellant under the contract of sale as to have avoided the policy of insurance. Again, it appears beyond reasonable contention that a change in the "in- terest" and "possession" of Dunne in the insured property accomplished the same legal result. The word "interest" is broader and more compre- hensive than the word "title"; it embraces both legal and equitable rights. (Southern Cotton Oil Co. v. Prudential Fire Association, 78 Hun, 373.) The doctrine contended for by appellant, that when the condition is against a change in the "title" there is no breach unless there is a change in the legal title, and that as long as the insured retains the legal title the policy is not avoided by a transfer of the equitable title, cannot be applied to a condition against a change of "interest." The terms are not synonymous. The true test is whether the vendor has parted with the absolute control and dominion over the property insured. If he has, a change in "interest" has been effected, and the policy is void. I am of the opinion also that there was a change in "possession" within the meaning of that word as used in the policy. While it is true that the agreement designates the occupancy of the vendee as that of a tenant of the vendor without pay or rent, it is apparent that the contract gave and se- cured to him more than the rights and interests of a tenant. He was charged with the liabilities of, and entitled to enforce the rights of, a purchaser in possession and could not be ejected as a tenant regardless of such rights. The possession of the vendee was absolute, and exclusive of the vendor, so long as he performed his contract. All the rights of possession of the insured property, held and exercised solely and exclusively by Dunne when he ob- tained the policy of insurance, he divested himself of by executing the con- tract and giving plaintiff possession under it. From the time such posses- sion was taken by plaintiff Dunne had no possession or right of possession while the former performed the contract provisions, and the attempted characterization in the contract of the occupancy of the vendee as that of a tenant, did not take from plaintiff its legal rights thereunder, as the equitable owner in possession, or have the legal effect of reserving to Dunne the sole and exclusive possession he owned and exercised when the contract of insur- ance was made with the respondent. As the learned trial justice aptly says: "Names cannot do away with the nature and substance of things." It may also be observed that by the policy of insurance, which was a per- sonal contract, the respondent undertook to indemnify Dunne against loss or damage by fire to his buildings as long as his ownership, interest and posses- sion thereof remained exactly the same as they then were, and no longer. This obligation cannot be extended beyond a time when Dunne voluntarily gave such right of i)ossession to the appellant and changed his interest and the nature of his title in and to the insured property, without the consent of the respondent, who never undertook to insure the buildings for the benefit of the appellant, or if they were to be possessed by the appellant, or if any interest therein, owned by Dunne at the time the pohcy was issued, was L4-1 BRIGHTON B. R. ASSN. V. HOME INS. CO. [CHAP. XIII thereafter acquired by the appellant as the result of Dunne's act. (Lett v. Guardian Fire Ins. Co., 125 N. Y. 82.) It follows that the right to enforce the poUcy of insurance terminated with the execution and the surrender of possession of the insured buildings, with- out the knowledge or consent of the respondent, and the judgment must be affirmed, with costs. HiRscHBERG, P. J., WooDWARD and Jenks, JJ., concurred. Judgment affirmed, with costs.^ 1 Brickell v. Atlas Assur. Co. (Cal., 1909), 101 Pac. 19; Skinner Shipbuilding Co. v. Houghton, 92 Md. 68, 48 Atl. 85; Gibb v. Phil. Ins. Co., 59 Minn. 267, 61 N. W. 137, 50 Am. St. R. 405; Davidson v. Hawkeye Ins. Co., 71 Iowa, 532, 32 N. W. 514; Cotting- ham V. Ins. Co., 90 Ky. 439, 14 S. W. 417, 9 L. R. A. 627; Granauer v. Westchester Fire Ins. Co., 72 N. J. L. 289, 62 Atl. 418. Assignment of Policy. — Or if the policy be assigned before loss. Even without express prohibition in the policy, it has been held that a fire policy is not assignable except with the consent of the insurer, since it is peculiarly a personal contract, and no new party assured can be introduced into it without the consent of the insurer, New England Loan & Tr. Co. v. Kenneally, 38 Neb. 895, 57 N. W. 759; Lett v. Guardian Fire Ins. Co., 125 N. Y. 82, 25 N. E. 1088. This warranty must not be disregarded, on pain of forfeiture. Miles Lamp Chimney Co. v. Erie Fire Ins. Co., 164 Ind. 181, 73 N. E. 107; and except as waiver may be established the consent of the company must be obtained in writing. New v. German Ins. Co., 5 Ind. App. 82, 31 N. E. 475; but there is no necessity that the assignment itself be evidenced by a written instru- ment. Cannon v. Farmers' Mut. Ins. Co., 58 N. J. Eq. 102, 43 Atl. 281. The com- pany's indorsement consenting to the assignment of the policy carries with it an im- plied consent to the transfer of interest in the property insured, Benninghoff v. Agricultural Ins. Co., 93 N. Y. 495; Gould w. Dwelling House Ins. Co., 134 Pa. St. 570, 590, 19 Atl. 793. A mere pledge or deposit of the policy as collateral security without assignment is not prohibited by this clause, Griffey v. N. Y. Central Ins. Co., 100 N. Y. 417, 3 N. E. 309, 53 Am. Rep. 202. Nor does the assured violate the terms of the standard policy by accepting from a common carrier a bill of lading containing as one of its provisions that the carrier is to have full benefit of any insurance upon the prop- erty, Jackson v. Boylston Mut. Ins. Co., 139 Mass. 508, 2 N. E. 103, 52 Am. Rep. 728. Where the policy has been transferred by the insured as collateral security, either with or without the consent of the insurer, the assignee is usually merely an appointee or payee to receive any insurance money to the extent of the debt, and subject to any defenses available as against the assignor, the insured, Illinois Mut. F. Ins. Co. v. Fix, 53 III. 151. In such a case it is not neces.sary that the assignee should show any title or insurable interest in the property itself. An equitable assignee of the proceeds to be derived from insurance need have no interest in the property insured, Merrill v. Colonial Fire Ins. Co., 169 Mass. 10, 47 N. E. 439; Baughman v. Camden Mfg. Co., 65 N. J. Eq. 546, 56 Atl. 376. Where the property or subject of the fire insurance, as well as the policy, are transferred to a purchaser with the assent of the company, a new contract is thus formed between the company and the assignee which will not be disturbed by any subsequent breach of condition by the assignor, Donnell v. Don- nell, 86 Me. 518, 30 Atl. 67; Fogg v. Middlesex Mut. F. Ins. Co., 10 Cush. (Mass.) 337; or by any agreement between him and the company, Georgia Co-operative Fire Assn. T. Borchardt, 123 Ga. 181, 51 S. E. 429. As to whether the insurers can avail them- selves of prior breaches of contract unknown to them at the time of the assignment, or whether the contract, though evidenced by the same policy and without further con- sideration, is to be regarded as a wholly independent contract, there is lack of harmony in the decisions. By the weight of authority the new owner seems to be given a fresh atari, precisely as though a new policy were issued to him ; and he is held to be relieved CHAP. XIIl] McFARLAND V. ST. PAUL F. & M. INS. CO. 245 McFARLAND v. ST. PAUL FIRE & MARINE INSURANCE CO. Supreme Court of Minnesota, 1891. 46 Minn. 519 Prohibition of keeping, using or allowing certain hazardous articles. Action on a fire insurance policy on plaintiff's dwelling house. Defense, breach of warranty in that plaintiff used gasoline without permit. Collins, J. Although the policy of insurance upon which plaintiff seeks to recover in this action, for loss caused by the explosion of a gasoline stove, contained a clause which provided that, if the assured should keep or use gasoline upon the insured premises — a dwelling house — without the written permission of the defendant company, the policy should be void, it is con- tended by him that as the house was insured without an application in writ- ing, and without any representations being made, after the company's agent had full opportunity to examine the premises, by which examination he would from the consequences of past forfeitures incurred by the assignor; for example, Virginia-Carolina Chem. Co. v. Ins. Co., 108 Fed. 451; Continental Ins. Co. v. Munns, 120 Ind. 30, 22 N. E. 78; Rines v. German Ins. Co., 78 Minn. 46, 80 N. W. 839; Hall V. Niagara Ins. Co., 93 Mich. 184, 53 N. W. 727; Steeu v. Niagara Ins. Co., 89 N. Y. 315, 327. This conclusion is defended by the argument that the company would presumably, if requested, cancel the old and issue a new policy, but only at greater inconvenience to itself, and that, therefore, the method adopted is for the benefit of the company exclusively. A weak point in this line of reasoning comes from the fact that the assured can compel cancellation of the policy only at short rates, which means that the insurer in that event retains mor^: than the proportionate amount of premium. Accordingly, other decisions enforce the more logical but harsher rule that the assignee will take only such rights as belong to the assignor at the time of the assignment; for example, Wilson v. Hakes, 36 111. 539; McKluskey v. Prov. Wash. Ins. Co., 126 Mass. 306; Citizens' Ins. Co. v. Doll, 35 Md. 89; Wilson v. Mutual Ins. Co., 174 Pa. St. 554, 34 Atl. 122; Reed v. Windsor Mut. Ins. Co., 54 Vt. 413. If, however, with the knowl- edge of past forfeiture, the company gives written consent to a change of interest or to an assignment of the policy, whether to a purchaser of the property or to a mort- gagee or other party in interest, then a clear ground of estoppel is established in favor of the assignee of the policy, Hayes v. Saratoga Ins. Co., 81 App. Div. 287, 80 N. Y. Supp. 888, aff'd 179 N. Y. 535, 71 N. E. 1131; Home Mut. Ins. Co. v. Nichols (Tex. Civ. App., 1903), 72 S. W. 440. No one except the company can make objection to the assignment from the original insured to the assignee, on the ground that the com- pany's consent has not been obtained, Leinkauf v. Caiman, 110 N. Y. 50, 17 N. E. 389. After a loss by fire has occurred, the claim of the assured for damages is a chose in action, which he has a right to assign, in spite of this clause, without asking permission of the company, Frels v. Little Black Farmers' Ins. Co., 120 Wis. 590, 98 N. W. 522; and the assignee then takes, subject to all defenses available to the insurer as against the assignor, Johnston v. Phoenix Ins. Co., 39 Md. 233. He also takes all rights, for instance, any right to a reformation of the policy, Benesh v. Mill Owners' Ins. Co., 103 Iowa, 465, 72 N. W. 674. But any excess of insurance over and above the fire loss still belongs to the assured assignor, and as to the residue of insurance he can no more assign the policy without consent than he could do so before the fire. 24(3 McFARLAND V. ST. PAUL F. & M. INS. CO. [CHAP. XIII have discovered that the gasoline stove was in common use for cooking pur- poses, it was chargeable with such knowledge as an investigation would have disclosed; and that therefore it assumed the risk as it actually existed when the policy was issued, subject to any use as a dwelling house not so exceptional and peculiar that the defendant company could not be supposed to have anticipated. To put the plaintiff's proposition in another form, it is that when an insurance company issues a fire policy without inquiry, or without application or representations, it consents to any existing use of the insured property which it could have ascertained by reasonable investiga- tion, although by the terms of the policy such a use is expressly prohibited, and there is nothing about the description of the property which necessarily implies or indicates that it may be used in the prohibited manner. On the trial testimony was offered and received in plaintiff's behalf which tended to prove that the practice of using gasoline stoves in dwelling houses had become quite prevalent in the city wherein the insured property was located. Undoubtedly, the purpose of this testimony was to show that the use of the forbidden article in dwellings was not exceptional or peculiar, but on the contrary had become established by custom. Its sufficiency in this respect we need not stop to consider, for all of this class of testimony should have been excluded as immaterial. The policy, which had gone into plain- tiff's hands, and the contents of which he is presumed to have known, was unequivocal on this point, and declared that if gasoline was used on the premises the contract for insurance should be void. There was no language in the instrument from which a different or contrary intention — an intent to permit the use of gasoline — could be gathered. The clause wherein its use was forbidden was not repugnant to any other provision, nor were there elsewhere terms or conditions from which it could be implied that the defendant company waived the prohibition. The plaintiff has not brought his case within an application of the rule laid down in Phoenix Ins. Co. v. Taylor, 5 Minn. 393 (492), in which it was held that printed conditions in an insurance policy prohibiting the keeping of gunpowder in the building containing the merchandise insured were controlled and governed by the written portion, describing the property covered by the policy as a "stock of goods consisting of ... , and such goods as are usually kept in a general retail store;" it having been showji that gunpowder was usually kept in such a .store. By the use of general terms in the written part of the policy, — terms which would ordinarily include the forbidden article, — the insurance company was deemed to have waived the invalidating printed clause as ef- fectually as if the article had been expressly insured. We think it may be said safely that none of the well-considered cases go beyond this, proceeding strictly upon the principle that the written portion of the contract must be given the controlling force, where a conflict or want of harmony arises be- tween it and a printed stipulation. But in the case at bar there was no con- flict or want of harmony. The defendant insured the plaintiff's dwelling house upon an express condition that the use of gasoline should terminate the contract. The defendant did not use ambiguous language, or insert in CHAP. XIIl] FAUST V. AMERICAN FIRE INS. CO. 247 one portion of its policy a clause at variance with or repugnant to a clause found elsewhere, and thus mislead the insured as to the burdens or restric- tions imposed upon him; but, on the other hand, it emphatically notified him that if he used gasoline, as well as other well-known hazardous articles, his policy became void. The cases cited by appellant where there were ambiguous and conflicting clauses and terms in the policies, in line with Phosnix Ins. Co. v. Taylor, supra, have no application to the facts now be- fore us. Order affirmed. FAUST, APPELLANT, v. THE AMERICAN FIRE INS. CO., RESPONDENT Supreme Court op Wisconsin, 1895. 91 Wis. 158 The general -printed prohibition as affected by the written or printed description of the sxibject-matter insured. Policy covered a building occupied as a furniture store and repair shop, together with the contents. Marshall, J. The main question presented on this appeal is whether the presence of a small amount of benzine on the premises for use in the re- pair shop rendered the contract of insurance void. Keeping in mind the un- disputed evidence that the prohibited article was not kept as an article of merchandise for sale, but as an article usually and necessarily kept in operat- ing the business of the repair department of the furniture store, which the policy expressly covered, we find abundant authority to support the general rule, which we adopt, that where a contract of insurance, by the written portion, covers property to be used in conducting a particular business, the keeping of an article necessarily used in such business will not avoid the policy, even though expressly prohibited in the printed conditions of the con- tract. It must be recognized that there is some conflict in the authorities on this subject, but the great weight of authority fully sustains the rule as above stated. In the light of the foregoing, obviously the contract of insurance which covered the building to be used as a repair shop in connection with the fumiture store permitted all things necessary to the enjoyment of the prop- erty for such use. The clause in the written portion of the policy, "Four hundred dollars on the stock of furniture, upholstery goods, and other mer- chandise, not more hazardous, usual to a retail furniture store," must be construed to cover merchandise kept in the trade in the furniture store, and the words "not more hazardous" to refer to such merchandise only and have no reference to the necessary articles kept for use in the repair shop. 248 YOCH V. HOME MUT. INS. CO, [CHAP. XIII The words "any usage or custom of trade or manufacture to the contrary notwithstanding," contained in the printed portion of the poUcy, so far as they would otherwise prohibit the necessary use of benzine in the repair shop, must be held to be controlled by the written portion of the policy, which expressly insures the building in part as a repair shop; this upon the presumption that must exist, that the parties intended that the repair shop as it was, and as it must necessarily continue to be if it continued at all, must be carried on with all usual and necessary incidents, and that as such it was protected by the contract of insurance; also by force of the well- established rule, the written special description of the particular subject- matter, wherever inconsistent with the printed clauses of the policy, must control. Citizens' Ins. Co. v. McLaughlin, 53 Pa. St. 485; Cushman v. N. W. Ins. Co., 34 Me. 487; Archer v. Merchants' & M. Ins. Co., 43 Mo. 434. The construction we thus give the policy renders the contract just and reasonable, and carries out the obvious intention of the parties to it. Any other con- struction would lead to the absurd result that the prohibitory clause of the policy would absolutely prevent the carrying on of the business expressly permitted in the written portion. No such absurdity can be held to have been contemplated by the parties, unless the terms of the contract are such as not to permit of any other reasonable construction. As said in Carlin V. Western Ass. Co., 57 Md. 515: "Where the contrary is not expressly made to appear, it is not to be presumed that, when an insurance is effected with reference to an established and current business, whose protection is really the object of the insurance, such a narrow and stringent construction of the provisions of the policy was intended as will necessarily cause its serious embarrassment or suspension." It follows from the foregoing that the judgment of the Circuit Court must be reversed and a new trial granted. By the Court: The judgment of the Circuit Court is reversed, and the cause remanded for a new trial. YOCH, RESPONDENT, v. HOME MUTUAL INS. CO., APPELLANT Supreme Court of California, 1896. HI Cal. 503 Effect of the written description as a permit. The policy covered a building occupied as a country store and the stock of merchandise "such as is usually kept in country stores." Testimony was given at the trial tending to show that gasoline is one of the articles of merchandise usually kept in country stores. Harrison, J. A contract of insurance is to be interpreted by the same rules as is any other contract. It must be so interpreted as to give effect to the mutual intention of the parties, as it existed at the time of contracting, CHAP. XIIl] YOCK V. HOME MUT. INS. CO. 249 80 far as the same is ascertainable. If it is reduced to writing, the intention of the parties is to he ascertained from the writing alone, if possible; the whole contract is to be taken together; when it is partly written and partly printed, the written parts control the printed parts, and, if there is any repugnancy between the two, the printed part must be disregarded; it may be explained by reference to the circumstances under which it was made; in cases of un- certainty, it is to be interpreted most strongly against the party who caused the uncertainty to exist. (Civ. Code, §§ 1636-1654.) Applying these rules to the contract 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 violation of the policy for the insured to keep gasoline upon the premises as a part of the stock of merchandise. When the defendant agreed to insure a stock of merchandise, "such as is usually kept in country stores," it must be presumed to have known the character of the merchandise which is usually kept in country stores, and that gasoline was one of these articles, and, consequently, that its policy covered all such merchandise. Harper v. Albany Mut. Ins. Co., 17 N. Y. 194; Pindar v. Kings County Ins. Co., 36 N. Y. 648, 93 Am. Dec. 544. The court would have no judicial knowledge of the character of merchandise which is usually kept in country stores and it was therefore competent to offer evidence on that point, for the purpose of enabling it, when interpreting the language of the policy, to understand the matter to which it related and the circumstances under which it was made. When it was shown that gasoline is one of the articles which usually is kept in country stores, the court correctly held that it was a part of the subject of the insurance, and that the insured did not violate the poHcy by keeping it in stock. The de- fendant, when it issued the policy in question, knew the character of a country store, and that Mrs. Brooks kept it for the purpose of retailing to her cus- tomers all of the articles kept by her, and that the gasoline which she kept was to be disposed of by retail in the same way as the other portion of her stock. To give to the policy the construction now claimed by the defendant would be to hold that, although it agreed with her to insure all the stock she usually kept in her store, yet, if she continued to keep that stock she for- feited all rights under the policy. The clause in the policy above quoted, and which is relied on by the appellant, cannot be construed as having this effect. The qualification therein which excepts the policy from becoming void, viz., "unless otherwise provided by agreement indorsed hereon," is found in the policy itself. The subject-matter of the risk— the stock of merchandise "such as is usually kept in country stores"— was written on the policy by the insurer, and as the defendant must be deemed to have intended thereby to insure all such articles as are usually kept in a country store, it must be held that this was an "agreement indorsed" upon the policy, which removed the exemption from liability that would otherwise have existed, Niagara Fire Ins. Co. v. De Graff, 12 Mich. 124. If there be any repugnance between the written phrase "such as is usually kept in country stores" and the printed clause "any usage or custom of trade or manufacture to the 250 MOORE V. PHCENIX INS. CO. [CHAP. XIII contrary notwithstanding," the former controls the latter, as being the more deliberate expression of the contracting parties, Fraim v. National Ins. Co., supra; Civ. Code, § 1651. The judgment and order are affirmed. Garoutte, J., and Van Fleet, J., concurred.' MOORE V. PHCENIX INS. CO. Supreme Court of New Hampshire, 1882. 62 N. H. 240 Unoccupancy for more than ten days, without permit; reoccupancy before the fire. Assumpsit on a policy of insurance which prohibited unoccupancy for more than ten days, without written permit. At the time the policy issued, 1 First Cong. Church v. Holyoke Ins. Co., 158 Mass. 475, 32 N. E. 572; Fraim ». National Fire Ins. Co., 170 Pa. St. 151, 32 Atl. 613. A policy in the Michigan standard form was procured on the Eaton county courthouse. Like the New York policy, it provided against increase of hazard, also against the keeping, using or allowing of gasoline or other explosives on the premises; but permitted repairing by mechanics for fifteen days at any one time. A committee appointed by the board of supervisors took charge of the repainting of the building, and, in connection with the work, a five-gallon can of gasoline was kept in the building by the painters for at least twenty- four days. From this can torches were filled with gasoline and were then used to burn off or blister the old paint on the outside of the building. The court allowed the verdict of the jury in favor of the insured to stand, Justice Grant writing a strong dissenting opinion. The majority of the court decided that painters are not "mechanics," that "keeping, using or allowing" explosives refers only to an habitual keeping or storage, and that repairs by painters, deemed by the jury to be a reasonable and necessary incident to the use of the property, though continued for more than fifteen days, would not avoid the policy. Smith v. German Ins. Co., 107 Mich. 270, 65 N. W. 236, 30 L. R. A. 368. The New Jersey Court of Errors and Appeals, with the Michigan case before it, was unable to construe the same clause of the standard policy with like liberality to the insured; but left a verdict for the plaintiff undisturbed, based on a different state of facts. The court, in an opinion by Justice Swayzc, concludes that painters are "mechanics," within the meaning of the policy; but holds that mechanics are impliedly allowed by the express privilege for repairs to make repairs in "a reason- able, proper and usual way," although the hazard may thereby be temporarily in- creased, and although the use of the generally prohibited article, gasoline, may be necessitated, but all within the limits of the specified period of fifteen days, Garrebrant V. Continental Ins. Co., 75 N. J. L. 577, 67 Atl. 90. The North Carolina court on the other hand, in construing the later memorandum clause of the New York standard policy, concluded that there was no necessary inconsistency between the language of the printed exception and the language of the written description of the plaintiff's policy. The written description covered "stock of cloth, cassimeres, clothing, trim- mings, and all other articles usual in a merchant tailor's establishment." "Patterns" are named in the printed memorandum clause, and excepted from the scope of the in- surance unless liability is specifically assumed thereon. A witness for the plaintiff testified, "all tailors usually keep patterns; can't well get along without them." The court, however, held that effect might be given both to the written and printed parte of the policy, and excluded from the plaintiff's recovery the value of the patterns, Johnston v. Niagara Fire Ins. Co., 118 N. C. 643, 24 S. E. 424. CHAP. XIIl] MOORE V. PHCENIX INS. CO. 251 the insured premises were occupied by the plaintiff's tenant, who, without giving the plaintiff notice, vacated the premises for more than ten days. Subsequently, and before the fire, the plaintiff put two men into occupancy of the buildings. Smith, J. The defendants are Hable only in accordance with the terms and stipulations expressed in their contract as the conditions of their lia- bility. The contract is in writing, and is contained in the policy of insurance. The contract was, not that the policy should be void in case of loss or dam- age by fire during the period of unoccupancy, but that vacancy and un- occupancy should terminate the policy. It is contended by the plaintiff upon the authority of State v. Richmond, 26 N. H. 232, that the policy had not become absolutely void at the expira- tion of ten days from the time the house became unoccupied, but was void- able only at the election of the defendants. In the construction of contracts, words are to be understood in their ordinary and popular sense, except in those cases in which the words used have acquired by usage a peculiar sense different from the ordinary and popular one. In this case the word "void" has not acquired by usage a different signification from the ordinary and popular one of a contract that has come to have no legal or binding force. Whether the cessation of the executory contract of insurance was temporary and conditional, or perpetual and absolute, is a question; but "void" means that on the eleventh day of continuous nonoccupation, the plaintiff was not insured. The defendants might have waived the condition altogether, or might have waived its breach; but having had no opportunity before the loss to make their election to waive the breach, their refusal to pay, when notified of the loss and unoccupancy, was an effectual election that they insisted upon the condition in the policy. The duty of obtaining the consent of the defendants to the changed con- dition of the buildings rested with the plaintiff. By his neglect to comply with this requirement of the contract, it came to an end by force of its own terms. The contract being once terminated, it could not be revived without the consent of both of the contracting parties. It is immaterial, then, whether the loss of the buildings is due to unoccupancy or to some other cause. The strict and literal meaning of the stipulation that the policy shall be void if the premises remain unoccupied more than ten days is not that the msurance will be suspended merely during nonoccupation after the ten days, and will revive when occupation is resumed. In ordinary speech a void policy is one that docs not and will not insure the holder if the insurer sea- sonably asserts its invalidity. It might be argued that this clause should be so construed as to accomplish no more than the purpose for which it was inserted; that its sole purpose was to protect the insurer against the risk resulting from nonoccupation; and that if this risk was terminated by re- occupation, the parties intended the insurance should be suspendcil only during the existence of the cause of a risk which the company did not assume. 252 INSUKANCE CO. OF N. A. V. PITTS [CHAP. XIII On the other hand, it might be argued that such an intention would have been manifested by words specially and expressly providing for a suspension and resumption of the insurance, and would not have been left to be inferred from the general agreement that the policy should be void; that a final termination of the insurance at the end of ten days of nonoccupation is plainly expressed by the provision that the policy shall then be void; and that the parties would not think it necessary to go further, and provide that the void policy should not become valid on reoccupation. Verdict set aside. Blodgett and Carpenter, JJ., did not sit; Stanley, J., dissented; the others concurred.' INSURANCE CO. OF NORTH AMERICA v. PITTS Supreme Court of Mississippi, 1906. 88 Miss. 587 Unoccupancy followed hy reoccupancy. The insured house, belonging to Pitts, was unoccupied for more than ten days, but after vacancy, it was reoccupied by a tenant, and his occupancy continued to the time of the fire. Calhoon, J. On the second contention the facts are that, pending the policy, the premises were at one time vacant for more than ten days, but actual possession was resumed, and some time afterwards, and while oc- cupied, the fire occurred. If the loss had occurred during the prohibited vacancy, there could be no recovery. This is everywhere held and so de- cided by our own court in Insurance Co. v. Scales, 71 Miss. 975 (15 South. Rep. 134). Authorities are not wanting to sustain the views of learned counsel for appellant, and they are sustained also by Mr. Ostrander on Fire Insurance (2d ed., 1897), § 145, and the numerical weight of the decisions he cites in note 5. We prefer to stand on the manifest trend and weight of modern authority, Born v. Home Ins. Co., 110 Iowa, 379, 81 N. W. Rep. 676, and on Freeman's note to that case in 80 Am. St. Rep. 310; Elliott on Insurance, § 205, and the other citations of the briefs for appellee. If the insurance had been for three years or more, and the premium paid, and the vacancy during the first month, and the fire afterwards and during occupancy, it would be very unfair to deprive the insured of protection. The common people who insure should not be entrapped by a harsh construction of a technical word. The insurance is revived by occupancy, though suspended during the vacancy. Affirmed.' 1 Couch V. Farmers' Fire Ins. Co., 64 App. Div. .367, 72 N. Y. Supp. 95. * In case of doubt the question whether the premises were unoccupied must go to the jury. The plaintiff's house insured was on a farm and situated about ten miles from the city of Menominee. Although the plaintiff was engaged in cultivating this CHAP. XIIlJ HUSTACE V. PH(ENIX INS. CO. 253 EUSTACE V. PHCENIX INSURANCE CO. Court of Appeals of New York, 1903. 175 N. Y. 292 Loss by explosion where fire precedes and causes explosion. Action on a policy of fire insurance in standard form, insuring "against all direct loss or damage by fire, except as hereinafter provided for," and providing that "this company shall not be liable for loss caused directly or indirectly by invasion or (unless fire ensues, and in that event for damage by fire only) by explosion of any kind." The controversy was submitted upon an agreed statement of facts. A conflagration, originating in the Tarrant building in New York City, in course of the burning and within less than half an hour after starting, reached a large stock of explosive drugs and chemicals stored in the building. In consequence of their ignition a terrific explosion ensued which wrecked neighboring buildings, including the building belonging to Hustace the plaintiff, and insured by the defendant. This building was distant fifty-six feet, eleven inches from the Tarrant building, and was separated from it by two buildings, and an alleyway about eight feet wide. These two inter- vening buildings were also wrecked by the explosion, but the conflagration from the Tarrant building subsequently swept over this space and con- sumed the ruins of the plaintiff's building. Parker, Ch. J. Now, this building was destroyed by explosion of some kind; and inasmuch as the policy expressly provides that "this company shall not be liable for loss caused directly or indirectly ... by explosion of any kind" "unless fire ensues, and in that event for the damage by fire only," it would seem as if— reading this provision of the contract according to the rule laid down by this court in Schoonmakcr v. Hoyt (148 N. Y. 425), Judge Martin writing: "Contracts and statutes are to be read and under- stood according to the natural and obvious import of the language without resorting to subtle antl forced construction for the purpose of cither limiting farm, yet she spent more than half her time in her city home; but she or members of her family were on the insured premises, so a witness testified, "a few days in every week." They slept and ate in the farmhouse while so staying on the farm, and the plaintiff's husband was in the insured building when the fire occurred. From this testimony the jury was allowed to infer that both city and farmhouse were occupied as dwelling houses; and the judgment in favor of the plaintiff was affirmed on appeal, Maas V. Anchor Fire Ins. Co., 148 Mich. 432, 111 N. W. 1044. In a Virginia case a policy for S3, 000 covered si.xteen tenement houses, S187.50 being apportioned to each house. During the life of the policy, eight of the buildings became unoccupied, and so remained for more than ten days. The court held that the insurance was valid as to the occupied houses and void as to those unoccupied, Connecticut Fire Ins. Co. ». Tilley. 88 Va. 1024. 14 S. E. Sol, 29 Am. St. R. 770. 254 HUSTACE V. PHCENIX INS. CO. [CHAP. XIII or extending their operation. Courts may not correct suspected errors, omissions or defects, or bj^ construction vary the contract of the parties" — the conclusion would be reached that an explosion on other premises which produced such a violent concussion as to destroy a building fifty-seven feet distant, would be plainly within the terms of such provision of the policy. Plaintiffs contend that the language employed indicates that the exemp- tion was not intended to apply to an explosion caused by a preceding fire, whether in distant premises or not, and argue that if the legislature had intended to exempt from explosion whether caused by fire or not, it would have omitted the words "unless fire ensues," etc., and merely said that the "company shall not be hable for loss sustained directly or indirectly by ex- plosion of any kind." Thus, according to their view the clause should be construed as if it read: "or (unless fire ensues, and in that event for the damage by fire only) by explosion of any kind, excepting explosion caused by fire." Such a clause should not, of course, be read into a contract that is plain and unambiguous, particularly when it has been framed pursuant to a direction of the legislature, and when necessarily care has been observed to select language which should aptly express the scope of the contract, as well as the limitations upon the liability of the insurer. The occasion for the insertion of this exemption clause in the standard policy was found in the decisions of the courts holding the insurer liable for loss caused indirectly by invasion, insurrection, riot, etc., for loss by order of civil authority directing that a building be blown up to stop the spread of a fire, for loss by theft, by lightning, and in some jurisdictions for loss by explosion. In view of these authorities, the insertion of this exemption provision must have been for the purpose of overcoming the decisions. ^ And fire in- surance companies had the right to limit their risks to loss or damage by fire direct if they so chose, rather than against damage by riot, theft, explosion, lightning and all other causes by which property could be accidentally destroyed. It should be noted that the insuring clause is "against all direct loss or damage by fire, except as hereinafter provided for." Plaintiffs argue that this phrase does not convey the same meaning as would a phrase "against all loss or damage by fire direct;" and their argu- ment is that the adjective "direct" refers to and qualifies the noun "loss" and not the noun "fire." It would seem as if the adjective "direct" in the connection in which it is employed qualifies not alone "loss" but also "dam- age by fire," and, hence, the phrase has precisely the same meaning as if the insurance was "against loss or damage by fire direct." And to meet situations where explosions might occur, it provided against liability unlesa * Was not the explosion clause of the standard policy intended rather to meet such cases as Scripture v. Lowell Mut. F. Ins. Co., 10 Cush. (Mass.) 356, in which the in- surer was held liable although explosion and not a conflagration was the primary catastrophe? CHAP. XIIl] HUSTACE V. PHCENIX INS. CO. 255 fire ensued, and in that event for the damage occasioned by the fire, and not for damage resulting from the explosion. This provision of the contract is in substantially the same language and has precisely the same meaning as a clause in an insurance contract tliat was before this court in Briggs v. N. A. & M. Ins. Co., (53 N. Y. 44G). That policy contained this provision: "This company shall not be hable for loss caused by invasion, insurrection, riot, civil commotion, military or usurped power, nor for loss caused by hghtning or explosions of any kind, unless fire ensues and then for the loss or damage by fire only." The building insured was used in rectifying spirits. A person repairing the machinery brought in a lamp. The vapor coming into contact with the burning lamp resulted in an explosion which did great damage. Fire resulted from the explosion, but the damage by fire was slight as compared with that caused by the explo- sion. Under the direction of the court, the jury found separately the dam- ages caused by the explosion and the fire. The General Term granted a new trial unless plaintiff deducted the damages caused by the explosion. This court affirmed the judgment of the General Term, holding that plain- tiff was not entitled to recover for the explosion, and it said: "If it was in fact an explosion, then the policy provides that defendant shall not be liable for damages caused thereby. The plaintiffs insist, however, that an explo- sion caused by a fire is a fire, and, therefore, defendant is hable for the ex- plosion as for a fire. But that reasoning gives no force to the exception. It allows a recovcrj"- for the explosion when the policy expressly stipulates that the defendant will not be liable for that. It may be conceded that in the absence of this exception a recovery could have been had for the whole damage as for loss by fire. The authorities referred to by the plaintiff's counsel tend to that result. I do not think that position will aid the plain- tiffs. An explosion without this exception, if it came under the general head of fire, might have afforded ground for recovery, but defendant guarded against that result by this express stipulation. The exception too, is general, including explosions by fire as well as others." As will be seen by comparison of the exemption clause in that i:)olicy with the one under consideration, that decision, as w-ell as the argument of the court, in which all concurred, is equally applicable to the clause in this pol- icy and to this situation. The Briggs case is the only authority in this court precisely in point as to the construction to be given to this exemption clause, and in that case the fire followed the explosion; but the court said of the exemption clause that it included explosions caused by fire as well as others. There are authorities that both in reasoning and decision tend otherwise, but attention is not called to them in detail because the position of this court as to that question is settled. Our object in calling attention to a few of the other authorities in other jurisdictions has been to show that this court is not alone in the position taken. Counsel for plaintiffs insists that the wreck of plaintiff's building by the explosion in the Tarrant building was direct loss or damage by fire within the 256 HUSTACE V. PHCENIX INS. CO. [CHAP. XIII meaning of the policy and that the situation calls for precisely the same dis- position as if the question was presented in an action upon a policy covering the Tarrant building where the fire had been raging for something Uke thirty minutes before the explosion. The fact that the courts prior to the insertion of the explosion exemption clause held that under the policy the insurer was liable as for a loss by fire does not make it a loss by fire direct if it is in reality a loss by explosion. Where a policy contains a provision that there shall be no liability for ex- plosion of any kind, as well as a provision for liability for direct loss by fire, each provision must be given full force and effect unrestrained by decisions made before the explosion exemption clause became a feature of the contract. So, while it may be that but for the explosion clause we should feel con- strained to follow those earlier decisions to which reference was made gen- erally in the Briggs case, and hold defendant liable because a fire in another building was the cause of the explosion, we are not permitted to do that in view of the exemption clause, relieving defendant from hability from ex- plosions of any kind ; and so we held that in the Briggs case charging the in- surance company with the loss by fire, which in that case, followed the ex- plosion and compelling plaintiff to bear the loss caused by the explosion. A similar construction was given to the lightning provision of an insurance contract in Beakes v. Phcsnix Ins. Company (143 N. Y. 402), Judge Bakt- LETT writing. In that case a policy of insurance contained a clause declaring that * this policj'' shall cover any direct loss or damage caused by lightning, (meaning thereby the commonly accepted use of the term lightning, and in no case including loss or damage by cyclone, tornado or wind-storm)." The plaintiff's buildings were struck by lightning and immediately thereafter a high wind came up which substantially damaged the buildings. Defendant claimed it should not be charged with damages occasioned by the wind: but the trial court charged that if the jury found that the buildings were struck by lightning and this was the proximate cause of the loss, plaintiff was entitled to recover the whole loss, although the wind subsequently in- creased the damage; and refused to charge as requested that "the jury must strictly confine their verdict to the actual damage done by the lightning." The plaintiff had judgment; in this court it was reversed on the ground that under the policy the recovery should have been limited to the direct loss or damage done by lightning. The construction placed upon this clause is in harmony with the construction placed upon the explosion clause in the Briggs case. The judgment should be reversed and judgment ordered for defendant on submission, with costs to defendant in both courts. Gray, 0'Brie:n, Haight, Vann, JJ. (and Martin, J., in result), concur; Bartlett, J., dissents. Judgment reversed, etc.^ ' Five judges below decided the other way. Compare the doctrine approved by the United States Supreme Court in The G. R. Booth, 171 U. S. 450, 19 S. Ct. 9, 43 L. Ed. 234. And see Brown v. St. Nicholas Ins. Co., 61 N. Y. 332. The insured, named Mitchell, had a policy for $5,000 on his stock of stoves and CHAP. XIV] VAN TASSEL V. GREENWICH INS. CO. 257 CHAPTER XIV Clauses of the Standard Fire Policy — Continued Cancellation, Mortgagee Clauses, etc. VAN TASSEL v. THE GREENWICH INS. CO. OF THE CITY OF NEW YORK Supreme Court of New York, 1893. 72 Hun, 141. See 151 N. Y. 130; 161 N. Y. 413, reversing 28 App. Div. 163; 184 N. Y. 607 What is an effectual notice of cancellation? Action on a fire insurance binder. Defense, that insurance had been canceled by the company, by notice. tinware in Georgetown, D. C. His clerk went down into the cellar of the store and lighted a match there, because it was dark. The lighted match came in contact with the vapor of gasoline kept in the cellar, and a violent explosion at once followed, causing a collapse of the building. The damage to the insured stock was due to the falling of the building and the crushing of the stock. The jury having found these facts, the court held that the loss was by explosion and that the insured could not recover under this policy since here the explosion was the first or primary catastrophe, Mitchell V. Potomac Ins. Co., 183 U. S. 42, 22 S. Ct. 22, 46 L. Ed. 74. La Force had a policy on his dwelling, which like the standard policy, excepted loss caused by ex- plosion on any kind unless fire ensued, and then included the loss by fire only. His housekeeper, for the purpose of driving away cockroaches, poured some gasoline on different parts of the kitchen floor. Some of the gasoline dripped through the cracks and evaporated, the vapor being confined between the floor and the ground underneath. There was no vapor in the kitchen, though on the kitchen floor there was liquid gaso- line, which is not explosive. About half an hour later the housekeeper dropped a lighted match on the floor, which caused a fire, but no immediate explosion. After the fire had extended entirely around the room, and had burned the gasoline from three to five minutes, and after the wainscoting around the wall had been ignited, the flames came in contact with the vapor beneath the floor, and it exploded, blowing the floor up and shaking the walls down. The court held that the damage done to the building, both by reason of the actual burning and by reason of the concussion, was occasioned by fire within the meaning of the policy, since the fire was the first or primary catas- trophe, and that the exception in favor of the insurer was not applicable. La Force v. The Williams City Ins. Co., 43 Mo. App. 518. The peril of fire insured against, though the primary cause in point of time may, however, be too remotely connected with the damage in question to be accepted as the responsible cause. For instance, where fire starting in a vessel which was lying temporarily in the River Mersey re- sulted in a violent gunpowder explosion aboard, which in turn shattered the windows of buildings on the banks, it was conceded that the explosion must be deemed the responsible cause of the damage to the windows. Here was a casual exposure which perhaps the underwriters could hardly have been expected to take into their calcula- 17 258 VAN TASSEL V. GREENWICH INS. CO. [CHAP. XIV January 1st, 1891, Beecher & Benedict, brokers for the plaintiff Van Tassel, procured from the defendant the following binding shp. "Beecher & Benedict, "New York, 189... "Insure E. M. Van Tassel, "S10,000 for 12 months at "On " Building N. E. corner 13th Ave. & W. 11th Street, N. Y. City. " In store "Binding this 1 day of January at noon. " (This memo, to be void on deUvery of the policy at the office of Beecher & Benedict.) "Company Amount Accepted "Greenwich $10,000 "Wm. Adams." tions, and which certainly was not to be found scheduled upon their insurance maps and surveys. It must be observed, however, that the issue in the case arose between stockholders of the insurers, and the insurers, who, it was claimed, had made payment ultra vires to the insured on account of the loss. The court rendered judgment adverse to the contention of the stockholders. The Lottie Sleigh case, Taunton v. Royal Ins. Co., 2 H. & M. 135, 10 Jur. N. S. 291, 33 L. J. Ch. 406, 10 L. T. N. S. 156. Even in that case the underwriters saw fit to settle, Bunyon, Ins. (5th ed., 1906) 79. Loss of cargo by fire may include loss of goods by the sinking of the vessel contain- ing them and though no fire touch them, provided the fire is the cause of the sinking, N. Y. & B. Despatch Exp. Co. v. Traders' & M. Ins. Co., 135 Mass. 221. Falling Building. — Or if a building or any part thereof fall, except as a result of fire, all insurance on such building or its contents shall immediately cease. If any sub- stantial portion of the structure falls, except as the result of antecedent fire, the in- surance forthwith terminates, Kiessel v. Sun Ins. Ofiice, 88 Fed. 243, 31 C. C. A. 515; Foster v. Home Ins. Co., 74 C. C. A. 445, 143 Fed. 307; Nelson v. Traders' Ins. Co., 181 N. Y. 472, 74 N. E. 421; but the rule is otherwise, if only a trifling portion falls, London & L. Ins. Co. v. Crunk, 91 Tenn. 376, 23 S. W. 140; Home Mut. Ins. Co. v. Tomkins, 96 Tex. 187, 71 S. W. 814. If, however, the fall is caused by an explosion and fire ensues, then, as is manifest, the company is liable for the fire loss, by virtue of the explosion clause of the policy, Leonard v. Orient Ins. Co., 109 Fed. 286, 48 C. C. A. 369, 54 L. R. A. 706; Friedman v. Atlas Assur. Co., 133 Mich. 212, 94 N. W. 757; Davis v. Ins. Co., 115 Mich. 382, 73 N. W. 393; Dow v. Faneuil Hall Ins. Co., 127 Mass. 346. The burden of proof rests on the insurance company to show that the fall preceded the fire, Western Assur. Co. v. Mohlman, 83 Fed. 811, 51 U. S. App. 577, 28 C. C. A. 157; Ermentrout v. Girard F. & M. Ins. Co., 63 Minn. 305, 65 N. W. 635, 56 Am. St. R. 485, 30 L. R. A. 346. Earthquake and Volcano Clause. — In California and in other localities an earthquake clause is sometimes employed. Its purpose is to reUeve the company from loss caused by a convulsion of nature. A defense under this exception often presents an issue of fact for the jury as to whether the fire in question may not have been proximately due to some other cause than the earthquake. The burden of proof is on the insurer. Board of Education v. Alliance Ins. Co., 159 Fed. 991; Williamsburgh City F. Ins. Co. v. Willard, 164 Fed. 404; McEvoy v. Security F. Ins. Co. (Md., 1909), 73 Atl. 167. CliAP. XIV] VAN TASSEL V. GREENWICH INS. CO. 259 More than five days before the fire, the defendant wrote to Beecher & Benedict as follows: "The Greenwich Inburance Company, "161 Broadway, "New York, Jan. 7, 1891. "Beecher & Benedict, 145 Broadway. "Gentlemen: — Your application for renewal of insurance for E. M. Van Tassel at n. e. cor. 13th Ave. & West 11th 8t. is declined for $10,000; would renew for $5,000 if wanted. "You will, therefore, consider that the risk is not held binding by this company for more than $5,000. "Very truly yours, "M. A. Stone, 'Secretary.' " No policy or renewal receipt was ever delivered or premium paid. The standard policy provides "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," etc. As usual in dealing through brokers, the company gave credit for the premium. The fire occurred on the night of January 13th, and destroyed the grain warehouse mentioned in the binding sUp. FoLLETT, J. The binding shp of January 1, 1891, continued the original policy for $10,000 in force subject to "the original stipulations" therein contained. It was provided in the policy that any renewal of it should be subject to its provisions, which is the legal effect of a "binding slip," Lipman V. The Niagara Fire Insurance Co., 121 N. Y. 454; Karelsen v. The Sun Fire Office, 122 N. Y. 545; May on Ins. (3d ed.), §§ 44-59. By the binding slip the defendant contracted to continue its policy in force for $10,000 during the year 1891. This slip bound the company as effectually as the usual renewal receipt issued by insurers, and there was no way in which the de- fendant could, without the plaintiff's assent, terminate its contract except in the mode provided in the policy. This it failed to do. The letter of January 7th was not effectual as a notice of cancellation, and at most it simply informed the insured that unless he consented to accept a policy for $5,000 and surrender the contract which he than held, the insurance would be canceled. To give this letter greater effect would be permitting the de- fendant to put an end to its contract in a way not provided for. The letter amounted only to a proposition by the defendant to the plaintiff to consent to a reduction of the amount insured. He had the right to accept the pro- posal or to stand by the contract then existing. He was not bound to take further action in the matter. Until the policj'- was canceled in accordance with its provision, it was in force and the plaintiff was liable for the premium earned while the risk was covered. Van Brunt, P. J., and Parker, J., concurred. On another ground the Appellate Division decided in favor of the defendant. The Court of Appeals 260 TISDELL V. NEW HAMP. FIRE INS. CO. [CHAP. XIV approved the portion of the opinion above reported, and as to the other point reversed in favor of the plaintiff. TISDELL V. THE NEW HAMPSHIRE FIRE INSURANCE COMPANY Court of Appeals of New York, 1898. 155 N. Y. 163 Whether notice of cancellation by the insurance company is effectual without tender of the amount of unearned premium. Action on a standard policy of fire insurance the cancellation clause of which is as follows: "This policy shall be canceled at any time at the re- quest of the insured, or by the company, by giving five days' notice of such cancellation. If this policy shall be canceled, as hereinbefore provided or become void, or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rates, except that when this policy is canceled by this company by giving notice, it shall retain only the pro rata premium." More than five days before the fire, the defendant through its agent had served upon the plaintiff a written notice of cancellation but made no payment back or tender of any part of the premium. Nor had the plaintiff returned or surrendered the poUcy. Bartlett, J. The question presented on this appeal is no longer an open one in this court. It was decided in the case of Nitsch v. American Central Insurance Company (152 N. Y. 635), affirmed in this court without an opinion. In that case, as in this one, the question presented was, whether the pro- vision of the New York standard policy of fire insurance, relating to the cancellation of a policy at the instance of the company, requires that, in addition to giving the five days' notice, the company must return or tender the unearned premiums in order to effect a cancellation. The answer was in the affirmative. The order should be affirmed, with costs. Parker, Ch. J. (dissenting). This controversy must be settled by the contract between the parties. The standard policy has been prepared under authority of law by men experienced in insurance contracts, and it is, therefore, fair to assume that the agreement may be treated as one prepared by men competent to use language adequate to convey clearly and distinctly the views of the parties. In such case it is the rule that if the language of a statute or contract, read in CHAP. XIV] TISDELL V. NEW HAMP. FIRE INS. CO. 261 the order of its clauses, presents no ambiguity, courts will not attempt, through transposition of clauses or ingenious argument a.s to the general intent, to quahfy by construction its meaning. (Doe v. Considine, 6 Wallace, 458.) The first sentence provides for the cancellation of a policy. It declares that "it shall be canceled ... by the company by giving five days' notice of such cancellation." In other words, the underwriter, by its contract, reserved to itself the right to cancel the contract of insurance by a notice of five days. Nothing else is provided to be done. Notice alone shall be suffi- cient says the contract. The language is unambiguous. It admits of no debate and requires no construction. Words more apt to accomplish the cancellation of a policy by the giving of the five days' notice cannot well be imagined. Having provided for a cancellation of the policy, either by the request of the insured or upon notice given by the company, the next clause of the agreement proceeds to make disposition of the unearned premiums, in the event of the exercise of the option to cancel by either of the parties. The opening phrase of the clause shows that what follows proceeds upon the assumption that the policy shall have been canceled before occasion arises for acting under its provisions. It reads, "If this policy shall be can- celed as hereinbefore provided" — referring necessarily to the company's five days' notice — "the unearned portion of the premiums shall be returned." When? At the time of the giving of the five days' notice of cancellation? Not at all; "on the surrender of the policy" is the occasion fixed by the con- tract for its return. The scheme of this portion of the contract, then, is to provide, first, for the cancellation of the policy — that is to be accomplished by the simple request of the insured, if he desires to cancel it, or by a five days' notice on the part of the company if it desires to terminate its obliga- tion under the policy. The policy having been put an end to by cancella- tion, at the insistence of one party or the other, then the situation of the parties is such that the company has in its possession certain premiums which it has not earned, and which it does not desire to earn, and the other party has in his possession the policy of insurance, no longer, of course, of use to him, and of no particular value to the company, except that when it finally comes into the company's possession it of itself furnishes evidence that the unearned premiums have been paid to the insured. With this situation, then, the agreement undertakes to deal, and it provides that upon the surrender of the policy the unearned premium, whether at short rate or pro rata premium, depending upon which party brought about the cancella- tion, shall be returned to the insured. Practically, it says to the insured: You return the policy to the place where you got it from and the company will at once turn over the unearned premium to which you are entitled under this contract. This agreement is so clearly expressed that there does not seem to be opportunity for insisting that the language means something quite different from what is suggested to the mind upon the first reading. And still other readings will not prompt the thought that there is possibly any ambiguity. 262 TISDELL V. NEW HAMP. FIRE INS. CO. [cHAP. XIV It is suggested in the opinion of the learned trial judge in the case of Nitsch V. American Central Insurance Company, subsequently afiirmed in this court without an opinion (152 N. Y. 635), that, under such a reading of the contract as on its face it is apparent it should have, "a, man might pay $1,000 for insurance to-day, receive a notice from the insurance company to-morrow which would have the effect to cancel his policy in five days, and at the end of the week have no remedy except an action at law against the company." Such a case could happen undoubtedly, but it is not likely to. Courts cannot assume that insurance companies will act arbitrarily, or that they are so lacking in business prudence as to be willing to acquire a reputa- tion for practicing a wrong of that character upon customers. On the con- trary, we must assume that corporations, as well as individuals, intend faithfully to keep their contracts. But were it our duty to indulge in a totally different presumption, the situation would not be changed, for the court is without authority to make contracts for the parties. The lawmaking power of the State, the legislature, has undertaken to provide for the creation of a standard policy of fire insurance for the protec- tion alike of the insured and the insurer, and if the standard policy needs further amendment, relief must be sought from that source. Prior to the passage of chapter 488 of the Laws of 1886, providing for a uniform contract of fire insurance to be used by fire underwriters within the State, there were two cases in this court, namely: Van Valkenburgh v. Lenox Fire Ins. Co. (51 N. Y. 465) and Griffey v. New York Central Insurance Co. (100 N. Y. 417), holding that the cancellation clause was not operative unless the company should tender or return to the insured the amount of the unearned premium. The cancellation clause in those contracts differs very materially from the one in question. It reads as follows: "This insurance may be terminated at any time at the request of the assured, in which case the company shall retain only the customary short rates for the time the policy has been in force. The insurance may also be terminated at any time at the option of the company on giving notice to that effect, and refunding a ratable proportion of the premium for the un- expired time of this pohcy." Now, clearly, that agreement did provide, as the courts held, that two things were required to terminate the policy — first, the giving of the notice, and, second, the refunding of the unearned premium. Now, after these decisions were made, the cancellation clause of the present policy was prepared, and it does not seem to be an intemperate use of the imagination to draw the inference that it was prepared in view of the decisions to which I have referred, and to meet them by establishing a con- tract which should make cancellation by the company less difficult. It is certainly difficult to see how they could have used language more appropriate to accomplish that result. The order should be reversed and a new trial granted, with costs to abide the event. Bartlett, J., reads for affirmance; Haight, Martin and Vann, JJ., con- CHAP. XIV] SCHWARZCHILD, ETC., CO. V. PHCENIX INS. CO. 2G3 cur; Parker, Cii. J., reads for reversal; O'Brien, J., concurs; Gray, J., absent. Order affirmed and judgment absolute ordered for ylalidijj on stipxdation, with costs. SCHWARZSCHILD & SULZBERGER CO. v. PHCENIX INS. CO. OF HARTFORD Circuit Court of Appeals, 1903. 124 Fed. 52 Same subject. The material facts and the form of cancellation clause were the same as in the last case. TowNSEND, Circuit Judge. The language of the foregoing provision de- mands a construction fatal to plaintiff's claim. It provides specifically for the absolute cancellation of the policy at any time by the companj' bj'' giving five days' notice thereof. It further provides in express terms that on sur- render of the policy after such cancellation, the unearned premium shall be returned. It is difficult to conceive how language more definite could have been employed to show that the right to claim such unearned premium could only accrue after cancellation by the insurer and surrender by the insured. In support of its contention, counsel for plaintiff relies upon the case of Tisdell V. The New Hampshire Fire Insurance Company, 155 N. Y. 163, 49 N. E. 664, 40 L. R. A. 765. It is true that in said case the Court of Appeals of the State of New York by a divided court, held that such repaj'ment was a condition precedent to cancellation. We are not unmindful of the great weight which should ordinarily be given to the decisions of said court, es- pecially upon a question involving the construction of a form of polic,v fixed by the statute of said State. But in the Tisdell case we are wholly without any sufficient or satisfactory guide as to the process of reasoning by which a majority of the court reached its conclusion. The opinion states that: "The question presented on this appeal is no longer an open one in this court. It was decided in the case of Nitsch v. American Central Insurance Company, 152 N. Y. 635, 46 N. E. 1149, affirmed in this court without an opinion." The memorandum of the decision in the Nitsch case only shows that it af- firmed a judgment of the Supreme Court, General Term, reported in 83 Hun, 614, 31 N. Y. Supp. 1131, which affirmed a judgment in favor of plain- tiff entered upon a verdict by the trial court. Reference to S3 Hun, 614, 31 N. Y. Supp. 1131, shows that the General Term wrote no opinion. We are, therefore, without anything in the reports to show, what questions were decided, or even what issues were presented. Chief Justice Parker, however, in his dissenting opinion in the Tisdell case, shows that the Court of Appeals 2u4 SCHWARZCHILD, ETC., CO. V. PHCENIX INS. CO. [CHAP. XIV was required to affirm a judgment of the General Term in the Nitsch case upon another and unquestioned ground of waiver by defendant. In these circumstances, we are unable to accept the conclusions of the Court of Ap- peals in the Tisdell case. Upon the facts found herein, we must hold that notice of cancellation was duly given by defendant, and acquiesced in by plaintiff, and that no further action on the part of defendant was necessary until after the surrender of the i)olicy. The judgment is affirmed with costs.^ • Davidson v. German Ins. Co., 74 N. J. L. 487. The authorities on both sides of this practical question are thoroughly considered in Taylor v. Ins. Co. of N. A. (Okla., 1909), 105 Pac. 354. Notice by the Insurer to Be Served Upon Whom. — As to whether the insurance company must serve the notice of cancellation upon the insured himself, or whether service upon the broker is sufficient, see Grace v. Am. Cent. Ins. Co., 109 U. S. 278, 3 S. Ct. 207, 27 L. Ed. 932; Standard Leather Co. v. Ins. Co., 224 Pa. St. 186; Snyder V. Commercial Ins. Co., 67 N. J. L. 7, 50 Atl. 509; Hermann v. Niagara Fire Ins. Co., 100 N. Y. 411; Karelsen v. Sun Fire Office, 122 N. Y. 545, 25 N. E. 921. MoKTGAGEE PROVISION OF THE POLICY. — A mortgagee may employ various methods for protecting his interest by insurance. Palmer Savings Bank v. Ins. Co., 166 Mass. 189. He can take out insurance upon the property for his own benefit exclusively, pajang the premiums himself. He is then the sole insured, Boyd v. Thuringia Ins. Co., 25 Wash. 447, 65 Pac. 785. His interest and right of recovery are limited to the amount of the indebtedness; and the debtor cannot claim the benefit of the insurance. Carpenter v. Ins. Co., 16 Pet. 495, 10 L. Ed. 1044. If the debt is paid the insurance falls, since the mortgagee then loses his insurable interest, Reynolds v. London & Lan. Fire Ins. Co., 128 Cal. 16, 60 Pac. 467. This method, however, is seldom satisfactory to the mortgagee, who prefers to take his interest accruing from the mortgage free and clear of any expense of insurance. If the mortgagor has contracted to give the mortgagee the benefit of insurance, the mortgagee will have an equitable lien upon the proceeds, Wheeler v. Ins. Co., 101 U. S. 439, 25 L. Ed. 1055; but in the absence of some contract with the mortgagor he has no interest whatsoever in the mortgagor's poUcies, Farmers' Loan & Tr. Co. v. Penn. Plate Glass Co., 186 U. S. 434, 22 S. Ct. 842, 46 L. Ed. 1234 (in which it was also held that a covenant by mortgagor to insure for the benefit of mortgagee would not run with the title to a purchaser). Likewise as before stated, unless there is some agreement between mortgagor and mortgagee to that effect, the mortgagor cannot avail himself in any way of the proceeds of in- surance which the mortgagee has taken out independently and exclusively for his own security. Palmer Savings Bk. v. Ins. Co., 166 Mass. 189. Though he contract with the mortgagor so to do, the mortgagee may not, for the benefit of himself and the mort- gagor, take out insurance in his own name exclusively in the New York standard form of policy and without disclosure of the facts, since he would thereby violate the con- dition of sole and unconditional ownership contained in the policy. Accordingly, the usual method of securing to a mortgagee the benefit of insurance is by the addition of a special provision in his favor, inscribed upon the face of the mortgagor's policy, and accompanied by the delivery of the original policy or a duplicate to the mortgagee. A special clause, for this purpose, in former years usually consisted simply of an in- dorsement on the face of the policy of the words, "Loss, if any, payable to A. B., mortgagee," or to "A. B., mortgagee, as his interest may appear," or some similar phrase, and such phrases are still in common use. A mortgagee, however, should not be content with a mere payee clause in New York and in most of the States, since this form of indorsement leaves him too largely at the mercy of his debtor. Syndicate Ins. Co. t. Bohn, 65 Fed. 165, 173, 12 C. C. A. 531. In most jurisdictions, in such a case, CHAP. XIV] SCHWARZCHILD, ETC., CO. V. PHCENIX INS. CO. 265 he is held to bo entitled to recover only subject to any defenses available to the com- pany against the insured mortgagor. Hence if the' mortgagor has violated any con- dition of the contract, the mortgagee, a mere payee, will take nothing. Bates r. Equita- ble Ins. Co., 10 Wall. (U. S.) 3.3; Jaskul.-^ki v. Ins. Co., 1.31 Mich. G03, 92 N. W. 98; Moore v. Hanover F. Ins. Co., 141 N. Y. 219, 3G N. E. 191; Krith v. Royal Ins. Co., 117 Wis. 531, 94 N. W. 295. Thus an award is binding on the mortgagee as payee, though ho has not been made a party to it, CoUinsville Sav. Soc. v. Boston Ins. Co., 77 Conn. 676, 60 Atl. 647. And so is an election on the part of the company to rebuild or reinstate, although the payee may not even have knowledge that the company has chosen this method of fulfilling its contract, Heilmann v. Westchester F. Ins. Co., 75 N. Y. 7. In several jurisdictions, however, a mere payee clause, construed in con- junction with the mortgagee provision of the standard policy, is held to create an in- dependent contract with the mortgagee, or other interested payee, and to relieve the mortgagee of the efTcct of forfeitures by the mortgagor. Queen Ins. Co. v. Dearborn Sav. Loan Assoc., 175 111. 1 15, 51 N. E. 717 (one-year limitation to begin suit) ; Christen- son V. Fidelity Ins. Co., 117 Iowa, 77, 90 N. W. 495 (foreclosure proceedings); East v. New Orleans Ins. Assoc., 76 Miss. 697, 26 So. 691 (conveyance of title); Senor v. Western Millers' Ins. Co., LSI Mo. 104, 79 S. W. 687 (additional insurance does not forfeit as to mortgagee) ; Henton v. Farmers' Ins. Co. (Neb.), 95 N. W. 670 (foreclosure proceedings); Boyd v. Thuringia Ins. Co., 25 Wash. 447, 65 Pac. 785 (alienation and subsequent insurance). These cases last cited exhibit a strained construction in favor h(' appointee and would seem to render the standard policy with such an indorse- 1 .i-nt a well-nigh unconditional agreement to indemnify him. The real purpose of the f-amers of the policy is illustrated by the similar clause relating to mutual com- panies. There is a conflict of opinion as to whether the mortgagee thus named as payee will forfeit his interest by commencing foreclosure proceedings without written consent, Delaware Ins. Co. v. Greer, 120 Fed. 916, 57 C. C. A. 188, 61 L. R. A. 137 (held avoided); Henton v. Far. & Merchants' Ins. Co. (Neb.), 95 N. W. 670 (held not avoided). Not being the insured, however, a mere payee by assigning his interest in the policy docs not violate the clause prohibiting an assignment of the policy, Whiting V. Burkhardt, 178 Mass. 535, 60 N. E. 1, 52 L. R. A. 788. Where the loss is made payable to the mortgagee as solo payee, and he collects it, he must hold anj' balance beyond his interest, in the eapacitj' of trustee for the mortgagor, the insured, Ermen- trout V. Am. Ins. Co., 60 Minn. 418, 62 N. W. 543; but where the loss is made payable to a mortgagee as his interest may appear, ho is entitled to collect only the amount of his interest. Palmer Sav. Bank v. Ins. Co. of N. A., 166 Mass. 189, 44 N. E. 211. By the terms of the policy the insured, and not a mere payee, should make the proof of lo.ss, ArmvStrong v. Agricultural Ins. Co., 130 N. Y. 560, 567. The Stand.\rd Moutgaoee Clause. — The policy as modified by the addition of the standard mortgagee clause is held to include two separate contracts largely independ- ent of each other, one in favor of the mortgagor, and the other in favor of the mort- gagee. By the terms of the rider, "the in.surancc, as to the interest of the mortgagee, shall not be invalidated hy any act or neglect of the mortgagor or owner," and, there- fore, a forfeiture as against the mortgagor docs not defeat the interest of the mort- gagee. Phoenix Ins. Co. t-. Trust Co., 41 Neb. 834, 60 N. W. 133, 25 L. R. A. 679; Eddy V. London Assur. Co., 143 N. Y. 311. 62 N. Y. St. R. 316; Brecyear r. Rocking- ham Farmers' M. F. I. Co., 71 N. H. 445, 52 Atl. 860. A concrete illustration will greatly clarify the situation existing where there are two or more mortgages. Brown owns a house worth $15,000. He borrows §5,000 from the Bowery Savings Bank, for which he gives to the bank a first mortgage on his house. Another loan of like amount he procures from his bankers, J. P. Morgan & Co., to whom he gives a second mort- gage on the same property. In pursuance of his mortgage covenants, he takes out a policy from the Home Insurance Company for S5,000, with full mortgagee clause in favor of the savings bank; and another policy from the Royal Insurance Company of like amount with similar clause in favor of Morgan & Co. The house, thereafter, is damaged by fire to the extent of S4,000. The savings bank promptly collects $4,000 266 SCHWARZCHILD, ETC., CO. V. PHCENIX INS. CO. [CHAP. XIV as soon as due from the Home Insurance Company, and credits the payment on the first mortgage. Morgan & Co. simultaneously collect $4,000 from the Royal Insur- ance Company, and credit the payment on the second mortgage. At this stage of the transaction, it is manifest, the owner of the house, having lost $4,000 and gained $8,000 has made a profit of $4,000 out of his insurance. But in legal theory the extreme limit of a fire insurance contract is to indemnify. Hence the two insurance companies hav- ing paid the fire loss twice over, must become subrogated to claims of $4,000 against Brown, $2,000 in favor of each company, representing in their relations to Brown, though not to the mortgagees, excess payments. Accordingly, after collection of these claims, the net aggregate loss of the insurers is reduced to $4,000, the precise amount oi the fire damage, for which amount also in the aggregate they would have been liable to the mortgagor under the same policies if there had been no mortgagee clauses attached to them. Brown has thus in fine sustained a fire loss to his property of $4,000 for which his insurers, by diminishing his net indebtedness to that extent, have exactly in- demnified him. But if Brown is insolvent at the time of the fire, and his house has depreciated in value to less than $10,000, obviously the insurers, upon failing to collect their claims against him under subrogation, may, after meeting their several obliga- tions to the mortgagees, be out of pocket considerably more than $4,000. CHAP. XV] PEABODY V. SATTERLEE 267 CHAPTER XV Clauses of the Standard Fire Policy — Concluded Service of Proofs, Magistrate's Certificate, Examination Under Oath, Appraisal, Contribution, Limitation of Time to Sue, etc. PEABODY V. SATTERLEE ET AL. Court of Appeals of New York, 1901. 166 N. Y. 174 Under the provisions of the standard fire policy, must proof of loss be actually received by the insurance company within sixty days after the fire? Bartlett, J. A sinslc question is presented under the provisions of the poUcy , the material portions of which read as follows : "If fire occur the insured shall give immediate notice of any loss thereby in writing to the attorneys of the underwriters, . . . and within sixty days after the fire, unless such time is extended in writing by the attorneys of the underwriters, shall render a statement to the attorneys of the underwriters, signed and sworn to by said insured, stating the knowledge and belief of the insured as to the time and origin of the fire; . . ." Here follow the usual requirements in proofs of loss. The contention of the plaintiff is that his assignor has fully complied with this provision as to proofs of loss, and he is, therefore, entitled to recover. It remains to consider the undisputed facts in order to determine whether this contention can be sustained. The fire occurred on the 22d day of August, 1S96. On the 23d day of September, 1896, Edward S. Hawley, as attorney in fact for Mr. Hamlin, the insured and plaintiff's assignor, prepared and verified proofs of loss and mailed them to the defendants, the attorneys for the underwriters in the city of New York. On the 30th day of September, 1896, the proofs of loss were returned to Mr. Hamlin, the insured, by the defendants, with a letter, which, after acknowledging receipt of the alleged proofs, reads: "These papers were signed and sworn to by Edward S. Hawley as your attorney. We cannot accept these papers as proofs of loss, not having been signed by you personally and sworn to by you. We reject these papers for reason as above stated and return them to you to be properly executed by yourself and not by an attorney." 268 PEABODY V. SATTERLEE [CHAP. XV On the 21st day of October, 1896, proofs of loss sworn to by Mr. Hamlin, the insured, were sent to the defendants by registered mail and were received in the post office in New York city on the 22d day of October, 1896, at eight- thirty P. M., sixty-one days after the fire occurred, they having been mailed in Buffalo on the sixtieth day after the fire. These are the facts upon which is raised the question whether the insured, according to the provisions of the policy, did, within sixty days after the fire, render a statement to the attorneys of the underwriters, signed and sworn to by him. In other words, can it be held, as matter of law, that the insured rendered these proofs of loss to the defendants by depositing them in the post office in Buffalo on the sixtieth day after the fire. As already pointed out, the policy provides that the assured within sixty days shall render this state- ment. The Century Dictionary defines the word "render" as meaning "to give; furnish; present." Webster's gives its meaning as "to furnish; state; deliver." A proper reading of the quoted provision of the policy is that the insured is to furnish or deliver to the defendants these proofs of loss, and this clearly means that the papers shall be so furnished to the defendants personally, or to their duly authorized agent if they have one. In cases of this kind substituted service or service by mail is either matter of statute or contract. In this case the contract is silent, and the depositing of the proofs of loss in the mail at Buffalo on the sixtieth day after the fire occurred can- not be held a comphance with the provisions of the policy. This view was adopted by the trial court, but the Appellate Division re- versed the judgment and ordered a new trial. The opinion of the Appellate Division, in part, is as follows: "While there are numerous cases reported in which it is held that it is necessary to comply with the provisions of the clause requiring that proof of loss shall be rendered to the attorneys of the under- writers within sixty days of a fire, as a condition precedent to the right of recovery, we are umvilling to say as matter of law that where the plaintiff has complied with all the requirements of the policy within the time given him by its terms to act and deposited it in the mails, that he has forfeited his right to maintain an action for the recovery of the insurance for which he has paid the premiums." The very question to be decided at this time is whether the plaintiff has complied with all the requirements of the policy within the time given him by its terms. If he has he should recover, and if he has not, this court in deciding against him declares no forfeiture of hirs legal rights, but construes a written contract according to its plain pro- visions. The use of the standard policy in this State was made compulsor in order to protect both parties to the contract of insurance from unnecessary and wasting litigations over questions having their origin in the varying forms of policies issued by the different companies. It is important alike to the insurer and insured that the standard policy should be fairly construed in order that an instrument, which came from the hands of its creators pre- senting many questions for construction, be rendered clear and easily un- derstood. In the case at bar the insured had nearly three weeks in which to correct his proofs after they were returned by the defendants, and it is CHAP. XV] PEABODY V. SATTERLEE 269 due solely to his own negligence that they did not reach the company in time. It is far more important that there should be a clear and settled rule as to the manner of rendering proofs of loss than that plaintiff should recover in this particular case. The duty of the court in the premises is in no way affected by the fact that the defendants have seen fit to avail themselves of a technical defense. The judgment appealed from should be reversed and judgment of Trial Term affirmed, with costs. Parker, Ch. J., Gray and Werner, JJ., concur; O'Brien, Martin and Vann, JJ., dissent. Ordered accordingly.^ ^ A considerable number of tribunals, however, have allowed to the insured under the New York standard policy twelve months less sixty days within which to serve his statement or proof of claim basing this conclusion on the ground that while service of proofs sixty days before action is unmistakably made a condition precedent, the policy nowhere expressly states that forfeiture will be incurred as a result of a failure to render the proof within the period named, Southern Ins. Co. v. Knight, 111 Ga. 622, 624, 36 S. E. 821, 78 Am. St. R. 216, 52 L. R. A. 70; St. Paul F. & M. Ins. Co. v. Owens, 69 Kan. 602, 77 Pac. 544; Allen v. Mil. Mcch. Ins. Co., 106 Mich. 204, 64 N. W. 15; Continental Ins. Co. v. Whittakcr, 112 Tenn. 151, 79 S. W. 119, 64 L. R. A. 451. Magisthate.s' Certificate. — If affirmatively required to do so the insured must furnish a magistrate certificate, McNally v. Phoenix Ins. Co., 137 N. Y. 389, 33 N. E. 475; Lane v. St. Paul Ins. Co., .50 Minn. 227, .52 N. W. 649, 17 L. R. A. 197; Kelly v. Sun Fire Office, 141 Pa. St. 10, 21 Atl. 447, 23 Am. St. R. 254. But see, conlra. Home Ins. Co. V. Hammang, 44 Neb. 567, 62 N. W. 883; German-Am. Ins. Co. v. Norris, 100 Ky. 29, 37 S. W. 267. Examination. — Likewise the assured must submit to a personal examination under oath and produce his books and bills on demand so far as it lies within his power to do so, Clafin V. Commonwealth Ins. Co., 110 U. S. 81, 3 S. Ct. 507; Firemen's Fund Ins. Co. V. Sims, 115 Ga. 939, 42 S. E. 269. Under such clauses of the policy, however, the insured is not required to perform impossibilities, L. & L. & G. Ins. Co. v. Kearney, 180 U. S. 132, 45 L. Ed. 460, 21 S. Ct. 326. Appraisal. — Likewise the assured must submit to the terms of the standard ap- praisal clause, Hamilton v. L. & L. & G. Ins. Co., 136 U. S. 242, 10 S. Ct. 945, 34 L. Ed. 419; Chainlcss Cycle Co. v. Security Ins. Co., 169 N. Y. 304, 62 N. E. 392; Kersey v. Phcenix Ins. Co., 135 Mich. 10, 97 N. W. 57; but a clause referring all matters of differ- ence to arbitration would be illegal and against i)ublic policy as ousting the courts altogether of their jurisdiction, Sanford v. Conn. Trav. Mut. Ace. Assoc, 147 N. Y. 326, 41 N. E. 694. The appraisal clause is of great value to the insurance companies and there are many decisions of the courts relating to it. Appraisers Competent, Disinterested. — The appraisers and umpire must be competent and disinterested, Bradshaw v. Agricultural Ins. Co., 137 N. Y. 137, 32 N. E. 1055; Produce Rcfrig. Co. v. Norwich Union Fire Ins. Co., 91 Minn. 210, 97 N. W. 875. They are a quasi court. Hall i\ Western Assur. Co., 133 Ala. 637, 32 So. 257; Goodwin v. Merchants' Ins. Co., 118 Iowa, 601, 92 N. W. 894; Schoenich v. Am. Ins. Co., 109 Minn. 388. Scope of the Appraisal. — The scope of the appraisal should be held to include the entire loss and not simply the damage to property some remains of which are left in sight, Rutter v. Hanover Fire Ins. Co., 138 Ala. 202, 35 So. 33 (1903) ; Adams r. N. Y. Bowery Ins. Co., 85 Iowa, 6, 51 N. W. 1149; Chippewa L. Co. v. Phoenix Ins. Co., 80 Mich. 116, 44 N. W. 1055; Schrepfer v. Rockford Ins. Co., 77 Minn. 291, 79 N. W. 1005; Conn. F. Ins. Co. v. Carnahan, 63 Ohio St. 258, 58 N. E. 805; contra, Lang v. Eagle Fire Co., 12 App. Div. 39, 42 N. Y. Supp. 539. 270 PEABODY V. SATTERLEE [CHAP. XV Conduct of Appraisal. — No very definite code of regulations for the guidance of umpire and appraisers can be deduced from the many decisions upon the subject. The rigid common-law rules of evidence and court procedure do not apply, Vincent I). German Ins. Co., 120 Iowa, 272, 94 N. W. 458. Nor is the appraisal precisely the same as an ordinary common-law arbitration, Stout v. Phoenix Ins. Co., 65 N. J. Eq. 566, 570; but it is rather intended to afford a simple, informal, and speedy remedy, Far'rcll v. German Ins. Co., 175 Mass. 340, 347, 56 N. E. 572, to be applied prior to the removal of the remains of the property damaged. Nevertheless the umpire and appraisers occupy very much the same position, and owe substantially the same duty, as common-law arbitrators; therefore, above all things, they must act fairly, without bias, and in good faith. Kaiser v. Hamburg-Brem. Fire Ins. Co., 59 App. Div. 525, 69 N. Y. Supp. 344, aff'd 172 N. Y. 663, 65 N. E. 1118. The policy docs not dictate as to the character of evidence that may be received, Strome v. London Assur. Corp., 20 App. Div. 571, 47 N. Y. Supp. 481. Consequently in proper cases the arbitrators, if left to pursue their own methods, may content them- selves with a personal inspection of the damaged property without further evidence, Hall V. Norwalk Fire Ins. Co., 57 Conn. 105, 17 Atl. 356; Ins. Co. v. Ries, 80 Ohio St. 272 (1909); but must not arbitrarily decline to receive proffered testimony. Conti- nental Ins. Co. V. Garrett, 125 Fed. 589, 60 C. C. A. 395; Harth Bros. Grain Co. v. Continental Ins. Co., 31 Ky. L. R. 180, 102 S. W. 242; Carlston v. St. Paul F. & Mar. Ins. Co., 37 Mont. 118, 94 Pac. 756. Unfinished Appraisals. — If an appraiser or umpire declines to act or to proceed, a new appointment should promptly be made, Westenhaver v. German-Am. Ins. Co., 113 Iowa, 726, 84 N. W. 717; but if, through the connivance or fault of the company, no award is reached, its absence furnishes no defense to it, Uhrig v. Williamsburgh City Fire Ins. Co., 101 N. Y. 362, 4 N. E. 745 (for the jury); Western Assur. Co. v. Hall, 120 Ala. 547, 24 So. 930, and in such a case the assured need not make an attempt at a second appraisal. The rule also, in most jurisdictions, seems to be substantially the same as just stated, where the award fails solely because of the fault of the com- pany's appraiser, to some extent an appraiser being thus regarded as the representative of the party appointing him. Agricultural Ins. Co., 137 N. Y. 137, 32 N. E. 1055; Chapman x. Rockford Ins. Co., 89 Wis. 572, 62 N. W. 422, 28 L. R. A. 405. Where the appraisal drops through no fault of either party, the question is not uniformly de- cided whether the insured must do anything more, though it is not easy to see how a mere attempt to comply with an important condition of the contract can be taken as an equivalent for performance. Some courts accordingly enforce the condition more rigorously, holding in effect that the assured must pursue his efforts, including if need be a fresh appointment, until it appears that through no fault or omission of his own it is impracticable to furnish an award, Vernon Ins. Co. v. Maitlcn, 158 Ind. 393, 63 N. E. 755 (appraisers could not agree on umpire, held, no excuse for breach of condi- tion) j Westenhaver v. German-Am. Ins. Co., 113 Iowa, 726, 84 N. Y. 717 (failure to agree on umpire no excuse for lack of award); Fisher v. Merchants' Ins. Co., 95 Me. 486, 50 Atl. 282 (must arbitrate or give good legal excuse). Other courts construe the condition more liberally towards the assured. Regarding the provision as inci- dental and collateral to the main contract, they are more disposed to consider that, in once selecting a suitable appraiser, and in standing ready to furnish in aid of an appraisal all pertinent testimony within his control, the assured has performed the full measure of his obligation under this clause of the policy. Western Assur. Co. v. Decker, 98 Fed. 381, 39 C. C. A. 383 (Sanborn, J., dissenting); Western Assur. Co. a. Hall, 120 Ala. 547, 24 So. 936; Bernhard v. Rochester German Ins. Co., 79 Conn. 388, 65 Atl. 134; Conn. Fire Ins. Co. v. Cohen, 97 Md. 294, 55 Atl. 675 (no umpire ever selected) ; Pretzfelder v. Merchants' Ins. Co., 116 N. C. 491, 21 S. E. 470; Fire Assn. v. Appel, 76 Ohio St. 1, 80 N. E. 952; Fritz v. Brit.-Am. Assur. Co., 208 Pa. St. 268, 57 Atl. 573. The Michigan court declares: "It is the established rule in this state that no right of action on the part of an insured exists until an appraisal provided for in the policy has been made." And the court held that if an appraiser failed to act CHAP. XV] PEABODY V. 8ATTERLEB 271 another should bo chosen, Baumgarth v. Firemen's Fund Ins. Co., 152 Mich. 479, 110 N. W. 449. If the appraisal extends beyond the limit of time for beginning ac- tion such period is by implication extended until sixty days after award. Setting Aside Awahu. — Where the arbitrators are governed by proper methods and act in good faith, much discretion is vested in them. Their award will not be vacated merely becaust; it is in fact either excessive, or inadequate, Kearney v. Wash- tenaw Ins. Co., 120 Mich. 240, 85 N. W. 7.33. In general, an award is conclusive as to the amount of loss, Billmycr v. Ins. Co., 57 W. Va. 42, 49 S. E. 901; but, where the error is so great as to be indicative of gross partiality, undue influence, or corruption, then there exists ground for setting aside the award. Kaiser v. Ins. Co., 59 App. Div. 525, 09 N. Y. Supp. 344, aff'd 172 N. Y. 003, 05 N. E. 1118; Ins. Co. of N. A. v. Hege- wald, 101 Ind. 031, 00 N. E. 902 (award less than one-half the loss); Vincent v. Ger- man Ins. Co., 120 Iowa, 272, 94 N. W. 458; Produce R. Co. v. Ins. Soc, 91 Minn. 210, 97 N. W. 875. The same is true, if the award "is obviously and extremely unjust," Perry v. Greenwich Ins. Co., 137 N. C. 402, 49 S. E. 889 (award S73.50; loss $750), though there be no evil intent or improper motive on the part of any person con- cerned, Prov. Wash. Ins. Co. v. Board of Education, 49 W. Va. 300, 38 S. E. 679. Where the methods of arl)itrators, acting, as judicial officers, arc shown to be unjust or unlawful, the award will 1)0 the more readily annulled. Thus the refusal to take pertinent and material testimony, Misness j). German-Am. Ins. Co., 50 Minn. 341, 52 N. W. 932; Stemmer v. Scottish U. Ins. Co., 33 Orcg. 65, 53 Pac. 498; or an estimate of the damage on an improper basis, Prov. Wash. Ins. Co. v. Board of Education, 49 W. Va. 360, 38 S. E. 679; or a neglect to allow one of the appraisers a fair participation in the proceedings, Hills v. Home Ins. Co., 129 Mass. 345 (in which two out of three prejudged the case on ex parte testimony); Springfield F. & M. Ins. Co. v. Payne, 57 Kan. 291, 46 Pac. 315; or an omission to afford i)roper opportunity to one of the par- tics to present his case, Redner v. N. Y. Fire Ins. Co., 92 Minn. 306, 99 N. W. 886; or the fraudulent concealment of books and inventory or other evidence, Stockton, etc., Works V. Glens Falls Ins. Co., 98 Cal. 557, 33 Pac. 033; or the failure to include in the estimate a part of the property submitted, Adams v. N. Y. Bowery Ins. Co., 85 Iowa, 6, 51 N. W. 1149, will be good ground for upsetting the award and defeating the plain- tiff altogether, or for relegating the parties to the verdict of a jury to determine the actual amount of loss, as the case may be. But the legal presumptions are in favor of the validity of the award. Consequently, in the absence of fraud, misconduct or gross mistake it is a final adjustment of the amount of loss, Hanover Fire Ins. Co. v. Lewis, 28 Fla. 209, 10 So. 297; Bates v. Brit.-Am. Ins. Co., 100 Ga. 249, 28 S. E. 155; Townsend v. Greenwich In.s. Co., 80 App. Div. 323, 83 N. Y. Supp. 909, aff'd 178 N. Y. 034, 71 N. E. 1140; Am. Cent. Ins. Co. v. Bass, 90 Tex. 380, 38 S. W^ 1119. Pro R.\ta Clause — Othek Insurance. — To admit of the application of the pro rata or contribution clause there must be more than one policy to contribute, and the total concurrent insurance must exceed the general loss, Lesurc Lumber Co. v. Mutual Ins. Co., 101 Iowa, 514, 70 N. W. 701; Pencil v. Home Ins. Co., 3 Wash. 485, 28 Pac. 1031. What Is Other Contributing Insurance. — Policies of fire insurance, to come into the apportionment or contribution, must insure the same interest, and be upon the same property or some part thereof, Niagara F. Ins. Co. v. Scammon, 144 III. 490, 28 N. E. 919; Lowell Mfg. Co. v. Safeguard Ins. Co., 88 N. Y. 592, 597. They must also be subsisting, unexpired, or uncanceled at the time of the loss. Farmers' Feed Co. V. Scottish U. & N. Ins. Co., 65 App. Div. 70, 72 N. Y. Supp. 732, reversed on another point, 173 N. Y. 241, 65 N. E. 1105. Thus, if a mortgagor insures his interest, and a mortgagee, either by a separate policy or by a mortgagee clause attached to the mort- gagor's policy, insures his interest on the same property, there is no double or other insurance. Home Ins. Co. v. Koob, 113 Ky. 300, 08 S. W. 453; Eddy v. London Assur. Co., 143 N. Y. 311, 38 N. E. 307, 25 L. R. A. 686. But if the mortgagor's policy is simply made payable to the mortgagee without a mortgagee clause, and the mortgagor should take out another policy upon the same property and against the same risk, it 272 PEABODY V. SATTERLEE [CHAP. XV woiild in most jurisdictions constitute a case of double insurance, Hine v. Woolworth, 93 N. Y. 75. To constitute other or contributing insurance, however, it is not neces- sary that the persons insured under the different policies should be named by the same description. For example, if a common carrier, warehouseman, or commission mer- chant, takes out insurance upon goods "his own or held by him in trust," or "on account of whom it may concern," or by any designation for the benefit of himself and others interested in the same property, provided such other persons have either given original authority for the procuring of the insurance or have subsequently ratified it, the policy covers their interest as well as the interest of the party named as insured, Kcllner v. Fire Asso., 128 Wis. 233, and in that case a policy by the owners or the other persons in interest will constitute other or double insurance, and both sets of policies will come into any apportionment, California Ins. Co. v. Union Compress Co., 133 U. S. 387, 10 S. Ct. 365. Nor is it essential in most jurisdictions that the properties de- scribed in the different policies be altogether identical ; it is enough, if they are in part the same, Corkey v. Security Ins. Co., 99 Iowa, 382, 68 N. W. 792. The other insurance may cover less, N. J. Rubber Co. v. Commercial Union Ins. Co., 64 N. J. L. 580, 582, 46 Atl. 777, or it may cover more, Washburn, etc., Co. v. Merchants', etc., Ins. Co., 110 Iowa, 423, 81 N. W. 707, but, unfortunately for the assured, policies that have been avoided for breach of warranty must be included in the category of other insur- ance, Bateman v. Lumberman's Ins. Co., 189 Pa. St. 465, 42 Atl. 184, and so must those of insolvent companies. NoNCONCURRENT APPORTIONMENTS. — Where under the contribution clause non- concurrent policies are called upon to contribute to the loss, the adjustment often becomes a matter of great complication. The following cases may profitably be studied: Page v. Sun Ins. Co., 74 Fed. 203, 20 C. C. A. 397, 33 L. R. A. 249; Cromie v. Kentucky, etc., Ins. Co., 15 B. Mon. (Ky.) 432; Meigs v. London Assur. Co., 126 Fed. 781 {contra on same facts 205 Pa. St. 378, 54 Atl. 1053, the Hill School case, in which there was blanket insurance covering main building and addition, also blanket cover- ing their contents. The addition was covered by specific policies. Its contents were covered to a part of their value by specific) ; Schmaelzle v. London & Lan. Ins. Co., 75 Conn. 397, 53 Atl. 863; Chandler v. Ins. Co. of N. A., 70 Vt. 562, 41 Atl. 502. As to the rule where some policies contain and others do not contain a coinsurance clause, see Farmers' Feed Co. v. Scottish U. & N. Ins. Co., 173 N. Y. 241, 65 N. E. 1105; Stephenson v. Ins. Co., 116 Wis. 277, 93 N. W. 19. Reinsurance. — Liability for reinsurance shall be as specifically agreed hereon. Re- insurance has already been described. It constitutes a new contract and is governed by the law of the place where it is made; but it largely rests upon the provisions of the original policy. Phoenix Ins. Co. v. Erie Transp. Co., 117 U. S. 312, 323, 6 S. Ct. 750, 29 L. Ed. 873. Its immediate subject-matter is not property, but the liabiHty, or a share of the liability, of the original insurer. The character of the risk should be the same as in the contract of original insurance; but it is said that, though the con- tract of reinsurance may involve a less hazard, it must not involve a greater, London Assur. Corp. v. Thompson, 170 N. Y. 94, 62 N. E. 1066. While this is true, it not in- frequently happens, however, that, for a time, the amount or sum insured in the policy of reinsurance will be greater than the amount of the original insurance, where the latter has been reduced by indorsement on account of a diminution in the amount of property at risk; but th:- amount of liability under the policy of reinsurance must always be limited by the am.;unt of liability under the original or straight insurance, and can never exceed it, since the contract, in its nature, is essentially one of indem- nity, Illinois Mut. Ins. Co. v. Andes Ins. Co., 67 111. 362, 16 Am. Rep. 620. The statute of frauds is not applicable to the contract of reinsurance, inasmuch as it is not a collateral agreement of guaranty, made with a creditor, to answer for the debt of another. Commercial Mut. Ins. v. Union Mut. Ins. Co., 19 How. (U. S.) 318, 15 L. Ed. 636, nor does it ordinarily constitute a novation in favor of the original in- sured, Barnes v. Heckla Ins. Co., .56 Minn. 38. 57 N. W. 314, 45 Am. St. R. 438. Inasmuch as the usual contract of -innsurance obligates the second or reinsuring CHAP. XV] PEABODY V. SATTERLEE 273 company to await, and be governed by, the terms of adjustment of loss slb made be- tween the original insurer and the original insured, it is held that the provisions re- garding proofs of loss, Consolidated Real Estate Co. v. Cashow, 41 Md. 59, appraisal, and the contract limitation of time within which to sue, Jackson v. St. Paul, F. & M. Ins. Co., 99 N. Y. 124, 1 N. E. 539; Home Ins. Co. v. Victoria, etc., Ins. Co. (1907), App. Cas. 59, are not applicable; but the ordinary rules, for example those relating to material misrepresentation, Louisiana Mut. Ins. Co. v. New Orleans Ins. Co., 13 La. Ann. 246, or concealment. New York Bowery Ins. Co. v. New York Ins. Co., 17 Wend. (N. Y.) 359, may be invoked by the reinsuring company in aid of defense against the original insured. In the absence of affirmative misrepresentation made to itself, however, the reinsurer must not complain though the representations of fact con- tained in the original application, correct when made, have ceased to be true, since in that event the reinsurer is insuring a valid contract as it stands, Cahen v. Ins. Co., 69 N. Y. 300; Jackson v. Ins. Co., 99 N. Y. 124, 1 N. E. 539. The original insured cannot bring suit against the second or reinsuring company unless the contract of re- insurance expressly stipulates that he may do so, or such be the intent of the arrange- ment, since without such intent no privity of contract exists between them, Good- rich's Appeal, 109 Pa. St. 523, 2 Atl. 209; Ruohs v. Traders' Ins. Co., Ill Tenn. 405, 78 S. W. 85; Nelson v. Empress Assn. Corp. (1905), 2 K. B. 281. If, however, the policy of reinsurance is made expressly for the benefit of the original insured, the latter may, at least in most jurisdictions, pursue his remedy upon either policy. Glen v. Hope Mut. Ins. Co., 56 N. Y. 379, or both, but can have only one satisfaction, Barnes V. Heckla Ins. Co., 56 Minn. 38, 57 N. W. 314. Any defense which is available to the original insurer may always be raised by the reinsuring company, for it is only the liability of the former that is reinsured, N. Y. State Marine Ins. Co. v. Protection Ins. Co., 1 Story, 458. But if, before having recourse to the reinsurer, the first insurer pays or adjusts its loss, or compromises it so as to fix its amount, this amount will control its right of recovery against the reinsurer, for the contract of reinsurance is one of indenmity only, and furthermore it is usually made expressly subject to ad- justments concluded by the original insurer, Illinois Mut. Fire Ins. Co. v. Andes Ins. Co., 67 111. 362, 16 Am. R. 620; Insurance Co. v. Insurance Co., 38 Ohio St. 11, 43 Am. Rep. 413. "Other insurance" in a policy of reinsurance means other reinsur- ance, Mut. Safety Ins. Co. v. Hone, 2 Comst. (N. Y.) 235. The contract of reinsurance, as has been observed, is an insurance of liability for loss, and consequently, as soon as the liability of the first insurer has actually accrued, it may bring suit against the reinsurer before an actual payment of the loss. Mutual Safety Ins. Co. v. Hone, 2 Comst. (N. Y.) 235. And so also the reinsurer may be obliged to pay the original insurer the amount of its liability, although the latter may have become insolvent, and although it may ultimately be unable to pay its indebtedness to the original in- sured under the original policy, Blackstone v. Alemannia F. Ins. Co., 56 N. Y. 104. The usual practice is for the original insurer, if sued by the original insured, to give the reinsuring company opportunity to come in and defend the suit at the expense of the latter. If the reinsuring company declines to do this, it will be liable for the reasonable costs of the suit, incurred by the original insurer, N. Y. State Mar. Ins. Co. V. Protection Ins. Co., 1 Story, 458; Faneuil Hall Ins. Co. v. L. «& L. & G. Ins. Co., 153 Mass. 63, 26 N. E. 244, 10 L. R. A. 423. Limitation of Time to Sue. — Likewise the insured is bound to institute actior within the period of limitation specified in the standard policy, Southern F. Ins. Co. v. Knight, 111 Ga. 622, 36 S. E. 821, 78 Am. St. R. 216, 52 L. R. A. 70; Garrestson v. Merchants' Ins. Co., 114 Iowa, 17, 86 N. W. 32; Barry Lumber Co. r. Citizens' Ins. Co., 136 Mich. 42, 98 N. W. 761; contra, Omaha Ins. Co. v. Drcnnan, 56 Neb. 623, 77 N. W. 67. When the Period Begins to Run. — By the better authority the period of limi- tation begins to run, under the standard jjolicy, from the date of the fire, as specifi- cally stated. For example, Allen v. Dutchess Co. Ins. Co., 95 App. Div. .^0, S^ N. Y. Supp. 530; Hocking v. Howard Ins. Co., 130 Pa. St. 170, 18 Atl. 614; Hart v. Citizens' 18 274 PEABODY y. SATTERLEE [CHAP. XV Ins Co 86 Wis 77. 56 N. W. 332, 21 L. R. A. 745, 39 Am. St. R. 880. Other courts hold that the period of limitation begins to run from the time when the cause of action on the policy accrues, for instance, often at expiration of sixty days after service of the proofs of loss. For example. Reade .. State Ins. Co.. 103 Iowa. 307, 72 N. W. 665. 64 Am. St. R. ISO; Sample v. Lond. & Lan. Ins. Co.. 46 S. C. 491, 24 S. E. 334, 47 L. R. A. 696. 57 Am. St. R. 701. CHAP. XVlJ A FORM OF APPLICATION AND POLICY 275 CHAPTER XVI Life Insurance Policy a form of application and policy A Form of Application I hereby apply for an assurance of $ on the plan, premiums pay- able with the Life Insurance Company, on the life of , born at , on 19 . . , at present and for years resident of I hereby warrant that he is not intemperate in the use of stimulants or narcotics. I agree that the answers ^ivcn herewith to the questions of the Agent and Examiner, which I declare and warrant to be true, shall be the basis of my contract with the company, and that such contract shall at all times and places be held and construed to have been made in the City of I also agree that if within two years from this date, the Insured shall, without the written consent of the company, reside or travel elsewhere than in or to the United States, Canada, or Europe; or shall within such period and without such consent, be personally engaged in blasting, mining, submarine operations, or in the making of explosives, or in service on any railway train, or on a steam or sailing vessel, or in naval or army service in times of war; the policy hereby applied for shall thereupon cease and determine. Dated at this day of 19 . . . Witness Signature Questions to be asked by the Agent, and answered by the person to be insured: 1. A What is your full name? n Are you married? 2. What is your occupation? (Give kind of bu.sine.ss and position held.) 3. Are you in good health? 4. A For whose benefit is the proposed insurance? b How related to you? 5. What is the total insurance now on your life? 6. In what companies and for what amounts? 7. Have you any applications for insurance now pending? In what companies? 8. A Have you ever applied to any agent or sought insurance in any company which either postponed or refused to issue a Policy? u State companies and cause. 9. Are you engaged in or connected with the manufacture or sale of Malt or Spiritu- ous Liquors? The answers to the following questions must be written by one of the Company's Examiners: 10. Have you now any disease or disorder? If so, what? 11. A For what have you sought medical advice during the past seven years? B Dates? c Duration? d Physicians consulted? 12. A Have you had any personal injury or accident? b What? c When? d Re- sult? 13. A Have you had Rheumatism? b Number of attacks? c Dates? d Duration? B Severity? 14. A Are you or have you been subject to Dyspepsia? b Dates? c Duration? D Severity? 276 A FORM OF APPLICATION AND POLICY [CHAP. XVI 15. Have you ever had any of the following? Calculus or gravel, . . DiflBculty in urinating, . Swelling of feet or face. Dropsy Palpitation, .... Disease of heart or brain. Loss of consciousness. Habitual or chronic cough. Consumption, .... Bronchitis, Asthma Spitting of blood, . . . Bleeding piles Pleurisy, Varicose veins. Paralysis or palsy, . . Apoplexy, Nervous exhaustion, . . Fits Sunstroke Dizziness or short breath Pneumonia Diabetes, Delirium Tr^nens Vertigo, Insanity, Liver complaint Jaundice Colic Dysentery, Diarrhoea (chronic), Disease of spine, Gout Tumors of any kind Swelling of glands Ulcers or open sores, Fistula Discharge from the ear, . . . Rupture, Difficulty in swallowing, . . . 16. Family record. Is your father living? . . Is your mother living? . How many brothers living? . (If none, so state.) How many sisters living?. (If none, so state.) Father's father living? . . Father's mother living? . Mother's father living? . . Mother's mother living?. Age Condition of Health Age Disease which Caused Death Duration Previous Health { How many brothers dead?. . ■< (If none, so state.) ( How many sisters dead? ....-; (If none, so state.) ( CHAP. XVl] A FORM OF APPLICATION AND POLICY 277 17. Have any two members of the family, Rranclparcnts included, had consumption, cancer, paralysis or apoi)lexy, disease of heart, disease of kidneys? Signed this day of 19 . . . {Parly to be insured sign here) A Form of Policy This policy witnesseth that the Life Insurance Company, in consideration of the statements and agreements in the application for this Policy which are hereby made a part of this contract and of the sum of dollars to it in hand paid by and of the annual premium of dollars to be paid at or before twelve o'clock, M., on the day of in every year during the continuance of this policy, docs irisure the life of in the amount of dollars, for the term of life, payable to , his executors, administrators or assigns, at its office in the City of upon due and satisfactory proof of interest and of the death of the said insured, deducting therefrom all indebtedness of the party to the company, together with the balance, if any. of the then current year's premium. Provided, that in ease the said premiums shall not be paid on or before the several days hereinbefore mentioned for the payment thereof, at the office of the company in the City of or to agents when tjiey produce receipts signed by the President or Treasurer, then, and in every such case, this policy shall cease and determine, sub- ject to the provisions of the company's non-forfeiture system as indorsed hereon, with accompanyiny table. This policy does not take effect until the first premium sliall have been actually paid; nor are agents authorized to make, alter or discharge this or any other contract in relation to the matter of this insurance, or to waive any forfeiture hereof, or to grant permits, or to receive for the cash due for premiums anything but cash. Any error made in understating the age of the insured will be adjusted by paying such amount as the premiums paid would purchase at the table rate. No assignment of this policy shall take effect until written notice thereof shall be given to the company. This policy, after two years, will be incontestable, except for fraud or non-payment of premium. In Witness Whereof, the said Life Insurance Company has. by its Presi- dent and Secretary, signed and delivered this contract, at the City of , this day of , one thousand nine hundred and , Secretary. President. non-forfeiture provisions When after two full annual premiums shall have been paid on this policy it shall cease or become void solely by the non-payment of any premium when due. its entire net reserve by the American P:xperience Mortality and interest at four per cent, yearly, less any indebtedness to the company on this policy, shall be applied by the company as a single premium at the company's rates published and in force at this date, either, first, to the purchase of non-participating term insurance for the full amount insured by this policy, or. second, upon the written application by the owner of this policy and the surrender thereof to the company at within three months from such non-payment of premium, to the purchase of a non-participating paid-up policy payable at the time this policy would be payable if continued in force. Both kinds of insurance aforesaid will be (subject to the same conditions, except as to pay- ment of premiums, as those of this policy. No part, however, of such term insurance shall be due or payable unless satisfactory proofs of death be furnished to the company within one year after death; and if death shall occur within three years after such non-payment of premium, and during such term of insurance, there shall be deducted from the amount payable the sum of all the premiums that would have become due on this policy if it had continued in force. 278 MUT. RES. FUND LIFE ASSN. V. COTTER [CHAP. XVI The following table shows the amount that the company agrees to loan (being one- half of the reserve) upon a satisfactory assignment of the policy as collateral security; also the additional time for which the insurance will be continued in full force after lapse by non-payment of premium; or the value of the policy in paid-up insurance upon surrender within three months from date of lapse. The figures given are based upon the assumption that the premiums (less current dividends) have been fully paid in cash. If there be any indebtedness upon the policy, the values as stated in the table would have to be reduced proportionally upon the principles stated in the policy. The indebtedness, if any, may be paid off in cash, in which case the figures in the table will apply: Company will Loan In Case of Lapse of Policy Number of Years' Premi- ums Paid Extended Insurance Paid-up Policy Years Days V $ $ % Certain States have either a standard statutory form of policy for life insurance or a statute defining certain clauses which must and certain clauses which must not be included in the policy. MUTUAL RESERVE FUND LIFE ASSOCIATION v. COTTER Supreme Court of Arkansas, 1904. 72 Ark. 620 Warranty as to good health and attending physician. This action was brought by W. M. Kennedy, as administrator of John Riffey, deceased, and by Arthur Cotter and W. D. Newburn, against Mutual Reserve Fund Life Association and United States Fidelity & Guaranty Company upon a policy of $1,000 issued by the Reserve Fund Life Associa- tion on the life of John Riffey, for the benefit of Arthur Cotter and W. D. Newburn, and bearing date the 30th of June, 1898; Riffey having died. The plaintiffs recovered judgment, and the defendants appealed. The policy was issued in pursuance of an application by John Riffey, the insured, in the month of June, 1898, for the benefit of the appellees, Cotter and Newburn, in which it was expressly agreed that the answers and state- ments contained in parts I and II thereof, by whomsoever written, were warranted to be full, complete and true, and that if any of the answers or statements made are not full, complete and true, or if any condition or agreement .shall not be fulfilled as required therein or by the policy, then the policy i-ssued thereon shall be null and void. These stipulations, by the terms thereof and by the provisions of the policy, became a part of CHAP. XVl] MUT. RES. FUND LIFE ASSN. V. COTTER 279 the policy. In the application were the following questions and answers: " (Q) How long since you consulted or were attended by a physician? (A) Sep- tember 1897. (Q) State name and address of such physician? (A) Name, W. B. Snipes; address, Spring Creek. (Q) For what disease or ailment? (A) Malarial fever." The facts were: He was sick in September, 1897, at Spring Creek; had a slight attack of fever; was in bed one day; and Dr. Snipes attended him two days. In October, 1897, about two weeks, or longer, thereafter, he was very sick at Marianna; suffered intense pain; had two physicians, Drs. Drake and Freeman, attending him; and his wife and daughter were called to his bedside. His physicians visited him as often as twice a day, and made as many as thirty or forty professional visits. He was sick a month or longer. He failed to make known to the life association the sickness in October. Battle, J. In Mutual Reserve Fund Life Association v. Farmer, 65 Ark. 581, 595, cited by the appellees, the question asked the insured was, "has the applicant ever had any illness, local disease, injury, mental or nervous disease or infirmity, or ever had any disease, weakness of the head, throat, heart, lungs, stomach, kidneys, bladder or any disease or infirmity whatever? " It "was answered by the examining physician (whose answers the applicant made his own) by stating, in effect, that applicant had had none of the dis- eases mentioned within ten years." The facts were that the insured (the applicant) in that case was found within the ten years, about one year or more before his death, in an insensible condition. The room in which he was at the time was filled with the odor of chloroform. But he was not in a dangerous condition and soon recovered. He did not need the services of a physician. This court held that these facts did not establish a breach of the insured's warranty of the truth of his answer to the question. In that case the sickness was slight, and of very short duration. In the case at bar the sickness in October, 1897, was serious and of long duration. It demanded the constant attention of physicians, and the at- tendance of the wife and daughter. It was no slight indisposition or trivial or temporary ailment. It might well have demanded and received the in- vestigation and consideration of the life association before issuing the policy sued on, for the purpose of ascertaining its effect on the insurable character of the life proposed. The insured, Riffey, evidently thought that the question called for the disclosure of his sickness in September, 1897. We see no reason for withholding information as to the more serious sickness in the October following. The life association was entitled to the information, to the end that it might have any investigation it might desire before issuing the policy. Providence Life Assurance Society v. Reutlinger, 58 Ark. 528. The conceal- ment of it was calculated to deceive the insurer. The answers to the ques- tions propounded were not full, complete and true, and according to the stip- ulations of the parties, there was a breach of warranty, and the policy sued on is void on account thereof. Reverse and remand for a new trial. 280 CUSHMAN V. U. S. LIFE INS. CO. [CHAP. XVI CUSHMAN V. UNITED STATES LIFE INS. CO. Court of Appeals of New York, 1877. 70 N. Y. 72 Warranty; Meaning of terms "disease" and "usual medical attendant." Action upon a policy of life insurance issued by defendant upon the life of Birt Cushman, plaintiff's intestate. The defense was a breach of warranty. The case upon a former appeal is reported in 63 N. Y. 404. At the close of the evidence defendant's counsel moved for a nonsuit, on the ground that the evidence showed a breach of warranty in answers by the insured to the following questions in the application: "Has the party had . . . disease of the liver? " Answer, "No," " Or any serious disease? " Answer, "No." "Give name and residence of party's usual medical attend- ant." Answer, "Charles Purdy, M. D., Norwich." The motion was denied, and said counsel duly excepted .- Earl, J. It is claimed that there was a breach of warranty in answering "No" to the question in the application whether the applicant "had ever had disease of the liver." Dr. Ormsby, a young physician, who was admitted to practice in 1868, attended the insured in July, 1870, for four, five, or six days, and he testified that he, in his judgment, had congestion of the liver. It does not appear that his symptoms were very marked. He was not much sick, was dressed every day, and up and around more or less, and soon re- covered. He again attended him in July, 1871, for a similar sickness, still less serious, visited him two or three times, and treated him for congestion of the liver. In 1872, after the policy was issued, he treated him again, for five days, for the same complaint; and in 1873 he again attended him for a few days in his last illness, and testified that he then had, and died of, acute congestion of the liver. The evidence tended to show that the assured was not much sick at any of the times when Dr. Ormsby visited him prior to his last sickness; that he was not confined to his bed; that he was up and around; that he speedily recovered; and that, during all the years prior to his last sickness, he was capable of vigorous labor and great endurance, and was apparently a sound, healthy man. In November, 1871, Dr. Purdy, de- fendant's examining physician, who had known the assured for many years, examined him upon his application for insurance, and found his liver sound and free from disea.sc. He was called to attend him in consultation with Dr. Ormsby, in his last sickness, shortly before his death, and testified that, from the symptoms detailed to him by Dr. Ormsby, he did not die of conges- tion of the liver, but of inflammation of the bowels, thus contradicting Dr. Ormsby as to the cause of death. Taking into consideration all the evidence, it cannot be said that it was so conclusivel}'- shown that the assured had had congestion of the liver prior to the date of the policy as to leave nothing for CHAP. XVl] CUSHMAN V. U. S. LIFE INS. CO. 281 the determination of the jury. Taking into consideration the symptoms of the sickness, the degree of skill and the extent of the examination of the doctor, the very slight nature of the sickness and the speedy and complete recovery, and all the other circumstances, it was for the jury to determine whether, prior to the insurance, the assured had had congestion of the liver. But, even if he had had such congestion, it does not follow that, within the meaning of the policy, he had had a disease of the liver. In construing con- tracts words must have the sense in which the parties used them; and, to understand them as the parties understood them, the nature of the contract, the objects to be attained, and all the circumstances must be considered. By the questions inserted in the application the defendant was seeking for information bearing upon the risk which it was to take, the probable duration of the life to be insured. It was not seeking for information as to merely temporary disorders or functional disturbances having no bearing upon gen- eral health or continuance of life. Colds are generally accompanied with more or less congestion of the lungs, and yet in such a case there is no dis- ease of the lungs which an applicant for insurance would be bound to state. So most, if not all, persons will have at times congestion of the liver, causing slight functional derangement and temporary illness; and yet, in the con- templation of parties entering into contracts of life insurance, and having regard to general health and the continuance of life, it may safely be said that in such cases there is no disease of the liver. In construing a policy of life^ insurance it must be generally true that, before any temporary ailment can ^ ' be called a disease, it must be such as to indicate a vice in the constitution, or be so serious as to have some bearing upon general health and the con- tinuance of life, or such as, according to common understanding, would be / ^ called a disease; and such has been the opinion of text-writers and judges. ;' 2 Park, on Ins. 933, 935; Chattock :-. Shawe, 1 ISIoody & R. 498; Fowkos v. The M. & L. Life Ins. Co., 3 Foster and Fin. 440; Barteau v. The Phcenix Mut. Life Ins. Co., 3 T. & C. (N. Y. Sup. Ct. R.) 578; Peacock v. New York Life Ins. Co., 20 N. Y. 293; Higbie v. Guardian Mut. Life Ins. Co., 53 N. Y. 603; Fitch v. Am. Pop. Life Ins. Co., 59 N. Y. 557, 571. Hence, whether the assured had had congestion of the liver, and whether such congestion was of such a character as to constitute a disease of the liver within the meaning of the policy, were both questions properly submitted to the jury, and their determination thereon is conclusive. The assured also answered "No" to the question in the application whether he "had had any serious disease." It can hardly be claimed that tliere was any evidence showing this answer to have been untrue. But whether it was true or not, for reasons above stated, it was at least a question of fact upon all the evidence for the jury. To the question as to the "name and residence of the party's usual medical attendant," the assured answered, "Dr. Charles Purdy," and it is claimed that his answer was untrue. In 1867 Dr. Greenleaf attended the assured when he was sick with some trouble of the bowels, from the 14th to the 30th day of August, and he never attended him before or after that time. Dr. 282 CUSHMAN V. U. S. LIFE INS. CO. [CHAP. XVI Ormsby attended him prior to the date of the poUcy only in July, 1870, and July, 1871, as above stated. The assured was a single man, who had always prior to his insurance lived in his father's family, and Dr. Purdy had for many years been the family physician. He had frequently attended different members of the family, but had never been called to the house to attend the assured except in his last sickness; but during many years the assured had called upon him every year, and sometimes several times a year, and con- sulted him as physician. It is quite evident that he knew more about the health and constitution of the assured than any other doctor. To constitute a medical attendance, it is not requisite that a physician should attend the patient at his home; an attendance at his own office is sufficient. Of these three phj^sicians, then, who was the "usual medical attendant"? It certainly was not Dr. Greenleaf, who had attended him during but one brief illness, and never before or after. Was it Dr. Ormsby, who had attended him on two occasions, visiting him in all probably not over half a dozen times? Or was it Dr. Purdy, the family physician in his father's family, upon whom he called yearly for many years for medical advice or treatment? I think Dr. Purdy could more properly be called the usual medical attendant; but, whether this be so or not, it was at least a question for the jury, and there was no error in submitting it to them. But the policy contained a clause in which the defendant promised to pay the amount insured "in three months after due notice and satisfactory proof of the death during the continuance of this policy of the ... as- sured . . . and proof of the just claim of the assured." After the death of the assured, the plaintiff delivered to the defendant claim and proof of loss, signed and verified by himself. Annexed thereto was the statement of Dr. Ormsby, as physician in attendance upon the assured in his last illness, as to the cause of his death; and in that statement, in answer to the question, "How long have you been the attendant or family physician?" he answered, "Five years." It is contended that this answer shows that Dr. Purdy was not "the usual medical attendant" of the assured prior to the date of the policy, and hence that there was a breach of warranty rendering the policy void, and that therefore there was no "proof of just claim" as required by the policy. To this contention there are several satisfactory answers. The answer made in August, 1873, that Dr. Ormsby had been the "attending physician" of the assured for five years, does not necessarily show that the answer made at the time of the insurance in November, 1871, that Dr. Purdy had, prior to that time, been the "usual medical attendant," was absolutely untrue. A party may have several "attending physicians" and one "usual medical attendant." But a still better answer is, that the plaintiff was not wholly responsible for the statements made by Dr. Ormsby. He had made his statement, showing a "just claim" against the defendant for the amount insured, and in that statement there was nothing in conflict with any war- ranty contained in the policy. This statement, we may infer from the form of blank furnished by the company, the plaintiff was required to procure from the physician who attended the assured in his last illness. The main CHAP. XVl] WILKINSON V. CONN. MUT. LIFE INS. CO. 283 object of this statement was to furnish the company evidence of the death, and the cause and circumstances thereof. There can be no reason for hold- ing the plaintiff responsible for any misstatement contained therein not caused by him. He was responsible for the statement made by himself, but not for the statements which he was required to procure from the attending physician, the officiating clergyman, and the undertaker. Such statements were procured at the request of the defendant for its information, and it must take them for what they may be worth. The plaintiff had no means of compelling answers in such statements to suit himself. If the answers were not satisfactory, or were in conflict with any answers contained in the application for the insurance, the defendant could have instituted further inquiries, or asked for further explanations from the plaintiff. This it did not do. So far as it appears, it made no objection to the proof of loss, and did not in answer, or at any prior time, allege the discrepancy now noticed as a reason for refusing to pay the amount insured. It cannot claim to have been misled by the statement of Dr. Ormsby into a defense of the action, even if that were material, as this defense was not alluded to in the answer, and other special defenses were, and were also litigated upon the trial, and there was no evidence that it was so misled. There was, therefore, nothing to prevent the plaintiff from proving upon the trial the truth as to who was the usual medical attendant of the assured. Life Ins. Co. v. Francisco, 17 Wall. 672. Judgment affirmed. WILKINSON V. THE CONNECTICUT MUTUAL LIFE INSURANCE CO. Supreme Court of Iowa, 1870. 30 Iowa, 119 Warranty as to previous injuries. A QUESTION and answer in the application were as follows: "Has the party ever met with any accidental or serious personal injury? If so, what was it? No." By a stipulation in the policy, it was warranted that if the answers shall be found in any respect untrue, the policy shall be void. It appeared that the insured, formerly a slave, had accidentally fallen from a tree and had for a time been sick in consequence, but that the injury was only tem- porary, and had passed off entirely in the course of a few days. Cole, Ch. J. The defendant claims that if the insured "ever met with any accidental . . . injury," that will bar a recovery, because the applica- tion is a warranty that she never did. In this construction we do not con- cur. The language of the question is to have a reasonable construction, in view of the purposes for which the question was asked. It must have ref- 284 WILKINSON V. CONN. MUT. LIFE INS. CO. [CHAP. XVI erence to such an accidental injury as probably would or might possibly have influenced the subsequent health or longevity of the insured. It could not refer, and could not be understood by any person reading the question for a personal answer to refer, to a simple burn upon the hand or arm, in infancy' ; to a cut upon the thumb or finger, in youth; to a stumble and fall- ing, or the sprain of a joint, in a more advanced age. The idea is that such a construction is to be put by the courts upon the language as an ordinary person of common understanding would put upon it when addressed to him for answer. The strict construction or hypercriticism of the language, which would make the word "any" an indefinite term, so as to include all injuries, even the most trifling, would bring a just reproach upon the courts, the law, the defendant itself and its business. The language of the question must have a fair construction, and in the words of our statute (Rev., § 3994), "that sense is to prevail against either party in which he had reason to suppose the other understood it." This construction is not only in accord with reason and justice, but it has the support of the authorities in like cases. Thus, in Chattuck v. Shawl, 1 Moody & Rob. 498, where the insured declared that "he had not been af- flicted with nor subject to fits," Lord Abinger, C. B., held this to mean, not that he never accidentally had had a fit, but that he was not a person habit- ually or constitutionally afflicted with fits; a person liable to fits from some peculiarity of temperament, either natural or contracted from some cause during life. And the policy was held not to be vitiated by the circumstance that, in consequence of a fall, the person whose life was insured had, several years before the date of the policy, two epileptic fits within a short interval, which the jury were satisfied had never recurred. So, in the case of Ross v. Bradshaw, 1 Wm. Black. 312, the warranty was that the party is in good health. The fact that twelve years before, the party had received a wound which produced partial paralysis of the organs of retention of the urine and fseces, but not such an injury as was calculated to shorten life or affect the vital functions, was held not to invalidate the policy; and Lord Mansfield told the jury that all that was necessary was proof that the life was in fact a good one, and so it might be though he had a particular infirmity; and the only question was, whether he was in a reasonably good state of health, and such a life as ought to be insured on common terms. Affirmed.'^ * For definition of life insurance and its nature, see Ritter v. Mut. L. Ins. Co., 169 U. S. 139, 151, 18 S. Ct. 300. At p. 151, the court says: "Life insurance imports a mutual agreement, whereby the insurer, in consideration of the payment by the as- sured of a named sum annually or at certain times, stipulates to pay a larger sum at the death of the assured. The company takes into consideration, among other things, the age and health of the parents and relatives of the applicant for insurance, to- gether with his own age, course of life, habits and present condition; and the premium exacted from the assured is determined by the probable duration of his life, calcu- lated upon the basis of past experience in the business of insurance. The results of that experience are disclosed by standard life and annuity tables showing at any age the probable duration of life." CHAP. XVlJ WILKINSON V. CONN. MUT. LIFE INS. CO. 285 Designation of Beneficiahy. — Payable to the insured, his executors, adminis- trators, or assigns. A policy taken out in this form is the property of the insured, is subject to the claims of his creditors, except in so far as exempt by some statute, and upon his death is collectible by his executors or administrators like any other per- sonal assets of his estate, unless he has previously assigned it, Washington Central Bk. V. Hume, 128 U. S. 195, 208, 9 S. Ct. 41, 32 L. Ed. 370; Kelley v. Mann, 56 Iowa, 625, 10 N. W. 221. Other Beneficiaries. — Oftentimes the policy is made payable to others than the insured, who may be designated by such general terms that it is not easy to determine to whom the description is intended to be applicable under the circumstances as they happen to exist at the time of the decease of the insured. In such cases the descrip- tive words are given a popular rather than a technical significance, and, especially where the appointment is gratuitous, parol evidence is freely received to arrive at the real meaning of the insured, Griswold v. Sawyer, 125 N. Y. 411, 26 N. E. 464. Thus the words, "heirs" or "heirs at law" or similar phrases have often been held to include all the distributees under the statutes of distributions, Mullen v. Reed, 64 Conn. 240, 29 Atl. 478, 24 L. R. A. 664, 42 Am. St. R. 174; Britton v. Supreme Council, 46 N. J. Eq. 102, 18 Atl. 675, 19 Am. St. R. 376. And the term "child" may be extended to include an adopted child. Virgin v. Marwick, 97 Me. 578, 55 Atl. 520. And chil- dren born after the making of the contract may be held included. Scull r. ^■:tna L. Ins. Co., 132 N. C. 30, 43 S. E. 504, 60 L. R. A. 615, 95 Am. St. R. 615; or children born by a subsequent wife, Helmken v. Meyer, 118 Ga. 657, 45 N. E. 450. Where a policy is payable to wife and children or other beneficiarios, thoy all divide the pro- ceeds equally, and not in accordance with the statutes of distributions, unless statutes or by-laws so provide. Bell v. Kinnecr, 101 Ky. 271, 40 S. W. 686. To constitute a "dependent" occasional presents to a beneficiary are not enough. There must be dependence in a material degree for assistance or support, Alexander r. Parker, 144 111. 355, 33 N. E. 183. In a Massachusetts case, the household consisted of Wilber, the insured, his wife and her two unmarried sisters. One of the sisters and the insured earned the needed funds for the common support while the wife and the remaining sister cared for the house. Wilber took out a benefit certificate after the death of his wife to aid the sisters in the event of his own death, making one of them beneficiary by the terms of the policy. The court concluded that a jury might find from the evidence that the beneficiary wad "dependent" upon the assistance of Wilbei to support her.self and sister in his lifetime in the same degree of comfort in which they had theretofore lived, and that an obligation to furnish such assistance, although perhaps not enforceable at law, might have rested upon moral and equitable grounds, Wilber v. Supreme Lodge, 192 Mass. 477, 78 N. E. 445. A designation of beneficiaries in fraternal societies, however, can be made only from the classes specified and in accordance with statutes and with the charter and by-laws of the company, so far as they may govern the subjcr*, Masonic Mut. Ben. As.soc. v. Severson, 71 Conn. 719, 43 Atl. 192; Norwegian Old People's Home Soc. r. Wilson, 176 111. 94, 52 N. E. 41; Smith v. Supreme Tent, 127 Iowa, 115, 102 N. W. 830; Car- son V. Vicksburg Bank, 75 Miss. 167, 22 So. 1, 37 L. R. A. 559. Other courts some- times approach this matter from a different point of view. Thus in a New York case, John M. Irvine, named the plaintiff, who was his sister-in-law, beneficiary in his certificate of membership in the Knights of Pythias. The association with the full knowledge of the relationship, which indeed was disclosed upon the face of the cer- tificate, issued the certificate and received payment of dues thereunder. On the trial, however, it contended that the appointment was not lawful within the meaning of its by-laws. The Court of Appeals, reversing the court below, held that the associa- tion was estopped from raising this defen.se. Strange v. Supreme Lodge, 189 N. Y. 346, 82 N. E. 433. If no beneficiary is sufficiently or legally designated, the insurance reverts to the estate of the insured, Boyden v. Mass. Masonic L. Assn., 167 Mass. 242, 45 N. E. 735; Mayher v. Manhattan L. Ins. Co., 87 Tex. 169, 27 S. W. 124. But see Warner t». Modern Woodmen, 67 Neb. 233, 93 N. W. 397. Where a subsequent 286 WILKINSON V. CONN. MUT. LIFE INS. CO. [CHAP. XVI designation of beneficiary fails for invalidity, the previous valid designation remaini in force. Grand Lodge v. Lcmkc, 124 Wis. 483, 102 N. W. 911. Anticipatory Breach. — By the weight of authority, if the insured renounces the continuing contract of insurance, upon his part, and unequivocally refuses in advance of its maturity, to perform it, the insured may at his option take the insurer at his word. The insured is then relieved of the duty of further performance on his part, and may maintain an action at law for damages, before the specified date of expira- tion, Rochm V. Horst, 178 U. S. 1, 20 S. Ct. 780, 44 L. Ed. 953; O'Neill v. Supreme Council, 70 N. J. L. 410, 57 Atl. 463; Mutual Res. Fund L. Assn. v. Taylor, 99 Va. 208, 37 S. E. 854. On the other hand, the courts of New York and Massachusetts hold that an attempted reduction of the face of a policy by an unwarranted by-law, or a refusal to accept a premium, will give no present right of action for damages against the insurer. Porter v. Supreme Council, 183 Mass. 326, 67 N. E. 238; Kelly v. Security Mut. L. Ins. Co., 186 N. Y. 16, 78 N. E. 584. Anticipatory Breach — Remedies Available. — By the prevailing rule, where the insurer renounces the contract prior to date of performance, the policy holder may take the insurer at his word and presently sue for damages, or he may bring an equi- table action to preserve the contract, or he may tender the premium and upon ma- turity of the contract bring action on the policy. Day v. Conn. G. Life Ins. Co., 45 Conn. 480; Krebs v. Security Trust & Life Ins. Co., 156 Fed. 294. History of Family and Relatives. — It is hardly to be expected that the appli- cant for insurance can carry around on the tip of his tongue full and accurate statistics regarding the ages at death, causes of death, and physical and mental health during life, of his ancestors and relatives, and the courts are reluctant to defeat a policy, be- cause an answer made in good faith to such collateral lines of inquiry turns out to have been erroneous. While in some cases the binding force of such a warranty has been recognized, McGowan v. Supreme Court, 104 Wis. 173, 80 N. W. 603, other courts have evaded a fatal result in the absence of bad faith and have sustained the policy by construing the statements as representations, or as matters of belief only, Globe Mut. Life Assn. v. Wagner, 188 111. 133, 58 N. E. 970, 52 L. R. A. 649, 80 Am. St. R. 169. Statement-^ as to Other Insurance. — Inquiry is often made in the application both as to other subsisting policies of life insurance and as to any rejected or post- poned applications. The importance of the warranty is obvious, Clapp v. Mass. Ben. Assoc, 146 Mass. 519. Where the policy in suit is issued by a regular insurance com- pany, the question arises whether the inquiries relating to other insurance include applications to fraternal societies or beneficiary associations and to certificates issued by them. The decisions on this point are not altogether in harmony and they some- times turn upon the phraseology of statutes. Fidelity Mut. L. Assn. v. Miller, 92 Fed. 63, 34 C. C. A. 211. Statements as to Age. — The rate of premium being based upon the age of the in- sured, it is quite material that the response to this question should be correct, Preuster V. Supreme Council, 135 N. Y. 417, 32 N. E. 135. The policy was held void where the applicant erroneously warranted his age to be fifty-nine instead of sixty-four, Sweet V. Citizens' Mut. Relief Society, 78 Me. 541. And where the true age was thirty-five and the application represented it to be thirty, it was held to be fatal variation, ^tna Life Ins. Co. v. France, 91 U. S. 510, 23 L. Ed. 401, 94 U. S. 561, 24 L. Ed. 287. Statements as to Family Relationship. — The untrue statement of the applicant that he was a widower was held to be fatal to a recovery under a policy. United Brethren Mut. Aid Soc. V. White, 100 Pa. St. 12. So also the erroneous statement that the lady with whom he had gone through the form of marriage was his wife, Gaines v. Fidelity & Cas. Co., 188 N. Y. 411, 81 N. E. 169 (she had a prior husband living). So also a breach of the warranty that the insured was a single man, when in reality a married man, forfeited the policy, although the risk was not thereby increased, Jeffries v. Life Ins. Co., 22 Wall. 47, 22 L. Ed. 8.33. Habits. — The warranty that the applicant is of temperate habits does not mean that CHAP. XVl] WILKINSON V. CONN. MUT. LIFE INS. CO. 287 he totally abstains from drinkiriK wines or liquors, Van Valkenburgh c. Amer. Popular Life Ins. Co., 70 N. Y. 605. But the warranty must be true, since a statement of habits is matter of fact, rather than opinion, Langdeau v. John Hancock Mut. L. Ins. Co., 194 Mass. 50, 80 N. E. 452. Statements as to Occupation. — The warranty as to the occupation of the insured is often a most important matter, since some occupations are far more hazardous than others. The statements relating to this subject, if warranted, must be true, Dwight V. Germania L. Ins. Co., 103 N. Y. 341, 8 N. E. 654, 57 Am. R. 729. Statements or Requihements as to Residence and Travel. — Statements in the application as to residence must be true, but ambiguities are to be construed favorably to the insured, Hann v. Nat. Union. 97 Mich. 513, 50 N. W. 834, 37 Am. St. R. 365; Fitch v. Am. Pop. L. Ins. Co., 59 N. Y. 557, 17 Am. Rep. 372. Similarly, restrictions contained in the policy relating to residence and traveling must be cora- I)lied with. In this connection the phrase "settled Hmits of the United States," nieans within the boundaries of the Union, and not the portions of the country that arc thickly settled, Caslcr v. Conn. Mut. Life Ins. Co., 22 N. Y. 427. If a permit is given to travel by a particular route or to remain in a hazardous region for a partic- ular time, the limitation must be strictly observed, Hathaway v. Trenton Mut. L. & F. Ins. Co., 11 Cush. (Mass.) 448. Inability to return will be no excuse for a breach of warranty, Evans v. U. S. Life Ins. Co., 64 N. Y. 304. But the company or its rep- resentative may waive such requirements of the policy, Germania Life Ins. Co. v. Koehler, 168 111. 293, 48 N. E. 297; Mut. Ben. Life Ins. Co. v. Martin, 108 Ky. 11, 55 S. W. 694. Statements about Bodily Injuries or Infirmities. — Breach of warranty avoids the policy, see ^tna Life Ins. Co. v. France, 91 U. S. 510, 23 L. Ed. 401 (hernia); Stand. L. & Ace. Ins. Co. v. Sale, 121 Fed. 664, 57 C. C. A. 418. Trivial injuries or infirmities undisclosed do not avoid the policy, Mfrs. Ace. Ind. Co. i'. Dorgan, 58 Fed. 945, 7 C. C. A. 581, 22 L. R. A. 620 (anfeniic murmur of heart); Bernays v. U. S. Mut. Ace. Assn., 45 Fed. 455 (erysipelas); Cotton i'. Fidelity & Cas. Co., 41 Fed. 506 (near-sightedneps):Stand. L. & Ace. Ins. Co. v. Martin, 133 Ind. 376, 33 N. E. 105 (injuries to left foot and right log causing slight limp); Tyler v. Ideal Ben. Assn., 172 Mass. 530, 52 N. E. 1083 (sprained ankle); Maryland Cas. Co. v. Gehrmann, 96 Md. 634, 54 Atl. 678 (curvature of leg); Bancroft r. Home Ben. Assn., 120 N. Y. 14, 30 N. Y. St. R. 175, 23 N. E. 997, 8 L. R. A. 68 (blow on windpipe from fencing causing blf)od to flow); Brink v. Guaranty Mut. Ace. Assn., 55 Hun, 606, 7 N. Y. Supp. 847, aff'd 130 N. Y. 675, 29 N. E. 1035 (unconsciousness from falls from buggy); Home Mat. L. Assn. v. Gillespie, 110 Pa. St. 84, 1 Atl. 340 (wound by shell at Cold Harbor, question for jury); but a stricture is "a local infirmity," and must be disclosed, Hanna V. Mut. L. Assn., 11 App. Div. 245, 42 N. Y. Supp. 228. So also as to severe concus- sion of brain from a fall, Snyder v. Mut. Life Ins. Co., 22 Fed. Cas. 740, aff'd 93 U. S. 393, 23 L. Ed. 887. The omission to recollect a temporary injury to an eye. caused by sand which was thrown into it and inflamed it, was not considered necessarily fatal to the policy where the applicant had answered in the negative the question whether he had ever had any illness, local disease, or injury in any organ. Fitch v. American Popular Life Ins. Co., 59 N. Y. 557, 17 Am. Rep. 372. In another case, an applicant warranted that he had never had any bodily or mental infirmity. As mat- ter of fact he had received a gunshot wound in the back of his head by which the ex- ternal table of the skull was fractured, and a piece about one-half inch square taken out, on the strength of which also he had received a pension from the government, and the pension had subsequently been increased on account of vertigo and impaired vision which he claimed were the result of the wound. Nevertheless, the court held that the issue of breach of warranty was one for the jury to determine. Black v. Trav- elers' Ins. Co., 121 Fed. 732. 58 C. C. A. 14, 61 L. R. A. 500. 288 PENN MUT. LIFE INS. CO. V. NORCROSS [CHAP. XVII CHAPTER XVII Life Insurance Policy — Concluded PENN MUTUAL LIFE INS. CO. v. NORCROSS Supreme Court of Indiana, 1904. 163 Ind. 379 Delivery of the policy as related to the condition that it is not to take effect until the first premium is actually paid. Among the conditions in the pohcy were the following: "This policy does not take effect until the first premium shall actually have been paid. No alteration of this contract or waiver of any of its conditions shall be valid unless made in writing and signed by an officer." An agent of the company, however, delivered the policy and accepted from the insured a promissory note in lieu of cash. GiLLETT, J. If a court is called on to interpret a writing purporting to be a contract, and the evidence shows that it was actually delivered as such by the person whose instrument it is, the court will not fail to consider the fact of delivery, if it be material, as an element in the intent of the parties. The provisions of a formal contractual writing, which a corporation has caused to be signed and placed in the hands of an agent for deUvery, may be waived by the act of the agent himself, if he have sufficient power in the premises, or it may be the result of silence on the part of the officers of the corporation after it had constructive knowledge of its agent's act in de- livering the contract, at least where resolute good faith required a timely disaffirmance of his act. Notwithstanding the limitations contained in the policy in suit, it pur- ported to be a present contract; and if such a policy had been executed by a natural person, and delivered by his own hand, the holder would have been warranted in indulging the inference that the limitations which it contained were not intended to be operative as conditions precedent to delivery, or else that, as conditions precedent, they had been waived. In Trustees, etc., v. Brooklyn Fire Ins. Co. (1859), 19 N. Y. 305, we find the following language: "A provision in a policy already executed and de- livered so as to bind the company, declaratory of a condition that premiums must be paid in advance, manifestly has no effect except to impart convenient information to persons who may wish to be insured. As such a provision in the policy in question could have no effect upon the delivered and perfect CHAP. XVIlJ PENN. MUT. LIFE INS. CO. V. NORCROSS 289 contract in which it was contained, so it could have none to prevent the same parties from making such future contract as they pleased. In any subse- quent agreement for a renewal or continuation of the risk, it was competent for the parties to contract by parol and to waive the payment in cash of the premium, substituting therefor a promise to pay on demand or at a future day. Proof of such an agreement would have no tendency to contradict or to change the written policy already in force between the parties, and which would be wholly spent before the new agreement could take its place." A valuable discussion of the subject is found in Van Schoick v. Niagara Fire Ins. Co. (1877), 68 N. Y. 434, where it was said that it "has been thought that the fact that the insurer delivered to the insured the written contract as the consummated agreement between them and did not then exact present payment of the premium as a necessary precedent to delivery, was too plainly in contradiction with the condition for prepayment, for it is not to be supposed that it was meant by the insurer or supposed by either party that it was intended to make that condition a potent part of the contract. Such a provision, it is said, could have no effect upon the delivered and perfect contract in which it was contained. ... It would be imputing a fraudulent intent to the defendant in this case, to say or to think that they did not mean, when they delivered this policy to the plaintiff, to give him a valid and binding contract of insurance, or that they did not mean that he should believe that he had one, or that they did not suppose that he did so be- lieve. And such imputation can be avoided, onlj^ by supposing that it had overlooked this condition, and so forgotten to e.xpress the fact as to the building, in writing, upon the poUcy; or that it waived the condition, or held itself estopped from setting it up. The condition of prepayment of premium is, like this under consideration, one at the threshold of the making of the contract, and if it is not observed, no valid contract is made unless it is stepped over or thrust aside. It is consistent with fair dealing and a freedom from fraudulent purpose, to hold that one or the other was done; that is, that there was a waiver, or an estoppel." In a later New York case, the court stated: "It is so obviously just that a partly to a written contract should be precluded from defeating it by asserting conditions and stipulations con- tained in it which would prevent its inception and which he knew at the time he delivered it and accepted the benefits were contravened by the actual facts, that any statement of the reasons upon which the rule rests is no longer necessary." See Wood v. American Fire Ins. Co. (1896), 149 N. Y. 382, 44 N. E. 80, 52 Am. St. 733. In view of the fact that the pleadings of appellant present no question as to the delivery of the policy it must be presumed that it was delivered by some officer or agent who represented the power of the company to waive all conditions precedent, or else that the circumstances were such that as against appellee, the company had become estopped to deny the validity of the instrument. If an insurance company delivers a policy under such circumstances that it goes into force at once, and accepts in lieu of cash the promissory note of 19 290 PENN MUT. LIFE INS. CO. V, NORCROSS [CHAP. XVII the person insured, made payable to the company, and the note is delivered and accepted as payment, the failure to pay the note will not forfeit the policy. Kline v. National Ben. Assn. (1887), 111 Ind. 462, 60 Am. Rep. 703; Stewart v. Union Mut. Life Ins. Co. (1898), 155 N. Y. 257, 42 L. R. A. 147. We find no error. Judgment affirmed.^ 1 Griffith V. N. Y. Life Ins. Co., 101 Cal. 627, 36 Pac. 113, 40 Am. St. R. 96. Pay- ment of the premium on the date as required is in general, of the essence of the life insurance contract, Klein v. Ins. Co., 104 U. S. 88; Crook v. N. Y. Life Ins. Co. (Md., 1910), 75 Atl. 388; Koehler v. Modern Brotherhood (Mich., 1910), 125 N. W. 49 (assessments). But the insurance company may waive its right to payment of the premium in cash, or it may waive the forfeiture for nonpayment of a premium on the date specified in the policy, Miesell v. Globe Ins. Co., 76 N. Y. 115. Kimbro, upon signing his application, gave his note for the first premium to Haynes, local agent for the defendant. The defendant, on receiving the application, decided not to issue the policy in the form applied for, but sent to the agent a different form of policy to be submitted to Kimbro. The agent, however, made no mention of the alteration, but simply notified Kimbro by letter of the receipt of the policy, stating that he would deliver it on the day the note became due. Kimbro was ignorant of the company's declination, nor did he know that the policy by its terms was not effective without prepayment of premium. Meanwhile, he was taken sick and died before maturity of the note. During his illness, his wife tendered payment of the premium in cash to the agent and demanded delivery of the policy, which was refused. The court held that the act of its agent Haynes in accepting a note in place of cash, and his representation that the policy was received and was being held for Kimbro were, in legal effect, the act and representation of the insurance company, and that Kimbro accordingly had the right to assume that his application was accepted as proposed and that the contract was closed. The judgment for the plaintiff was affirmed, Kimbro V. N. Y. Life Ins. Co., 99 Minn. 176, 108 N. W. 861. In a case in South Carolina, the insured, Hill by name, had given his note for the first premium, and this had been duly accepted by the agent of the insurance company, and after its maturity, had been transferred to Doyle, the plaintiff, who brought action upon it against Hill. Hill defended on the ground that the policy was avoided from the inception of the con- tract, and that, therefore, there was no consideration for the note. He offered to show that the policy was void because of a false answer written in the application by tht- medical examiner, but he admitted that he had given the correct answer orally to the medical examiner. The court held that the proffered testimony was not admissible and that the defense was not established, since the company was estopped from setting up forfeiture of the policy, Doyle v. Hill, 75 S. C. 261, 55 S. E. 446. Statdtory Notice of Premiums Due. — In many States it is provided that before claiming forfeiture for nonpayment of premium, the insurance company must send a specified notice to the insured, which is intended to operate as a reasonable warning, Mut. Life Ins. Co. v. Phinney, 178 U. S. 327, 20 S. Ct. 906, 44 L. Ed. 1088. In order to establish forfeiture of the policy for nonpayment of the ijremium, the burden is thrown upon the insurer to prove a compliance with the terms of the statute, Strauss V. Union Cent. L. Ins. Co., 170 N. Y. 349. The fact that the insured is financially unable to pay the premium and can derive no benefit from the notice, furnishes the company with no excuse for omitting to conform to the statutory requirement. Equita- ble Life Assur. Soc. v. Perkins, 41 Ind. App. 183, 80 N. E. 682. Assessments. — In mutual associations and Vjeneficiary societies the premiums are often paid in the form of assessments, and it is in order on the happening of a death to call for an asses.sment with which to meet it, nonpayment of which ipso facto usually occaaiona suspension or forfeiture of all rights on the part of the insured member, Butler V. Grand Lodge, 146 Cal. 172, 79 Pac. 861. Such assessments are practically CHAP. XVIl] RUSSELL V. PRUDENTIAL INS. CO. 291 RUSSELL V. PRUDENTIAL INSURANCE COMPANY Court of Appeals of New York, 1903. 17G N. Y. 178 Delivery of the "policy as related to the condition that it is not to take effect until the first premium is actually paid. Action on a policy of life insurance. Defense that the policy never had a valid inception inasmuch as the premium was not paid. deferred premiums, levied upon members to meet losses of others occurring during the term of membership, and based, not upon estimated laws of average, but rather upon an amount of ascertained losses. Supreme Comniandory v. Ainsworth, 71 Ala. 436, 443. They are a part of the consideration payable Ijy the member to the asso- ciation in return for the benefit of insurance actually enjoyed by him, the balance of pecuniary consideration often consisting of small foes and dues or stated assessments for expenses. Therefore, by reason and by the great weight of authority, when prop- erly levied, assessments constitute a collectible debt in favor of the association, re- gardless of whether the member has expressly promised to pay them or whether their nonpayment occasions forfeiture of his rights and insurance. Calkins v. Angell, 123 Mich. 77, 81 N. W. 977; EUerbe v. Barney, 119 Mo. 632, 25 S. W. 384, 23 L. R. A. 435; Re Globe Mut. Benefit Assn., 63 Hun, 263, 17 N. Y. Supp. 852, aff'd 135 N. Y. 280, 32 N. E. 122. In most instances an express promise to pay assessments can be deduced either from the statutes, by-laws, application, or certificate applicable to the case, Dettratt v. Kestner, 147 Pa. St. 566, 23 Atl. 889; Fulton v. Stevens, 99 Wis. 307, 74 N. W. 803. Where, however, no express undertaking by the member to pay assessments can be found, several courts and several standard text-writers have con- cluded that if forfeiture is prescribed as a penalty for nonpayment of assessments no other result can be inferred; and that, therefore, the association cannot collect the assessment from the delinquent member, Lehman v. Clark, 174 111. 279, 51 N. E. 222, 43 L. R. A. 648. But the difficulty with these decisions is that they allow to the de- faulting member his own insurance for a period without exacting in return the proper consideration; and their authority is weakened by the course of reasoning adopted in the opinions rendered in their support. For in these, the conclusion secn)S to be in substance based upon the two propositions that the ordinary life policy is unilateral and that the assessment policy should be governed by similar doctrines. It is true that the regular life policy is in a sense unilateral. The instrument is executed by only one party. It is also true, that where, at the inception of the contract the as- sured has paid the entire premium for a year's insurance there is nothing more for him to do during the year, N. Y. Life Ins. Co. v. Statham, 93 U. S. 24, 23 L. Ed. 789. If, on the other hand, the applicant for insurance has failed to make advance payment of the first premium, the regular policy does not attach to the risk. There is no con- tract. The applicant pays nothing and gets nothing. The insurance company cannot sue for the premium, since no part of it has been earned, Cravens v. N. Y. Life Ins. Co., 148 Mo. 583, 599, 50 S. W. 519, 53 L. R. A. 305, 71 Am. St. R. 628. These well- established principles, however, furnish no sanction for a rule relieving the insured member in an a.ssessment company from the liability for assessment for deferred premium where the liability of the company has already attached, and where the member has been actually receiving the protection of his certificate for at least a por- tion of the corresponding period. AssEssMENT.s McsT Bf, LAWFULLY AND PROPERLY Levied. — The association can be compelled in equity to levy a mortuary assessment pursuant to its laws, or upon its failure to do so the member may sue for damages, Lawler v. Murphy, 58 Conn. 292 RUSSELL V. PRUDENTIAL INS. CO. [CHAP. XVII Bartlett, J. The facts are as follows: On the twenty-sixth day of De- cember, 1899, the plaintiff made a written application for the policy in suit. The material portions of that application read: "I hereby declare and war- 294, 20 Atl. 457, 8 L. R. A. 113. The officials lawfully entrusted with this power cannot delegate it to others, Miles v. Mut. R. F. Assn., 108 Wis. 421, 84 N. W. 159. Proper proofs of death must first have been received, Coyle v. Ken. Grangers' Mut. Ben. L. Soc, 8 Ky. L. R. 604, 2 S. W. 676, and the requirements of the charter and by- laws must be observed. Grand Lodge v. Bagley, 164 111. 340, 45 N. E. 538. The assess- ment upon a member must not include losses occurring before he became a member. Capital City Mut. Fire Ins. Co. v. Boggs, 172 Pa. St. 91, 33 Atl. 349; but may include losses occurring during membership, although assessment therefor is not assessed until membership has ceased, Ionia, etc., Mut. Fire Ins. Co. v. Ionia Judge, 100 Mich. 606, 59 N. W. 250, 32 L. R. A. 481. Illegal assessments need not be paid to avoid forfeiture, Benjamin v. Mut. R. Fund Assn., 146 Cal. 34, 79 Pac. 517. It is said that the burden is upon the association to show the legality, regularity, and necessity of the assessment, Shea v. Mass. Ben. Assn., 160 Mass. 289, 35 N. E. 855, 39 Am. St. R. 475; Hartford Ins. Co. v. Hyde, 101 Tenn. 396, 48 S. W. 968. The member must not he assessed for more than his just proportion of the loss, U. S. Mut. Ace. Assn. v. Mueller, 151 111. 254, 37 N. E. 882 (incorrect amount named in notice) ; Ebert v. Assoc, 81 Minn. 116, 83 N. W. 506 (must not discriminate between classes, though rate may be changed); nor for future prospective losses, Vandalia Mut. Co. Fire Ins. Co. v. Beasley, 84 111. App. 138. While a reasonable discretion must be left to the directors or other officials levying the assessment, because of contingencies, and in view of the fact that sometimes members may default, Ionia, etc., Mut. Fire Ins. Co. v. Ionia Judge. 100 Mich. 606, 59 N. W. 250, 32 L. R. A. 481, yet an assessment for twice the indebtedness was held void, Lawler v. Murphy, 58 Conn. 294, 20 Atl. 457, 8 L. R. A. 113. Power to Change Rate' of Assessments. — The nature of the contract in an assessment association is such as naturally to call for a varying rate of assessment. A power to change the rate equitably from time to time will be inferred, Ebert v. Mut. R. Fund L. Assn., 81 Minn. 116, 83 N. W. 506; Messer v. Grand Lodge, 180 Mass. 321, 62 N. E. 252 (adoption of new by-law, valid), unless the plain meaning of the contract prohibits. Covenant Mut. L. Assn. v. Kentner, 188 111. 431, 58 N. E. 966; but such change must not be unreasonable, or repugnant to vested rights, Strauss V. Mut. R. Fund L. Assoc, 126 N. C. 971, 36 S. E. 352, 54 L. R. A. 605, 83 Am. St. R. 699. Contra, Gaut v. Mut. R. Fund L. Assoc, 121 Fed. 403. A member often expressly agrees to be bound by future by-laws and regulations by which, in that event, the rate may be changed pursuant to the charter, FuUenwider v. Supreme Council, 180 111. 621, 54 N. E. 485, V2 Am. St. R. 239; Miller v. National Council, 69 Kan. 234, 76 Pac. 830. A change even from assessments to regular premiums may not be in violation of the Constitution of the United States, Wright v. Minnesota Mut. L. Ins. Co., 193 U. S. 657, 24 S. Ct. 549. Notice of Assessment to Insured. — Until notice of the amount of a mortuary assessment is duly given to a member, no obligation to pay is imposed upon him, Wright V. Supreme Commandery, 87 Ga. 426, 13 S. E. 564, 14 L. R. A. 283; Cronin v. Supreme Council, 199 111. 228, 65 N. E. 323, 93 Am. St. R. 127. A subsequent by- law, rescinding a provision for such notice before forfeiture, would be unreasonable and inoperative, Thibert v. Supreme Lodge, 78 Minn. 448, 81 N. W. 220, 47 L. R. A. 136, 79 Am. St. R. 412. If the testimony admits of doubt the jury determines whether the notice has been received. If not received there is no forfeiture, Garbutt v. Assn., 84 Iowa, 293, 51 N. W. 148; McCorkle v. Texas Ben. Assoc, 71 Tex. 149, unless the contract provides that sending or mailing of the notice is sufficient service. Modern Woodmen v. Tevis, 117 Fed. 369, 54 C. C. A. 293. Contracts of insurance with assessment companies have been the occasion of much litigation. CHAP. XVIl] RUSSELL V. PRUDENTIAL INS. CO. 293 rant that all the statements and answers to the above named questions, as well as those made or to be made to the company's medical examiner, are or shall be complete and true, and that they, together with this declaration, shall form the basis and become a part of the contract of insurance hereby applied for. And it is further agreed that the policy herein applied for shalF be accepted subject to the conditions and agreements therein contained, and said policy shall not take effect until the same shall be issued and delivered by the said company and the first premium paid thereon in full," etc. This application was signed by the applicant and duly witnessed. Upon receipt of the application the policy was sent to the general agent at Syracuse. On January 6, 1900, the general agent, in comiiany with a subagent, went to the house of the deceased and had an interview with him. Plaintiff swears in substance that after her husband had stated his in- ability to pay the first premium at that time, the general agent informed him that he might have thirty days additional time in which to pay the first premium and that the insurance would go into immediate effect. The gen- eral agent and the subagcnt denied this conversation in toto and say that deceased was distinctly informed that the policy, as stated therein, would not go into effect until the first premium was paid in full. The receipt for the first premium was thereupon signed by the general agent and delivered to the insured and by him handed to the subagent, who was to hold it until the payment was actually made. This transaction as to the receipt is not disputed. The policy contained the following, among other, provisions; it is headed, "Regarding agents:" "No agent has power in behalf of the company to make or modify this or any contract of insurance, to extend time for paying the premium, to waive any forfeiture, or to bind the company by making any terms, or making or receiving any representation or information. These powers can be exercised only by the president, one of the vice-presidents or the secretary, and will not be delegated. Modifications, etc. No provision of this policy can be modified or waived in any case except by indorsement hereon signed by the president, one of the vice-presidents or the secretary." The general agent was appointed to his position under a WTitten contract, which is in evidence, and contains this provision, among others: "4. It is understood and agreed that said general agent has no authority on behalf of the Prudential Insurance Company of America, to make, alter or destroy any contract, to waive forfeitures, nor to receive any moneys due or to be- come due to said company, except on policies or renewal receipts signed by the president, secretary or manager of the ordinary branch and sent to him for collection." These facts constitute, substantially, the plaintiff's case, and the defendant thereupon moved for a nonsuit, on the ground that the plaintiff had failed to make out a cause of action. The court denied the motion. The defendant swore the general agent and subagcnt as witnesses and each posit ivel}' denied that the conversation testified to by plaintiff ever occurred between the general agent and the insured. 294 RUSSELL V. PRUDENTIAL INS. CO. [CHAP. XVII At the close of the evidence the defendant again moved for a nonsuit and for a directed verdict, specifying, among others, the ground that upon the plaintiff's own evidence, and upon the uncontradicted evidence in the case, the general agent had no authority to make or modify the contract of insur- ance as testified by plaintiff. The learned trial judge, in denjdng this motion, said: "I deny the motion and give you an exception. The one question I am going to submit to the jury, is this: whether on January 6, 1900, Mr. Tennant, at the time he de- livoreil the policy to Mr. Russell, agreed that the time for payment of the premium should be extended, as is claimed by plaintiff, and that the policy could, in the meantime, remain in force. That is the only question I am going to submit to the jury. If they find in favor of the plaintiff upon that state of facts the verdict will be for plaintiff. If they find for defendant upon that proposition the verdict will be for the defendant." To this limitation the defendant excepted. The trial judge, in one of his rulings, said: "I hold as matter of law that if Mr. Tennant did what plaintiff claims he did on the 6th of January, then there can be a recovery in this case." To this ruling the defendant excepted. The defendant contended that if there was any evidence that Tennant had apparent authority to put the policy in force and waive its express conditions, and any evidence of estoppel, the questions were for the jury, but the court adhered to its view that it was a question of law upon the contract of insur- ance. The important question presented in this case, therefore, is. Can an insurance company so draw the various papers constituting its contract of insurance as to prevent general and local agents from exercising powers to the detriment of the company, when the substantial provisions of that con- tract are brought home to the insured prior to the alleged delivery of the policy. This case may be regarded as a test one on the point, as it is apparent that the contract of insurance now before the court is as strong in favor of the company as language can make it. In the case before us we have a contract that distinguishes it from a large number of cases which hold that the provision of the policy to the effect that only certain officers of the company can waive payment of premiums when due and that agents cannot do so, does not apply to the initial premium. This distinguishing feature is found in the fact that the application, which is made a part of the policy, contains the express condition that the policy shall not take effect until the same shall have been issued and delivered by the company and the first premium paid thereon in full. In this connection it is to be observed that not only is the application made a part of the policy by its terms, but the policy opens with this provision: "In consideration of the application for this policy, which is hereby made part of this contract, and of the quarterly annual premium of seven and two one-hundredths dollars, which it is agreed shall be paid to the company in exchange for its receipt on the delivery of this policy," etc. The above quotation from the policy gives added significance to the man- ner in which the receipt was treated at the interview between the agents and CHAP. XVIl] RUSSELL V. PRUDENTIAL INS. CO. 295 the insured, to which reference has already been made. The policy states that it is to be given in exchange for the receipt, and it rests upon the un- disputed evidence that the receipt was left in the custody of the subagent, not to be surrendered until the first premium was paid. In many of the cases cited, where insurance companies were held liable, the agent having waived the payment of the first premium contrary to the provisions of the policy and without authority from the company, the de- cision was based upon the fact that the policy had never been delivered to the insured, and, consequently, he could not be charged with notice of its contents at the time of the agent's waiver of payment. It was argued that to hold otherwise would practically permit the company, through its agent, to work a fraud upon the insured by leading him to believe that he had se- cured insurance when such was not the fact. We have been cited to a multitude of cases by the respondent which it is quite impossible to review in detail within the limits of an ordinary oi)inion. Many of these are within the class to which reference has already been made, in regard to waiving the payment of the initial premium, and others deal with waiver in various forms, such as resting on the general course of busi- ness with the insured; knowledge of the agent before issuing the policy that property was subject to mortgage or other lien; that the title was in a third person; that there was other and undisclosed insurance, or various conditions which would render the policy void, by its terms, if the company were not chargeable with the knowledge of its agent, by reason of information im- parted to him by the insured during the preliminary negotiations. In the case at bar there is no evidence of a course of business between the company and the insured, nor was it shown that the general agent had power to waive payment of the first premium. On the contrary, the plaintiff put in evidence the contract between the company and its general agent, which showed, affirmatively, that he possessed no such power. We thus come to the important and controlling question in this case, whether the insured is to be charged with notice of the contents of the writ- ten application which he executed, making the same a part of the contract of insurance. The legal presumption is, in the absence of fraud, that the in- sured read or had read to him the application before signing it. This being so, he was advised that the policy could not issue or take effect until the first premium was paid thereon in full. The legal effect is that the insured covenanted with the company directly and not through its agent, that the policy was not to be binding upon the company until the first premium was paid in full. Is this contract to be enforced as clearly written, or is it to be ignored for the reason that men enter into contracts without reading them and assume that a vague and unproven custom exists permitting a local agent to give life and validity to the policy without reference to the terms of the contract of insurance? The question may be put in another form. Can an insurance company enter into a contract with a person applying for insurance, which can so fix the precise conditions under which the policy shall issue, that the 206 RUSSELL V. PRUDENTIAL INS. CO. [CHAP. XVII agent, in the absence of express authority, cannot abrogate it? It would seem that the mere statement of the foregoing questions would compel an answer in favor of the company without argument. An insurance company is entitled to have its contract enforced by the courts as written unless, as has been stated in many cases, to strictly construe it as against the insured would work a fraud upon him. As already pointed out, this might be the case in reference to the payment of the initial premium, where the only provisions in regard to the same are contained in the policy. It cannot be said in this case, in the teeth of the express covenant of the insured contained in his ap- plication and carried into the policy with due reference to the same, that he would be subjected to a fraud if the waiver of the agent, made without authority, is held not to abrogate the contract between him and the com- pany, of which he is chargeable with full notice. We are of opinion that it was error for the learned trial judge to instruct the jury that if they found that at the interview between the agents and the insured the general agent delivered the policy to the insured and agreed with him that the time of the payment of the first premium should be extended, and that in the meantime the policy should be in force that their verdict should be for the plaintiff. The order and judgment appealed from should be reversed and a new trial ordered, with costs to abide the event. Haight, J., dissented on the ground that the act of the general agent in delivering the policy was the act of the company, and that therefore it was within the scope of his actual authority to determine whether he should exact a cash payment of the first premium as provided by the policy or whether he should extend credit therefor; and that if the intention of the company through its general agent had been to postpone the time of the inception of the contract until the first premium should be paid, then he would not have presently delivered the policy but would have retained it in his own possession until he should have received such payment. ^ 1 Seidel v. Equitable L. Assur. Soc, 138 Wis. 66. Reserve. — That portion of the premiums of a policy with the interest thereon which is required to be reserved or set aside as a fund for the payment of the life in- surance policy when it becomes due is called the "reserve." The mean or average duration of the life of an individual after any specified age, according to a given table of mortality, is called the "expectation of life." Statistical observations on the dura- tion of human life point to the conclusion that, after the period of extreme youth is passed, the death rate among any given body of persons increases gradually with advancing ago; and where the annual premium is fixed at a uniform rate during the life of the policy, as is customary in life insurance, it is evident that if the policy is surrendered by the insured before its expiration, the insurers can generally afford to make a return of a portion of the premiums which have been paid. Of the reserve value which the policy is estimated to have at the time of surrender, a part called "the surrender value," the company off(;rs to pay to the insured in return for the can- cellation of the policy before its natural expiration. From these same considerations it appears, also, that in the event of the insolvency and winding up of a life insurance company, there is a ba.sis for calculating the present value of the unexpired policies, by which an equitable distribution of aaseta may be CHAP. XVIl] ACCIDENT INS. CO. V. CRANDAL 297 ACCIDENT INSURANCE COMPANY v. CRANDAL Supreme Court of United States, 1886. 120 U. S. 527 What is suicide? The policy provision exempting from liability for suicide, did not contain the further phrase "sane or insane." Mr. Justice Gray. The single question to be decided, therefore, is whether a policy of insurance against "bodily injuries efTected through ex- ternal, accidental and violent means," and occasioning death or complete disability to do business; and providing that "this insurance shall not extend to death or disability which may have been caused wholly or in part by bodily infirmities, or disease, or by suicide, or self-inflicted injuries;" covers a death by hanging one's self while insane. The decisions upon the effect of a policy of life insurance, which provides that it shall be void if the assured "shall die by suicide," or "shall die by his own hand," go far towards determining this question. This court, on full consideration of the conflicting authorities upon that subject, has repeatedly and uniformly held that such a provision, not containing the words "sane or insane," docs not include a self-killing l\v an insane person, whether his unsoundness of mind is such as to prevent him from understanding the i)hys- ical nature and consequences of his act, or only such as to prevent him, while foreseeing and premeditating its physical consequences, from under- standing its moral nature and aspect. Life Ins. Co. v. Terry, 15 Wall. 580; Bigelow V. Berkshire Ins. Co., 93 U. S. 284; Insurance Co. v. Kodcl, 95 U. S. 282; Manhattan Ins. Co. v. Broughton, 109 U. S. 121. In the last case, which was one in which the assured hanged himself while insane, the court, repeating the words used by Mr. Justice Nelson, when Chief Justice of New York, said that "self destruction by a fellow-l)cing bereft of rea.son can with no more propriety be a.scribed to the act of his own hand than to the deadly instrument that may have been used by him for the purpose," and "was no more his act, in the sense of the law, than if he had been impelled by irre- sistible phy.sical power." 109 U. S. 132; Breasted v. Farmers' Loan & Trust Co., 4 Hill, 73. In a like case. Vice Chancellor Wood (since Lord Chancellor Hatherley) observed, that the deceased was "subject to that which is really just as much an accident as if he had fallen from the top of a house," Horn V. Anglo-Australian Ins. Co., 30 Law Jonrnal (N. S.) Ch. 511; s. c, 7 Jurist (N. S.), G73. And in another case, Chief Ju.stice Appleton said, that "the in- sane suicide no more dies by his own hand than the .suicide by mistake or accident," and that, under such a jiolicy, "death by the hands of the insured, made to all the policy holdcr.s in accordance with the laws of priority, People t. Aaso- ciation, 150 N. Y. 94, 45 N. E. 8 (reserve, how distributed on dissolution). 298 MALLORY V. TRAVELERS' INS. CO. [CHAP. XVII whether by accident, mistake, or in a fit of insanity, is to be governed by one and the same rule," Eastabrook v. Union Ins. Co., 54 Maine, 224, 227, 229. Many of the cases cited for the plaintiff in error are inconsistent with the settled law of this court, as shown by the decisions above mentioned. In this state of the law, there can be no doubt that the assured did not die "by suicide," within the meaning of this policy; and the same reasons are conclusive against holding that he died by "self-inflicted injuries." If self- killing, "suicide," "dying by his own hand," caimot be predicated of an in- sane person, no more can "self-inflicted injuries"; for in either case it is not his act. The death of the assured not having been the effect of any cause specified in the proviso of the policy, and not coming within any warranty in the ap- plication, the question recurs whether it is within the general words of the leading sentence of the policy, by which he is declared to be insured "against bodily injuries effected through external, accidental and violent means." This sentence does not, like the proviso, speak of what the injury is "caused by"; but it looks only to the "means" by which it is effected. No one doubts that hanging is a violent means of death. As it affects the body from with- out, it is external, just as suffocation by drowning was held to be, in the cases of Trew, Reynolds and Winspear. And, according to the decisions as to suicide under policies of life insurance, before referred to, it cannot, when done by an insane person, be held to be other than accidental. The result is, that the judgment of the Circuit Court in favor of the plain- tiff was correct, and must be Affirmed.^ MALLORY V. TRAVELERS' INS. CO. Court of Appeals of New York, 1871. 47 N. Y. 52 Suicide: burden of proof. Appeal from judgmoiit of the General Term of the second judicial dis- trict, affirming a judgment entered upon verdict in favor of plaintiff. * In an interesting case in thn United States Supreme Court, although the insured, one Runk, had warranted and agreed in the application, "I will not die by my own act, whether sane or insane," etc., nevertheless as the company had omitted to attach the application to the policy, as provided for by the Pennsylvania statute, the warranty could not be considered as part of the contract or admitted in evidence, and, therefore, the question arose as though the contract had been altogether silent on the subject of suicide. There was no finding by the jury that the insured had taken out the policy in suit with the purpose of committing suicide. Their only finding was that Runk was sane when he committed the act. He had misappropriated large sums of money be- longing to his friends and relatives, and V)elieved that out of the half million dollars of insurance on his life, which he was carrying, his obligations would be paid. The CHAP. XVIl] MALLORY V. TRAVELERS' INS. CO. 299 This action is brought upon an accident policy of insurance issued upon the hfc of W. S. Mallory for the sum of $2,000, for the benefit of and made payable to plaintiff. By the policy the defendant agreed to pay the sum insured, and "within ninety days after sufficient proof that the insured, at any lime within the term of this poHcy, shall have sustained personal injury caused by any accident within the meaning of this policy and the conditions hereunto annexed, and such injuries shall occasion death within three months after the hai)pening thereof." "And if the insured shall sustain any per- sonal injury which shall not be fatal, but which shall absolutely and totally court held that the death of the assured, if directly and intentionally caused by him- self when in sound mind, was not a risk intended to be covered, or which could legally have been covered by the policies in suit, Ritter v. Mut. Life Ins. Co., 169 U. S. 139, 18 S. Ct. 300, 42 L. Ed. 693. Degree of Insanity Required to Save the Insurance. — As to the doRree of insanity which will operate as an excu.sc to the insured to prevent the application of a suicide clause not containing the words "sane or insane," the English, New York, and Ma.ssachusctts courts, and others, have adopted a view somewhat at variance with the rule announced in the principal case. This view may be thus expressed; that to relieve from the suicide clause on the ground of insanity, the insured must have been so mentally disordered as not to understand that the act he committed would cause his death, or he must have committed it under the influence of some un- controllable insane impulse. These courts hold that in order to escape forfeiture, it is not sufficient to show that he was unconscious merely of the moral ohliqxnty of the act, Borrodaile v. Hunter, 5 M. & G. 639, 44 E. C. L. 335; Cooper v. Mass. Mut. Life Ins. Co., 102 Mass. 227, 3 Am. Rep. 451; Van Zandt v. Mutual Benefit Ins. Co., '65 N. Y. 169, 14 Am. Rep. 215. Suicide and Self-De.struction, Sane or Insane, Excepted.— *To extend for their benefit the operation of the restriction, the insurers have generally added to the suicide clause the words "sane or insane," and with this addition the exemption covers all cases of intentional self-destruction, Bigelow v. Ins. Co., 93 U. S. 284, 23 L. Ed. 918. Under such an exception the insurers are relieved from respon.sibility unless the death of the insured was purely accidental, Moore v. Ins. Co., 192 Mass. 468, 78 N. E. 488. And it matters not whether the policy is payable to the insured or to his estate or to other designated beneficiaries, as, for instance, creditors. The vol- untary suicidal act avoids the policy altogether, Ellinger v. Mutual Life Ins. Co. (1905), 1 K. B. 31. But to produce forfeiture of such a policy there must be some- thing more than a mere accident, Clarke v. Eciuitable Life Assur. Soc, 118 Fed. 374, 55 C. C. A. 200; Scarth i-. Security Mut. Life Ins. Co., 75 Iowa, 346, 349; there must be an intent, though not of necessity a rational one, to commit the act of self-destruction. Union Cent. Life Ins. Co. v. Hollowell, 14 Ind. App. 611, 43 N. E. 277. Such intent would seem logically to involve at least some consciousness of the physical nature or consequences of the act and this seems to be the prevailing and better doc- trine, Jenkins v. National Union, 118 Ga. 587, 45 S. E. 449; Supreme Lodge r. Gelbke, 198 111. 365, 64 N. E. 1058; Hart v. Modern Woodmen, 60 Kan. 678, 57 Pac. 936, 72 Am. St. R. 380. If the destructive act be intended and its character be known by the insured to be destructive, it is clear that neither an irresistible insane impulse. Supreme Lodge v. Gelbke, 198 111. 365, 64 N. E. 1058; Manhattan Life Ins. Co. r. Beard, 112 Ky. 455, 66 S. W. 35, nor ignorance and unconsciousness of the moral aspect of the act will afford any excuse to the insured or other beneficiary, where the Buicidi- clause contains the phrase, "sane or insane," Bigelow r. Ins. Co., 93 V. S. 286, 23 L. Ed. 918; Hart v. Modern Woodmen, 60 Kan. 678, 57 Pac. 936, 72 Am. St. R. 380; Streeter v. West. Union Mut. Life Ins. Co., 65 Mich. 199, 31 N. W. 780, 8 Am. St. R. 883. 300 MALLORY V. TRAVELERS' INS. CO. [CHAP. XVII disable him from the prosecution of business, then on satisfactory proof of such injury, compensation shall be paid to him," etc. "Provided always that no claim shall be made under this policy by the said insured in /espect of any injury, unless the same shall be caused by some outward and visible means, of which proof satisfactory to the company shall be furnished," etc. Grover, J. The question whether the plaintiff had an insurable interest in the life of the deceased docs not arise in this case. The insurance was upon the life of W. S. Mallory. The policy was procured by him, and he paid the premium therefor, and made the loss payable to the plaintiff (his daughter) or legal representatives. This, in effect, was a policy procured by him upon his own life, and an assignment thereof to the plaintiff. Gros- venor v. The Atlantic Fire Ins. Co., 17 N. Y. 391; Rawls v. American Mutual Ins. Co., 27 N. Y. 282. There was no error in denying the defendant's mo- tion for a nonsuit. No ground for such motion was stated, and in such a case the well-settled rule is, that there is no error committed by denying it, although there may be a defect in the plaintiff's proof, if the defect was suck that it might have been supplied if pointed out upon the motion. But there was no such defect. The proof showed that the deceased had been staying at his brother's at Bridgeport, Conn., for about a week; that he left the house on Sunday, and was last seen alive on that day, walking toward a railroad bridge over a culvert, across a stream emptying into the sound, where the waters of the sound set, to some extent, into the land and up the stream at high tide; that this bridge was used by pedestrians to cross the stream to a considerable extent; that the body of the deceased was found in the pond not far from the bridge, in a few days thereafter. The policy was one em- bracing cases only where the death was caused by an injury received from an accident. From the facts above it appeared either that the death was caused by such an injury or the suicidal act of the deceased; but the presump- tion is against the latter. It is contrary to the general conduct of mankind; it shows gross moral turpitude in a sane person. That it resulted from the former cause was to some extent rendered more probable by the wound upon the head of the deceased, and the break in the corresponding part of his hat. Although this wound might have been made after the deceased was in the water, or while falling in, yet it was for the jury to say how it was caused, and to determine its effect upon the question whether the death was the result of an accidental injury, or whether the deceased had destroyed his own life. The court did not err, in charging the jury, that the conversation between the president of the company and the deceased had no bearing upon this particular application. It was proved that the deceased at the time of death was, and for some time previous to procuring the policy had been, a canvasser for applications for insurance with the defendant; that in an inter- view with the president, the deceased remarked that he could procure a great number of applications in Newark: to which the president in substance replied, that he mu.st be cautious, as the company did not wish to insure in- sane persons, or persons of habits of intoxication. This evidence was relied CHAP. XVIl] MALLORY V. TRAVELERS* INS. CO. 301 upon by the defendant to avoid the policy, in connection with the facts proved, that the deceased, twenty years before making the appUcation, had a severe fever, during which he was more or less insane, but that after re- covering therefrom he was sane until three or four years before that time, when he was insane, from what cause did not appear, and was placed for about three months in a retreat for such persons, when he was discharged cured therefrom, from which time to his death he more or less attended to busi- ness, was sane, or at most the evidence of a want of sanity was so slight dur- ing any portion of this period as hardly warranted the submission of any question thereon to the jury; that the deceased did not state to the company, upon making application for the policy, that he ever had been insane, but did state there were no circumstances which rendered him peculiarly liable to accident. This general conversation with the president some time be- fore the application had no tendency to show a fraudulent concealment of material facts upon making the application. There was no evidence tend- ing to show that he was then insane, or that he had been for some time be- fore, and this conversation did not convey to his mind the idea that the company regarded those that a long time before had been insane, as pecul- iarly hable to accidents. The construction put upon the contract in the charge was correct. That construction was, that the terms outward and visible means applied only to injuries not causing death in three months, but to such only as entitled the deceased to certain sums from the company during their continuance, as provided by the policy. The part of the charge to the effect that if the wound led to the cause of his death, then it would be an accidental death, could have been understood only in the sense of the wound being produced by an accident, but that this, not causing death, did cause him to fall into the water, where he died from drowning, then the death was accidental; so understood, it wao entirely correct. The judge was right in charging that, if the deceased did not conceal any fact which, in his own mind, was material in making the application, the policy was not void. Rawls V. The American Mutual Life Ins. Co., 27 N. Y. 282; Van Lindenau V. Desborough, 15 Eng. C. L. 290, and Valton v. National Fund Life Ins. Co., 20 N. Y. 32. Cases cited by counsel were cases where false answers were given to inquiries made, and have no application to this case. The counsel was mistaken in his exception to the charge, that if the deceased was insane so that he could not know right from wrong, his death in such a condition was an accident, which would entitle him to recover. The judge did not so charge. The judge did charge that if his condition at the time was such that he could not distinguish right from wrong, if it was such that he could not be held in his own mind to know that he was doing an act which would produce death, then he was an involuntary agent, and the result of that involuntary act producing death was an accident. This part of the charge was not excepted to. Hence no question arises thereon for review by this court. The defendant can sustain no injury from the want of a proper exception, even if right in its law, for the reason that there was no evidence tending to show that the deceased did not know that keeping his head under 302 MALLORY V. TRAVELERS' INS. CO. [CHAP. XVII water for a sufficient time would cause his death. It was wholly immaterial whether Lawton ever told Johnson that the deceased was insane, or when he told him so. The defendant could not have sustained any injury from this testimony. The judgment appealed must be affirmed, with costs. All concur. Judgment affirmed. Two late Minnesota cases on the subject of suicide, resting side by side in the reports are instructive. The Western Life Indemnity Company, the defendant, in- sured the life of Kornig, by a policy which provided that there should be no recovery in case of death by suicide, intentional or unintentional, and whether deceased was sane or insane at the time. Kornig who had been living happily and in good health was found dead one afternoon from a bullet in his head, with a pistol in his hand, in a room in Minneapolis, which he had leased from a woman, the principal witness for the insurance company. The woman testified that she had gone to the room in answer to Kornig's complaint that it was not in order, that without a word he shot and wounded her, and that she heard no second shot. The accuracy of this narrative was slightly impeached. She denied improper relations with Kornig. The court refused to disturb a verdict in favor of the widow, Kornig v. Western Life Indemnity Co., 102 Minn. 31, 112 N. W. 1039. Zearfoss had a policy from the Switchmen's Union, containing a clause exonerating the association in case of deliberate suicide. He lived with his family and on good terms. He stopped working as a switchman on January 20, and took his pay. Two days later he went for a spree to a lodging house near his home, kept by the Fishers, where he drank and played cards in the saloon at night and took and occupied a bedroom above. He said he had had a little trouble in the family. The next evening about seven o'clock he was found dead in the bedroom, where a bottle with carbolic acid was also discovered. The post-mortem examination showed that the deceased had died from the effects of carbolic acid, but the surgeons testified that there were no burns apparent in his mouth or on his fingers. The proprietor of a neighboring drug store identified Zearfoss as without much doubt the man who had bought the acid, though the witness would not swear that he was sure of it. There was no evidence to show that the insured had been foully dealt with. A verdict in favor of the widow was set aside by the court, as unsupported by the evidence, the fair meaning of which was consistent only with an inference of deliberate suicide, Zearfoss V. Switchmen's Union, 102 Minn. 5G, 112 N. W. 1044. In a New York case, the com- pany refused to pay the insurance on the ground that the insured, Louise L. Buxton, had committed suicide within a year after the policy was issued. Some time prior to her death the insured underwent an operation at St. Luke's Hospital, and thereafter suffered from hemorrhages, but was discharged as cured about two weeks before her death. The evening before her death she came downstairs appearing greatly excited and with hair somewhat disheveled. The next day she was found dead in her bed with both gas jets turned on, but not lighted. There was no evidence tending to show that anyone had entered the room from the time the insured retired until she was found dead, or that the bed was in a position where she could read, or that there had been a turning off and on of the gas supply from the outside room. By a divided court the judgment in favor of the plaintiff was reversed, White v. Prudential Ins. Co., 120 App. Div. 260. Cady, the insured, went to a hospital March 28, in very low spirits, and was put in charge of a trained nurse. His thoughts dwelt upon the subject of dying. The same day he executed a will. The night thereafter he was somewhat delirious. March 30th during the temporary absence of his nurse, who went at his request to get him a glass of hot water, he ran up several flights of stairs, rapidly, in his night robe. On being hailed by a person, he quickened his pace, put his hands on a railing around an open shaft, leaped over, fell to the bottom and died in about three minutes. Judgment in favor of the beneficiary was affirmed, Cady v. Fidelity & Cas. Co. (1908), 134 Wis. 322, 113 N. W. 967. ^ X^L-v.^.^ ^r^<^C..^^-u-X CHAP. XVIl] MURRAY V. N. Y. LIFE INS. CO. 303 -n... X ,5/7: ^ MURRAY t). NEW YORK LIFE INS. CO. Court of Appeals of New York, 1884. 96 N. Y. 614 Exemption from liability if death is in conseqicence of violation of law. Andrews, J. The policies upon the life of Wisner Murray each contain a condition that, if the insured "shall die in, or in consequence of, a duel, or of the violation of the laws of any nation. State, or province," the policy shall be void. The assured died from a pistol shot from a pistol in the hands of one Berdell, upon whom the deceased and his brother had committed a violent assault, and the defense is based upon this condition in the policy. It is an undisputed fact that the brothers, acting in concert, planned the assault upon Bcrdcll. They stationed themselves in the waiting room of the station, awaiting his arrival, and, when he entered the room, Spencer Murray seized him by the arms from behind and held him, while his brother, Wisner Murray, standing in front, beat him over the head and face with a rawhide, striking from ten to twenty blows, inflicting severe and painful wounds from which the blood flowed profusely, covering his face and cloth- ing. The assault was a brutal one, and, so far as appears, without provoca- tion. Berdell testified that in the struggle to escape from Spencer Murray his hand was involuntarily brought into contact with his hip pocket, con- taining a pistol. He drew it from his pocket, and it appears that Wisner Murray, seeing the pistol, started toward the lunch counter, keeping his face toward Berdell and calling on his brother to "hold him and not to let him shoot." Wisner Murray jumped over the lunch counter, and, as he was passing through a door into another room, the pistol in the hands of Berdell was discharged, the ball hitting the assured in the forehead, causing his death. Berd?ll, who was called as a witness by the defendant, testified, in sub- stance, that the firing of the pistol was accidental, and was caused by the sudden jerking of his arm by Spencer Murray, who was still holding him, and that he had no intention of firing at the deceased. It is established by the great preponderance of testimony that, until after the pistol was fired, Berdell was in the grasp of Spencer Murray, and was struggling to release himself. Bcrdcll also testified that the deceased, during the time he was re- treating, had a pistol which he pointed at the witness as if aiming at him. He is confirmed as to the deceased having a pistol by another witness, and a pistol was found, after the affray, on the floor near where the deceased fell, a distance of about thirty feet from the place where Berdell was when the shot was fired. The witnesses differ as to the time which elapsed between the commencement of the affray and the firing of the pistol, the highest estimate given by any witness being thirty seconds. It is not disputed that the assault made upon Berdell was a violation of 304 MURRAY V. N. Y. LIFE INS. CO. [CHAP. XVII law. But it is contended that as, according to the evidence of Berdell, the firing was accidental and not intentional, and as it also appears that it hap- pened after the assured had abandoned the combat, his death was "not in, or in consequence of, a violation of law," and was not, therefore, a death excepted from the operation of the polic3^ The argument is that death under such circumstances, from an accidental shooting, cannot, in a legal sense, be attributed to the violation of law which preceded it, so as to bring it within the condition of the policy. There must, no doubt, be a relation between the act causing the death and the violation of law to avoid the policy. In the case of Bradley v. Mutual Benefit Life Insurance Company, 45 N. Y. 422, involving the construction of a similar clause in a life policy, the court said : "It seems to be clear that a relation must exist between the violation of law and the death to make good the defense; that the death must have been caused by the violation of law." It may be that the proviso in the policy was primarily intended to exempt the company from the hazard of a death from violence to which persons engaged in the execution of criminal acts are exposed, and especially where the unlawful or criminal act is such as is likely to be met by forcible resistance. It is plain that a homicide committed in self-defense would be a death within the condition; so, also, a death at the hands of justice in punishment for crime. The death in these cases would be the direct and legitimate result of the criminal act. Another case, a little further removed from the violation of law as its cause, would be one where a party assailed, in the heat of pas- sion engendered by the act of the assured, on the moment takes the life of the aggressor, although the provocation might not be a legal justification of the homicide. Such a death, we conceive, might be within the condition, depending upon circumstances. If the violation of law in which the deceased was engaged was trivial, although calculated to some extent to excite op- position or resistance, but the taking of life was a result which no reasonable man could have contemplated as likely to follow from the unlawful act, there would be no such relation between the act and the death that the former could be said to be the cause of the latter. But if, on the other hand, the party killed was engaged in committing a violent assault, the natural result of which would be to arouse the passions and excite the anger of the party assailed, and in the heat of passion he killed his assailant, the death would, we think, be the result of the unlawful act within the meaning of the policy, although the party causing it exceeded the bounds of lawful re- sistance. As between the company and the assured, his violation of law ought justly to be treated as the cause of the death, because the deceased must be assumed to have known the danger he incurred, and that a party resisting an assault under such circumstances, and whose anger is naturally excited, does not mark with exactness the line which separates lawful defense from ex- cessive and unjustifiable force. We have so far had in view cases where the death of a person insured was the result of the intentional act of another, or of the law. But while it is probable, as we have said, that cases of this kind were primarily in the con- CHAP. XVIl] MURRAY V. N. Y. LIFE INS. CO. 305 templation of the parties to the contract, the words of the condition are too broad to permit them to be confined to this narrow and rigid Hmitation. The proviso clearly exempts the company from all risks of life which attend the violation of law, which are the natural and reasonable concomitants of the transaction. Prize fighting is prohibited by law, and is attended with some danger. Suppose in such a friendly contest, by mishap one of the combatants strikes a blow which causes the death of the other. Would a death under such circumstances be a death in the violation of law within the policy, although there was no intention to kill? However this might be an- swered, we think it is clear that there may be a death in violation of law within the meaning of the i)olicy, although not intentionally inflicted, and although it was not occasioned by the act of another. A burglar who, in consequence of a misstep, or to escape detection, falls or jumps from the roof of a house which he is attempting to enter, and is killed, dies in violation of law as plainly as if he had been shot by the owner in defense of his dwelling. In the former as in the latter case, the death results from the criminal act, within the policy, as a natural and rcasona]:)lc consequence, because, although the immediate cause of the death was the fall, yet the exposure to the danger was encountered in the prosecution of the criminal purpose. Another case may be stated, of which there may perhaps be more doubt. Suppose the assured in this case, instead of having been killed by the pistol, had, in the struggle with Berdell, ruptured a blood vessel, or, being jjredisposed to heart disease, it had been brought on by the excitement of the affray, and he had died from either of these causes in the midst of the struggle. Death from a rupture of a blood vessel, or from disease of the heart, occurring independ- ently of any violation of law, would be covered by the policy. The company assume the risk of death from these causes under ordinary circumstances. But do they assume such risk when the immediate, exciting cause of the death is a struggle originating in a criminal assault in which the deceased was engaged at the time? To exempt the company, must the death result from some peculiar and special risk connected with the commission of crime? It seems to us not, and that it is sufficient to bring a case within the condition, if there is such a relation between the act and the death that the latter would not have occurred at the time if the deceased had not been engaged in the violation of law. In the case before us it is said that the shooting was accidental and not voluntary or intentional, and consequently was not a death, in or in conse- quence of a violation of law. What incidents would attend the assault by the Murrays could not be foreseen. They i)robably did not know that Ber- dell had a pistol, and if they had known it, they could not have anticipated that it would be discharged in the manner stated by him. But they took the risk of his resistance to any extremity. They took the risk of an injury which might hajipcn to them in consequence of his handling a deadly weapon, whether such injury was intentional or accidental. The case is to be consid- ered under the actually existing circumstiinces of the assailants and assailed, and if the killing under these circumstances was not an unnatural result of 20 306 MURRAY V. N. Y. LIFE INS. CO. [CHAP. XVII the attack, the case is within the condition. Assuming that Berdell's state- ment that the shooting was unintentional was binding on the jury, and that the Icilling was accidental, yet the accident was the result of the struggle of Berdell to free himself from the grasp of Spencer Murray, and the jerking of his arm by the latter. The accident, so called, was caused by the assault, and the risk of injury from the discharge of the pistol was occasioned by the criminal act of the Murrays. The claim that Wisner Murray had aban- doned the combat before the firing of the pistol, if true, does not meet the difficulty. He was a party to the original encounter. The struggle with Spencer Murray was continuing when the pistol was fired. If the shot had killed Spencer Murray, and he had been the person insured, there could, we think, be no doubt. It killed his brother, who was unfortunately within its range, but at a time when it is said he was attempting to escape from the scene. But he was not relieved from responsibility for the act of his con- federate in a crime jointly planned, who was continuing the assault, and the act of Spencer Murray in jerking the arm of Berdell, causing the ex- plosion, is as to the company the act of both. We are of opinion, assuming as true to its full extent the statement made by Berdell, that the defense was established. If, as there is some slight evidence to show, Berdell fired the pistol after he had escaped from Spencer Murray, the case is not changed. At all events the jury upon that theory of the case might well have found, and could not justly have found otherwise, that it was fired by Berdell in the heat of passion, and under circumstances which, if they did not full}'' justify him, made the firing and the consequent death a natural and reasonable consequence of the assault. Whether, there- fore, the firing of the pistol was intentional or not, or whether Wisner Murray had or had not abandoned the combat, the jury upon the evidence were justified in finding as they did by the general verdict, that the assured died in, or in consequence of, a violation of law. This conclusion answers the points made upon the exceptions to the charge. Judgment affirmed. Ik Violation of Law. — The Massachusetts court in the leading case of Cluff v. Mutual Ben. Life Ins. Co., 13 Allen (Mass.), 308, 99 Mass. 318, concluded that a similar clause worded "in known violation of law," referred to known violation of criminal law. The New York court upon the same facts, in an action brought by an assignee of ClufT, refused to decide whether violations of criminal law alone were in- cluded in the exception, the judges differing in their views, Bradley v. Mut. Ben. Life Ins. Co., 45 N. Y. 422, 6 Am. Rep. 115. Both courts, however, found material issues of fact for the jury to pass upon. In this case, Cluff, the insured, attempted to un- hitch and take forcible possession of the horses of Cox, his debtor, when they were in charge of Cox's son, who was driving them with a wagon. During, or just after, the trespass or assault, the son shot and killed Cluff with a pistol. Bad feeling had previ- ously been engendered between the families which might have had influence in leading up to the shooting. The New York court, reversing a judgment obtained by the de- fendant, held it error to refuse to allow the jury to decide, whether the shooting was in consequence of the unlawful act of the insured, and whether the insured knew that it was unlawful. Crenshaw's certificate stipulated that "if death is cau.sed or superinduced at the hands of justice or in violation of or attempt to violate any criminal law," only a di- minished amount would be payable. At the time of attempted or realized criminal CHAP. XVIl] WRIGHT V. MUT. BENEFIT LIFE ASSN. 307 WRIGHT V. MUTUAL BENEFIT LIFE ASSOCIATION OF AMERICA Court of Appeals of New York, 1890. 118 N. Y. 237 Incontestable clause. This action was upon a certificate of life insurance upon the life of Charles F. Wright, and payable to Byron D. Houghton, who assigned his interest to plaintiff, wife of the deceased. The application upon which the certificate was issued contained a condi- tion on the part of the applicant "that if any misrepresentation or fraudulent or untrue answer or statement had been made, or if any fact which should have been stated to the association be suppressed," the agreement of as- surance should be null and void. The applicant also warranted the truth of the statements in his application. Further facts are stated in the opinion. relations between Crenshaw and another's wife, the husband, in a burst of indigna- tion over the discovery, shot and killed the insured. The court, in perhaps a border- line decision, refused to find any defense in favor of the insurer, holding that the death was not caused or superinduced in violation, or attempted violation, of law within the meaning of the policy. Supreme Lodge v. Crenshaw, 129 Ga. 195, 58 S. E. 628. Death Must Be Caused dy Unlawful Act. — To effect forfeiture, it is held that there must be some causative and reasonably contemporaneous connection between the violation of law and the ensuing death or injury, Pythias Knights v. Beck, 181 U. S. 49, 21 S. Ct. 532, 45 L. Ed. 741. For example, the policy is not avoided because the insured happens to be engaged in illegally selling lottery tickets at the time when he is stricken with heart disease unconnected with his occupation, Bradley v. Ins. Co., 45 N. Y. 422; and if the insured is accidentally injured by a gun shot from a distance, the company is not relieved because by chaace he is in the act of violating a law against profane swearing, Ace. Ins. Co. v. Bennett, 90 Tenn. 256, 16 S. W. 723, 25 Am. St. R. 685. On the other hand, the insurer was held not liable when the insured met his death because of a collision that occurred during a horse race forbidden by law, Trav- elers' Ins. Co. V. Scaver, 19 Wall. 531, 22 L. Ed. 155. In an interesting case of first impression in Illinois, Kilpatrick, the insured, was con- victed and executed for murder. The defendant had issued to him a policy of life in- surance which contained no special stipulation relating to loss of life in violation of law or at the hands of justice. In an action on the policy the defendant contended that considerations of public policy precluded a recovery, and the courts below so decided. But the Supreme Court reversed, holding that the argument was erroneous and rested upon the same grounds that were urged centuries ago in support of the now obsolete doctrine of attainder and corruption of blood, Collins v. Met. Life Ins. Co. 232 111. 37, 83 N. E. 542. In a Federal court case where the policy by its terms became payable to the in- sured, he committed the crime of murder for which he was convicted and hanged. After the commission of the crime he assigned the policy to the plaintiffs. The judg- ment of conviction not being res adjudicata as against them, they offered but were not allowed to prove that it was in fact unjust. The court held that the evidence was not admissible and that they could not recover, since it would be contrary to public policy to uphold an insurance indemnifying for loss occasioned by miscarriage of justice in the courts, Burt v. Union Cent. Life Ins. Co., 187 U. S. 362, 23 S. Ct. 139, 47 L. Ed. 216. Compare Box v. Lanier, 112 Tenn. 393, 79 S. W. 1042. 64 L. R. A. 458. 308 WRIGHT V. MUT. BENEFIT LIFE ASSN. [CHAP. XVII Potter, J. Upon the trial, after the plaintiff had introduced the neces- sary proofs to entitle her to a recovery, the defendant offered to prove as a defense to the action, that the deceased Charles F. Wright and BjTon D. Houghton, the beneficiary named in the policy, for the purpose of obtaining the policy and defrauding the defendant, falsely represented that Wright the insured, was not then suffering and never had been suffering from cer- tain diseases which had seriously impaired his health, for the purpose of in- ducing and by means whereof defendant was induced to issue the policy in- suring the life of said Wright and that such representations were false, etc. This evidence was objected to by the plaintiff, that such proof was inad- missible under the provision of the policy; "that no question as to the valid- ity of an application or certificate of membership shall be raised, unless such question be raised within the first tw,o years from and after the date of such certificate of membership, and during the life of the member therein named," and the objection was sustained and defendant excepted. The defendant also offered to show that the beneficiary Houghton, had no insurable interest in the life of the insured, in short, that it was a speculative and fraudulent scheme, devised and practiced by Houghton, to secure an advantage to himself upon the life of Wright which must soon terminate from the disease he was then afflicted with. This was also objected to by the plaintiff and excluded by the court and defendant excepted, the court hold- ing that the defendant could not show any such thing unless during the life of the assured or during the period of two years from the date of the policy such question had been raised. These rulings present the main question upon this appeal and inasmuch as I have reached the conclusion that the judgment should be affirmed, there is but little, if any, occasion to add anything to the reasons contained in the opinion of the General Term affirming the judgment of the trial court in this case. (43 Hun, 61.) There does not seem to be room for any doubt in relation to the meaning of the stipulation referred to. The defendant's counsel does not contend that the language of the stipulation or waiver is not plain and comprehensive of everything which can constitute a defense, nor that the stipulation, though indorsed upon the certificate, does not form a part of the contract of insurance. But he argues from certain supposed analogies to stipulations releasing carriers from liability which have been held not to exempt the carrier from liabilit}^ for negligence, that it must have been intended between the defendant and the insured to except the defense of fraud from the operation of the stipulation in question. (Mynard V. S. B. & N. Y. R. R. Co., 71 N. Y. 180; Holsapple v. R., W. & 0. R. R. Co., 86 id. 275.) It does not seem to me that there is any analogy between the two classes of liability and nothing is more misleading than an assumed analogy. The liability of a common carrier of persons or property for injury or loss was adopted at a very early period in view of the peculiar exigencies of the carrying trade, as a rule of public policy. The degree and extent of the lia- bility of the carrier for negligence was fixed by law and not by the terms of a CHAP. XVIl] WRIGHT V. MITT. BENEFIT LIFE ASSN. 309 contract between the parties. There were numerous contingencies incident to the carrying business other than the neghgence of the carrier which might result in loss or injury to the person or goods carried and for which the lia- bility of the carrier would depend upon the facts to be established upon a trial. It might well be held in construing an agreement of exemption in general terms, that its office and effect was to relieve from those grounds of liability which depended upon the evidence and not the liability which was fixed by law. The rule laid down in the cases referred to by the appellant's counsel is merely a rule of the construction of the terms and effect of an agree- ment. It by no means holdc that liability for negligence may not be stipulated away; for the contrary has been repeatedly held, but the terms of the stipu- lation in those cases did not provide exemption from liability for negligence. The case under consideration is an alleged fraud in making a private con- tract between the parties to it. The contract contains a great number of material representations in re- lation to the past and present condition of the insured and of course they are varied with every applicant for insurance and every person insured. Such representations if untrue constitute a breach of warranty which will avoid the contract of insurance. If the representations are known by the party making them to be untrue when made, they would also constitute a fraud and avoid the contract of insurance. The difference between the representations and the proof of them upon a trial to avoid the contract would be only the fact whether the party knew the representation was false when he made it. It is to be presumed that the defendant had some purpose when it offered to the insured a contract containing the stipulation and that the stipulation itself had some meaning. The court is asked to hold that the parties to the stipulation understood (for unless the insured so understood the stipulation the defendant was practicing a. fraud upon him); that while the stipulation embraced all representations that were untrue, it did not em- brace the same representations, if known by the party making them, to be untrue. The practical difference or effect of this would be, that upon a trial to enforce the contract, the proofs of the representation, their material- ity and untruth, would have to be made all the same, but the stipulation would come in as a defense to all representations save those the insured knew to be false. While I might, perhaps, entertain the idea that the insurer so understood the stipulation, I am very confident that the insured did not so understand it. It seems to me the analogy is based upon an entire mis- conception of the object and nieaning of the stipulation. It is not a stip- ulation absolute to waive all defenses and to condone fraud. On the con- trary, it recognizes fraud and all other defenses but it provides ample time and opi^ortunity within which they may be, but beyontl which they may not be, estal)lished. It is in the nature of and serves a similar purpose as stat- utes of limitations and repose, the wisdom of which is apparent to all reason- able minds. It is exemplified in the .statute giving a certain period after the discovery of a fraud in which to apply for redress on account of it and in 310 WRIGHT V. MUT. BENEFIT LIFE ASSN. [CHAP. XVII the law requiring prompt application after its discovery, if one would be relieved from a contract infected with fraud. The parties to a contract may provide for a shorter limitation thereon than that fixed by law and such an agreement is in accord with the poHcy of statutes of that character. Wilkinson v. First Nat. Fire Ins. Co., 72 N. Y. 499, 502. No doubt the defendant held it out as an inducement to insurance by removing the hesitation in the minds of many prudent men against paying ill-afl'orded premiums for a series of years when in the end and after the pay- ment of premiums, the death of the insured and the loss of his and the testi- mony of others, the claimant instead of receiving the promised insurance may be met by an expensive lawsuit to determine that the insurance which the deceased has been paying for through many years, has not and never had an existence except in name. While fraud is obnoxious and should justly vitiate all contracts, the courts should exercise care that fraud and imposi- tion should not be successful in annulling an agreement, to the effect that if cause be not found and charged within a reasonable and specific time, es- tablishing the invalidity of the contract of insurance, it should thereafter be treated as valid. Hence I fail to perceive any error in the disposition made of this question in the court below. I think the judgment should be affirmed with costs. All concur; H.\ight, J., in result; Follett, Ch. J., not sitting. Judgment affirmed.^ 1 Royal Circle v. Achterrath, 204 111. 549, 68 N. E. 492, 03 L. R. A. 452, 98 Am. St. R. 224; Welch v. Ins. Co., 108 la. 224, 78 N. W. 853, 50 L. R. A. 774; Holdcn v. Pru- dential L. Ins. Co., 191 Ma.ss. 153; Patterson v. Ins. Co.. 100 Wis. 118, 75 N. W. 980, 42 L. R. A. 253, 69 Am. St. R. 899. Incontestable from date. Union Central L. Ins. Co. V. Fox, lOG Tcnn. 347, 61 S. W. 62, 82 Am. St. R. 885. As affecting rule for in- surable intere.st, Clement v. Ins. Co., 101 Tenn. 22, 46 S. W. 501, 42 L. R. A. 247, 70 Am. St. R. 650; Auctil v. Ins. Co. (1899), App. Cas. 604 (but see 118 N. Y. 237). As related to suicide, Mut. L. Ins. Co. v. Kelly, 114 Fed. 268 (but see 169 U. S. 139). CHAP. XVIIl] A FORM OF ACCIDENT POLICY 311 CHAPTER XVIII The Accident Insurance Policy A FORM OF POLICY OF ACCIDENT INSURANCE AND HEALTH CLAUSE A Form of Policy The Insurance Company, in consideration of the warranties in the applica- tion for this policy and of dollars, docs hereby insure under classifica- tion (being a by occupation) for the term of months from noon of , 19. ., in the sum of dollars per week against loss of time not exceeding consecutive weeks, resulting from bodily injuries effected dur- ing the term of this insurance, through external, violent, and accidental means, which shall, independently of all other causes, immediately and wholly disable him from transacting any and every kind of business pertaining to his occupation above stated. Or if loss by severance of one entire hand or foot results from such injuries alone within ninety days, will pay insured one-thirtl the princiijal sum herein named, in lieu of said weekly indemnity, and on such jjaynient this policy shall cease and be surrendered to said company, or in event of loss by severance of two entire hands or feet, or one entire hand and one entire foot, or loss of entire sight of both eyes, .solely through injuries afore- said within ninety days, will pay insured the full principal sum aforesaid, provided he survives said ninety days. Or if death results from such injuries alone within ninety days, will pay dollars to if surviving; in event of his prior death, to the legal representatives or assigns of insured, provided — ■ 1. If insured is injured in any occupation or exposure classed by this company as more hazardous than that here given, his insurance shall be only for such sums as the premium paid by him will purchase at the rates fixed for such increased hazard. 2. This policy shall not take effect unless the premium is paid previous to any acci- dent undi-r which claim is madi;; and the company may cancel it at any time by re- funding said premium, less a pro rata share for the time it has been in force. 3. Th(! company's total liability hereon in any policy year shall not exceed the principal sum hereby insured; therefore, in case of claim for full principal sum, any sums paid as indemnity within such policy year shall be deducted therefrom. 4. Inmiediate written notice, with full particulars and full name and address of insured, is to be given said company at of any accident and injury for which claim is made. Unless affirmative proof ni death, loss of limb or sight, or duration of disal)ility, and of their being the proximate result of external, violent and accidental means, is so furnished within seven months from time of such accident, all claims based thereon shall be forfeited to the company. No legal proceedings for recovery hereunder shall be brought within three months after receipt of proof at this office, nor at all, unless begun within one year from date of alleged accident. 5. This insurance does not cover disappearances; nor suicide, sane or insane; nor injuries of which there is no visible mark on the boiiy (the body itself in case of death not being deemed such mark); nor accident, nor death, nor loss of limb or sight, nor disability, resulting wholly or partly, directly or indirectly from any of the following causes, or while so engaged or affected: Disea.sc or bodily infirmity, hernia, fits, vertigo, sleep-walking; medical or surgical treatment, except amputations necessitated solely by injuries and made within ninety days after accident; intoxication or narcotics; vohmtary or involuntary taking of poi-son or contact with ixiisonous substances or inhaling of any gas or vapor; sunstroke or freezing; dueling or fighting, war or riot; 312 FIDELITY & CASUALTY CO. V. JOHNSON [CHAP. XVIII intentional injuries (inflicted by the insu^red or any other person); voluntary over- exertion; violating law; violating rules of a corporation; voluntary exposure to un- necessary danger; expeditions into wild or uncivilized countries; entering or trying to enter or leave a moving conveyance using steam as a motive power (except cable cars), riding in or on any such conveyance not provided for transportation of passengers, walking or being on a railway bridge or roadbed (railway employees excepted). 6. No claim shall be valid in excess of $10,000 with $50 weekly indemnity under accident policies, nor for indemnity in excess of money value of insured's time. All premiums paid for such excess shall be returned, on demand, to insured or his legal representatives. 7. Any medical adviser of the company shall be allowed, as often as he requires, to examine the person or body of insured in respect to alleged injury or cause of death. 8. Anj- claim hereunder shall be subject to proof of interest. A copy of any assign- ment shall be given within thirty days to the company, which shall not be responsible for its validity. The company may cancel this policy at any time by refunding the unearned premium thereon. No agent has power to waive any condition of this policy. In witness whereof, etc. Health Clause For the period during which the Insured shall independently of all other causes be necessarily confined to the house and wholly disabled, and prevented by bodily disease not hereinafter excepted, from performing any and every duty pertaining to his oc- cupation, the Company will pay a weekly indemnity of $ , and if following such a period of total disability and confinement in the house, he shall be wholly dis- abled and prevented from performing any and every kind of duty pertaining to his occupation, but shall not be necessarily confined to the house, one-half of saicUamount per week will be paid to the Insured; but no payment shall be made for disabiliti' of less than seven consecutive days' or in excess of twenty-six consecutive weeks' duration. Upon satisfactory proof to the Company that he has, as the result of disease, con- tracted during the term of this Policy, and not hereinafter excepted, entirely and irrecoverably lost the sight of both eyes, or permanently and entirely lost the use of both hands or both feet, or of one hand and one foot, and also that he has been for one year, and will thereafter, and during his life, by reason thereof be permanently dis- abled from engaging in any work or occupation for wages or profit, the Company will pay to him $ Certain States have statutes specifying provisions which must and other provisions which must not be inserted in the policy of accident insurance. FIDELITY & CASUALTY CO. v. JOHNSON Supreme Court of Mississippi, 1894. 72 Miss. 333 Injuries effected through external, violent and accidental means. The insured suffered death by hanging at the hands of a mob. Woods, J. The court refused to charge the jury for appellant as asked in his twelfth instruction. This instruction reads as follows: "If the jury believe, from the evidence in this case, that John Johnson came to his death by the hands of a mob, his death was not the result of an accident, and thia CHAP. XVIIl] FIDELITY & CASUALTY CO. V. JOHNSON 313 case is not within the terms and conditions of the policy sued on, and the jury will find for defendant." By the terms of the policy, indemnity against "bodily injuries sustainetl through external, violent and accidental means" was secured by the insured. That Jolinson came to his death by external and violent means is not denied, but death by hanging at the hands of a mob, it is said by appellant's counsel, is foreign to our preconceived ideas as to what constitutes an accident. According to lexicographers, an accident is a sudden, unforeseen and un- expected event. It has been held by courts adopting this or any similar definition that where a man was killed by robbers, that this was a case of death by accident in the sense in which that word is used in accident insur- ance policies. So, too, it has been held that death from a blow struck by one who has attempted to blackmail the assured was an accident covered by an accident insurance policy. In these and all like cases in which death occurs by violent means external to the man, and against or without in- tention or concurrence of will on the part of the man, death may properly be called an accident. A learned and laborious writer states the true rule for determining whether injuries are accidental. With great simplicity, clearness and strength, Biddle says: "An injury may be said objectively to be accidental, though subjectively it is not; and, if it occur without the agency of the insured, it may logically be termed accidental, though it was brought about designedly by another person." Ajfmucd.^ 1 The United States Supreme Court approved of the following statement of the law: "The term 'accidental' was used in the policy in its ordinary, popular sense, as mean- ing happening by chance; unexpectedly taking place; not according to the usual course of things; or not as expected. If a result is such as follows from ordinary means, voluntarily employed, in a not unusual or unexpected way, it cannot be called a result effected by accidental means. But if, in the act which precedes the injury, something unforeseen, unexpected, unusual occurs, which produces the injury, then the injury has resulted through accidental means," Mut. Ace. Assn. v. Barry, 131 U. S. 100, 121, 9 S. Ct. 755, 33 L. Ed. 60. An injury happening to the insured without the concur- rence of his will or intent is nevertheless accidental, although resulting from his own intentional act, provided only such result was not foreseen by him; thus in case of an injury to the insured caused by intentionally jumping from the platform of a train of cars under such circumstances that no harm could reasonably have been expected to follow, U. S. Mut. Ace. Assn. v. Barry, 131 U. S. 100, 9 S. Ct. 755, 33 L. Ed. 60. The same conclusion was reached in the following cases: A sprain unexpectedly caused by lifting heavy weights, Martin v. Travelers' Ins. Co., 1 F. & F. 505; blood poisoning from cutting a corn, Nax v. Travelers' Ins. Co., 130 Fed. 985, or from the use of a hypodermic needle, Bailey v. Interstate Cas. Co., 8 App. Div. 127, 40 N. Y. Supp. 513, aff'd 158 N. Y. 723, 53 N. E. 1123; an unintentional taking of poison, Healey v. Mut. Ace. Assn., 133 111. 556, 25 N. E. 52, 9 L. R. A. 371, 23 Am. St. R. 637; an injury to the insured caused by a blow from the handle of a pitchfork slipping through his hands while he was loading hay, which produced peritoneal inflammation and ultimately death, North Am. Ins. Co. v. Burroughs, 69 Pa. St. 43; rupture of a blood vessel dur- ing exercise with Indian clubs, McCarthy v. Travelers' Ins. Co., 15 Fed. Cas. 1254, 8 Biss. 362; exertion causing unusual dilation of the heart, Horsfall v. Pac. Mut. L. Ins. Co., 32 Wash. 132, 72 Pac. 1028, 63 L. R. A. 425, 98 Am. St. R. 846; suicide while insane, Blackstone v. Standard, etc., Ins. Co., 74 Mich. 592, 42 N. W. 156, 3 L. R. A. 486; self-inflicted injuries while insane, Accident Ins. Co. v. Crandal, 120 U. S. 527, 314 LAWRENCE V. ACCIDENTAL INS. CO. [CHAP. XVIII LAWRENCE v. ACCIDENTAL INS. CO. Supreme Court of Judicature, ISSL L. R. 7 Q. B. D. 216 Meaning of proviso, "direct and sole cause of death," where an excepted cause cooperates to produce the accident. Denman, J. During the argument of this case I have had considerable doubt as to the meaning of the condition in the policy, and I am not sure 7 S. Ct. 685, 30 L. Ed. 740. But if the acts of the insured are purely voluntary and usual, and the results natural, the injury has been held not to be accidental within the meaning of the policy, although unexpected. Such rulings, however, have usually turned upon the particular phraseology of the contract, Feder v. Iowa, etc., Assn., 107 Iowa, 538, 78 N. W. 252, 43 L. R. A. 693, 70 Am. St. R. 212. The phrase "external and violent means," added to the policy by the insurers for the purpose of restricting their liability, is very strictly construed against them. The word "external" refers to the force or cause and not to the injury. If the cause be external, it may act internally without relieving the company. Am. Ace. Co. v. Reigart, 94 Ky. 547, 21 L. R. A. 651, 23 S. W. 191, 42 Am. St. R. 374; and to hold the insurer, it need not be shown that the cause was violent in the sense of breaking tissues, or visibly marring the body. There- fore, notwithstanding this restrictive clause, it is held that the policy covers death by accidental drowning, Manufacturing Ace. Ins. Co. v. Dorgan, 58 Fed. 945, 7 C. C. A. 581, 22 L. R. A. 620; death by accidental inhaling of gas, Paul v. Travelers' Ins. Co., 112 N. Y. 472, 20 N. E. 347, 3 L. R. A. 443, 8 Am. St. R. 758; intestinal inflammation from eating spoiled oysters, Maryland Cas. Co. v. Hudgins (Tex. Civ. App., 1903), 72 S. W. 1074; choking to death in the attempt to swallow a piece of beefsteak, Amer. Ace. Co. V. Reigart, 94 Ky. 547, 23 S. W. 191, 21 L. R. A. 651; a fatal bite of an insect upon the toe causing blood poisoning, Omberg v. U. S. Mut. Assn., 101 Ky. 303, 40 S. W. 909, 72 Am. St. R. 413; freezing to death caused by the collapse of a wagon, Northwe-st Commercial T. A. v. London Guarantee & A. Co., 10 Manitoba, 537; a stumbling and fatal fall against a locomotive engine. Equitable Ace. Ins. Co. v. Osborn, 90 Ala. 201, 9 So. 869, 13 L. R. A. 267; a blow intentionally struck by another person, Richards v. Travelers' Ins. Co., 89 Cal. 170, 26 Pac. 762, 23 Am. St. R. 455; a rupture caused by jumping from a train. Travelers' Ins. Co. v. Murray, 16 Colo. 296, 26 Pac. 774; lockjaw from a self-inflicted gunshot wound, Travelers' Ins. Co. v. Melick, 65 Fed. 178, 12 C. C. A. 544. So also the insurer was held liable where the immediate cause of death was fright, but caused in conjunction with efforts to hold a runaway hor.se, McGlinchey v. Fidelity & Cas. Co., 80 Me. 251, 14 Atl. 13, 6 Am. St. R. 190. On the other hand, where an existing but dormant disease is brought into activity by the exertions of the insured, it is decided that the resulting death is not caused by external, violent and accidental means. Travelers' Ins. Co. v. Selden, 78 Fed. 285, 24 C. C. A. 92, 42 U. S. App. 253. Fitzgerald, the insured, went to sleep with his hand vnder his head, and in this position his hand rested upon the edge of the bed rail. This quiet pressure, continuing for a considerable period, resulted in an inflammation of the periosteum of certain bones of the fingers, rendering an operation necessary. The court held that the injury was by "violent means," within the purport of the policy, ^tna Life Ins. Co. v. Fitzgerald, 165 Ind. 317, 75 N. E. 262. The burden is on the plaintiff in an action on the policy to show that the alleged accident is the causa of CHAP. XVIIl] LAWRENCE V. ACCIDENTAL INS. CO. 315 that, but for Winspcar v. Accident Insurance Co., 6 Q. B. 1). 42, I should not have thought that the company were protected. The facts are these: The (lccca.s('(l jxTson, while on a railway platform, was suddenly seized with a fit, which caused him to fall forward off the i)hitform on to and across the railway. A locomotive engine; was at that moment passing through the station; it passed over his neck and body, and he received mortal injuries, of which he then and there died. Then it is stated in the case: "The falling forward of the insured off the platform as aforesaid was in consequence of his being seized with a fit or sudden illness, and but for such fit or illness he would not have suffered death or injury as before mentioned." Now, the immediate cause of death is not in the least disputable; but there is no doubt that if he had not fallen there in consequence of the fit he would not have suffered death, and in that sense the fit led to his death. The ciucstion is whether that was merely one of several events which brought about the accident, in the sense that it caused the accident to happen by causing him the death or injury. Thus, in a Federal court ease, Winficld L. Scott, a railway postal clerk, was insured. The only evidence of accidental injury was a red-lookins bruise on his left shin, five or six inches long, and two or three inches wide, seen hy his wife eome three months prior to his death. But for a long time before sustaining this bruise, the defendant who was sixty years old had been treated for double hernia, congestion of the liver and palpitatien of the heart. The court concluded that there was an entire absence of proof tending to show that death had resulted from bodily injuries received through external, violent and accidental means, and the judgment in favor of the plaintiff was reversed, National A.ssn. of Ry. Postal Clerks v. Scott, 155 Fed. 92. In another case in a Federal court, the death of the insured was due to rupture of the heart. The walls of the heart were thin and weakened by fatty de- generation. Just before his death, the insured %vas engaged in carrying a cellar door, weighing about eighty-six pounds, from one of his buildings to another. Upon arriv- ing at his destination, he exclaimed, "I am tired." A few seconds afterward, his lips turned blue, he grabbed the door with both hands, and fell forward, dead. In carrying the door, there was no stumble, wrench, slip or fall. There was no unforeseen, acci- dental, or involuntary movement of the body. The court held that the rupture was due, not to accident, but to disease, and affirmed the judgment directed by the court below in favor of the defendant, Shanberg v. Fidelity & Cas. Co., 158 Fed. 1. And where the insured died of septicscmia after an operation for appendicitis, the court de- cided that the death was due to disease, and not to external, violent and accidental means, Herdic v. Maryland Cas. Co., 146 Fed. 396. In the controversy over Mc- Cormick's policy, the question arose whether his death was the result of his fall, or his fall the result of his death. On the trial, evidence was received tending to show that the a.ssured by his condition and habit of life was predisposed to an attack of apoplexy. He was driving a buggy in the city of St. Paul. While his horse was on a walk, and while he was putting on his gloves, he reached forward, apparently to gather up the reins, and at that instant the buggy bumped against an obstruction. The as- sured fell forward, struck his head against the pavement, and died within a few minutes. Conflicting expert testimony was received as to the cause of death. The court con- cluded that the case was one for the jury, McCormick v. Illinois C. Men's Assn., 159 Fed. 114. Where, however, it appears that the death or injury was caused by an accident, the burden then rests on the insurer to show that the accident happened by reason of something that was excepted from the provisions of the policy, and not on the insured to aflRrmativdy show that the accident did not occur by reason of any or all of the exceptions incorporated therein, Starr v. ^Etna Life Ins. Co., 45 Wash. 128, 87 Pac. 1119. 316 LA WHENCE V. ACCIDENTAL INS. CO. [CHAP. XVIII to be there, or whether it was, within the meaning of this proviso, a cause of death which would prevent the pohcy appljnng to the case. In Winspear V. Accident Insurance Co., where a man, while fording a river, was seized with a fit, and so fell and was drowned in the river— a fit being undoubtedly a kind of a disease which was not within the meaning of the pohcy, which was very like the present one, although not exactly identical — it was held that the death did not arise from disease within the exceptions in the policy. By this present policy, if the insured shall receive any personal injury caused by accidental and external violence within the meaning of this policy and the conditions thereto, and the direct effects of such injuries shall occasion his death within three calendar months from the happening thereof, then the funds of the company shall be subject to pay the sum assured. "Provided always that this policy insures payment only in case of injuries accidentally occurring from material and external cause operating upon the person of the insured where such accidental injury is the sole and direct cause of death to the insured, or disability to follow his avocations; but it does not insure in case of death or disability arising from fits or rheumatism, gout, hernia, erysipelas, or any disease whatsoever arising before or at the time or follow- ing such accidental injury (whether consequent upon such accidental in- jury or not, and whether causing such death or disability directly or jointly with such accidental injury)." Now, the words that appeared to me during a part of the argument to be strongly in favor of the defendants in this case are those latter words, "causing such death or disability directly or jointly with such accidental injury." If the words had simply been these, "this policy shall not attach in cases where the death is caused by an accident, jointly with a fit," I should have thought it was a case in which in all prob- ability the defendants would be entitled to orr judgment. But these three last lines of the clause are merely lines in a parenthesis, and they are put in for the purpose of showing that the exception will apply, whether the dis- ease be consequent upon the accidental injury or not, or whether the disease be one that shall have caused the death ii^cli directly, or whether it shall have caused the death jointly with the accidental injury. But then these are words merely defining the cases in which the previous words, "arising from," may be applicable. The words "arising from" have already received judicial construction in the case of Winspear v. Accidental Insurance Co., in which it was held that the death did rot arise from the disease. It ap- pears to me that where words are merely put in as a variation of those pre- viously used, and which are exactly the same as those that have received a judicial constr'xtion, wo cannot put a difi'crcnt construction upon them. I think we are bo-n-I "o 'o'^l tha^ the rV.ith arose from the engine destroying the insured by co-^'p': -^^-ro^s him, and not from the previous fact of a fit having attacked I-.im ard .'o bro' ght l.im there. It is far better for us to decide in accordance with Winspear v. Accidental Insurance Co., on words that are really identical, so far as they operate in this case, than to gather a distinction out of words which are, after all, merely used as illustrations of the previous descriptions. CHAP. XVIIl] LAWRENCE V. ACCIDENTAL INS. CO. 317 Watkin Williams, J. I am clearly of the opinion that the plaintiff is entitled to recover, and I desire to base my decision upon reason and prin- ciple, and not upon the decided cases. It seems to me perfectly clear, and altogether free from doul)t, that upon every principle of construction and upon the true meaning of this policy, the company are liable to pay the ad- ministratrix in this case. Now, the whole case depends on the true construc- tion of the words in the proviso, because in this case the deceased person, having fallen down accidentally in a fit from the platform of the railway on to the rails, was, while lying there, accidentally run over by a train that happened at that moment unfortunately to come up, and he was undoubtedly killed by the direct external violence of the engine upon his body, which caused his death immediately. The question arises whether, according to the true construction of the proviso, it can be said that this is a case of death arising from a fit; because, if this death did not arise from the fit, according to the true construction of the policy, the remainder of the clause does not come into existence at all, and is inapplicable. It seems to me that the well- known maxim of Lord Bacon, which is applicable to all departments of the law, is directly applicable to this case. Lord Bacon's language in his " Maxims of the Law," Reg. 1, runs thus; "It were infinite for the law to consider the causes of causes, and their impulsions one of another; therefore it contenteth itself with the immediate cause." Therefore, I say, according to the true principle of law, we must look at only the immediate and proximate cause of death; and it seems to me to be impracticable to go back to cause upon cause, which would lead us back ultimately to the birth of the person, for if he had never been born the accident would not have happened. The true meaning of this proviso is that, if the death arose from a fit, then the com- pany are not liable, even though the accidental injury contributed to the death in the sense that they were both causes, which operated jointly in causing it. That is the meaning, in my opinion, of this proviso. But it is essential to that construction that it should be made out that the fit was a cause in the sense of being the proximate and immediate cause of the death, before the company are exonerated, and it is not the less so because you can show that another cause intervened and assisted in the intervention. Now, if the argument of the defendants be a good one, this absurdity would fol- low. Supposing a man went out in the field following sports, and he v.'crc to be seized with a fit, either a fainting fit or an epileptic fit, or any other fit, and had retired to one side of the field, and remained there recovering from the fit; and being there, a sportsman — not knowing he was there — accidentally shot him: It might be said, in the same manner, that the cause of death arose from a fit. It seems to me only to require to be stated, to show the entire absurdity of it. The only difference between that case and this is in the time that intervened between the time of the fit and the person being placed within the influence of the succeeding accident, which, in this case, was very short; but I fail to see, in point of reason, that there is any difference between one hour, or one minute, or one day. The break in the chain of causes seems to be equally complete. I, therefore, put my decision on the 318 L.\WRENCE V. ACCIDENTAL INS. CO. [CHAP. XVIII broad ground that, according to the true construction of this policy and this proviso, this was not an act arising from a fit; and, therefore, whether it contributed directly or indirectly, or by any other mode to the happening of the subsequent accident, seems to me wholly immaterial, and the judgment of the court ought to be in favor of the plaintiff. Judgment for the 'plaintiff.^ ' Sole and Proximate Cause. — Independently of all other causes. George C. French, a pas.senger conductor, had an accident policy for $5,000. He accidentally struck the lower part of his leg against a small iron safe in the baggage car, causing an abrasion of the skin. Septic poison set in, resulting in his death about two weeks after the happening of the accident. The court considered that the disease of blood poison- ing was to be regarded as a mere incident or effect of the accidental injury, and in no sense an independent cause, and held that the claimant was entitled to recover on the policy, French v. Fidelity & Cas. Co., 135 Wis. 259, 115 N. W. 869; General Ace. F. & L. Assur. Co. v. Homely (1908), 109 Md. 93, 71 Atl. 524 (accident the predominant and sole cause, disease a mere link in the chain). In another case, the insured, a rail- way employe, by being precipitated against the edge of timbers, sustained severe bruises on his chest. Pneumonia or pleurisy, accompanied by a largo accumulation of pus, resulted, and death followed about two months after the accident. The court held that the accident was to be regarded as the sole cause of death. Continental Cas. Co. V. Colvin, 77 Kan. 561, 95 Pac. 565. Same Subject. — "Immediately and wholly disable." — Bishop Green, a freight handler, was insured by a policy which provided that it should be liable in case of in- jury, "at once resulting in continuous total disability" to engage in business. Janu- ary 31st, Green was seriously injured by a heavy crate of glass which fell upon him. February 2d, however, he returned to his work, and continued at it until March 25th when he died in consequence of the accident. The appellate court below, applying to the policy a liberal rule of construction in favor of the insured, held that the terms of the policy requiring the inability to be continuous had no reference to a death loss and affirmed the judgment in favor of the plaintiff. But the Supreme Court reversed, holding that the language of the policy being without ambiguity, and the disability resulting from the accident not being continuous, the claimant was entitled to no re- covery from the defendant, Continental Cas. Co. v. Wade, 101 Tex. 102, 105 S. W. 35. Letherer's policy provided indemnity for loss of time resulting from bodily injuries which should "immediately, wholly and continuously disable and prevent the assured from performing any and all duties pertaining to any business or occupation." The insured fell and struck a scantling. The injury finally resulted in his giving up work altogether, but meanwhile he continued his duties in connection with running an engine in a cider mill for over a week, though the labor was accompanied with great pain. The court held that he was not entitled to recover his insurance money and reversed his judgment, Letherer v. U. S. Health & Ace. Ins. Co., 145 Mich. 310, 108 N. W. 491. In an earlier Michigan case the plaintiff, Hohn, was a barber. lie was injured on Friday. On Saturday he went to his shop late and did .some work, l)ut ntjt nearly so much as he would have done if well. He rested on Sunday. On Monday he again went to his shop and attempted to work, but suffered si'ch i)ain that he fainted away; a physician was called, and the plaintiff was taken home in a carriage. He continued to visit his shop during the week, suffering pain all the while, and occasionally working a little, but was unable to perform all the duties of his business, because of the pain he suffered. The court held that the case was one for the jury, Hohn v. Interstate Cas. Co.. 115 Mich. 79, 72 N. W. 1105. Exception of Hazardous Employment. — In a Nebraska case, Simmons was in- sured with the defendant as a traveling .salesman for a wholesale drug company. Hav- ing lost his position, for a period of some two years while trying to obtain another position, he lived on his father's ranches. He came and went at his own will, put in CHAP. XVIIl] BACON V. U. S. MUT. ACCIDENT ASSN. 319 BACON V. UNITED STATES MUT. ACCIDENT ASSOCIATION Court of Appeals of New York, 1890. 123 N. Y. 304 Whether a loss by accident or by disease, where both causes unite. The policy, or certificate, was in general similar to the form of accident policy given in the appendix, but one of the stipulations was worded as follows: "Benefits under this certificate shall not extend to any death or disability which may be caused, wholly or in part, by bodily infirmities or most of his time hunting or visiting from one place to another, and though he some- times communicated orders from his father to the employes on the ranches, he re- ceived no compensation and was never employed as a superintendent. The occuph- tion of "stock farmer, owner or superintendent, supervising only" was classed by the policy as more hazardous than salesman. The father of Simmons asked him to examine the windmills at two of the wells, to sec if they were pumping properly. In compliance with this request, Simmons stopped at the Lost Tank well and there accepted an in- vitation to dine with Mr. Franklin, the foreman of the ranch. He sat down on the ground with Franklin to eat dinner, when a large rattlesnake came out of the grass and bit him so that he died the following day. In the action on the policy, the court held that Simmons had not changed his occupation to the more hazardous employ- ment, Simmons v. Western Travelers' Ace. Assn., 79 Neb. 20, 112 N. W. 365. Some policies provide, not that the insurance shall be avoided, but that the indemnity shall be diminished, if the insured be injured while engaged in an employment classified as more hazardous than that named by him. The same principles, already explained, are applicable. Thus if a man insure as a "stock-dealer visiting yards, not tending in transit," when in reality at the time of injury, his vocation is that of "stock-dealer and tender in transit," classified in such a policy as more hazardous, his recovery will be reduced accordingly, Locsch v. Union Gas. & Sur. Co., 176 Mo. 654, 75 S. W. 621. But a farmer's occupation does not change to that of a "pile driver," because he temporarily engages in driving piles in the construction of a private bridge. National Ace. Soc. V. Taylor, 42 111. App. 97. The policy issued to the plaintiff by the defendant contained the clause: "If the assured shall change his occupation to or be injured in any occupation or exposure or in performing acts classified by this company as more hazardous than that in which the member was cla.ssed when accepted, then and in :ill such cases, the insurance, fixed indemnity or weekly indemnity payable shall lie only the amount fixed for such increased hazard in accordance with the classification of risks by the company and as per the table on the back her(-of." Kenny was insured as a manager of a mill, but when on a visit of a few days at his brother's farm he undertook to work with his brother's new six-foot McCorniick mowing nuichine. The sea.son was unusually wet. The horses attached to the machine jumped a ditch of water with which Kenny had not been made acciuainted. As a result, Kenny was thrown into the air, and on his descent struck his leg and back on the front part of the seat, receiving injuries which developed into traumatic neuritis. The court held that Kenny was none the less a miller because temporarily occupied in riding a mowing machine as an act of exercise or diversion, and the larger scale of indemnity was allowed him, Kenny v. Bankers' Ace. Ins. Co., 136 Iowa, 140, 113 N. W. 566. Visible Mark of Injury Required. — As to the legal effect of this clause, see Barry r. U. S. Mut. Ace. Assn., 23 Fed. 712, aff'd 131 U. S. 100, 9 S. Ct. 755, 33 L. Ed. 60; Horsfall v. Pac. Mut. L. Ins. Co., 32 Wash. 132, 72 Pac. 1028, 63 L. R. A. 425, 98 Am. St. R. 846. 320 BACON V. U. S. MUT. ACCIDENT ASSN. [CHAP. XVIII disease existing prior or subsequent to the date of this certificate, or by poison in any manner or form." Verdict for plaintiff, affirmed by General Term Supreme Court. Peckham, J. I think the deceased died from disease within the meaning of the language used in the policj' sued upon in this action, and not from an accident causing the disease. The disease itself was not caused by an acci- dent within the meaning of the policy. The case of Paul v. Travelers' Ins. Co., 112 N. Y. 472, has been cited by counsel for the respondent as decisive of his case. Upon the question de- cided the case is conclusive, and we have no disposition to alter our views as expressed therein. But upon the question of whether the deceased in this case died from disease, as above stated, the case of Paul is without the slightest analogy. In that case the deceased came to his death by acci- dentally inhaling illuminating gas. This gas is a manufactured article, gathered into large reservoirs, and hence distributed through pipes into almost every house in a city or village. The deceased accidentally, while asleep, inhaled this gas and was suffocated. This would seem to be a plain case of death from accident, and it was found that the gas was not purposely inhaled. The death being the result of accident, it was then held that such death was caused by external and violent means, within the meaning of the policy. This also seems plain enough. The gas was external, and it was not inhaled voluntarily — i. e., intentionallj'^ and for the purpose of being killed therebj\ It might naturally be said — as in effect it was — that death, as the result of accident, imports an external and violent agency as the cause. There was no question in the Paul case that the deceased came to his death through disease; no pretense could properly be made as to death from disease in such a case. If the deceased had been asleep in a room into which a large quantity of water was poured through the accidental breaking of a water- main, and in consequence thereof he had been drowned, no one would deny that the death was caused by accident, and. was not the result of disease, as that word is generally used among men. There is no difference in the case in principle if the death, instead of being caused by water which was visible, was caused by gas which is invisible. In neither case could the idea even suggest itself that death was caused by disease. But hi the case before us the facts are entirely different. The deceased died, as is said and as will be here conceded, from malignant pu.stule. It is cau.sed, as the plaintiff's witness testified, by the infliction upon the body of a certain kind of animal suKstance, contact with disease or putrid animal matter; this acts by producing, at the point of contact with this matter, a papula, something like a flea bite, which rapidly becomes a vesicle, a blister-like affair, and then a pustule; this is accompanied by a great deal of swelling in the parts immediately around it, and a great deal of pain in the individual ; the glands in the vicinity become infiltrated with blood and pus, and become dark red or even black in color; the neighboring glands become involved ; then comes, almost immediatelj' after or together with these signs. CHAP. XVIIl] BACON V. U. S. MUT. ACCIDENT ASSN. 321 a great prostration, and the patient dies in a short time, five to eight days generally, the extreme limits being from twenty-four hours to sixteen days; he dies of exhaustion. As to the cause of the pustule, the witness stated that the virus comes from the hide, or hair, or wool of animals suffering from this disease; from their flesh sometimes, or it may come from the feathers of birds that have been feeding upon this peculiar kind of carrion; it may be commimicated directly, that is, by the immediate contact of the individual with it, by his touching it or handling it and then bringing the nuittcr in contact with the skin or thin mucous membrane; or it may be transi)orted, as there are very many cases known, by insects, flies, mosquitoes, that have been feeding upon this, carrying it away and depositing it upon individuals. It is commonly known as malignant pustule, or charbon, or anthrax; they are all sj'nonymous terms. It has been called wool-sorter's disease, because it happens among people that handle wools and hides, such as tanners, butchers, and herds- men, and those people that are engaged in business where they are brought in contact with that sort of thing. In answer to the question, "How rare is malignant pustule?" this same witness for the plaintiff answered: "In the eastern parts of this country it is pretty rare; there have been some epidemics reported in America; in the eastern part of Massachusetts, I think about twenty years ago, there were quite a number of cases among the hairworkers, people that take the hair that comes from abroad and make mattresses of it." The witness thus designates the difficulty as an epidemic, which word is so frequently used in connection with disease as almost to be sj'nonymous therewith. It was undoubtedly so used in this instance by the witness, who thus described malignant pustule as a disease, when referring to its frequency in Massachusetts some years ago. The word epidemic would scarcely be used to express a frequent occurrence of accidents. The witness also said that he had seen it termed in one standard authority as an acute infectious disease. He said that the special poison of the disease has been found to be a particular kind of bacteria, "bacillus-anthrax." The following question was put to the witness: "Is it not so that anthrax is an acute, infectious malady, which breaks out commonly in an epizootic or enzootic manner, and is not infrequently s])oradic in herbivorous animals and swine, and is transmissible to a great number of other animals, as well as to mankind?" The answer of the witness, after some fencing, was, "Yes, I think that is correct." Malignant pustule differs, according to this same witness, from diphtheria, smallpox, or scarlet fever, in the single fact that this is a particularly poi- sonous animal matter, and it has one particular germ from which it originates, as smallpox has another, and hydrophobia another, and the cause of the difficulty in each case is some form of bacteria, transmissible to mankind. It can be contracted through eating the flesh of animals subject to the disease. The bacillus is very small, so small that it may enter in the pores of the skin, and an abrasion of the skin is not necessary, but might quicken 21 322 BACON V. U. S. MUT. ACCIDENT ASSN. [CHAP. XVIII the result. The forming of the pustule upon the skin is the product of the poison. Another witness for the plaintiff, who was a physician, said that he under- stood malignant pustule to be a development of the particular bacilli in the system radiating from the point of contact. He added that the contagion might be internal as well as external, taken through the mouth or through the nose, and it is generally considered an acute infectious disease. Both these learned gentlemen, however, refused, themselves, to designate malignant pustule as a disease. Dr. Harris defined it as "a pathological condition and succumbing of the body to the infliction of this particular poison." Dr. Bailey says he con- siders it as a "pathological condition following this particular inroad of this particular kind of bacilli." We all know that "pathology," as used generally, means that part of medicine which explains the nature of diseases, their causes and symptoms. A "pathological condition" means neither more nor less than a diseased condition of the body. The insurance in this case was against bodily injuries effected through external, violent, and accidental means. It was not to extend "to any death or disability which may have been caused wholly or in part by bodily in- firmities, or disease existing prior or subsequent to the date" of the policy, "nor to any case except where the injury is the proximate or sole cause of the disability or death." There cannot be the slightest doubt that malignant pustule is regarded generally, by those who have but the usual acquaintance with such matters, as a disease. Every particle of testimony given by the doctors called by the plaintiff, shows clearly, to my mind, that it is so re- garded generally in the medical world, and that it is only when these doctors are asked to define the case in a manner to suit their refined notions of scientific and artistic accuracy that they define the trouble as a "pathological condition of the body;" in the one case, "succumbing to infliction of this particular ]:)oison," and in the other, "following this particular inroad of this particular kind of bacilli." The difference between the cause of this condition and the causes of typhoid fever, tuberculosis, smallpox, scarlet fever, and such like diseases, is that this particular condition is caused by different bacilli from the others, and they come in contact with the skin or enter into its pores, while in the other cases they are generally breathed in. But no abrasion of the skin is needed to produce the contact of the bacilli, and what follows from such contact seems to be as plainly a disease as in the case of smallpox or typhoid fever. The question then Is, even assuming that some particular physicians refuse to call this a disease and describe it as a pathological condition, whether it is not a disease within the meaning of that term as used in this policy? Taking all the facts testified to by these physi- cians of the plaintiff, including their own special description of this condition of the body, and it seems to me there can be no intelligent, rational doubt that the insured died from a disease attacking him subsequent to the issuing CHAP. XVIIl] BACON V. U. S. MUT. ACCIDENT ASSN. 323 of the policy. He did not die from any accident, within the provision con- tained in the poHcy defining an accident. The definition given by the phy- sicians for the plaintiff, as to the difficulty being a pathological condition of the body and not a disease, is upon these facts entirely too fragile to base a recovery upon, and the distinction between a disease and a pathological con- dition of the body is, with reference to this case, much too refined for com- mon acceptance. It seems to me clear that the meaning of the words used in the policy covers just such a case, and that the parties never intended that a cause of death which to all outward appearances, and to the world in gen- eral, was a disease, should be converted into a "j)athological condition" of the body caused ])y an accident. The judgment should be reversed and a new trial ordered; costs to abide the event. O'Brien, J. (dissenting). The principal, if not the only, question in this case is whether the death of the insured was the result of accident, within the meaning of the words used in the contract, or of disease or other cause not covered by the stipulations of the parties. There is no dispute as to the fact that death resulted from the effects of a malignant sore upon the lip of the insured, which, soon after its appearance, involved the neighboring parts, producing septicaemia and utter exhaustion. There were two theories as to what this local sore was. On the part of the plaintiff, it was claimed that it was what was known as malignant pustule, while the defendant sought to establish the fact that it was a facial carbuncle, and, therefore a disease, or the result of disease, within the terms or meaning of the contract. The court instructed the jurj' that if the sore was, in fact, a carbuncle, that the plain- tiff could not recover, but that if it was a malignant pustule produced upon the person of the deceased in the manner claimed by the plaintiff, that then the plaintiff was entitled to a verdict. The testimony of the medical experts produced by the plaintiff was to the effect that this pustule is not a disease in the strict sense of that term, but a pathological condition of the system caused by the accidental infliction of diseased or putrid animal matter, infested with bacteria or bacilli anthrax, upon the thin skin of the lip, whence the bacilli multiply and arc diffused through the system. The animal virus that produces the sore comes from the hides, hair, wool, or flesh of animals suffering from the disease known as anthrax, and may be transmitted to human beings directly by the immediate contact of the individual with it, by his touching or handling it, and then bringing the matter in contact with the skin or thin mucous membrane, or it may be carried by carrion birds, or by insects, and in various other ways communicated to man and inflicted or implanted upon some exposed por- tion of the body. People whose business requires them to handle hides, hair, or wool, and wlio live in cattle-grazing regions, or localities such as the .south- ern or western portions of the United States, are, according to the proofs in this case, more exposed to malignant i)ustule than persons in other vocations, or who live in localities where cattle do not abound. The msured went to Council Bluffs on the 1st of February, 1884, and, as 324 BACON V. U. S. MUT. ACCIDENT ASSN. [CHAP. XVIIi. has been stated, died there in less than two months after. He was first em- ployed as a bookkeeper in a meat market, and later as a check clerk in the transfer department of the Union Pacific Railroad. It was shown that car- loads of hides frequently pass that station, and that a large number of cattle are brought there and slaughtered in the vicinity, but there was no direct or positive proof that the deceased ever came in immediate contact with the hides, or even the flesh, of these animals. We must accept the verdict of the jury that the deceased died from the effects of malignant pustule. Whatever an appellate court may think of the weight and force of the evidence submitted at the trial, it cannot, when there is some evidence, ignore or disregard the deliberate judgment of the body which, under our system of administering justice, is empowered and required to determine disputed questions of fact. There was evidence to warrant the finding, and in such a case, after review by the General Term, this court must deal with the case upon the principle that death was caused as claimed by the plaintiff. Whether the malignant pustule of which the insured died was the result of animal virus coming in contact with the lip, or whether the sore was pro- duced in some other way, was, perhaps, a more difficult question; but in view of the testimony of the plaintiff tending to show that the infliction of this virus upon the person is the only cause of pustule, and that the insured was in some degree exposed to it, and that death generally follows contact with it in a few days, we think it cannot be said that this finding is based wholly on speculation and conjecture. It was the province of the jury to draw all proper inferences from the testimony, and while there was no direct or positive proof as to when or how the animal virus came in contact with the person of the deceased, yet the jury was warranted in finding from the other testimony in the case that in some way the bacilli anthrax were im- planted upon the lip where the sore appeared, and at some time within ninety days prior to the death of the insured. Assuming that death was the result of malignant pustule, caused in the manner claimed by the medical experts who testified in behalf of the plaintiff, the question remains: whether this was "external, violent and accidental means," within the intent and mean- ing of the contract. This court has held that where death results from breathing an atmosphere impregnated with illuminating gas which in some way escaped from pipes while the insured was asleep, the beneficiary was en- titled to recover under a policy containing those words. Paul v. T. Ins. Co., 112 N. Y. 472. Death by drowning is included in such a contract. Trew V. R. P. Assn., 6 H. & N. 839; Mallory v. T. Ins. Co., 47 N. Y. 53. So is death which may have been produced by fright. McGlinchey v. F. & C. Co., 80 Me. 251. Without attempting to collate all the cases on this point, it is sufficient to observe that the courts, both in this country and in England, have given to these words a broad and liberal interpretation in favor of the insured or the beneficiary designated in the policy. U. S. M. A. Assn. v. Barry, 131 U. S. 100, 121; X. A. L. & A. Ins. Co. v. Burroughs, 69 Pa. St. 43; A. Ins. Co. CHAP. XVIIl] BACON V. U. S. MUT. ACCIDENT ASSN. 325 V. Crandal, 120 U. S. 527; Winspear v. A. Ins. Co., L. R. 6 Q. B. Div. 42; Paul V. T. Ins. Co., supra. Guided by the i)rinciples laid down in these and other cases, and by what seems to have been the intention of the parties, I am of the opinion that we should hold in this case that the infliction of animal virus by some exterior force or power upon the person of the deceased, as found by the jury, was a bodily injury, "effected through external, violent, and accidental means," producing death, within the intent and meaning of the policy, and that the defendant is liable. When death results from the accidental infliction of the animal virus upon the person, whether by hand- ling the same, or deposited upon his person by insects or otherwise, as shown by the witnesses for the plaintilT, it cannot, I think, be said that the jury was bound to find that the malignant pustule was a disease within the conditions of the policy exempting the defendant from liability. The jury could have found, in view of the evidence, that the deceased lived in a locality, and was engaged in employments in which he was exposed to contact with this pecul- iar form of poison, and it seems to me that a malignant pustule produced by the deposit upon the lip of the deceased of a particle of this animal virus, resulting in death, is as much an accident as in the case of death from breath- ing illuminating gas while asleep. There was evidence upon which the jury could have found that the deceased contracted the pustule in this way. For these reasons I am constrained to dissent from the prevailing opinion in this case, and am in favor of affirming the judgment. All concur with Peckham, J., except Ruger, C. J., and O'Bbien, J., dissenting. Judgment reversed.^ ' Farmer's policy, issued by the defendant, contained two kinds of insurance, one against accidents and the other against disease. The part rehiting to accidents pro- vided insurance, "For loss through personal, bodily injuries caused solely through accidents . . . due wholly to violent means external to the body . . . and such as are not caused or contributed to by any deformity or disease." Another provision of the policy declared: "All cases of . . . contact with poison or with poisonous or in- fectious substances, are covered only under the health provisions of this policy." While Farmer was sitting in front of his hotel holding a little dog on his lap, some one came behind him and pinched the dog's tail, whereupon the dog bit the insured on his thumb, from the poisonous effects of which, two weeks thereafter, he died. The court held that within the meaning of the policy it was a case of accident, and not of disease or poisoning and that the bite was to be regarded as the sole cause of death, Farmer v. Mass. Mut. Ace. Assn., 219 Pa. St. 71, 67 Atl. 927. Bailey's policy excepted injuries directly or indirectly from any disease. The insured was a physician, and, being in a somewhat emaciated and exhausted condition, due to a prior injury, in order to gain stimulus during his drive on the highway in the country, he dissolved a tablet of morphia as he had been accustomed to do, and injected it into his leg with a hypo- dermic needle, while sitting in his carriage. Owing to the disease of cellulitis, or blood poisoning, which shortly resulted, Dr. Bailey was disabled for about twenty weeks. On appeal, the judgment of nonsuit was reversed, and it was held that the question whether the injuries complained of were sustained through externtd, violent and acci- dental means should have been submitted to the jury, Bailey v. Interstate Gas. Co., 8 App. Div. 127. aff'd 158 N. Y. 723. Intoxic.mion or Narcotics. — The insured, one of the guests at a convivial dinner, had been drinking freely of stimulants. One of his boon companions present boasted of his skill in the use of hia pistol and declared his ability to shoot the insured in the 326 TUTTLE V. travelers' INS. CO. [CHAP. XVIII TUTTLE V. TRAVELERS' INS. CO. Supreme Judicial Court of Massachusetts, 1883. 134 Mass. 175 Exposure to obvious or unnecessary danger. Due diligence. When not for jury. Action of contract upon an accident policy of insurance, issued by de- fendant upon the life of Stephen Tuttle, and made payable to plaintiff, his wife. ear without hurting him elsewhere. Presumably owing to his condition, the insured made no objection to the experiment. He was shot in the forehead and killed by hia friend. The policj' was avoided, Shader v. Assurance Co., 66 N. Y. 441, 23 Am. Rep. 65. Poisov, ETC. — Voluntary or involuntary taking of poison or contact with poisonous substances. This exception covers the accidental taking of poison, Eariy r. Standard Life & A. Co., 113 Mich. 58. 71 N. W. 200, 67 Am. St. R. 445; Miller v. Fidelity & Cas. Co.. 97 Fed. 836; Travelers' Ins. Co. r. Dunlap, 160 111. 642, 43 N. E. 765, 52 Am. St. R. 355; but many courts agree that if the exception contains only the phrase "taking poison," the insurer will not be relieved from liability in the case of a purely accidental taking, since the word "taking" points to a conscious act. The Inh-vlixg of Gas or V.^^por. — The strong leaning of the courts towards a construction of the terms of the accident policy which shall favor the insured is strik- ingly illustrated by an Illinois case. The policy provided: "This insurance shall not cover . . . death . . . resulting, wholly or partly, directly or indirectly . . . from any gas or vapor." The insured met his death by reason of the unconscious and in- voluntary inhaling of escaping gas at night while he was asleep. The court allowed the plaintiff to recover on the policy, interpreting the clause to refer to a conscious inhaling of gas in connection with medical or sxirgical treatment, or dentist's work, or a suicidal purpose. Travelers' Ins. Co. r. Ayers, 217 111. 390, 75 X. E. 506 (citing many cases) ; Mcnncillcy v. Employers' Liability Assur. Corp., 148 X. Y. 596, 43 X. E. 54. 31 L. R. A. 86; and see Pickett v. Pac. Mut. Life Ins. Co., 144 Pa. St. 79, 22 Atl. 871. 13 L. R. A. 661, 27 Am. St. R. 618. DtJELiNG OR Fighting. — This exception should not be construed as meaning that the insured shall submit without resistance to whatever \-iolence may be offered him. Coles V. New York Cas. Co., 87 App. Div. 41, 83 X. Y. Supp. 1063; Jones r. U. S. Mut. Ace. Ass., 92 Iowa, 653, 61 X. W. 485. But if the insured is injured in consequence of his voluntary engagement in a fight the insurer will be exonerated from liability under this clause, Jones v. U. S. Mut. Ace. Ass., supra. Intention.\l Ixjurie.s. — Intentional injuries inflicted by tf>p insured or any other person. Intention which is a question of fact to be inferred from the act itself and surrounding circumstances, is an essential element under this clause to relieve the insurer from liability, Stevens v. Continental Cas. Co., 12 X. D. 463, 97 X. W. 862. But though the injur>' may be wholly accidental to the insured in that it was unfore- seen by him, yet, if intended by his assailant, there can be no recovery under this exception. Butcro v. Travelers' Ace. Ins. Co.. 96 Wis. 536, 71 S. W. 811, 65 Am. St. R. 61. .\nd such an intent exists where a person has intentionally struck the insured in order to protect himself though without intent to inflict the particular injurj' sus- tained. By virtue of this exception, if the insured is murdered the company is re- lieved from liability. Travelers' Ins. Co. r. McConkey. 127 U. S. 661. 8 S. Ct. 1360. 32 L. Ed. 308. And if a constable is intentionally injured in making an arrest or serving a process this exception in his accident policy becomes applicable, Grimes v. CHAP. XVIIl] TUTTLE V. TRAVELERS' INS. CO. 327 The evidence showed that about ten o'clock in the evening of March 13, 1879, Tuttle was killed by being struck by a railroad train, while running along the tracks in front of it, for the purpose of getting on a train approach- ing in an opposite direction on a parallel track. The trial judge directed a verdict for the defendant, and reported the case for the consideration of the full court. C. Allen, J. The policy provides, among other things, that no claim shall be made under it "when the death or injury may have happened in consequence of exposure to any obvious or unnecessary danger." It is also made subject to the condition that "the party insured is required to use all due diligence for personal safety and protection." Both of these provisions were violated by the act of the deceased in going upon and along the track of the railroad, under the circumstances stated in the report. Wright v. Boston & Maine Railroad, 129 Mass. 440, 443. No two cases are precisely alike in their facts, and what constitutes due care must depend upon the facts of each case. But the conduct of the deceased was such as, in the words of Mr. Justice Colt, is "condemned by the general knowledge and experience of all prudent men, and is conclusive on the question of due care." The danger was obvious, the exposure to it unnecessary, the want of due diligence clear, and the death of the insured occurred in consequence thereof. See also Wills V. Lynn & Boston Railroad, 129 Mass. 351; Johnson v. Boston & Maine Railroad, 125 Mass. 75; AUyn v. Boston & Albany Railroad, 105 Mass. 77; Cordell v. New York Central & Hudson River Railroad, 75 N. Y. 330; 70 N. Y. 119; 64 N. Y. 535; Baxter v. Troy & Boston Railroad, 41 N. Y. 502; McCarty v. Delaware & Hudson Canal, 17 Hun, 74. The plaintiff contends that it was not the exposure or negligence of the assured which caused his death, but the coming upon him of the locomotive engine, the bell or whistle of which may not have sounded; that this was a new force or power which intervened, of itself sufficient to stand as the cause of the misfortune; that it was for the jury to determine whether or not the railroad corporation was negligent; and that, if so, the negligence of the as- sured, if it existed, was too remote to defeat the policy. Insurance Co. v. Tweed, 7 Wall. 44, 52; Milwaukee & St. Paul Railway v. Kellogg, 94 U. S. 469, 475; Scheffer v. Railroad Co., 105 U. S. 249, 252. But, without speculat- ing as to po.ssible cases, we do not think that the doctrine relied on is ap- plicable to this case. If a person voluntarily places himself in a position where he is exposed to an obvious danger, and the precise injury happens to him which there is reason to fear, it cannot fairly be held that the language Fidelity & Gas. Co.. 33 Tex. Civ. App. 275, 76 S. W. 811. But the act of an insane person incapable of forminp a rational intent will not fall within the restriction. Cor- ley V. Travelers' Protection Assn., 105 Fed. 854, 46 C. C. A. 278. Voluntary Overexertion. — Under the exception the insured does not lose his right to recover unless there has been a conscious or intentional overexertion or a reckless di-sre^ard of consequences, Rustin v. .Standard Life & A. A. I. Co., 58 Neb. 792, 76 N. W. 712, 46 L. R. A. 253, 76 Am. St. R. 136. 328 BURKHARD V. TRAVELERS' INS. CO. [CHAP. XVIII of this policy was not intended and understood to be applicable to such a case. For example, if one while walking on a railroad track is assaulted by a robber or a dog, or is struck by lightning, his act of traveling there has no tendency to produce the injury, and is not to be deemed a contributory cause thereof. But, on the other hand, if one who goes into a battle is hit by a bullet, or if one who goes up in a balloon is blown out to sea by the currents of air, or if one who makes a railroad track his path for travel is run over by a passing locomotive engine, he must ordinarily in any legal question be held to take the risk of those results. There is in each of these cases such an association of cause and effect, that the one must be held to have con- tributed to the other. To hold that the death of the assured in the present case did not happen in consequence of his exposure to the risk, but from a new force or power which intervened, would be to fritter away the language of the policy by metaphysical distinctions too fine to enter into the under- standing or contemplation of parties engaged in the practical business of making a contract of insurance. We must assume that the assured read his policy, and was acquainted with its language and attached some practical meaning to it. See White v. Lang, 128 Mass. 598; McGrath v. Merwin, 112 Mass. 467; Norton v. Eastern Railroad, 113 Mass. 366; McDonald v. Snel- ling, 14 Allen, 290; Cluff v. Mutual Benefit Ins. Co., 13 Allen, 308, 319; s. c, 99 Mass. 317, 329; Harper v. Phoenix Ins. Co., 19 Mo. 506. Judgment on the verdict. BURKHARD v. TRAVELERS' INS. CO. Pennsylvania Supreme Court, 1883. 102 Pa. St. 262 Accident. Voluntary exposure to unnecessary danger. Walking or being on roadbed of railway. Chief Justice Mercur delivered the opinion of the court. This case arises on a contract of insurance against injuries and death through external, violent and accidental means. The death of the intestate was so caused. The general terms of the policy are broad enough to make the company liable. It claims exemption therefrom under certain exceptions in the policy. What rule, then, must be applied in the interpretation of this contract and its exceptions? The true principle of sound ethics, says Chancellor Kent, is to give the contract the sense in which the person making the promise believes the other party to have accepted it. A just sense should be exercised in so interpreting it as to give due and fair effect to its provisions. 2 Kent's Com. 557. When a party uses an expression of his liability having two meanings, one broader and the other more narrow, and each equally probable, he cannot, after an CHAP. XVIIl] BURKHARD V. TRAVELERS' INS. CO. 329 acceptance by the other contracting party, set up the narrow construction. 2 Whar. on Con., § 070. Hence, when an insurance company tenders a poHcy to a party seeking to he insured, and uses in the policy ambiguous words, these words will be held to have the meaning most favorable to the insured, as the presumption is that on this construction he took the policy, and as the company could have avoided the difficulty by being more specific. Id.; Fowkes t'. Ins. Co., 3 B. & S. 917. The words in such ca.se, said Mr. Jus- tice Blackburn, ought to be construed in that .sense in which, looking fairly at them, a prudent man would have understood the words to mean. Id. It is now well recognized as a general rule, that when a stipulation or an excep- tion to a policy of insurance, emanating from the insurers, is capable of two meanings, the one is to be adopted which is most favorable to the insured. May on Ins., §§ 172-179; Wood on Ins., §§ 141-140; Allen v. Ins. Co., 85 N. Y. 473; Western Ins. Co. v. Cropper, 8 Casey, 351; White v. Smith, 9 Id. 186. In case of doubt as to the meaning of terms emanating from an in- surance company, they are to be construed most strongly against the insurer. May on Ins., supra; Fowkes v. Ins. Co., supra; Wilson v. Ins. Co., 4 R. I. 156; Bartlett v. Ins. Co., 46 Maine, 500; Bowman v. Same, 27 Mo. 152; Ins. Co. V. Slaughter, 12 Wall. 404; N. A. Life & Ace. Ins. Co. v. Burroughs, 19 P. F. Smith, 43. The business of this company is to insure against accidents. The purpose of this policy is to pay specific damages for bodily injuries and death caused by external, violent, and accidental means. The death of the intestate was so caused. The company seeks to avoid liability under two clauses in the policy. One provides, the insurance shall not extend to a case of death or in- jury caused by "voluntary exposure to unnecessary danger;" the other, that "walking or being on the roadbed or bridge of any railway are hazards not contemplated or covered by this contract, and no sum will be paid for disability or loss of life in consequence of such exposure, or while thus ex- posed." The insured was traveling by rail through Indiana on his way to Kentucky. The train stopped on the bridge across the Ohio River by reason of the draw part of the bridge being open. He went to the front platform of the coach in which he was riding, and stepped off, and through a hole in the floor of the bridge, causing his death. This hole was about three feet wide and four feet long. It was caused by the removal of some planks during the making of repairs. 1. Was this act of the insured a voluntary exj^osurc to unnecessary danger? To make him guilty of a "voluntary exposure to danger," he must inten- tionally have done some act which reasonable and ordinary prudence would pronounce dangerous. The uncontradicted evidence shows that several other passengers got out of the coach, and some of them in advance of the insured. They certainly apprehended no danger. It is customary for male passengers to alight when a train stops for any length of time. No notice wa.'^ given to passengers that it was dangerous to get out of the coach where it stood. So far as appears, the bridge, with the exception of this hole, was well 330 BURKHARD V. TRAVELERS' INS. CO. [CHAP. XVIII covered with plank and entirely safe. When the intestate alighted, other passengers were standing on the bridge near the brakeman. The latter was sitting on timber that was lying on the footwalk of the bridge, and was to be used in the repairs being made. The passengers had no knowledge of these repairs. The brakeman held his lantern so placed on the floor that another timber cast its shadow over this hole, making it impossible for the insured to see it. He could see that portion of the floor lighted by the lantern, and the passengers standing thereon. He could see the brakeman near them. He stepped out of the coach in plain sight of the brakeman. He had a right to suppose he would land on a floor as firm as that on which the others stood. Neither word nor sight gave him any notice of danger. He did not approach the opening caused by the draw, and was not injured thereby. It is true he voluntarily left the car; but a clear distinction exists between a voluntary act and a voluntary exposure to danger. Hidden danger may exist ; yet the exposure thereto without any knowledge of the danger does not constitute a voluntary exposure to it. The approach to an unknown and un- expected danger does not make the act a voluntary exposure thereto. The result of the act does not necessarily determine the motive which prompted the action. The act may be voluntary, yet the exposure involuntary. The danger being unknown, the injury is accidental. Accident is defined by Worcester to be an event proceeding from an un- known cause or happening without the design of the agent; an unforeseen event; incident; casualty; chance: and by Webster, an event that takes place without one's forethought or expectation; an event which proceeds from an unknown cause, or is an unusual effect of a known cause, and therefore not expected; chance; casualty; contingency. In view of the unquestioned facts, the death of the intestate was accidental. The danger was unknown. Theinjury was not designed. We think there was not such a voluntary exposure to danger as to fairly bring the act of the in- sured within the meaning of the exception. 2. Was he walking or being on the roadbed or bridge of the railway? He certainly was not walking on the roadbed or bridge; and, strictly speaking, it is doubtful where he was being on either. The evidence indicates that, without touching either, he probably passed directly from the steps of the car through the hole in the bridge. We will not, however, put the case on the narrow ground that he did not come in contact with either roadbed or bridge. 1 The language of the exception clearly implies two thoughts: One, that the insured must not be on the roadbed or bridge for any length of time; the other, that the prohibition is not to guard against injury resulting from a defective roadbed or defective railway bridge, but against the danger of injury from trains passing thereon. If the design was to apply the language to bridges defectively constructed or out of repair, it would not have been restricted to railuxiy bridges. It would have included all bridges, both foot and wagon. The purpose is not to avoid liability for injuries resulting from being on bridges unsafe in themselves. The manifest intent is to exempt from ' Compare McClure v. Ace. Assn., 141 la. 350. CHAP. XVIIl] BURKHARD V. TRAVELERS' INS. CO. 331 responsibility for damages caused by collision with trains moving thereon. The present is not like a ca.sc between a passenger and a railway company, in which tlie conij^any may be exempt from liability for damages arising from negligence of tlio passenger not voluntary. Nor did the act of the in- inred prove such a reckless exposure of his person, nor obvious risk of dan- ger, as to bring him within the application of the rule declared in Morel v. i.Iiss. Valley Ins. Co., -1 Bush, 535; Lovell v. Accident Ins. Co., 3 Ins. Law Jour. 877; Sawtelle v. Railway Pass. Ass. Co., 15 Blatchford, 216, and kin- tired cases. We therefore think, under the facts found, and the rules of lav.- which we have stated, the learned judge erred in holding that the conduct of the in- sured brought liim williin cither of the exceptions, so as to relieve the com- pany from liabilily. Judgmenl reversed.^ ' Rcl)m,an'.s piiliry coiitaiiicd tho provision: "Nor docs this contract extend to, nor insure against, death or any kind of disablement resulting wholly or partly, directly or indirectly, from voluntary exposure to unnecessary danger. The certificate holder is required to use all due diligence for personal safety and protection." Rcbman had frequently taken the 1 : 02 i-. .m. train for Pittsburgh at a station near his home. Shortly before the accident, orders had been given not to take on passengers at this station, but mail was received and discharged there. Rebman did not know of this order. He went to the station expecting the train to stop. He saw it approach with steam ofT and at reduced speed. While it was running six or eight miles an hour and passing to his right, he seized the hand rail at the front platform of the last car with his left hand, placing his left foot on the Liwcr step, and was in the act of raising his body when his hold was broken, and he fc II backward and was killed. He was nearly sixty-six years of age, weighed ISt poimds and harl an umbrella under his left arm. The Pennsylvania Supreme Court held that a judgment of nonsuit was proper, since the insured was injured by exposing himself to a risk not covered by the policy, Rebman i'. General Ace. Ins. Co., 217 Pa. St. 518, 66 Atl. 859. Hunt's policy excepted injuries resulting from "voluntary or unneccs-sary exposure to danger." Hunt, thirty-six years of age, was engaged in playing a game of indoor baseball in a gymnasium of the Young Men's Christian Association. The floor was slippery. Having batted the ball, he overran first base, and, a.s he was in the habit of doing to stop himself, he put out his foot and hand against the side wall of the gymna.sium which was between six and ten feet beyond the base. In doing this he broke his ankle. He admitted that he could have stopped short of the wall if he had tried. The court below directed a verdict for the defendant. The jutlgment was reversed antl a new trial ordered, Hunt r. U. S. Ace. Assn., 146 Mich. 521, 109 N. W. 1042. Voluntary Exposure to Un'necess.\ry D.\nuer. — A conspicuous object of in- surance is to provide indemnity for misfortunes resulting from inadvertent heedless- ness. By the insertion of an exception covering injury or death caused by voluntary exposure to unnecessary danger, insurers against accidental injuries have attempted to impose a very considerable restriction upon their general liability. While this pro- vision of the contract may not be altogether ignored, the courts do not construe the words as meaning the same as contributory negligence in the law of torts. Travelers' Ins. Co. V. Randoli)h, 78 Fed. 754. 24 C. C. A. 305, 47 U. S. App. 260. They hold rather that there must be a conscious and intentional exposure to unnecessary danger, that is to say, that the insured must be aware of such danger and purposely assume the risk of it, before the insurer can invoke the aid of this clause in defense, Ashcn- felder v. Employers' Liability .Assur. Corp., 87 Fed. 682, 31 C. C. A. 193 (contractor suffocated by burning bucket of tar, companj- nevertheless liable) ; Collins v. Bankers' Ace. Ins. Co., 96 Iowa, 216, 64 N. W. 778, 59 Am. St. R. 367 (fishing in the dark from 332 NORTHKUP V. RY. PASS. ASSUR. CO. [CHAP. XVIII NORTHRUP V. RAILWAY PASSENGER ASSURANCE CO. CouBT OF Appeals of New York, 1S71. 43 N. Y. 516 Accident ivhile traveling by 'public or private conveyances. GuovER, J. It must be conceded that the injury received by the plaintiff's intestate does not come within the strict literal words of the contract of as- surance. By that contract the respondent agreed to pay the legal representa- tives of the intestate, in the event of her death from personal injury ensuing ooat without knowledge of snags, company liable); Irwin v. Phoenix Ace, etc., Assn., 127 Mich. 630, 86 N. W. 1036 (not mere thoughtlessness meant, as where mason stepped on unsupported end of scaffold), Thomas v. Masons' Fraternal Ace. Assn., 64 App. Div. 22, 71 N. Y. Supp. 692 (gun standing against a tree slipped and injured hunter, not within the exception, Johnson v. London G. & Ace. Co., 115 Mich. 86, 72 N. W. 1115, 40 L. R. A. 440, 69 Am. St. R. 549 (insured attempted to drive a bull out of a pasture, company liable). Self-defense by the insured, apparently necessary, is ju.stifiable, Campbell «. Fidelity & Cas. Co., 109 Ky. 661, 60 S. W. 492. An act is not unnecessary if performed in the line of duty, Pac. Mut. Life Ins. Co. v. Snowden, 58 Fed. 342, 7 C. C. A. 264 (cattle dealer in transit), Rustin v. Ins. Co., 58 Neb. 792, 79 N. W. 712, 46 L. R. A. 253, 76 Am. St. R. 136 (proprietor of pleasure resort, in order to test veracity of one of his performers, raised a very heavy dumb-bell, company liable); Freeman v. Travelers' Ins. Co., 144 Mass. 572, 12 N. E. 372 (employe of rail- road shoveling snow); Bateman v. Travelers' Ins. Co., 110 Mo. App. 443, 85 S. W. 128 (flagman involuntarily went to sleep) ; Jamison v. Continental Cas. Co., 104 Mo. App. 306, 78 S. W. 812 (flagman fell asleep, question for jury, many cases reviewed); Coles V. N. Y. Cas. Co., 87 App. Div. 41, 83 N. Y. Supp. 1063 (bartender ejected a noisy customer); Richards v. Travelers' Ins. Co., 18 S. D. 287, 100 N. W. 428, 67 L. R. A. 175 ("cattle dealer visiting yards"). Where the insured was engaged regularly in electric light repairing, and fell from a tree while so engaged there was no volun- tary exposure to unnecessary danger. Continental Cas. Co. v. Jennings (Tex. Civ. App., 1907), 99 S. W. 423. Attempts to save life are not prohibited, for example, to prevent a peison from being run over, Williams ». U. S. Mut. Ace. Assn., 82 Hun, 268, 31 N. Y. Supp. 343, afT'd 147 N. Y. 693, 42 N. E. 726; or to rescue wrecked sailors. Tucker v. Ins. Co., 50 Hun, 50, 4 N. Y. Supp. 505, aff'd 121 N. Y. 718. An insured does not voluntarily expose himself to unnecessary danger by scaling a bank with u, loaded gun, Cornwell v. Fraternal Ace. Assn., 6 N. D. 201, 69 N. W. 191, 40 L. R. A. 437, 66 Am. St. R. 601; or by cleaning a gun in ignorance that it is loaded. Miller v. American Mut. Ace. Assn., 92 Tenn. 167, 21 S. W. 39, 20 L. R. A. 765; or by crossing a railroad track at a point recognized as a thoroughfare, Payne t>. Fraternal Ace. Assn., 119 Iowa, 342, 93 N. W. 361 ; or, as matter of law, by standing on the platform or steps of a railroad car. Smith v. .Etna Life Ins. Co., 115 Iowa, 217, 88 N. W. 368, 56 L. R. A. 271, 91 Am. St. R. 153; or by passing from one car to another in a vestibuled train, Robin.son v. Society, 132 Mich. 695, 94 N. W. 221. It mu.st be observed that while in ordinary actions for personal injuries the burden of proof rests upon the plaintiff to prove his due care, or absence of contributory negligence, under the clause of the accident policy the burden is upon the insurance company to show that there was a voluntary exposure to unnecessary danger or a lack of due diligence, Garcelon ti. Commercial Travelers' E. Ace. As.sn., 195 Ma.ss. 531, 81 N. E. 201; Noyes v. Commer- cial Travelers' E. Ace. Assn., 190 Mass. 171, 183. CHAP. XVIIl] NORTHRUP V. RY. PASS. ASSUR. CO. .333 in three months from the happening thereof, when caused by any accident while traveling by public or private conveyances provided for the transporta- tion of travelers, etc. The intestate was not actually traveling upon any public or i)rivatc conveyance j)roviilcd for the transportation of passengers at the time of receiving the injury which caused her death. It appears from the facts agreed upon by the parties, that the intestate, prior to such time,, had undertaken to go a journey from Steuben to Madison County; that the mode a(l()i)tod for making the journey was by rail from .Steuben to Watkins in Schuyler County, thence by steamer to Geneva, thence by rail to Madi- son. That the intestate, in the prosecution of such journey, had arrived at Geneva on board the steamer, and, as usual, was passing on foot from the steamboat landing to the railway station to go on board of the cars for the remainder of her journey; and while so passing from the landing to the sta- tion, a distance of about seventy rods, she slipped and fell, thereby receiving an injury which caused her death about four days thereafter. It further appears, that upon the arrival of the boat at Geneva there were usually hacks at the landing seeking passengers for any part of the village or the rail- road station, but that a large majority going to the railroad station went there on foot. The question for determination is, whether at the time of re- ceiving the injury the plaintiff was, within the meaning of the policy, traveling by a public or private conveyance. The policy must be construed so as to carry into effect the intention of the parties, so far as such intention can be determined from the language used, construed in the light of well-known extrinsic facts, which must be presumed to have been known to the con- tracting parties at the time of making the contract, and in reference to which it was entered into. One fact of this character, very important in the present case, is that of the frequent change required from one train of cars to anothc* at intermediate stations upon the same journey. Those passing from Buf- falo or the Falls to New York by the New York Central, or from the former or Dunkirk to the same by the Erie, cannot be unaware of this fact. Can it be said that a passenger is not traveling, within the meaning of this con- tract, by public conveyance, while passing from one train to go on board another in the actual prosecution of his journey; or, for further illustration, can this be said of a passenger from New York to Dunkirk bj'^ the Erie, while going from the ferryboat at Jersey City to get on board of the train Due Diligence for Personal Safety and Protection. — The provision found in some policies calling for due diligence for personal safety and protection is satisfied if reasonable diligence is exercised, Kentucky L. & Ace. Ins. Co. v. Franklin, 102 Ky. 512, 43 S. W. 709 (hunter on fence with gun cocked). The burden of proof is on the insurer, Keene r. New England Mut. Ace. Assn., 161 Mass. 149, 36 N. E. 891 (cross- ing railway tracks); Freeman v. Travelers' Ins. Co., 144 Mass. 572, 12 N. E. 372. But the court will hold certain acts of negligence to be plainly within the exception, for example, where the a.ssured foil a.sleep on a railroad tie. Standard L. & .\cc. Co. r. Langston, 60 Ark. 381, 30 S. W. 427. A passenger on a vcstibuled train is not guilty of negligence in going into the dining car when the train is moving at full speed, if he does not know that a side door of the vestibule is open, Robinson v. U. S. Ben. Soc., 132 Mich. 695, 94 N. W. 211. 334 NORTHRUP V. RY. PASS. ASSUR. CO. [CHAP. XVIII at that place? I think that such passenger, within the meaning of this con- tract, and also within the fair construction of the language, is a traveler by public conveyance all the way from New York to Dunkirk, although he may walk a short distance from the ferryboat to the train at Jersey City, or from one train to another when such changes are made at intermediate stations. An injury received while so necessarily walking in the actual prosecution of the journey is received while traveling by public conveyance within the meaning of the policy, as such walking is the actual and necessary accom- paniment of such travel. There is no difference in principle between a pas- senger so walking and the intestate in the present case. The presumption is, that the railroad trains and the steamer run in connection, the same as the ferryboat from New York to Jersey City with the Erie trains, and that, b}' means of this connection, the journey of the intestate was designed to be continuously prosecuted; and it surely can make no difference in principle that the space to be walked over in going from one conveyance to another is a few steps more or less. Nor does it affect the question, that the intes- tate might have procured a hack to carry her, had she so chosen. She pur- sued the same course that the great majority of passengers did. This she had the right to do under the contract. Theobald v. Railway Passenger Assurance Co. (26 Eng. Law & Equity), 432, sustains this view. In that case, the assurance was against railway accident whilst traveling in any class carriage, on any line of railway in Great Britain, etc. This was held to in- clude an injury received from slipping on the step of the car, while standing at the station, in getting out. Judgment reversed. CHAP. XIX] FORM OF MARINE INSURANCE POLICY 335 CHAPTER XIX The Marine Insurance Policy form of policy of marine insurance with collision clause A Form of Policy of Marine Insurance: Cargo By the Insurance Company on account of In case of loss, to be paid in funds current in the United States, or in the City of New York, to , do make insurance, and cause to be insured, lost or not lost, at and from upon laden or to be laden on board the good , whereof is master for this present voyage , or whoever else shall go for master in said vessel, or by whatever other name or names the said vessel, or the master thereof, is or shall be named or called. Beginning the adventure upon the said goods and merchandises from and immedi- ately following the loading thereof on board of the said vessel, at as aforesaid, and so shall continue and endure until the said goods and merchandise shall V)e safely landed at as aforesaid. And it shall and may be lawful for the said vessel, in her voyage, to proceed and sail to, touch and stay at, any ports or places, if thereunto obliged by stress of weather, or other unavoidable accident, without prejudice to this insurance. The said goods and merchandises, hereby insured, are valued (premium included) at dollars. Touching the adventures and perils which the said Insurance Company is contented to bear, and take upon itself in this voyage, they are of the seas, men-of-war, fires, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, reprisals, takings at sea, arrests, restraints and detainments of all kings, princes or people, of what nation, condition or quality soever, barratry of the master and mariners, and all other perils, losses and misfortunes that have or shall come to the hurt, detriment or damage of the said goods and merchandises, or any part thereof. And in case of any loss or misfortune, it shall be lawful and necessary to and for the assured, his factors, servants and assigns, to sue, labor, and travel for, in and about the defense, safeguard and re- covery of the said goods and merchandises, or any part thereof, without prejudice to this insurance; nor shall the acts of the insured or insurers, in recovering, saving and preserving the property insured, in case of disaster, be considered a waiver or an ac- ceptance of an abandonment; to the charges whereof the said Insurance Company will contribute according to the rate and quantity of the sum herein insured; having been paid the consideration for this insurance, by the assured, or his assigns, at and after the rate of per cent. And in case of loss, such loss to be paid in thirty days after proof of loss, and proof of interest in the said (the amount of the note given for the premium, if unpaid, being first deducted), but no partial loss or particular average shall in any case be paid, unless amounting to /?re per cent. Provided always, and it is hereby further agreed, That if the said assunnl shall have made any other assurance upon the premises afore- said, prior in day of date to this policy, then the said Insurance Company shall be answerable only for so much as the amount of such prior assurance may be deficient towards fully covering the premises hereby assured; and the said Insurance Company shall return premium upon so much of the sum by them assured, as they shall be by such prior assurance exonerated from. And in case of any assurance upon the 336 FORM OF MARINE INSURANCE POLICY [CHAP. XIX said premises, subsequent in day of date to this policy, the said Insurance Company shall nevertheless be answerable for the full extent of the sum by them Bubscribed hereto, without right to claim contribution from such subsequent assurers, and shall accordingly be entitled to retain the premium by them received, in the same manner as if no such subsequent assurance had been made. Other assurance upon the premises aforesaid, of date the same day as this policy, shall be deemed simultaneous herewith; and the said Insurance Company shall not be liable for more than a ratable contribution in the proportion of the sum by them insured to the aggregate of such simultaneous assurance. It is also agreed, that the property be warranted by the assured free from any charge, damage or loss, which may arise in consequence of a seizure or detention, for or on account of any illicit or prohibited trade or any trade in articles contraband of war. Warranted not to abandon in case of capture, seizure, or detention, until after condemnation of the property insured; nor until ninety days after notice of said condemnation is given to this company. Also warranted not to abandon in case of blockade, and free from any expense in consequence of capture, seizure, detention or blockade, but in the event of blockade, to be at liberty to proceed to an open port and there end the voyage. In Witness Whereof, the President or Vice-President of the said Insur- ance Company hath hereunto subscribed his name, and the sum insured, and caused the same to be attested by their Secretary, in , the day of 19... Memorandum. It is also agreed, that bar, bundle, rod, hoop and sheet iron, wire of all kinds, tin plates, steel, madder, sumac, wicker-ware and willow (manufactured or otherwise), salt, grain of all kinds, tobacco, Indian meal, fruits (whether preserved or otherwise), cheese, dry fish, hay, vegetables and roots, rags, hempen yarn, bags, cotton bagging, and other articles used for bags or bagging, pleasure carriages, house- hold furniture, skins and hides, musical instruments, looking-glasses, and all other articles that are perishable in their own nature, are warranted by the assured free from average, unless general; hemp, tobacco stems, matting and cassia, except in boxes, free from average under twenty per cent, unless general; and sugar, flax, flax-seed and bread, are warranted by the assured free from average under seven per cent, unless general; and coffee, in bags or bulk, pepper in bags or bulk, and rice, free from average under ten per cent, unless general. Warranted by the insured free from damage or injury, from dampness, change of flavor, or being spotted, discolored, musty or mouldy, except caused by actual contact of sea water with the articles damaged, occasioned by sea perils. In case of partial loss by sea damage to dry goods, cutlery or other hardware, the loss shall be ascer- tained by a separation and sale of the portion only of the contents of the packages so damaged and not otherwise, and the same practice shall obtain as to all other merchan- dise as far as practicable. Not liable for leakage on molasses or other liquids, unless occasioned by stranding or collision with another vessel. If the voyage aforesaid shall have been begun and shall have terminated before the date of this policy, then there shall be no return of premium on account of such termina- tion of the voyage. In all cases of return of premium, in whole or in part, one-half per cent, upon the sum insured is to be retained by the assurers. S , dollars. Secretary , President. A Form of Collision Clause And it is further agreed, that if the vessel hereby insured shall come in collision with another vessel, and the assured become liable to pay, and shall pay, any sum or sums for damages resulting therefrom to said other vessel, her freight or her cargo, in such case this company will contribute towards the payment of three-fourths part CHAP. XIX] PARMENTER V. COUSINS 337 of the total amount of said damages, in the proportion that the sum insured under this policy bears to the total valuation of the vessel as stated herein, provided, that this company shall not in any event he held liable under this agreement for a greater sum than three-fourths part of the amount insured under this policy. And it is also agreed that this insurance company will bear a like proportionate share of any costs and expenses that may be incurred in contesting the liability re- sulting from said collision, provided, the written consent of the company to such contest be first obtained. But under no circumstances shall this company be held liable for any contribution in respect of any sum that the insured may be held liable to pay by reason of loss of life or personal injury to individuals from any cause whatsoever, nor for any claim for demurrage or loss of the use of any vessel, nor for wages or provisions or expenses of master, officers or crews. It is further agreed to, that in no event shall this insurance company be liable under this policy for more than the sum insured in any case, either for claims for losa and damage and or charges to hull of the vessel hereby insured and or for claims of any and all kinds arising under this collision clause, or the policy to which it is at- tached, and all payments made under this policy shall reduce this policy by the amounts so paid, unless restored by a new premium. In this country there is no statutory form of policy for marine insurance. PARMETER v. COUSINS Court op King's Bench, 1809. 2 Campb. 235 The voyage: commencement of the rifsk, irhen it attaches. This was an action on a policy of insurance on .ship and freight, valued at £1,200, at and from St. Michael's, or all or any of the Western Islands, to England. The ship met with very tempestuous weather on lier outward voyage, and wlien she arrived at St. Michael's she was so leaky that the crew were obliged to work at the pumps spell and spell. She was then quite in an unfit state to take in a cargo, and, there being no harbor in the island, she was in great danger from the storm, which still continued. In fact, after lying at anchor above twenty-four hours, she was blown o'.it to sea and was wrecked. Park for the plaintiff contended that the underwriters were clearly an- swerable for a loss so happening. The policj^ being at as well as from, at- tached the moment the ship cast anchor at St. Michael's; and at any rate she had lain tliere twenty-four hours, j;o that the outwartl risk had completely expired. The objection of want of seaworthiness, when proi)erly considered, was without any foundation. The ship on her arrival at St. IMichael's was unfit to commence the homeward voyage; but this was unnecessary. It was enough if she was fit for the voyage when the voyage commenced. One state of seaworthiness was reciuirod while she remained at, and another when she sailed from, the place. This (list incl ion had been settled by Lord Kenyon 338 LIDGETT V. SECRETAN [CHAP. XIX (Forbes v. Wilson, Park, 299, n.; Marsh. 155; Smith v. Surridge, 4 Esp. 25 S. P.), and recognized by Lord Ellenborough (Hibbert v. Martin, Sat. after M. T. 1808). If it were not allowed, the policies on the homeward voyage would in almost every instance be vitiated; as it seldom happens that a ship on her arrival at the outward port wants no repairs, but is in a condition im- mediately to take in the homeward cargo. If in this case the policy on the outward voyage had expired, and the policy on the homeward voyage had not attached, how was the shipowner to secure himself an indemnity dur- ing the whole course of the adventure? Lord Ellenborough. What we have to consider here is, whether the underwriters on this ship, at and from St. Michael's to England, be liable for a loss happening in the manner that has been described. And I am clearly of opinion that they are not. To be sure, while the ship remains at the place, a state of repair and equipment may be sufficient which would constitute un- seaworthiness after the commencement of the voyage. But while in port she must be in such a condition as to enable her to lie in reasonable security till she is properly repaired and equipped for the voyage. She must have once been at the place in good safety. If she arrives at the outward port so shattered as to be a mere wreck, a policy on the homeward voyage never attaches. Such is the present case. I do not remember anyone like it; but the principles on which it must be decided are perfectly well established. Plaintiff nonsuited.^ LIDGETT V. SECRETAN Court of Common Pleas, 1870. L. R. 5 C. P. 190 The voyage: termination of the risk, until moored twenty-four hours in good safety. The policy in this case, which was upon the ordinary printed form of a Lloyd's policy, was effected by the plaintiffs on their iron sailing ship Char- lemagne. The risk was described in writing to be "at and from London to Calcutta, and for thirty days after arrival;" and by the other terms of the policy was to continue until the said ship, etc., should be moored at Cal- cutta. Then followed the usual printed words, "upon the said ship, etc., •'ntil she hath moored at anchor twenty-four hours in good safety." The ship left London for Calcutta, and after sustaining damage at sea arrived in the River Hooghly in the month of October, 1866. She was then ' Lost or Not Lost. — The effect of this stipulation is that the insurer takes upon himself not only the risk of future loss, but also loss, if any, that may have already happened, Hooper v. Robinson, 98 U. S. 528, 25 L. Ed. 219. The necessity for such a retrospective application in policies is evident; since owing to the time occupied in the transmission of advices from abroad, property is often exposed to marine risks before the parties interested are cognizant of the fact or have had an opportunity to protect themselves by insurance. CHAP. XIX] LIDCETT V. SECRETAN 339 taken in tow by a steam tug, and brought to moorings at a usual place of discharge within the harljor of Calcutta, where she came to anchor and was moored on the 28th of Octol)er. The captain gave the pilot the usual certif- icate that she was then pror^rly moored and left in safety. She had Ijrought troops from I''i;jj;lan(l, who then disembarked, and her cargo was unloaded and completely and safely discharged by the 8th of November, with the excoplion of two hundred tons of iron which were left in her for ballast. On the 12th of November she was taken from l.er nujorings to a dry dock for survey and rejjairs; and, in the course of her rejjairs in the dock, the vessel accidentally caught fire and was wholly destroyed on the 5th of December. It was found in the case that the vessel had sustained considerable damage from striking on a reef or bank before she reached Calcutta, whereby she became much strained and injured and leaky. Considerable repairs were necessary; and she required extraordinary pumping, which was done at first by the troops on board and afterwards by an engine and lascars from the shore, to get her clear of the water which was in one of her compartments. She was also injured in her rudder or steering ai)])aratus, so as materially to affect her steering; and she was in danger of breaking from her moorings, from the currents and bore of the River Ilooghly; and, if she had broken away, the defect in her steering apparatus wor.ld havc^ further endangered her. But, notwithstanding these matters, she remained at her moorings for more than twenty-four hours as a ship, though damaged, and safely dis- charged her cargo. Under these circumstances, it was contended on behalf of the plaintiffs that they were entitled to recover as for a total loss by fire; and on behalf of the defendant, that the plaintiffs were only entitled to claim in respect of the partial lo.ss by sea damage before Ihe arrival of the ship at her moorings, and that they were not entitled to claim anything in respect of the loss by fire, because such fire occurred after the termination of the risk under the policy. The judgment of the court (Bovill, C. J., Willks, J., and Brktt, J.) was delivered by Bovill, C. J. If the thirty days covered by the policy are to be reckoned from the time of the ship's arrival at Calcutta, either in the sense of arrival in the port, or arrival at and being finally mooreil at an ordinary place of mooring and discharge within the port, then, as the fire and loss of the vessel did not occur until the thirty-eighth day after she was so moored at Calcutta, viz., the 5th of December, the loss would not come within this policy; but if the risk was extended, and continued beyond such thirty days, by reason of the printed words "until she hath moored at anchor in good safety," and of the vessel having been moored in a damaged state as described, then the ship was covered by this policy at the time of the fire on the 5th of December, and the defendant would be liable for the total loss by fire. Whether the thirty days were in this case to be reckoned from the arrival 340 LIDGETT V. SECRETAN [CHAP. XIX only of the vessel at Calcutta, or from her having been moored at anchor twent3'-four hours in good safety, it is not necessary to determine, because we are all of opinion that, even in the latter view, the defendants are entitled to judgment. Assuming, then, that the thirty days are to be reckoned from the time of the ship being moored for twenty-four hours in good safety, the question arises, what is the meaning of those words in such a policy? We are of opinion that the meaning is not, as has been contended, that the moorings are safe, but that the words refer to the ship being in safety. The words cannot mean that the vessel is to arrive without any damage or injury whatever from the effects of the voyage; otherwise, the loss of a mast, or even a spar, a sail, or a rope, though the vessel was perfectly fit to keep not only the river, but the sea, would, contrary to all the ordinary meaning of language, prevent her from being considered as in safety. So, on the other hand, the words would not, in our opinion, be satisfied by the vessel arriving and being moored in a sinking state, or as a mere wreck, or by a mere tem- porary mooring. We think also that the mere liability to damage, whether partial or total, during the twenty-four hours, by the occurrence of some or all of the perils insured against, cannot prevent the running of the twenty-four hours, be- cause the extension of the period of risk for twenty-four hours after having moored in good safety clearly implies that, notwithstanding the safety in- tended, the ship is liable to partial or total loss by the occurrence of a peril insured against. The American decision upon that point, of Bill v. Mason, 6 Mass. 313, proceeded on the ground that, although the ship was, during twenty-four hours after being moored, liable to damage or total loss, she was not in fact either lost or in that case even damaged. Where, on the other hand, a ship arrived in port in a sinking state, and on being moored was obliged to be lashed to a hulk in order to keep her afloat until the people on board were landed, and where she sunk on being moved toward the shore, it was held that she was not moored in safety, because the court considered that she in fact arrived as a wreck, and not as a ship. Shawe v. Felton, 2 East, 109. So, where a vessel arriving in a hostile port with simulated papers had her papers immediately taken and her hatches sealed down by the officers of government, although she was not formally condemned until afterwards, it was held that she had not been moored in safety for twenty-four hours, be- cause she was in effect within the twenty-four hours taken from her owners by the foreign government. Horneyer v. Lushington, 15 East, 46. Nor was a vessel which had been for a short period moored to a wharf, but within twenty-four hours was ordered into quarantine, and whilst there, but more than twenty-four hours after the original temporary mooring, was lost by a peril insured against, considered to have moored in good safety, because, as it would seem, she had not, before the loss in respect of which the claim was made, been finally moored at the ordinary place of mooring. Waples v. Eames, 2 Str. 1243. CHAP. XIX] LIDGETT V. SECPETAN 341 Where a vessel after being moored remained in aetual safety as a ship for twenty-four hours, and so that during those twenty-four hours her owners had complete and undisturbed possession of her, but afterwards she was seized in consequence of the master having smuggled before her arrival, it was held that the terms of the policy were satisfied, and that the loss by the seizure was a loss after the termination of the risk. Lockyer v. Offley, 1 T. R. 252. In that case, Willes, J., in delivering the judgment of the court, said (1 T. R. at p. 261): "There must be some certain and reasonable limitation in point of time laid down by the court when the insurer shall be released from his engagement. If he be liable for a month, he may be for a year, and so on. And we all tliink that the law on insurances would be left unsettled and in much confusion if any other time were suggested than that prescribed by the policy; viz., the continuance of the voyage and the ship's being moored twenty-four hours in safety." In the present case, the vessel, though consideral)ly damaged and leaky, and with one compartment full of water, existed as a ship at the time of her arrival, and she was able to keep afloat and did keep afloat as a ship for more than twenty-four hours after being moored, by exerting the means within the power of the captain. She arrived and moored at the ordinary place for unloading, and was so moored as a ship in the possession or control of l.(r owners for more than twenty-four hours; and she remained as a ship and in possession of her owners for more than thirty days after the lapse of the twenty-four hours l^efore described, and until the time of the fire by which she was totally lost. If the underwriters are liable beyond thirty days from her being so moored for twenty-four hours, it is difficult under such circumstances to see when the liability is to end. We think the only safe rule in this case is to hold, that, after the expiration of thirty days from the arrival and mooring of the vessel, and her having remained as a vessel, and in the possession or control of her owners, though not sound, for twenty-four hours, the underwriters were not responsible. We are, therefore, of opinion that there was not a total loss within the period of risk covered by this policy, and that our judg- ment should be for the defendant. Judgment for the defendant.^ * By special indorsement on the policy in consideration of an additional premium the ship Ravensworth Castle was at liberty to go to Antwerp. She never reached the inner dock iit Antwerp, which was the usual place for discharging cargo, although she arrived at the outer dock of that port. The court held that the voyage was not at an end, Stone v. The Marine Ins. Co., etc., 1 Exch. D. 81. The ship A/ton was insured for a voyage to any port of discharge in the United Kingdom "and whilst in port during thirty days after arrival." She arrived at (Jreenock on the Clyde, discharged her cargo, and was placed in a dock for repairs. Within thirty days after arrival at this port of discharge she proceeded in tow on a new voyage for Glasgow. She had reached the channel of the Clyde, her stern being about 500 feet distant from the Greenock harbor works, when she was capsized by a sudden gust of wind. It was held that she was not "in port" and that the underwriters were not liable. Hunter v. Northern Mar. Ins. Co., L. R. 13 App. Cas. 717. By indorsement on an open canal cargo policy, Petrie's shipment of cement was insured again.st " i)erils of the seas, canals, rivers, etc.," "to New York harbor." The cargo in fact was shipped to Tarrytown from the Brook- 342 LIDGETT V. SECRETAN [CHAP. XIX lyn stores. Evidence of custom, however, was received on the trial in the action against the insurer to the effect that the term "harbor of New York," as used in the businees of marine insurance, included Tarrytown and other points within the New York customhouse district. It also appeared that the boat, which was seaworthy, arrived at Tarrytown, was moored alongside the dock, but when the tide went out it grounded and was so broken or strained that it sank and the cargo was destroyed. The jury found for the plaintiff, and the judgment was affirmed, the court holding that a loss had occurred within the harbor of New York by a peril insured against, and that the insurer was liable, Petrie v. Phoenix Ins. Co., 132 N. Y. 137, 30 N. E. 380. Cargo should be landed within a reasonable time after the ship's arrival when no time is specified; otherwise it will cease to be covered by the. policy. What is a reasonable time in any particular case depends upon the usages of the trade, Parkinson v. Collier, 2 Park, Ins. 653. CHAP. XX] MILLER V. CALIFORNIA INS. CO. 343 CHAPTER XX The Marine Policy — Concluded MILLER, APPELLANT, v. CALIFORNIA INS. CO., RESPONDENT Supreme Court of California, 1888, 7G Cal. 145 Perils of the sea. Action on a policy of marine insurance on the steamer Pilot. Among others, the risks insured against were as follows: "Touching the adventures and perils which this insurance company is content to bear and take upon itself, they are of the seas, fires, pirates," etc. " It is also agreed that in case of insurance on a steamer, this company is not liable for any injury, de- rangement or breakage of the machinery or bursting of the boilers, unless occasioned by stranding." In the course of the voyage, the boiler exploded, and the vessel shortly sank and became a wreck. The plaintiff contended that the explosion of the boiler was a peril of the sea. Paterson, J. Perils of the sea arc defined by our Civil Code to be : "storms and waves; rocks, shoals and rapids; other obstacles, though of human origin; changes of climate; the confinement necessary at sea; animals peculiar to the sea; and all other dangers peculiar to the sea." (Civ. Code, § 2199.) The bursting of a boiler is not within any of the first six causes named. Is it a danger peculiar to the sea? Perils of the sea have been defined to be, "all perils, losses and misfortunes of a marine character, or of a character incident to a ship as such." (Thames & Mersey Mar. Ins. Co. v. Hamilton, 12 App. Cas. 484.) In that case it was said: "The damage to the donkey- engine was not through its being in a ship at sea. The same thing would have happened had the boiler and engines been on land, if the same mismanage- ment had taken place. The sea, waves and wind had nothing to do with it. . . . It is, I think, impossible to say that this is damage occasioned by a cause similar to perils of the sea on any interpretation which has ever been applied to that term. It will be observed that Lord Ellenborough limits the operation of the clause to marine damage. By this I do not understand him to mean only damage which has been caused by the sea, but damage of a character to which a marine adventure is subject. Such an adventure has its own perils, to which either it is exclusively subject or which possess, in relation to it a special or peculiar character. To secure an indemnity against these is the purnnse and object of a policy of marine insurance. . . . 344 MILLER V. CALIFORNIA INS. CO. [CHAP. XX But the explosion of the boiler on board the Panama had no marine char- acter at all. It might have happened in precisely the same way, and done the same kind of damage, if a similar engine had been in use for the purpose of moving manufacturing machinery on shore." These views seem to express very clearly the proper meaning of the seventh clause of § 2199, supra. Judgment affirmed.^ McKiNSTRY, J., and Searls, C. J., concurred. ' In the famous case cited above, the steamer Inchmaree, with her machinery, in- cluding a donkey-engine, was insured by the defendant. For purposes of navigation, the donkey-engine was being used in pumping water into the main boilers, when, owing to a valve having been inadvertently closed, water was forced into and split open the air-chamber of the donkey-pump, damaging it to the extent of about £72, 10s. The closing of the valve was not due to ordinary wear and tear, nor had the action of the sea, waves, or wind anything to do with it. The House of Lords, reversing the court below, held that whether the injury occurred through negligence, or accidentally without negligence, the loss was not covered by the policy, either under the words "perils of the seas," or under the general words "all other perils, losses and misfortunes that have or shall come to the hurt, detriment or damage of the subject-matter of insurance," Thames & Mersey Mar. Ins. Co. v. Hamilton, 12 App. Cas. 484, 56 L. J. Q. B. 626. So also the English court has declared that difficulties arising merely from the ordinary obstruction or closing in by ice of a port, which is subject to be closed, and is always closed in the winter months, do not amount to a peril of the seas within the ordinary meaning of a policy of marine insurance, but that when the obstruction by ice is accidental and unexpected, due, for example, to the prevalence of unexpected winds or currents, then an extraordinary difficulty and danger is created and such obstruction and danger constitute a peril of the seas, Popham v. St. Petersburg Ins. Co., 10 Com. Cas. 31. In another English case, twenty-six packages of dead pigs had been shipped at Hamburg on board the Leopard. Thirty-two quarters of beef had been shipped at a later date for the same voyage on board the Ostrich. Both shipments were consigned to the plaintiff, the insured. All the meat so shipped became putrid and was necessarily thrown overboard, not because of any direct action of storms or seas affecting it, but solely on account of the unusual delay in the voyage, which, however, was occasioned by tempestuous weather. The English court held that this was not a loss by perils of the seas, or within the words "all other perils, losses and misfortunes," etc., in the policy, Taylor v. Dunbar, L. R. 4 C. P. 206. During a voyage of one of the ocean liners from New York to Liverpool the ship's carpenter and the deck-hands erected a temporary structure on deck to protect passengers while dancing. The job was done so carelessly that the shelter with its heavy supports falls to the deck in calm weather. The collapse breaks certain cabin windows, damages the tempo- rary structure, and also injures one of the ladies who was engaged in dancing at the time. The injurt'd passenger recovers compensation for her hurt and her fright from the steamship company. The steamship company, however, fails to recover from ita underwriters for the damage sustained by the temporary erection and the ship; since the loss is not within the scope of the perils clause of the marine policy as construed by the courts, Thames & Mersey Mar. Ins. Co. v. Hamilton, 12 App. Cas. 493, 56 L. J. Q. B. 626. Nor can the steamship company look to that policy to recover re- imbursement for the amount of the judgment paid by it to the injured passenger, since the usual marine policy does not cover employers' liability, which forms the suljject of another cla.ss of insurance. Damage to cargo by ordinary dampness of the hold is not covered by the policy, although aggravated by the length of the voyage due to stress of weather. Likewise damage by worms or climate is not covered. Baker V. Mfrs. Ins. Co., 12 Gray (Mass.), 603; Martin v. Salem Mar. Ins. Co., 2 Mass. 420. Collision. — Collision is also a peril, Peters v. Warren Ins. Co., 14 Pet. (U. S.) 99, 10 L. Ed. 371, and this whether the collision be the result of inevitable accident, or CHAP. XX] GREEN V. ELMSLIE 345 GREEN V. ELMSLIE Court of King's Bench, 1795. 1 Pcake, N. P. Cas. 278 Capture: proximate caiise of loss. This action was on a policy of insurance on the ship Fly, from Exeter to London. The insurance was against capture only. The ship, while on her voj'agc, was driven by a hard gale of wind on the coast of P>ance, and was there captured by the enemy; she did not receive any damage from the wind. Erskine contended that this was a loss by the perils of the seas, and not by capture, and that therefore the defendant was not lial)l(' on this policy. But Lord Kenyon said, the case was too clear to admit of argument; this was clearly a loss by capture, for had the ship been driven on any other coast but that of an enemy, she would have been in perfect safety. Verdict for the plaintiffs.^ fault on the part of the ship insured, or of fault on the part of the other ship; for, on the principle of causa proxima, the underwriters must pay, be the fault whose it may, Richelieu Nav. Co. v. Boston Ins. Co., 1.36 U. S. 408, 421, 10 S. Ct. H34, 34 L. Ed. 398. The courts difTer, however, as to whether the underwriters' liability extends to rover payments made by the insured for damages to the other ship. The English and Fed- eral courts hold that such loss is too remote to be covered unless expressly insured, The Barnstable, 181 U. S. 464, 21 S. Ct. 684. The Massachusetts court adopts the opposite view and considers the loss within reach of the ordinary marine policy without specific mention, Whorf v. Equitable Mar. Ins. Co., 144 Mass. 68, 10 N. E. 513. It is usual, however, to provide for this liability by a distinct contract called the collision or running down clause, Tatham v. Burr (1898), App. Cas. 382. In New York the term "collision" seems not to be limited to an impact between vessels or navigable objects, but to include also an accidental striking of a vessel against ice or other foreign object, Newtown Creek Towing Co. v. JEtna Ins. Co., 163 N. Y. 114, 57 N. E. 302 (in the briefs are cited many authorities). Thieves. — The word "thieves," associated as it is with "enemies, pirates, rovers," has in England been held applicable only to persons outside the ship who enter and commit robbery, this conclusion being put upon the ground that the ship or master is liable in tort for goods stolen or embezzled by anyone on board, Steinman r. Angier Line (1891), 1 Q. B. 619. But in America the clause is held applicable as well to a larceny or theft committed by passengers or those in the service of the ship, Spinetti V. Atlas S. Co., 80 N. Y. 71, 36 Am. Rep. 579. Barr.\try. — The term "barratry" includes every wrongful act willfully committed by the master or crew to the prejudice of the owner, or, as the ease may be, the char- terer of the ship, Atkinson v. Great Western Ins. Co., 65 N. Y. 531. But mere negli- gence or error of judgment does not constitute barratry, Hutchins v. Ford, 82 Me. 363, 19 Atl. 832. Though acta to be barratrous must be prejudicial to the owner, they need not be 80 intended, if intentionally committed, Earle v. Rowcroft, 8 East, 126. Ac- cordingly, any unauthorized breach of law expo.sing the owner to penalties is barratry, even though intended for his advantage, Gold.schmidt v. Whitmore, 3 Taunt. 508; nor need the barratrous act, if unlawful, be intended to enure to the self-benefit of the master or mariners committing it, Dedcrer v. Delaware Ins. Co., 2 Wash. (C. C.) 61, Fed. Cas. No. 3,733. 1 The Bawnmorc was insured by a valued time policy against loss or damage by fire or explosion only. She stranded on the coast of Oregon and sustained such in- 346 MONTOYA V. LONDON ASSUR. CO. [CHAP. XX MONTOYA ET ALS. v. THE LONDON ASSURANCE CO. Exchequer, 1851. 6 Exchequer, 451 Proximate cause; how far followed in its results? Plaintiff's insurance covered hides and tobacco. In the course of her voyage, the vessel shipped large quantities of sea water. This rendered the hides rotten and putrid and on the termination of the voyage it was dis- covered that the putrefaction of the hides had in turn imparted an ill flavor to the tobacco, a large portion of which was rendered totally worthless. Pollock, C. B. The question for the court is, whether, under the partic- ular circumstances of this case, the plaintiffs are entitled to recover from the underwriters for the damage occasioned to the tobacco, as a loss within the meaning of the policy; and we are all clearly of opinion that our judgment ought to be for the plaintiffs. Mr. Peacock has argued the case with much ingenuity, and the effect of his argument has been to cause some doubt where the precise limits of the responsibility of underwriters are to be fixed. Many ingenious cases might be suggested, in which the court would have much difficulty in deciding whether they would fall within such limits. But it appears to me that no such doubt or difficulty exists in the present case, and I think, as fell from one of the members of the court in the course of the argument, that if the underwriters here would have been responsible for damage done to a cargo consisting entirely of corn, the lower part of which had been spoilt by direct contact with the sea water, and the upper by the fermentation of the lower part, the underwriters must equally be liable in the present case ; for, in truth, there is no distinction between the two cases. It is a matter of no difference whether the whole of the cargo belongs to one person, and consists of one entire package of corn, or whether the cargo con- sists partly of corn and partly of hides, and is the property of several owners. In both cases the loss arises from perils of the seas; and it is difficult to see how the loss can be said not to be the immediate result of such perils. Several of the cases put to us on the part of the defendants are, in my opinion, cases of the direct and immediate consequence of perils of the seas, in which the sea water is the immediate cause of the loss. And I think it may be laid down as a general rule, that where mischief arises from perils of the seas, and the natural and almost inevitable consequence of that mischief is to create fur- ther mischievous results, the underwriters, in such case, are responsible for the further mischief so occasioned. jurios by 8oa perils that the cost of repairing her would have been greater than her value when repaired. Thirty-six hours afterwards she was completely destroyed by fire. The English court held that the insurer was liable for the full amount under- written, Woodside v. Globe Mar. Ins. Co. (1986), 1 Q. B. D. 106. CHAP. XX] THE G. R. BOOTH 347 Parke, B. I am also of opinion tluit our judRmont ought to be for the plaintiffs. There is no doubt that the maxim of Lord Bacon, which was cited at the commencement of the case, and has been relied upon by Mr. Peacock, is perfectly correct, and applies not only to the present case but to all cases of this description; and the question in each case is what is causa proxima, and what caiisa remota. There is very great difficulty, as my Lord Chief Baron has observed, in saying where the precise line is to be drawn: and it is often no easy matter to decide whether a particular ca.se falls within it or not. But I do not sec tliat there is any difficulty in saying that the present case docs fall witliin the line. If the owner of this tobacco which has been injured, could recover compensation for his loss occasioned by that injury from the master or owner of the vessel, there is no good reason why he should not be entitled also to recover against the underwriter for a loss occasioned by perils of the seas. If the cargo had consisted wholly of hides, and the upper part had been injured by vapors arising from the decomposi- tion of the lower hides, occasioned by the action of sea water, the owner of the hides would have been entitled to recover from the underwriter for the injury so occasioned to the upper layers. It is a matter of no difference whatever that the cargo consists partly of corn and partly of hides. The loss in either case is immediately and directly caused by perils of the seas, and would therefore fall within the terms of this policy. It is therefore not necessary to give any opinion upon the cases which have been put on the part of the defendants. Some of them may fall within the line, and others without it. It seems to me to be impossible to distinguish this case from that which I put, where the cargo is supposed to consist entirely of hides or corn, and the upper part is injured by noxious gases arising from the decom- position of the lower portions, or by the water being raised by capillary at- traction. The assured are therefore entitled to recover in this action. Judgment for the plaintiffs. THE G. R. BOOTH Supreme Court of the United States, 1898. 171 U. S. 450 Joint action of peril insured against and peril excepted. This was a libel against the steamship G. R. Booth, for damage done to sugar, part of her cargo, under the following circumstances: Another part of the cargo consisted of twenty cases of detonators, being copper caps packed with fulminate of mercury for exploding dynamite or gun cotton. While the steamship was being unladen at the dock in New York City, her port of destination, one of the cases of detonators exploded, purely by accident, and without any fault or negligence on the part of anyone engaged in carrying or 348 THE G. R. BOOTH [CHAP. XX discharging the cargo. The explosion made a large hole in the side of the ship, through which the sea water rapidly entered the hold and greatly dam- aged the sugar. The bill of lading of the sugar provided that "the ship or carrier shall not be liable for loss or damage occasioned by the perils of the sea or other wa- ters," or "by collision, stranding or other accidents of navigation, of what- soever kind." The question certified by the Circuit Court of Appeals to this court is whether the damage to the sugar is within these exceptions in the bill of lading. Mr. Justice Gray. The case turns upon the question whether the dam- age to the sugar by the sea water which entered the ship through the hole made in her side by the explosion, without her fault, was "occasioned by the perils of the sea"; or, in other words, whether it is the explosion, or a peril of the sea, that is to be considered as the proximate cause of the dam- age, according to the familiar maxim causa proxima non remota spedatur. Generally speaking the words "perils of the sea" have the same meaning in a bill of lading as in a policy of insurance. There is a difference, indeed, in their effect in the two kinds of contract, when negligence of the master or crew of the vessel contributes to a loss by a peril of the sea; in such a case, an insurer against "perils of the sea" is liable, because the assured does not warrant that his servants shall use due care to avoid them; whereas an ex- ception of "perils of the sea" in a bill of lading does not relieve the carrier from his primary obligation to carry with reasonable care, unless prevented by the excepted perils. But when, as in the present case, it is distinctly found that there was no negligence, there is no reason and much inconven- ience, in holding that the words have different meanings in the two kinds of commercial contract. Phoenix Ins. Co. v. Erie Transportation Co., 117 U. S. 312, 322-325; Liverpool Steam Co. v. Phoenix Ins. Co., 129 U. S. 397, 438, 442; Compania La Flecha v. Brauer, 168 U. S. 104; The Xantho, 12 App. Cas. 503, 510, 514, 517. In the case at bar the explosion of the case of detonators, besides doing other damage, burst open the side of the ship below the water line, and the sea water rapidly flowed in through the opening made by the explosion, and injured the plaintiff's sugar. The explosion, in consequence of which, and ' through the hole made by which, the water immediately entered the ship, must be considered as the. predominant, the efficient, the proximate, the responsible cause of the damage to the sugar, according to each of the tests laid down in the judgments of this court, above referred to. The damage to the sugar was an effect which proceeded inevitably, and of absolute neces- sity, from the explosion, and must, therefore, be ascribed to that cause. The explosion concurred, as the efficient agent, with the water, at the instant when the water entered the ship. The inflow of the water, seeking a level by the mere force of gravitation, was not a new and independent cause but was a necessary and instantaneous result and effect of the bursting open of the CHAP. XXj THE G. R, BOOTH 349 ship's side by explosion. There being two concurrent causes of the dam- age — the explosion of the detonators and the inflow of the water — without any appreciable interval of time, or any possibility of distinguishing the amount of damage done by each, the explosion, as the cause which set the water in motion, and gave it its efficiency for harm at the time of the dis- aster, must be regarded as the predominant cause. It was the primary and efficient cause, the one that necessarily set the force of the water in opera- tion; it was the superior or controlling agency, of which the water was the incident or instrument. The inflow of the sea water was not an intermediate cause, disconnected from the primary cause, and self-operating; it was not a new and independent cause of damage; but on the contrary, it was an in- cident, a necessary incident and consequence, of the explosion, and it was Cje of a continuous chain of events brought into being bj^ the explosion — events so linked together as to form one continuous whole. The damage was not owing to any violent action of winds or waves, or to the ship coming against a rock or shoal or other external object; but it was owing to an explosion within the ship, and arising out of the nature of the cargo, which cannot be considered, either in common understanding, or ac- cording to the judicial precedents, as a peril of the sea. As was observed by this court in Insurance Co. v. Boon, 95 U. S. 131. "Often in case of a fire much of the destruction is caused by water applied in efforts to extinguish the flames; yet, it is not doubted, all that destruction is caused by the fire, and insurers against fire are liable for it." If damage done by water thrown on by human agency to put out a fire is considered a direct consequence of the fire, surely damage done by water entering instantly, by the mere force of gravitation, through a hole made by an explosion of part of the cargo, must be considered as a direct conse- quence of the explosion. Upon principle and authority, therefore, our conclusion is that the ex- plosion and not the sea water, was the proximate cause of the damage to the sugar, and that this damage was not occasioned by the i^erils of the sea, within the exceptions in the bill of lading. Much reliance was placed by the appellee upon a recent English case, in which the House of Lords, reversing the decision of Lord Esher and Lords Justices Bowcn and Fry in the Court of Appeal, and restoring the judgment of Lord Justice Lopes in the Queen's Bench Division, hckl that damage to goods by sea water which, without any neglect or default on the part of the shipowners or their servants, found its way into the hold of a steamship through a hole which had been gnawed by rats in a leaden pipe connected with the bath-room of the vessel, was within the exception of "dangers or accidents of the seas" in a bill of lading. Hamilton v. Pandorf, 12 App. Cas. 518; 17 Q. B. D. 670; 16 Q. B. D. 629. There is nothing in the report of any stage of that case to show that the sea water entered the ship inunediately upon the gnawing by the rats of the hole in the pipe; and any sucli inference would be inconsistent with one of the opinions delivered in the House of Lords, in which Lord Fitzgerald said: "The remote cause was in a certain 350 THE G. R. BOOTH [CHAP. XX sense the action of the rats on the lead pipe; but the immediate cause of the damage was the irruption of sea water from time to time through the in- jured pipe, caused by the roUing of the ship as she proceeded on her voyage." 12 App. Cas. 528. However that may have been, that case differs so much in its facts from the case now before us that it is unnecessary to consider it more particularly. Qicestion certified answered in the negative.'- * If the master barratrously bore holes in the ship, causing her to fill and sink, barratry and not sea peril is the proximate cause, Waters v. Merchants' Ins. Co., 11 Pet. (U. S.) 213, 9 L. Ed. 69 (but see Heyman v. Parish, 2 Camp. 149; Arcangelo v. Thompson, 2 Camp. 620). An English marine policy on living animals contained a warranty "free from mortal- ity and jettison." The violence of a storm which was a peril insured against so injured some of the animals as to cause their death. The insurer was held liable notwith- standing the exception embodied in the warranty, Lawrence v. Aberdein (1821), 5 B. & Aid. 107. In another English case, under a bill of lading which excepted "acci- dents of the seas," the question arose whether an accident of the seas, or the resulting heat from the engine room, which damaged the plaintiff's cargo of grain, was to be regarded as the proximate or significant cause of the loan. During the voyage from Baltimore to Avonmouth, owing to exceptionally heavy weather, and for the safety of the ship, the ventilators of the steamship were closed for about a week, with the result that the air in the hold nearest the engine-room space became heated, and, not being able to escape through the ventilators, damaged a portion of the plaintiffs' grain. The court held that an accident of the sea was the proximate cause of the loss, and that, therefore, the exception in the bill of lading applied in favor of the defend- ants, the shipowners, The Thrunscoe (1897), Prob. 301. In a New York case a marine policy upon the cargo of a canal boat contained an "ice clause" providing that if the boat "was prevented or detained by ice or the closing of navigation from terminating the trip," the policj' should cease. The canal boat with others in a tow was proceeding down the Delaware River, when, in consequence of a gale, the towing tugs were sepa- rated from the boats which were driven ashore and stranded. During the night ice formed about them so that the tugs could not get at them. The boat thus remained frozen in until a thaw, when the wind and ice forcing her upon another boat, she broke in two, sank, and the cargo was injured. The court held that the primary, predominating, all-embracing cause to which all the ensuing loss must be attributed was the storm and not the ice, and that, therefore, the defendant was liable. Brown v. St. Nicholas Ins. Co., 61 N. Y. 332. By virtue of the doctrine here presented, the law holds that the hostile agency first in operation gives character to the whole connected catastrophe, unless otherwise expressly defined by the terms of the policy. For example, if an explosion named as an excepted peril, causes a destructive fire, as well as breakage or displacement, explosion is taken as the predominant and exclusive cause of the entire loss, Ins. Co. v. Tweed, 7 Wall. 44. And by the same logic, if in the natural ('ourse of a conflagration insured against, incidental explosions occur, no matter how violent, the effects of combustion and explosion alike, if not too remote and improbal)lc are attributed to fire as the Bole primary and all-embracing cause, Mitchell v. Potomac Ins. Co., 183 U. S. 42, 52, 22 S. Ct. 22, 40 L. Ed. 74 ("a lo.ss occurring solely from an explosion not resulting from a preceding fire is covered by the exception") ; Hall v. National F. Ins. Co., 115 Tenn. 613. 92 S. W. 402; contra, Hustace v. Phoenix Ins. Co., 175 N. Y. 292, 67 N. E. 592 (a heavy explosion, a mere incident to preexisting conflagration, was held to be the proximate cause and the insurer exonerated). The same doctrine finds copious and striking illustration in many court decisions, already adverted to, relating to the construction of the accident policy; for example, where the accidental injury, insured against, in turn results in blood poisoning, pntmmonia or some other form of disease, disease being expressly designated in the policy as an excepted risk. CHAP. XX] MAGNUS V. BUTTEMER 351 MAGNUS V. BUTTEMER English Court of Common Pleas, 1852. 11 C. B. 875 Whether loss by perils of the sea, or wear and tear. Action of assumpsit on a policy of assurance on the ship Elizabeth, for twelve calendar months, in port or at sea, in all services, in the coast and coasting trade of the United Kingdom. The Elizabeth sailed from Rochester to Sunderland. On her arrival at Sunderland, the vessel went up the river abreast of Laing's shipyard. She had to wait four or five days before she could go in to discharge. She was moored head and stern, and floated when the tide was in, and was aground, but not dry, at low water. She took three days to discharge. The beach was hard, shingly, and steep. When the vessel took ground, she listed towards the beach about two planks. When the first tide was ebbing, a creaking noise was heard as she took the ground, and it occurred when she floated again. This happened every tide, and sounded as if something was breaking. The cabin door, which would open and shut freely when the vessel was afloat, would not do so when she was aground. After first lying on the beach the vessel made more water than usual. The mate saw that she was "hogged," after having taken the ground. He observed that some of the trenails had started, and that some of the planks had left the trenails. The question for the opinion of the court was, whether, under these cir- cumstances, there was a loss by perils of the seas. Jervis, C. J. I am of opinion that the loss in this case was not a loss by perils of the sea, but a damage falling within the description of ordinary Independent Causes, Producing Distinguishable Damages. — During the Amcricnn Civil War, the light on Cape Huttonis having boon oxtingui.shed hy the Confederate troops for military reasons, the captain of a ship missed his reckoning, struck on a reef of rocks, and the ship became a wreck. The cargo consisted of 6,500 bags of cofTce, of which 150 bags were saved and 1,000 more would liave been saved if Federal salvers had not been interrupted by Confederate troops. This coffee was insured "free from all consequences of hostilities." ()n these facts, the English court held that the underwriters were liable for the loss of the 5, .350 bags left on the ship. The case was to be dealt with, the court said, as if there were two policies, one on the war risk and the other on the sea risk, and the question here was. Which of the two was the proximate cause of each loss? One hundred and fifty bags were actually re- covered. As to the 1,000 bags remaining aboard, it was the Confederate forces which directly prevented the rescue, and hence caused the loss. But the extinguishing of the light was only the remote cause of the loss of the remainder, the proximate cause being the striking on the reef which could not be said to follow as a natural or ordinary, still less as a necessary consequence of the extinguishing of the light, lonides r. Uni- versal Marine Ins. Co., 14 C. B. (N. S.) 259, 10 Jur. (N. S.) 18. 32 L. J. C. P. 170. 8 L. T. 705. 352 MAGNUS V. BUTTEMER [CHAP. XX wear and tear. No doubt, the question is one of importance; but I think it has been very unnecessarily brought before the court; for the matter seems to have been perfectly understood and settled by all the text-writers upon this branch of the law. To make the underwriters liable, the injury must be the result of something fortuitous or accidental occurring in the course of the voyage. Here the vessel, upon her arrival at Sunderland, goes up the river, and, in consequence of the rising and falling of the tide, rests upon the river's bed, and receives damages. There was nothing unusual, no peril, no accident. To hold that the assured were covered, in such a case, would be virtually making the policy a warranty against the wear and tear and or- dinary repairs of the vessel. I think the defendant is entitled to judgment. Maule, J. I am of the same opinion, and I concur with the lord chief justice in thinking that this is a very clear case. Stevens, and the other text \\Titers referred to, express no sort of doubt, but are evidently well ac- quainted with the distinction between wear and tear, for which the under- writers are 7wt liable, and accidents, the occurrence of something out of the ordinary course of the voyage, for which they are liable. This distinction has been well understood for many years. To hold the underwriters liable in such a case as this would be tantamount to holding that the ordinary repairs of a vessel are to be comprehended within the perils insured against. The case of Fletcher v. Inglis was sufficiently distinguished in the course of the argument; the statement of damage there is this: "Between 9 and 10 at night, the tide having then left the vessel, a cracking noise was heard in the ship, proceeding, as the witness believed, from something breaking. Some time after this, on the return of the tide, there was a considerable swell in the harbor, and the ship struck the groiind hard several times; in the morning eighteen of her knees were found to be broken." There were in that case some cir- cumstances which also occur here; but there was another circumstance there which is wanting here to make the cases parallel. There was casus fortuitus, the swell that set in, after ichich the ship's knees were found to be broken. That, I apprehend, was the ground of the decision in that case; and that is quite' consistent with the argument of Mr. Scarlett, who was not likely to lay down a general doctrine which did not meet the assent of the court, so familiar as they were at that time with insurance law. The case evidently proceeded upon the extraordinary and accidental circumstance of the great swell setting in the harbor. Suppose, instead of the swell, the case had stated, or the evidence shown, that a violent storm had arisen, and that the vessel was dashed against a rock and injured, nobody could have doubted that that was a loss by perils of the sea. That only differs in degree from the actual ca.se of Fletcher v. Inglis; but it differs very materially from the present case, which shows a mere subsiding of the ship upon the shore or beach on the re- ceding of the tide in the usual and expected course. According to sound law and common sense, the assured was entitled to recover in that case, whereas here nothing has happened which the assured could have wished or antici- pated to happen otherwise than it did happen. They intended the ship to CHAP. XX] PROV. WASH. INS. CO. V. ADLER 353 take the ground as she did. There was no accident. We are asked, there- fore, to assume a loss by perils of the sea when the facts disclosed to us ab- solutely negative the existence of sea peril. No instance is to be found of underwriters being liable where the voyage has been conducted to its ter- mination without anything happening but what was expected and intended, and where the sole cause of the damage was the insufficiency of the ship to bear the ordinary stress of the voyage to which she is exposed. Authority and common sense concur in showing that this is not a liability which ought to be cast upon the underwriters. Judgment for the defendants PROVIDENCE WASHINGTON INS. CO., ETC., v. ABLER, ETC. Court of Appeals of Maryland, 1885. 65 Md. 162 Loss by inherent vice. The plaintiffs shipped by a line of steamers, running from New York to the South, a quantity of oilcloth clothing to Louisiana and Texas. They insured this clothing before shipment in the office of the defendant company. The clothing was packed in boxes, and on its arrival at its destination, it was found injured and comparatively worthless, either by spontaneous com- bustion or bj' some chemical action arising from the material in the goods themselves. They all presented the appearance of having been burned or charred within the boxes. The clothing was not injured by any external force or accident, but whatever the injury was, it was the result of the in- herent infirmity of the goods themselves. Neither the plaintiffs nor the de- fendants knew at the time the insurance was effected, that the goods were liable to spontaneous combustion, or to be injured by any inherent defect in the goods. No extra premium to cover such risk was paid. Under these circumstances the defendants claim that by the general principles of insurance law, they are not liable for a loss by spontaneous combustion, caused b}' the inherent infirmity of the goods themselves. Stone, J. This was a marine policy, and one of the dangers insured against, by the terms of the policy, was fire. But while this is undoubtedly so, the question remains, and is still undecided in this State, whether the term "fire" used in the ordinary marine policy will, upon general i^rinciples, cover the case of spontaneous combustion, caused by an inherent infirmity in the article insured, and not the result of accident or peril of the sea. There is no doubt of the liability of the defendant company, under its policy, had the ship taken fire, and the goods been consumed ; or had the fire originated ' A policy does not cover the chemical action of the sea on the Atlantic cable coiled in a ship, there being no influx of sea water, Paterson r. Harris, 1 Best. & S. 336, 101 E. C. L. 336. Nor damage to the subject insured caused by climate, Martin v. Salem Marine Ins. Co., 2 Mass. 420. 23 354 ST. PAUL F. & M. INS. CO. V. PAC. C. S. CO. [CHAP. XX from any of the perils insured against; but the question is a very different one, when, as in this case, the goods are in good faith insured, and beheved both by pkiintiffs and defendant, not to be Hable to spontaneous combustion by reason of their inherent infirmity, but which in fact were so Hable, and were so injured. No well-managed insurance company would take a marine risk, on an article inherently liable to spontaneous combustion; nor would any prudent shipmaster or owner receive such on his vessel, as not merely the property so insured, but the property of others, and the safety of the ship, and the lives of the crew would be endangered by so doing. It would, as Emerigon says, be intolerable that the owner should receive pay for goods that destroyed themselves. The object of a marine policy is to insure against the perils of the sea, and not against the perils incident to the goods themselves. In this case it is very clear that the goods were injured by their own inherent in- firmity, and that such inherent infirmity was not called into activity by any peril insured against. We think such loss was not within the contemplation of either party to the contract of insurance; that the term "fire" used in the policy included fire from accident or brought about by a peril of the sea, and not spontaneous combustion. Judgment reversed.^ ST. PAUL FIRE & MARINE INS. CO. v. PACIFIC COLD STORAGE CO. Circuit Court of Appeals, 1907. 157 Fed. 625 The suing and laboring clause. Libel against the insurance company to recover expenses under the suing and laboring clause of the marine policy. The insured, a storage company, was engaged in the business of selling, in Alaska, certain refrigerated supplies. Its policy covered a cargo of re- frigerated meats, canned goods, etc., on a voyage from Tacoma, Wash., to Dawson, Yukon Territory. Owing to the very low water, there was a strand- ing of the refrigerating vessel on the Yukon River, causing a delay of several days. Part of the cargo was thereupon transferred to a lighter steamer with- out refrigerating plant. Both vessels reached Circle City in October. The river above had become partially closed by ice, and navigation was dangerous. The refrigerating vessel was then laid up and the lighter steamer proceeded * Loss by inherent vice includes, for example, natural and ordinary diminution by leakage or evaporation, natural and ordinary disease, decay, fermentation or other deterioration in the subject insured, Cory v. Boylston F. & M. Ins. Co., 107 Mass. 140, 9 Am. Rep. 14; Eldridge (1907), pp. 94, 95. Willes, J., says: "By the expression 'vice' is meant only that sort of vice which by its internal development tends to the destruction or the injury of the animal or thing to be carried, and which is likely to lead to such a result." Blower v. Gt. W. R. Co., L. R. 7 C. P. 662. CHAP. XX] ST. PAUL F. & M. INS. CO. V. PAC. C. S. CO. 355 until frozen in, seventy miles from Dawson. Both vessels were in danger of being crushed or disabled by the ice, and their cargoes lost by freshets likely to occur in the spring. To avert this peril, both cargoes were transported to Dawson by land during the winter. Hunt, District Judge. It is contended by the appellant that the cargo of the Kerr was not exposed to any peril under the terms of the policy, that it was merely delayed, and that the appellee was not entitled to expend any amount under the sue and labor clause because, it argues, the said clause was not ai)i)licable "to a case of remote and future peril, but to an immediate danger or present loss, and not under any circumstances to a case of delay alone." We are satisfied that peril to the boat of being destroyed or disabled by masses of floating ice coming down in the spring was one covered by the policy of insurance issued by appellant to appellee, and that, when it was determined to send the goods overland, rather than to leave them on the boat, with the risk of t/otal loss in the spring, the decision was made with regard to the safetj' of the goods themselves. Moreover, the insurance com- pany knew the facts and was satisfied that the assured should use its best judgment to save the cargo by moving it overland to Dawson. The agent of the insurance company knew just where the boats were. He was advised that it was thought best to remove the cargo overland, he knew the probable cost of moving each pound of cargo and he acquiesced in the opinion that it was best to move it, rather than to take the risk of a total loss by the break- ing up of the ice in the spring. The insurance company fairly agreed to make an advance toward the expense of removing the goods, and, it is just to say, led the assured to believe that when the removal was completed and the vouchers showing the total expense were received, and the claim adjusted, the underwriter would pay such a proportion of the expense of removal as it might be liable for under its policy of insurance. What proportion of the expenses should be borne by the underwriters was left open for subsequent determination; but the reasonable inference from the whole evidence is that there was no contention in respect to the wisdom of forwarding the goods overland to Dawson. We therefore conclude that the cargo was in a posi- tion of peril and that the expense of removing it was incurred by the assured with the consent of the underwriter to avert a probable total loss from the peril then ponding. The peril was a peril of the sea; and, as the goods would probably have been a total loss unless removed and forwarded to Daw.son during the winter, the expenses of so forwarding them became a consequence of the peril, Hubbell v. G. W. Ins. Co., 74 N. Y. 254; Phillips on Insurance, §§ 1127, 1128; Bryant v. Insurance Co., 13 Pick. (Mass.) 543. We find no error of which appellant can complain. The decree is affirmed.^ ' The sue aiul liihor rlau.se thouKh part of the policy is to be treated as wholly distinct from the engagement to indemnify for losses caused by the perils insured against and, therefore, in exceptional cases this collateral agreement may impose upon the under- 356 ST. PAUL F. & M. INS. CO. V. PAC. S. C. CO. [CHAP. XX writers an obligation to make pajTiicnt to the insured even in excess of the entire amount for which the poh"cy is underwritten, Aitchison v. Lohre, 2 Q. B. D. 502, 3 Q. B. D. 553, 566, 4 App. Cas. 755; Gilchrist v. Chicago Ins. Co., 104 Fed. 566, 44 C. C. A. 43; for example, in case of expenses paid by the master in an unsuccessful attempt to recover captured property in addition to a total loss of the property by the capture. For the same reason liability under the sue and labor clause is not a lia- bility for particular average and is not subject to the percentage restrictions contained in the memorandum clause, but is to be met in due proportion whatever the amount, Kidston v. Empire Marine Ins. Co., L. R. 1 C. P. 535. This provision of the policy has reference to expenditures not covered by the general perils clause, Alexander v. Sun Mut. Ins. Co., 51 N. Y. 253. The object of the clause is to furnish compensatory encouragement to the insured, to put forth diligent and prudent effort toward a prevention or diminution of the underwriters' loss, without prejudice to the rights of either party under the policy of insurance, Washburn & M. Mfg. Co. v. Reliance Mar. Ins. Co., 179 U. S. 1, 18, 21 S. Ct. 1, 45 L. Ed. 49; Munroe v. Ins. Co., 52 Fed. 777, 3 C. C. A. 280; Soelberg v. Western Assur. Co., 119 Fed. 23. Two conditions are requisite to constitute a valid claim under this clause; the apprehended loss must be something for which the underwriters would have been liable, and the measure for safety which gives rise to the expense claimed must be the act of the assured himself or of his agent or servant, Aitchison v. Lohre, 4 App. Cas. 755; Uzielli v. Boston Mar. Ins. Co., 15 Q. B. D. 11. If, for example, goods are insured "free of capture," it is clear that an expense incurred to prevent a capture could not be claimed under this clause; nor, if "against total loss only," an expense incurred merely to diminish damage or avert a loss other than total, Kidston v. Empire Ins. Co., L. R. 1 C. P. 543, Exch. L. R. 2 C. P. 357. In England, general average losses including contributions are not recoverable under the sue and labor clause. Mar. Ins. Act (1906), § 78 (2); Aitchison v. Lohre, 4 App. Cas. 755, 49 L. J. Q. B. 123. The rule differs in the United States, International Nav. Co. v. Atlantic Mut. Ins. Co., 100 Fed. 313, 322 (Brown, J.). Salvage Recovered, how to Be Divided. — The plaintiffs DufEeld and others were owners oi the steamboat Sam Cloon. The value of the vessel as agreed upon in the policies was $20,000, the total insurance $15,000, leaving the owners insurers to one- fourth the value. The steamboat was sunk in the Mississippi River, and abandoned to the insurers, who accepted the abandonment and proceeded to raise the wreck. The net amount of salvage recovered by the underwriters as a result of their opera- tions was $3,000. Under the phraseology of the sue and labor clause of the policy, the insurers contended that they were entitled to keep the whole of the proceeds, but the court held that the plaintiffs were entitled to recover from them one-fourth of the net amount of the salvage realized, Cincinnati Ins. Co. v. Duffield, 6 Ohio St. 200. Except in case of a liability policy, Ursula Bright v. Amsinck, 115 Fed. 243, if the total amount of marine insurance is short of the value of the property insured, the assured is himself a coinsurer for the deficiency. Hood Rubber Co. v. Atlantic Mut. Ins. Co., 161 Fed. 788; Egan v. Ins. Co., 193 111. 295, 61 N. E. 1081; Natchez, etc., Co. v. Louisville Underwriters, 44 La. Ann. 714, 11 So. 54. Memorandum Clause. — Warranted free frotn average unless general: warranted free from average under a certain percentage unless general. Certain articles are in their nature perishable, or peculiarly susceptible to change. A list of such articles is made subject to the restrictions of the modern memorandum clause. "The term 'average unless general' means a partial loss of the subject-matter insured other than a general average loss, and does not include 'particular charges,' " Eng. Mar. Ins. Act (1906), 1 Sch. 13. Total Loss of Part. — Where the subject-matter insured is warranted free from particular average the assured cannot recover for a loss of part, other than a loss in- curred by a general average sacrifice, unless the contract contained in the policy be apportionable; but if the contract be apportionablc, the assured may recover for a total loss of any apportionable part, Silloway v. Neptune Ins. Co., 12 Gray (Mass.), 73. CHAP. XX] ST. PAUL F. & M. INS. CO. V. PAC. S. C. CO. 357 Unless Ship Be Sthandkd. — As to the moaning uf this phrase sometimes added to the mcniorunduni claus(! and us to what constitute! a stranding, see London Assur. Co. V. Conipanhia dc, etc., 1G7 U. S. 149. 17 S. Ct. 785, 42 L. Ed. 113. Unless the Ship Be Burnt. — As to when a ship is "burnt," sec London Assur. Co. V. Companhia dc, etc., 167 U. S. 149; The Gienlivet (1894), Prob. 48. 358 EDGEFIELD MFG. CO. V. MD. CAS. CO. [CHAP. XXI CHAPTER XXI Guarantee, and Liability Insurance EDGEFIELD MFG. CO. v. MARYLAND CASUALTY CO. Supreme Court of South Carolina, 1907. 78 S. C. 73 Immediate notice of accident required. Plaintiff procured an employer's liability policy of insurance for $3,500 from the defendant to indemnify against claims for accidents to its employes. Jennings, an employe, recovered a judgment of $3,500 against the manu- facturing company for personal injuries received in their employ. After payment of the judgment, the manufacturing company as plaintiff brought this action on its insurance policy to recover $1,500, the insurance being lim- ited to that amount, for the death or injury of any one employ^. The acci- dent occurred October 21, 1903. The negligence suit based upon it was be- gun in January, 1904. Price, who was actively in charge of the mill, and indeed the larger part of the office force were, during this period, sick with the smallpox. Woods, J. The stipulation that the insured should give immediate notice of an accident and full information concerning it, and send the summons immediately to the insured company, means that these things should be done with reasonable promptness under the circumstances, not that they should be done literally without the lapse of any time.i The numerous au- thorities on this point are collated in 21 Cyc. 1731, 1732. What is reasonable promptness under such stipulation is usually a question of fact for the jury. There was evidence that Price, vice president and treasurer in charge of the mill, was in extreme ill health, though trying to attend to the duties of his office, when the accident happened to Jennings, and grew worse, until his death in February, 1904. Mr. A. S. Tompkins then took charge of the offices of the mill as temporary successor to Price. In March, 1904, Mr. Tompkins was made aware for the first time that his company had casualty insurance by finding the policy among the papers of the company, and on the same day gave the casualty company notice of the accident, and offered to send it the summons served on behalf of Jennings. Mr. Tompkins thus sums up in his evidence the reasons for the delay: "That is when I found the policy. ' Compare with strict doctrine of warranties relating to matters applicable prior to bss. CHAP. XXl] EDGEFIELD MFG. CO. V. MD. CAS. CO. 359 Not only had Mr. Price been sick, but the balance of the people in the office nearly all had smallpox. The entire office had three or four months' vaca- tion by Mr. Price being in a dying condition; quarantined on account of smallpox. That was the condition of things at the time this accident oc- curred and shortly after. We had these conditions to contend with. The mill was almost entirely at a standstill." In view of these facts, it is evident a jury could not reasonably reach any other conclusion than that the delay was excusable, and the notice given and the summons sent with all promptness to be fairly expected and exacted. The judgment of this court is that the judgment of the Circuit Court be af- firmed.'' ' Immediate Notice of Accident Required. — To govern the rights of the parties under this important provision of the policy the New York Court of Appeals has laid down a set of rules and holds among other things that the liability of the assured for the negligence of his servants or agents in failing to apprise him of an accid(!nt must be confined to those agents whose duty it is, either by his express regulation, or by their supervision and control in the natural and proper conduct of business over the sub- ordinate servants by whom the accident had been caused to transmit such knowledge to their superiors or the assured, and the assured is not chargeable with th(! knowledge of the servant causing the accident or with the knowledge or information of a co- servant of the same rank as the one causing the accident, Woolverton v. Fidelity & Casualty Co.. 190 N. Y. 41, 82 N. E. 745. Compare Mandell v. Fidelity & Cas. Co., 170 Mass. 173, 49 N. E. 110, 64 Am. St. R. 291. The clause of the fidelity bond calling on the employer to give immediate notice of default or misconduct on the part of the employ^ is similarly construed. Fidelity & Cas. Co. v. Courtney, 186 U. S. 342, 22 S. Ct. 833, 46 L. Ed. 1193. The individual surety generally acts gratuitously. Not so the surety company. The courts construe the contract of the surety company as one of insurance rather than as one of suretyship, American Surety Co. v. Pauly, 170 U. S. 144, 18 S. Ct. 552, 42 L. Ed. 977; Bank of Tarborov. Fidelity & Deposit Co.. 126 N. C. 320, 35 S. E. 588, 83 Am. St. R. 682, 128 N. C. 366, 38 S. E. 908, 83 Am. St. R. 682. Meaning of "forthwith," "immediate," "as soon as possible" in connection with a requirement for notice or proofs under any kind of policy, Everson v. General F. & L. Assur. Corp.. 202 Mass. 169. 88 N. E. 658; Trippe v. Provident Fund Soc. 140 N. Y. 23. 35 N. E. 316, 22 L. R. A. 432, 37 Am. St. R. 529; Hughes v. Ins. Co., 222 Pa. St. 462; Cady v. Fidelity & Cas. Co., 134 Wis. 322, 113 N. W. 967, 17 L. R. A. (N. S.) 260. But if the condition of the policy prescribes a limit of time for service the notice must be received within the time specified, McCord v. Masonic Cas. Co., 201 Mass. 473. "Satisfactory proof" means "such as ought to be satisfactory to reasonable men acting reasonably," Traiser v. Commercial F. E. Ace. Assn., 202 Mass. 292. JuD(iMENT IN Accident Suit Conclusive. — The insurer, having received proper notice of the accident suit and opportunity to conduct the defense, is concluded by the judgment therein rendered, which naturally is offered in evidence in the suit on the policy, to establish the fact of the employer's liability to the insured person, and the amount of that liability. B. Roth Tool Co. v. New Amsterdam Cas. Co., 161 Fed. 709; City of St. Joseph v. Ry. Co.. 116 Mo. 636, 22 S. W. 794, 38 Am. St. R. 026. The United States Supreme Court says: "When a person is responsible over to another either by operation of law or by express contract, and he is duly notified of the pendency of the suit, and requested to take upon himself the defense of it, he is no longer re- garded as a stranger, because he had the right to appear and defend the action, and has the same means and advantages of controverting the claim as if he were the real and nominal party upon the record. In every such case, if due notice is given to such 360 EDGEFIELD MFG. CO. V. MD. CAS. CO. [CHAP. XXI person, the judgment if obtained without fraud or collusion, will be conclusive against him whether he has appeared or not," Washington Gas Co. v. Dist. of Columbia, 161 U. S. 316, 16 S. Ct. 564, 40 L. Ed. 712. As to the liability of the insurer for the costs in the accident suit see New Amsterdam Cas. Co. v. Cumberland T. & T. Co., 152 Fed. 961; Nesson v. U. S. Cas. Co., 201 Mass. 71. APPENDIX APPENDIX (Note. — Forms of insurance policies in current use are interpolated in the text in connection with the discussion of the legal meaning of their clauses. Standard fire policies, pp. 207 el scq. Life policy, pp. 275 et seg. Accident policy, pp. 311 el acq. Marine policy, pp. 335 et scq.) Simple Form of Applicalion for Fire Policy The Home Insurance Co., New York. Insurance is wanted by to the amount of $ rate term from 190.. to 190 . . On Location Binding Slip Used in New York City Name . . . Location Amount $ Rate Time Months. Each of the undersigned companies, for itself only, insures the property above described for the amount set opposite its name until the issue of its Standard Policy on the same in place hereof, or until twelve o'clock noon of the next business day after the risk is declined, by notice to the assured or broker placing the risk. But in no event shall this insurance be in force over fifteen days from the date of com- mencement of liability hereunder. Binder Signed Company Amount Date of Commencement of Liability Signature (The use of the foregoing form of binder is compulsory among the members of the New York Fire Exchange, to wit, the stock companies and certain insurance agencies. The late judge AViiliimi Humsey, who prepared it, advised that it was not inconsistent with the cancellation clause of the standard fire policy, l)ut the point has not been adjudicated. The New York Fire Exchange governs the action both of stock com- panies and of brokers within si)ecified territory. Some such institution is almost a necessity to compel uniformity and system in rates and forms of clauses and in other 303 364 APPENDIX particulars relating to the conduct of insurance. The Exchange prohibits rebates and encourages improvements by the insured which shall diminish the risk of fire loss and lower the rates of premium.) Printed Rider Called "The Forms" (Including Description of the Property and Special Clauses), Prepared by the Broker to Be Attached to the Policies on Stock of a Depart- ment Store. $ On merchandise and articles on sale of every description, including ma- terials, samples and supplies, manufactured, unmanufactured and in process of manufacture, their own or held by them in trust or on consignment or commission, or sold but not delivered or removed, including the property of others held on storage, or for repairs, or for which the insured may be liable, also for labor and materials put on same, contained in the brick, stone and iron buildings and additions situate It is understood and agreed that this insurance shall cover the assured, as now or hereafter constituted. It is understood and agreed that this insurance is for the benefit of Brown & Co., as now or may be hereafter constituted. Privileged to work overtime and to keep for use not exceeding two (2) quarts of benzine, in patent safety cans. Privileged to do such work and to use such materials as are usual in the business of department store. Privileged to use steam for heat and power and gas for light and heat, and for existing communications. Other insurance permitted. Sole Occupancy Warranted. — "Warranted by the assured that the building herein described is occupied exclusively by one tenant." Watchman and Clock. — "Warranted by the assured to maintain. Night, Sunday and Holiday W^atchman, with approved stations and approved watch clock, and making such reports to the New York Fire Insurance Exchange as may be required." Special Building Signal. — "Warranted by the assured to maintain a Special Build- ing Signal approved by the New York Board of Fire Underwriters for the transmission of alarms to Fire Department Headquarters." Automatic Fire Alarm Clause. — The entire building containing the property hereby insured, having been equipped with the Automatic Fire Alarm Signal Telegraph, in accordance with the Rules and Regulations of the New York Board of Fire Under- writers, and a certificate to that effect issued by authority of said Board, this policy is issued at a reduced rate of premium, and in consideration of such reduced rate, it is hereby made a condition of this policy that the assured shall use due diligence that such equipment shall continue to be maintained during the full term of this insurance. Automatic Sprinkler Clause. — It is hereby made a condition of this policy that the insured shall use due diligence to maintain in full working order during the term of this insurance the automatic sprinkler erjuipment now in use, and that no change shall be made in such system without the approval of the New York Fire Insurance Exchange or the New York Board of Fire Underwriters, and that if such sprinkler equipment is not automatically connected with a central fire alarm station in a manner approved by said Exchange or Board the insunsd shall maintain a watchman, with an approved watch clock, during the hours when the premises are not regularly in opera- tion and when closed or whenever such automatic fire alarm signal station is tem- porarily disconnected. (The 100% average clause is here inserted.) Mechanics' Privilege. — Permission for mechanics to be employed for ordinary altera- tions and repairs in the within describtid premises, but this shall not be held to include the constructing or reconstructing of the building or buildings, or additions or the enlargement of the premises. APPENDIX 365 New York Standard Clause Forbidding the Use of Electricity. — This entire policy ehall be void if electricity is used for light, heat or power in the above described premises unless written permission is given by this company hereon. "Privileged to Use Elactricily in the above mentioned premises for light, and / or heat, and /or power, it being hereby made a condition of this policy that where the equipment is owned or controlled in whole or in part by the assured a Certificate shall be obtained from the New York Board of Fire Underwriters, and that no alterations shall be made in that portion of the equipment owned or controlled by the assured after Certificate is issued without notice thereof being given to the said Board." Lightning Clause. — This policy shall cover any direct loss or damage caused by Lightning (meaning thereby the commonly accepted use of the term Lightning, and in no case to include loss or damage by cyclone, tornado or windstorm), not exceeding the sum insured, nor the interest of the insured in the property, and subject in all other respects to the terms and conditions of this policy. Provided, however, if there phall be any other insurance on said property, this Company shall be liable only pro rata with such other insurance for any direct loss by Lightning, whether such other insurance be against direct loss by Lightning or not. Attached to and forming part of Policy No Insurance Company. Send Policy to Benedict & Benedict. Liberty and Nassau Sts. New York. (Signed) Please Sign This Form, and Make no Alterations A Combined Form for Dwclling-IIouse and Furniture Prepared by the Broker S On the Dwelling, Additions and extensions. Decorations, Frescoes, Plate and other Glass, Heating and Electric Apparatus, Wiring and Moulding covering the same, Gas and Electric Fixtures, Elevators, Plumbing, Steam, Gas and Water Pipes, Awnings, Stoops, Sidewalks, Fences and Yard Fixtures, and all permanent fixtures contained in or attached to said dwelling and additions situate Loss, if any, payable to Mortgagee, subject to clause hereto attached $ On Household Furniture and Utensils, useful and ornamental, Beds, Bed- ding, Carpets, Rugs, Linen, Wearing Apparel, Plate, Plated Ware, Chande- liers, Gas Fixtures, Printed Books and Music, Pictures, Paintings, En- gravings and their Frames (at not exceeding cost). Bronzes, Statuary and other Works of Art, objects of Virtu, Curiosities, Curios, Antiques, Piano- fortes, Musical Instruments, Scientific Instruments, Billiard Tables, Bicy- cles, Guns, Fishing Rods, and other Sporting Implements, Trunks, Tools, Sewing Machines, Curtains, Mirrors, Clocks, Watches, Diamonds, and all other Jewelry, Crockery, Glass and China Ware, Stoves, Fuel and Family Stores and all other household furniture the property of the assured, or any member of the family or servants or guests, all contained in the above- described dwelling, additions and extensions. The item of this policy covering on household furniture does not cover on property insured under policies covering on building. It is understood that the existence of a mortgage on the above-described buildings shall not invalidate this insurance. It is understood that the insurance shall not be invalidated should the buildings stand on leased ground or be vacant or unoccupied. Other insurance permitted. Privileged to make additions, alterations and repairs, and this policy to cover thereon 366 APPENDIX and therein ; to use Steam Furnaces or Grates for heating, to use Gas, Kerosene Oil or Electricity for lighting, and to use Kerosene Oil or Gas Stoves; also to use small quan- tity of Benzine or Naphtha for cleaning purposes. (Lightning Clause as in last preceding form.) Attached to and forming part of Policy No Insurance Company. Send Policy to Benedict & Benedict, Liberty and Nassau Sts. New York. (Signed) Please S'^n This Form, and Make no Alterations (The purport of some of the provisions in the last two forms shows that they are included by the broker, because they are required by the insurer or because they secure a lower rate of premium.) Dwelling Warranties Dwelling Warranty. — Warranted by the assured that the within-described building is occupied exclusively for dwelling purposes by not more than two families; or Flat House Warranty. — Warranted by the assured that the within-described build- ing is occupied exclusively for dwelling purposes. (The New York Fire Exchange requires one or the other to indicate whether private residence or apartment house. The latter calls for the higher rate. See 103 App. Div. 12.) A Form of Average Clause It is understood and agreed, that the amount insured by this policy shall attach in each of the above-named premises in that proportion of the amount hereby insured that the value of property covered by this policy, contained in each of said places, shall bear to the value of such property contained in all of above-named premises. (The New York standard fire policy and others expressly allow the attachment to the policy of special clause-s. See 181 N. Y. 472.) Application and Survey Clause New York Standard. This policy is based upon an application and survey of the property on file which ia hereby referred to as forming part of this policy. Date of Application, Where Filed Attached to and forming part of Policy No [Signature for Company.] Coinsurance Clause New York Standard. If at the time of fire the whole amount of insurance on the property covered by this policy shall be less than the actual cash value thereof, this Company shall, in case of loss or damage, be liable for such portion only of the loss or damage as the amount insured by this policy shall bear to the actual cash value of such property. Attached to and forming part of Policy No [Signature for Company.] Mortgagee Clause New York Standard. Lose or damage, if any, under this policy, shall be payal'e to as mortgagee [or trustee], as interest may appear, and this insurance, as to the interest APPENDIX 367 of the mor^gaKOP [or trustop] only therein, shall not be invalidated by any art or neg- lect of the mortgagor or owner of the within dpscribed property, nf)r 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 pur- poses more hazardous than are permitted by this policy; provuled, that in case the mortgagor or owner shall neglect to pay any premium due under this policy, the mort- gagee [or trustee] shall, on demand, pay the same. Provided, also, that the mortgagee [or trustee) shall notify this Company of any change of ownership or occupancy or increase of hazard which shall come to the knowledge of said mortgagee [or trustee], and, unless permitted by this policy, it shall be noted thereon and the mortgagee [or trustee] shall, on demand, pay the premium for such increased hazard for the term of the use thereof; otherwise this policj' shall be null and void. This Company reserves the right to cancel this policy at any time as provided by its terms, but in such case this policy shall continue in force for the benefit only of the mortgagee [or trustee] for ten days after notice to the mortgagee [or trustee] of such cancellation and shall then cease, and this Company shall have the right, on like notice, to cancel this agreement. Whenever this Company shall pay the mortgagee [or trustee] any sum for loss or damage under this policy and shall claim that, as to the mortgagor or owner, no lia- bility therefor existed, this Company shall, to the extent of such payment, be there- upon legally subrogated to all the rights of the partj' to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may, at its option, pay to the mortgagee [or trustee] the whole princii)al due or to grow due on the mort- gage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee [or trustee] to recover the full amount of claim. Dated, Attached to and forming part of Policy No [Signature for Company.] An Iron Safe Clause The following covenant and warranty is hereby made a part of this policy : 1st. The assured will take a complete itemized inventory of stock on hand at least once in each calendar year, and unless such inventory has been taken within twelve calendar months prior to the date of this policy, one shall be taken in detail within 30 days thereof, or this policy shall then be null and void and upon demand of the assured the unearned premium from that date shall be returned. 2d. The assured will keep a set of books, which shall clearly and plainly present a complete record of business transacted, including all purchases, sales and shipments, both for cash and credit, from date of inventory as provided for in first section of this clause, and during the continuance of this policy. 3d. The a.ssured will keep such books and inventory, and also the last preceding inventory, if such has been taken, securely locked in a fire-proof safe at night, and at all times when the building mentioned in this policy is not actually open for business; or, failing in this, the assured will keep such books and inventories in some place not exposed to a fire which would destroy the aforesaid building. In the event of failure to produce such set of books and inventories for the inspec- tion of this Company, this policy shall become null and void, and such failure shall constitute a perpetual bar to any recoverj' thereon. (The above clause is used sometimes in the South, not in New York.) An Earthquake Clause This Company shall not be liable for loss or damage occasioned by or through any volcano, earthquake, hurricane or other eruption, convulsion or disturbance of nature. 368 APPENDIX A Form of Clause for Insurance of Use and Occupancy On the use and occupancy of his mill buildings, situate at It is a condition of this contract of insurance that, if the said buildings or machinery therein, or either of them, or any part thereof, shall be destroyed, or so damaged by fire occurring during the continuance of this policy that the mill is entirely prevented from producing goods, this Company shall be liable at the rate of dollars per day for each working day of such prevention, and in case the buildings, or machinery, or any part thereof, are so damaged as to prevent the making of a full daily average pro- duction of goods, this Company is to be liable per day for that proportion of dollars which the product so prevented from being made bears to the average daily yield previous to the fire, which, for the purpose of this insurance is agreed to be the average daily production of goods based upon the time said mill was running for one year previous to the fire, not exceeding in either case the amount insured. Loss to be com- puted from the day of the occurrence of any fire to the time when the mill could with ordinary dihgence and dispatch be repaired or rebuilt, and machinery be replaced therein, and not to be limited by the day of expiration named in the policy. The National Board of Fire Underwriters Have Recommended Certain Forms OF Clauses Among Which Are the Following Rent Clause National Board Standard. $ On the rents of the story building, situated and known as No The intention of this insurance is to make good the loss of rents, caused by fire or lightning, actually sustained by the assured on occupied or rented portions of the premises which have become untenantable, for and during such time as may be neces- sary to restore the premises to the same tenantable condition as before the fire; said time, in case of disagreement, to be determined by appraisement in the manner pro- \'ided in the conditions of this policy; but this Company shall not be liable for a greater proportion of any loss than the sum hereby insured bears to the actual annual rental of such occupied or rented portions of the premises. Attached to and made a part of Pohcy No of Insurance Company. Reinsurance Clause National Board Standard. This policy is issued as reinsurance to apply to Policy No of the Insurance Company, and is subject to the same risks, privileges, conditions and en- dorsements (except changes of location), assignments, changes of interest or of rate, valuations and modes of settlements, as are or may be assumed or adopted by the said company. The amount payable under this policy shall bear the same ratio to the amount payable by the reinsured company under any and all policies upon the property specified and contained within the limits described herein, that the amount of this reinsurance in force at the time of loss shall bear to the total amount insured by the reinsurance company upon such property in force at the time of such loss, and shall be paid at the same time and in the same manner as payment shall be made by said reinsured company. Other reinsurance is permitted without notice until required. Attached to and forming part of Policy No of the Insurance Company. Where a Retainer Clause is desired to be attached to the foregoing Reinsurance Clause, the following is approved by the National Board of Fire Underwriters: Retainer Clause The reinsurance company shall retain at its own risk, on the identical property covered at the time of any loss, by this policy, over and above all its reinsurance thereon, APPENDIX 3G9 an amount equal to the amount of this policy upon such property, and, failing so to do, the amount which would (jtherwiso ho payaiile under this jjolicy by reason of said loss shall be proportionately reduced. Attached to and forming part of Policy No of the Insurance Company. ■:.! A Form of Proof of Loss State of. . County of. Be it known. That on this day of , 189. ., before me, , a Notary Public duly commissioned and sworn, and residing in the County and State aforesaid, pers(jnally appeared , who, being duly sworn, says that the follow- ing statement and the papers therein referred to and signed with his own hand con- tain a particular, just and true account of his loss in the words and figures following, to wit: I. That on the day of , 189. ., the Insurance Company by their Policy of Insurance, numbered , did insure the party herein and therein named against loss or damage by fire to the amount of dollars on (description of property insured from the policy) for the term of from the day of , 189. ., to the day of , 189. ., at noon. II. That in addition to the amount covered by said policy of said company, there was other insurance made thereon to the amount of dollars, as specified in the following schedule, besides which there was no other insurance thereon. (List of policies covering any of the property, showing as to each policy its date, term, and amount, the name of the company, and a copy of the description and schedule of property insured contained in such policy.) III. That the property insured belonged to (statement of interest of in- sured and of all others in the property and of all incumbrances thereon and changes of title, etc., since the issuing of the policy). IV. That the building insured or containing the property destroyed or damaged, was occupied at the time of fire in its several parts by the parties hereinafter named, and for the following purposes, to wit: (List of tenants.) V. That the actual cash value of the property so insured amounted to the sum of dollars at the time immediately prrceding the fire, as set forth in the follow- ing schedule: That on the day of 189. ., a fire occurred by which the property insured was injured or destroyed to the amount of dollars, as set forth in the following schedule which the deponent declares to be a just, true and faithful account of his loss as far as he has been able to ascertain the same: (Schedule of property damaged or destroyed, showing the cash value of each item thereof and the amount of loss thereon.) And the insured claims of the In- surance Company the sum of dollars. (If there are subdivisions in policy, also a statement of the amount claimed under each subdivision.) VI. That the fire originated (statement of knowledge and belief of the insured as to the time and origin of the fire), and the said deponent further declares that the said fire did not originate by any act, design or procurement on his part, or in consequence of any fraud or evil practice done or suffered by him, and that notliing has been done by or with his privity or consent to violate the conditions of insurance or render void the policy aforesaid. (Insured.) Sworn to before me this, day of , 189. ., } Notary Public. 24 370 APPENDIX Examples of the Operation of Coinsurance Clauses Prepared for This Book by WiUis O. Robb, Esq., Manager of the New York Fire Exchange. Companies Pay Under 80% Clause Under 100% Claiue 1. Value SIO.OOO") Ins. 6,000 > $ 4,500 $ 3.600 Loss 6,000 J 2. Valire 10,000^ Ins. 6,000 y 6,000 4,800 Loss 8,000 J 3. Value 10,000^ Ins. 6,000 V 6,000 6,000 Loss 10,000 j 4. Value 10,000 ") Ins. 8,000 V 6,000 4,800 Loss 6,000 J 5. Value 10,000") Ins. 8.000 V 8.000 6,400 Loss 8,000 j 6. Value 10,000 ") Ins. 8.000 V 8.000 8.000 Loss 10.000 J 7. Value 10,000 ") Ins. 10.000 y 6.000 6,000 Loss 6,000 J 8. Value 10.000 ") Ins. 10,000 y 8.000 8.000 Loss 8.000 j 9. Value 10.000 ") Ins. 10,000 V 10.000 10.000 Loss 10,000 J 10. Value 10,000 ~1 Ins. 12,000 [> 6,000 6,000 Loss 6,000 j 11. Value 10,000') Ins. 12,000 \- 8,000 8;000 Loss 8.000 j 12. Value lO.OOO) Ins. 12,000 y 10,000 10.000 Loss 10.000 j 6000= (the insurance) . Thus in the first example, under the 80% clause _-_-_-_^— ^^ = ,. or , 2000= (the deficit) , , -nn rii 4500, of the loss falls on the insurers, and — — — ; ; — -=8. or 150U, lalls 8000= (80% of value) on the insured. Under the 100%, clause {(,, or 3600. falls on the insurers, and j%, or 2400, on the insured. APPENDIX 371 Marine Policy Established by Statute of Florence, January 28, 1523 Be it known and made manifest to all persons, that of makes assurance on , merchandise belonRiug to him or his friends, or to whomsoever the same may belong, laden or to be laden for [such or such a port or roadstead in euch a place] by the hands of or his agent, or although others have laden it in the name of the aforesaid , or in some other name designated or not designated on board the ship named , or howsoever named, commanded by We begin the said insurance from the time when the said goods shall be, or shall have been, laden on board the said ship in [such a place), to continue until the said mer- chandise shall be discharged on land or in safety at (such a place], with liberty for the ship to touch at any othc^r place, and to navigate forwards or backwards, to the right hand or the left, at the pleasure of the captain, and as he may require: The said as- surers taking upon themselves in respect of the said goods the risk of all perils of the seas, fire, jettison, reprisals, robbery by friend or foe, and every other chance, peril, misfortune, disaster, hindrance, misadventure, though such as could not be imagined or supposed to have occurred, or be likely to occur, to the said goods, and barratry by the master, except as to stowage or customhouse. All the said risks the said in- surers are to run and take on themselves until the said goods shall be safely discharged on shore at [such a place] ; and if they are not laden, the insurers are entitled to retain one and a half per cent. And if the said goods shall sustain, or have sustained, any disaster (which God forbid), the insurers shall pay to the said the sum insured, within two months from the news reaching the city. And if within six months there shall have been no true news, the insurers shall pay to the said the sum insured; and in case of subsequent arrival and safe dis- charge at the said place, tlu; aforesaid shall pay back to each the sum he has received. In the event of shipwreck, it is allowed to make recovery without authority from the insurers, it being stipulated that the said insurers are not responsible for theft by the captain of the said ship. And the insurers are bound first to pay to the aforesaid the sums insured, and to litigate afterwards. And these are to bind themselves by sufficient sureties (one or more as directed by the fire official deputies on insurance) to pay back to each insurer the sums they have received, with damages of twenty per cent. The time allowed to the insurers for proving is eighteen months. To the observance of this |^e insurers bind themselves to the said , them- selves, their heirs, and goods present and future, submitting themselves to the office aforesaid, and to every other judgment and court whither the said shall please to summon them. Inchmaree Clause This insurance also specially to cover (subject to the free of average warranty) loss of or damage to hull or machinery through the negligence of master, mariners, engineers, or pilots, or through explosions, bursting of boilers, breakage of shafts, or through any latent defect in the machinery or hull, provided such loss or damage has not resulted from want (jf due diligence by the owners of the ship or any of them or by the manager. A Negligence Clause Including negligence and errors of navigation; including all risk of negligence, default, or error in judgment of the pilot, master, mariners, engineers, or others of the crew. A Deviation Clause It is hereby agreed to hold the assured covered should the vessel deviate from the terms and conditions of this policy, at a premium to be arranged as soon as the devia- tion is known. 372 APPENDIX A Craft Clause Including all risk of craft, boats, lighters, to or from the vessel upon whatever terms as to liability or otherwise the lighterman may be employed: such craft, boat or lighter being deemed a separate insurance, and loss in boats, craft, or lighter is to be settled under this policy without reference to the liability or non-liability of the lighterman under special agreement between assured and lighterman or otherwise, the assured transferring all rights against the lighterman to the underwriters. A Clause as to Loading Warranted by the assured not to be loaded in tons of 2,240 lbs. more than the registered capacity under tonnage deck, with lead, marble, stone, coal, sand or iron; also warranted not to be loaded with lime under deck. Also if loaded with grain, warranted to be loaded under the inspection of the Surveyor of the Board of Under- writers, and his certificate as to the proper loading and sea-worthiness obtained. Customary Deductions: England In the adjustment of claims for particular average in a policy on ship, in the absence of any special provisions in the policy, the following items for repairing damage or making good losses are recoverable from the insurer without deduction new for old: — Graving dock expenses. Cost of removals. Use of shears, stages, and graving dock appliances, and cost of cartage and carriage. Cost of anchors and of provisions and stores which have not been in use. Cost of temporary repairs. Cost of straightening bent iron-work. All repairs of damage sustained by a vessel on her first voyage. Chain cables are subject to a deduction of one-sixth. All other repairs of damage sustained after the first voyage are subject to a deduc- tion of one-third. Metal sheathing must be dealt with by allowing in full the cost of a weight equal to the gross weight of metal sheathing stripped off, minus proceeds of the old metal. N'ails, felt, and labor metaling, are subject to one-third, also the cost of replacing metal lost. ■ Chalmers & Owen, Ins. (1907), p. 154. p INDEX INDEX Abandoiiniont, 195, 19G Accident meaning of, 313-315 accid(!nt or disease, 314-325 Accident policy and clauses, 311-334 Accident policy, form of, 311 Accounting, no right to, 69 Accounts, production of, 209 Actions, 45, 273, 274 Actual total loss, 180-190, 219 Additions, 217 Adjusters. 177, 190, 197 Adjustment marine, 196, 197 general average, 203, 204 fire, 271, 272 Age, 286 Agents of the insured brokers, 77, 78 concealment, 89 notice of cancellation, 264 Agents of insurers, 132-138, 147-177 See Waiver and Estoppel Alienation clause, 239-244 Anticipatory breach of contract, 286 Application, forms of, 275, 363 Application written, 109 Application and survey clause, form of, 360 Apportionment, 190, 197, 203, 271, 272 Appraisal, 209-271 Arbitration, see Appraisal Assessments, 290-292 Assignment of policies, 00 of fire policy, 244, 245 See Bankruptcy "At and from," 337 Average clause, form of, 366 Award, see Appraisal Bailees. 26, 27 Bankruptcy of insurer, 297 Barratry, 345 Beneficiary rights of, 66-69 Beneficiary change of, 08. 69 creditors, 69 wife and children, 69 designation of, 285, 280 Benefit societies, 7-13 Benzine, 245-250 Bills, production of, 209 Binding slip, 73-83 form of, 303 Blanket policy, 4 Books, production of, 269 Broker, 77, 78, 264 "Burnt," 357 By-laws, 7-13 Cancellation, 257-264 Capture, 345 Cargo, 182, 186, 197, 203, 244, 356 Carrier, see Common Carrier Cars, 331-334 Cause, see Proximate Cause Caveat emptor, 87 Certificate, fraternal societies, 7 Change of interest, title or possession, 239-244 Change of voyage, 186 Charter, 7 Chattel mortgage, 113 Clauses of fire policies treated in sequence, 207-274 of life policies treated in sequence, 274-310 of accident policies treated in sequence, 311-334 of marine policies treated in sequence, 335-S57 employers' liability insurance, 358, 359 Closing of contract, 70-86 Coinsurance clause, form of, 366 Coinsurance clauses, 272, 370 Coinsurer, marine, 42, 356 Collateral security, 244, 245 Collision, 344, 345 Collision clause, form of, 336, 337 376 INDEX Commencement of risk, marine, 337, 338 Common carriers, 26, 27, 45 Concealment marine, 87-89 fire and life, 88-92 Conditions precedent, 103, see Warranties Consideration, 71, 137, 290-292 Constitution of societies, 7-13 Constitutionality, 13-17 Construction of the contract, 83-86, 247- 250 Constructive total loss, 195, 196 Consummation of contract, 70-86 Contract of insurance nature of, 3-69 closing and construction of, 70-86 requisites of, complete, 70 Contributing policies common law, 42 fire policy, 271, 272 Contribution, 271, 272 Contributory negligence no defense, 41, 42 unseaworthiness, 178-182 accident policy, 331-333 Conveyance, 332 Convoy, 187 Countersigning agent, 161-176 Court or jury, 95. 96, 112, 113 See Jury Craft clause, form of, 372 Creditors, 32-40, 69 Crimes, 303-307 Custom or usage, 83, 84, 105 especially marine, 84 Customary deductions, 372 Damage, see Loss; Measure of Indemnity Danger, voluntary exposure to unneces- sary, 328-332 Dangerous articles, 245-250 Death by the hands of justice or in viola- tion of law, 303-307 Deck load, 203 Deductions, customary, marine, 197, 372 Delay, marine, 186, 344 Delivery of policy, 70-73, 288-290 Department store, form of clause, 364 Dependents, 285 Description of property insured, 217, 218 Deterioration, ordinary, 353, 354 Deviation, 182-187 Deviation clause, form of, 371 Disease, 120, 278-283, 325 Divisibility of contract, 129-131, 218-222 Double insurance, see Other Insurance Due diligence for personal safety, 333 Dueling, 326 Dwellings, form of description of, 365 Dwelling warranties, form of, 366 Earthquake and volcano clause cases under, 258 form of, 367 Employers' liability insurance, 358, 359 Employment, 287, 318, 319 Entirety of contract, 129-131, 218- 222 Estoppel, see Waiver Evidence, 140-142 Examination under policy, 269 Exchange, New York Fire, 363 Excuses , 107 Executory contract of sale, 45-54, 241- 244 Explosion, excepted loss, 253-258 External, violent, and accidental means, 312, 313 illustrations, 312-314 Factories, 228-230 temporary cessation, 228 Falling building, 258 False swearing, 220-227 Family, 69, 285 Family physician or usual medical at- tendant, 278-283 Family relationship, 286 Fidelity and guarantee insurance, 358, 359 Fighting or dueling, 326 Fire, what constitutes, 213-217 Fire Exchange, New York, 363 Fire loss, 213-217 Fire policies, forms of, 207-212 Fire policy and clauses, 207-274 Fireworks prohibited, 106 Floating policy, 4 Florentine ancient marine policy, 371 Forfeitures not favored, 84-86, 110 See Warranties Forms, 360-372 "For whom it may concern," 27 Fraternal associations, 7-13 Fraud or false swearing, 220-227 "Free of average," 189, 356, 357 Furniture, form of description for, 365 INDEX 377 Gas, acridont policy, 314, 326 General average, 198-204 "Good faith," 87 Habits, 120, 286, 287 Hazardous articles prohibited, 245-252 Hazardous employment, 318, 319 Health, 120, 278-283, 325 Health clause, form of, 312 Heirs, 285 "Held in trust," 26 Husband, 69, 101 Illegality, 187 Illness, see Health Immediate notice of accident, 358, 359 Immediate notice of loss, 359, 360 "Immediately and wholly disable," 318 Implied warranty, see Warranties Inchmaree or machinery clause, form of, 371 Incontestable clause, 118, 308, 309 Increase of risk, 230-232 Incumbrances, 113 Indemnity, a cardinal principle, 18, 28, 29, 42, 47, 57, 58 Industrial insurance, 7 Infirmities, 283, 284, 287 Inhaling gas or vapor, 314, 326 Inherent vice, 353, 354 Injuries, 283, 284, 287 Inquiry, failure to make, 91, 234-238 Insanity, see Suicide Insolvency of insurer, 297 Insurable interest property, 18-26 life, 27-40 creditor, 32-40 payees, assignees, 40 when must interest exist, 40 temporary suspension, 40 Insurance nature of, 3 definitions, 4-6 a personal contract, 58-62 Insurance department, 13 Insured, 4 Intentional injuries, 326 Interest of insured. 232-234 Interpretation, see Construction of Con- tract Interstate commerce, 15 Intoxicants, 325, 326 Iron-safe clause, 107, 367 Jettison, 203 Jury, 95, 96, 113, 114, 120, 131, 219. 225, 232, 252, 302, 303 325, 332 "Kept," "used," "allowed," 106, 250 Law, in violation of, 303-307 Law of place, 86 Lessee, 58 Liability of insurer, see Measure of Recovery Liens, 113 Life insurance, 284 Life insurance policy, 277 Life policy and clauses, 275-310 Life tenant, 58 Lightning, 217, 256 Lightning clause, form of, 365 Limitation of time for suit, 273, 274 Lloyd's, 7, 14 Loading clause, form of, 372 Location, 218 Loss under fire policy, 57, 58, 271, 272 under marine policy, 196, 197 in general average, 203, 204 "Loss if any payable to," 264 Lost or not lost, 338 Machinery or Inchmaree clause, form of, 371 Magistrate's certificate, 269 Manufactory, 228-230 Marine policy ancient Florentine, 371 Marine policy, form of, 335, 336 Marine policy and clauses, 335-357 Married woman, 69 Massachusetts standard fire policy, 210- 212 Materiality, test of, 94, 95 Measure of recovery as related to indemnity, 57, 58 limited interest, 58 marine, 196, 197 fire, 218, 219 Mechanics, 250 Medical attendance, 278-283 Memorandum clause fire, 245-250 marine, 356 Merchandise, fluctuating. 218 Mill. 228-2.30 Misrepresentation, see Representation 378 INDEX Mortality tables, 284 Mortgage, 113 Mortgagee, 264-266 meaning of standard clause, 265 Mortgagee clause, form of, 366 Mortgagor, 264-266 Mortuary tables, 284 Murder, 326 Mutual benefit societies, see Benefit Societies Narcotics, 325 Negligence, no defense, 41, 42 unseaworthiness, 178-182 accident policy, 331-333 Negligence clause, form of, 371 New for old, see Deductions New York P'ire Exchange, 363 New York standard fire policy, 207- 210 Notice of abandonment, 195, 196 Notice of accident or injury, 358, 359 Notice of loss, 359, 360 Occupancy, change of, 232, 243 Occupancy clause, form of, 368 Occupation, 287, 318, 319 Open policy, 4 Operation, of factories, 228 Opinion, 93, 94, 118, 120, 224, 225 One-third new for old, 197, 372 Oral contract, 71, 83 Other or double insurance warranty against, 230, 280 contribution, 271, 272 Overexertion, 327 Ownership, 232-238 waiver, 234-238 Parole, 71, 83, 140 Partial loss, marine, 190, 197 Particular average, 186, 187 Parties, 71 Partners, alienation, 239, 240 Partnership, 239, 240 Patterns, 250 Payee, 40, 264, 265, 285 Perils insured against; marine, 343-357 Personal examination, 269 Physician, 278-283 Place of contract, 86 Poison, 326 Policies kinds of, 45 forms of, 360-372 See Clauses Pooling agreement, 240 Port, 185, 337, 338 Possession, change of, 243 Premises, see Description; Location Premium apportionable or returnable, 63-66 prompt payment, 290 credit for, fire, 71, 78 waiver of payment, life, 132, 146, 288- 297 statutory notice of, 290 Presumption, suicide, insanity, 299-303 See Evidence "Prime cost," 197 Profits, 4, 40, 41, 219 Prohibited articles, 245-250 Prohibited waters, 104, 105 Proof of loss, form of, 369 Proofs of loss, 267-274, 359 Proper vice, 353, 354 Property insured, 217, 218 Pro rata clause, 271, 272 Proximate cause fire, 216, 253-258 accident, 314-318 marine, 345-351 Proximate and sole cause, 314-318 Railway bridge, 328-331 Railway relief department, 7 Ratification, 27 Rebuilding, 219 Recovery, see Measure of Recovery Regulation and control, 3 Reinstatement, 219 Reinsurance description of, 5 meaning of clause, 272, 273 Reinsurance clause, form of, 368 Relationship, 286, 287 Release, subrogation, 57 Relief department, 7 Remedies, 45, 69, 273, 274 Removal, see Location Renewal, 5 Rent clause, form of, 368 Rent policy, 4 Repairs, 250 Replace, 219 Representations, 92-98 Reserve, 297 INDEX 379 Residence and travel, 287 Retainer clause, 368 Rider. 83 Roadbed, 32G-331 Rale, see Alienation KalvaKC, 195, 106, 356 "Sane or insane," 118, 299 Seamen, seaworthiness, 181 Seaworthiness, 178-182 Self-defense, 326 Self-destruction, see Suicide Severable contract, 129 131, 218-222 Ship, policy on, usually valued, 6 Sickness, 120, 278-283 Slip, see Binding Slip Smoke, 213-217 Smuggling, 187 Sole cause, 318 Sole ownership, 232-238 Solicitors, 147-161 Sprinkler clause, 114 Standard policies fire, 207-212 life clauses, 278 accident clauses, 312 contract binding though not standard, 212 Statutes, 3, 13, 131, 139, 155 as to warranties, 131 as to agency, 155 Stock, fluctuating, 218 Stowage, as affecting seaworthiness, 181 Stranding whether general average, 199-202 under memorandum clause, 357 Subject of insurance a chance, 88 property, 217, 218 Subrogation, 43-57 Sue and labor clause, 354-357 salvage under, 356 Suicide, 68, 118, 131. 297-303 "Surrender value," 297 Survey clause, form of, 366 Temperate habits. 120. 286. 287 Temporary breach, 104, 126-129 Tenant, 58, 106 Term, 71, 338-342 Termination of risk, marine, 338-342 Their own or held in trust, 26 Thieves, marine, 345 Time policy, 5 Title, 232-244 Tontine policy. 5 Total loss actual. 186-195 constructive, 195. 196 total loss <){ part, 356 total loss of building, fire, 219 Totally disabled, 318 Trade usage or custom, 83, 84 Travel and residence, 287 Traveling, injuries while, 332-334 "Uberrima' fidci," S7 Unconditional and sole ownership, 232- 238 Unlawful advnturo, 187 "Unless ship be burnt," 357 See Memorandum Clause "Unless ship be stranded," 357 Unoccupied, 250-252 Unseaworthiness, 178-182 Usage or custom, 83, 84 Use and occupancy, 240 Use and occupancy clause, form of, 368 Vacancy, 250-252 \'aIuation, see Measure of Recovery Value, opinion, 94 Valued policy, 6, 219 Vendee, 46, 47, 62. 233, 241-244 Vendor, 46, 47, 62, 233, 241-244 Vested rights, 66-69 Violation of law, 303-307 VisiBle mark of injury, 319 Volcano clause, 258, 367 Voluntary exposure to unnccrst^ary dan- ger, 328-332 Voluntary overexertion, 327 Voluntary stranding, 199-rC :: Voyage policy. 5 Wagers, void, 32 Waiver and estoppel nature of, course of business, 132-137 election once made is final, 137 whether new consideration required, 137 what cannot be waived, 139 oral promise at time of contract, 140 whether silence a waiver, 142 demanding proofs of loss, 142-145 authority of agents to waive, 147-177 illiterate applicants, 161 380 INDEX Waiver and estoppel knowledge of forfeiture at time of con- tract, 161-174 knowledge of intended future viola- tion, 174-176 oral waivers during term of policy, 176 oral waivers after loss, 142-146, 177 by omitting to inquire, 234-238 by delivering life policy, 288-297 Walking on roadbed, 328-331 War, 107 Warranties, express nature of, 99-105 affirmative and promissory, 101 acts of tenant, 106 inability to fulfill, 107 reference to extraneous papers, 107-109 contrasted with representations, 109- 114 what constitutes, 109, 110 Warranties, express interpretation of, 109-118 opinion, expectation, belief, 118-120 of present condition or use, 120, 121 questions unanswered or partially an- swered, 122-126 temporary breach, 104, 126-129 divisibility of contract, 129-131 See Clauses Warranties, implied seaworthiness, 178-182 against deviation, 182-187 against illegality, 187 Wear and tear, 351-353 Whom it may concern, 27 Wife, 69, 101 Worms, marine risk, 344 York-Antwerp rules, 204 SUPPLEMENT A COLLECTION OF CONDENSED CASES AND QUESTIONS WITHOUT DECISIONS PREFACE TO SUPPLEMENT In the daily routine of the law office, the client submits to his counsel a narrative of circumstances, and a question to be decided. Counsel examines the facts presented, endeavors to apply the law, and announces the answer; and usually he must perform this service for his client without help of any reported decision exactly in point. In somewhat similar fashion, applicants for admission to the bar, on their entrance examination, are confronted with questions, for which, by aid of reason and memory only, they are expected to find correct answers. An unanswered interrogatory comes to us with an aspect of its own, and its sound determination requires exercise of a special faculty of the mind, namely, the judgment. To ponder, no matter how diligently, over a standard treatise, or the report of a case al- ready decided, is one thing. To solve a fresh issue is quite another thing. Without neglecting the important task of acquiring a certain mastery over officially reported cases and a certain familiarity with their import, we conclude, then, that the student of law may rightly covet the ability to resolve, with independence and self-reliance, a variety of legal problems. By some means or other, and sooner or later, he must learn the art of discovering for himself the controlling principle of law that fits each new question arising. So also must he learn how to construct for himself a course of argument that will furnish support to his conclusions. Among approved and well-tried methods employed in many branches of education, the working out of practical examples holds a sure and abiding place, and no reason is apparent why, in the study of the law, like methods of mental train- ing should not be regarded as equally appropriate, at least as an ad- junct. Accordingly, the following condensed cases without decisions, and many of recent date, have been arranged, for study and class-room discussion, in connection with the corresponding chapters of the case- book. In numerous instances, the holding of the court is, of necessity, 80 arbitrary, that the instructor may prefer to announce the decision in advance, leaving it to the class, either to engage in a debate, or to prepare an oral or written opinion in support of the judgment ren- iered. 383 384 PREFACE TO SUPPLEMENT A conspicuous feature of these supplementary problems will not be overlooked, namely, that, while altogether in harmony with the case system, they cover in compact form, convenient for study and for review, a wide and useful range of law. Three hundred cases reported in full would occupy two large volumes, and the answers to many of the questions here presented involve one or more cases on either side, thus greatly increasing the actual number of cases considered. G. R. New York, June, 1913. PART I GENERAL PRINCIPLES OF INSURANCE LAW CHAPTER I Introductory Nature of Insurance and Insurance Companies 1. The Physicians Defense Co., for a stated annual price, issued a contract to doctors agreeing, if they should be sued for malpractice, to employ local attorneys as well as its own attorney for defense, and to pay all attorney fees and expenses of defending suits, not exceeding specified sums, but not to pay any judgments recovered against the doctors. Under the statutes, is this to be classed as a contract of insurance, or a contract of service? 2. A law of the defendant, a beneficiary association, provided that "alterations and amendments to these laws can be made." At the time the complainant became a member, a by-law provided that "the dues shall be fifty cents, except that when the receipts are insufficient, they will be increased to sixty cents, until the liabilities are paid." Subsequently a by-law was enacted making the dues ninety cents. Must complainant submit to the subsequent amendment? 3. A policy or certificate in a fraternal beneficiary association, as issued to the member, covered unintentional self-destruction after one year. Subsequently the society amended its by-laws to the effect that self-destruction by the member even though insane, at any time within five years from date of the policy, should render it void. Was this a reasonable and effectual amendment, as agauist the claimant under the policy? 4. Assume, in the last case, that the amendment in the by-laws had excepted "self-destruction while sane." Should this amendment be enforced as against policies previously issued? 5. The member accepted membership, as is customary in fraternal beneficiary associations, subject to such by-laws and rules as the Supreme Lodge might thereafter adopt. The constitution already prohibited the occupation of bartender. A subsequent amendment provided for forfeiture of all rights, if the member should sell malt liquors as a beverage in the capacity of employee or otherwise. Was the amendment reasonable and binding upon existing members? 387 388 NATURE OF INSURANCE AND INSURANCE COMPANIES 6. A member agrees to abide by the by-laws in force or subsequently to be adopted. A subsequent by-law limited the appointment of beneficiaries to a member of the family, or one related by blood, or a dependent. In naming a new beneficiary must the member conform to the amendment? 7. May a member of a beneficiary association, who has been wrong- fully expelled, sue for damages without having prosecuted his remedy by appeal within the order, and without bringing mandamus for rein- statement? 8. A New York penal statute forbids the issuing by a non-authorized foreign company of any insurance on New York property. The defendant, AUgeyer, a citizen of New York, learning that rates were lower at London Lloyds than in New York, wrote a letter to certain underwriters at Lloyds for a policy of fire insurance on his stock of merchandise situated in New York. The policy was executed in London and mailed to the insured in New York. On the trial of penal proceedings brought by the state of New York against the insured, he contended that the statute as applied to this transaction was unconstitutional. What should be the judgment? 9. A statute forbids the agent of a foreign company to issue policies of his company, until he shall have obtained a license and complied with statutory requirements, and affixes a penalty for non-compliance. An agent of a foreign company, in violation of this statute, issues within the state a policy of fire insurance, which is accepted by the insured. The agent gives credit to the insured for the premium, which the insured, though pecuniarily responsible, fails to pay. The company thereupon brings action within the state against the insured for the premium. Can it recover? 10. Assume in the last case that a loss by fire occurs during the term of the policy. The insured now tenders the premium, and brings action upon the policy for his damage. Can he recover? 11. Assume in the last case that the insured voluntarily paid the premium to the agent. The agent, however, refused to pay it over to the company, on the ground that the transaction is illegal, in that the company has not complied with the statutory requirements enabling it to do business within the state. Can the company recover the premium? 12. The defendant, a resident of New Jersey, with his business bflfice in New York, is arrested and tried in New York, under the NATURE OF INSURANCE AND INSURANCE COMPANIES 389 New York statute, for misdemeanor in countersigning and issuing a policy of fire insurance of the United London & Scottish Ins. Co., a non-admitted company, that is, a company which has not qualified to do an insurance business within the state of New York. The prop- erty insured is located in Kentucky. The defendant contends that this penal statute being territorial in its operation cannot constitu- tionally be applied by the court to the case of insurance on property located outside the state. Is the defense good? 13. Would the same rule apply in case of a statute which pro- hibited brokers from negotiating such insurance? 14. All the large insurance companies habitually issue policies of insurance to various parties in states other than the state of issue. Is this "interstate commerce," so that Congress by its laws may take jurisdiction and management of the business of such companies generally, and establish, if possible, some uniform and economical method of control? 15. May a state by statute establish a schedule of insurance rates in detail, and forbid the insured and insurers from agreeing upon other rates than those fixed by statute? Does the constitutional right to "liberty and the pursuit of happiness" involve the right to freely contract with respect to insurance? Is the imposition by statute of unreasonable compulsory rates a confiscation, and without "due process of law"? May the state by statute delegate the power to fix rates to the Superintendent, or Commissioner, of Insurance? Would it be wise to do so? CHAPTER II General Principles op Insurance Law Insurable Interest, Coinsurance, Subrogation, Premium whether Ap- portionable, Assignability, Rights of Beneficiaries, etc. 16. September 20th plaintiff executed and delivered to a grantee an absolute deed of conveyance of the title to a building which he owTied. This deed was not recorded until the 23d of the following December. Between those dates the plaintiff took out a policy of fire insurance on the building in his own name as owner. Had he an insurable interest? 17. In Nebraska a married woman has the right to control and sell her own property without her husband's consent. The plaintiff bought a farm with dwelling house thereon, and had the conveyance made to his wife. They did not reside therein. Subsequently he took out a policy on the house in his own name. The house was destroyed by fire. He sued upon the policy. The company claims that he had no insurable interest. Can he recover? 18. The estate of curtesy initiate no longer exists in New Jersey, but an inchoate right of curtesy is still recognized there, if issue has been born of the marriage. A husband took out a policy in his own name upon his wife's building, in which they both resided with their children. Was the policy void for lack of insurable interest? 19. The defendant company issued a policy to plaintiff for $1,000 on a building which was the property of his mother exclusively. The plaintiff, however, had possession of a part of the building under an oral arrangement made with his mother, by the terms of which he was to have the use of a room in the building as long as his mother should live, in return for the payment of a monthly rental to her of $15. The market value for this was $30 a month. Thus he had a pecuniary interest in the continuance of the arrangement amounting at least to $180 a year, or more than $1,000 for seven years, the mother's expectation of life being seven years by the tables. But by the Statute of Frauds the oral arrangement was void. While the plaintiff was in possession, he made improvements in the building 390 INSURABLE INTEREST 391 which cost him SI, 000, but these liccame the property of his mother, who still held the title. During the life of the policy, the property was destroyed by fire. The plaintiff brought action upon his policy to recover $1,000. The insurance company defends on the ground that the plaintiff was a mere tenant at will, and discloses no insurable interest. Has he a right to recover? 20. A judgment creditor of B took out a policy of fire insurance upon B's house, on which his judgment was a lien. The house burned down. A sued on the policy. The company defends on the ground that A has no insurable interest. Who is entitled to judgment? 21. A, not being able to collect his wages, took out and kept up a policy on the life of his employer B, and then left his employ. B never paid the debt, which became barred by the Statute of Limita- tions. Its enforcement is also barred by B's discharge in bankruptcy. Many years later, upon the death of B, A brings suit upon the policy. Can he recover? 22. Assume in the last case that the employer is a copartnership. Has the creditor an insurable interest in the life of each copartner? 23. Gainor and two other stockholders in, and promoters of, a glass company agreed to take out three policies of insurance, each for $10,000 on his own life for the credit of, and payable to, the glass company. This company paid the premiums. In borrowing money for the glass company the policies were represented as belonging to it. Gainor ceased all connection with the glass company about two years before his death. Had the glass company an insurable interest to support the policy taken out by Gainor? On Gainor's death is the insurance company liable? If so, to whom, to the glass company or to Gainor's estate? 24. A New York lady, on leaving the city for the summer months, stored her furs worth $5,000 with Altman. Altman carried a large amount of insurance on property ''his own or held by him in trust." An extensive fire occurred during the summer which destroyed the furs. Altman made claim against his insurers for the amount of this loss. Has he a right to recover? If he recovers, must he turn over any part to the owner of the furs if she makes claim to it? Assume that she knew nothing about Altman's insurance until after the fire. 25. Assume in the last case that Altman insured property "his own or held by him in trust to the extent of his interest and liability." 392 SUBROGATION 26. The insured sold and assigned a policy taken out by himself upon his o^^^l life to one who had no insurable interest in that life. The consideration for the sale was a trifling sum of money, for which the insured stood in need, and an agreement by the assignee to pay the premiums thereafter. Upon the death of the insured, had the assignee the right to the whole proceeds of the insurance, or only to the amount paid by him to the insured and for premiums? 27. A is indebted to B in the sum of $10,000. For his own protec- tion, B takes out a policy for that amount on the life of A, and pays the premiums as they become due. Before his death A paid up his indebtedness in full. Upon the death of A to whom does the amount of insurance belong, to B or to A's estate? 28. Libelant's steamship Florida, including her stores, was worth $75,000 at Philadelphia. It was insured for $40,000 by defendant's unvalued marine policy. On the voyage which was from Philadelphia, to Port Tampa a loss of $10,000 by marine peril was sustained, and this amount, as adjusted by Messrs. Johnson & Higgins, average adjusters of New York City, was agreed to by both parties. What amount can the libelant recover under the policy? 29. Coals from a defective ash pan of a locomotive started a fire, which burned the building of A adjoining the railroad. A collected the full damage $1,000 under his policy. The insurance company thereupon brought action against the railroad company for the same amount. Is it entitled to recovery? 30. A's goods are insured in transit. They are destroyed by a fire in a freight car. The common carrier, being unable to make delivery, is liable in damages to A, although the fire was not due to negligence on the part of the carrier or its agents. The insurance company hav- ing paid the loss to A claims subrogation against the carrier. Can it recover by virtue of that doctrine? 31. A has insurance of $3,000 on hay worth $5,000 stored in a barn. B, a workman, intentionally and criminally destroys the hay by fire. The insurance company, having paid the insurance, sues B under subrogation, using A's name as plaintiff, and gets judgment for $5,000, but owing to the insolvency of B is only able to collect $2,000 and expenses of suit. To whom does the $2,000 belong? 32. The insurers voluntarily paid to the insured a loss-claim honestly preferred by the latter. The insurers then, under claim of subrogation, sued the party who had caused the loss. The tort feasor SUBROGATION 393 defended on the ground that the insurers might have successfully defended the claim against them, the loss in fact not being within the terms of the policy because of a breach of warranty. Would this fact, if proved, constitute a valid defense in favor of the tort feasor as against the claim of the insurers? 33. Goods of a shipper are destroyed by fire in a freight car. For the non-delivery of the goods the shipper has a good cause of action against the railroad company. His bill of lading, however, provides that the railroad company shall have the benefit of any insurance as to goods. The shipper collects the amount of loss from his under- writers. Have they a right under subrogation to sue the railroad com- pany for the amount of loss? 34. Assume in the last case that the bill of lading contained no such clause, and that after loss and before proving his claim against the insurance company, the shipper was persuaded to execute a gen- eral release in favor of the railroad company. Would that furnish a defense to the insurance company as against the claim of the insured under the policy? 35. Assume that the insurance company, knowing nothing of the release to the carrier, had paid the amount of loss to the shipper, could it recover back the amount on learning of the facts? 36. A owns a building worth $10,000 which is leased to B. A has two contracts of indemnity against fire loss, a policy of insurance for $10,000 and a covenant in the lease providing that in case of fire B shall rebuild or repair. The building is destroyed by fire, without fault on the part of B. If applicable, apply the doctrines of subro- gation and contribution, one or both, and state how the loss ought ultimately to be borne? 37. In the last case, would the ultimate apportionment of the loss be changed, if the covenant in the lease provided that B should make payment to the landlord in money, for the amount of damage by fire, in place of making repairs? 38. A's barn was insured for $1,000. B intentionally and criminally set it on fire. A sued B for the damage, and recovered and collected judgment from him. Thereafter A sued the insurance company. Has the company a defense? 39. A marine policy was taken out on one hundred hogsheads of sugar to be shipped at New Orleans for London. The premium was 394 ASSIGNABILITY OF POLICIES paid. As it turned out, only seventy-five hogsheads were shipped and carried. Was the insured entitled to any return of premium? 40. The insured has a policy of $5,000 on his furniture and house- hold effects in his dwelling house. At the expiration of the insurance, the insured, claiming that at no time were the contents of his house worth more than $2,500, institutes action against the company to recover back one-half of the premium paid. Who is entitled to judg- ment? 41. Almost immediately after the commencement of the voyage, the insured, the o\vner of a vessel, lost all benefit of his insurance, be- cause the master inadvertently deviated from the prescribed course of the voyage, thereby avoiding the policy. Is the insured entitled to any return of premium? 42. A was carrying a policy of fire insurance on his dwelling house. He conveyed the house to B, and, in consideration of the payment to him by B of the unearned premium, he also made an assignment of the policy to B. This was done without the knowledge of the insur- ance company. Before expiration of the term named in the policy, the house burned down. For extra precaution, B then induced A to assign to him any and all claims that might exist under the policy. B thereupon served proofs of loss, waited sixty days, and brought suit on the policy for his loss by fire. Has the company a defense? 43. A policy of fire insurance on a building contained a provision that the policy should be void, if it should be assigned, either before or after loss. After loss, the insured assigned his loss claim to the plaintiff Alkan, who brought action on the policy. The company defends on the grounds, first, that it made no contract with the plaintiff, second, breach of warranty against assigning the policy. Is the defense valid? 44. Insured was carr5dng a policy upon his own life, payable to him- self or his estate; and, standing in need of money for business pur- poses, he sold and assigned the policy for a consideration, without the knowledge of the insurance company. The policy contains no express provision regarding assignments. Before the next annual premium became due he died. The assignee sued on the policy. The insurance company defends on the ground that it has made no contract with the plaintiff. Who is entitled to judgment? 45. A resident of New York took out a policy upon his own life in a regular life insurance company, naming as beneficiary an intimate RIGHTS OF BENEFICIAKIES 395 friend, who, however, had no insurable interest at all. The policy is silent as to change of beneficiary. Subsequently, having married, and desiring to change the appointment, the insured presented the policy at the office of the company, and requested the president to substitute the name of the wife for that of the friend. This was done. The friend never heard of the policy until after the death of the in- sured. Both friend and wife now claim the insurance. The company has interpleaded and paid the money into court. Judgment for whom? 46. A resident of New York took out a policy in a regular life in- surance company upon his own life, naming his wife as beneficiary. The policy was silent as to change of beneficiary. After keeping up the insurance for five years, and being short of funds, he repeatedly borrowed from the company, depositing the policy as security. He used part of this money to pay the premiums, which were always paid. He finally borrowed the entire surrender value of the policy, and, being unable to pay the debt, he signed an agreement surrender- ing the policy to the company for cancellation. Some time after the company had cancelled the policy, he died. The wife then for the first time discovered that there had been such insurance, and now brings suit upon the policy. The company defends on the grounds (1st) that the policy belonged to the insured to do with as he liked, (2d) that, even assuming that the wife had some right originally, the insured must be regarded as her agent. Wlio is entitled to judg- ment? 47. A mother took out a paid up policy upon her o^\^l life, payable to her minor son, for whom she was guardian. For the necessary support of the son, and upon the pledge of the policy, she obtained a loan from the insurance company equal to the surrender value of the policy. The loan was not paid at maturity, and so the policy was surrendered and cancelled. After his mother's death, the son brought suit upon the policy, claiming that his rights in the policy being vested they could not be disturbed without his consent. Can he recover? 48. The policy named the wife of the insured as beneficiary, but the policy also expressly reserved to the insured the right to change the beneficiary. No statute prohibited this. During the life of the policy, the insured had the appointment changed to his daughter, and later to his executors. After his death, widow, daughter and execu- tors, lay claim to the insurance. Who is entitled to recover? 49. A resident of New York took out a policy upon his own life, 396 RIGHTS OF BENEFICIARIES payable on his death to his wife, if Hving, otherwise to his children. He paid the premiums. After he and his wife had assigned their interest in the policy to A for a valuable consideration, the wife died. Thereafter the husband died leaving two children. The chil- dren and A make claim to the insurance. To whom is it payable? 50. The wife of the insured, last named, took out a policy upon the life of her husband, payable to her if she survived her husband, otherwise to her children. The policy contained no clause expressly reserving a right to change the beneficiary. Husband and wife as- signed their interests in this policy to B. The children and B claim the insurance money. To whom is it payable? 51. A joined one of the fraternal beneficiary associations, gov- erned by the customary by-laws, and, in his certificate of member- ship, had his wife named as beneficiary of the insurance fund which was payable on his death. He advised her of his action at the time, and assured her that the money would render very substantial aid towards her support, if she survived him. Some years later, his sentiments towards his wife, meanwhile, having undergone a change, he privately took the certificate to the office of the association, and had his daughter substituted as beneficiary in place of his wife. On his death, both wife and daughter make claim. Which is entitled to the money? CHAPTER III General Principles — Continued Consummation and Construction of the Contract 52. An agent of the defendant, with authority to sign and issue its poHcies, solicited plaintiff to take out a policy on his storehouse. Accordingly plaintiff made application to the agent for a policy for $900 thereon, for one year from November 13, premium to be $18. The agent promised to send the policy, and agreed to give plaintiff thirty days' credit for payment of the premium. Subsequent to November 13th, but before the policy was signed or delivered, the building burned dowTi. Plaintiff brings suit in equity for a policy, and for the amount of the loss. Is he entitled to judgment as prayed for? 53. The company issued a policy on Wanamaker's department store in New York, and, as usual, gave temporary credit for the premium. Subsequently Wanamaker paid the premium to the broker who placed the order for the insurance, but the broker was a defaulter, and made no payment to the company. The company sues Wanamaker for the premium, and he alleges in answer the pay- ment already made. Is the defense good? 54. A local agent of the insurance company countersigned, and issued, one of its policies to himself, upon his dwelling, without the knowledge of his company. Shortly afterwards the house was de- stroyed by fire. He presented his claim to the company, which de- clined to recognize it. Can he collect? 55. The usual local agent of a fire insurance company is author- ized, among other things, to countersign and issue policies, collect premiums, give wTitten permits and close the terms of contract. Plaintiff met the local agent of the insurer, a few days before his existing insurance on barn and contents was expiring, and told the agent that he would probably want a renewal of the policy. The agent replied "All right, we are ready to renew." Nothing further was said. A few days after expiration of the earlier policy, and before any policy in renewal had been actually signed, or delivered, the 397 398 CONSUMMATION AND CONSTRUCTION OF THE CONTRACT property was destroyed by fire. On the trial of a suit brought to compel the company to issue a renewal policy, upon like terms with the earlier policy, plaintiff proved that the company had always ex- tended credit to him for the premium, in the case of many prior pol- icies on this and other properties. Who is entitled to judgment? 56. A doctor in Iowa, solicited by a local agent, executed the usual detailed application for insurance upon his life, payable to his wife, and made a payment of premium to the agent by giving a note, con- ditioned upon subsequent acceptance of the application by the com- pany in New York. The day following, the applicant wrote to the local agent, stating that he would not accept a policy, unless the company would make him sole medical examiner for the town in which he resided. The home office, in ignorance of this letter, ap- proved the original written application, which had been forwarded to them, and issued the policy in accordance with the terms of the application. This policy was delivered to the insured. He at once returned it, without comment, to the local agent, and shortly after- wards died. The wife served proofs of her husband's death, and brought suit for the insurance money. Is she entitled to recover? 57. An applicant for life insurance submitted himself to medical examination, and executed the usual application papers, and made a payment on account of the first premium to bind the bargain, as of that date, in the event that the application should be accepted at the home office of the company. On inspection and approval of the ap- pUcation papers, the home office mailed a letter to the applicant accepting his application unconditionally, and stating that the policy would be issued within a few days. Before receipt of the policy, the applicant died. Was he insured? 58. Bell owned a barn. He met defendant's local agent, and told him that he wanted a policy of fire insurance for $400 on his barn, to run three years from the 7th of the following August. The agent repUed, "All right"; and further stated that the premium would be $9, and that he would send a policy issued by the defendant company. Nothing else was said about the terms and conditions of the insurance. On the 8th of August, before any policy was issued, the barn burned down. The defendant then refused to issue any policy, stating that many important provisions of the contract had not yet been agreed upon between the parties. Bell now brings action to compel the company to issue its usual policy, and for recovery thereunder for his fire loss. Is he entitled to recover? CONSUMMATION AND CONSTRUCTION OI' THE CONTRACT 399 59. Plaintiff, being about to take title at noon to 51 West 38th St., New York City, stopped at the office of an insurance company in the morning, and asked the application clerk to issue to him a one year policy for $10,000 on the house, and to bind the risk immediately. The application clerk took the address of the house and said, "All right." No written contract, or memorandum, was made by either party, and no policy was ever issued, or premium paid. Plaintiff took title at noon, and in the afternoon of the same day the property was destroyed by fire. Plaintiff promptly served proper proofs of loss, tendered the market premium, and demanded payment of the policy. The insurance company refused, claiming that the contract was never completed as to many of its essential terms, and was never executed. Can the plaintiff recover? 60. In the last case, the regular policy always given limited the commencement of actions on the policy to a period of one year after the fire. Plaintiff, having received no policy, had no knowledge of this provision, and did not begin action until after this period had expired, but within the statutory period of six years. Can he recover? 61. Plaintiff had a policy of S500 upon his building, issued by de- fendant, with like terms as in the last case, and expiring January 1st, 1908. In September preceding, defendant's agent promised plaintiff that the policy should be renewed January 1st. On January 10th, 1909, the building was destroyed by fire. Defendant had not issued ' a policy, and after that refused to issue any. Plaintiff never served proofs of loss, and did not commence action until April 15, 1910. Plaintiff sues for damages for breach of contract. Can he recover? 62. Plaintiff is widow and beneficiary of the insured. When in good health, he applied to defendant's agent, in due form, for a life insurance policy, and paid the premium conditionally. The agent, however, neglected for a month to forward the application to the home office of the company, and, before it was acted upon, the insured suddenly lost his life. The widow sued the company for damages in tort, on the theory of negligent and unreasonable delay. Has she a right to go to the jury? 63. Assume, in the last case, that the administrator of the insured had brought the action. Would he have a right to go to the jury? 64. Insurance upon furniture and effects, "contained in the build- ing, owned by the assured, and situate on the southerly side of the highway." Plaintiff's broker madvertently put the word "south- 400 CONSUMMATION AND CONSTRUCTION OF THE CONTRACT erly" in the application, which was signed by himself. In fact, the building was situate on the northerly side of the highway. Plaintiff owTied no other building in the county. Action to reform the poUcy. Defendant claims in defense that there was no mutual mistake, that while plaintiff's agent made a mistake, the policy is just as the com- pany intended it to be. Judgment for whom? 65. The premium was paid, and the life insurance policy delivered, in IMontana. In that state, there was no statute requiring the com- pany to serve a preliminary notice, of a certain number of days, before the due date of each premium. The policy was signed, and was pay- able, in New York City, and by a New York company, in which state the statute requires such a notice and provides that, without it, the company cannot claim forfeiture for non-payment of premium, though the policy stipulate that in such a case the insurance shall forthwith cease. No notice was given, and the insured defaulted in payment of premium when due. By what law is the contract to be governed? Was the policy avoided? CHAPTER IV General Principles — Continued Representations and Concealments 66. Is the doctrine, that a contract of insurance is one uberrimce fidei, binding on the insurance company, as well as on the insured? 67. A New Orleans owner of a ship, supposing that a voyage from New Orleans to Calcutta was not ended, obtained a time policy on the ship by mail through a London agent from underwriters at London Lloyds. These underwriters, through private advices, then believed that the ship had already arrived safely at destination. Upon dis- covery that such was the fact, the owner of the ship sued the under- writers for a return of premium. Shall he recover? If so, upon what ground, or grounds? 68. The insured, when making application for marine insurance, said nothing about certain rumors, which had been transmitted to him by his foreign agent, one rumor that a hostile privateer was reported near the vessel, another rumor, which the agent said he doubted, that the vessel had already been captured. Was the policy avoided by the non-disclosure of these reports? 69. The insured, on procuring his insurance on a ship, inadvertently, and without intent to deceive, omitted to state, that the ship was a confederate cruiser and not a merchantman. Was the policy avoided? 70. The policy was on a floating dock, to be towed from Avon- mouth to Brindisi, and contained the clause, "seaworthiness ad- mitted." The assured honestly believed the structure to be sea- worthy. In fact, it was not. During the voyage, it sank and was lost. The company defended suit on the policy, on the ground that the assured ought to have ascertained the facts, and disclosed to tlie company the defective condition. Was there fatal concealment? 71. Fire insurance of a shipper on a consignment of goods in transit. The bill of lading provided that the carrier should have the benefit of any insurance effected by the shipper, wiiich thus deprived the insurance company of any right of subrogation against the carrier. 401 402 REPRESENTATIONS AND CONCEALMENTS The insured omitted to say anything about the terms of the bill of lading. There was some evidence tending to show that there was no intent to withhold material facts. Was the policy avoided, and is the question for court, or jury? 72. An applicant for life insurance, by means of a written applica- tion was questioned about all his illnesses occurring within seven years. He intentionally refrained from mentioning quite a serious sickness, of several weeks' duration, accompanied by severe pains in the back, fever, severe headache, swelling of eyes and face, and other symptoms. He subsequently died of an entirely different disease. Was the policy avoided? 73. The policy provided that it should be void, if the insured's personalty was incumbered by a chattel mortgage. The insured, on applying for the policy on his stock of goods, was interrogated as to incumbrances. He replied that the only incumbrance was a mort- gage on the building. In fact, in return for a loan, he had executed and delivered a chattel mortgage, which had not yet been recorded in the county clerk's office. Was this a misstatement which avoided the policy? 74. The application papers for life insurance, as usual, called for disclosure of all diseases. The insured deliberately refrained from stating that a doctor, upon examining him not long before, had found germs of tuberculosis. Was this matter of fact or of opinion? Was it fatal concealment? 75. After the application papers had been executed, including those relating to the medical examination, the applicant was taken seriously sick with pneumonia, before the contract was closed, or the policy delivered. He made no fresh disclosure to the company, leaving the written application papers to speak for themselves. The company claims that the insurance was avoided by concealment. Is the de- fense good? 76. An accident policy was renewed from year to year, and each year the original application was copied, and attached to the policy and made part of it. The statements of the application, regarding sound health and medical attendance, were true at the time when originally made, but not true as of the date of the last policy. Is the policy avoided? CHAPTER V General Principles — Continued Warranties 77. The policy contained an iron safe clause (see p. 367, swpm, providing that an itemized inventory of stock on hand should be made within thirty days of the issuance of the policy, or else the policy should be null and void. The insured made no inventory at all, but kept books of account, which, in the aggregate, showed what goods were on hand and destroyed by the fire. Plaintiff's counsel insisted that this information was all that was material, and hence was all that the insurer was entitled to. Was the policy avoided? 78. Assume, in the last case, that an inventory had been made and kept as required, but that it had been destroyed by the very fire in- sured against. It is not, and cannot be, produced. Is the policy avoided? 79. "Warranted that at all times there shall be a competent watch- man on board the insured boat." Without the knowledge of the owner, the watchman in charge left the boat for a few hours, and went on shore to get a change of clothing. A fire occurred during his ab- sence. Was the policy forfeited? 80. Assume a warranty in a policy to be worded that, " a watchman shall be kept in the building." How would you construe the clause? What compliance is sufficient? 81. Insured was sick, and so delirious, that he could take no thought of his accident and health policy. In consequence, he violated one of its conditions, requiring him to give notice of sickness within a speci- fied time. Was the policy forfeited? 82. The policy was an accident policy. The injury insured against was so serious, that, by its own effects, it disabled the insured intel- lectually from giving the notice of injury, provided for by the poUcy. Was this a fatal breach of the warranty? 83. The insured, an ignorant man, who could not read, for this reason inadvertently violated a warranty of his life insurance policy. 403 404 WARRANTIES The agents of the company did nothing to mislead him. Can the insurance company take advantage of the forfeiture? 84. Assume, in the last case, that the company's agent, when issuing the policy, had assured the illiterate that the policy contained no such warranty. In an action on the policy will the court grant relief to the plaintiff, if so, what relief? 86. The insured in terms agreed, as a condition of the policy, that he would "use due diligence to maintain the sprinkler equipment in full working order" (see p. 364, supra). Who usually decides whether the facts constitute a breach of such a stipulation, containing the phrase "due diligence," judge or jury? 86. A building was insured as "a tobacco store house." The policy provides that it shall be void if the hazard be increased by any means within the control or knowledge of the insured. Without the knowledge or consent of the insurance company, the insured used the building, during the period of a month, for a manufacturing pur- pose involving a greater hazard, which called for a higher rate of premium. The forbidden use, however, was discontinued before the fire, and did not contribute in any way to the loss. Was the policy avoided? 87. A policy covered (1) a building, (2) contents of the building, and (3) other personal property, with a separate amount of insurance on each of the three classes. The insured warranted that the building had brick or tile chimneys, and that there was no incumbrance upon it. In fact there was a mortgage on the building, and the chimneys were of a kind more hazardous than stated. Is the insurance alto- gether avoided? If not, as to which class or classes of property may it be sustained? CHAPTER VI General Principles — Continued Nature of Waiver and Estoppel 88. The insured was absent from home, and was not sure whether the premium on his hfe insurance pohcy, about to become due, had been paid or not. He wrote to the office of the company making in- quiry, and received a reply stating that the premium in question had already been paid. As matter of fact, it had not been paid. The policy provided that the insurance should immediately cease, and the policy be avoided, if any premium was not paid on the day when due. A month after the due date he died. Was the policy avoided? 89. The policy of fire insurance not being assignable without the company's consent, the insured, on making a sale of his insured farm buildings, made application at the company's office for a consent to the transfer of the policy to the vendee. This consent was given in writing by the proper official, but shortly afterwards the same of- ficial wrote a letter in duplicate revoking the consent. This letter w^s served both upon the vendor and the vendee. The next day the property was destroyed by fire. Was the company liable to the as- signee of the policy? 90. Plaintiff had a voyage policy on his steamship. The daj' after the policy was delivered, the insured called at the office of the com- pany, and asked the president for the privilege of deviating from the regular voyage, and of touching at an outside port. On the voyage, this deviation was in fact committed. At the trial of the action brought on the policy for loss sustained, the insured testified that the president orally consented to the request, above mentioned and orally granted the privilege. The president's testimony was in flat contradiction. It was undisputed that no further premium, or con- sideration of any sort, was paid for the privilege, and that, before the voyage began or any action had been taken by the insured, he received a letter from the president of the company, stating that the company never granted or recognized oral permits. The company defended on the ground that there was no element of estoppel shown, 405 406 NATURE OF WAIVER AND ESTOPPEL and no consideration paid for the deviation. May the insured be allowed to testify to and rely upon the oral waiver? 91. A policy covered stock, furniture and fixtures. Without con- sent of the insurance company, the insured had placed a chattel mortgage on the property, thereby avoiding the policy. After the fire the defendant's agent, who had full authority to adjust and dis- pose of the claim in his discretion, told the insured that the company waived the forfeiture occasioned by the chattel mortgage. The in- sured parted with no consideration in return for this assurance, nor was he misled by it in any way to his prejudice, for there were other issues in dispute between the parties which necessitated litigation. Is the insured entitled to recover, or may the company rely upon the defense of chattel mortgage? 92. When the policy issued, the agent also issued a written permit for other insurance, but the slip was never attached to the policy, as required by its terms, until after loss. May the insured rely upon the permit? CHAPTER VII General Principles — Continued Doctrine of Waiver and Estoppel Further Illustrated 93. Colorado has a statute to the effect that, after the first policy year, suicide voluntary or involuntary, sane or insane, shall not be a defense to a life insurance company. At the time of the issuance of a policy in that state, and as a part of the contract, the parties agreed together in writing that the provisions of the statute, should be waived and not insisted upon. Is this agreement binding? 94. A policy of fire insurance contained no lightning clause. Some time after the policy issued, the insured was told by the agent who issued the policy, that the insurance covered loss by lightning. The building was struck by lightning and considerably shattered, though no fire resulted. The insured brings action on the policy. Can he recover for the loss? 95. The description of the property insured, as contained in the policy, is ambiguous. May parol testimony be received, in an action on the policy, to apply the description, and to show what property was in fact intended by the parties? 96. Where the description, as it reads, can only be applied to house A, may the insured testify, in an action on the policy, that the agent who signed and delivered the policy told him that it insured house B? 97. The contents of the policy as written were known to the in- sured, and the policy was accepted and retained by him without ob- jection. It was an employers' liability policy. It provided that the premium should be a given percentage of the wages, to be ascertained at the end of the year. The general agent of the company, however, orally promised, at the time of issuance, that the rate should be a smaller flat rate. The company sues for the premium. Can the insured, in an equitable defense, hold it to the lower rate? 98. A policy of life insurance provided, that the insurance would cease, unless the premiums were paid in cash on the annual due date mentioned. Shortly before the due date, the insured sent a letter 407 408 DOCTRINE OF WAIVER AND ESTOPPEL FURTHER ILLUSTRATED to the company stating that he was hard up, and could not pay the premium when due, but would pay as soon as he could, later on. To this letter the company made no reply. About a month after the due date, the insured tendered the proper premium in cash, which the company refused to accept. Was the policy forfeited? 99. After a loss by fire, the insurance company through the investi- gations of its adjiAter, learned of a breach of warranty by the assured. Nevertheless, the company retained the premium, and made no af- firmative offer to return it, until trial of the action on the policy brought by the insured. Was that a waiver of the breach? CHAPTER VIII General Principles — Continued Waiver and Estoppel hy Agents xOO. Dr. Langlcy was medical examiner for the defendant, au- thorized by it to examine applicants, take down their answers, and report them to the company. The policy, however, stipulated that for this purpose he should be deemed the agent of the applicant. The insured gave true answers to the examiner regarding certain matters, l3ut the examiner transcribed them inaccurately, so that on the face of the contract, as written, unknown to the insured, there was a breach of warranty. Is the policy avoided, or is the company estopped? 101. A policy of life insurance, issued in 1901, provided that only the president and secretary had the power to extend the time for paying a premium. The insured made default in payment of a premium, subsequently becoming due, but, on the due date, the cashier of the company promised an extension of time. Within this period of extension, the premium was tendered to the company, but not accepted. Is the policy forfeited? 102. The agent of a foreign company was authorized to solicit life insurance, and collect the first premium. The insured executed a written application, and paid the first premium by giving two prom- issory notes drawn to the agent's order, payable one month and six months from date, respectively. The application was sent to the company and accepted, and the policy mailed to the agent for de- livery, but it did not reach the insured, because of his sudden death just after the mailing. There was a provision in the policy, to the effect that no agent had power to extend the time of paying the first premium, but the insured had no knowledge of this provision. Was he insured? 103. Before obtaining a binding slip in London on the ship Cambria, the broker received advices that probably the ship was ashore off the harbor of Galveston, Texas. He concealed this material information from the company. But, subsequently, the assistant underwriter of 409 410 WAIVER AND ESTOPPEL BY AGENTS the company obtained the same information from Lloyd's hsts. Nevertheless, after obtaining it, he allowed the representatives of the company to execute and deliver the policy to the broker. Was this a waiver of the forfeiture? 104. The insured made false statements regarding his health to the medical examiner of the company. These false statements, in- corporated in the application, constituted a breach of warranty. The insured, however, had made true statements, regarding these same matters, to Freeman who was a mere solicitor for the company. Free- man had no authority to effect insurances or issue policies, and made no report of what he had heard. Was the policy avoided, or was the company estopped? 105. The fire insurance policy provides in substance that it shall be avoided, if the insured is not unconditional and sole owner in fee simple. As matter of fact, his title was far otherwise, but, on applying for the policy, the insured left with the manager of the company a deed, which showed upon its face exactly what the character of owner- ship was, to wit, a tax title. The manager, however, did not happen to read the paper, and remained ignorant of its contents. Is the policy forfeited, or is the company estopped? 106. The policy, on a New York building, contained a private dwelling warranty (see supra, p. 366). In fact, there was also a retail drug store in the building. Was there a breach of warranty as matter of law? The plaintiff offered to show on the trial that the agent, who signed and issued the policy, had maps and cards in his possession at that time, disclosing the true occupancy of the building. Should this evidence have been admitted? 107. The insured building was on ground not owned by the insured in fee simple, though the policy warranted that it was. The agent, who countersigned and issued the policy, however, had knowledge of the facts. On expiration of the policy, and at request of the insured, the same agent issued another policy in renewal, for a further term. At the time of issuing the renewal, the agent did not have present in his recollection the facts regarding the title. Was the renewal avoided? 108. The policy was conditioned to be void, if the insured procured other insurance without written agreement, or permit, attached to the policy. It also stipulated that no agent had power, or should be deemed, or claimed, to have power to waive orally. The local agent WAIVER AND ESTOPPEL BY AGENTS 411 of the company was authorized to take risks, and enter into contracts of insurance, without consulting the company. His duties included the issuing, canceling, indorsing and delivering poUcies; soliciting and writing insurance; collecting and remitting premiums. During the term of the policy, the insured procured additional insurance, with the knowledge of the company's agent, who promised to make the proper indorsement, but failed to do so, though he had access to the plaintiff's box in which the policy was kept. Is the policy avoided, or is the company estopped? 109. The policy permitted ordinary repairs, but for unusual repairs a written permit, attached to the policy, was required, else the policy, by its terms, was to be avoided. The insured made unusual repairs. In advance of the repairs, but after issuance of the policy, she wrote to the agent, who had countersigned it, advising him that extra re- pairs were about to be made, and to let her know at once, if the notice were not sufficient. She received no reply. The policy was at that time in the agent's possession, and remained there until the fire. No written permit was in fact given or attached. Was the policy avoided, or was the company estopped? 110. Assume, in the last case, that the mortgagee clause (see p. 366, supra) was attached to the policy, and that the policy was in the hands of the mortgagee, and that the agent of the company had not only agreed to give the permit, but had undertaken himself to go to the mortgagee and attach the permit to the policy. Would such a situation estop the company from pleading forfeiture? 111. An adjuster, with authority to adjust the amount of loss and settle the claim, examined the premises and the damage, and told the insured that he would adjust the loss with him without any service of formal proofs, and that formal proofs need not be made. Is that a waiver of verified proofs under a form of policy that in terms denies authority to waive orally, and contains a stipulation that no oral waiver shall be claimed? CHAPTER IX General Principles — Continued Marine Insurance, Seaworthiness, Deviation, Illegality 112. The chartered steamship Dunkeld, laden with sugar, started from Antilla, Cuba, for New York, with inferior and insufficient coal. The master, who was agent for the ship's owner, concealed from the charterer and from the owners of the cargo the fact that the supply was defective. The insurers of the cargo, after a marine loss, con- tend that the ship was unseaworthy, and the insurance avoided. Are they j ustified? 113. The master of an American ship, on her voyage, seeing signals of distress in mid ocean, went out of his course several miles to rescue a crew of American mariners, previously taken from a shipwreck by the vessel signalling, and bound to a foreign port. The delay occa- sioned was only about three hours. Incidentally a box of bullion, also, was transferred to the rescuing ship, but this caused no further delay. Was the American ship guilty of deviation? 114. An insurance was effected in England, on French goods, and against British capture. England was then at war with France. The goods were captured by a British cruiser in the course of the voyage. Can the owner of the goods recover on the policy? 115. An American policy insured a ship. The master, with con- nivance of the owner, engaged in smuggling goods into this country in violation of our revenue laws. In consequence a loss by marine peril occurred. Can the insured recover "under the policy for the loss? 116. Assume, in the last case, that the smuggling was but an in- cident of the enterprise and purely the wrongful act of the master, without connivance on the part of the insured owner. Can the owner recover under the policy for the loss to his ship, caused by a marine peril in connection with smuggling operations? 412 CHAPTER X General Average Marine 117. In stormy weather, a day and a half out from Sandy Hook, the forepeak of the steamship filled with water. The master believed that the vessel had sprung a dangerous leak below the water line, imperilling the safety of ship and cargo, and accordingly he ordered the sluices opened. By this means, the water in the forepeak was reduced, but it ran into one of the holds, and damaged part of the cargo of flour. After the water subsided, examination disclosed that the leak had been caused by a break in the hawse pipe, and that in fact there was no occasion for opening the sluices. Was the damage to cargo general, or particular, average? 118. The Schiedam, bound for New York, discovered a crack in her shaft, when about three hundred miles from Sandy Hook. The shaft was strengthened by bolts, and she proceeded, at reduced speed, until sixteen miles from the Hook, when the shaft broke and greatly damaged the machinery. Contribution in general average was claimed by the shipo^vner, on the ground that the risk to the ship was undertaken in order to save ship and cargo the heavy expense of towage. The evidence showed that the officers confidently be- lieved that no breakdown or damage would occur as a result of the methods adopted. Was there a general average sacrifice? 119. The steamboat Connecticut, proceeding up Long Island Sound, encountered a heavy gale. To prevent her going to the bottom, the captain jettisoned a large amount of cargo, which was carried on deck according to the custom of the trade. The vessel was thereby saved. Arc the owners of the jettisoned cargo entitled to a general average contribution? 413 PART II MEANING AND LEGAL EFFECT OF THE CLAUSES OF THE POLICIES CHAPTER XI Clauses of the Fire Policy Loss by Fire, Description of Property and Interest, Measure of Re- covery, Option to Rebuild, Divisibility of Contract, etc. 120. It is often difficult to obtain fire insurance, in the home market, to fully cover valuable risks, like railroads, warehouses, factories, department stores and large commercial establishments. Statutes allow the deficiency to be covered in non-admitted com- panies, domiciled in other states or countries, proof of the necessity being made by affidavit. The foreign company, having no facilities for surveying the property, adjusting losses, etc., often adds to its policy the name of some well known local or admitted company on the risk, together with a warranty in substance that the rates, terms and adjustments of the local company named shall govern. Does such a warranty constitute a violation of the statutes prescribing a form of standard policy? 121. Does the insertion of an average clause (see p. 366, supra) constitute a violation of such a statute? 122. Has the adoption of a standard fire policy changed the rule, that in case of ambiguity, or doubt, the insured must be favored by a liberal construction, and that, if it can be accomplished without doing violence to the language, a forfeiture must be avoided? 123. A large quantity of wool in the fleece, as it comes from the animal, was stored and insured. Owing to the rise of an adjacent river, the building became inundated with water for several days. Decomposition in the fiber of the wool and great heat resulted, ac- companied by smoke and smouldering in the wool, and, as the plain- tiff contended, spontaneous combustion, although no luminosity or visible flame or glow was seen. Should the court decide, as matter of law, that this was no case of fire? 124. In the Ontario grain elevator at Buffalo, there was a great quantity of dust suspended in the air, which is highly explosive: a fire, insignificant in size, starting in a closet, burned through a board parti- tion, and immediately thereafter ignited the dust, and caused a 417 418 DESCRIPTION OF PROPERTY tremendous explosion, which wrecked the building. Was the loss one by fire, or by explosion, within the meaning of the policy? 125. A policy on a garage covered loss by fire, and excluded loss by explosion. A match, intentionally lighted, caused gasoline vapor in the garage immediately to explode, injuring the building. Was this a loss by fire or by explosion? 126. An accident policy on plate glass excepted losses caused di- rectl}^ or indirectly by fire. A fire, occurring in a building 700 feet distant from that named in the policy, caused an explosion in the distant building. No fire reached the building in which was the plate glass, which was injured by concussion alone. Was the company liable? 127. Policy on "his brick building and addition communicating." It appeared, on the trial of the action brought on the policy, that there was no communicating addition, brick or otherwise. The only "addition," or additional building, was an entirely separate building, a frame building, detached, and several feet distant. Losses were agreed to, to wit, $5,000 on brick building, and $1,000 on frame. What shall be the recovery, $5,000 or $6,000, and who shall decide, court or jury? 128. Is it permissible, in an action on the policy, to show by facts the intention of only one party, when such facts and such intention were not known to the other party? 129. In case of ambiguity in the description, and dispute as to whether the policy includes a certain building under the term "ad- ditions," is it permissible at the trial to ask one of the parties on direct examination, whether it was his intention to include the building? 130. A shopkeeper in Newport, R. I., took out a policy for $5,000 June 1st, for one year, on his stock of fancy articles. He sold out his entire stock during the summer months, and closed his shop until the following May, under vacancy permit. In May he again stocked up with goods of the same quality and character. On May 15th the goods were destroyed by fire. The company denies liability on the ground that the goods destroyed were not the goods insured. Can he recover under his policy? 131. A householder has a policy of $5,000 on "his furniture." After procuring the policy, he sold his piano, which was almost worth- MEASURE OF HKCOVERY 419 less, and bought a new Stein way grand. A fire occurred, and dam- aged the furniture to the extent in all of nearly S5,000. The new piano was ruined. The company objects to paying the loss on the new piano. Is the partial defense valid? 132. A fire engine and appurtenances were insured, "while con- tained in" a certain building, "and not elsewhere." The fire engine was destroyed by fire, when being operated at a fire about 800 feet away from the said building. Was the loss covered? 133. The policy was on household effects in the dwelling of the in- sured in New York City. He claimed, as an item in his loss, the clothes hanging on the line in the back yard which were also burned up. Should this item be allowed? 134. Lord & Taylor have policies (p. 207, supra) on their stock aggregating $2,000,000. An extensive fire in their store injures their stock to the extent of one million dollars, and also, by interrupting their business for several months, causes a loss of $100,000 of profits. What amount can they collect on said insurance? 135. A resident of New York City has a life estate in his dwelling house, which however he insured against fire to the full value of the house. The house was destroyed by fire, and he claims the face of the policy. The company contends that it is liable only for the value of the life estate, as estimated by the life insurance tables. What should be the judgment? 136. Insured has a policy of $5,000 on his building in New York which is totally destroyed by fire. The actual value of the building at the time of the fire is proved to be $4,000. Can the insured recover the full face of the policy, upon which he has been paying premiums? 137. Assume that the policy, last mentioned, is upon a dwelling located in Minnesota or Kansas, or in any other state which is gov- erned by a valued policy law. What would be the measure of re- covery? 138. Assume that a Minnesota house is totally destroyed as a building. The walls however are left standing in part, but are in no fit condition to be utilized for rebuilding without being taken down. Is there a total loss? 139. The Minnesota house is damaged to about one-half its value. Is the insured entitled to one-half the face of the policy, or should he 420 DIVISIBILITY OF CONTRACT prove and recover the actual damage not exceeding the face of the pohcy? 140. A New York hotel company has a use and occupancy policy. The damage by fire, smoke, and water, does not extend to all the rooms, but is so general that the hotel business cannot be conducted until after the repairs are made. Is the loss total? 141. A wooden building is damaged in part by fire, but a city ordinance prohibits its reconstruction. The policy has no provision regarding city ordinances. Is the loss total? 142. The insurance company served a seasonable notice to the effect that it elected to rebuild the insured store, instead of paying the fire loss in cash. Its contractor, however, failed to restore the building to as good a condition as it was in just before the fire, and performed the work in such a dilatory manner as to cause the insured much needless loss in connection with the conduct of his business. What is his remedy? 143. Assume, in the last case, that, after electing to rebuild, the company took no steps at all towards rebuilding for a long time, can the insured revert to the policy and sue for the insurance money? 144. Assume that a policy (p. 207, supra) covers property of dif- ferent classes, with one gross premium, but with an apportionment of the insurance, a specified amount to each class. Does a breach of warranty, that relates to one class, avoid the whole policy, or only the insurance on the class directly affected? For example, will a breach of warranty, as to title or ownership of a building, avoid the policy as to contents of the building, when the hazard on contents is not increased? 145. Under a similar policy will a chattel mortgage on cattle only, avoid as to building and furniture? 146. Under a similar policy will a breach as to the iron safe clause (see p. 367, supra) avoid the whole policy on building and contents? 147. The policy provided that it should be void, if the interest of the insured was not truly stated therein. In fact, insured was not owner, but mortgagee, of the insured building. No mention was made of this fact in the policy. Was it avoided? CHAPTER XII Clauses of the Fire Policy — Continued Other Insurance, Cessation of Operations, Increase of Hazard, Un- conditional Ownership, Waiver by Omitting to Inquire, etc. 148. For his own protection A, a creditor of B, took out insurance on B's goods. Another creditor of B Ukewise took out insurance on B's goods. Was either pohcy "other insurance" with relation to the other pohcy? 149. Humble had a policy upon his colliery. It was conditioned to be void, if the insured had other insurance on the property without written consent indorsed. Humble took out no other insurance, but another party, to wit, a mortgagee, did so in Humble's name without the knowledge, consent or authority of the insured. Was Humble's policy avoided? 150. A policy was conditioned to be void, if the mill ceased to be operated for more than ten consecutive days, but the insurers knew when they issued the policy that, in the winter, there was likely to be failure of water power. This failure occurred, and, necessarily, opera- tions ceased for about three months. Was the policy avoided? 151. During the term of the policy (see p. 207, supra), a new build- ing was erected on the adjoining lot, within a few feet of the insured building. The insured had no ownership in, or control over, the new building, which was vacant. Its presence substantially increased the hazard in the insured building. The insured had knowledge of these facts. The matter of "exposures," as they existed at the time the policy issued, had been covered by correct answers in the application when the plaintiff took out the insurance. Was the policy avoided? 152. During the term of a policy, a grocery store was erected be- tween the dwelling house of the insured and the nearest exposure which he had described in his application. Plaintiff knew of the existence of this new building. Defendant did not. A grocery was rated by insurance companies as more hazardous than a dwelling. On the trial the defendant claimed a fatal increase of hazard. Who 421 ■422 INCREASE OF HAZARD shall decide whether this neighboring building amounted to a material increase of risk in plaintiff's building, avoiding the policy? 153. Policy on a stock of merchandise. The insured, for an extra premium, procured a written permit to store fireworks for fifteen days. He continued to keep them for eleven days after expiration of permit. The fireworks became ignited, and shortly exploded, doing much dam- age to the stock generally. Was the policy forfeited as matter of law? 154. With the knowledge of the insured and the mortgagor, fore- closure proceedings were commenced on a mortgage covering the insured premises. Assume that there is no warranty in the policy regarding foreclosure proceedings. Can the insurer maintain that such a proceeding amounts to an increase of risk as matter of law? 155. The policy was conditioned to be void, if mechanics were employed in building, altering, or repairing for more than fifteen days at any one time. During the term of the policy, carpenters and masons were engaged in repairing the insured house for three weeks. The job was finished, however, before the fire, and in no wise con- tributed to it. Was the poUcy avoided? 156. Assume, under the same form of policy, that no one mechanic was occupied for fifteen days, but that continued operations by vari- ous mechanics on the one job, in the aggregate, extended beyond that period. Is there a forfeiture? 157. An executory vendee has paid part of the purchase price, and is obligated to pay the balance upon passing of the deed of convey- ance of the premises. Under the terms of the contract he has been given possession, and any loss by fire will fall upon him. Is he "un- conditional and sole owner" within the meaning of the poUcy of insurance? 158. In his policy, the building of the insured was described as "his building." On the trial, it appeared that the insured was in possession and occupancy of the building, but no deed was put in evidence, as is customarily done, nor was there other evidence offered either by plaintiff or insurance company. Did plaintiff make out a prima fade case of title? 159. The policy on a sanatonum, owned by the insured, the plain- tiff, provided that it should be void if the interest of the insured was other than unconditional and sole ownership, unless otherwise pro- vicied by agreement added thereto. The policy was in favor of the UNCONDITIONAL OWNERSHIP 423 Peerless Mineral Springs Co., payable to "Roberts trustee as his interest may appear." Roberts in fact was trustee under a deed or mortgage securing bonds issued by the Springs Co. The insurance company claims that the policy is avoided. Judgment for whom? 160. The policy was conditioned to be void, if the building was on ground not own(!d by the insured in fee simple. In fact the building of the insured was on leased ground. No permit was ol)tained or asked for. No inquiry regarding the title was made of the agent of the company, and no representation was made by the insured at any time. Formerly this company required applicants for insurance to incur the trouble and delay involved in filling out an application blank with numerous questions regarding title, incumbrances, ex- posures, and the condition of the property generally, answers to which were made part of the contract and warranties, but this prac- tice, inconvenient to the public, had been discontinued, and the com- pany relied upon the provisions of the policy only. Was the policy avoided? 161. Assume in the last case that the building, sixteen feet in width, encroached say two feet on the adjoining lot, to which the insured had no title. Would this avoid the policy? 162. The policy was conditioned to be void, if the property was incumbered by a chattel mortgage. When the policy issued there was a chattel mortgage upon the property. On the trial, the insured contended that the forfeiture was waived, first, because the com- pany made no express inquiry of the insured regarding the title or in- cumbrances, and, second, because the chattel mortgage was recorded and the record was notice to the company. Was the claim of waiver valid? 163. Assume that a chattel mortgage is given not for money loaned, but merely as collateral security for rent. Is the policy avoided? CHAPTER XIII Clauses of the Fire Policy — Continued Alienation, Prohibited Articles, Vacancy, Excepted Causes, etc. 164. The owner of a building in Boston was insured against fire. During the term of his policy, which was in the Massachusetts stand- ard form (see p. 210, supra), he made an absolute conveyance of the property to a friend, without the knowledge or consent of the com- pany. There was no transfer of the policy. Shortly thereafter the building was destroyed by fire. The vendor and vendee agreed to divide equally whatever could be collected from the insurance com- pany. The vendor also executed an assignment of any and all his rights in the policy to the vendee after loss, and the vendee brings action against the company. Can he recover? 165. A policy in the New York form (see p. 207, supra) covered several buildings, a separate amount on each building. The insured sold one of the buildings. Was the whole policy avoided? 166. Insured sold and delivered a stock of merchandise, but on condition that title was not to fully pass until the purchase price was fully paid. By the terms of the contract the executory vendee who took possession was to sell at retail, and make to the vendor weekly and monthly statements of sales. Was this "a change of interest"? 167. Building and contents were insured by one policy (p. 207, supra), but in separate amounts. In violation of the ''change of in- lerest" clause the insured sold the building, but not the contents. He still had possession of the building. Was the whole policy thereby avoided? 168. The policy contains no special clause regarding real estate mortgages. Is the giving of a real estate mortgage, during the term of the policy, "a change in the title, interest or possession" of the property insured, as that phrase is used in the policy? 169. What would be the effect, if, during the term of insurance on his building, the insured should execute a deed of conveyance absolute in form, but in fact given as collateral to secure payment of a debt? 424 PROHIBITED ARTICLES 425 170. What is the effect on a poHcy, in the New York form (p. 207, supra), of a levy on insured real estate by the sheriff under execu- tion, before expiration of the statutory period for redemption by the judgment debtor? 171. What is the effect on such a policy, of a levy on insured personal property by the sheriff under execution before sale? 172. Under the alienation clause of the last mentioned form of policy what would be the effect of selling the contents and not the building, where both are covered by the policy with an apportion- ment of the amount as between building and contents? 173. The policy (p. 208, supra) was conditioned to be void, if gasoline, ether, etc., were kept, used or allowed. Without knowledge or consent of the insured, his tenant kept gasoline in the house for many days, without permit. There was no clause in the policy to the effect that a breach would suspend the insurance. This violation of the policy in no wise contributed to the loss. Was the policy avoided? 174. Policy, in form like the last, on a dwelling house. Ether was used medicinally on one occasion, in connection with a surgical opera- tion performed in the house. Was the policy avoided? 175. Policy, in terms like the last, on a factory. The insured ordered five gallons of gasoline to be delivered at another building. By mistake it was sent to the factory and remained on the factory premises though not in the building foi' about an hour only. Was the policy avoided as matter of law? 176. Policy, in terms like the preceding. On a single occasion, without knowledge or consent of the insured, his wife ordered a gallon of gasoline to be sent to the house. It remained there, for several hours, in a tub. The husband, thinking it was water, threw a lighted match into it, thereby setting fire to the place. Was the policy on the house avoided? 177. The policy was in the same form as the last. In making ex- pressly permitted repairs on the court house, gasoline was used for fuel in the chamber of a torch by which the painters burned off the old paint from the outside. The conflagration was not caused directly by the gasoline but by the flame, and any other fuel producing a similar flame would have brought about the same result. Was the policy avoided as matter of law or should the case go to the jury? 178. A servant, in the pay and employ of the insured, without 42G VACANCY AND UNOCCUPANCY knowledge or complicity on the part of his employer, took a can of gasoline into the insured building, in the nighttime, and deliberately and willfully used it to set fire to the building. Was the policy avoided? 179. The written description of the policy covers "drugs" and "chemicals" in a drug store. The general printed clause warrants, that no benzine shall be "kept, used, or allowed," (p. 208, supra), without written consent attached. Is it permissible, on the trial, to show by parol, that the usual stock of "drugs and chemicals" in- cludes benzine? 180. Policy on "stock of fancy goods and other articles in his line of business." Fireworks were classified as extra hazardous, and keeping them without written agreement or permit was expressly stipulated by the printed terms of the policy to avoid it. Plaintiff kept fireworks, as part of his stock, and the fire was caused thereby, but he proved, on the trial, that it was in his regular line of business to keep them. Shall the written description be taken as in itself amounting to a written agreement of consent or permit, or must the court apply the doctrine that effect can be given to both clauses in the policy, to wit, the written description and the printed prohibition? 181. The building, in which the furniture insured was contained, was described in the policy as "a dwelling house." The house was well furnished, and was put under the supervision of a neighbor. Fre- quent visits at the house in the daytime were made by the owner and by his son, but no one, for more than a month, slept in the house. There was no permit for unoccupancy. Was the policy avoided? 182. The policy covers the whole building. A part only of the building becomes vacant. Does this affect the insurance on the building? 183. A building, insured as a schoolhouse, had no one sleeping in it, and during the usual vacation it was altogether unoccupied. There was no vacancy permit. Was the policy avoided? 184. A building was insured as a church. On account of the ab- sence of the pastor, no services were held for many, weeks, but the edifice was left in charge of the sexton. Was the policy avoided? 185. A policy covered two buildings, with a separate amount on each. One of them became vacant in violation of the vacancy clause. The vacancy increased the risk in the other house. There was no FALLEN liUlLDING. 427 clause in the policy to the effect that a breach should suspend and not avoid the insurance. Was the whole policy avoided? 186. Does unoccupancy of a building for more than the permitted period avoid as to insurance which covers only the contents of the building? 187. As the result of the great earthquake of 1906 in California, the whole front of the l)uilding, in which plaintiff's goods were insured against fire (see p. 208, supra), fell, before any fire started. Subse- quently the goods were damaged by fire. Can the insured recover? 188. Assume, in the last case, that the jury find that the fire started first, and caused the fall of the building. Does the fallen building clause furnish a defense? 189. Assume that the California earthquake of 1906 started a fire, which immediately spread, and, after burning several intervening blocks, consumed plaintiff's building which was not shaken by the earthquake. Which is to be taken as the operative and proximate cause, the earthquake an excepted cause, or the fire, the peril insured against? CHAPTER XIV Clauses of the Fire Policy — Continued Cancellation, Mortgagee Clauses, etc. 190. The cashier of a bank was local agent for defendant and had access to the vault where the plaintiff kept its policy of insurance (p. 208, supra) covering its manufacturing plant. This agent received instructions from the company to cancel the policy. He sent it to the company, and wrote to insured saying that upon orders from the company he had cancelled the policy and had credited the insured with the amount of the return premium. Insured simply replied ask- ing if the policy could not be rewritten in one of the agents' other com- panies and asking for details of the policy. Did this amount to a cancellation by mutual consent? 191. A broker procured a binding slip on the property for his New York customer, but subsequently, learning that the property was otherwise insured to the extent required, he returned the binder to the company, with the direction, "mark this off," indorsed upon it. The company objected to doing this, and very shortly the fire occurred. Did this direction amount to a good notice of cancella- tion? 192. Upon request of insured, the company cancelled the policy. Both parties were then ignorant of the fact that a loss had already occurred, and that the insurer was liable for it. Shall the cancellation stand, or will the court set it aside at the instance of the insured? 193. Park & Tilford, having decided to employ a new broker, ac- cordingly sent a letter to Benedict, asking him to procure $50,000 f)f insurance on their stock in a branch store. The broker at once l)ound the risk with five companies for $10,000 each, and within a few days delivered all the policies to his customer. Two days later, one of these insurers, the Home Insurance Co., having ascertained meanwhile that it was already heavily interested in adjoining prop- erties in the same block, served upon Benedict a five-day notice of cancellation of its policy, and, at the same time, paid to him the amount of unearned premium on the policy. Twelve days later a 428 CANCELLATION 429 fire occurred in the grocery. Park & Tilford refused to take the return premium from the broker and .sued the Home Insurance Co. on the pohcy. The company sets up cancellation in defense. Who is entitled to judgment? 194. Would it affect the question if Benedict had been employed to take general and continuous charge of insurance matters for Park & Tilford? 195. Insured owned a building worth $10,000, and was carrying $5,000 insurance upon it with the Home Insurance Co. He had in- structed his broker, that that was the limit of insurance which he desired to carry. November 7th, the Home served upon the insured a five-day notice of cancellation, and paid to him the unearned premium. The insured notified his broker of this, and instructed him to take out with the Royal Insurance Co. another policy for $5,000, which the insured and the broker intended should take the place of the cancelled pcdicy; l)ut the instructions to the broker and their intentions were not mentioned to either company. The policy with the Royal was issued and paid for November 10. The next day the building was damaged by fire to the extent of $7,500. From what company, or companies, shall the insured collect, and how much? 196. Assume, in the last case, that the broker was also agent for the first company, what would your answer be? 197. Assume in case No. 195 that the same agency represented b'oth companies, that the broker was in general and continuous charge of insurance matters for the insured, and, on binding the risk for the second policy, had stated, at the insurance agency, that his purpose was to replace the policy cancelled. 198. The policy of the owner of a building contained a standard mortgagee clause (p. 366, supra). After loss, neither mortgagor nor mortgagee gave any notice of loss, or served any proofs. The prop- erty was incumbered beyond its value, and the owner would do noth- ing. The insurance company first learned that there had been a loss, by receiving summons antr complaint in an action on the policy, brought by the mortgagee fifteen months after the fire. All evidence of the fire, and of the damage, had by that time been obliterated. Insurer set up as breaches of warranty in defense, (1) that no notice of loss had been given, (2) that no proofs of loss had been served, (3) that action had not been begun within a ycai after the fire. Who is entitled to judgment? 199. A mortgagor covenanted with the mortgagee to keep the 430 MORTGAGEE CLAUSES property insured, for the further security of the mortgagee. The mortgagor's policy, however, had no mortgagee clause attached, and made no mention of the mortgagee. After a loss by fire, a judgment creditor of the mortgagor attached, or garnisheed, the insurance money. Who has the superior claim to the insurance, the mortgagee or the judgment creditor? 200. A mortgagee employed a broker to take charge of his insur- ance. This was done by attaching to the mortgagor's policies a stand- ard mortgagee clause. Before expiration of one of these policies, the broker made application to the company for "a renewal." The company accepted the application, but through inadvertence omitted to attach a mortgagee clause to the new policy, and issued the poUcy naming only the mortgagor. The broker carelessly omitted to notice this omission, and delivered the policy to the mortgagor, who kept it. A fire occurred shortly after. Has the mortgagee a right of action against the company? Has he a right of action against his broker, if the company refuses to pay? 201. A owns a building and lot worth $10,000, and has a policy of $5,000 upon the building. This policy has a standard mortgagee clause, or rider, upon it in favor of B, a mortgagee, whose mortgage is for $3,000. The building is destroyed by fire. You are counsel for B. The company refuses to pay, and A refuses to sue. Whom will you make parties plaintiff and defendant to the action which you begin on the policy? i I ) CHAPTER XV Clauses of the Fire Policy — Concluded Service of Proofs, Examination Under Oath, Appraisal, Contribution, Reinsurance, Limitation of Time to Sue, etc. 202. How do you construe the meaning of the clause in the fire policy (p. 209, supra), that the insured must give "immediate written notice of loss"? Do you make any distinction, as between the condi- tions or warranties that affect the risk, and the conditions or warran- ties that pertain to an ascertainment of the cause and amount of loss after the capital event insured against has occurred? 203. A resident of New York, whose property was destroyed by fire, following the San Francisco earthquake, owing to the confusion existing in that city, was unable to ascertain what property had in fact been lost, until nearly fifty days after the fire. Immediately on learning the facts, he prepared proof of loss, and had it served upon the San Francisco agent of the company. Was this a compliance with the provision for "immediate notice of loss," and who is to de- termine the question, court or jury? 204. When the loss by fire occurred, the insured was traveling on the continent of Europe, and could not be reached within sixt}^ days. His wife, though not appointed his agent, was familiar with the facts, and so, acted as his agent ex necessitate, and signed and verified formal proof of loss, and served it upon the insurance company; at the same time advising it that her husband was not in the country. The com- pany returned the paper, with the objection that it was not sworn to by the insured, as required by the standard policy. Is the service good? 205. In the last case, the company refusing to pay, the wife brought action on the policy in her husband's name, and during his absence. He returned, however, before the trial. The policy provided that it should be void in case of any fraud or false swearing by the insured. In the proof of loss upon which claim is based, the wife intentionally included certain items of property, as damaged, which she knew were not exposed to loss. The husband was not willingly a party to this 431 432 EXAMINATION UNDER OATH deceit, and on the trial asked judgment only for his actual loss. Was the policy forfeited? 206. After damage by fire to a boat, insured under the standard fire policy, the insurance company served written notice upon the insured requiring him to submit to a personal examination under oath, and to produce books of account and vouchers, as provided by the policy (p. 209, supra). Upon this examination, the insured refused to answer a question as to what he had paid for the boat when he bought it. Since purchase, he had made considerable repairs, and believed the question to be immaterial. In fact, the inquiry was material and altogether proper. Is it for court, or for jury, to deter- mine whether the policy was thereby forfeited? 207. After loss, the insured and insurer, being unable to come to terms as to the amount of damage, and also as to whether the insured had violated certain warranties of the policy, arranged to refer the whole controversy to a well known insurance lawyer, in whom both parties had confidence, and to abide by the result of his decision. The parties executed a most explicit written instrument to that effect under seal, purporting to bind them absolutely and finally. There were many hearings before the arbitrator. The insurance company, especially, incurred heavy expenses for stenographer's fees, and for bringing several witnesses from distant states. Before the hearings were concluded, the insured, finding that his cause was not prospering, and concluding that he could do better before a jury, refused point blank to proceed, and started action in court on the policy. The company set up in defense the arbitration agreement and also pleaded estoppel. Are the defenses good? 208. Policy (p. 209, supra) on a large stock of goods in a department store. The fire damaged a part of the stock, and altogether destroyed the greater part, so that no ocular evidence of it was left. The ap- praisers, appointed under many New York standard policies on the risk, were experts in the same line of busin&ss. They refused, how- ever, to pass upon sound values and damage, in the case of items of property burned out of sight, stating that they were not familiar with rules of evidence, and had no adequate facilities for compelling the attendance of witnesses, and production of books and papers. Their award, in fact, was limited to damage which they could inspect. Was this award altogether invalid? Was it binding as to property included in it? 209. An appraisal over a damaged stock of goods having been APPRAISAL 433 begun in accordance with the terms of the poHcy, the insured served a written notice upon the umpire and appraisers, to tiie effect that he demanded opportunity to give personal testimony before them, and to submit certain books of account relating to the stock. They replied that they were skilled experts and not judges, and must re- fuse his demand. They, however, visited the premises repeatedly, and satisfied tliemselves as to the amount of damage })y means of careful inspections and examinations of the goods themselves. The insured withdrew from the appraisal, and refused to a})ide by the award which was al)out to be made. He brought suit attacking the award, and to recover on the policy, and, on the trial, offered to prove the facts above mentioned, and the amount of loss actually sustained. The company contends that the award is conclusive as to the amount of loss. Should the plaintiff's testimony be received? 210. During the course of an appraisal under the policy, and when it was almost completed, the umpire })ecame unable to proceed, be- cause of illness, and shortly died. The two appraisers are hopelessly apart in their estimates, irritated with each other, and refuse to make any attempt to agree upon another umpire. What would you advise the assured to do? 211. Suppose the insured desires to attack an award, on the ground of fraud on the part of an arbitrator, or illegality, or misconduct, or failure to pass upon part of the property submitted. May he attack the award, with proper allegations, in his action on the pohcy, or must he bring suit in equity for that express purpose? 212. At the time of the fire, the insured has five concurrent policies of S10,000 each, in the standard form, from as many companies, covering his mill. This fire caused a partial loss only to the mill. The insured through a clever public adjuster promptly made a very favorable settlement with four of the companies, so much so that the payments from them more than indemnified him for his actual damage sustained. He was obliged to sue the other company. It defends on the ground that, insurance being simply a contract of in- demnity, there is no loss left to pay. Is the defense good? 213. At the time defendant issued its policy, its agent asked the insured whether he was carrying any other insurance on the same building. Insured replied that he had another policy of the same amount. This latter policy expired before the fire, and was not re- placed, so that defendant alone was on the risk at the time of the fire. Defendant puts in a partial defense, in the action on the policy, 434 CONTRIBUTION pleading that it is only liable for one-half the loss. Is this contention sound? 214. In case of loss to a valuable property insured, there are almost always many policies contributing. Where there is litigation over the insurance, the companies are frequently represented by the same counsel, and, when represented by different counsel, they often interpose the same defense. May the insured institute one omnibus suit at law against all the contributing companies to recover the one aggregate loss, or must he sue each company separately for its pro rata share of the loss? 215. Would it, in your opinion, make a difference, if the policies were only partly concurrent with one another, so that the apportion- ment of the loss as between them would appear to be complicated, and perhaps of necessity more or less arbitrary. Might an omnibus suit then lie in equity or, the claims being upon contract for a money judgment only, has each defendant a right to a jury trial, and based upon its own contract, unembarrassed by other parties and other contracts? 216. The insured owns two adjoining apartment houses, each worth $4,500. He has three policies, a blanket policy from the Continental Insurance Co. for $2,500 on both houses, a policy from the Sun Fire Office of the same form and amount, and a specific policy of $3,000 from a Milwaukee company apportioned $1,500 on each house. No policy has a co-insurance clause, but each has the usual contribution or pro rata clause. A fire causes a loss of $2,000 to one house and $1,000 to the other. How shall the loss be apportioned as between the companies. Shall the two blanket policies be considered as ap- portioned between the two houses in the ratio of the values of the houses? 217. The Home Insurance Co. of New York, while carrying a larger line than it wanted on the contents of a large cotton warehouse in New Orleans, reinsured one-half its liability with the Royal In- surance Co. of Liverpool, admitted to do business in New York. The parties used for this purpose the National Board standard clause (p. 308, supra), which was pasted as a rider on the New York form of standard policy, the whole document being executed by the Royal. A heavy loss occurred, which was not adjusted for many months as between the Home Insurance Co. and the owner of the insured building. The Royal, suspecting a case of arson, declined to pay on the reinsurance policy. Is the Home Insurance Co. under obligations REINSURANCE 435 to serve proofs of its claim upon the Royal within sixty days after the fire, and to begin action within one year, as provided by the New York standard policy? 218. On the trial of the action on the reinsurance policy, last re- ferred to, the Royal Insurance Co, claims that the Home, the direct insurer, made a far too liberal adjustment and payment to the owner, and that the company granting reinsurance is liable, only for one-half the actual liability or loss to be proved on this trial. Is this contention sound? 219. The policy (p. 210) provides that no action shall be sustain- able unless commenced within twelve months next after the fire. An action on the policy is one that falls within the six-year class according to the state Statute of Limitations. Which provision is controlling? CHAPTER XVI Life Insurance Policy 220. A policy of life insurance, in a regular company, was payable to the wife of the insured, or in case she predeceased her husband, to her children. She died before her husband, leaving two children, and the child of a daughter who had predeceased her, surviving. On the death of the insured, do the two children take all, or is the grandchild entitled to a share? Shall the policy be construed as a con* tract, or as a testamentary provision? 221. Where a husband applies for a policy upon his life, in the name of his wife, and for her use, and the policy provides for payment of premiums by the wife, although in fact all premiums upon it are paid by the husband, with whom is the contract made, and whose property is the policy? 222. The by-laws of a beneficiary association provide that a beneficiary must be either one of the family, or a blood relation of the member, or a dependent upon him. The member designated his niece, but afterwards cancelled the appointment, and had the society substitute the name of another as beneficiary, who did not come within any of the classes above mentioned. On the death of the member to whom is the insurance payable? 223. Has a gratuitous beneficiary, named in the member's certifi- cate of the usual fraternal beneficiary association, a vested right, during the life of the member, or, without his consent, can the mem- ber make a new appointment? 224. Where the beneficiary dies before the member, and the society has not provided for a change of beneficiary, will a designation of beneficiary named in the member's last will and testament be ef- fectual? 225. Assume that, by the laws of the society, the appointment of a new beneficiary is not to be complete until the new certificate issues. Assume that the member has done all in his power, and all that per- tains to him to do, to change the appointment, but dies before the 436 LIFE insurance: warranties 437 society actually issues the now certificate. In a controversy between the two appointees, which of them will the court favor? 226. Assume, that, by the laws of the society, a change of bene- ficiary is dependent upon surrender of the outstanding certificate. May the society waive the by-law? 227. Your client reports to you that the insurance company has wrongfully, and without his consent, cancelled his policy of life insurance which was in the company's possession for another purpose. What advice can you give as to his available remedies? 228. The written application was made part of the policy of life insurance, and the answers were warranted to be true. Mudge, the decedent, warranted that he had never had the disease of insanity. By the undisputed testimony, it appeared that he had previously been insane, and had been so adjudged, and that he had been confined and treated as insane, and that, although aware of these facts, lie had made no allusion to them in his interview with the examiner. Mudge knew that his answers were not correct. There was evidence, however, showing that the examiner and agent had knowledge of the previous insanity of the applicant. The widow sues on the policy- Can she recover? 229. In response to the interrogatory, "have you other insurance? If so, name amount and companies," the written statement appears in the application, "Atlas $5,000; Star $10,000; will drop Star July 15, '96." The answers to the interrogatories were, by the policy, incor- porated and warranted to be full and complete. In fact, the answer to the interrogatory regarding other insurance was correct, so far as responsive, but the volunteered statement as to future action, "will drop Star," etc., was not correct. Was there a breach of war- ranty? 230. Mrs. Beck, the beneficiary in her husband's policy, brings action on the policy. Beck agreed as follows: "The truthfulness of each statement above made, by whomsoever written, is material to the risk, and is the sole basis of the contract; I hereby warrant each and every statement, herein made, to be full, complete and true." The defendant claims breach of warranty in that the questions were not fully answered. One of the answers is as follows: "I have never had or been afflicted with any sickness, disease, ailment, injury, or complaint, except rheumatism three years ago." Close to the answer appeared the printed direction, "Duration,, whether trivial or other- 438 LIFE insurance: warranties ■nise. If rheumatism, state whether muscular, sciatic or .inflam- matory." This direction or requirement was not complied with. Was the policy avoided? 231. In many states there is a statutory provision, in substance that the policy must contain the entire contract, and that nothing shall be incorporated by reference to by-laws, application, or other writing, unless the same are indorsed upon, or attached to, the policy when issued. If an application is attached, which in part is a correct, and in part an incorrect, copy, may the company avail itself of any breach of warranty disclosed in that part which is correctly copied, or must the whole application be discarded? 232. In many states there is a statutory provision, in substance that a breach of warranty, unless in a matter material to the risk or involving bad faith, shall not avoid the policy. The insured war- ranted in his application that he had no kidney disease. He died of that trouble about three months later. On the trial against the com- pany, evidence is produced tending to show that the insured had not intentionally misrepresented his condition in the application, and that any misstatements regarding sickness or kidney trouble were not of matters necessarily increasing the risk. How and by whom shall the case be decided? 233. Assume, under a similar statute, that the insured has war- ranted his age to be thirty, when in fact it was forty, or that he had warranted his health to have been sound, when in fact he had been afflicted with a serious disease, undoubtedly of a nature to shorten life. How and by whom should the case be decided? 234. The Maryland statute provides that untrue statements in the application, made in good faith, must relate to some matter material to the risk to avoid the policy. The applicant stated, "That his habit as to the use of intoxicants was one glass of beer a day on an average, and that such had been his habit in the past, and that he had never taken any special treatment for alcoholism." These state- ments were incorrect. In fact, he drank much more than one glass of beer a day on an average, and had been treated for alcoholism. Plaintiff was allowed to obtain a verdict in the court below. The insurance company appeals, on the ground that the answers related to matters material to the risk. Do you vote for affirmance or re- versal? 235. Assume that both the insured himself, and also the soliciting LIFE insurance: warranties 439 agent of the company, are well aware that the answers of the insured, in the application for life insurance, are false in material matters. Is the policy avoided, or is the company estopped from taking advantage of the breach? 236. Does a warranty regarding occupation refer to occasional acts, or to a regular vocation? The occupation of " saloon bartender " was prohibited by the decedent's certificate. His work was to scrub and clean in the saloon, yet occasionally he waited on customers at the bar, when the proprietor was otherwise busy or absent. Was his policy avoided? CHAPTER XVII Life Insurance Policy — Concluded 237. The policy stipulates that failure to pay any annual premium^ when due, will thereupon void the policy, and forfeit all premiums theretofore paid. The premium due in February was not paid, and the insured died the following August. The claimant contends, in analogy to the case of many building contracts, and contracts for future conveyances of real estate, that time is not of the essence of the contract, and that the court should abhor a forfeiture. The in- surance company contends that for a comparatively small premium it incurs the risk of a much greater liability, and solely upon faith of the fulfillment of the contract conditions; that an evasion of these con- ditions means a repudiation of the very sum and substance of the contract, and a demoralization of the insurance business; and that all calculations are based upon the hypothesis of prompt payment of premiums. Judgment for whom? 238. The policy provides that failure to pay any premium, or note, when due, will thereupon terminate the insurance, and forfeit all pay- ments. The policy was taken out by Behling, upon his own life, pay- able to the plaintiff, his wife. He made default in payment of a note when due. The company claimed forfeiture. The plaintiff now con- tends, (1) that, before claiming forfeiture, the company should have called her husband's attention to his default, and have given him reasonable opportunity to make subsequent payment; and (2) that her right was vested and not to be disturbed by the default of her husband. Judgment for whom? 239. The policy in an assessment company provides, that it shall lapse and become forfeited for non-payment of any assessment, unless the assured shall be restored to membership. The assured defaulted in payment of a monthly assessment, and was never restored to membership, but the company continued to collect subsequent assess- ments from him for several months after the default. On the death of the insured, the beneficiary brings suit. Judgment for whom? 240. The by-laws of a beneficiary association provide, that in case of default in paying an assessment, and consequent forfeiture, the 440 LIFE insurance: premiums, assessments 441 insured may make application for reinstatement, upon furnishing a satisfactory medical certificate as to present good health, any assess- ments paid meanwhile to be kept in a "suspense" account. The insured inadvertently made default in payment of an assessment, but sent a cheque for the amount two days after it was due. The association cashed the cheque, and put the cash into the suspense account. The insured applied for reinstatement, but was unable to furnish a satisfactory medical certificate. The association thereupon tendered the amount of the cheque to the insured, but he refused to accept it. His widow now l)rings action on the certificate of member- ship claiming waiver. Can she recover? 241. The policy provided that the insurance would forthwith cease, unless premiums were paid on dates specified. On a due date, the insured was traveling in a foreign country, and was also very dangerously ill, and inadvertently omitted to make payment. A few weeks afterwards on his return home, having discovered the omission, he immediately tendered the premium at the company's office. It was refused. He thereupon brought suit in equity to revive his poficy. Judgment for whom? 242. Under the New York insurance law requiring notice of due date of premium on a life insurance policy and the many similarly worded laws of other states, is it sufficient to state, in the notice mailed to the insured, that the agent named is the "general agent" of the company, or must the notice further state that the person named "is authorized to collect the premium"? Is it sufficient to name the due date, and then to state that "if the premium be not paid, the policy and all payments thereon will become forfeited," etc., or must it be more explicitly stated that "if the premium be not paid by or before the day it falls due the policy and all payments thereon ^vilI become forfeited," etc.? 243. Proper statutory notice to pay the premium was duly mailed before premium was due. After receipt of this notice, it was arranged that a promissory note should be given by the insured for the pre- mium, failure to pay which, on maturity, should nullify the policy. There was default in payment of the note so given, but no separate preliminary notice to pay the note was ever sent to the insured. Was the policy avoided? 244. A beneficiary association, finding its rate of mortuary assess- ments too low to meet its obligations, doubled the rate by amendment of its by-laws applying the new rule to all existing as well as future 442 SUICIDE memberships. In such associations the by-laws, if not the state statutes, provide that members shall be governed by the by-laws as existing or as thereafter amended. Is the new by-law retroactive, that is, does it operate as against existing memberships? Would it matter in your judgment, if the society expressly agreed to the lower rate of assessments in the original certificate of membership? 245. Does it matter in your judgment whether the reservation of power to amend the by-laws was couched in general terms, or whether "the certificate had provided that the payments therein specified should be subject to such modification, as to amount, terms, and con- ditions of payment, and contingencies in which the same were payable, as the endowment laws of the order from time to time might provide "? 246. A beneficiary association diminished the amount of sickness benefits by amendment of the by-laws, but, as diminished, they are still as large as when the claimant became a member. Must he sub- mit to the reduction? 247. Assume that the rate of assessments is illegally raised. What is the remedy of the objecting member? 248. Assume that the plaintiff was induced to join the association by fraudulent misrepresentations regarding the assets of the company. May he rescind, on discovering the fraud, and recover back all pre- miums paid, or will the court rule that he must pay for the insurance which he has had? 249. The policy contains no suicide clause in favor of the com- pany. The insured was heavily in debt, and, not knowing how other- wise to make provision for the necessary support of his wife and minor children, took out the poHcy upon his life, payable to his estate, with the deliberate purpose of committing suicide, and this he does shortly after the policy issues. Are his executors entitled to collect the insurance? 250. A took out a policy, in good faith, upon his own life, payable to himself, his executors, administrators or assigns. It contained no provision regarding suicide. A intentionally kills himself while sane. Is the insurer liable? 251. A took out a policy, in good faith, upon his own life, but pay- able to his wife and children, whose interests thereupon became vested. It contained no provision regarding suicide. Thereafter, he intentionally killed himself while sane. Is the insurer liable, if the ex- SUICIDE 443 press provisions of the policy have been complied with on the part of the insured? 252. The policy contains an exception as follows: "if the insured dies by his own hand or act." The court charged the jury that the exception refers to suicide, that is to say, intentional self-destruction, and that if the insured accidentally shot himself with a pistol, the company is liable. Defendant excepted to the charge. Should judgment for plaintiff be affirmed or reversed? 253. A took out a policy, in good faith, on his own life, payable to himself, his executors, administrators or assigns. It provides that it shall be void, if the insured commits suicide or dies by his own hand. Three years after issuance of the policy, A jumped out of a window, killing himself, while insane. Can the executors recover? 254. A took out a policy in good faith in the Berkshire Life Ins. Co. on his own life, payable to his wife and children. It provides that it shall be void, if the insured "dies by his own hand, sane or insane." Three years after the issuance of the policy A intentionally kills himself while insane. Can the beneficiaries recover? 255. A took out a policy in good faith on his own life, payable to himself, his executors, administrators and assigns. It provides that it shall be void if the insured "die by his own act, sane or insane." Purely by mistake, A drank poison, believing it to be water. It caused his death. Can his executors recover? 256. Suppose, under the same form of policy, the insured acci- dentally shot and killed himself while out hunting. Can his executors recover? 257. A policy of life insurance is payable to the wife of the insured. The premiums have been kept up and all the conditions mentioned in the policy are complied with, but the wife intentionally kills her husband by poison. The policy contains no clause regarding mur- der. Can she recover under the policy? 258. Suppose, in the last case, the wife was insane when she took her husband's life. 259. The corpse of the decedent is found, but whether death was intentional or accidental is not indicated by its condition. What proof is admissible? May the company show that the decedent was insured in other companies? That he was financially embarrassed? That orally, or in writing, he had hinted at a purpose tc kill himself? 444 INCONTESTABLE CLAUSE 260. The policy is payable to the insured, his executors, adminis- trators or assigns, and contains the clause that it will be incontestable after one year from date, except for non-payment of premiums. The premiums are all paid covering many years. In an action on the policy, the company defends on the ground that the insured, when applying for the insurance, fraudulently warranted in his application that he had never applied for other insurance, and had never had con- sumption, whereas, as he well knew, he had made several previous applications for other life insurance, and was also afflicted with the disease of consumption of which he subsequently died. Is the de- fense, if proven, good? 261. The policy contains the clause that it will be incontestable from and after date, except for non-payment of premiums. The company proves in defense, in an action on the policy, that the insured, when applying for insurance, fraudulently warranted in his application that he had never applied for other insurance, whereas, as he well knew, he had made several previous applications for life insurance. Is the policy avoided? 262. Assume that the policy contained a two-year incontestable clause. It was originally taken out in good faith and is payable to the insured or his estate. The company proves in defense that, three years after issuance of the policy, the insured intentionally and fraudulently committed suicide while sane. Is the policy avoided? 263. Policy is like the last. The insured plans to commit suicide, before the incontestable clause begins to operate, but does not ac- tually kill himself until after. Is the policy avoided? CHAPTER XVIII The Accident Insurance Policy 264. Insured when washing clothing, as she testified, splashed water into her eye, infecting it with germs. The disease of blood poisoning resulted, which destroyed the eye. The judge charged, that if the germs floated through the air into her eye, the trouble was to be classed as a disease, and not covered by the policy, but if splashed into her eye in connection with the washing, the injury was effected by accidental means, and the company would be liable. Was the charge correct? 265. The deceased died as the result of having swallowed a fish bone, cauvsing inflammation, which in turn caused blood poisoning. Death resulted from blood poison. Was death by "external, violent and accidental means "? Was it the proximate result of the accident? 266. The decedent, when in good health, wore a pair of new shoes. After wearing them for a few days, one of them caused an abrasure of the skin of one of his toes. Blood poison set in with fatal results. Was the injury by external, violent and accidental means? 267. Insured, in attempting to steal second base, in the fifth inning, slid ten feet head foremost on his stomach, stopping on the plate, which was a cement slab two inches thick. He felt pain in the ap- pendix at the time, and two days later developed appendicitis. Death was caused by the resulting septic jieritonitis. Was the injury caused by external, violent and accidental means? Was it the proximate cause of the death? 268. Insured engaged for three successive evenings in the violent exercise of bowling ten pins, and strained his side. The strain devel- oped into appendicitis and disability. Was the injury the result of external, violent and accidental means? 269. Insured rode his Ijicycle for about an hour and a half. There was no fall, and nothing extraordinary al)out the ride, except that there was an unexpected friction, or fretting, of the proas muscle of the abdomen, which caused appendicitis, peritonitis and death. Was the injury by external, violent, and accidental means? 445 446 ACCIDENT INSURANCE 270. The insured raised and lowered himself repeatedly in a Morris chair, by use of his hands and arms. The exertions, which were voluntary and intended, caused death by dilatation of the heart, which, on post mortem examination, proved to be in an ab- normal condition. Was the injury effected independently of all causes other than external, violent, and accidental means? 271. The policy covered injuries effected by external, violent, and accidental means, independently of all other causes. Insured, when suffering from a diseased and abnormal appendix, strained that region of his body accidentally, which brought on another and fatal attack of appendicitis. Was the insurance company liable? 272. An accident policy excluded injuries, "of which there was no visible mark on the body." The insured received injuries, which produced no immediate outward signs upon the surface of his person, but subsequently he developed pallor, emaciation, and physical decay. Was the injury covered by the policy? 273. A policy required "an external and visible sign of injury." Is death itself such a sign? 274. Is a redness of the brain tissues, revealable only by an au- topsy, "a visible mark upon the body"? 275. The uisured, under an accident policy, and his sister, named as beneficiary in case she survived him, died in a common disaster. There was no affirmative evidence showing which died first. To whom is the insurance payable, to the representatives of the insured, or of the sister? 276. An accident policy expressly excludes injuries resulting wholly or partly from disease. How do you solve the question as to lia- bility of the company in each of the following cases: (1) When an accident caused a diseased condition, which, together with the accident, results in the injury or death complained of? (2) When, at the time of the accident, the insured is suffering from some disease, but the disease has no causal connection with the injury or death re- sulting from the accident? (3) When, at the time of the accident, there is an existing disease, which, co-operatmg with the accident, results in the injury or death? 277. In an accident policy, there is an exception of "death or in- juries resulting directly or indirectly from poison." A druggist by mistake gave the insured aqua ammonia, a poison, in place of the ACCIDENT INSURANCE 447 remedial medicine ordered. The taking of the poison was purely accidental, so far as the insured was concerned, but he died as a result. Is the company liable? 278. Assume, in the last case, that there is no such exception in the policy, but that the company relies for defense upon the clause limiting to "bodily injuries sustained through external, violent, and accidental means," is the company liable? 279. The insured was starting out to hunt prairie chickens in a season closed by statute, but had not yet begun to hunt, when the accident occurred. Is the exception (p. 312 supra) applicable ? 280. The insured had been illegally engaged in Sunday hunting, but at the time of the accident had finished hunting; though not yet returned home. Is the exception (p. 312 swpra) applicable ? 281. The drift in a mine was full of gas. The insured, seeing a brother miner lying there overcome and unconscious, instead of saving himself, deliberately and bravely went to the relief of his friend, in a desperate attempt to rescue him. Both were killed by the gas. Was this a voluntary exposure to unnecessary danger? 282. Insured, a merchant engaged in loading and shipping farm produce at railroad stations, started to walk along the track, between a station and a village a mile apart, which for many years had been the usual traveled way. As a train approached him from the rear, he moved away from the track, then turned half around vnih. an excited look, put his hand on his breast, and fell over the track, and was killed by the train. Was this "an unnecessary exposure to ob- vious risk" as matter of law? 283. Is a taxicab for hire, a " public conveyance," within the mean- ing of an accident policy? 284. A statute forbade walking upon, or along, the track. When the insured met with an accident, he was about to step upon the track at a point where there was a passenger crossing, acquiesced in by the railroad company. Was the policy forfeited? 285. Injury to the insured due to walking or being on the roadbed of a railway is expressly excepted by the terms of the policy. Insured was not walking along the roadbed when struck by a locomotive and killed; he was simply walking across the track, in order to call on a neighbor who lived on the opposite side of the track. There was no regular crossing near there. Is the company liable? CHAPTER XIX The Marine Insurance Policy 286. October 3d the Phoenix Insurance Co. insured a cargo by the Alata, lost or not lost, from Philadelphia to Rochfort. Novem- ber 14th the Alata arrived safely at Rochfort. She discharged there her cargo undamaged, and sailed thence December 18th. Decem- ber 23d the insurer effected a policy of reinsurance, on the same cargo and risk, to the extent of 1,500 pounds, at a premium of 75 guineas per cent, at English Lloyds, neither insurer nor reinsurer having any knowledge of the safe arrival of the ship the month before. The action is brought by the reinsurer against the original insurer to recover the premium, and is defended on the ground that the voyage being completed before the reinsurance was taken out, there was no risk to which the policy of reinsurance could attach. Judg- ment for whom? 287. Ship Sunlight was insured " at and from port risks at Foynes Shannon, and ceasing on sailing therefrom." The ship, equipped for sea and possessed of clearances, crew and cargo, quitted her moorings, and commenced to navigate upon her voyage, but while so sailing, and still within the limits of the port, she struck the bottom of the river Shannon and sustained damage. Does the policy cover? 288. Policy covered a shipment of cotton from Norfolk, Va., to Liverpool. The cotton arrived safely at Liverpool, and was unloaded from the vessel to the dock, but that very night, and before there was time to transfer it to the warehouse, it was destroyed by fire. Is the loss covered by the policy? 289. Policy on a cargo of skins and hides, irom Rio Grande to New York. The cargo arrived safely at quarantine, New York, but the vessel was detained there by the authorities. It was the usual custom at the port of New York, when a vessel, laden with hides, was detained at quarantine, to send the cargo by lighters to a depot at Brooklyn. That course was adopted in this case, and on the way thither the lighter was struck by a violent flaw of wind in the harbor, which threw her on her broadside, and 797 of the hides sUpped over- board and were lost. Is the loss covered by the policy? 448 MARINE INSURANCE 449 290. Policy on a cargo, at and from Baltimore to Leghorn, the risk to commence on the loading, and to continue until the said goods shall be safely landed at Leghorn. By custom of the port, a policy on goods, "to be safely landed at Leghorn," Ls discharged by landing them at the quarantine, or Lazarette, a {Mace on the shore of the port, about half a mile from the city of Leghorn. Accordingly, the cargo was deposited there, and while remaining there; performing quaran- tine, it was seized and sequestered by a body of hostile French troops, who refused to give it up until a ransom of about 50% of its value was paid by th(! insured. Action is brought on th(; polity to recover the amount thus paid by necessity in order to obtain restitution of the goods. Judgment for whom? / CHAPTER XX The Marine Insurance Policy — Concluded 291. Insurance on the steamer Pilot. In clear and quiet weather, near San Francisco, the boiler of the steamer burst, causing the vessel quickly to sink to the bottom. Was this loss by sea peril, and covwed by the usual policy? 292. Maruie insurance on opium, laden on an old wooden hulk at anchor. Owing to the rotten condition of the wood, the hulk sprang a leak, and the opium was damaged by water percolating through from outside. Was this a loss by "peril of the sea," and covered by the policy? 293. Insurance on cargo of lime, "at and from Rockland, Me., to New York, exempt from liability up to 5% particular average on the whole." The voyage was unusually long, with rough weather and gales. The ship arrived tight and with no special damage. Decks occasionally were awash, and a little sea water reached the cargo, damaging it to less than 5%. The bulk of the cargo, however, was found to be in bad condition on arrival, and had sifted out on the floor of the hold, owing to the fact that the hoops of the barrels were not very strong and had loosened during the rolling and pitching of the vessel. Was this damage by "peril of the sea," and covered by the poUcy? 294. A marine policy covered live cattle carried between decks. During a severe storm, which caused a tremendous rolling of the ship, many of these cattle were thrown violently together, and killed by the impact, though not touched by sea-water. Was the loss occa- sioned by a "peril of the sea," and covered by the policy? 295. A marine policy covered live horses. A violent storm dis- turbed them, and, in consequence, some of them kicked one another to death. Was the loss by sea peril, and covered by the policy? 296. Marine policy on a cargo of cheese. During the voyage, the cargo was badly damaged by ship rats in the hold. Was this a loss by sea peril, and covered by the policy? 450 MARINE INSURANCE 451 297. During the voyage rats eat a hole through the hull below the water line. Through this oi)ening the sea water found access to a cargo of fruit, occasioning considerable damage. Is the loss by sea peril, and covered by the policy? 298. On a calm, clear, quiet day, the vessel accidentally was run on a hidden rock, and shortly foundered. The disaster was in no wise due to any unusual disturbance of winds or waves, or any weakness in the vessel itself. Was the loss by sea peril, and covered by the policy? 299. In the course of the voyage, one day, the master was seized with a temporary fit of giddiness, which caused him to drop the ship's chronometer through the hatchway down into the hold. The chro- nometer was broken by the fall. Was the damage to it caused by sea peril within the meaning of the maruie policy? 300. A marine policy, in usual form, on a sloop. The vessel drifted on the shore, and was damaged by wind and water, because the seamen in charge were asleep. Is the loss covered by the policy? 301. Policy insures a steam tug against liability for any accident caused by collision to vessels in tow. A canal boat in tow in the winter was deliberately forced through the ice floe, with which New York harbor was covered. The ice made a hole in her bow, and she sank. Does the policy cover? 302. While at Costa Rica, en route, the captain, without knowl- edge or connivance of the insured owner of the ship, deviated from the lawful course of the voyage, and went to Cocos Island for his own profit. Did this deviation avoid the policy? 303. A marine policy, in usual form, covered a shipment of cotton from Augusta, Ga., to Liverpool. The master gave a bill of lading requiring that cotton should be stowed under deck. Willfully, un- necessarily and in violation of his known duty, the master stowed a part of the cotton on deck, without knowledge or consent on the part of the owners of the ship or the insured. During a storm, this portion was damaged. Does the policy cover the loss, if so, under which peril? CHAPTER XXI Guarantee and Liability Insurance 304. Insurance against liability under a workmen's compensation act. Insurer, a farmer, employed only one person, his son, at £75 a year. The son lost his hand, and was paid under the terms of the act. The insurance society now refuses to indemnify the employer, on the ground of non-compliance with the following condition in the policy (which declared it, and other clauses, to be conditions precedent to the society's liability), "the first and all renewal premiums are to be regulated by the amount of wages and salaries paid to em- ployees. The name of every employee, and the amount of wages and salary paid to him, shall be duly recorded in a proper wages book. The insured shall at all times allow the society to inspect such books, and shall supply the society with a correct account of all such wages and salaries, paid during any period of insurance, within one month from the expiration of such period, and the premium thereto- fore paid shall be revised accordingly." It was shown in evidence that no wages book was kept. Was the keeping of a book a condition precedent to a right of recovery as applied to this case? And what would be your answer assuming that the insured had been a lodging house keeper with one maid? 305. An employer had a liability policy to cover liability for acci- dents suffered by his employees. The policy provided that "no ac- tion should lie unless brought by the assured." An employee, having sustained such an accident, recovered judgment against the employer, and the employer being insolvent, the employee thereupon brought action against the insurer, on the theory that he was himself in effect "the assured." Can the employee recover under the policy? 306. Liability insurance usually obligates the insurer to indemnify the insured, not for mere liability to the employee or third party, but only "for loss actually sustained and paid in satisfaction of a judgment." Such a policy provided that no action should lie unless brought by the assured, "for loss actually sustained and paid in money by him after the trial of the issue." An employee after trial obtained a judgment against the insured for a personal injury. The 452 GUARANTEE AND LIABILITY INSURANCE 453 insured, the employer, executed his note for the amount of this judg- ment. The note wus discounted at a bank and the proceeds used to extinguish the judgment. Was the insurance company liable on the policy? 307. Adan operated an auto. Patterson was riding with him. Adan carelessly upset the auto, and injured Patterson, who sued Adan for damages, and recovered judgment for S4,500. Adan had a liability policy, issued bj'^ the Philadelphia Casualty Co. to protect him from the results of such accidents. The policy provided that no action should lie, "unless brought by the assured for loss or expense actually sustained and paid in money by him, after trial of the issue." The casualty company was garnisheed in the action. It took sole but unsuccessful charge of the defense, to the exclusion of the assured as it had the right to do under the policy. The judgment was not paid by Adan, who left the state and was supposed to be insolvent. Is the casualty company liable? 308. The policy required that notice of accident be served within fifteen days. After six days following the accident, the insured be- came so ill, physically and m'entally, as a result of the accident itself, that it was impossible for him to give notice. Did the omission dis' charge the insurer? 309. A burglary policy excluded liability, "unless there are visible marks upon the premises of the actual force and violence used in making entry or exit." Burglars, with pistols in hand, opened a door which was unlocked, violently assaulted two employees of the insured, and took and carried away a large amount of silks. No marks of violence were testified to as left upon the building, other than the opening and shutting of the door. May the insured recover? ^^^'' -^'^Tm uc AA 000 785 559 •.